Insurance commissioner Dennis Funa issued a circular letter allowing insurance companies to invest in infrastructure-related projects under the Philippine Development Plan as a project proponent, financiers/sponsors or under operation and maintenance contract.
According to Funa, the new circular created a new investment channel for insurers and opened new opportunities for insurers to improve risk-adjusted returns, portfolio diversification, and asset-liability matching.
“This circular is aimed at encouraging insurers to invest in domestic infrastructure projects to boost our economy and to reap the benefits of portfolio diversification and higher return,” he said.
“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 said.
Under the circular, investments in infrastructure projects duly approved by the commission would now be considered as admitted assets
One of the important features of the new regulation is a methodology in calculating the risk factors of the investments in infrastructure to encourage insurer investment while still safeguarding their financial stability.
Before investment in infrastructure is approved by the insurance regulator, insurers are required to submit the financial statements of the infrastructure projects which will be evaluated by the regulator to determine the risk impact on the capital of the insurer.
“Lack of sufficient funding for infrastructure presents an opportunity for investors with a long-term horizon, such as insurance companies, that are positioned to provide capital or funding for infrastructure projects,” Funa said.
“Taking into consideration the need for insurers to increase their net worth and the clamor for alternative investment channels, we see that the insurance industry can provide for provision for stable and adequate financing to close the infrastructure funding gap,” he said.
Source: Manila Standard