Gov’t looking to tap insurance companies to fund PPP projects

THE GOVERNMENT is looking into allowing more insurance companies to finance public-private partnerships (PPPs) amid efforts to ramp up investments in public infrastructure.

“We have been meeting with the [Finance] secretary and other authorities to allow the industry to invest in PPPs... because we are running out of investment opportunities,” Insurance Commissioner Emmanuel F. Dooc told reporters recently.

In a speech during the celebration of the Insurance Commission’s 67th anniversary last month, Finance Secretary Cesar V. Purisima tagged the insurance industry as the “proper match” for infrastructure projects in terms of the length and cost of financing.

“That is something we all have to work together — to make sure that we have regulations that will facilitate investments by the insurance sector in infrastructure,” Mr. Purisima said.

The official noted that funding for infrastructure projects largely comes from the banking sector at present and that such an arrangement could result in “duration mismatches.”

“For example, the longest loan you can get from the banking sector right now is probably 15 years. Then the infrastructure projects are all very long-term, requiring contracts with government of up to 30 years.”

BETTER RETURNS

Mr. Dooc said the IC plans to reactivate its investment advisory council to facilitate the crafting of regulations aimed at “encouraging” more insurance companies to invest in PPP projects.

Infrastructure projects, including those under the PPP scheme, could provide insurance companies another investment opportunity and better returns, he said.

The commissioner cited Sun Life of Canada (Philippines) Inc., which already received the go signal from its parent Sun Life Financial Inc. to invest in a power plant project in Mindanao. The insurer has also expressed interest in participating in PPPs.

“We hope to replicate that. I cannot give you the timeline now, but hopefully this year we will be seeing some non- traditional investments,” Mr. Dooc said.

Allowing insurance companies to invest in PPPs, in turn, would help the government bridge the

infrastructure financing gap needed to support the economy’s expansion, the official said.

The Philippines needs about $11.56 billion yearly to meet its infrastructure needs from 2010 to 2020, according to an estimate from multilateral lender Asian Development Bank.

For this year, the government allocated about P766.5 billion — equivalent to 5% of gross domestic product — of the P3.002 trillion national budget for public infrastructure.

“The insurance industry is going to be an important component of the Philippine Growth Plan especially as we continue to direct our resources more infrastructure projects,” Mr. Purisima said.