Insurance Companies Can Now Participate In ‘Build, Build, Build’ Projects

Your trusted insurance company can now become a part of the government’s massive Build, Build, Build infrastructure program.

The Insurance Commission (IC) published a circular that would allow insurers to invest in the government’s “Build, Build, Build” program.

Insurance Companies can now participate in Build Build Build

A circular issued by Insurance Commissioner Dennis B. Funa states that insurance and reinsurance firms can “now invest in debt or equity security instruments for infrastructure projects under the Philippine Development Plan.”

New investment channels for insurers

According to IC Circular Letter No. 2018-74, insurance companies can now participate in big-ticket government projects through any of the following options: as project proponents, financiers or sponsors, and operation and maintenance contractors.

“The new circular creates a new investment channel for insurers and opens 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,” said Funa.

Through the circular, some of the programs under the “Build, Build, Build” project of the Duterte administration that can be undertaken by the insurance companies are as follows:

  • Highways and other road projects like expressways and bridges
  • Railways and other non-rail mass transit programs
  • Sea port and airport projects
  • Energy related projects
  • Telecommunications and information technology infrastructure
  • Agricultural and fishery facilities
  • Agricultural and market structures

“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,” said Funa.

(Read: ‘Build, Build, Build’ Projects To Earn P31 Trillion And Generate Over A Million Jobs)

Funding for Infrastructure projects

Why did the IC give insurers the green light to become part of the Duterte administration’s massive infrastructure program?

According to Funa, insurance firms will benefit under the program in two ways: Companies can bolster their net worth through pouring their assets in the following projects and become instrumental in the nation-building task through creating long-term structural programs.

“Lack of sufficient funding for infrastructure presents an opportunity for investors with long-term horizon, such as insurance companies, that are positioned to provide capital or funding for infrastructure projects. 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,” Funa said.

Under the circular, any form of investment poured in by insurers in the infrastructure projects will be considered admitted assets, along with mortgages, stocks, bonds, and accounts receivable.

“Before an 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,” the Insurance Commissioner said.

Although the gates are now open for said firms to become part of the “Build, Build, Build” program, what are the safeguards placed by the IC to make sure that their capital won’t take a hit in case the investment tanks?

According to the circular, companies are required to submit the “financial statements of the infrastructure projects,” which will be subject for evaluation by the Insurance Commission.