Guidelines for foreign currency investments

Republic Act No. 8183 repeals Republic Act No. 529 (the Uniform Currency Act).
The Insurance Commission coordinates with the Investment Advisory Committee and the Joint Financial Committee in issuing these guidelines.
The guidelines direct that the pertinent provisions of the Insurance Code on investments shall apply to foreign investments.

The guidelines establish requirements governing foreign currency denominated investments and insurance policies.
The guidelines regulate the allowable foreign currencies, the permitted investment instruments, and the matching and accounting treatment for foreign currency assets and liabilities.

Only foreign currencies acceptable to the Bangko Sentral ng Pilipinas (BSP) as part of its international reserves shall be allowed.
The acceptability standard for foreign currencies is the BSP international reserves criterion.

Foreign currency denominated investments that may be allowed include issues of the Philippine government or Philippine government-owned or controlled corporations.
Foreign currency denominated investments may include issues of Philippine private corporations with a credit rating of at least BB+ or its equivalent.
Foreign currency denominated investments may include issues of foreign governments with a credit rating of BB+ or better as rated by an international credit rating agency acceptable to the Insurance Commission.
Foreign currency denominated investments may include issues of foreign corporations with a credit rating of at least BBB as rated by an international credit rating agency acceptable to the Insurance Commission.

Loans against mortgages on real properties outside the Philippines are treated as surplus investments.
The mortgage-loan category is allowed only if the laws of the country where the property is located allow the tender to own real estate property in the event of foreclosure.
Investments in venture are treated as surplus investments when made in accordance with rules and regulations and upon prior approval of the Insurance Commission.
Loans guaranteed by banks of foreign countries are treated as allowed investments when the guarantor bank has a credit rating of at least BBB as rated by an international credit rating agency acceptable to the Insurance Commission.

Reserves and other liabilities in a foreign currency must be matched with assets in the same currency to at least 50%.
Exceptions may be granted where aggregate liabilities in a foreign currency are less than 10% of the company’s total foreign currency liabilities.
The guidelines require that the pertinent provisions of the Insurance Code on investments apply to foreign investments.

All liabilities resulting from the insurance of a foreign currency denominated policy must be valued in the same currency used in the insurance policy.
All foreign currency assets must be booked in the currency stated in the underlying instrument/document; when no instrument/document basis exists, assets must be booked in the currency of the country where the asset is physically located.
Only cash holdings in acceptable foreign currencies (as defined by the BSP international reserves standard) are allowed.
Premium-related taxes and documentary stamp taxes must be based on the peso equivalent of the premium or sum assured, as the case may be, at the time the taxes are due in accordance with BIR regulations.
Commissions must be paid in the currency agreed upon in the agency contract.
Policy benefits and claims must be payable in the currency of the insurance policy; payment may be made in another currency only subject to the agreement between the claimant and the insurance company.
Premiums must be billed in the same currency as the policy issued; payment may be made in another currency only subject to the agreement between the policy holder and the insurance company.
Income arising from foreign currency investments must be recognized in the currency of the instrument; if the instrument specifies another currency, investment income must be valued in that specified currency.

For original transaction recording, foreign currency assets and liabilities must be recorded in their original currency, then converted to Philippine Peso using the exchange rate used by the individual insurance company at the time the assets were acquired or liabilities incurred.
For periodic and annual reporting, foreign currency assets and liabilities must be converted to Philippine peso based on the BSP guiding rate at the end of the reporting period.
Unrealized foreign exchange gain or loss must be recognized as Fluctuation Reserve-Foreign Exchange.
Realized foreign exchange gain or loss must be recognized as income or loss in the Income Statement.
Schedules showing balance sheet items in foreign currency values and their peso equivalent must be submitted with the Annual Statement.
If an account consists of multiple currencies, a sub-schedule showing the currency breakdown must likewise be submitted with the Annual Statement.