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Regulator broadens investment avenue for insurers

The Insurance Commission is allowing insurers, reinsurers and mutual benefit associations to invest in foreign-currency-denominated debt and equities securities.

Only foreign currencies acceptable to the Bangko Sentral ng Pilippinas as part of its international reserves are allowed.

This loosening of investment rules was announced by Insurance Commissioner Dennis B Funa in a circular dated 10 September that widens the investment channel for (re)insurers.

Also allowed as investments are:

  • Collective Investment Schemes (i.e. mutual funds, unit investment trust funds, exchange traded funds, REITs, etc ) provided, however, that the underlying basket is fully or substantially composed of fixed-income securities or, when the basket is composed of equity securities, it must be that of a broad-market index;

  • certain unrated financial instruments;

  • below investment grade and unrated financial instruments not guaranteed by any third party entity, subject to the approval of the Insurance Commission.

For derivatives, aside from swaps and forwards, the IC has added options and futures as allowable instruments so local insurers can hedge risks from their foreign currency-denominated assets.

Mr Funa said that the investment vehicles, which are subject to the prior approval of the Insurance Commission, will help insurance companies in risk diversification, hedging and improving portfolio liquidity.

This will also allow life and non-life insurers to sell foreign currency-denominated insurance products to their policyholders.

The circular also sets out caps on investments in the various financial instruments.


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