The insurance industry in the Philippines is experiencing a more optimistic outlook due to favorable investment yields, driven by the high domestic interest rate environment. According to AM Best, as companies reinvest their assets into higher-yielding fixed-income instruments upon maturity, insurers’ investment returns remain robust.
In its Best’s Market Segment Report, “Market Segment Outlook: Philippines Non-Life Insurance,” AM Best upgraded the market segment outlook for the Philippine non-life insurance market from ‘Negative’ to ‘Stable.’ This revision is attributed to strong investment yields, alongside insurance market and economic growth.
The growth of the insurance market is also being propelled by opportunities in both personal and commercial lines. While fire and motor remain the primary non-life business lines in terms of premium share, there was a notable double-digit increase in the casualty, health, and accident lines in 2023. Additionally, primary rate increases in the property line are aligning more closely with reinsurance rate hikes, despite ongoing rate pressure from market competition.
“The market has struggled to keep pace with reinsurance rate increases for the property line due to a general reluctance to lose market share. However, this trend is now shifting,” said Susan Tan, a financial analyst at AM Best. “Earlier anticipated hikes in minimum catastrophe tariffs, once seen as necessary to drive premium rate increases, are no longer viewed as essential for achieving underwriting profitability.”
Further contributing to the positive outlook is the implementation of new regulatory standards. The Philippine Financial Reporting Standard 17 (PFRS 17), set to take effect on January 1, 2025, along with the Own Risk and Solvency Assessment (ORSA) framework adopted in 2023, is expected to enhance risk management quality and financial resilience within the insurance market.
Despite the positive developments, some factors temper the outlook revision to ‘Stable.’ The market’s net retention of underwriting risks could lead to earnings volatility, and the Philippines remains highly exposed to natural catastrophe risk.
