Philippine non-life insurers stable but pitfalls remain: report

The sector had one of the highest five-year compound growth rates before COVID-19.

The Philippine non-life insurance sector has solid long-term growth prospects, underpinned by a rising GDP per capita, higher minimum net worth requirements and increased digitalisation in retail sales, according to an AM Best report.

However, a near-term economic slowdown, fierce competition, and higher exposure to catastrophic risks threaten the sector’s stability.

The industry had been demonstrating one of the highest five-year average compound growth rates in Southeast Asia, but the pandemic triggered a sharp fall in premiums in 2020. Social mobility restrictions also curtailed operations, particularly hitting insurers with no adequate infrastructure for remote work.

The pandemic will remain a short-term challenge for the sector, AM Best wrote, as future waves of infection will likely be met with strict movement restrictions even with better infrastructure to support remote work.

These measures will impact economic fundamentals and investment conditions in the country which may subsequently dampen non-life insurers’ earnings and revenue.

Currently, the country has a significant untapped potential even with a very low non-life insurance penetration at less than 1%. The government’s Build, Build, Build programme is also expected to catalyse the long-term growth of the property, cargo, and engineering insurance segments.