The high domestic interest rate environment in the Philippines will keep insurers' investment yields strong as companies reinvest their assets into higher yielding fixed-income instruments upon maturity, according to AM Best.
In its Best’s Market Segment Report, “Market Segment Outlook: Philippines Non-Life Insurance,” AM Best says that it has revised its market segment outlook on the Philippine non-life insurance market to ‘Stable’ from ‘Negative’, citing factors that include strong investment yields amid insurance market and economic growth.
Opportunities in personal and commercial lines also are driving insurance market growth. While the main non-life business lines, in terms of premium share, remain fire and motor, the market experienced double-digit increases in the casualty, health, and accident lines of business in 2023. Furthermore, primary rate increases in the property line are catching up to reinsurance rate hikes, although rate pressure remains due to heavy market competition.
“The market has struggled to keep pace with reinsurance rate increases for the property line given a general reluctance to lose market share, but this trend is now shifting,” said Ms Susan Tan, financial analyst at AM Best. “Earlier anticipated hikes in minimum catastrophe tariffs to drive premium rate increases are no longer seen as a prerequisite to ensure adequate premium rates to achieve underwriting profitability.”
Philippine Financial Reporting Standard 17
Additionally, the insurance market’s new accounting standard, the Philippine Financial Reporting Standard 17 (PFRS 17), takes effect on 1 January 2025. The implementation of PFRS 17, along with the Own Risk and Solvency Assessment (ORSA) framework adopted in 2023, is a positive development that will elevate risk management quality and financial resilience in the insurance market.
Moderating factors in the outlook revision to ‘Stable’ include the market’s net retention of underwriting risks, which could create earnings volatility, as well as the exposure to natural catastrophe risk, which is high in the Philippines.
Source: asiainsurancereview.com
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