Non-life companies may invest in real properties

THE Insurance Commission said non-life insurance companies may now invest their assets in real properties provided they adhere to the conditions set in the recently signed circular of the commission.

The commission earlier prescribed the parameters to be observed in cases of investments in real properties of non-life insurance companies.

“The new guidelines now allow non-life insurance companies to invest their money in incoming-producing real properties, other than those utilized as its main place of business or offices, provided that the applicant non-life insurance company satisfies the conditions stated therein,” Insurance Commissioner Dennis Funa said Thursday.

Under the circular, only those non-life companies with a minimum networth of P550 million and have complied with the liquidity requirements may invest in income-producing real properties.

In addition, the Insurance Commission requires an applicant-insurance company to adopt a comprehensive liquidity risk framework duly approved by the board of directors.

Liquidity risk relates to the possibility that an insurer will be unable to realize assets to fund its obligations when they fall due.

To ensure compliance with liquidity requirements, an insurance company should adopt a comprehensive liquidity risk framework, which contains strategies, policies and products that will take into account any mismatch between the expected assets and liability cash flows, inability to sell assets quickly, and cash-flow positions, among others.

Funa, however, clarified that such investment was subject to a 20 percent ceiling.

“The aggregate book value of investments in any income producing real property shall not exceed twenty percent of its total net worth of a non-life insurance company as shown in its latest financial statement approved by the IC. Included in the computation of the threshold is the cost of improvement or development of the real property,” Funa said.

Topics: Insurance Commission , Non-life insurance companies , Real properties
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