Investment in Income Producing Real Properties

August 22, 2017 INSURANCE CIRCULAR LETTER NO. 043-17 Supersedes: None TO : All Non-Life Insurance Companies Doing Business in the Philippines SUBJECT : Investment in Income Producing Real Properties For the purpose of further enhancing the Capital Build Up Program of insurance companies in view of the country's prevailing low interest rate environment, any non-life insurance company may acquire real property, other than property to be used primarily for the accommodation of its own business, as an investment for the production of income or may acquire real property to be improved or developed for such investment purpose. This shall be considered as admitted asset pursuant to the provisions of Section 202 of the Insurance Code, as amended by R.A. No. 10607, stated as follows: "(b) Investments in securities, including money market instruments, and in real property acquired or held in accordance with and subject to the applicable provisions of this Code and the income realized therefrom or accrued thereon . (k) Other assets, not inconsistent with the provisions of paragraph (a) to (j) hereof, which are deemed by the Commissioner to be readily realizable and available for the payment of losses and claims at values to be determined by him in a circular, rule or regulation." subject to the following conditions: 1. Qualification: Only those non-life insurance companies with a minimum networth of five hundred fifty million pesos (Php550,000,000.00) and have complied with the liquidity requirements may invest in income producing real properties. A company should adopt a comprehensive liquidity risk management framework that requires maintaining sufficient liquidity to withstand a range of stress events. The said framework shall be duly approved by the Board of Directors. IAcDET 2. Limitation: The aggregate book value of the Investments in any income producing real property including the cost of improvement or development thereof shall not exceed twenty percent (20%) of the networth of the non-life insurance company as shown in its latest financial statement approved by the Commissioner. 3. Other requirements: A. The real property shall be registered under the name of the company with tax declaration and latest proof of real estate tax payment. B. A written request shall be submitted for approval of the investment together with the following: 1. Five (5)-year projected income including assumptions thereof; 2. Intended occupants and period/term of stay; 3. Copy of the proposed rental/lease contract; 4. Photocopy of the Transfer of Certificate of Title (TCT) and/or Condominium Certificate of Title (CCT) of the subject property; and 5. Pertinent Board Resolutions. C. Quarterly statement of rental income duly certified by the company's internal auditor. (See blank form in Annex A) 4. This shall be considered as reserve investment. For strict compliance. (SGD.) DENNIS B. FUNA Insurance Commissioner ANNEX A _____________________________________ Name of Company STATEMENT OF RENTAL INCOME For the Quarter Ended _____ Year _____ For the month of: _____________ Lessee/Tenant Property Description Terms of Contract Official Receipt Nos./Date Rental Income (Amount) For the month of: _____________ Lessee/Tenant Property Description Terms of Contract Official Receipt Nos./Date Rental Income (Amount) For the month of: _____________ Lessee/Tenant Property Description Terms of Contract Official Receipt Nos./Date Rental Income (Amount) Certified by: _____________________ Printed Name Designation