Guidelines on Investments in Infrastructure Projects under the Philippine Development Plan
Background
This Circular Letter (CL) provides the framework for investments that an insurance or professional reinsurance company ("regulated entities") may undertake. This CL aims to provide a comprehensive framework on investments in infrastructure projects to encourage regulated entities to invest in infrastructure projects under the PDP while complying with the statutory net worth and risk-based capital requirements, as well as other applicable rules and regulations of the Commission.
Forms of Investment
Regulated entities may participate in the implementation of infrastructure projects/activities through any or a combination of the following:
- Equity investment in the Private Proponent, wherein a regulated entity invests capital in an infrastructure project; or
- Debt investment in the Private Proponent, wherein a regulated entity may invest as a financier or sponsor of an infrastructure project.
Investment Limitation
Investments in infrastructure projects under the PDP shall be subject to the following limitations:
- For Life lnsurance Companies Life lnsurance Companies – The total allowable investments in infrastructure projects under the PDP shall not exceed forty percent (40%) of the investing company's admitted assets as per its latest approved annual statement.
- For Non-Life lnsurance Companies and Professional Reinsurance Companies – The total allowable investments in infrastructure projects under the PDP shall not exceed forty percent (40%) of the investing company's net worth as per its latest approved annual statement.
Risk-based Capital Considerations
In calculating the risk charges relating to investments in infrastructure projects, the following shall be applied:
- Debt Instruments – The risk charge on a debt instrument relating to the investment in an infrastructure project shall be 6%. The Commission may, at its discretion, impose a lower risk charge considering a high credit rating on the instrument given by an external credit rating agency. Any variance from the risk charge of 6% shall require prior approval of the Commission.
- Equity Instruments – The risk charge on an equity instrument relating to an investment in an infrastructure project shall be 9%
Pre-Approval Requirements
A regulated entity seeking approval of its investment in an infrastructure project shall submit the following documents for the Commission's evaluation and assessment:
- Written request addressed to the lnsurance Commissioner for approval to invest in an infrastructure project activity;
- Regulated entity's Board Resolution approving the investment in the infrastructure project;
- Latest Audited Financial Statement of the Private Proponent (for existing projects);
- Copy of the Government Approval of the Project; and
- Financial projections accompanied by supporting documents and scenario analysis or stress testings to assess the company's resilience against severe but plausible macroeconomic stresses affecting the infrastructure projects/activities.
Effectivity
This circular shall take effect immediately
Please see attached circular for the list of allowed types of infrastructure or activities and for further guidance.
