Insurance Commissioner Emmanuel F. Dooc has allowed insurance companies, reinsurance companies and mutual benefit associations (MBAs) to invest in mutual funds and unit investment trust funds (UITFs), subject to certain conditions.
To give additional investment outlets for insurance companies, Dooc has issued Circular Letter 2014-50 to give insurance companies more leeway in their choices for investment in mutual funds and UITFs.
The new circular supersedes the old directive which provided that investments in mutual funds could only be made if such mutual funds are invested in fixed income funds only.
The new circular provides that the mutual funds, or UITF, in which an insurance company may invest are placed in either fixed-income securities, equities, or a mix of both.
The aggregate placements in each fund (mutual fund or UITF), based on the company’s latest synopsis, should also not exceed 10 percent of the total admitted assets of a life insurance company or MBA, or 20 percent of the net worth of a nonlife insurance company or professional reinsurance company.
Under the amended insurance code, investments in mutual funds and UITF are expressly allowed, subject to certain conditions as may be provided for by the insurance commissioner.
These kinds of investments are considered as reserve investments, which means that these investments will be considered by the Insurance Commission as part of its admitted assets when computing for the margin of solvency that insurance companies are required to maintain to ensure that they would be able to settle claims by policy-holders.