on October 23, 2012 by admin in Insurance Industry, Comments (0)

Argentina to Require Insurance Companies to Invest in Public Works

Argentina's government will require insurance companies to investment in public infrastructure projects and other "productive investments," a move that aims to boost the funding of such projects by more than more than ARS7 billion ($1.47 billion) through mid 2013.

The imposition on the insurance industry, unveiled by President Cristina Kirchner in a speech late Monday, comes as the government looks for ways to boost economic growth through "counter-cyclical" policies.

Earlier this year, the government started requiring banks to boost lending and do it at below-market rates as part of another program aimed at spurring growth. Now the government is requiring direct investment.

"This is the opposite of what's happening in the rest of the world, where they're pushing austerity policies," Mrs. Kirchner said.

She said she expects the insurance industry to be in full compliance with the news rules by the end of May 2013.

The amounts the companies will be required to invest will be proportionate to the amount of insurance they offer through short, medium and long policies.

Companies offering shorter-term workers' injury compensation insurance will be required to invest between 5% and 20% of their available funds, according to an Economy Ministry document. Longer-term life insurance providers will have to invest between 12% and 30% of their funds. Other general insurance providers will be required to invest between 10% and 20% of their funds.

Companies must have at least 5% of the relevant funds dedicated to public works and productive investments projects by the end of March 2013.

"We're going to move from shorter-term financial investment to long-term productive investments," Mrs. Kirchner said, noting insurance companies currently invest in financial instruments that don't directly benefit taxpayers.

Mrs. Kirchner said the insurance industry is "flourishing" and flush with billions of dollars in funding that should be put to uses that benefit the public.

Argentina's general insurance industry has previously voiced interested in having a greater offer of securities linked to infrastructure projects as insurers look to diversify their investment portfolios.

Last year, the government forced insurers to repatriate most of the 8.2 billion pesos ($1.8 billion) they had invested abroad and largely banned offshore investments in a move that was widely viewed as an attempt to bolster the central bank's international reserves.

Earlier this year, the U.K.'s RSA Insurance Group PLC (RSANY, RSA.LN) and Australia's QBE Insurance Group (QBIEY, QBE.AU) bought Argentine general insurers with a view to expand their existing presence in country.

The insurance industry manages onshore investments of about ARS64 billion pesos.

"We're turning the page on the destiny of insurance companies' funds," Mrs. Kirchner said.

Write to Taos Turner at taos.turner@dowjones.com

Copyright © 2012 Dow Jones Newswires

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