Allianz PNB Life Insurance Inc. (Allianz PNB) is keener to invest in long-term infrastructure projects to enable life insurance companies to leverage on better hedging investment risks.
“What the government should leverage better is long-term investments,” Allianz PNB Life President and CEO Alexander Grenz said in a news conference last Friday in Makati City. “So we are looking for vehicles, which gives us possibility to hedge basically our risk and hedge our investments over long term.”
He said insurance companies like Allianz PNB are looking to invest its funds for a period as long as 20 years to 30 years, which the current regulations do not provide as of yet.
“And we are speaking not only about the five, seven and 10 years, which are the typical in the market but if we could find things that help us to invest 20 years to 30 years with certain guaranteed years; that is something life insurance is highly interactive,” Grenz said. “I think there’s still a possibility to improve that and to leverage better life insurance companies. So I think it’s a missed opportunity that such vehicles and financial instruments are not catering to the life insurance, particularly.”
He explained that although it’s good that the government is encouraging insurance companies to invest in infrastructure projects, under its “Build, Build, Build” program, the private sector also needs to offer more projects made for long-term investments.
According to Grenz, the Philippine Life Insurance Association is facilitating discussion with the Insurance Commission for such platform.
“However, the IC, I don’t think is putting up regulations for that. But in infrastructure, you also see very long-term projects. And some of these longer-term projects we’ll be interested in, possibly investments.”
Last February, the IC gave the go-ahead to insurance companies in the country to invest their funds in state-led infrastructure projects, in a bid to boost the growth of the Philippine economy and help these firms meet the higher net worth requirement imposed on them for this year.
Insurance Commissioner Dennis B. Funa issued Circular Letter 2018-74, which enumerates the guidelines on how local insurance companies can invest their funds in the infrastructure projects of the government under the Philippine Development Plan (PDP).
Under that circular, insurance and reinsurance firms may now invest in debt or equity security instruments for infrastructure projects under the PDP, participating either through the project proponents, financiers or sponsors, or through operation and maintenance contracts.
The 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.
Furthermore, an important feature of the new regulation is methodology in calculating the risk factors of the investments in infrastructure, in order to encourage insurer investment while still safeguarding their financial stability.
The activities that may be undertaken as provided under the PDP include highways, railways, nonrail-based transit facilities, port infrastructure, airports, warehouses, environmental and solid waste management-related facilities, and climate-change mitigation and adaptation infrastructure projects.
The circular states that investments in infrastructure projects without guaranty or contingent liability fund may be considered as reserve investment.