BMI View: The Philippines insurance sector is increasingly attracting international attention, with multinational insurers drawn to high growth rates and substantial future growth potential. At present the life sector is considera bly more developed than the non- life sector, with higher rates of penetration (premiums against GDP) and density (premiums per capita). Both life and non-life insurance lines are expected to grow at healthy rate s throughout our forecast period, however, with domestic economic growth and a rise in household consumption increasing demand for a range of insurance products. The market remains fragmented, and we expect to see further consolidation among the smaller players moving forward.
In recent years, growth in the Philippine insurance industry has been driven by life insurance, a development indicative of a population growing not only in wealth but also in its awareness of risk. The non-life segment continues to grow, but at a far slower pace than the life segment. Recent natural disasters in the Philippines have brought about an escalation of claims and as a result premiums, with insurers increasingly mindful of the high risk levels in the market; non-life insurance therefore remains out of the reach of many, particularly in those lines most vulnerable to high levels of claims, such as property insurance. The Philippines is therefore a key market for micro-insurance products. According to the Insurance Commission, over a quarter of the population (around 28mn) purchased micro-insurance products in 2014, greatly expanding coverage (particularly in the non-life sector).
We expect that 2015 will see the Philippines life insurance sector continue to outperform the non-life market in terms of premium growth as insurers, particularly multinationals, step up their distribution efforts and expand coverage to communities outside of the capital and other major cities. The recent relaxation of regulation surrounding bancassurance distribution should provide particular scope for growth as insurers leverage the relatively high penetration of international banking groups in the country. Meanwhile, the growth of new distribution platforms such as online banking should increase awareness and accessibility among a rapidly growing middle class market, more able to afford traditional life products and keen to supplement the relatively low government provision of retirement and disability benefits.
The divergence in growth rates between life and non-life insurance coverage should continue to be seen over our mid-term (2015-2019) forecast period. Non-life providers will remain more cautious in terms of expanding business due to the unpredictable nature of insurance claims, following significant spikes over recent years as the result of tropical storms and other natural disasters to which the country is extremely vulnerable. Demand for motor insurance, a compulsory line, will remain steady, supported by increasing new auto sales. Property insurance, on the other hand, may lose market share as providers become increasingly risk adverse. Less developed segments of the market such as health and financial guarantee insurance will increase their market share over our forecast period. This reflects the growing appetite of Filipinos for private healthcare and financial services as income levels and disposable income increase in line with a fast growing economy. Credit insurance is a particularly strong growth area, with the development of the financial services market in the Philippines supporting greater demand for credit and financial guarantee insurance.
Besides the recent changes to laws governing bancassurance, one of the major developments to impact the market in recent years has been increased regulatory demands made of firms' financial solvency, with the minimum capital requirements of insurance providers set to increase steadily over the next few years until 2022. This has already led to consolidation among smaller players, particularly non-life insurers (the number of players decreased from 105 to 65 since the introduction of new regulations) and should provide new entrants with further opportunities for mergers and acquisitions over the next few years.
The Amended Insurance Code means that all life and non-life insurance companies must meet capitalisation requirements of PHP550mn by end-2016, increasing to PHP900mn by 2019 and PHP1.3bn by 2022.
Philippines National Bank is reportedly investigating options for selling a 40% stake in its life insurance business ( Philippine Life Insurance) for an estimated USD500mn.
The Philippines is one of the countries that has committed to liberalising its insurance sector under plans to form the ASEAN Economic Community.
Key BMI Forecasts
Gross life insurance premiums are expected to increase by 14.7% in 2015 to reach USD4.1bn.
Non-life premiums are forecast to grow by 6% to reach USD1.29bn.
Within the non-life sector, motor premiums will rise by 6% to USD406.5mn.
Property insurance will increase by 4.4% to USD408.1mn.