Business insurance

Best Market Segment Outlook: AM Best Maintains Stable Outlook in the Philippine Non-Life Insurance Segment

SINGAPORE–(BUSINESS WIRE)–AM Best maintains a stable market segment outlook for the Philippine non-life insurance segment, citing signs of recovery in 2021 regarding premium growth and improving investment conditions.

In his news Best Market Segment Report“Market Segment Outlook: Philippines Non-Life Insurance”, AM Best also notes strong growth in microinsurance, improving affordability of insurance products and insurance penetration, as underpinning the stable outlook.

As of September 2021, gross and net premiums written by Philippine non-life insurers for the nine-month period increased by 11.9% and 7.6%, respectively, to reach PHP 64.3 billion (USD 1.2 billion). ) and PHP 38.1 billion (USD 0.7 billion). , compared to the same period of the previous year. In addition, the government’s “Build Build Build” program, which includes more than 20,000 infrastructure projects nationwide, has resumed and is expected to drive the Philippines’ economic recovery. It is also likely to act as a catalyst for the long-term growth of the property insurance, construction and engineering segments. There is still some uncertainty surrounding the pandemic, which will remain a challenge for Philippine non-life insurers. Nevertheless, non-life insurers have made progress in adapting to the current environment by strengthening their infrastructure and improving digital capabilities to be able to operate remotely.

Additionally, according to the report, as part of the pandemic-fueled fiscal stimulus in the Philippines, the country is maintaining a historically low interest rate, which has limited investment results for insurers. However, interest rates are expected to rise in the coming year and unrealized losses from rising bond yields could impact insurers’ economic capital, depending on the asset-liability matching positions of insurers. companies. AM Best notes that investment assets are heavily concentrated in fixed-income securities and local currency term deposits, and that rate increases over a longer period could increase investment income generated from interest payments. interests, with a positive effect on the profitability of Philippine non-life insurers.

The Philippines is one of the countries most exposed to natural disasters, and the non-life segment faces another year of high exposure to catastrophic events. In April 2021, the Insurance Commission, under the Philippine Department of Finance, announced the establishment of the Philippine Catastrophe Insurance Facility, the first large-scale private sector catastrophe risk financing initiative in the country, enabling all insurers pool catastrophe risk within The Philippines. AM Best believes the facility should help domestic insurers diversify catastrophe risk in addition to their existing cessions to international reinsurers. However, greater retention of risk in the country raises the risk of greater losses in the event of a major disaster. Therefore, as the pool grows, proper risk management will be crucial to ensure that the facility performs as expected.

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=318162.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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