PH insurance companies allowed to invest in UITFs

Regulators have revised the rules governing the additional investment outlets for insurance firms, with the inclusion of unit investment trust funds (UITFs).

Last week, the Insurance Commission (IC) released Circular Letter (CL) 2014-50, which implements Section 202 (j) of the Amended Insurance Code under Republic Act 10607 approved in August last year.

CL 2014-50, issued by Insurance Commissioner Emmanuel F. Dooc on Dec. 11, supersedes CL 01-2012, which covered only investments in mutual funds.

Under the new circular, insurance and reinsurance companies as well as mutual benefit associations (MBAs) may now invest not only in mutual funds but also in UITFs.

Investments in mutual funds must first be approved by the Securities and Exchange Commission, while UITF investments must have prior approval by the Bangko Sentral ng Pilipinas.

These funds should be placed in equities, fixed income securities, or a combination of both. Previously, investments in mutual funds had been limited to fixed income funds.

As for the aggregate placements in the funds, the maximum exposure (based on the company’s latest synopsis) should be as follows: 10 percent of the total admitted assets for life insurance companies and MBAs; and 20 percent of the net worth in the case of non-life as well as professional reinsurance firms.

Additional investments in these funds will be considered “reserve investment.”

They used to be considered “surplus investment” under CL 01-2012.

The latest IC data showed that at end-September, cumulative investments of insurance companies reached P799.4 billion, of which more than half or P417.8 billion were invested in bonds—P378.8 billion in government bonds and P39.1 billion in corporate bonds.

Over a fifth or P181.7 billion had been placed in equities or shares of stocks, while the remaining P199.9 billion were investments made in loans, mutual funds, or real estate.