Allianz PNB keen on infra funding

MANILA, Philippines — Bancassurance firm Allianz PNB Insurance Inc. is exploring long-term investments in the infrastructure sector as part of efforts to diversify its investment portfolio.

In a press briefing, Allianz PNB president and CEO Alexander Grenz welcomed the government’s efforts that enable local insurers to participate in the government’s Build Build Build infrastructure program.

“It’s interesting and we are also considering, like everybody else, to put it into the mix of investment strategy,” Grenz told reporters.

However, Grenz said there is still a lack of options in the infrastructure sector where life insurance can place their funds for long-term investments.

“I do think it is promising. However, I think there’s still a possibility of improving that and to leverage better life insurance companies,” Grenz said.

The property and casualty insurance companies are seen to benefit more from infrastructure projects for now, given that a lot of them would give short-term investment opportunities, Grenz said.

“But for life insurance companies, it can be tough sometimes, because what we can provide and what the government should leverage better is long-term investments. So we are looking for vehicles which give us possibility to hedge our risk and hedge our investments over the long-term,” Grenz said.

He said life insurers are more interested in projects or investment vehicles that cover 20 to 30 years with a certain number of guaranteed years.

“So I think it’s a missed opportunity that such vehicles and financial instruments are not catering to the life insurance, particularly,” Grenz said.

To help address this constraint, Grenz is encouraging the government to help identify and facilitate more long-term infrastructure projects.

The Duterte administration is currently embarking on the Build Build Build infrastructure program which will require P8 trillion to P9 trillion in investments over the medium term.

Under the program, the administration lined up 75 big-ticket infrastructure projects.

In support of this program, the Insurance Commission (IC) in December last year released Circular Letter 2018-74, which allowed insurance firms to invest in debt or equity instruments for infrastructure projects under Philippine Development Plan.

It allows insurers to participate in infrastructure projects through various capacities--as project proponents, financiers or operation and maintenance contractors.

Projects that may be undertaken by insurance firms as provided under the PDP include highways, railways, non-rail-based transit facilities, port infrastructure, airports, warehouses, environmental and solid waste management related facilities, and climate change mitigation and adaptation projects.

Last May, the IC also issued Circular Letter 2019-19, which provides that debt and equity instruments related to infrastructure projects are now recognized as a new classification of assets for insurance firms.

It also provided lower capital charges for these type of assets, making infrastructure investments more attractive and cheaper for insurers.