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Philippines Insurance Report Q2 2008
Business Monitor International, June 2008, Pages: 33
The Philippines Insurance Report provides independent forecasts and competitive intelligence on Philippines insurance industry.
As was the case in Q108, the main focus of this report is BMI’s proprietary Insurance Business Environment Rating (IBER). The rating brings together a number of pieces of relevant quantitative data, together with BMI’s Country Risk Rating (CRR). The IBER makes it easier for the insurance sector business environment in a particular country to be compared with the business environment for any other BMI-monitored industry in that country. The IBER also allows an objective and meaningful comparison of the insurance sector business environment between countries. Over the coming months, we will substantially change the format of the BMI insurance reports. In essence, we will focus to a much greater extent on the companies that are active in the non-life and life segments.
The Philippines IBER is 51.4. Relative to other countries in the Asia Pacific it is a medium-sized market, although much less-developed than it immediate neighbours. Regionally it equates to Indonesia in terms of penetration and density. Its IBER is significantly held back by a heavy bureaucratic and tax burden in a generally unhelpful regulatory environment. The Philippines stands out for its highly fragmented insurance market.
Over the forecast period, we anticipate that non-life premiums will grow by 20% annually in local currency terms and by 10% in US$ terms. Life premiums are expected to increase by 6% annually in local currency terms and by 9% in US$ terms. The key driver of growth in the non-life segment in 2007-2012 is the anticipated rise in nominal GDP from around US$141.4bn to US$196.9bn. Nevertheless non-life penetration is expected to be sluggish with around 0.65% to 0.75% of GDP. Life penetration is likely to perform even worse rising from 0.85% to 0.94% over the period. However, life density is expected to be the key driver of growth with the envisaged rise from a miniscule US$14.02 per capita in 2007 to US$20 per capita in 2012. The Philippines’ total population is growing slowly.
The Philippines insurance sector has relatively few barriers to entry and has tried and tested strong brands that have weathered many adverse conditions in the market over the year. The competitive landscape, in both the non-life and the life segment, is extremely fragmented by any comparison. Both segments are open to participation by foreign groups and these have been prepared to overlook the challenges of doing business in the Philippines, possibly because their ability to insure offshore companies against risks in the country gives them an advantage over local groups.
Perhaps the most significant obstacle the industry faces is the heavy tax burden put on premiums, as it erodes corporate profit margins and discourages new customers. Combined with this, the economy is expected to continue a slowdown and there are ongoing security and stability concerns in the country. Notwithstanding these general negatives, the low penetration rates indicate that there is obviously room for growth, in the event of improvements to the tax regime and an eventual upturn in the economy.
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