Through Circular Letter 2016-07 issued on 5 February 2016, the insurance commissioner enacted guidelines seeking to monitor the establishment and activities of branch offices outside the Philippines of domestic insurance companies.
A branch office is defined as an operating entity, which is not a legal entity separate from the domestic insurance company, but forms part thereof in terms of its organization. Its capital is held by the domestic insurance company.
A domestic insurance company seeking to establish a branch office outside the Philippines must comply with the following requirements:
- A minimum paid-up capital and net worth required under Section 194 of the New Insurance Code;
- The domestic insurance company must have strong internal control, adequate risk management and governance systems; and
- The branch has secured the necessary license in the foreign jurisdiction where it seeks to operate.
Prior approval of the Insurance Commission is required for a branch of a domestic insurance company to carry out activities in other jurisdictions. Approval of the Insurance Commission must also be secured for any sales, purchases, exchanges, loans or extension of credit or investments made by the foreign branch.
Under the guidelines issued by the insurance commissioner, approved foreign branches are:
- subject to monitoring and regulatory requirements to ensure the stability of its parent domestic insurance company;
- required to limit the risk exposure of policyholders from the host jurisdiction to the risks associated with the foreign branch's legal structure;
- required to maintain readily available assets that correspond to its insurance liabilities and the required capital;
- required to submit annually its audited financial statements to the Philippine Insurance Commission not later than every 30th day of March each year; and
- obligated to provide the names of its representatives or officers in the jurisdiction where it operates.
The insurance commissioner may likewise issue further guidelines pursuant to its power to monitor the activities of branches established outside the Philippines.