Global credit ratings agency AM Best has revised its outlook for the Philippine non-life insurance market from negative to stable, citing strong investment yields, insurance market growth, and a supportive economic environment.The agency stated in a new report that the high domestic interest rate environment will keep insurers’ investment yields strong as they reinvest maturing assets into higher-yielding fixed-income instruments.
Growth Across Personal and Commercial Lines
Opportunities in both personal and commercial insurance lines are driving market expansion. While fire and motor remain the dominant business lines by premium share, the market saw double-digit growth in 2023 for casualty, health, and accident insurance.
Pricing Momentum Builds in Property Insurance
Primary rate increases in the property segment are now catching up with reinsurance rate hikes, although competitive pressures continue to limit pricing power.Susan Tan, Financial Analyst at AM Best, noted that insurers are gaining confidence in setting adequate premium rates without relying on mandated minimum catastrophe tariffs.The market had previously hesitated to raise prices due to fears of losing market share, but this trend is shifting as underwriting discipline improves.
Strong Economic Growth Supports Insurance Demand
The Central Bank of the Philippines forecasts real GDP growth of 6% to 7% in 2024, driven by improved global conditions, a rebound in tourism, labor market gains, and higher infrastructure spending. This robust economic outlook is expected to sustain demand for insurance products.
Regulatory Reforms Enhance Resilience
The upcoming implementation of the Philippine Financial Reporting Standard 17 (PFRS 17) on January 1, 2025, along with the Own Risk and Solvency Assessment (ORSA) framework adopted in 2023, is viewed as a positive step forward.AM Best believes these developments will improve risk management quality and strengthen the financial resilience of the insurance sector.
Risks Remain Despite Improved Outlook
Despite the positive revision, certain challenges persist. The market’s high net retention of underwriting risks could lead to earnings volatility. Additionally, the Philippines’ significant exposure to natural catastrophes remains a key risk factor given its geographic vulnerability.
- High investment yields are supporting profitability
- Diversified growth is emerging beyond traditional lines
- Pricing discipline is improving in property insurance
- Regulatory reforms are strengthening governance
- Natural catastrophe exposure and net retention pose ongoing risks
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