Authored by Dennis A. Quintero and Kristina R. Navarro
The Insurance Commission, through Circular Letter No. 2018-74 dated 28 December 2018 (Circular Letter), issued the guidelines for admissibility of investments in infrastructure projects, thereby encouraging insurance and professional reinsurance companies to invest in infrastructure projects under the Philippine Development Plan (PDP) for 2017 to 2022.
Based on the Circular Letter, subject to certain conditions, insurance and professional reinsurance companies may invest either in debt and/or equity security instrument for the infrastructure projects under the PDP through the following participations:
- as project proponent in construction projects;
- as financiers or sponsors in project financing; or
- as regards operation and maintenance contract, through an existing public service facility which will require operation and maintenance and will be paid through consignment or service fees
The Circular Letter provides that investments in infrastructure project with guaranty or with contingent liability fund will be considered as reserve investment. Further, investments in infrastructure project without guaranty or without contingent liability fund may likewise be considered as reserve investment subject to certain limitations.
Prior to approval of the investment, the Insurance Commission will require insurers to submit the financial statements of the infrastructure projects and assess the same to determine the risk impact on the insurer’s capital.
Actions to Consider
Insurance companies should take note of the (i) policy of the IC encouraging investments in infrastructure projects and (ii) the requirements for such investments to become admitted assets to address the insurer’s statutory net worth requirements under the Insurance Code.