Fitch: Philippine Insurers Show Ample Growth Potential, Face Changes

Sun Feb 9, 2014 8:00pm EST

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(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Philippines Insurance Sector: Ample Growth Potential in Evolving Landscape here SINGAPORE, February 09 (Fitch) Fitch Ratings says the Philippine insurance industry has ample room for premium growth in the next few years, supported by a low penetration rate, loosened bancassurance rules, and increasing urbanisation. However, insurers are likely to face changes in the operating environment, including tighter regulations and market consolidation. Philippine insurance premiums rose by 47% in 2013, the country's Insurance Commission said, driven by strong growth in the life sector, where variable unit-linked policies have become increasingly popular in the last few years. However, non-life sector premium growth was slower, primarily due to higher claims from catastrophes and heavy taxes on insurers, which amounted to nearly 27% of premiums. Fitch expects the trend of strong growth in life insurance premiums and more moderate growth in the non-life sector to continue. In Fitch's view, catastrophe risk is the most significant risk that Philippine insurers face. The country experiences earthquakes, typhoons and other natural disasters, the claims for which have potential to wipe out insurers' growth and create volatility in underwriting performance, if improperly managed. Fitch believes more insurers whose profits have come under pressure will exit or merge with rivals in the next few years. This follows the Philippine Department of Finance's move in June 2012 to raise capital thresholds on insurers operating in the country to bolster overall industry capitalisation. The capital requirements were subsequently revised in August 2013 to be based on net worth instead of paid-up capital. Some insurers that struggled to meet the new thresholds have been forced to exit the industry or restructure. The report, 'Philippines Insurance Sector', is available at www.fitchratings.com or by clicking on the link above. Contact: Thomas Ng Analyst +65 6796 7224 Fitch Ratings Singapore Pte Ltd 6 Temasek Boulevard #35-05 Suntec Tower Four Singapore 038986 Wan Siew Wai Senior Director +65 6796 7217 Jeffrey Liew Senior Director +852 2263 9939 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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