• They noted that their present paid up capital of P125 million is more than enough for the size of their market

Ten non-life insurers went to court early this week to stop what they labeled as "oppressive" minimum capitalization requirement of the Department of Finance (DOF) which could cause their demise and that of other small- and medium-sized companies.

In a 32-page motion filed before the Quezon City Regional Trial Court branch 98, the 10 insurers said they would be put out of business if the court doesn't stop Finance Secretary Cesar Purisima who wants all insurance companies to have minimum paid-up capitalization way beyond what the market could support.

The 10 insurers are Security Pacific Assurance Corp., Visayan Surety and Insurance Corp., Finman General Assurance Corp., Milestone Guaranty and Assurance Corp., R & B Insurance Corp., Industrial Insurance Company., Philippine Phoenix Insurance and Surety Corp., Mercantile Insurance Company, Great Domestic Insurance Company of the Philippines, and Insurance of the Philippine Islands Company.

Based on Insurance Commission records, these companies have paid-up capitalization of P100 million to P125 million each but they claim they are no longer capable of raising their capital to P175 million. Their failure to meet the P175 million by end of this month would result in the non-issuance of license for them to operate.

Purisima has been adamant in pursuing Department Order 27-2006 which mandates an increase in the required paid-up capital of all insurance companies in the country. The original order wanted to raise the capital from P50 million before 2006 to P500 million in 2015. However, Purisima raised the requirement further to P1 billion by 2016 without citing any basis. He only said that "small companies have no place in the insurance business."

In their motion, the 10 companies insist that they have been in the insurance business for decades and have not been remiss in paying their obligations to their customers.

They noted that their present paid up capital of P125 million is more than enough for the size of their market. They also argued that though they are small and medium-sized non-life insurance firms, they are considered to be in good standing if you would take the controversial DoF order out of the equation.

"Apart from the arbitrary and oppressive compliance fixed capitalization requirement by DO 27-2006, there is no other governmental regulation or imposition that we have failed to meet," said the companies in their motion.

They added that insurance is based on fundamental principles such as the law of large numbers, distribution of risks, and accumulation of a common fund from which the claims are paid.

The 10 companies urged the court to issue the temporary restraining order, stressing that the continued implementation of the DoF's order would cause severe losses to them, to their employees and their respective families.*