Philippine insurers face underwriting swings from weather

Susan Tan said volatile conditions are pressuring non life carriers.

The Philippines’ non-life insurance market’s growth may be offset by risks including macroeconomic uncertainty, tighter monetary policy, and potential financial market volatility linked to geopolitical tensions.

AM Best has maintained a stable outlook for the Philippines' non-life insurance sector, supported by strong growth prospects driven by economic expansion and a pipeline of major infrastructure projects.

In the “Market Segment Outlook: Philippines Non-Life Insurance” report, the ratings agency said the sector continues to benefit from stabilised reinsurance capacity, the emergence of insurance pools to support underwriting capacity, and a generally favourable pricing environment. Investment income is also expected to remain supported by relatively high domestic interest rates.

“Another key potential headwind is the increasingly volatile weather conditions, which are placing significant pressure on non-life insurers and contributing to greater volatility in underwriting results,” Susan Tan, senior financial analyst at AM Best, said in the report.

The International Monetary Fund forecasts the Philippines' economy will grow by 4.1% in 2026, down 1.5 percentage points from its January projection. 

The revision reflects the impact of the US-Israel-Iran conflict on the country's dependence on oil imports from the Middle East.

The report also highlighted ongoing developments in the country's regulatory environment, including efforts to strengthen financial resilience, transparency and accountability for public infrastructure risks. 

The mandatory adoption of Philippine Financial Reporting Standard 17 (PFRS 17), the local equivalent of IFRS 17, remains scheduled for 1 January 2027.

Also, the Insurance Commission has expanded its definition of admitted assets to include real estate investment trusts (REITs) and selected structured products. 

AM Best said the change is expected to give insurers greater flexibility in meeting risk-based capital requirements.

According to the report, the non-life insurance market continues to adjust pricing, particularly in property insurance, to address persistent inflation, rising claims costs, and the growing frequency and severity of climate-related losses.

Victoria Ohorodnyk, senior director at AM Best, said insurers are adopting more disciplined underwriting practices, including stricter risk selection and data-driven pricing, to better align premiums with underlying risks.

Despite continued premium growth, profitability remains vulnerable to volatility due to the country's exposure to natural catastrophes such as typhoons, floods and earthquakes. 

AM Best noted that primary insurers have increased their retention of catastrophe risks in recent years as they seek to balance rising reinsurance costs with profitability objectives.