The Insurance Commission (IC) has updated guidelines for investments in infrastructure projects under the Philippine Development Plan (PDP).
The new Circular Letter (CL), approved on 14 November 2024, provides a framework for infrastructure investments that an insurance or professional reinsurance company may undertake. These allowable investments factor in the determination of the entities’ compliance with statutory prudential requirements, says the IC.
The issuance of the new CL was prompted by President Ferdinand R Marcos, Jr’s approval of his eight-point socioeconomic agenda under the PDP for 2023 until 2028. The new CL supersedes CLs pertaining to allowable investments under the PDP for the years 2017 to 2022.
“With the issuance of the PDP for 2023 to 2028, there was a need for the Commission to review and update its guidelines on allowable investments in infrastructure projects under the PDP with the objective of aligning policy with the President’s agenda,” said Insurance Commissioner Mr Reynaldo A. Regalado.
Allowable investments
Regulated insurers or reinsurers may undertake either or a combination of an equity investment, by which the regulated entity invests capital in the project, and/or a debt investment as a financier or a sponsor of an infrastructure project. The investments shall require the prior approval of the Commission.
For life insurance companies, the total allowable investments in infrastructure projects under the PDP shall not exceed 40% of their admitted assets, respectively, per their latest approved annual statements.
For non-life insurance companies and professional reinsurers, the total allowable investments in infrastructure projects under the PDP shall not exceed 40% of their respective net worth, per their latest approved annual statements
In the determination of an insurer or professional reinsurer’s compliance with the risk-based capital requirement, which is also a prudential requirement by the Commission, the new CL imposes risk charges relating to investments in PDP infrastructure projects. The risk charge for equity instruments is 9%, while the charge for debt instruments is 6%. However, the Commission may impose a lower risk charge for debt instruments if the same have high credit ratings given by an external credit rating agency.
Mr Regalado said, “The Commission will be closely coordinating with the Department of Finance, the National Economic Development Authority, and the Public-Private Partnership to ensure that requests for these kinds of investments are in line with national government policy objectives.”