Accounting Alert

This Accounting Alert is issued to circulate Insurance Commission (IC/Commission) Circular Letter (CL) No. 2021-61 dated October 31, 2021 on the guidelines on the minimum capitalization and net worth requirements for cooperative insurance companies.

Overview

The IC circular letter No 2021-61, guidelines on the minimum paid-up capitalization and net worth requirements for cooperative insurance companies, was issued to clarify the provision of the Amended Insurance Code insofar as the minimum paid-up and minimum net worth requirements for insurance cooperatives are concerned, and apply the provisions of Rule 3 of the Insurance Cooperatives' revised rules and regulations implementing certain and special provisions of the Philippine Cooperative Code of 2008.

New Cooperative Insurers

The following are the guidelines for a new cooperative insurance company:

1. No new cooperative insurance company shall be allowed to do insurance business and be licensed as such unless it has paid-up capital of at least 50% of what is required under the Amended Insurance Code and subsequent amendments thereto. 
2. A new cooperative insurance company,  other than those existing and licensed at the time of the effectivity of the Amended Insurance Code, is considered as a new cooperative insurer.
3. A new cooperative insurance company's minimum paid-up capital must remain unimpaired but shall subsequently follow the minimum net worth requirements for an existing cooperative insurance company for the continuance of the license.

Existing Cooperative Insurers

For existing cooperative insurance company, the following are the applicable guidelines:

1. The minimum net worth shall comply with the amounts and schedule of compliance provided in the table below:

2. A cooperative insurance company is classified as "existing" if the same is already authorized to transact business prior to and at the time of the effectivity of the Amended Insurance Code.

3. The minimum paid-up capital of an existing cooperative insurance company, as required under applicable laws, rules or regulations prior to the effectivity of the Amended Insurance Code, must remain unimpaired for the continuance of the license. 

Increase in the Minimum Capitalization

The Secretary of Finance may, upon recommendation of the Insurance Commissioner, increase such minimum paid-up capitalization and/or minimum net worth requirements under such term and conditions as he may impose, to an amount which, in his opinion, would reasonably assure the safety of the interests of the policyholders and the public. The minimum paid-up capital and net worth requirements must remain unimpaired for the continuance of the license.

See attached Circular Letter for further details.