Advance approval from the Philippine Insurance
Commission (IC) is now required to acquire a stake in a
Philippine corporation that is licenced as an insurance broker
or reinsurance broker. This is based on the IC's circular
letter number 2017-09 dated February 14 2017 which prescribes
guidelines on the documentation requirements for acquiring a
domestic insurance or reinsurance broker.
Section 3 of the circular begins with the statement 'no
person will acquire ownership of any domestic insurance broker
and reinsurance broker without the prior written approval of
the Insurance Commissioner'. This is a new requirement which
appears to mirror the requirement under section 302 of the
Insurance Code of the Philippines, as amended, with respect to
the acquisition of control of a domestic insurance company. An
insurance broker and reinsurance broker, like an insurance
company, can be wholly foreign-owned.
The circular refers to section 302 of the Insurance Code and
imposes requirements similar to those under that section, such
as providing advance notice in writing to the target company of
the 'investor's intention to acquire control'. The first
sentence of section 3 of the circular relates to an approval to
acquire 'ownership' of a broker, but it does not specify the
percentage of shares to be acquired for the requirement to
apply. However, since an investor has to send advance notice of
its intention to acquire control to the target company, it
might be advisable for investors planning only to be minority
shareholders to request the IC to clarify whether they have to
comply with the circular.
The other requirements under the circular pertain to the
financial standing of the investor (a sworn declaration of
assets, liabilities and net worth, and income tax returns) and
information on the board of directors of the investor company.
A separate list of requirements for an investor who is a
natural person is set out in the circular. The circular states
that these documents are requested to enable the IC to verify
the financial status and trustworthiness of the investor.
An investor that intends to acquire a stake in a broker
company by subscribing to new shares instead of through a share
purchase may wish to verify with the IC if the requirement will
apply to its subscription.
The circular provides that the requirement of advance
consent of the IC may be waived 'for a valid reason'.
||Hiyasmin H Lapitan