Republic Act 10607 (RA 10607), a law which amends the Insurance Code of the Philippines (Presidential Decree 612, PD 612), recently took effect.
PD 612 was issued on December 18 1974. While it had been amended several times, RA 10607 updates PD 612 by introducing provisions on new insurance products and developments in the insurance industry, and reflecting standards and thresholds under rules and regulations implemented by regulators prior to its promulgation.
Under PD 612, a new insurer established under Philippine law had to have a paid-up capital of at least P5 million ($111,000). That requirement had been increased over the years by the secretary of finance under the power granted to him by PD 612. Now, the minimum paid-up capital required of a new insurance company is P1 billion. This is consistent with the threshold set out in Department Order 15-2012, which was issued last year by the secretary of finance. The power of the secretary of finance to increase the capital required of a domestic insurer has been retained under RA 10607.
The unimpaired capital or assets and reserve of a Philippine branch of a foreign insurance company also has to be at least P1 billion. A company that will engage solely in the reinsurance business has to have a capitalisation of at least P3 billion paid in cash.
A domestic insurer that is already operating at the time of effectiveness of RA 10607 is required to have a net worth of P250 million as of June 30 2013. Increased amounts of the applicable net worth of a domestic insurer as of December 31 of 2016, 2019, and 2022 are provided under section 194 of RA 10607.
Section 444 of this new law grants persons affected by the amendments with a period of one year from its effectiveness (from September 20 2013) to comply.
RA 10607 extends the period of validity of the licences of insurers, insurance agents and insurance brokers from one year to three years. The transitory provision of RA 10607 states that licences that would have expired by June 30 2013 will be valid until December 31 2015.
Other new provisions introduced by RA 10607 are on micro-insurance and bank-assurance.
We understand that the Office of Insurance commissioner is formulating rules and regulations to implement RA 10607.
Hiyasmin H Lapitan
© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.