Regulator increases investment allocations for preneed insurers

Troubled sector receives relief from pressure caused by flat and declining investment yields

Regulator increases investment allocations for preneed insurers

Insurance News

By Gabriel Olano

The Philippines’ insurance regulator on Monday raised the cap on preneed insurers’ investment allocations, alleviating some of the pressure on the struggling sector.

The Insurance Commission issued an order allowing a 2% increase in the investment allocation threshold. This allows insurers to invest up to 17% of their funds in long-term commercial paper, up from the previous 15%. Investments in direct loans now have a maximum level of 7%; equities at 32%; and real estate at 12%.

Preneed insurers typically offer non-life insurance products such as pension, education, and funeral policies.

Data from the regulator showed that almost 700,000 preneed policies were sold in 2016, almost unchanged from the 2015 figure. The sector had total assets of PHP120 billion (US$2.4 billion), with PHP101 billion (US$2.02 billion) invested in various instruments.

The decision to raise the investment caps was due to a trend of flat and declining investment yields, which caused concern among insurers and regulators.

“Considering this situation and the current limit under the Pre-Need Code, which prevent the trustee banks of preneed companies from taking full advantage of instruments with higher returns, the Insurance Commission decided to increase the present threshold,” Insurance Commission chief Dennis Funa told the Inquirer.

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