The Philippines' Insurance Commission (IC) has lowered the capital charges for investments made in infrastructure projects, reported local publication The Philippine Star. The move intends to spur insurers to participate in the state's significant infrastructure development efforts, and comes after the publication of IC Circular Letter No. 2019-19 which was recently signed by Insurance Commissioner Dennis Funa who said the move was announced following "the clamour of the insurance industry."

According to the new circular, debt and equity instruments related to infrastructure projects which are included in the Philippine Development Plan (PDP) are now recognised as a new classification of assets for insurance firms. Mr Funa said that the circular provided lower capital charges for these type of assets resulting in infrastructure investments being more attractive and cheaper for insurers.

“The risk calibration for debt instruments has been reduced to 6% while the risk charges for investment in equity shares were likewise reduced to 9%. This is a substantial improvement compared to the previous calibration,” said Mr Funa.

Previously, capital charges relating to investments in infrastructure projects were subject to risk calibration ranging between 1.25% to 24% for debt instruments and 40% to 55% for equity investments. Meanwhile, the risk charges for debt and equity instruments had no distinction as to whether or not they are infrastructure-related.

“The reduction in risk charges of investment in infrastructure projects of the government demonstrates the recognition by this commission that these investments exhibit better recovery rates than corporate debt and provide relatively stable long-term cash flow. As a result of the imposition of better capital charges, insurers will find it more attractive, easier and cheaper to invest in infrastructure projects,” said Mr Funa.