The government’s trillion-peso Build, Build, Build infrastructure program is a boon to the insurance sector asthe Insurance Commission (IC) moved to allow regulated companies to invest in the debt or equity securities of infrastructure projects.
With the administration’s “Build, Build, Build” Program in full swing, insurers can take advantage of investing their assets in infrastructure projects to aid them in improving their revenue that would address their compliance with the statutory net worth requirements under the Insurance Code
Fortune General Insurance Corp. president and chief operating officer Mitch Rellosa said the new regulation gives industry players another avenue to place their funds.
“It’s good in general because it gives us more choices in investing,” Rellosa said.
He explained that since insurance companies are required to have a minimum capital of P900 million by end-2019 and P1.3 billion by end-2022, these firms have more assets in their hands.
He cited that the “size of the industry does not support that amount of capital,” thus, the latest IC regulation is good for the players. “We welcome this. We may now be able to invest in the projects of the government and have better returns,” he said.
Prior to the issuance of the Circular, insurance companies are only allowed to invest in government-issued securities, mutual funds and unit investment trust funds that are placed in equities fixed income securities or a combination.
Rellosa said under the additional investment options for insurance firms, those that are part of conglomerates with construction-related businesses have an edge over those without because they have better access to projects.
He, however, said other companies are not really disadvantaged because they may be approached by construction companies for possible funding. “The whole point is, there are more chances for us now for a wide array of investment products,” he added.
Under IC Circular Letter 2018-74, insurance and reinsurance companies may invest in infrastructure projects under the Philippine Development Plan as a project proponent, financier/sponsor or through an operation and maintenance contract.
The IC, in a statement, said the amount to be invested in infrastructure projects that the agency has approved “shall now be considered as admitted assets.”
Insurance Commissioner Dennis Funa said the circular aims to encourage players to invest in domestic infrastructure projects that will help boost economic growth.
“With the administration’s ‘Build, Build, Build’ Program in full swing, insurers can take advantage of investing their assets in infrastructure projects to aid them in improving their revenue that would address their compliance with the statutory net worth requirements under the Insurance Code,” he added.