To answer this question, the best answer is to cite the promulgation of the Insurance Code on July 23, 2012 as an amendment that aims to “strengthen the insurance industry”
The following are required for life insurance companies:
(1) Solvency requirements. “Section 200. An insurance company doing business in the Philippines shall at all times maintain the minimum paid-up capital, and net worth requirements as prescribed by the Commissioner of the IC. Such solvency requirements shall be based on internationally accepted solvency frameworks and adopted only after due consultation with the insurance industry associations.
(2) Reserves. Section 216 and 217 requires every life insurance company doing business in the Philippines to annually make a valuation of all policies… obligations.. according to international standards… and shall be valuated according to standard table of mortality… and reported to the Commissioner. The aggregate value shall be deemed as its reserve… and the Commissioner must make sure these are placed in safe legal securities.. it must also provide the variable nature of such securities
(3) Regular checking. Life insurance companies are subject to regulations, authorizations, checks and balances, assessments, reporting, and many other measures to insure stability, integrity, and solvency.
(4) Metrics-driven. To insure stability of insurance companies and uphold the trust of the people, Insurance Commission uses the following quantitative metrics to determine the state of health of the companies:
- Premium income
- Paid-up Capital
- Net Worth
- Net Income
- Invested Assets
- Net Premiums
- Gross Premiums
- (5) Security Fund. Worst case scenario, what if the life insurance company becomes insolvent? What will happen to all my contributions?
- The law has create a fund called Security Fund (Section 378 of the IC) which shall be used in the payment of claims. These claims shall be charged against the insurance company remaining unpaid by reason of the insolvency.
- It may also be used to reinsure or transfer the policy from the insolvent to the solvent insurer.
- (6) Cease and Desist. Also, when the IC, upon evidence finds out that an insurance company is on the verge of insolvency, or would be hazardous to policyholders and creditors, the Commission can order it to cease and desist and gather all its assets and if necessary, and bring suits to foreclose the company’s liabilities.