Philippines Insurance Report Q3 2013 - New Market Report
New Financial Services market report from Business Monitor International: "Philippines Insurance Report Q3 2013"
[USPRwire, Tue Jul 23 2013] Although BMI is reasonably upbeat about the prospects for both of the major segments in 2013, we suggest that the outlook is considerably more exciting for the (substantially larger) life segment than for the Philippines' non-life segment. It is clear that life density is growing rapidly, with the result that the life segment should be able to sustain double-digit growth (if from a base that is low by most metrics) for some years. The development of the segment is in part due to the generally positive economic environment. It is also due to the ongoing improvement in perceptions of risk attached to the Philippines. Most crucially, though, the growth of life insurance is due to the companies themselves and the initiatives that they are undertaking. The segment is dominated by subsidiaries and affiliates of major regional or global multinationals, all of whom have access to the capital that they need. Together with Insular Life, the mutual company that is the leading indigenous life insurer, the major players are actively developing new and attractive products. Most of the majors distribute through multiple channels, and have built successful and substantial bancassurance partnerships.
The Philippines remains at an early stage of a transition from a situation where the non-life segment consists of dozens of tiny, undercapitalised firms. As is the case in some other South East Asian countries (and in the Middle East) it is not obvious that many of these companies have a clear competence in insurance. The decrease in non-life penetration in past years has been a clear sign of a lack of discipline in pricing risks and/or a lack of pricing power. Minimum capital requirements are being increased - as a part of the preparation for 2015, when the Association of Southeast Asian Nations (ASEAN) Free Trade Agreement (AFTA) could result in much higher competition from other companies that are based elsewhere in the region. In practice, we are not certain that other ASEAN-based non-life insurers will see the opportunities in the Philippines as being more attractive than those at home. However, we remain of the view that it would be extraordinary if there is not a wave of mergers and acquisitions over the next two years. There could also be very substantial consolidation in the life segment.
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