THE Insurance Commission (IC) has issued guidelines on insurers’ investment on real estate investment trusts (REIT), admitting such as assets.

In a circular posted on its website on June 21, the IC allowed all insurance and reinsurance firms, pre-need companies and mutual benefit associations (MBA) to invest in REITs, which shall qualify as admitted assets.

“While the Insurance Code specifically allows insurance companies to invest in REITs, it is not a self-executory provision. In other words, there is a need for the issuance of implementing rules and regulations,” Insurance Commissioner Dennis B. Funa was quoted as saying in a separate statement on Wednesday.

The circular said the REIT must have prior approval of the Securities and Exchange Commission. Only publicly-listed REITs can treated as admitted assets of an insurer or pre-need firm.

Investments by a life insurer or an MBA in REITs should not exceed 10% of their total admitted assets, while that of a non-life insurance firm or professional reinsurance company should not exceed 20% of its net worth.

For pre-need companies, the maximum investment amount in REITs is at 15% of their total trust fund.

Investments in REITs shall be subject to a risk-based capital charge of 25%, in accordance with the amended Risk-Based Capital Framework.

Under Republic Act No. 9856, REITs are listed corporations that own and operate income-generating real estate assets such as offices, apartment buildings, hotels, warehouses, shopping centers and highways.

Mr. Funa said no local REIT has been incorporated or established even as it lapsed into law a decade ago, since market players claim that legal and administrative requirements have made investment in domestic REIT market difficult.

“Taking into consideration much-anticipated amendments to the implementing rules and regulations of the REIT Law by the SEC (Securities and Exchange Commission) and the ‘Build Build Build’ infrastructure program…, the issuance of the investment guidelines in REIT…is very timely to ensure that insurers and pre-need industry players are well-prepared,” he added.

The SEC said it can release guidelines on the issuance of REITs as early as July without changing the minimum public ownership requirement.

Ayala Land, Inc. said last April that it is preparing a REIT offering where it could raise about P25-26 billion within the year. Meanwhile, DoubleDragon Properties Corp. is anchoring its next stage of growth on the hospitality and industrial sectors in preparation for a REIT offering.

“The new regulation will allow the insurance and pre-need companies to hit the ground running as early as the first listing of a Philippine REIT,” Mr. Funa added. — K.A.N. Vidal

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