Life and non-life lines of insurance look set to expand in the Philippines

This is an important period of transition for the Philippine insurance sector, as stakeholders attempt to meet a range of new regulatory requirements designed to expand the industry’s depth and reach. There has been strong growth in profitability and gross written premium (GWP) in recent years, generated by a wide range of insurance types and entities. Indeed, one of the main characteristics of the Philippine market is that it includes not only conventional life and non-life insurance, but also composite companies, pre-need outfits, mutual benefit associations (MBAs), health maintenance organisations (HMOs), and micro- and macro-insurers. All segments are likely to benefit from continued efforts to strengthen the market by the sector regulator, the Insurance Commission (IC). Moves towards establishing a more comprehensive disaster and emergency fund are also expected to improve market standing and spread risk in the years ahead.

Structure & Oversight 

The IC has at its foundation the Insurance Code of the Philippines, issued in 1974 and consolidated in 1978. Then, in 2009, the country’s Pre-need Code brought this variety of insurance plan under the IC’s remit, while in August 2013 Republic Act No. 10607, known as the Amended Insurance Code, was signed into law, changing a number of key requirements for insurers (see analysis). In 2015 the regulation and supervision of the country’s HMOs was also brought under purview of the IC, following a presidential executive order.

At present, the IC is in the process of overseeing a major regulatory alignment project, moving the sector towards new risk-based capital (RBC) standards, known as the RBC 2 Framework. This has three pillars, with the first pillar setting the current RBC ratio at 100%, while the second pillar covers governance and risk management, along with the supervisory review process. The third pillar contains company disclosure requirements to ensure transparency.

Thus, under RBC 2, the IC needs to be much more engaged in monitoring sector players and acting to ensure corrective plans are drawn up and implemented if a company does not meet the standards. This will strengthen the industry, but it will also require capacity building and improved technology to ensure the availability of accurate and up-to-date statistical information. Meeting these requirements is therefore one of the main challenges facing insurers and the IC in the period ahead.

At the same time, the sector is transitioning to International Financial Reporting Standards 17 (IFRS 17), the global regulatory framework set by the International Accounting Standards Board. This, too, requires companies and the IC to implement a major overhaul of internal accounting methods, which will also require new technologies and capacity building. In recognition of the issues firms face in adopting such a regime alongside RBC 2 and the new paid-up capital requirements, at the start of 2019 the IC postponed its target date for the implementation of IFRS 17 by one year, to January 1, 2023.

Sector Characteristics 

HMOs and pre-need companies are two key features of the Philippine insurance sector, with the latter largely unknown elsewhere. Pre-need outfits were at one time extremely common, with around 200 in existence before 1997, though that number had fallen to 17 by December 2018. Pre-need firms provide customers with open-ended plans to finance specific future needs, such as college education, retirement and funeral costs. The segment experienced difficulties after the 1997-98 Asian financial crisis, with many pre-need companies becoming insolvent. This acted as a major headwind against the sector’s overall growth by undermining public trust, explaining the sector’s current determination to establish itself on a more robust footing to avoid any similar crises in future. The IC has thus tightened up on pre-need company performance and regulation. Membership of the subsector’s professional association, the PreNeed Federation, was also made compulsory in 2015.

Among the largest of the pre-need firms in terms of assets reported in the first quarter of 2016, the last period for which IC data is available, are PhilPlans First, worth P41bn ($762.7m); St. Peter Life Plan, worth P33.2bn ($618.5m); and Manulife Financial Plans, worth P12.3bn ($229.6m).

HMOs, meanwhile, are private, pre-paid health care providers. Members can access specific hospitals and medical professionals within the HMO’s network. A risk-sharing model is used, with members’ coverage dependent on the value of their subscription and sometimes limited to specific types of care or a certain allowance per year.

As of the end of 2018, there were 30 HMOs licensed to operate in the Philippines. The largest companies in terms of assets are Maxicare, with P9.8bn ($182.3m); Caritas Health Shield, with P8.6bn ($160m); Intelicare, with P5.8bn ($107.9m); and MediCard Philippines, with P5.4bn ($100.4m).

New Regulations 

The period ahead will likely see the IC draw up and implement a range of new regulations for HMOs, which have only recently been transferred from the Department of Health’s remit to the commission’s. Currently, HMOs operate according to a different set of regulatory criteria to other outfits regulated by the IC. Paid-up capital requirements, for example, are just P10m ($186,000), rising to P100m ($1.9m) for new entrants. A process of rapid evolution therefore lies ahead for the HMO industry as it moves towards adopting tougher standards.

The regulatory changes will ensure that the Philippine insurance sector remains regionally competitive. “The higher capitalisation requirements will allow players in the Philippines to be more competitive with its neighbours in the region in anticipation of the ASEAN integration,” Benedict Sison, CEO and country head of Sun Life Financial, told OBG. “Insurance companies will also be in a better position to achieve their economic objectives and expand operations to serve the public better,” he added.

There are 35 MBAs in the market, including the Armed Forces and Police MBA, and fire service and government employee associations. MBAs are particularly active in micro-insurance, and since February 2019 the IC has allowed them to purchase pre-need policies to distribute to their members. MBAs can have a maximum of 20% of their total liabilities in unassigned surplus, making them some of the more conservative elements of the sector.

The Philippines has five composite insurers, which combine both life and non-life elements. The segment includes some of the country’s largest insurance providers, such as Philippine American Life and General Insurance (Philam Life), part of Hong Kong-based AIA. Philam Life had invested assets of P252bn ($4.7bn) in 2017 – the greatest assets of any life insurer. Paramount Life & General, AsianLife & General Assurance, CLIMBS Life and General and the 1 Cooperative Insurance System of the Philippines Life and General (1CISP) are the other four. 1CISP is the country’s largest cooperative insurance outfit and reported a record 65% growth in its assets for 2018, reaching P2.6bn ($48.4m) by the year’s end.

The sector also includes one domestic reinsurer, the National Reinsurance Corporation of the Philippines (Nat Re). This provides both life and non-life reinsurance and is listed on the Philippine Stock Exchange. The largest shareholder, however, is the Government Service Insurance System (GSIS), which has a 25.7% stake in the domestic reinsurer.

Nat Re is entitled to take a maximum 10% share of all reinsurance placed abroad, giving the company wide access to all domestic insurance business. It was given a “PRS A” rating from the Philippine Rating Services Corporation, an affiliate of credit rating agency Standard & Poor’s, and was reported by the IC in January 2019 to have net worth well beyond the regulatory minimum capital requirement for a reinsurer of P3bn ($55.8m) by 2022. In terms of foreign reinsurers, Swiss Re and Munich Re are among the most active in the Philippines, with both also working alongside the World Bank to strengthen the country’s disaster management policies and agricultural crop insurance.


An average of 20 typhoons make landfall in the Philippines each year. These can be highly damaging: the typhoons Ondoy and Pepeng, for example, caused some $4.4bn in losses between them, or 2.7% of the country’s GDP, in 2009.

In 2010 the government enacted the Philippines Disaster Reduction and Management Act, shifting emphasis from response and recovery to preparedness and risk reduction. In 2013 this was followed by the implementation of a three-tiered Disaster Risk Financing and Insurance Strategy. Under this plan, – the first ever reinsurance agreement between the World Bank and a government agency – the Treasury purchases insurance policies from GSIS to cover local and national government assets. The World Bank acts as an intermediary, transferring risk outside the country through catastrophe-swap transactions with international reinsurers. Payout is then made in Philippine pesos in the event of a loss exceeding a defined deductible amount.

The government has also secured a $500m immediate draw-down facility from the World Bank in the event that it declares a state of national emergency. On a subnational level, the World Bank, supported by local and international insurance companies including Swiss Re and GSIS, provides earthquake and typhoon coverage for the 25 provinces on the eastern side of the archipelago. This coverage was doubled in January 2019 to $390m.

Another area for future development is insuring the agriculture sector against crop failure or natural disaster. This will be critical for broader economic growth, especially as climactic events worsen. The IC is studying new approaches to this major national challenge, as the commission estimates that only around 2% of the sector’s entire productive capacity is currently covered by insurance.


The segment has evolved in recent years from its microfinance base, following three sets of legislation – passed in 2006, 2010 and 2015 – which have served to regulate and strengthen the industry. There has been a concomitant expansion of micro-insurance MBAs (MI-MBAs), while conventional insurers have also moved into traditional micro-insurance areas, such as crop insurance for smallholder farms and cover for small and medium-sized enterprises.

While the total number of MI-MBAs on the Philippine market in 2006 was just six, by 2014 this figure had grown to 21. The number of conventional commercial insurers in the micro-market also rose from just three to 42 over the same period.

According to IC figures, by the end of 2018 approximately 38.9m Filipinos were covered by a micro-insurance policy, up by 18.8% compared to 2017. Some 22.8m of these people had policies with MI-MBAs. Premium production also increased by around 14.5% between 2017 and 2018, from P7.1bn ($132.1m) to P8.1bn ($150.7m), with the highest growth being in the non-life segment, where premium grew by 25.8% to reach P998.9m ($18.6m).

The Philippines has thus secured a leading role for itself in the global micro-insurance market and is often cited as an international role model for sector development in emerging markets.


The IC reported 63 licensed brokerages at the end of 2017, the last year for which data was available. The top five by premium were BDO Insurance Brokers, with P9bn ($167.4m); Marsh Philippines, with P7.4bn ($137.6m); Aon Insurance and Reinsurance Brokers, with P7bn ($130.2m); HSBC Insurance Brokers, with P4.3bn ($80m); and Jardine Lloyd Thompson, with P3.5bn ($65.1m).

A total of 19 reinsurance brokers also had licences in 2017, with the top three firms in terms of premium being PhilPacific, with P504.8m ($9.4m), KRM Reinsurance, with P355.7m ($6.6m) and Pana Harrison Reinsurance, with P346m ($6.4m).

The most recent figures from the IC show that in non-life, individual agents were the largest distribution channel in 2017, accounting for 36.7% of the total premium, followed by brokerages, with 33.5%; direct marketing, with 14.6%; bancassurance, with 7.5%; and other distribution channels, with 7.7%. As for professional groups, the Philippine Insurers and Reinsurers Association works across the industry, with other bodies including the Philippine Life Insurance Association, the Association of Insurance Brokers of the Philippines, the Philippine Institute of Loss Adjusters, the Philippine Insurers’ Club and the Actuarial Society of the Philippines.

Performance & Size 

Figures from the IC for 2018 show that the life, non-life and MBA segments combined had total assets of P1.58trn ($29.4bn), up from P1.56trn ($29.1bn) in 2017. Meanwhile, total premiums stood at P290bn ($5.4bn), compared to P260bn ($4.8bn) the previous year. Overall net income also grew from P36.4bn ($677m) to P37.4bn ($695.6m), although net losses rose from P97bn ($1.8bn) in 2017 to P103bn ($1.9bn) in 2018. IC data from 2017 shows that premium accounted for 1.4% of gross national income, and the life insurance sum represented 46.2% of GDP.

As of the end of 2018 the life segment comprised 29 companies, while there were 65 in non-life. The non-life segment had total assets of P235.4bn ($4.4bn) in December 2018, up from P221.7bn ($4.1bn) a year previously, giving non-life approximately 14% of the overall sector total. Life, meanwhile, had total assets of P1.25trn ($23.3bn) in December 2018, or around 80%, with the MBA segment accounting for the remaining 6%.

Therefore, life is the industry’s main offering, as is common in a fairly youthful insurance market. “In developing economies such as the Philippines – where insurers are focused on opening up and expanding the market and increasing penetration rates – the life segment usually drives growth,” Peter Grimes, CEO of FWD Life, told OBG. “In order to maintain the growth, and spread it beyond the life insurance segment, it will be necessary to educate the population on the benefits of insurance as investment products,” he added.

In the non-life segment, total GWP amounted to P92.7bn ($1.7bn) in 2018, up from P86.4bn ($1.6bn) in the previous year, while losses also grew from P20bn ($372m) to P23bn ($427.8m), and thus net income was also down, decreasing from P3.56bn ($66.2m) to P3.42bn ($63.6m). In life, meanwhile, total premium increased from P205.5bn ($3.8bn) in 2017 to P228.6bn ($4.3bn) in 2018, while total benefit payments went from P71bn ($1.3bn) to P73.7bn ($1.4bn), reducing net income from P27.3bn ($507.8m) to P28.7bn ($533.8m). In terms of total premium, 2018 was a good year for the life segment, which grew by 12.9% compared to 2017, while net written premium for non-life rose by 4.7%.

Overall, market penetration rates have remained steady in recent years, as the country’s population continues to grow rapidly, increasing from 98.8m in 2013 to 104.9m in 2017, according to the latest World Bank figures. Over that period, insurance penetration fell from 1.83% to 1.64%, but IC figures released at the end of 2018 indicate some improvement, with the rate rising to 1.67%.

Insurance density – defined as the ratio of premium to the total population – increased by 16.1% between September 2017 and the same period in 2018, from P1768 ($32.90) to P2054 ($38.20). However, figures show that insurance remains largely confined to a more affluent segment of society. Although penetration rates are continuing to grow among this demographic, a large part of the country still lacks adequate insurance coverage. Increasing the uptake of insurance products beyond their traditional customers is one of the greatest challenges currently faced by the sector.

Life Subsector 

After Philam Life, the life subsector’s other top players in terms of total assets are Sun Life, with P230.8bn ($4.3bn); local company Insular Life Insurance, with P139bn ($2.6bn); UK-based Pru Life, with P135.3bn ($2.5bn); and AXA Philippines, with P110.6bn ($2.1bn).

The Amended Insurance Code stipulations on higher levels of paid-up capital have not affected the life segment as much as non-life, given the preponderance of larger, international players in the former. Composite companies will, however, be required to have both their life and non-life units meet the minimum capital requirement separately, which as of the end of 2018 had been set at P900m ($16.7m).

In March 2019 the commission released investment guidelines for insurers to follow in funding large-scale infrastructure projects under the government’s construction strategy, the Philippine Development Plan 2017-22. The new framework loosens the restrictions on what insurance companies can invest in – restrictions that were designed to minimise their exposure to market risk.

The other challenge the sector faces in the years ahead is widening its channels of distribution in order to expand coverage beyond traditional demographics. “Most banks are associated with particular life insurers,” Rado de la Cruz, chief actuary for Generali Life Assurance, told OBG. “However, there are only a finite number of banks, so insurers are now looking to move beyond bancassurance. Partnerships with entities such as MBAs, which have a lot of members, may be one way to increase coverage.”


While very much the junior partner in the insurance sector, the non-life segment still has some significant players, aside from the composite companies. In terms of assets, in the licence period 2016-18, IC figures show that Malayan Insurance was the largest provider, with P38.8bn ($721.7m), followed by Pioneer Insurance and Surety, with P25.4bn ($472.4m); BPI/MS Insurance, with P12.59bn ($234.4m); Prudential Guarantee & Insurance, totalling P12.57bn ($233.8m); and Charter Ping An Insurance, with P10.5bn ($195.3m).

In 2017 these five were also the largest firms in terms of GWP, with Malayan at P9.6bn ($178.6m), Prudential at P8.9bn ($165.5m), Pioneer at P8bn ($148.8m), BPI/MS at P5.9bn ($109.7m) and Charter Ping An at P5.7bn ($106m).

As in many countries, motor vehicle insurance dominates the non-life market, with this segment responsible for around 50% of non-life premium. The Philippine automotive sector has boomed in recent years, growing by 18.4% in 2017, when sales hit a record of almost 425,700 vehicles. That year, however, was an exception, with high sales triggered by looming tax hikes on both vehicles and fuel. In 2018 sales dropped for the first time in seven years, to 357,400 vehicles. Non-life companies with strong automotive components in their portfolio thus saw a decline in motor insurance growth, although non-life still recorded an increase in overall GWP.

Another challenge for motor vehicle insurance is the prevalence of false policies. Under the law, car insurance must be taken out before a vehicle is registered. However, some disreputable dealers offer fake policies in order to speed up the procedure and generate extra income, a phenomenon that the IC is currently taking action against.


As a result of RBC 2 and IRFS 17, sector players will need to update their practices radically in the period ahead. The adoption of new technology will be a key part of this change, particularly with the rise of insurance apps and increasing smartphone penetration rates. This promises greater coverage and the potential to reach previously untapped demographic groups, as digital apps do not require physical branch networks. However, building the technological infrastructure required remains a challenge. Recognising this issue, the state is working to improve the telecoms infrastructure (see ICT chapter). At the same time, many Filipinos still look for face-to-face contact and follow-up when purchasing policies, particularly in the life segment. While 2019 is likely to see growth for both life and non-life segments, the biggest challenge will be meeting the escalating capital requirements. The market is expected to see further consolidation in the coming years, especially approaching the final deadline at the end of 2022, when insurers are required to have a minimum net worth of P1.3bn ($24.2m). At the same time, 2019 promises new regulatory alignment for HMOs, with implications for health insurance providers in particular. Overall, if it can keep up with the changes ahead, the outlook is good for this dynamic and fast-growing sector.


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The Report: The Philippines 2019

Insurance chapter from The Report: The Philippines 2019

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