-I . 
‘;ENATE 
.
.
 
OF TflE 
~~~~~~ 
“I. 
FOURTEENTH CONGRESS OF THE 
1 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
SENATE 
. -  
S. B. No. 
Introduced by SENATOR EDGARDO J. ANGARA 
EXPLANATORY NOTE 
Introduction 
The bill seeks to address the need for a statute to regulate the 
proliferating pre-need companies in the country. 
Considering the importance of the preneed industry to the average 
Filipino and to the government, it should be given utmost attention. The 
industry should be saved from the danger of extinction brought about by 
problematic preneed companies. 
Recent events have shown that some preneed companies, particularly 
educational plans, have encountered extreme problems that they cannot even 
meet current tuition fee payments. Some companies have trust funds lower 
than their actuarial reserve liability. And since ARL determines the firms 
compliance with their contracts, this even highlights the immediate need to 
protect the planholders while at the same time saving the firms, being 
equally vital in helping the government in giving hopes to families of lower 
income bracket who avail of these preneed services. 
With the recent scenario, there is an urgent need to fully regulate so as 
to protect not only the industry but the planholders as well. 
It is imperative that the state ensures that funds of these preneed 
companies meet the long-term promises of the contracts. The government has 
to make sure that preneed firms are able to maintain sufficient funds to cope 
and comply with their contracts. 
With the aforementioned rationale, approval of this bill is earnestly 
sought. 
EDGARDO J. ANGARA 
Senator 


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SENATIE 
it% W- THE Stl;t-:ET$&y 
FOURTEENTH CONGRESS OF THE REPUBLIC 
First Regular Session 
} 
OF THE PHILIPPINES 
SENATE 
s. No. 
6 
v 
~ 
~~ 
Introduced by SENATOR EDGARDO J. ANGARA 
AN ACT 
ESTABLISHING THE PRE-NEED CODE OF 2007 
Be it enacted by the Senate and House of Representatives of the 
Republic of the Philippines in Congress assembled: 
CHAPTER I 
GENERAL PROVISIONS 
SECTION 1. Short Title. - This Act shall be known as the "Pre-Need 
Code of 2007." 
SECTION 2. Declaration of Policy. - It is hereby declared the policy 
of the State to regulate the establishment of pre-need companies and to place 
their operation on sound efficient and stable basis to derive the optimum 
advantages from them in the mobilization of savings and to prevent and 
mitigate, as far as practicable, practices prejudicial to public interest and the 
protection of planholders. 
The State shall hereby regulate, through an empowered agency, Pre- 
Need Companies based on prudential principles to promote soundness, 
stability and sustainable growth of the pre-need industry. 
SECTION 3. Construction. - Any doubt in the interpretation and 
implementation of any provision in this Code shall be interpreted in favor of 
the rights and interests of the planholder. 


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SECTION 4. Definition of Terms. - Whenever used in this Code, the 
following terms shall have the respective meanings hereafter set forth or 
indicated, unless the context requires otherwise: 
"Commission" refers to the Insurance Commission. 
"Pre-Need Plans" are contracts, agreements, deeds or plans for 
the benefit of the Planholders which provide for the performance 
of future serviceh, payment of monetary considerations or 
delivery of other benefits at the time of actual need or agreed 
maturity date, as specified therein, in exchange for cash or 
installment amounts with or without interest or insurance 
coverage and includes life, pension, education, interment, and 
other plans, instruments, contracts or deeds as may in the 
future be determined by the Commission. 
%-e-Need Company" refers to any corporation registered with 
the Commission and authorizedllicensed to sell or offer to sell 
Pre-Need Plans. Except as used in Sections 7, 8, 9, 44 and 45 of 
this Code, the term "Pre-Need Company" shall also refer to 
schools, 
memorial 
chapels, 
banks, 
non-bank 
financial 
institutions and other entities that sell or offer to sell Pre- Need 
Plans insofar as their Pre-Need activities or business are 
concerned. 
rrPZanhoZder" refers to any person, natural or juridical, who 
purchases a Pre- Need Plan from a Pre-Need Company for whom 
or for whose beneficiaries Benefits are to be delivered as 
stipulated and guaranteed by the Pre-Need Company. The term 
includes the assignee, transferee, and any successor in interest 
of such Planholder. 
"Y3eneficiary"refers to the person designated by the Planholder 
as the recipient of the Benefits in the Pre-Need Plan. 
"Contract Price" refers to the stipulated price in the Pre-Need 
Plan. 
'Benefits" refer to the payment of monetary considerations 
andlor performance of future services which the Pre-Need 
Company undertakes to deliver either to the Planholder or his 
beneficiary at the time of actual need or agreed maturity date, 
as specified in the Pre-Need Plan. 
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?Sales Counselor" refers to a person engaged in the sale, 
whether on commission or salary basis, of Pre-Need Plans upon 
authority of a registered Pre-Need Company and registered by 
the Commission to engage in the business of selling Pre-Need 
Plans. 
"Trust Fund" refers to a fund set up from Planholders' 
payments, separate and distinct from the paid-up capital of a 
Pre-Need Company, established with a Trustee under a trust 
agreement approved by the Commission, to guarantee the 
delivery of Benefits. 
r'L,iquidity Reserve" refers to a portion of the Trust Fund set 
aside by the Trustee to cover the Benefits due to Planholders for 
the ensuing year. 
r'Actuarial Reserve Liability" (ARL) is the measure of 
liabilities of the Pre- Need Company for its Pre-Need Plans 
outstanding as of valuation date. 
"Fixed Value Plans" are Pre-Need Plans whose Benefits and 
costs are fixed and pre-determined at the inception or purchase 
of the Plan. 
!Actual Cost or Traditional Plans" are Pre-Need Plans 
wherein the Benefits or services at the time they are due are 
guaranteed, regardless of any increase in cost from the 
originally assumed values since the date of issue of the Pre-Need 
Plan. 
CHAPTER 11 
AUTHORITY OF THE COMMISSION 
SECTION 5. Supervision and Regulation. - Pre-Need Companies 
shall be under the supervision and regulation of the Commission, The 
Commission is hereby authorized to provide for its reorganization, to 
streamline its structure and operations, upgrade its human resource 
component to enable it to effectively and efficiently perform its functions and 
exercise its powers under this Code. 
All positions of the Commission shall be governed by compensation and 
position classification systems and qualification standards approved by the 
Commission based on a comprehensive job analysis and audit of actual duties 
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and responsibilities. The compensation plan shall be comparable with the 
prevailing compensation plan in the Bangko Sentral ng Pilipinas (BSP) and 
other government financial institutions and shall be subject to periodic 
review by the Commission no more than once every two (2) years without 
prejudice to yearly merit reviews or increases based on productivity and 
efficiency. The Commission shall, therefore, be exempt from laws, rules, and 
regulations on compensation, position classification and qualification 
standards. The Commission shall, however, endeavor to make its system 
conform as closely as possible to the principles under the Compensation and 
Position Classification Act of 1989. 
SECTION 6. Powers and Functions of the Commission. - The 
Commission shall, at ail times, act with transparency and dispatch and shall 
have, among others, the following powers and functions: 
1. 
Have primary and exclusive jurisdiction and supervision over ail 
Pre-Need Companies. 
Approve, amend, renew or deny any license, registration or 
certificate issued under this Code. 
Fix and assess fees and/or charges as it may find reasonable in 
the exercise of regulation. 
2. 
3. 
4. 
Regulate, 
supervise 
and 
monitor 
the 
operations 
and 
management of Pre- Need Companies to ensure compliance with 
the provisions of this Code, existing laws, rules and regulations, 
including but not limited to: 
(a) 
Revoke or nullify investments made and/or entered into 
by a Pre-need Company or a Trustee which are contrary 
to existing laws and regulations; 
Demand for the conversion of the investments made by 
the Trustee to cash or other liquid assets to protect the 
interest of the Planholders. 
Regulate, investigate or supervise activities of Pre-Need 
Companies, their officers, employees, Sales Counselors, 
consultants or agents. 
(b) 
(c) 
5. 
Issue cease and desist orders to prevent fraud and injury to the 
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investing public; 
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6. 
7. 
8. 
9. 
10. 
11. 
13. 
14. 
15. 
16. 
Issue subpoena duces tecum and ad testificandum, order the 
examination, search and seizure of documents, papers, files, tax 
returns, books of accounts and other records, in whatever form, 
of any entity or person under investigation. 
Punish for contempt of the Commission, both direct and indirect, 
in accordance with the pertinent provisions of and penalties 
prescribed by the Rules of Court. 
Impose sanctions, institute cases andlor prosecute offenders for 
violation of this Code, related laws, rules, regulations and orders 
issued pursuant thereto. 
Suspend or revoke licenses. 
Enlist the aid and support of and/or deputize any and all 
enforcement agencies of the Government in the implementation 
of its powers and exercise ofits functions under this Code; 
Take over Pre-Need Companies which fail to comply with this 
Code, related laws, rules, regulations and orders issued 
pursuant thereto, either through the appointment of a 
conservator, receiver or liquidator. 
Prepare, approve, amend or repeal rules, regulations and orders, 
and issue opinions and provide guidance on and supervise 
compliance with such rules, regulations and orders. 
Formulate policies and recommendations on issues concerning 
the pre-need industry including proposed legislation. 
Retain and utilize, in addition to its annual budget, an amount 
up to one hundred million pesos (P 100,000,000.00) of the fees, 
charges and other income derived from the regulation of Pre- 
Need Companies. 
Exercise such other powers as may be provided by law as well as 
those which may be implied from, or which are necessary or 
incidental to carry out of, the express powers granted the 
Commission to achieve the objectives and purposes of the law. 
CHAPTER I11 
ORGANIZATION, LICENCING AND MANAGEMENT OF 
PRE- NEED COMPANIES 
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SECTION 7. Pre-requisites to Incorporation.. - Except upon 
favorable recommendation of the Commission, the Securities and Exchange 
Commission shall not accept or approve the articles of incorporation and by- 
laws of any Pre- Need Company. 
A foreign corporation may be allowed to engage in a pre-need business 
in the Philippines, Provided, that it shall comply with the pertinent laws and 
regulations. 
SECTION 8. Amendment of the Articles of Incorporation and By- 
Laws. - Amendments to the articles of incorporation and by-laws of a Pre- 
Need Company, including merger, consolidation and dissolution, shall not be 
approved by the Securities and Exchange Commission without the favorable 
recommendation from the Commission. 
SECTION 9. Paid-up Capital. - A Pre-Need Company incorporated 
after the effectivity of this Code shall have a minimum paid-up capital of One 
Hundred Million Pesos (P100, 000,000.00). Existing Pre-Need Companies 
shall comply with the following minimum unimpaired paid-up capital: 
(a) 
With three-type plans 100,000,000 
(b) 
With two-type plans 75,000,000 
(c) 
With one-type plan 50,000,000; 
Provided, that existing Pre-Need Companies with traditional education 
plans shall have a minimum unimpaired paid-up capital of P100, 000,000. 
Provided, further, that the Commission may adopt risk-based 
principles on capital adequacy based on internationally accepted standards. 
In the exercise of its authority under this paragraph, the Commission may 
prescribe a higher minimum unimpaired paid-up capital for Pre-Need 
Companies. 
SECTION 10. Licensing of Pre-Need Companies. - No person shall 
operate as a Pre-Need Company or engage in the business of a Pre-Need 
Company unless licensed by the Commission in accordance with this Code. 
Every license under this Section shall expire every thirtieth day of June, or 
such date of every year as may be fixed by the Commission. The license may 
be renewed upon compliance with the prescribed requirements. 
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SECTION 11. Fit and Proper Rule. - To maintain the quality of 
management of Pre-Need Companies and afford better protection to 
Planholders and beneficiaries, the Commission shall prescribe, pass upon and 
review the qualifications and disqualifications of individuals elected or 
appointed directors or officers of Pre-Need Companies, including its 
actuaries, and disqualify those found unfit. The Commission may disqualify, 
suspend or remove any director or officer who commits or omits an act which 
renders him unfit for the position. 
In determining whether an individual is fit and proper to hold the 
position of a director or officer of a Pre-Need Company, regard shall be given 
to his integrity, experience, education, training, and competence, Provided, 
However that the following persons, and those determined by the 
Commission to be unfit, shall in no case be allowed to serve or act in the 
capacity of officer, employee, director, consultant, Sales Counselor of any Pre- 
Need Company: 
1. 
any person convicted of any crime involving any Pre-Need Plan, 
security or financial product, 
any person convicted of an offense involving moral turpitude or 
involving fraud, or embezzlement, theft, estafa or other 
fraudulent acts or transactions; 
any person who, by reason of any misconduct, is enjoined by 
order, judgment, or decree by any court, quasi-judicial body or 
administrative agency of competent jurisdiction from acting as a 
director, officer, employee, consultant, agent or occupying any 
fiduciary position. 
any person found by the Commission to have willfully violated, 
or willfully aided, abetted, counseled, commanded, induced, or 
procured the violation of this Code, Insurance Code, the 
Securities Regulation Code, or any related laws and any rules or 
orders thereunder; 
any person judicially declared to be insolvent, or incapacitated 
to contract; 
any person found guilty by a foreign court, regulatory authority 
or government agency of the acts or violations similar to any of 
the acts or misconduct enumerated in the foregoing paragraphs. 
2. 
3. 
4. 
5. 
6. 
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Provided, that, conviction in the first instance shall be considered as 
sufficient ground for disqualification. 
SECTION 12. Independent Directors. - The independent directors of 
a Pre- need Company shall be at least two (2) or twenty percent (20%) of the 
members of the board, whichever is higher. For this purpose, an "independent 
director" shall refer to a person other than an officer, employee or any person 
having a fiduciary relation to the Pre-Need Company, its parent or 
subsidiaries, or any other individual having a relationship therewith, which 
may interfere with the exercise of independent judgment in carrying out the 
responsibilities of a director. 
CHAPTER IV 
LICENSING OF SALES COUNSELORS 
SECTION 13. Licensing of Sales Counselors. - No Sales Counselor 
shall be allowed to solicit, sell or offer to sell Pre-Need Plans under this Code, 
without being licensed as such by the Commission. No license shall be issued 
unless the following qualifications have been complied with: 
1. 
The applicant must be of good moral character and must not 
have been convicted of any crime involving moral turpitude. 
The applicant has undergone a training program approved by 
the Commission and such fact has been certified under oath by a 
duly authorized representative of a Pre-Need Company; 
The applicant has passed a written examination administered 
by the Commission. Provided, that the administration of the 
examination may be delegated to an independent organization 
under the supervision of the Commission. 
2. 
3. 
Such license shall automatically expire every thirtieth day of June, or 
such date of every year as may be fixed by the Commission and may be 
accordingly renewed. 
SECTION 14. Denial, Suspension, Revocation of License. An 
application for the issuance or renewal of a license to act as Sales Counselor 
may be denied, or such license, if already issued, shall be suspended or 
revoked based on the following grounds: 
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3s 
materially misrepresented statements in the application 
requirements; 
obtained or attempted to obtain a license by fraud or 
misrepresentation; 
materially misrepresented the terms and conditions of Pre-Need 
Plan which he sold or offered to sell; 
terminated for cause from another Pre-Need Company; or 
similar grounds found in Section 11 of this Code 
analogous circumstances. 
CHAPTER V 
REGISTRATION OF PRE-NEED PLANS 
SECTION 15. Registration of Pre-Need Plans - No Pre-Need 
Company shall sell or offer to sell Pre-Need Plans unless such plans are 
registered with the Commission. The Commission shall have the authority to 
determine the number of Pre-Need Plans to be sold under each certificate of 
registration. 
SECTION 16. Registration Requirements - The Commission shall 
set forth the requirements for registration of Pre-Need Plans and shall 
require the following documents, among others: 
Duly accomplished Registration Statements; 
Board resolution authorizing the registration of applicant’s Pre- 
Need Plans; 
Opinion of independent counsel on the legality of the issue; 
Audited financial statements; 
Viability study with certification, under oath, of pre-need 
actuary accredited by the Commission; 
Copy of the proposed Pre-Need Plan; and 
Sample of sales materials. 
SECTION 17. Approval 
of Forms. - All forms, including 
amendments thereto, relating to the Pre-Need Plans shall be approved by the 
Commission. 
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SECTION 18. Advertising of Pre-Need Plans. - All advertisements, 
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sales paraphernalia or information disseminated to the public involving Pre- 
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Need Plans and/or Pre-Need Companies shall be approved by the 
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Commission. The lapse of twenty (20) working days from submission or 
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request for approval without action from the Commission shall be deemed an 
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approval. 
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Approved, 
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CHAPTER 6 
DEFAULT AND TERMINATION BY PLANHOLDERS 
SECTION 19. Default Reinstatement Period. - A Pre-Need 
Company shall provide a grace period of at least sixty (60) days within which 
to pay unpaid installments on Pre-Need Plans. The said grace period shall be 
counted from the due date of the first unpaid installment. Non-payment 
beyond the grace period shall render the Pre-Need Plan without further force 
and effect but the Planholder shall be allowed a period of not less than two 
(2) years from the lapse of the grace period within which to reinstate his plan. 
The Pre-Need Company shall not cancel Pre-Need Plan within the 
reinstatement period, during which, such Pre-Need Plan shall still be 
considered as outstanding. The Pre-Need Company must give written prior 
notice to the Planholder that his Pre-Need Plan will lapse if no payment is 
received within the grace period or that his Plan will be cancelled if not 
restored within the reinstatement period. 
SECTION 20. Termination of Pre-Need Plans. . A Planholder may 
terminate his Pre-Need Plan at any time by giving written notice to the 
issuer. 
A Pre-Need Plan shall contain a schedule of termination values to 
which the Planholder is entitled to upon termination. Such schedule of 
termination value shall be required for all outstanding Pre-Need Plans and 
shall be fair, equitable and in compliance with the Commission issuances. 
The termination value of the Pre-Need Plan shall be computed at the end of 
each anniversary year and pre-determined by the actuary of the Pre-Need 
Company upon application for registration of the Pre-Need Plans with the 
Commission. 
CHAPTER VI1 
CLAIMS SETTLEMENT 
SECTION 21. Unfair Claim Settlement Practices. - (1) No Pre- 
Need Company shall refuse, without just cause to pay or settle claims and/or 
benefits arising from the Pre-Need Plans, nor shall any such company engage 
in dilatory acts or practices prejudicial to the settlement of the claim. Any of 
the following acts by a Pre-Need Company, when performed with such 


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frequency as to indicate a general business practice, shall constitute unfair 
claim settlement practices; 
(a) 
knowingly misrepresenting to claimants pertinent facts or plan 
provisions relating to coverages at issue; 
failing to acknowledge communications with respect to claims 
arising under its plan with reasonable promptness; 
failing to adopt and Implement reasonable standards for the 
prompt investigation of claims arising under its plan; 
failing to effect prompt, fair and equitable settlement claims 
submitted In which liability has become reasonably clear; or 
offering, without justifiable reason, amount and/or services not 
in accordance with the Pre-Need Plans, thereby compelling 
Planholders to resort to court action. 
(b) 
(c) 
(d) 
(e) 
(2) If it is found that a Pre-Need Company has violated this section, each 
instance of non-compliance with paragraph (1) may be treated as a separate 
violation of this section and shall be considered sufficient cause for the 
suspension or revocation of the Pre-Need Company's license to operate. 
SECTION 22. Payment of Plan Proceeds. - The proceeds of the Pre- 
Need Plan shall be paid immediately upon maturity of the contract, unless 
such proceeds are made payable in installments or as an annuity, in which 
case the installments or annuities shall be paid as they become due. Refusal 
or failure to pay the claim within fifteen (15) days from maturity or due date 
will entitle the beneficiary to collect Interest on the proceeds of the plan for 
the duration of the delay at the rate twice the legal interest unless such 
failure or refusal to pay is based on the ground that the claim is fraudulent. 
Provided, that the planholder has duly compiled with the documentary 
requirements of the Pre-Need Company as approved by the Commission. 
Section 23. Conseqnen.ces of Delay or Default. - In case of any 
litigation for the enforcement of any Pre-Need Plan, it shall be the duty of the 
Commission to determine whether the payment of the claim of the 
Planholder has been unreasonably denied or withheld. If found to have 
unreasonably denied or withheld the claim, the Pre-Need Company shall be 
liable to pay damages, consisting of actual damages, attorney's fees and legal 
interest to be computed from the date the claim is made until it is fully 
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satisfied; Provided, That the failure to pay any such claim within the time 
prescribed in the preceding section shall be considered prima facie evidence of 
unreasonable delay in payment. 
CHAPTER VI11 
TRUST FUND 
SECTION 24. Trust Fund. - To guarantee the delivery of property or 
performance of services in the future, a portion of the installment payment 
collected shall be deposited by the Pre-Need Company in the appropriate 
Trust Fund, the amount of which will be determined by an actuary and shall 
be sufficient to pay the benefits promised under the Pre-Need Plan. Should 
the Commission, based on its experience in implementing the Trust Fund 
framework, determine that the admitted asset framework will better protect 
the interests of the Planholders, it may instead adopt such framework as 
provided in the Insurance Code. 
In such case that the Commission adopts the admitted' asset 
framework, it shall likewise have the authority to prescribe appropriate rules 
for registration of Pre-Need Plans. 
SECTION 25. Contributions to the Trust Fund. - The minimum 
limits of the deposit contribution to the Trust Fund shall be forty eight 
percent (48%) of the amount collected for life plans and fifty four percent 
(54%) of the total amount collected for Pre-Need Plans other than life plans 
unless a higher deposit contribution is determined by the actuary and duly 
approved by the Commission. 
In case of installment payments, the minimum limits, unless the 
actuary and the Commission determine otherwise, of the deposit 
contributions to the Trust Fund shall be in accordance with the following 
schedule: 
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Payment Received 
Life 
Plans 
Collection of the 1st 20% of 
10% 
Contract Price 
Collection of the 2nd 20% of 
20% 
Contract Price 
Collection of the 3rd 20% of 
70% 
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Other 
Plans 
10% 
20% 
80% 
Contract Price 
Collection of the 4th 20% of 
Contract Price 
Collection of the 5th 20% of 
70% 
80% 
70% 
80% 
Contract Price 
Pre-Need Companies shall incorporate in the Pre-Need Plan the 
schedule of the minimum Trust Fund contribution. Likewise, each Pre-Need 
Company shall inform the Planholders of the annual actual contributions to 
the Trust Fund. 
Trust Fund Contributions shall not form part of the income or gross 
receipts of the Pre-Need Company and therefore, not available for dividend 
declaration or payment to creditors. 
No withdrawal shall be made from the Trust Fund except for payment 
of Benefits, cost of other services related to the delivery of Benefits and 
investment expenses in the operation of the Trust Fund, including trust fees 
and bank charges. 
SECTION 26. Terms and Conditions of a Trust Fund. - A Trust 
Fund must be established separately for each type of Pre-Need Plan with the 
trust department of a trust company, bank or investment house doing 
business in the Philippines; Provided, that no director and/or officer of the 
Pre-Need Company shall at the same time serve as director and/or officer of 
the affiliate or related trust entity; Provided further that no Trust Fund shall 
be established by a Pre- Need Company with a subsidiary, affiliate or related 
trust entity. However, such may be allowed provided the following conditions 
are complied with: 
(1) 
A written approval of the Commission has been previously 
obtained; and 
Public disclosure of the affiliation with the trust entity be 
included in all sales materials, in whatever form; and 
(2) 
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The Trust Agreement shall be submitted to the Commission for 
approval before execution and shall contain the following salient provisions, 
Rmong others: 
The manner in which the Trust Fund is to be operated; 
Investment powers of the trustee with respect to trust deposits, 
including the character and kind of investment; 
Auditing and settlement of accounts of the trustee with respect 
to the Trust Fund; 
Basis upon which the Trust Fund may be terminated; 
Provisions for withdrawal of the Trust Fund; 
That the trustee shall submit to the power of the Commission to 
examine and verify the Trust Fund; 
An undertaking by the Trustee that it shall abide by the rules 
and regulations of the Commission with respect to the Trust 
Fund; and 
An undertaking by the Trustee that it shall submit such other 
data or information as may be prescribed by the Commission. 
SECTION 27. Responsibilities of the Trustee. -The trustee shall: 
(a) 
Administer and manage the Trust Fund with utmost good faith, 
care and prudence required by a fiduciary relationship. 
The Trustee shall have the exclusive management and control 
over the funds and the right at any time to sell, convert, invest, 
change, and transfer or otherwise change or dispose of the assets 
comprising the funds. 
Not use the Trust Fund to invest in or extend any loan or credit 
accommodation to the Pre-Need Company, its directors, officers, 
stockholders, and related interests as well as to persons or 
enterprises controlling, owned or controlled by, or under 
common control with said company, its directors, officers, 
stockholders and related interests. 
(b) 
(c) 
SECTION 28. Investment of the Trust Fund. - All investments of 
the Trust Fundls of a Pre-Need Company shall be limited to the following and 
subject to limitations to wit: 
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less. This category includes: 
(1) 
Fixed Income Instruments. These may be classified into short 
term and long term instruments. The instrument is short term if 
the maturity period is three hundred sixty five (365) days or 
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Government securities; 
Savingskime deposits with a commercial bank with 
satisfactory examination rating as of the last examination 
by the Bangko Sentral ng Pilipinas; 
Commercial papers duly registered with the Commission 
with a credit rating of “1” for short term and “Aaa“ for 
long term based on the rating scale of an accredited 
Philippine Rating Agency or its equivalent at the time of 
investment. 
Direct loans to corporations which are financially stable, 
profitable for the last three (3) years and have a good 
track record of paying their previous loans from the Trust 
Fund of Pre-Need Companies. 
These loans shall be fully secured by a real estate mortgage up to the 
extent of sixty per cent (60%) of the appraised value of the property at the 
time the loan was granted. 
The property shall be covered by a Transfer Certificate of Title 
registered In the name of the mortgagor and free from liens and 
encumbrances. 
(2) 
Mutual Funds duly registered with the Securities and Exchange 
Commission and/or Unit Investment Trust Fund (UITF) of any 
trust entity, where such funds are invested only in fixed income 
instruments and blue chip securities subject to the limitations 
prescribed by law, rules and regulations. 
Investments in equities shall be limited to Stocks listed on the 
Main board of a local Stock Exchange. 
(3) 
In determining these investments, compliance to certain standards 
such as good track record, financially stability and history of dividend 
declaration and payment over the past three years shall be considered. 
(4) Real Estate. These shall include prime real estate properties 
located in cities and first class municipalities free from liens and 
encumbrances at the time of investment. 
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The Commission shall set the allowable level of investments in the 
above-enumerated assets, Provided, that no investment in any single entity, 
except for investment in government securities, shall exceed twenty five 
percent (25%) of the total value of the Trust Fund. 
The Commission may adopt the same investment guidelines as 
provided in the Insurance Code, for Pre-Need Companies and its trust funds. 
SECTION 29. Valuation of Actuarial Reserve Liabilities (ARL) - 
To determine the sufficiency and adequacy of the Trust Fund to guarantee 
the delivery of future Benefits stipulated in the Pre-Need Plan, an annual 
valuation of Actuarial Reserve Liabilities as of valuation date shall be made 
and submitted to the Commission within one hundred five (105) days from 
the end of the calendar year. The actuarial valuation report containing the 
actuarial assumption, methodology, and results should be certified by the 
actuary accredited by the Commission In accordance with actuarially sound 
and accepted principles and subject to the minimum standard of valuation 
and guidelines set by the Commission. Upon approval by the Commission of 
the actuarial computation, any deficiency in the Trust Fund shall be covered 
by the Pre-Need Company through additional deposit within thirty (30) days 
from submission of the actuarial valuation report or from notice of deficiency 
whichever is earlier. Any excess of the Trust Fund shall be credited for future 
deposit requirements. 
SECTION 30. Liquidity Reserve. - The trustee shall at all times 
maintain a Liquidity Reserve which shall be sufficient to cover at least fifteen 
percent (1594) of the Trust Fund but shall in no case be less than the amount 
of the Benefits payable for the succeeding year. For this purpose, the Pre- 
Need Company shall timely submit to the Trustee a summary of Benefits 
payable for the succeeding year. 
The following shall qualify as investments for the Liquidity Reserve: 
(a) 
Loans secured by a hold-out on assignment or pledge deposits 
maintained either with the TRUSTEE or other banks, or of 
deposit substitute of the TRUSTEE itself or mortgage and 
chattel mortgage bonds issued by the TRUSTEE; 
Treasury notes or bills, other government securities or bonds, 
and such other evidences or indebtedness or obligations the 
(b) 
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servicing and repayment of which are fully guaranteed by the 
Republic of the Philippines; 
Repurchase agreements with any of those mentioned in Item "b" 
above, as underlying instruments thereof; and 
(c) 
(d) 
Savings or time deposits with government-owned banks or 
commercial banks 
SECTION 31. Distribution of Profits. - A Pre-Need Company may 
declare dividend provided that the following shall remain unimpaired, as 
certified under oath by the President and the Treasurer: 
(a) 
(b) 
One hundred percent (100%) of the capital stock; 
An amount sufficient to pay all net losses reported, or in the 
course of settlement, and all liabilities for expenses and taxes. 
Any dividend declared under the preceding paragraph shall be 
reported to the Commission within thirty (30) days after such declaration. 
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CHAPTER M 
ACTUARIES FOR PRE-NEED COMPANIES 
SECTION 32. Required Actuary. - No Pre-Need Company shall be 
licensed to do business in the Philippines nor shall any Pre-Need Company 
doing business in the Philippines be allowed to continue doing such business 
unless they shall engage the services of an actuary duly accredited with the 
Commission who shall, during his tenure of engagement, be directly 
responsible for the direction and supervision of all actuarial work connected 
with or that may be involved in the business of the Pre-Need Company. 
Actuarial work shall at least include the following: 
1. 
Determining the contract price for a pre-need plan that is 
submitted by the Pre-Need Company for registration or 
amendment, with the Commission; 
2. 
Valuing liabilities of the Pre-Need Company referred to as 
Actuarial Reserve Liabilities in Pre-Need Plans that were issued 
by the Company, and other plans in which the Company 
continues to have obligations as of a valuation date; 
3. 
Issuing 
a 
Statement 
of 
Actuarial 
Opinion 
on 
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appropriateness of the actuarial reserves, when compared with 
the assets of the trust fund that was set up to back the liabilities 
represented by such reserves. Opinion on the appropriateness of 
actuarial reserves as of a certain date shall be based on a 
comparison of the amount of assets in the trust fund with the 
amount of reserves, and the projection of the income and outgo 
of the trust fund of at least five (5) years, for the purpose of 
establishing the adequacy of the trust fund to pay for the 
contingent and maturing obligations of the Pre-Need Company 
to the plan holders. 
The work of the actuary shall be performed under guidelines and 
standards that are internationally accepted and shall be subject to the 
applicable rules and regulations of the Commission 
No accredited actuary shall serve more than one client or employer at 
the same time. However, one already in the employ, or is already engaged as 
a consultant, of a Pre-Need Company may be allowed by the Commission to 
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serve another Pre-Need Company, provided the following conditions are first 
complied with: 
1. 
that the request to engage his services by another company is in 
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writing; 
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that his present employer acquiesced to it in writing: and 
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that he furnishes the Commission with copies of said 
agreements from the companies. 
SECTION 33. Qualification of the Actuary. - A person shall be 
officially accredited by the Commission to act as an Actuary in any Pre-Need 
Company upon application therefore and the payment of the corresponding 
fee hereinafter prescribed, provided that: (1) he is a Fellow in good standing 
of the Actuarial Society of the Philippines as having met the continuing 
education requirements of the Society at the time of his application for 
accreditation with the Commission, and remains in such good standing 
during the tenure of his engagement; or (2) in the case he is not a Fellow in 
good standing of the Actuarial Society of the Philippines, he should meet ail 
the requirements For accreditation as a Fellow of the Society and has been 
given permission by the pertinent government authorities in the Philippines 
to render service in the Philippines, as determined by the Commission. 
Provided further, that the accreditation of an actuary shall be subject 
to the approval of the Commission under Section 11 of this Code 
SECTION 34. Renewal of 
Certificate. - No certificate of 
accreditation issued under this Chapter shall be valid after the thirty-first 
day of December of the year following its issuance unless it has been renewed 
by the Commission. 
SECTION 35. Prohibited Positions. - No actuary engaged by a Pre- 
need Company shall at the same time be a stockholder or serve as a Director 
of the Board, Chief Executive Officer or Chief Financial Officer of the 
Company or any such position that the Commission may determine to have 
an inherent conflict of interest to the position of an actuary. 
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SECTION 36. Required Certified Report. -The followiiig documents 
which are from time to time submitted to the Commission by a Pre-Need 
Company shall be duly certified by an actuary: 
(a) 
Actuarial valuation of all liabilities pertaining to pre-need 
contracts; 
Asset share studies when applying for approval of new products 
or enhancement or re-pricing of existing products; 
Accounts in the financial statement of the Pre-Need Company 
pertaining to actuarial reserve liabilities and other actuarial 
reserve items; 
Financial projections showing the probable income and reserve 
requirements, enumerating the actuarial assumptions and bases 
of projections; and 
Such other reports as may be required by the Commission. 
(b) 
(c) 
(d) 
(e) 
It shall be the duty of an actuary to immediately report to the 
Commission any matter contained in, arising out of, or in relation to the 
above reports requiring intervention of the Commission to protect the 
interests of Planholders. Provided, thut; the actuary shall not be liable to the 
Pre-Need Company for any acts done under this paragraph, unless there is a 
clear showing of bad faith, malice or gross negligence. 
SECTION 37. Disaccreditation of an Actuary - An actuary shall be 
disaccredited by the Commission on the following grounds: 
(a) 
Failure to adequately perform his required functions and duties 
under this Code; 
Failure to meet the requirements of Section 11 of this Code; 
Failure to disclose conflict of interest; 
Failure to comply with the Code of Conduct of the Actuarial 
Society of the Philippines; or 
Such other grounds that may be determined by the Commission. 
(b) 
(c) 
(d) 
(e) 
CHAPTER X 
MINIMUM REPORTORIAL REQUIREMENTS 
SECTION 38. Required Certified Reports. - 
All Pre-Need 
Companies are required to submit to the Commission within one hundred 
twenty (120) days after each calendar year, which shall be the fiscal year, the 
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following reports in such form and with such details as may be prescribed by 
the Commission: 
Annual Report which shall include among others the financial 
statements and the management discussion and analysis of 
results of operations and shall be certified under oath by the 
Chairman, Chief Executive Officer, Chief Finance Officer and 
the actuary; 
Actuarial Valuation Report which shall be prepared in 
accordance with the minimum standards of valuation for pre- 
need plans prepared by the Actuarial Society of the Philippines 
and adopted by the Commission and certified under oath by the 
actuary; 
Annual Audited Financial Statement which shall be certified 
under oath to by the Chairman, Chief Executive Officer and 
Chief Finance Officer of the Pre-Need Company and its external 
auditor in accordance with a uniform accounting system that 
may be prescribed by the Commission; 
Annual Statement of Trust Fund which shall include details 
such as the income, disbursements, assets and liability items 
and shall be certified under oath by the Chairman, Chief 
Executive Officer and Chief Finance Officer of the Pre-Need 
Company and at least two (2) of the highest-ranking officers of 
the Trustee; and 
Any other report that may be required by the Commission. 
SECTION 39. Publication of Reports. - Within thirty (30) days after 
the receipt of the annual statements approved by the Commission, every Pre- 
Need Company shall publish in two (2) newspapers bf general circulation a 
full synopsis of the annual statements. 
The Commission may require the publication of other reports it may 
deem necessary to apprise Planholders of the condition of the Pre-Need 
Company. 
CHAPTER XI 
EXAMINATION OF PRE-NEED COMPANIES 
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SECTION 40. Keeping of Records. - The Commission shall require 
every Pre-Need Company to keep its books, records, accounts and vouchers in 
such manner and for such period that he or his authorized representatives 
may readily verify its annual statements and ascertain whether the company 
is solvent and has complied with the provisions of this Code or the circulars, 
instructions, rulings or decisions of the Commission. 
SECTION 41. Examination. - The Commission shall at least once a 
year and as often as necessary cause an examination to be made into the 
affairs, financial condition and method of business of every Pre-Need 
Company and of any other person or entity managing the affairs andlor 
property of such Pre-Need Company. Provided, that, for such purpose, the 
managing person or entity shall be deemed to be a Pre-Need Company and 
subject to the authority of the Commission. 
CHAPTER XI1 
SANCTIONS AND PENALTIES 
SECTION 42. Administrative Sanctions. Any violation of this Code 
shall be proceeded against in the following manner: 
(1) 
Cease and Desist Order. The Commission may, motu proprio or 
upon verified complaint by any party, issue a cease and desist 
order (CDO) against any Pre-Need Company upon proof, after 
due notice and hearing, of violation of any provision of this Code, 
provided, that such cease and desist (CDO) may be issued ex 
parte if the violation is clearly apparent, injurious to a number 
of Pianholders and requires immediate intervention by the 
Commission. The cease and desist order (CDO) shall specifically 
enjoin the Pre-need Company from performing certain activities 
and shall impose fines and state the required remedial actions. 
All proceedings before the issuance of the cease and desist order 
(CDO) shall be confidential. 
Suspension of License. The Commission shall issue a suspension 
order against the Pre-need Company if it fails to comply with 
the cease and desist order within thirty (30) days from issuance 
thereof. 
(2) 
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(3) 
Revocation of License. The Commission may issue a revocation 
order of the license of the Pre-Need Company under suspension 
for a period of ninety (90) days. 
Any administrative sanction shall not prejudice the filing of 
appropriate criminal or civil actions. 
SECTION 43. Criminal Penalties. The following acts are criminal in 
Selling or offering to sell a Pre-Need Plan by unregistered 
persons shall be penalized by an imprisonment of one (1) year 
and fine equivalent to triple the contract price of each of the Pre- 
Need Plans sold; 
Selling or offering to sell an unregistered Pre-need Plan or any 
product that has Pre-need Plan features shall be penalized by 
imprisonment of one (1) year and a fine equivalent to triple the 
contract price of each of the Pre-Need Plans sold; 
Any negligent act or omission that is prejudicial or injurious to 
the Planholder shall be penalized by imprisonment of one (1) 
year and one (1) day to six (6) years and a fine in the amount of 
fifty thousand pesos (P50, 000.00) to five hundred thousand 
pesos (P500, 000.00) 
Any fraudulent act or omission that is prejudicial or injurious to 
the Planholder shall be penalized by imprisonment of six (6) 
years and one (1) day to twelve (12) years and a fine in the 
amount of one hundred thousand pesos (P100, 000.00) to one 
million pesos (Pl, 000, 000.00) and 
Willful violation of the provisions of the Code or orders of the 
Commission provided that repeated violations shall constitute 
prima facie evidence against the offender, shall be penalized by 
imprisonment of six (6) years and one (1) day to twelve (12) 
years and a fine in the amount of one hundred thousand pesos 
(P100, 000.00) to one million pesos (Pl, 000,000.00). 
CHAPTER XI11 
APPOINTMENT OF CONSERVATOR 
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SECTION 44. Appointment of Conservator. If at any time before, or 
after, the suspension or revocation of the license of a Pre-Need Company as 
provided In Section 42 hereof, the Commission finds that such company is in 
a state of continuing inability or unwillingness to comply with the 
requirements of the Code and/or orders of the Commission, a conservator may 
be appointed to take charge the assets, liabilities, and the management of 
such company, collect all moneys and debts due the company and exercise all 
powers necessary to preserve the assets of the company, reorganize its 
management, and restore its viability. The conservator shall have the power 
to overrule or revoke the actions of the previous management and board of 
directors of the said company, any provision of law, or of the articles of 
incorporation or by-laws of the company, to the contrary notwithstanding, 
and such other powers as the Commission shall deem necessary. 
The conservator may be another Pre-Need Company, by officer or 
officers of such company, or any other competent and qualified person, firm 
or corporation. The remuneration of the conservator and other expenses 
attendant to the conservation shall be borne by the Pre-Need Company. 
The conservator shall not be subject to any action, claim or demand by, 
or liability to, any person in respect of anything done or omitted to be done in 
good faith in the exercise, or in connection with the exercise, of the powers 
conferred on the conservator. 
The conservator appointed shall report and be responsible to the 
Commission until such time as the Commission is satisfied that the Pre-Need 
Company can continue to operate on its own and the conservatorship shall 
likewise be terminated should the Commission, on the basis of the report of 
the conservator or of his own findings, determine that the continuance in 
business of the Pre-Need Company would be hazardous to Planholders and 
creditors, in which case the provisions of Chapter 14 shall apply. 
CHAPTER XIV 
INSOLVENCY PROCEEDINGS 
SECTION 45. Proceedings upon Insolvency. Whenever, upon 
examination or other evidence, it shall be discovered that the condition of any 
Pre-Need Company is one of insolvency, or that its continuance in business 
would be hazardous to its Planholders and creditors, the Commission shall 
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forthwith order the company to cease and desist from transacting business 
and shall designate a receiver to immediately take charge of its Trust Fund, 
assets and liabilities, as expeditiously as possible collect and gather all the 
assets and administer the same for the Benefit of its Planholders and 
creditors, and exercise all the powers necessary for these purposes including, 
but not limited to, bringing suits and foreclosing mortgages in the name of 
the Pre-Need Company. 
The commission shall thereupon determine within thirty (30) days 
whether the Pre-Need Company may be reorganized or otherwise placed in 
such condition so that it may be permitted to resume business with safety to 
its Planholders and creditors and shall prescribe the conditions under which 
such resumption of business shall take place as well as the time for 
fulfillment of such conditions. In such case, the expenses and fees in the 
collection and administration of the Pre-Need Company shall be determined 
by the Commission and shall be paid out of the assets of such company. If the 
Commission shall determine and confirm within the said period that the Pre- 
Need Company IS insolvent, as defined hereunder, it shall, if the public 
interest so requires, order its liquidation, indicate the manner of its 
liquidation and approve a liquidation plan and implement it immediately. 
The Commission shall designate a competent and qualified person as 
liquidator who shall take over the functions of the receiver previously 
designated and, with all convenient speed, distribute the Trust Fund 
exclusively to the Planholders in proportion to termination values of their 
respective Pre-Need Plans, convert the assets of the Pre-Need Company to 
cash, or sell, assign or otherwise dispose of the same to the Planholders, 
creditors and other parties for the purpose of settling the liabilities or paying 
the debts of 
such company and he may, in the name of the company, 
institute such actions as may be necessary In the appropriate Court to collect 
and recover accounts and assets of the Pre-Need Company, and to do such 
other acts as may be necessary to complete the liquidation as ordered by the 
Commission. 
The provisions of any law to the contrary notwithstanding, the actions 
of the Commission under this Section shall be final and executory, and can be 
set aside by the Court upon petition by the company and only if there is 
convincing proof that the action is plainly arbitrary and made in bad faith. 
The Commission shall then file the corresponding answer reciting the 
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proceeding taken and praying for the assistance of the Court in the 
liquidation of the company. No restraining order or injunction shall be issued 
by the Court enjoining the Commission from implementing his actions under 
this Section, unless there is convincing proof that the action of the 
Commission is plainly arbitrary and made in bad faith and the petitioner 
files a bond in favor of the Commission with the Court in an amount fixed by 
it, The restraining order or injunction, shall be refused or, if granted, shall be 
dissolved upon filing by the Commission, if he so desires, of a bond in an 
amount twice the amount of the bond of the petitioner conditioned that it will 
pay the damages which the petition may suffer by the refusal or the 
dissolution of the injunction. 
The Court shall give preference to ail proceedings under this Chapter. 
The Commission shall not be required to pay any fee to any public officer for 
filing, recording, or in any manner authenticating any paper or instrument 
relating to the proceedings. 
As used in this Title, the term "Insolvency" shall refer to the financial 
condition of a Pre-Need Company that is generally unable to pay its liabilities 
as they fall due in the ordinary course of business or that -has liabilities that 
are greater than its assets. 
In case of liquidation of a Pre-Need Company, after payment of the cost 
of the proceedings, including reasonable expenses and fees incurred in the 
liquidation to be allowed by the Court, the Commission shall pay all allowed 
claims against such company, under order of the Court, in accordance with 
their legal priority. 
The receiver or the liquidator, as the case maybe, designated under the 
provisions of this title shall not be subject to any action, claim or demand by, 
or liability to, any person in respect of anything done or omitted to be done in 
good faith in the exercise, or in connection with the exercise, of the powers 
conferred on such receiver or liquidator. 
CHAPTER XV 
MISCELLANEOUS PROVISIONS 
SECTION 46. Adjudicatory power. The Commission shall have the 
power to adjudicate any and all claims involving Pre-need Plans. The decision 
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of the Commission shall be final and executory if the amount of Benefits does 
not exceed One Hundred Thousand Pesos (P100, 000.00). 
The authority to adjudicate granted to the Commission under this 
section shall be concurrent with that of the civil courts, but the filing of a 
complaint with the Commission shall preclude the civil courts from taking 
cognizance of a suit involving the same subject matter. 
SECTION 47. Duly of the Regulator - In view of the nature of the 
pre-need industry as one impressed with public interest, the officers and 
employees of the Commission are strictly enjoined to monitor, enforce and 
ensure compliance with the provisions of this Code. Failure to do so shall be 
dealt with under existing laws and regulations in the gravest degree. 
SECTION 48. Transitory Prouisions. - Any Pre-Need Company who 
at the time of the effectivity of this Code has been registered and licensed to 
sell Pre-Need Plans and similar contracts, shall be considered registered and 
licensed under the provision of this Code and It5 implementing rules and 
regulations and shall be subject to and governed by the provisions hereot 
provided, however, that compliance for all sections with the exception of 
Section 13, may be deferred for such reasonable time as the commission may 
determine but not to exceed one (1) year from approval of this code. With 
respect to Chapter 5, compliance will cover all new plans sold one hundred 
twenty (120) days after the 
effectivity of this law. 
The respective department of the Securities and Exchange Commission 
handling all matters related to the pre-need industry prior to the effectivity 
of this Act shall hereby secure and transfer all its files and records to the 
Insurance Commission within sixty (60) days after the effectivity of thk 
Code. 
SECTION 49. Implementing Rules and Regulations. - The 
Commission shall adopt such rules and regulations for the proper and 
effective implementation of this Code within sixty (60) days, from approval 
hereof. The Commission shall publish once a week for two (2) consecutive 
weeks in two newspapers of general circulation the rules and regulations 
promulgated pursuant to the preceding section. 
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SECTION 50. Effect on Existing Laws and Contracts. - The rights 
and remedies provided by this Code shall be in addition to any and all other 
rights and remedies that exist under existing laws. Nothing in this Act shall 
impair the obligation of existing contracts nor affect or be construed to affect 
existing criminal, civil or administrative cases. 
SECTION 51. Separability Clause. - Any portion or provision of this 
Act that may be declared unconstitutional or invalid shall not have the effect 
of nullifying other portions or provisions hereof as long as such remaining 
portion or provision can still subsist and be given effect in their entirety. 
SECTION 52. Repealing Clause. - All acts, laws, executive orders 
andlor rules and regulations or any part thereof which are Inconsistent with 
the provisions of this Code are hereby repealed or modified accordingly. 
SECTION 53. Effectivity Clause. - This Code shall take effect upon 
its approval. 
Approved, 
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