LOCAL insurance companies may hold a minimum of P10 million in investment unit instruments in a Financial Institutions Strategic Transfer (FIST) corporation, the Insurance Commission said in its latest guidelines.

The commission in a circular letter dated Feb. 21 said the FIST Act identified insurance companies as credit-granting institutions that may invest in and transfer non-performing assets to FIST corporations.

The FIST Act or Republic Act 11523 signed in February last year helps financial institutions clean their balance sheets by selling nonperforming assets to FIST corporations that are registered with the Securities and Exchange Commission.

Under the IC’s guidelines for the industry, any domestic insurance company authorized to transact in the Philippines can hold investment unit instruments in FIST corporations.

The insurance company may only do so if related organizations and people, including subsidiaries, officers, close relatives, do not hold investment unit instruments of the FIST corporation that acquired their non-performing assets.

Organizations and people close to the parent company must also not hold these kinds of instruments in a FIST corporation.

“A life insurance company can invest in equity shares and investment unit instruments up to 10% of its latest verified total admitted assets,” the commission said.

Meanwhile, a non-life insurance company may invest up to 20% of its net worth, based on its most recent approved annual statement.

Insurance companies planning to transfer their non-performing assets to a FIST corporation must file an application for certificate of eligibility with the commission.

The transfer will only be allowed once the insurance company has given notice to the borrowers of the non-performing loans. The borrower must then be informed within 15 business days after the sale or transfer.

Provisions in the circular apply to assets that are non-performing by Dec. 31. — Jenina P. Ibañez

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