The Insurance Commission (IC) has provided additional regulatory relief amid the COVID-19 crisis, this time allowing insurers to set aside a bigger chunk of their net worth for loans and other financial assistance for employees hit badly by the pandemic.
Insurance Commissioner Dennis B. Funa noted in IC Circular Letter (CL) No. 2020-63 dated May 18 that “the restricted business operations due to the extended quarantine has also caused adverse effects on the financial performance of insurance companies.”
Under earlier IC rules issued in 2014, financial assistance and emergency loans to officers, employees and sales associates were considered part of insurance firms’ admitted assets.
Other qualified admitted assets included car loans and lease-purchase plans, loans to buy computers and office equipment, as well as salary loans worth up to six months.
For all these loans considered as admitted assets, IC rules mandated their aggregate amount to be a maximum of 6 percent of the insurer’s net worth.
But acknowledging that insurers will likely be approving more loans for officials, workers and sales agents hit by response to the pandemic, the IC raised the exposure limit applied to financial assistance programs to 20 percent of net worth, as shown in the company’s latest approved synopsis.
This higher threshold will be allowed only during fiscal year 2020.
“The IC finds the need to relax the limitation,” Funa said.
Last week, the IC extended regulatory relief on insurers’ quarterly net-worth requirement, but only to those already compliant with the mandatory end-2019 level of P900 million.
Edited by TSB
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