FIFTEENTH CONGRESS OF THE REPUBLIC ) ’
OF THE PHILIPPINES )
Third Regular Session )

s.no,_ 2280 ea

Prepared jointly by the Committees on Banks, Financial Institutions and Currencies
and Justice and Human Rights with Senators Angara, Trillanes IV, Ejercito Estrada,
Revilla Jr., Defensor Santiago, Osmefia Ill, Villar and Escudero as authors

AN ACT
REVISING PRESIDENTIAL DECREE NO. 612, OTHERWISE KNOWN AS THE INSURANCE CODE,
AS AMENDED BY PRESIDENTIAL DECREE NOS. 1141, 1280, 1455, 1460, 1814, AND 1981,
AND BATAS PAMBANSA BLG. 874, AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress
assembled:
GENERAL PROVISIONS
Sec. 1. This Decree shall be known as "The Insurance Code".
Sec. 2. Whenever used in this Code, the following terms shall have the respective
meanings hereinafter set forth or indicated, unless the context otherwise requires:
(1) A “contract of insurance" is an agreement whereby one undertakes for a consideration
to indemnify another against loss, damage or liability arising from an unknown or
contingent event,
A contract of suretyship shall be deemed to be an insurance contract, within the meaning
of this Code, only if made by a surety who or which, as such, is doing an insurance

business as hereinafter provided.



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(2) The term "doing an insurance business” or "transacting an insurance business", within
the meaning of this Code, shall include:

(a) making or proposing to make, as insurer, any insurance contract;

{b) making or proposing to make, as surety, any contract of suretyship as a vocation
and not as merely incidental to any other legitimate business or activity of the surety;

ss, including a reinsurance business, specifically recognized

(c} doing any kind of bu:

as constituting the doing of an insurance business within the meaning of this Code;
(d) doing or proposing to do any business in substance equivalent to any of the
foregoing in a manner designed to evade the provisions of this Code.
In the application of the provisions of this Code the fact that no profit is derived from the
making of insurance contracts, agreements or transactions or that no separate or direct
consideration is received therefor, shall not be deemed conclusive to show that the making
thereof does not constitute the doing or transacting of an insurance business.
(3) As used in this Code, the term "Commissioner" means the "Insurance Commissioner”.
Chapter 1
‘THE CONTRACT OF INSURANCE
Title 1
WHAT MAY BE INSURED
Sec, 3. Any contingent or unknown event, whether past or future, which may
damnnify a person having an insurable interest, or create a liability against him, may be
insured against, subject to the provisions of this chapter,
The consent of the [husband] SPOUSE is not necessary for the validity of an

insurance policy taken out by a married [woman] PERSON on HIS OR her life or that of HIS

24 ORher children.



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{Any minor of the age of eighteen years or more, may, notwithstanding such minority,

contract for life, health and accident insurance, with any insurance company duly

authorized to do business in the Philippines, provided the insurance is taken on his own life
and the beneficiary appointed is the minor's estate or the minor's father, mother, husband,
wife, child, brother or sister.

The married woman or the minor herein allowed to take out an insurance policy may

exercise all the rights and privileges of an owner under a policy.]

All rights, title and interest in the policy of insurance taken out by an original owner on the
life or health of [@ minor] THE PERSON INSURED shall automatically vest in the [minor]
LATTER upon the death of the original owner, unless otherwise provided for in the policy.

Sec. 4. The preceding section does not authorize an insurance for or against the
drawing of any lottery, or for or against any chance or ticket in a lottery drawing a prize.

Sec. 5. All kinds of insurance are subject to the provisions of this chapter so far as the
provisions can apply.

Title 2
PARTIES TO THE CONTRACT

Sec. 6. Every {person] CORPORATION, partnership, OR association, [or corporation]
duly authorized to transact insurance business as elsewhere provided in this code, may be
an insurer.

Sec. 7. Anyone except a public enemy may be insured.

Sec. 8. Unless the policy otherwise provides, where a mortgagor of property effects
insurance in his own name providing that the loss shall be payable to the mortgagee, or.
assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the
interest of the mortgagor, who does not cease to be a party to the original contract, and any

prior to the loss, which would otherwise avoid the insurance, will have the same
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effect, although the property is in the hands of the mortgagee, but any act which, under the
contract of insurance, is to be performed by the mortgagor, may be performed by the
mortgagee therein named, with the same effect as if it had been performed by the
mortgagor.

Sec. 9. If an insurer assents to the transfer of an insurance from a mortgagor to 2
mortgagee, and, at the time of his assent, imposes further obligation on the assignee,
making a new contract with him, the act of the mortgagor cannot affect the rights of said
assignee.

Title 3
INSURABLE [NTEREST
Sec. 10. Every person has an insurable interest in the life and health:
{a) Of himself, of his spouse and of his children;
(b) Of any person on whom he depends wholly or in part for education or support, or in
whom he has a pecuniary interest;
{c) Of any person under a legal obligation to him for the payment of money, or respecting
property or services, of which death or illness might delay or prevent the performance; and
(4) Of any person upon whose life any estate or interest vested in him depends.

Sec. 14. The insured shail have the right to change the beneficiary he designated in
the policy, unless he has expressly waived this right in said policy.

Sec. 12. The interest of a beneficiary in a life insurance policy shall be forfeited when
the beneficiary is the principal, accomplice, or accessory in willfully bringing about the death

of the insured. {; in which event, the nearest relative of the Insured shall receive the

proceeds of said insurance if not otherwise disqualified.) IN SUCH A CASE, THE SHARE
FORFEITED SHALL PASS ON TO THE OTHER BENEFICIARIES, UNLESS OTHERWISE

DISQUALIFIED, IN THE ABSENCE OF OTHER BENEFICIARIES, THE PROCEEDS SHALL BE PAID
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IN ACCORDANCE WITH THE POLICY CONTRACT. IF THE POLICY CONTRACT IS SILENT, THE
PROCEEDS SHALL BE PAID TO THE INSURED'S ESTATE,

Sec. 13. Every interest in property, whether real or personal, or any relation thereto,
or liability in respect thereof, of such nature that a contemplated peril might directly
damnify the insured, is an insurable interest.

Sec. 14, An insurable interest in property may consist in:

fa) An existing interest;

(b) An inchoate interest founded on an existing interest; or

{c) An expectancy, coupled with an existing interest in that out of which the
expectancy arises.

Sec. 15. A carrier or depository of any kind has an insurable interest in a thing held
by him as such, to the extent of his liability but not to exceed the value thereof.

Sec. 16. A mere contingent or expectant interest in anything, not founded on an
actual right to the thing, nor upon any valid contract for it, is not insurable.

Sec. 17. The measure of an insurable interest in property is the extent to which the
insured might be damnified by loss or injury thereof.

Sec. 18, No contract or policy of insurance on property shall be enforceable except
for the benefit of some person having an insurable interest in the property insured.

Sec. 19, An interest in property insured must exist when the insurance takes effect,
and when the loss occurs, but not exist in the meantime; and interest in the life or health of
a person insured must exist when the insurance takes effect, but need not exist thereafter
‘or when the loss occurs.

Sec. 20. Except in the cases specified in the next four sections, and in the cases of
life, accident, and health insurance, a change of interest in any part of a thing insured

unaccompanied by a corresponding change in interest in the insurance, suspends the
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insurance to an equivalent extent, until the interest in the thing and the interest in the
insurance are vested in the same person.

Sec. 21. A change in interest in a thing insured, after the occurrence of an injury
which results in a loss, does not affect the right of the insured to indemnity for the loss.

Sec. 22. A change of interest in one or more several distinct things, separately
insured by one policy, does not avoid the insurance as to the others.

Sec. 23. A change on interest, by will or succession, on the death of the insured, does
not avoid an insurance; and his interest in the insurance passes to the person taking his
interest in the thing insured.

Sec. 24. A transfer of interest by one of several partners, joint owners, or owners in
‘common, who are jointly insured, to the others, does not avoid an insurance even though it
has been agreed that the insurance shall cease upon an alienation of the thing insured.

Sec. 25. Every stipulation in a policy of insurance for the payment of loss whether
the person insured has or has not any interest in the property insured, or that the policy
shall be received as proof of such interest, and every policy executed by way of gaming or
wagering, is void.

Title 4
CONCEALMENT

Sec. 26. A neglect to communicate that which a party knows and ought to
communicate, is called a concealment.

Sec. 27. A concealment whether intentional or unintentional ‘entitles the injured
Party to rescind a contract of insurance. [(As amended by Batasang Pambansa Blg. 874)]

Sec. 28. Each party to a contract of insurance must communicate[d] to the other, in
good faith, all facts within his knowledge which are material to the contract and as to which

he makes no warranty, and which the other has not the means of ascertaining
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Sec. 29. An intentional and fraudulent omission, on the part of one insured, to
communicate information of matters proving or tending to prove the falsity of a warranty,
entitles the insurer to rescind,

Sec. 30, Neither party to a contract of insurance is bound to communicate
information of the matters following, except in answer to the inquiries of the other:

(a) Those which the other knows;

{b) Those which, in the exercise of ordinary care, the other ought to know, and of
which the former has no reason to suppose him ignorant;

(c) Those of which the other waives communication;

(d) Those which prove or tend to prove the existence of a risk excluded by a
warranty, and which are not otherwise material; and

(e) Those which relate to a risk excepted from the policy and which are not
otherwise material.

Sec. 31. Materiality is to be determined not by the event, but solely by the probable

and reasonable influence of the facts upon the party to whom the commu! due, in

forming his estimate of the disadvantages of the proposed contract, or in making his

Sec. 32. Each party to a contract of insurance is bound to know all the general causes
which are open to his inquiry, equally with that of the other, and which may affect the

al or material perils contemplated; and all general usages of trade.

Sec. 33. The right to information of material facts may be waived, either by the
terms of the insurance or by neglect to make inquiry as to such facts, where they are
distinctly implied in other facts of which information is communicated.

Sec. 34, Information of the nature or amount of the interest of one insured need not

be communicated unless in answer to an inquiry, except as prescribed by section fifty-one.
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Sec. 35. Neither party to a contract of insurance is bound to communicate, even
upon inquiry, information of his own judgment upon the matters in question.
Title 5
REPRESENTATION

Sec. 36. A representation may be oral or written.

Sec. 37. A representation may be made at the time of, or before, issuance of the
policy.

Sec. 38. The language of a representation is to be interpreted by the same rules as
the language of contracts in general.

Sec. 39. A representation as to the future is to be deemed a promise, unless it
appears that it was merely a statement of belief or expectation.

Sec. 40. A representation cannot qualify an express provision in a contract of
insurance, but it may qualify an implied warranty.

Sec. 41. A representation may be altered or withdrawn before the insurance is
effected, but not afterwards.

Sec. 42. A representation must be presumed to refer to the date on which the
contract goes into effect.

Sec. 43. When a person insured has no personal knowledge of a fact, he may
nevertheless repeat information which he has upon the subject, and which he believes to be
true, with the explanation that he does so on the information of others; or he may submit

the information, in its whole extent, to the insurer; and in neither case is he responsible for

its truth, unless it proceeds from an agent of the insured, whose duty it is to give the

information.

Sec. 44, A representation is to be deemed false when the facts fail to correspond

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Sec. 45. If a representation is false in a material point, whether affirmative or
promissory, the injured party is entitled to rescind the contract from the time when the

representa

ion becomes false. {The right to rescind granted by this Code to the insurer is
waived by the acceptance of premium payments despite knowledge of the ground for
rescission,] [(As amended by Batasang Pambansa Big. 874).]

Sec. 46. The materiality of a representation is determined by the same rules as the
materiality of a concealment.

Sec. 47. The provisions of this chapter apply as well to a modification of a contract of
insurance as to its original formation,

Sec. 48. Whenever a right to rescind a contract of insurance is given to the insurer by
any provision of this chapter, such right must be exercised previous to the commencement
of an action on the contract.

After a policy of life insurance made payable on the death of the insured shall have
been in force during the lifetime of the insured for a period of two years from the date of its
issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or

/Irescindole] RESCINDABLE by reason ofthe frauduient concealment or misrepresentation
of the insured or his agent.
Title 6
THE POLICY

Sec; 49, The written instrument in which a contract of insurance is set forth, is called
a policy of insurance.

Sec. 50, The policy shall be in printed form which may contain blank spaces; and any
word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete

the contract of insurance shail be written on the blank spaces provided therein



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Any rider, clause, warranty or endorsement purporting to be part of the contract of
insurance and which is pasted or attached to said policy is not binding on the insured, unless
the descriptive title or name of the rider, clause, warranty or endorsement is also
mentioned and written on the blank spaces provided in the policy.

Unless applied for by the insured or owner, any rider, clause, warranty or
endorsement issued after the original policy shall be countersigned by the insured or owner,
which countersignature shall be taken as his agreement to the contents of such rider,
clause, warranty or endorsement.

[Group insurance and group annuity policies, however, may be typewritten and need
not be in printed form.]

NOTWITHSTANDING THE FOREGOING, THE POLICY MAY BE IN ELECTRONIC FORM
SUBJECT TO THE PERTINENT PROVISIONS OF REPUBLIC ACT NO. 8792, OTHERWISE
KNOWN AS THE “ELECTRONIC COMMERCE ACT” AND TO SUCH RULES AND REGULATIONS

AS MAY BE PRESCRIBED BY THE COMMISSIONER.

Sec. $1, A policy of insurance must specify:
{a) The parties between whom the contract is made;

{b) The amount to be insured except in the cases of open or running policies;

(c) The premium, or if the insurance is of a character where the exact premium is
only determinable upon the termination of the contrac, a statement of the basis
and rates upon which the final premium is to be determined;

(d) The property or life insured;

{e) The interest of the insured in property insured, if he is not the absolute owner
thereof;

(f) The risks insured against; and

(g) The period during which the insurance is to continue.
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Sec, 52. Cover notes may be issued to bind insurance temporarily pending the

issuance of the policy. Within sixty days after the issue of the cover note, a policy shall be

issued in lieu thereof, including within its terms the identical insurance bound under the
cover note and the premium therefor.

Cover notes may be extended or renewed beyond such sixty days with the written
approval of the Commissioner if he determines that such extension is not contrary to and is
not for the purpose of violating any provisions of this Code. The Commissioner may
promulgate rules and regulations governing such extensions for the purpose of preventing
such violations and may by such rules and regulations dispense with the requirement of
written approval by him in the case of extension in compliance with such rules and
regulations.

Sec. 53. The insurance proceeds shall be applied exclusively to the proper interest of

the person in whose name or for whose ben’ made unless otherwise specified in the

policy.

Sec. 54. When an insurance contract is executed an agent or trustee as the
insured, the fact that his principal or beneficiary is the real party in interest may be
indicated by describing the insured as agent or trustee, or by other general words in the
policy.

Sec. 55, To render an insurance effected by one partner or part-owner, applicable to
the interest of his co-partners or other part-owners, it is necessary that the terms of the
policy should be such as are applicable to the joint or common interest.

Sec. 56. When the description of the insured in a policy is so general that it may

comprehend any person or any class of persons, only he who can show that it was intended

to include him, can claim the benefit of the policy.

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Sec. 57. A policy may be so framed that it will inure to the benefit of whomsoever,
during the continuance of the risk, may become the owner of the interest insured.

Sec. 58. The mere transfer of a thing insured does not transfer the policy, but
suspends it until the same person becomes the owner of both the policy and the thing
insured

Sec. 59. A policy is either open, valued or running.

Sec. 60. An open policy is one in which the value of the thing insured is not agreed
upon, [but is left to be ascertained in case of loss.] AND THE AMOUNT OF THE INSURANCE
(MERELY REPRESENTS THE INSURER’S MAXIMUM LABILITY. THE VALUE OF SUCH THING
INSURED SHALL BE ASCERTAINED AT THE TIME OF THE LOSS.

Sec. 61. A valued policy is one which expresses on its face an agreement that the

thing insured shall be valued at a specific sum.

Sec. 62. A running policy is one which contemplates successive insurances, and

which provides that the object of the policy may be from time to time defined, especially as

to the subjects of insurance, by additional statements or indorsements.

Sec. 63. A condition, stipulation, or agreement in any policy of insurance, limiting the
time for commencing an action thereunder to a period of less than one year from the time
when the cause of action accrues, is void

Sec. 64. No policy of insurance other than life shall be cancelled by the insurer
except upon prior notice thereof to the insured, and no notice of cancellation shall be

effective unless it is based on the occurrence, after the effective date of the policy, of one or

more of the following:

(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured against;

(c) discovery of fraud or material misrepresentation;
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(d) discovery of willful or reckless acts or omissions increasing the hazard insured
against;

(e) physical changes in the property insured which result in the property becoming
uninsurable; or ~

(f) DISCOVERY OF OTHER INSURANCE COVERAGE THAT MAKES THE TOTAL

INSURANCE IN EXCESS OF THE VALUE OF THE PROPERTY INSURED; OR a

determination by the Commissioner that the continuation of the policy would violate

or would place the insurer in violation of this Code.

Sec, 65. All notices of cancellation mentioned in the preceding section shall be in
writing, mailed or delivered to the named insured at the address shown in the policy, OR TO
HIS BROKER PROVIDED THE BROKER IS AUTHORIZED IN WRITING BY THE POLICY OWNER
TO RECEIVE THE NOTICE OF CANCELLATION ON HIS BEHALF, and shall state (a) which of
the grourids set forth in section sixty-four is relied upon and (b) that, upon written request
of the named insured, the insurer will furnish the facts on which the cancellation is based.

Sec, 66. In case of insurance other than life, unless the insurer at least forty-five days

in advance of the end of the policy period mails or delivers to the named insured at the

address shown in the policy notice of its intention not to renew the policy or to condition its
renewal upon reduction of limits or elimination of coverages, the named insured shall be
entitled to renew the policy upon payment of the premium due on the effective date of the
renewal. Any policy written for a term of less than one year shall be considered as if written
for a term of one year. Any policy written for a term longer than one year or any policy with
no fixed expiration date shall be considered as if written for successive policy periods or
terms of one year.

Title 7

WARRANTIES.
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See. 67. A warranty is either expressed or implied.

Sec. 68, A warranty may relate to the past, the present, the future, or to any or all of
these.

Sec. 69. No particular form of words is necessary to create a warranty.

Sec. 70. Without prejudice to section fifty-one, every express warranty, made at or
before the execution of a policy, must be contained in the policy itself, or in another
instrument signed by the insured and referred to in the policy as making a part of it.

Sec, 71. A statement in a policy of matter relating to the person or thing insured, or
to the risk, as a fact, {s an express warranty thereof.

Sec. 72. A statement in a policy which imparts that it is intended to do or not to doa
thing which materially affects the risk, is a warranty that such act or omission shall take
place.

Sec. 73. When, before the time arrives for the performance of a warranty relating to
the future, a loss insured against happens, or performance becomes unlawful at the place of
the contract, or impossible, the omission to fulfill the warranty does not avoid the policy.

Sec. 74, The violation of a material warranty, or other material provision of a policy,
on the part of either party thereto, entitles the other to rescind.

Sec. 75. A policy may declare that a violation of specified provisions thereof shall
avoid it, otherwise the breach of an immaterial provision does not avoid the policy.

Sec. 76. A breach of warranty without fraud merely exonerates an insurer from the
time that it occurs, or where it is broken in its inception, prevents the policy from attaching
to the risk.

Title 8

PREMIUM

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Sec. 77. An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is valid and
binding unless and until the premium thereof has been paid, except in the case of a life or
an industrial life policy whenever the grace period provision applies, OR WHENEVER UNDER
THE BROKER AND AGENCY AGREEMENTS WITH DULY LICENSED INTERMEDIARIES, A 90-
DAY CREDIT EXTENSION IS GIVEN. NO CREDIT EXTENSION TO A DULY LICENSED
INTERMEDIARY SHOULD EXCEED 90-DAYS FROM DATE OF ISSUANCE OF THE POLICY.

SEC, 78, AN EMPLOYEE OF THE REPUBLIC OF THE PHILIPPINES, INCLUDING ITS
POLITICAL SUBDIVISIONS AND INSTRUMENTALITIES, AND GOVERNMENT OWNED OR
CONTROLLED CORPORATIONS, MAY PAY HIS INSURANCE PREMIUM AND LOAN
OBLIGATIONS THROUGH SALARY DEDUCTION: PROVIDED, THE TREASURER, CASHIER,
PAYMASTER OR OFFICIAL OF THE ENTITY EMPLOYING THE GOVERNMENT EMPLOYEE IS
AUTHORIZED, NOTWITHSTANDING THE PROVISIONS OF ANY EXISTING LAW, RULES AND
REGULATIONS TO THE CONTRARY, TO MAKE DEDUCTIONS FROM THE SALARY, WAGE OR
INCOME OF THE LATTER PURSUANT TO THE AGREEMENT BETWEEN THE INSURER AND THE
GOVERNMENT EMPLOYEE AND 10 REMIT SUCH DEDUCTIONS TO THE INSURER
CONCERNED, AND COLLECT SUCH REASONABLE FEE FOR ITS SERVICES.

Sec. [78] 79. An acknowledgment in a policy or contract of insurance or the receipt
of premium is conclusive evidence of its payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be binding until the premium is
actually paid.

Sec. [79] 80. A person insured is entitled to a return of premium, as follows:

(a) To the whole premium if no part of his interest in the thing insured be exposed to

any of the perils insured against;
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(b) Where the insurance is made for a definite period of time and the insured
surrenders his policy, to such portion of the premium as corresponds with the
unexpired time, at a pro rata rate, unless a short period rate has been agreed upon
and appears on the face of the policy, after deducting from the whole premium any
claim for loss or damage under the policy which has previously accrued; Provided,
That no holder of a life insurance policy may avail himself of the privileges of this
paragraph without sufficient cause as otherwise pravided by law.

Sec. {80] 81, If a peril insured against has existed, and the insurer has been liable for
any period, however short, the insured Is not entitléd to return of premiums, so far as that
particular risk is concerned.

Sec. [81] 82. A person insured is entitled to return of the premium when the contract
is voidable AND SUBSEQUENTLY ANNULLED UNDER THE PROVISIONS OF THE CIVIL CODE;
OR on account of fraud or misrepresentation of the insurer, or of his agent, or on account of

jout his fault; or when by any

facts, the existence of which the insured was ignorant
default of the insured other than actual fraud, the insurer never incurred any liability under
the policy.

‘A PERSON INSURED IS NOT ENTITLED TO A RETURN OF PREMIUM IF THE POLICY IS
ANNULLED, RESCINDED OR IF A CLAIM IS DENIED BY REASON OF HIS FRAUD.

Sec. [82] 83. In case of an over-insurance by several insurers{,] OTHER THAN LIFE,
the insured is entitled to a ratable return of the premium, proportioned to the amount by
which the aggregate sum insured in all the policies exceeds the insurable value of the thing
at risk.

SEC. 84. AN INSURER MAY CONTRACT AND ACCEPT PAYMENTS, IN ADDITION TO
REGULAR PREMIUM, FOR THE PURPOSE OF PAYING FUTURE PREMIUMS ON THE POLICY

OR TO INCREASE THE BENEFITS THEREOF.
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Titled
Loss

Sec. [83] 85. An agreement not to transfer the claim of the insured against the
insurer after the loss has happened, is void if made before the loss except as otherwise
provided in the case of life insurance,

Sec. [84] 86. Unless otherwise provided by the policy, an insurer is liable for a loss of
which a peril insured against was the proximate cause, although a peril not contemplated by
the contract may have been a remote cause of the loss; but he is not liable for a loss which
the peril insured against was only a remote cause.

Sec. [85] 87. An insurer is liable where the thing insured is rescued from a peril

in the course of such rescue, the

insured against that would otherwise have caused a loss, i
thing is exposed to a peril not insured against, which permanently deprives the insured of its
possession, in whole or in part; or where a loss is caused by efforts to rescue the thing
insured from a peril insured against.

Sec. 86] 88. Where a peril is especially excepted in a contract of insurance, a loss,
which would not have occurred but for such peril, is thereby excepted although the
immediate cause of the loss was a peril which was not excepted,

Sec. [87] 89. An insurer is not liable for a loss caused by the willful act or through the
connivance of the insured; but he is not exonerated by the negligence of the insured, or of
the insurance agents or others.

Title 10
NOTICE OF LOSS

‘Sec. [88] 90. In case of loss upon an insurance against fire, an insurer is exonerated,

if WRITTEN notice thereof be nat given to him by an insured, or some person entitled to the

benefit of the insurance, without unnecessary delay. FOR OTHER NON-LIFE INSURANCE,
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THE COMMISSIONER MAY SPECIFY THE PERIOD FOR THE SUBMISSION OF THE NOTICE OF
Loss,

‘Sec. [89] 91. When a preliminary proof of loss is required by a policy, the insured is
not bound to give such proof as would be necessary in a court of justice; but it is sufficient
for him to give the best evidence which he has in his power at the time.

Sec. [90] 92, All defects in a notice of loss, or in preliminary proof thereof, which the
insured might remedy, and which the insurer omits to specify to him, without unnecessary
delay, as grounds of objection, are waived.

ec, [91] 93. Delay in the presentation to an insurer of notice or proof of loss is
waived if caused by any act of him, or if he omits to take objection promptly and specifically
upon that ground.

Sec. [92] 94. If the policy requires, by way of preliminary proof of loss, the certificate
or testimony of @ person other than the insured, it is sufficient for the insured to use
reasonable diligence to procure it, and in case of the refusal of such person to give it, then
to furnish reasonable evidence to the insurer that such refusal was not induced by any just
grounds of disbelief in the facts necessary to be certified or testified.

Title 12
DOUBLE INSURANCE

Sec. [93] 95. A double insurance exists where the same person is insured by several
insurers separately in respect to the same subject and interest.

Sec, [94] 96. Where the insured IN A POLICY OTHER THAN LIFE is over-insured by
double insurance:

(a) The insured, unless’ the policy otherwise provides, may claim payment from the
insurers in such order as he may select, up to the amount for which the insurers are

severally liable under their respective contracts;
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{b) Where the policy under which the insured claims is a valued policy, [the insured
must give credit as against the valuation for] any sum received by him under any
other policy SHALL BE DEDUCTED FROM THE VALUE OF THE POLICY without regard
to the actual value of the subject matter insured;
(c) Where the policy under which the insured claims is an unvalued policy ANY SUM
RECEIVED BY HIM UNDER ANY POLICY SHALL BE DEDUCTED [he must give credit, as]
against the full insurable value, for any sum received by him under any policy;
(0) Where the insured receives any sum in excess of the valuation in the case of
valued policies, or of the insurable value in the case of unvalued policies, he must
hold such sum in trust for the insurers, according to their right of contribution among
themselves;
(e) Each insurer is bound, as betweén himself and the other insurers, to contribute
ratably to the loss in proportion to the amount for which he is liable under his
contract. .
Title 12
REINSURANCE

Sec, [95] 97. A contract of reinsurance is one by which an insurer procures a third

person to insure him against loss or liability by reason of such original insurance,

Sec. [96] 98. Where an insurer obtains reinsurance, except under automatic

reinsurance treaties, he must communicate all the representations of the original insured,
and also all the knowledge and information he possesses, whether previously or

subsequently acquired, which are material to the risk.

Sec. [97] 99. A reinsurance is presumed to be a contract of indemnity against

liability, and not merely against damage.

Sec, [98] 100, The original insured has no interest in a contract of reinsurance.
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Chapter
CLASSES OF INSURANCE
Title |
MARINE INSURANCE
Sub-Title 1-4

DEFINITION

Sec. [99] 101. Marine Insurance includes:

(1) Insurance against loss of or damage to:

(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise,
effects, disbursements, profits, moneys, securities, choses in action, evidences
of debts, valuable papers, bottomry, and respondentia interests and all other

kinds of property and interests therein, in respect to, appertaining to or in

connection with any and all risks or perils of navigation, transit or
transportation, or while being assembled, packed, crated, baled, compressed
or similarly prepared for shipment or while awaiting shipment, or during any
delays, storage, transhipment, or reshipment incident thereto, including war
risks, marine builder's risks, and all personal property floater risks;

(b) Person or property in connection with or appertaining to a marine, inland

marine, transit or transportation insurance, including liability for loss of or

damage arising out of or in connection with the construction, repair,
operation, maintenance or use of the subject matter of such insurance (but
not including fife insurance or surety bonds nor insurance against loss by

reason of bodily injury to any person arising out of ownership, maintenance,

or use of automobiles);

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(c) Precious stones, jewels, jewelry, precious metals, whether in course of
transportation or otherwise;

(d) Bridges, tunnels and other instrumentalities of transportation and
communication (exciuding buildings, their furniture and furnishings, fixed
contents and supplies held in storage); piers, wharves, docks and slips, and
other aids to navigation and transportation, including dry docks and marine

railways, dams and appurtenant facilities for the control of waterways.

(2) "Marine protection and indemnity insurance,” meaning insurance against, or

yy of the insured for loss, damage, or expense incident to owners!

against legal lial
operation, chartering, maintenance, use, repair, or construction of any vessel, craft or
instrumentality in use of ocean or inland waterways, including liability of the insured for
personal injury, illness or death or for {oss of or damage to the property of another person.
Sub-Title 1-B
INSURABLE INTEREST

Sec. [100] 102. The owner of a ship has in all cases an insurable interest in it, even
when it has been chartered by one who covenants to pay him its value in case of loss:
Provided, That in this case the insurer shall be liable for only that part of the loss which the
insured cannot recover from the charterer.

Sec. [101] 103, The insurable interest of the owner of the ship hypothecated by
bottomry is only the excess of its value over the amount secured by bottomry.

Sec. [102] 104, Freightage, in the sense of a policy of marine insurance, signifies all
the benefits derived by the owner, either from the chartering of the ship or its employment

for the carriage of his own goods or those of others.

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Sec. [103] 105. The owner of a ship has an insurable interest in expected freightage

which according to the ordinary and probable course of things he would have earned but for
the intervention of a peril insured against or other peril incident to the voyage.

Sec. [104] 106. The interest mentioned in the last section exists, in case of a charter
party, when the ship has broken ground on the chartered voyage. if a price is to be paid for
the carriage of goods it exists when they are actually on board, or there Is some contract for
putting them on board, and both ship and goods are ready for the specified voyage.

Sec. [105] 107. One who has an interest in the thing from which profits are expected
to proceed has an insurable interest in the profits.

Sec. [106] 108, The charterer of a ship has an insurable interest in it, to the extent
that he is liable to be damnified by its loss.

Sub-Title 1-C
CONCEALMENT

Sec. [107] 109. In marine insurance each party is bound to communicate, in addition
to what is required by section twenty-eight, all the information which he possesses, material
to the risk, except such as is mentioned in Section thirty, and to state the exact and whole
truth in relation to all matters that he represents, or upon inquiry discloses or assumes to
disclose.

‘Sec. {108] 110. in marine insurance, information of the belief or expectation of a
third person, in reference to a material fact, is material.

Sec. [109] 111. A person insured by a contract of marine insurance is presumed to
have knowledge, at the time of insuring, of a prior loss, if the information might possibly
have reached him in the usual mode of transmission and at the usual rate of

communication.

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Sec, [110] 112. A concealment in a marine insurance, in respect to any of the
following matters, does not vitiate the entire contract, but merely exonerates the insurer
from a loss resulting from the risk concealed:

(a) The national character of the insured;
(b) The liability of the thing insured to capture and detention;
{c) The liability to seizure from breach of foreign laws of trade;
(d} The want of necessary documents;
{e) The use of faise and simulated papers.
Sub-Title 1-D
REPRESENTATION

Sec. {111} 113. If a representation by a person insured by a contract of marine
insurance, is intentionally false in any material respect, or in respect of any fact on which
the character and nature of the risk depends, the insurer may rescind the entire contract.

Sec. [112] 114. The eventual falsity of a representation as to expectation does not, in
the absence of fraud, avoid a contract of marine insurance.

Sub-Title 1-€
IMPLIED WARRANTIES

Sec. [113] 115. In every marine insurance upon a ship or freight, or freightage, or

upon anything which is the subject of marine insurance, a warranty is implied that the ship

is seaworthy.

Sec. [114] 116. A ship is seaworthy when reasonably fit to perform the service and to
encounter the ordinary perils of the voyage contemplated by the parties to the policy.
Sec. [115] 117. An implied warranty of seaworthiness is complied with if the ship be

seaworthy at the time of the [of] commencement of the risk, except in the following cases:

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{a) When the insurance is made for a specified length of time, the implied warranty is
not complied with unless the ship be seaworthy at the commencement of every
voyage it undertakes during that time;

{b) When the insurance is upon the cargo which, by the terms of the policy,
description of the voyage, or established custom of the trade, is to be transhipped at
an intermediate port, the implied warranty is not complied with unless each vessel
upon which the cargo Is shipped, or transhipped be seaworthy at the commencement
of each particular voyage

Sec. [116] 118. A warranty of seaworthiness extends not only to the condition of the
structure of the ship itself, but requires that it be properly laden, and provided with a
competent master, a sufficient number of competent officers and seamen, and the requisite
appurtenances and equipment, such as ballasts, cables and anchors, cordage and sails, food,
water, fuel and lights, and other necessary or proper stores and implements for the voyage.

Sec, [117] 119. Where different portions of the voyage contemplated by a policy
differ in respect to the things requisite to make the ship seaworthy therefor, a warranty of
seaworthiness is complied with if, at the commencement of each portion, the ship is
seaworthy with reference to that portion.

Sec. [1:18] 120. When the ship becomes unseaworthy during the voyage to which an
insurance relates, an unreasonable delay in repairing the defect exonerates the insurer on
ship or shipowner's interest from liability from any loss arising therefrom.

Sec, [119] 121. A ship which is seaworthy for the purpose of an insurance upon the
ship may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for
the purpose of the insurance upon the cargo.

Sec. {120] 122. Where the nationality or neutrality of a ship or cargo is expressly

warranted, it is implied that the ship will carry the requisite documents to show such
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nationality or neutrality and that it will not carry any documents which cast reasonable
suspicion thereon.
Sub-Title 1-F
‘THE VOYAGE AND DEVIATION
Sec. [121] 123, When the voyage contemplated by a marine insurance policy is
described by the places of beginning and ending, the voyage insured in one which conforms
to the course of sailing fixed by mercantile usage between those places.

Sec. [122] 124. If the course of sailing is not fixed by mercantile usage, the voyage

insured by a marine insurance policy is that way between the places specified, which to a
master of ordinary skill and discretion, would mean the most natural, direct and
advantageous.

Sec. [123] 125. Deviation is a departure from the course of the voyage insured,
mentioned in the last two sections, or an unreasonable delay in pursuing the voyage or the
commencement of an entirely different voyage.

Sec. [124] 126. A deviation is proper:

(a) When caused by circumstances over which neither the master nor the owner of
the ship has any control;

{b} When necessary to comply with a warranty, or to avoid a peril, whether or not the

peril is insured against;

(c) When made in good faith, and upon reasonable grounds of belief in its necessity to
avoid a peril; or
(d) When made in good faith, for the purpose of saving human life or relieving

another vessel in distress.

Sec. [125] 127. Every deviation not specified in the last section is improper.

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Sec. [126] 128. An insurer is not liable for any loss happening to the thing insured
subsequent to an improper deviation.
Sub-Title 1-G
Loss
Sec. [127] 129. A loss may be either total or partial.
Sec. [128] 130. Every loss which is not total is partial
Sec, [129] 131. A total loss may be either actual or constructive.
Sec. [130] 132. An actual total loss is [cause] CAUSED by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by being broken up;
{c) Any damage to the thing which renders it valueless to the owner for the purpose
for which he held it; or
(d) Any other event which effectively deprives the owner of the possession, at the
port of destination, of the thing insured,
Sec. [131] 133. A constructive total loss is one which gives to a person insured a right
to abandon, under Section one hundred [thirty-nine] FORTY ONE.
Sec. [132] 134. An actual loss may be presumed from the continued absence of 2
ship without being heard of. The length of time which is sufficient to raise this presumption
depends on the circumstances of the case.

Sec. [133] 135. When a ship is prevented, at an intermediate port, from completing

the voyage, by the perils insured against, the liability of a marine insurer on the cargo
continues after they are thus reshipped.

Nothing in this section shall prevent an insurer from requiring an additional premium if the

hazard be increased by this extension of liability.

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Sec. [134] 136. In addition to the liability mentioned in the last section, a marine
insurer is bound for damages, expenses of discharging, storage, reshipment, extra
freightage, and all other expenses incurred in saving cargo reshipped pursuant to the last
section, up to the amount insured.

Nothing in this or in the preceding section shall render a marine insurer liable for any
amount in excess of the insured value or, if there be none, of the insurable value.

Sec, [135] 137. Upon an actual total loss, 2 person insured is entitled to payment
without notice of abandonment.

Sec. [136] 138. Where it has been agreed that an insurance upon a particular thing,
‘or class of things, shall be free from particular average, a marine insurer is not liable for any
particular average loss not depriving the insured of the possession, at the port of
destination, of the whole of such thing, or class of things, even though it becomes entirely
worthless; but such insurer is liable for his proportion of all general average loss assessed
upon the thing insured.

Sec, [137] 139. An insurance confined in terms to an actual loss does not cover a
constructive total loss, but covers any oss, which necessarily results in depriving the insured
of the possession, at the port of destination, of the entire thing insured,

Sub-Title 1-H
ABANDONMENT

Sec. [138] 140. Abandonment, in marine insurance, is the act of the insured by
which, after a constructive total loss, he declares the relinquishment to the insurer of his
interest in the thing insured.

Sec. [139] 141. A person insured by a contract of marine insurance may abandon the

thing insured, or any particular portion thereof separately valued by the policy, or otherwise

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separately insured, and recover for a total loss thereof, when the cause of the loss is 2 peril
insured against:
(a) If more than three-fourths thereof in value is actually lost, or would have to be
expended to recover it from the peril;
(b) If its injured to such an extent as to reduce its value more than three-fourths;
(c) if the thing insured is a ship, and the contemplated voyage cannot be lawfully
performed without incurring either an expense to the insured of more than three-
fourths the value of the thing abandoned or a risk which a prudent man would not
take under the circumstances; or
(d) if the thing insured, being cargo or freightage, and the voyage cannot be
performed, nor another ship procured by the master, within a reasonable time and
with reasonable diligence, to forward the cargo, without incurring the like expense or
risk mentioned in the preceding sub-paragraph. But freightage cannot in any case be

abandoned unless the ship is also abandoned.

Sec. [140] 142. An abandonment must be neither partial nor conditional.

Sec. [141] 143, An abandonment must be made within a reasonable time after
receipt of reliable information of the loss, but where the information is of a doubtful
character, the insured is entitled to a reasonable time to make inquiry.

Sec. [142] 144, Where the information upon which an abandonment has been made
proves incorrect, or the thing insured was so far restored when the abandonment was made
that there was then in fact no total loss, the abandonment becomes ineffectual.

Sec, [143] 145. Abandonment is made by giving notice thereof to the insurer, which
may be done orally, or in writing; Provided, That if the notice be done orally, a written

notice of such abandonment shall be submitted within seven days from such oral notice.

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Sec, [144] 146. A notice of abandonment must be explicit, and must specify the
particular cause of the abandonment, but need state only enough to show that there is
probable cause therefor, and need not be accompanied with proof of interest or of loss.

Sec. [145] 147, An abandonment can be sustained only upon the cause specified in
the notice thereof. .

Sec. [146] 148, An abandonment is equivalent to a transfer by the insured of his
interest to the insurer, with ail the chances of recovery and indemnity.

Sec. [147] 149. If a marine insurer pays for a loss as if it were an actual total loss, he
is entitled to whatever may remain of the thing insured, or its proceeds or salvage, as if
there had been a formal abandonment.

Sec. [148] 150. Upon an abandonment, acts done in good faith by those who were
agents of the insured in respect to the thing insured, subsequent to the loss, are at the risk
of the insurer and for his benefit.

Sec, [149] 151. Where notice of abandonment is properly given, the rights of the
insured are not prejudiced by the fact that the insurer refuses to accept the abandonment.

Sec, [150] 152. The acceptance of an abandonment may be either express or implied
from the conduct of the insurer. The mere silence of the insurer for an unreasonable length
of time after notice shail be construed as an acceptance.

Sec, [151] 153. The acceptance of an abandonment, whether express or implied, is
conclusive upon the parties, and admits the loss and the sufficiency of the abandonment.

Sec, [152] 154. An abandonment once made and accepted is irrevocable, unless the
ground upon which it was made proves to be unfounded.

Sec. [153] 155. On an accepted abandonment of a ship, freightage earned previous
to the loss belongs to the insurer of said freightage; but freightage subsequently earned

belongs to the insurer of the ship.
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Sec, [154] 156. If an insurer refuses to accept a valid abandonment, he is liable as
upon actual total loss, deducting from the amount any proceeds of the thing insured which
may have come to the hands of the insured.

Sec, [155] 157. If a person insured omits to abandon, he may nevertheless recover
his actual loss.

Sub-Title 1-4

MEASURE OF INDEMNITY

Sec. [156] 158. A valuation in a policy of marine insurance (in] IS conclusive between
the parties thereto in the adjustment of either a partial or total loss, if the insured has some
interest at risk, and there is no fraud on his part; except that when a thing has been
hhypothecated by bottomry or respondentia, before its insurance, and without the
knowledge of the person actually procuring the insurance, he may show the real value. But a
valuation fraudulent in fact, entitles the insurer to rescind the contract.

Sec. [157] 159. A marine insurer is liable upon a partial loss, only for such proportion
of the amount insured by him as the loss bears to the value of the whole interest of the
insured in the property insured.

Sec. [158] 160. Where profits are separately insured in a contract of marine
insurance, the insured is entitled to recover, in case of loss, a proportion of such profits
equivalent to the proportion which the value of the property lost bears to the value of the
whole.

Sec. [159] 161. In case of a valued policy of marine insurance on freightage or cargo,
if @ part only of the subject is exposed to the risk, the evaluation applies only in proportion

to such part.

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Sec. [160] 162, When profits are valued and insured by a contract of marine
insurance, a loss of them is conclusively presumed from a loss of the property out of which
they are expected to arise, and the valuation fixes their amount.

Sec. [161] 163. In estimating a loss under an open policy of marine insurance the
following rules are to be observed:

(a) The value of a ship is its value at the beginning of the risk, including all articles or
charges which add to its permanent value or which are necessary to prepare it for the
voyage insured;

(b) The value of the cargo is its actual cost to the insured, when laden on board, or
where the cost cannot be ascertained, its market value at the time and place of
lading, adding the charges incurred in purchasing and placing it on board, but without
reference to any loss incurred in raising money for its purchase, or to any drawback
onits exportation, or to the fluctuation of the market at the port of destination, or to
expenses incurred on the way or on arrival;

(c) The value of freightage is the gross freightage, exclusive of primage, without
reference to the cost of earning it; and

(d) The cost of insurance is in each case to be added to the value thus estimated.

Sec. [162] 164, If cargo insured against partial loss arrives at the port of destination
ina damaged condition, the loss of the insured is deemed to be the same proportion of the
value which the market price at that port, of the thing so damaged, bears to the market
price it would have brought if sound.

Sec. [163] 165. A marine insurer is liable for all the expenses attendant upon a loss
which forces the ship into port to be repaired; and where it is stipulated in the policy that

the insured shall labor for the recovery of the property, the insurer is liable for the expense

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incurred thereby, such expense, in either case, being in addition to a total loss, if that
afterwards occurs.

Sec. [164] 166. A marine insurer is liable for a loss falling upon the insured, through a
contribution in respect to the thing insured, required to be made by him towards a general
average loss called for by a peril insured against; provided, that the liability of the insurer
shall be limited to the Proportion of contribution attaching to his policy value where this is
Jess than the contributing value of the thing insured.

Sec. [165] 167. When a person insured by a contract of marine insurance has a
demand against others for contribution, he may claim the whole loss from the insurer,
subrogating him to his own right to contribution. But no such claim can be made upon the
insurer after the separation of the interests liable to the contribution, nor when the insured,
having the right and opportunity to enforce the contribution from others, has neglected or
waived the exercise of that right.

Sec. [166] 168. In the case of a partial loss of ship or its equipment, the ‘old materials
are to be applied towards payment for the new. Unless otherwise stipulated in the policy, a
marine insurer is liable for only two-thirds of the remaining cost of repairs after such
deduction, except that anchors must be paid in full

Title 2
FIRE INSURANCE

Sec. [167] 169. As used in this Code, the term “fire insurance" shall include insurance
against loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when
such risks are covered by extension to fire insurance policies or under separate policies.

Sec. [168] 170. An alteration in the use or condition of a thing insured from that to

which it is limited by the policy made without the consent of the insurer, by means within

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the control of the insured, and increasing the risks, entitles an insurer to rescind a contract,
of fire insurance.

Sec. [169] 171. An alteration in the use or condition of a thing insured from that to
which it is limited by the policy, which does not increase the risk, does not affect a contract
of fire insurance.

Sec. [170] 172. A contract of fire insurance is not affected by any act of the insured
subsequent to the execution of the policy, which does not violate its provisions, even
though it increases the risk and is the cause of the loss.

Sec. [171] 173. If there is no valuation in the policy, the measure of indemnity in an
insurance against fire is the expense it would be to the insured at the time of the
commencement of the fire to replace the thing lost or injured in the condition in which at
the time of the injury; but if there is a valuation in a policy of fire insurance, the effect shall
be the same as ina policy of marine insurance.

Sec. [172] 174. Whenever the insured desires to have a valuation named in his
policy, insuring any building or structure against fire, he may require such building or
structure to be examined by an independent appraiser and the value of the insureds
interest therein may then be fixed as between the insurer and the insured. The cost of such
examination shall be paid for by the insured. A clause shall be inserted in such policy stating
substantially that the value of the insured’s interest in such building or structure has been
thus fixed, In the absence of any change increasing the risk without the consent of the

Insurer or of fraud on the part of the insured, then in case of a total loss under such policy,

the whole amount so insured upon the insureds interest in such building or structure, as

stated in the policy upon which the insurers have received a premium, shall be paid, and in

case of a partial loss the full amount of the partial loss shall be so paid, and in case there are

two or more policies covering the insured's interest therein, each policy shail contribute pro
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rata to the payment of such whole or partial loss. But in no case shall the insurer be
required to pay more than the amount thus stated in such policy. This section shall not
prevent the parties from stipulating in such policies concerning the repairing, rebuilding or
replacing of buildings or structures wholly or partially damaged or destroyed.

Sec. [173] 175. No policy of fire insurance shall be pledged, hypothecated, or
transferred to any person, firm or company who acts as agent for or otherwise represents
the issuing company, and any such pledge, hypothecation, or transfer hereafter made shall
be void and of no effect insofar as it may affect other creditors of the insured,

Title 3
CASUALTY INSURANCE

Sec. [174] 176. Casualty insurance is insurance covering loss or liability arising from
accident or mishap, excluding certain types of loss which by law or custom are considered as
falling exclusively within the scope of other types of insurance such as fire or marine. It
includes, but is not limited to, employer's liability insurance, motor vehicle liability
insurance, plate glass insurance, burglary and theft insurance, personal accident and health
insurance as written by non-life insurance companies, and other substantially similar kinds
of insurance.

Title 4
SURETYSHIP

Sec. [175] 177. A contract of suretyship is an'agreement whereby a party called the
surety guarantees the performance by another party called the principal or obligor of an
obligation or undertaking in favor of a third party called the obligee. It includes official
recognizances, stipulations, bonds or undertakings issued by any company by virtue of and

under the provisions of Act No. 536, as amended by Act No. 2206.

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Sec. [176] 178. The liability of the surety or sureties shall be joint and several with
the obligor and shall be limited to the amount of the bond, It is determined strictly by the
terms of the contract of suretyship in relation to the principal contract between the obligor
and the oblige. {(As amended by Presidential Decree No. 1455).]

Sec. [177] 179. The surety is entitled to payment of the premium as soon as the
contract of suretyship or bond is perfected and delivered to the obligor. No contract of
suretyship or bonding shall be valid and binding unless and until the premium therefor has
been paid, except where the obligee has accepted the bond, in which case the bond
becomes valid and enforceable irrespective of whether or not the premium has been paid
by the obligor to the surety: Provided, That if the contract of suretyship or bond is not
accepted by, or filed with the obligee, the surety shall collect only reasonable amount, not
exceeding fifty per centum of the premium due thereon as service fee plus the cost of
stamps or other taxes imposed for the issuance of the contract or bond: Provided, however,

That if the non-acceptance of the bond be due to the fault or negligence of the surety, no

such service fee, stamps or taxes shall be collected.
In the case of a continuing bond, the obligor shall pay the subsequent annual premium as it
falls due until the contract of suretyship is cancelled by the obligee or by the Commissioner
or by a court of competent jurisdiction, as the case may be.

Sec. [178] 180. Pertinent provisions of the Civil Code of the Philippines shall be

applied in a suppletory character whenever necessary in interpreting the provisions of a
contract of suretyship.
Title S
LIFE INSURANCE
Sec, [179] 181. Life insurance is insurance on human lives and insurance

appertaining thereto or connected therewith.
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EVERY CONTRACT OR UNDERTAKING FOR THE PAYMENT OF ANNUITIES INCLUDING
CONTRACTS FOR THE PAYMENT OF LUMP SUMS UNDER A RETIREMENT PROGRAM WHERE
ALIFE INSURANCE COMPANY MANAGES OR ACTS AS A TRUSTEE FOR SUCH RETIREMENT
PROGRAM SHALL BE CONSIDERED A LIFE INSURANCE CONTRACT FOR PURPOSES OF THIS
cope.

Sec. [180] 182. An insurance upon life may be made payable on the death of the
person, or on his surviving a specified period, or otherwise contingently on the continuance
or cessation of life.

Every contract or pledge for the payment of endowments or annuities shall be
considered a life insurance contract for purpose of this Code.

In the absence of a judicial guardian, the father, or in the latter's absence or
incapacity, the mother, or any minor, who is an insured or a beneficiary under a contract of
life, heaith or accident insurance, may exercise, in behalf of said minor, any right under the
policy, without necessity of court authority or the giving of a bond, where the interest of the
minor in the particular act involved does not exceed {twenty thousand] ONE MILLION pesos
‘OR IN SUCH AMOUNT AS MAY BE DETERMINED BY THE COMMISSIONER. Such right may
include, but shall not be limited to, obtaining a policy loan, surrendering the policy, receiving
the proceeds of the policy, and giving the minor's consent to any transaction on the policy.

Sec, [180-A] 183. The insurer in a life insurance contract shall be liable in case of
suicides only when it is committed after the policy has been in force for a period of two
years from the date of its issue or of its last reinstatement, unless the policy provides
shorter period: Provided, however, That suicide committed in the state of insanity shall be
compensable regardless of the date of commission. {(As amended by Batasang Pambansa

Big. 874).)

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Sec. [181] 184. A policy of insurance upon life or health may pass by transfer, will or
succession to any person, whether he has an insurable interest or not, and such person may
recover upon it whatever the insured might have recovered.

Sec. [182] 185. Notice to an insurer of a transfer or bequest thereof is not necessary
to preserve the validity of a policy of insurance upor-life or health, unless thereby expressly
required.

Sec. [183] 186. Unless the interest of a person insured Is susceptible of exact
pecuniary measurement, the measure of indemnity under a policy of insurance upon life or

health is the sum fixed in the policy.

TITLE 6
MICROINSURANCE,
SEC, 187. MICROINSURANCE 1S A FINANCIAL PRODUCT OR SERVICE THAT MEETS

‘THE RISK PROTECTION NEEDS OF THE POOR WHERE:

(A) THE AMOUNT OF CONTRIBUTIONS, PREMIUMS, FEES OR CHARGES, COMPUTED
ON A DAILY BASIS, DOES NOT EXCEED FIVE (5) PERCENT OF THE CURRENT DAILY
MINIMUM WAGE RATE FOR NON-AGRICULTURAL WORKERS IN METRO MANILA; AND

(B) THE MAXIMUM SUM OF GUARANTEED BENEFITS IS NOT MORE THAN FIVE
HUNDRED (500) TIMES OF THE CURRENT DAILY MINIMUM WAGE RATE FOR NON-
AGRICULTURAL WORKERS IN METRO MANILA.

SEC. 188, NO INSURANCE COMPANY OR MUTUAL BENEFIT ASSOCIATION SHALL
ENGAGE IN THE BUSINESS OF MICROINSURANCE UNLESS IT POSSESSES ALL THE
REQUIREMENTS AS MAY BE PRESCRIBED BY THE COMMISSIONER. THE COMMISSIONER

SHALL ISSUE SUCH RULES AND REGULATIONS GOVERNING MICROINSURANCE.

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CHAPTER II
FINANCIAL REPORTING FRAMEWORK
SEC, 189. ALL COMPANIES REGULATED BY THE COMMISSION, UNLESS

OTHERWISE REQUIRED BY LAW, SHOULD COMPLY WITH THE FINANCIAL REPORTING
FRAMEWORKS ADOPTED BY THE COMMISSION FOR PURPOSES OF CREATING THE
STATUTORY FINANCIAL REPORTS ANO THE ANNUAL STATEMENTS TO BE SUBMITTED TO
THE COMMISSION. FINANCIAL REPORTING FRAMEWORK MEANS A SET OF ACCOUNTING
AND REPORTING PRINCIPLES, STANDARDS, INTERPRETATIONS AND PRONOUNCEMENTS
THAT MUST BE ADOPTED IN THE PREPARATION AND SUBMISSION OF THE STATUTORY
FINANCIAL STATEMENTS AND REPORTS REQUIRED BY THE COMMISSION. THIS FINANCIAL
REPORTING FRAMEWORK IS NOT THE SAME AS THE FINANCIAL REPORTING FRAMEWORK
USED TO PREPARE THE FINANCIAL STATEMENTS THAT THE SECURITIES AND EXCHANGE
COMMISSION MAY REQUIRE. THE MAIN PURPOSE OF THE STATUTORY STATEMENTS IS TO
PRESENT IMPORTANT INFORMATION ABOUT THE LEVEL OF RISK AND SOLVENCY
SITUATION OF INSURERS. IN PRESCRIBING THE APPLICABLE STATUTORY FINANCIAL
REPORTING FRAMEWORK, THE COMMISSIONER SHALL TAKE INTO ACCOUNT
INTERNATIONAL STANDARDS CONCERNING SOLVENCY AND INSURANCE COMPANY
REPORTING AS WELL AS GENERALLY ACCEPTED ACTUARIAL PRINCIPLES CONCERNING
FINANCIAL REPORTING PROMULGATED BY THE ACTUARIAL SOCIETY OF THE PHILIPPINES.

‘THE ASSETS AND INVESTMENTS DISCUSSED IN SECTIONS 206 TO 213 SHALL BE
ACCOUNTED FOR IN ACCORDANCE WITH THIS SECTION.

THE VALUATION OF RESERVES SHALL BE ACCOUNTED FOR IN ACCORDANCE WITH
TITLE 5 OF THIS CODE.

Chapter II

‘THE BUSINESS OF INSURANCE.
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Title 1
INSURANCE COMPANIES, ORGANIZATION,
CAPITALIZATION AND AUTHORIZATION

sec. [184] 190. For purposes of this Code, the term "insurer" or "insurance company"
shall include all [individuals,] partnerships, ‘associations, or corporations, including
government-owned or controlled corporations or entities, engaged as principals in the
insurance business, excepting mutual benefit associations. Unless the context otherwise
requires, the terms shall also include professional reinsurers defined in section two hundred
[eighty eight] NINETY SIX. “Domestic company" shall include companies formed, organized
or existing under the laws of the Philippines. "Foreign company" when used without
limitation shall include companies formed, organized, or existing under any laws other than
those of the Philippines.

Sec. [185] 190. {Corporations formed or organized to save any person or persons or
other corporations harmless from loss, damage, or liability arising from any unknown or
future or contingent event, or to indemnify or to compensate any person of persons or
other corporations for any such loss, damage, or liability, or to guarantee the performance
of or compliance with contractual obligations or the payment of debt of others shall be
known as "insurance corporations"’]

The provisions of the Corporation [Law| CODE, AS AMENDED shall apply to all insurance
corporations now or hereafter engaged in business in the Philippines insofar as they do not
conflict with the provisions of this chapter.

Sec. [186] 191, No [person] CORPORATION, partnership, or association of persons
shall transact any insurance business in the Philippines except as agent of a {person or]
corporation, PARTNERSHIP OR ASSOCIATION authorized to do the business of insurance in

the Philippines, unless possessed of the capital and assets required of an insurance
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corporation daing the same kind of business in the Philippines and invested in the same
manner; nor unless the Commissioner shall have granted to [him or them] IT a certificate to
the effect that {he or they] IT [have] HAS complied with all the provisions of {law which an
insurance corporation doing business in the Philippines is required to observe] THIS CODE.

Every {person,] CORPORATION, partnership, or association receiving any such
certificate of authority shall be subject to the insurance AND OTHER APPLICABLE laws of the
Philippines and to the jurisdiction and supervision of the Commissioner [in the same manner
a if an insurance corporation authorized by the laws of the Philippines 10 engage in the
business of insurance specified in the certificate],

Sec, [187] 192, No insurance company shall transact any insurance business in the
Philippines until after it shall have obtained a certificate of authority for that purpose from
the Commissioner upon application therefor and payment by the company concerned of the
fees hereinafter prescribed.

The Commissioner may refuse to issue a certificate of authority to any insurance
company if, in his judgment, such refusal will best promote the interest of the people of this
country, No such certificate of authority shall be granted to any such company until the
Commissioner shall have satisfied himself by such examination as he may make and such
evidence as he may require that such company is qualified by the laws of the Philippines to

transact business therein, that the grant of such authority appears to be justified in the light

of economic requirements, and that the direction and administration, as well as the
integrity and responsibility of the organizers and administrators, the financial organization
and the amount of capital, [notwithstanding the provisions of section one hundred eighty-
eight,] reasonably assure the safety of the interests of the policyholders and the public.

ALL INSURANCE COMPANIES DULY LICENSED AND ISSUED CERTIFICATES OF

AUTHORITY BY THE INSURANCE COMMISSION SHALL BE ALLOWED TO ISSUE INSURANCE
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POLICIES OR TRANSACT INSURANCE BUSINESS WITHIN THE SCOPE OF THEIR LICENSES OR
CERTIFICATES OF AUTHORITY, ANYWHERE IN THE PHILIPPINES, REGARDLESS OF ANY
ACCREDITATION REQUIREMENTS, PRACTICES, OF ANY GOVERNMENT AGENCY OR
INSTRUMENTALITY, OR ORDINANCE ENACTMENTS OF ANY LOCAL GOVERNMENT UNITS.

In order to maintain the quality of the management of the insurance companies
and afford better protection to policyholders and the public in general, any person of good
moral character, unquestioned integrity and recognized competence may be elected or
appointed director or officer of insurance companies[.] IN ACCORDANCE WITH THE
PERTINENT PROVISIONS CONTAINED IN THE CORPORATE GOVERNANCE CIRCULARS
PRESCRIBED BY THE COMMISSIONER. IN ADDITION HERETO, [T]the Commissioner shall
prescribe the qualifications of DIRECTORS, [the] executive officers and other key officials of
insurance companies for purposes of this section.

No person shall concurrently be a director and/or officer of an insurance company
and an adjustment company.

[Incumbent directors and/or officers affected by the above provisions are hereby
allowed to hold on to their positions until the end of their terms or two years from the
effectivity of this decree, whichever is shorter.]

Before issuing such certificate of authority, the Commissioner must be satisfied that
the name of the company is not that of any other known company transacting a similar
business in the Philippines, or a name so similar as to be calculated to mislead the public.
THE COMMISSIONER MAY ISSUE RULES AND REGULATIONS ON THE USE OF NAMES OF
INSURANCE COMPANIES AND OTHER SUPERVISED PERSONS OR ENTITIES.

THE CERTIFICATE OF AUTHORITY ISSUED BY THE COMMISSIONER ‘SHALL EXPIRE on
THE LAST DAY GF DECEMBER, THREE (3) YEARS FOLLOWING ITS DATE OF ISSUANCE, AND

SHALL BE RENEWABLE EVERY THREE (3) YEARS THEREAFTER, SUBJECT TO THE COMPANY'S
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CONTINUING COMPLIANCE WITH THE PROVISIONS OF THIS CODE, CIRCULARS,
INSTRUCTIONS, RULINGS OR DECISIONS OF THE COMMISSION.
[Such certificate of authority shall expire on the last day of June of each year and shall

be renewed annually if the company is continuing to comply with the provisions of this Code

or the circulars, instructions, rulings or decisions of the Commissioner.] Every company
receiving any such certificates of authority shail be subject to the provisions of this Code and
other related laws and to the jurisdiction and supervision of the Commissioner.

No insurance company may be authorized to transact in the Philippines the business of
life and non-life insurance concurrently unless specifically authorized to do so BY THE
COMMISSIONER: Provided, That the terms "life" and "non-life" insurance stall be deemed
to include health, accident and disability insurance.

No insurance company shall have equity in an adjustment company and neither shalt
an adjustment company have [an] equity in an insurance company.

{insurance companies and adjustment companies presently affected by the above
provision shall have two years from the effectivity of this Code within which to divest of
their stockholdings.] [(As amended by Presidential Decree No. 1455).]

Sec. [188] 194, [Except as provided in section two hundred eighty-one, no domestic
insurance company shall, in a stock corporation, engage in business in the Philippines
unless possessed of a paid-up capital stock equal to at least five million pesos: Provided,
That a domestic insurance company already doing. business in the Philippines with a paid-
up capital stock which is less than five million pesos shall have a pald-up capital stock of at
least three million pesos by December thirty-one, nineteen hundred seventy-eight, four
million pesos by December thirty-one, nineteen hundred seventy-nine and five million
pesos by December thirty-one, nineteen hundred eighty: Provided, further, that the

Secretary of Finance may, upon recommendation of the Insurance Commissioner, increase
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such minimum paid-up capital stock requirement, under such terms and conditions as he
may impose, to an amount which, in his opinion, would reasonably assure the safety of the
interests of the policyholders and the public.]

NO DOMESTIC STOCK INSURANCE COMPANY SHALL ENGAGE IN INSURANCE OR
REINSURANCE BUSINESS IN THE PHILIPPINES UNLESS POSSESSED OF THE REQUIRED
CAPITALIZATION WHICH INCLUDES MINIMUM NET WORTH AND PAID-UP CAPITAL, AS
DEFINED AND PROVIDED UNDER APPLICABLE ORDERS AND/OR CIRCULARS ISSUED BY
THE SECRETARY OF FINANCE, UPON RECOMMENDATION OF THE INSURANCE
COMMISSIONER. SECRETARY OF FINANCE MAY CHANGE SUCH MINIMUM NET WORTH
AND PAID-UP CAPITAL STOCK REQUIREMENT UNDER SUCH TERMS AND CONDITIONS AS
HE MAY IMPOSE, TO AN AMOUNT WHICH, IN HIS OPINION, WOULD REASONABLY
ASSURE THE SAFETY OF THE INTERESTS OF THE POLICYHOLDERS AND THE PUBLIC,

The Commissioner may, as a pre-licensing requirement of a new insurance
company, in addition to the paid-up capital stock, require the stockholders to pay in cash
to the company in proportion to their subscription interests a contributed surplus fund [of
not less than one million pesos, in the case of a life insurance company, of not less than
five hundred thousand pesos, in the case of an insurance company other than life.] IN AN
AMOUNT AS MAY BE FIXED IN APPLICABLE ORDERS AND CIRCULARS DULY ISSUED BY
THE COMMISSIONER. He may also require such company OR ALREADY EXISTING
COMPANIES, to submit to him a CAPITAL BUILD-UP PROGRAM OR business plan showing
the company's estimated receipts and disbursements, as well as the basis therefor, for the
next succeeding three years.

forganized as a mutual company, in lieu of such capital stock, it must have available
cash assets [of at least five million pesos above all liabilities for losses reported, expenses,

taxes, legal reserve, and reinsurance of all outstanding risks, and the contributed surplus
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fund equal to the amounts required of stock corporations. IN AN AMOUNT NOT LESS THAN
THAT REQUIRED UNDER PRESENT OR FUTURE APPLICABLE ORDERS OR CIRCULARS ISSUED
BY THE SECRETARY OF FINANCE, UPON RECOMMENDATION OF THE COMMISSIONER.
THESE REQUIRED CASH ASSETS MUST BE NET OF ALL LIABILITIES FOR LOSSES REPORTED,
EXPENSES, TAXES, LEGAL RESERVE, AND REINSURANCE OF ALL OUTSTANDING RISKS, AND
THE CONTRIBUTED SURPLUS FUND MUST BE EQUAL TO THE AMOUNTS REQUIRED OF
STOCK CORPORATIONS. A stock insurance company doing business in the Philippines may,
subject to the pertinent law and regulations which now are of hereafter may be in force,
alter its organization and transform itself into @ mutual insurance company. [(As amended
by Presidential Decree No. 1455).] .

Sec. [189] 195. Every company must, before engaging in the business of Insurance in
the Philippines, file with the Commissioner the following

{a) A certified copy of the last annual statement or a verified financial statement

exhibiting the condition and affairs of such company;

(b) If incorporated under the laws of the Philippines, a copy of the articles of

incorporation and by-laws, and any amendments to either, certified by the Securities

and Exchange Commission to be a copy of that which is filed in its Office;

(c) If incorporated under any taws other than those of the Philippines, a certificate

from the Securities and Exchange Commission showing that it is duly registered in the

mercantile registry of that Commission in accordance with the Corporation [Law]

CODE. A copy of the articles of incorporation and by-laws, and any amendments to

either, if organized or formed under any law requiring such to be filed, duly certified

by the officer having the custody of same, or if not so organized, a copy of the law,

charter or deed of settlement under which the deed of organization is made, duly

certified by the proper custodian thereof, or proved by affidavit to be a copy; also, a
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certificate under the hand and seal of the proper officer of such state or country
having supervision of insurance business therein, if any there be, that such
corporation or company is organized under the laws of such state or country, with the
amount of capital stock or assets and legal reserve required by this Code;
(d) if not incorporated and of foreign domicile, aside from the certificate mentioned
in paragraph (c) of this section, a certificate setting forth the nature and character of
the business, the location of the principal office, the name of the individual or names
of the persons composing the partnership or association, the amount of actual capital
employed or to be employed therein and the names of all officers and persons by
whom the business is or may be managed.
The certificate must be verified by the affidavit of the chief officer, secretary, agent,
or manager of the company; and if there are any written articles of agreement of the

company, a copy thereof must [be] accompany such certificate.

Sec. [190] 196, The Commissioner must require as a condition precedent to the
transaction of insurance business in the Philippines by any foreign insurance company, that
such company file in his office a written power of attorney designating some person who
shall be a resident of the Philippines as its general agent, on whom any notice provided by
law or by any insurance policy, proof of lass, summons and other legal processes may be
served in all actions or other legal proceedings against such company, and consenting that
service upon such general agent shall be admitted and held as valid as if served upon the
foreign company at its home office. Any such foreign company shall, as further condition
precedent to the transaction of insurance business in the Philippines, make and file with the

Commissioner an agreement or stipulation, executed by the proper authorities of said

company in form and substance as follows:

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“the (name of company) does hereby stipulate and agree in consideration of the
permission granted by the Insurance Commissioner to transact business in the
Philippines, that if at any time said company shall leave the Philippines, or cease to
transact business therein, or shail be without any agent in the Philippines on whom
any notice, proof of loss, summons, or legal process may be served, then in any
action or proceeding arising out any business or transaction which occurred in the
Philippines, service of any notice provided by law, or insurance policy, proof of loss,
summons, or other legal process may be made upon the Insurance Commissioner
shall have the same force and effect as if made upon the company."
Whenever such service of notice, proof of loss, summons, or other legal process shall be
made upon the [Commission] COMMISSIONER, he must, within ten days thereafter,
transmit by mail, postage paid, a copy of such notice, proof of loss, summons, or other legal
process to the company at its home or principal office. The sending of such copy by the
Commissioner shall be a necessary part of the service of the notice, proof of loss, or other
legal process.

Sec, [191] 197, No insurance company organized or existing under the government
or laws other than those of the Philippines shall engage in business in the Philippines unless
possessed of paid-up unimpaired capital or assets and reserve not less than that herein
required of domestic insurance companies UNDER APPLICABLE ORDERS OR CIRCULARS OF
THE COMMISSIONER, nor until it shall have deposited with the Commissioner for the
benefit and security of the policyholders and creditors of such company in the Philippines,
securities satisfactory to the Commissioner consisting of good securities of the Philippines,
including new issues of stock of “registered enterprises", as this term Is defined in [Republic
Act No. 5186, otherwise known as the /nvestment Incentives Act,] THE OMNIBUS

INVESTMENTS CODE as amended, to the actual market value of not less than the minimum
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paid-up capital required of domestic insurance companies: Provided, That at least fifty per
centum of such securities shall consist of bonds or other evidences of debt of the
Government of the Philippines, its political subdivisions and instrumentalities, or of
government-owned or controlled corporations and entities, including the {Central Bank]
BANGKO SENTRAL NG PILIPINAS. PROVIDED FURTHER, THAT [T] the total investment of a
foreign insurance company in any registered enterprise shall not exceed twenty per centum
of the net worth of said foreign insurance company [nor] OR twenty per centum of the
capital of the registered enterprise, unless previously authorized in writing by the
Commissioner.

For purposes of this Code, the net worth of a foreign insurance company shall refer only to
its net worth in the Philippines.

Sec. [192] 198. The Commissioner shail hold the securities, deposited as [aforesaid]
REQUIRED IN THE IMMEDIATELY PRECEDING SECTION, for the benefit and security of all
the policyholders AND CREDITORS of the company depositing the same. {but shall]
PROVIDED, THAT THE COMMISSIONER MAY as long as the company is solvent, permit the

jends on the securities so deposited, and, from time

company to collect the interest or di
to time, with his assent, to withdraw any of such securities, upon depositing with said
Commissioner other like securities, the market value of which shall be equal to the market
vatue of such as may be withdrawn. In the event of any company ceasing to do business in
the Philippines, the securities deposited as aforesaid shall be returned [upon] TO the
company [making application therefor and proving to the satisfaction of the Commissioner]
UPON THE COMMISSIONER'S WRITTEN APPROVAL AND ONLY AFTER THE COMPANY HAS
DULY PROVEN IN ITS APPLICATION THEREFOR that it has no further liability WHATSOEVER

under any of its policies NOR TO ANY OF ITS CREDITORS in the Philippines.

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Sec. [193] 199. Every foreign company doing business in the Philippines shall set
aside an amount corresponding to the legal reserves of the policies written in the
Philippines and invest and keep the same therein in accordance with the provisions of this
section. The legal reserve therein required to be set aside shall be invested only in the
classes of the Philippine securities described in section two hundred SIX: Provided, however,
That no investment in stocks or bonds of any single entity shall, in the aggregate exceed
twenty per centum of the net worth of the investing company or twenty per centum of the
capital of the issuing company, whichever is the lesser unless otherwise approved in writing
by the Commissioner. The securities purchased and kept in the Philippines under this
section, shall not be sent out of the territorial jurisdiction of the Philippines without the
written consent of the Commissioner:

Title 2
[MARGIN OF INSOLVENCY] SOLVENCY .

Sec. [194] 200. An insurance company doing business in the Philippines shall at all
times maintain THE MINIMUM PAtD-UP CAPITAL, AND NETWORTH REQUIREMENTS AS
PRESCRIBED BY THE COMMISSIONER. SUCH SOLVENCY REQUIREMENTS SHALL BE BASED
ON INTERNATIONALLY ACCEPTED SOLVENCY FRAMEWORKS AND ADOPTED ONLY AFTER
DUE CONSULTATION WITH THE INSURANCE INDUSTRY ASSOCIATIONS. [a margin of
solvency which shall be an excess of the value of its admitted assets exclusive of its paid-up

admitted assets in

capital, in the case of a domestic company, or an excess of the value o|
the Philippines, exclusive of its security deposits, in the case of a foreign company, over the
amount of its liabilities, unearned premium and reinsurance reserves in the Philippines of at
least two per mille of the total amount of its insurance in force as of the preceding calendar
year on all policies, except term insurance, in the case of a life insurance company, or of at

least ten per centum of the total amount of its net premium written during the preceding
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calendar year, in the case of a company other than a life insurance company: Provided, That
in either case, such margin shall in no event be less than five hundred thousand pesos: and
Provided, further, That the term "paid-up capital” shall not include contributed surplus and
capital paid in excess of par value. Such assets, liabilities and reserves shall exclude assets,
liabilities and reserves included in separate accounts established in accordance with section
two hundred thirty-seven. } .

Whenever the aforementioned [margin] REQUIREMENT be found to be less than
that herein required to be maintained, the Commissioner shall forthwith direct the company
to make good any such deficiency by cash, to be contributed by all stockholders of record in
proportion to their respective interest, and paid to the treasurer of the company, within
fifteen days from receipt of the order: Provided, That the company in the interim shall not

be permitted to take any new risk of any kind or character unless and until it make good any

Provided, further, that a stockholder who aside from paying the

such deficiencyf
contribution due from him, pays the contribution due from (the] another stockholder by
reason of the failure or refusal of the latter to do so, shall have a lien on the certificates of
stock of the insurance company concerned appearing in its books in the name of the
defaulting stockholder on the date of default, as well as on any interests or dividends that
have accrued or will accrue to the said certificates of stock, until the corresponding payment
or reimbursement is made by the defaulting stockholder. [(As amended by Presidential
Decree No. 1455(.]

Sec. [195] 201. No domestic insurance corporation shall declare or distribute any
dividend on its outstanding stocks UNLESS IT HAS MET THE MINIMUM PAID-UP CAPITAL
[AND NET WORTH REQUIREMENTS UNDER SECTION ONE HUNDRED NINETY FOUR AND
except from profits attested in a sworn statement to the Commissioner by the president or

treasurer of the corporation to be remaining on hand after retaining unimpaired:
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{a) The entire paid-up capital stock;
{b) The {margin of] solvency {required] REQUIREMENTS DEFINED by section TWO
fone] hundred [ninety-fourl;
(c) In the case of life insurance corporation, the legal reserve fund required by section
two hundred [eleven] SEVENTEEN;
(D) IN THE CASE OF CORPORATIONS OTHER THAN LIFE, THE LEGAL RESERVE FUND
REQUIRED BY SECTION two hundred [thirteen] NINETEEN;
[(d)] (E) {In the case of corporations other than life, the legal reserve fund required by
section two hundred thirteen;] A SUM SUFFICIENT TO PAY ALL NET LOSSES
REPORTED, OR IN THE COURSE OF SETTLEMENT, AND ALL LIABILITIES FOR EXPENSES
AND TAXES.
[(e) A sum sufficient to pay all net losses reported, or in the course of settlement, and
all liabilities for expenses and taxes.]
Any dividend declared or distributed under the preceding paragraph shall be
reported to the Commissioner within thirty days after such dectaration or distribution.
if the Commissioner finds that any such corporation has declared or distributed any
such dividend in violation of this section, he may order such corporation to cease and desist
from doing business until the amount of such dividend or the portion thereof in excess of
the amount allowed under this section has been restored to said corporation.
THE COMMISSIONER SHALL PRESCRIBE ‘SOLVENCY REQUIREMENTS FOR BRANCHES
OF FOREIGN INSURANCE COMPANIES OPERATING IN THE PHILIPPINES.
Title 3
ASSETS
Sec. [196] 202. In any determination of the financial condition of any insurance

company doing business in the Philippines, there shall be allowed and admitted as assets
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only such assets LEGALLY OR BENEFICIALLY owned by the insurance company concerned

[and] AS DETERMINED BY THE COMMISSIONER which consist of:

1. Cash in the possession of the insurance company or in transit under its control, and
the true and duly verified balance of any deposit of such company in a financially
sound [commercial] bank or trust company DULY AUTHORIZED BY THE BANGKO
SENTRAL NG PILIPINAS.

2. 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.

3. Loans granted by the insurance company concerned to the extent of that portion
thereof adequately secured by non-speculative assets with readily realizable values in
accordance with and subject to the limitations imposed by applicable provisions of
this Code.

s, contracts or certificates of

4, Policy loans and other policy assets and liens on poli
a life insurance company, in an amount not exceeding legal reserves and other policy
liabilities carried on each individual life insurance policy, contract or certificate.
5, The net amount of uncollected and deferred premiums and annuity considerations
in the case of a life insurance company which carries the full mean tabular reserve
liability.
6. Reinsurance recoverable by the ceding insurer:
{a) from an insurer authorized to transact business in this country, the full
amount thereof; or
(b) from an insurer not authorized in this country, in an amount not exceeding
the liabilities carried by the ceding insurer for amounts withheld under a

reinsurance treaty with such unauthorized insurer as security for the payment
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of obligations thereunder if such funds are held subject to withdrawal by, and
under the control of, the ceding insurer. The Commissioner may prescribe the
conditions under which a ceding insurer may be allowed credit, as an asset or
as a deduction from loss and unearned premium reserves, for reinsurance
recoverable from an insurer not authorized in this country but which presents
satisfactory evidence that it meets the applicable standards of solvency
required in this country.

7. Funds withheld by a ceding insurer under a reinsurance treaty, provided reserves

for unpaid losses and unearned premiums are adequately provided.

8. Deposits or amounts recoverable from underwriting associations, syndicates and

reinsurance funds, of from any suspended banking institution, to the extent deemed

by the Commissioner to be available for the payment of losses and claims and values

to be determined by him.

9. Electronic data processing machines, as may be authorized by the Commissioner

1m cost of which to

to be acquired by the insurance company concerned, the acquisi
be amortized in equal annual amounts within a period of five years from the date of
acquisition thereof.

40. PARTICIPATION IN MUTUAL FUNDS, REAL ESTATE INVESTMENT TRUSTS, UNIT
INVESTMENT TRUST FUNDS, SALARY LOANS, SPECIAL DEPOSIT ACCOUNTS AND
‘SUCH SECURITIES AS MAY BE PRESCRIBED BY THE COMMISSIONER.

[10] 11. Other assets, not inconsistent with the provisions of paragraphs 1 to [9]10
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.

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Sec. [197] 203, In addition to such assets as the Commissioner may from time to
time determine to be non-admitted assets of insurance companies doing business in the
Philippines, the following assets shall in no case be allowed as admitted assets of an

insurance company doing business in the Philippines, in any determination of its financial

condition:
1. Goodwill, trade names, and other like intangible assets.
2. Prepaid or deferred charges for expenses and commissions paid by such insurance
company.
3. Advances to officers (other than policy loans), which are not adequately secured
and which are not previously authorized by the Commissioner, as well as advances to

‘employees, agents, and other persons on mere personal security.

4, Shares of stock of such insurance company, owned by it, or any equity therein as
well as loans secured thereby, or any proportionate interest in such shares of stock
through the ownership by such insurance company of an interest in another
corporation or business unit.

5, Furniture, furnishing, fixtures, safes, equipment, library, stationery, literature, and

supplies.

6. Items of bank credits representing checks, drafts or notes returned unpaid after

the date of statement.

7. The amount, if any, by which the aggregate value of investments as carried in the
ledger assets of such insurance company exceeds the aggregate value thereof as
determined in accordance with the provisions of this Code and/or the rules of the
Commissioner.

All non-admitted assets and all other assets of doubtful value or character included

as ledger or non-ledger assets in any statement submitted by an insurance company to the
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Commissioner, or in any insurance examiner's repurt to him, shall also be reported, to the
extent of the value disallowed as deductions from the gross assets of such insurance
company, except where the Commissioner permits a reserve to be carried among the
liabilities of such insurance company in lieu of any such deduction,
Title 4
INVESTMENTS

Sec. [198] 204. A LIFE INSURANCE COMPANY MAY LEND TO ANY OF is
POLICYHOLDERS UPON THE SECURITY OF THE VALUE OF ITS POLICY SUCH SUM AS MAY BE
DETERMINED PURSUANT TO THE PROVISIONS OF THE POLICY.

No insurance company shall loan any of its money or deposits to any person,
corporation or association, except upon THE SECURITY OF ANY OF THE FOLLOWING: [first

mortgage or deeds of trust of unencumbered, improved or unimproved real estate,

including condominiums, in cities and centers of population of municipalities in the
Philippines when the amount of such loan is not in excess of seventy per centum of the
market value of such real estate; or upon the security of first mortgages or deeds of trust of
actually cultivated, improved and unencumbered agricultural lands in the Philippines when

the amount of such loan is not in excess of forty per centum of the market value of such

es received by it upon the sale

land; or upon the purchase money mortgages or like secu!
or exchange of real property acquired pursuant to sections two hundred and two hundred
two; of upon bonds or other evidences of debt of the Government of the Philippines or its
political subdivisions authorized by law to issue bonds, or upon bonds or other evidences of
debt of government-owned or controlled corporations and instrumentalities including the
Central Bank or upon obligations issued or guaranteed by the International Bank for
Reconstruction and Development; or upon stocks, bonds or other evidences of debt as are

specified in section two hundred,]
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[A life insurance company, however, may lend to any of its policyholders upon the
security of the value of its policy such sum as may be determined pursuant to the provisions
of the policy.}

[Loans granted upon the security of real estate for a period longer than five years
shail be amortized in monthly, quarterly, semi-annual or annual installments; Provided, That
no such loans shall have a maturity in excess of twenty years.)

{The phrase "improved real estate" used above is hereby defined to mean land with
permanent building or buildings erected or being erected thereon. Except as otherwise
approved by the Commissioner, in case the building or buildings on land do not belong to
the owner of the latter, no loan shall be granted on the security of the real estate in
question unless both the owner of the building or buildings and the owner of the land sign

the deed of mortgage, and unless the owner of the land is the Government of the

Philippines or one of its political subdivisions, in which event the owner is not required to
sign the deed of mortgage.)
(A) FIRST MORTGAGE OR DEEDS OF TRUST OF REGISTERED, UNENCUMBERED,
IMPROVED OR UNIMPROVED REAL ESTATE, INCLUDING CONDOMINIUMS; OR
(B) FIRST MORTGAGES OR DEEDS OF TRUST OF ACTUALLY CULTIVATED, IMPROVED
AND UNENCUMBERED AGRICULTURAL LANDS IN THE PHILIPPINES; OR

(©) LEASE PURCHASE AGREEMENTS OR SIMILAR SECURITIES EXECUTED OR RECEIVED

BY IT ON ACCOUNT OF THE SALE OR EXCHANGE OF REAL PROPERTY ACQUIRED

PURSUANT TO SECTIONS TWO HUNDRED SIX AND TWO HUNDRED EIG!
1D) BONDS OR OTHER EVIDENCES OF INDEBTEDNESS ISSUED OR GUARANTEED BY
THE GOVERNMENT OF THE PHILIPPINES OR ITS POLITICAL SUBDIVISIONS

AUTHORIZED BY LAW TO INCUR SUCH OBLIGATIONS OR ISSUE SUCH GUARANTEES

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OR OF GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS AND

INSTRUMENTALITIES INCLUDING THE BANGKO SENTRAL NG PILIPINAS; OR

{E) OBLIGATIONS ISSUED OR GUARANTEED BY UNIVERSAL BANKS, COMMERCIAL
BANKS, OFFSHORE BANKING UNITS, INVESTMENT HOUSES OR OTHER FINANCIAL
INTERMEDIARIES DULY REGISTERED WITH THE BANGKO SENTRAL NG PILIPINAS; OR
{F) OBLIGATIONS ISSUED OR GUARANTEED BY FOREIGN BANKS OR CORPORATIONS,
EACH OF WHICH SHALL HAVE TOTAL ASSETS OF ONE BILLION US DOLLARS, AS
SHOWN IN THEIR FINANCIAL STATEMENTS AS OF THE IMMEDIATELY PRECEDING
FISCAL YEAR; OR

(G) ASSIGNMENTS OF MONETARY INSTRUMENTS SUCH AS CASH DEPOSITS, DEPOSIT
CERTIFICATES OR OTHER SIMILAR INSTRUMENTS OF UNIVERSAL BANKS,
COMMERCIAL BANKS, INVESTMENTS HOUSES OR OTHER FINANCIAL
INTERMEDIARIES DULY REGISTERED WITH THE BANGKO SENTRAL NG PILIPINAS;

(H) PLEDGES OF SHARES OF STOCK, BONDS OR OTHER EVIDENCES OF INDEBTEDNESS
SPECIFIED IN SECTION TWO HUNDRED TEN;

(I) CHATTEL MORTGAGES OVER EQUIPMENT NOT MORE THAN THREE YEARS OLD;
AND

(J) SUCH OTHER SECURITY AS MAY BE APPROVED BY THE COMMISSIONER.

THE LOANS PROVIDED IN THE PRECEDING SUBSECTION SHALL BE SUBJECT TO THE

FOLLOWING CONDITIONS:

(a) THE AMOUNT OF LOAN SECURED BY REAL ESTATE MORTGAGE OVER A
NON-AGRICULTURAL LAND SHALL NOT EXCEED SEVENTY PER CENTUM (70%) OF ITS
APPRAISED VALUE, AND IN THE CASE OF A LOAN SECURED BY A REAL ESTATE
MORTGAGE OVER AN AGRICULTURAL LAND, THE AMOUNT OF LOAN SHALL NOT

EXCEED FORTY PER CENTUM (40%) OF ITS MARKET VALUE. PROVIDED THAT, IN NO
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CASE SHALL SUCH LOAN HAVE A MATURITY PERIOD IN EXCESS OF TWENTY FIVE
YEARS;
(b) UNLESS APPROVED BY THE COMMISSIONER, NO LOAN MAY BE GRANTED
UPON THE SECURITY OF A MORTGAGE ON IMPROVED REAL ESTATE IF THE
IMPROVEMENTS THEREON DO NOT BELONG TO THE OWNER OF THE LAND AND THE
OWNER OF THE IMPROVEMENTS DOES NOT SIGN THE DEED OF MORTGAGE.
HOWEVER, IF THE OWNER OF THE LAND IS THE GOVERNMENT OF THE PHILIPPINES
OR ANY OR ITS POLITICAL SUBDIVISIONS AND A LONG TERM LEASE HAS BEEN
EXECUTED IN FAVOR OF THE OWNER OF THE IMPROVEMENTS, THE OWNER OF THE
LAND NEED NOT BE A PARTY TO THE DEED OF MORTGAGE. THE EXPIRATION DATE
OF THE LEASE SHALL NOT, HOWEVER, PRECEDE THE MATURITY OF THE LOAN. THE
PHRASE “IMPROVED REAL ESTATE” AS USED HEREIN SHALL MEAN LAND WITH
PERMANENT BUILDING OR BUILDINGS ERECTED THEREON;
() LEASE-AGREEMENTS OR SIMILAR SECURITIES RECEIVED ON THE SALE OF
REAL ESTATE PROPERTY SHALL NOT EXCEED ONE HUNDRED PER CENTUM (100%) OF
THE SELLING PRICE OF SAID PROPERTY, OR ONE HUNDRED PER CENTUM OF ITS
MARKET VALUE AT THE TIME OF ITS DISPOSITION, WHICHEVER AMOUNT IS LOWER.
HOWEVER, IN NO CASE SHALL SUCH MORTGAGE OR AGREEMENT HAVE A MATURITY
PERIOD NOT EXCEEDING TWENTY-FIVE YEARS;
(a) LOANS SECURED BY SHARES OF STOCK OF SOLVENT CORPORATIONS OR
INSTITUTIONS SHALL NOT EXCEED FIFTY PER CENTUM (50%) OF:

1) FOR LISTED SHARES, THE LATEST SELLING PRICE OF SUCH STOCKS LISTED IN

THE STOCK EXCHANGE; AND

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{1) THE WEIGHTED AVERAGED MARKET PRICE FOR THE THIRTY DAYS
PRECEDING THE RELEASE OF THE LOAN FOR SHARES LISTED IN THE STOCK EXCHANGE
AND)
2) FOR UNLISTED SHARES, THE BOOK VALUE OF SUCH SHARES BASED ON THE
LATEST AUDITED FINANCIAL STATEMENTS OF THE CORPORATION.
‘THE PHRASE, “SOLVENT CORPORATION” AS USED HEREIN SHALL MEAN A CORPORATION
OR ENTITY WHICH HAS RECORDED PROFITS FOR A PERIOD OF AT LEAST THREE YEARS
IMMEDIATELY PRECEDING THE DATE OF THE LOAN.
(e) LOANS SECURED BY THE CHATTEL MORTGAGES OVER EQUIPMENT SHALL
NOT EXCEED SEVENTY PER CENT (70%) OF THE MARKET VALUE OF SAID EQUIPMENT;
AND
Sec, [199] 205. No loan by any insurance company on the security of real estate shall
be made unless the title to such real estate shall have first been registered in accordance

with the existing Land Registration Act, or shall [be a titulo real duly registered, or] have

been previously registered under the provisions of the existing Mortgage Law AND THE LIEN
OR INTEREST OF THE INSURANCE COMPANY AS MORTGAGEE HAS BEEN REGISTERED.

See, [200] 206. (1) An insurance company may purchase, hold, own and convey such
property, real and personal, as may have been mortgaged, pledged, or conveyed to it in
good faith in trust for its benefit by reason of money loaned by it in pursuance of the regular
business of the company, and such real or personal property as may have been purchased

by it at sales under pledges, mortgages or deeds of trust for its benefit on account of money

loaned by it; and such real and personal property as may have been conveyed to it by

rrovided,

borrowers in satisfaction and discharge of loans made by the company [to the!

however, That any real estate purchased by ai

surance company] in payment or by reason

of any loan made by [it] THE COMPANY IN PAYMENT OR BY REASON OF ANY LOAN MADE
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BY IT shall be sold by the company within twenty years after the

le thereto has been

vested in it.

(2) An insurance company may purchase, hold, AND own THE FOLLOWING [and

convey real and personal property as follows}:

{a) REAL PROPERTIES [The lot with building thereon in] which SERVE AS ITS MAIN
PLACE OF [the company conducts and carries on its] business AND/OR BRANCH
OFFICES; PROVIDED, THAT SUCH INVESTMENT SHALL NOT IN THE OVERALL
EXCEED TWENTY PER CENTUM OF ITS NET WORTH AS SHOWN BY ITS LATEST
FINANCIAL STATEMENT APPROVED BY THE COMMISSIONER.
(b) Bonds or other evidencefs] of [debt] INDEBTEDNESS of the Government of the
Philippines or its political subdivisions authorized by law to issue bonds at the
reasonable market value thereof.
(c) Bonds or other evidences of debt of the government-owned or controlled
corporations and entities, including the [Central Bank] BANGKO SENTRAL NG
PILIPINAS.
(d) Bonds, debentures or other evidences of indebtedness of any solvent corporations
or institution created or existing under the laws of the Philippines: Provided, however,
That the issuing, assuming or guaranteeing entity or its predecessors shall not have
defaulted in the payment of interest on any of its securities and that during each of
any three including the last two of the five fiscal years next preceding the date of
acquisition by such insurance company of such bonds, debentures, or other evidences

stitution

of indebtedness, the net earnings of the issuing, assuming or guaranteeing i
available for its fixed charges, as hereinafter defined, shall have been not less than one
and one-quarter times the total of its fixed charges for such year; and Provided,

further, that no life insurance company shall invest in or loan upon the obligations of
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any one institution in the kinds permitted under this sub-section an amount in excess
of twenty-five per centum of the total admitted assets of such insurer as of December
thirty-first next preceding the date of such investment.

‘As used in this sub-section the term “net earnings available for fixed charges" shall
mean net income after deducting operating and maintenance expenses, taxes other
than income taxes, depreciation and depletion; but excluding extraordinary non-
recurring items of income or expense appearing in the regular financial statement of

the issuing, assuming or guaranteeing institution. The term “fixed charges” shall

‘ion of debt discount, and

include interest on funded and unfunded debt, amortiz
rentals for leased properties.

{e) Preferred or guaranteed stocks of any solvent corporation or institution created or
existing under the laws of the Philippines: Provided, [however, That the issuing,
assuming or guaranteeing entity or its predecessors has paid regular dividends upon
its preferred or guaranteed stacks for a period of at least three years next preceding
the date of investment in such preferred or guaranteed stock: Provided, further,] That
if the stocks are guaranteed, the amount of stocks so guaranteed is not IN excess of
fifty per centum of the amount of the preferred or common stocks, as the case may

be, of the guaranteeing corporation: and Provided, finally, That no life insurance

‘company shall invest in or loan upon obligations of any one institution in the kinds
permitted under this sub- section an amount in excess of ten per centum of the total
admitted assets of such insurer as of December thirty-first next preceding the date of
such investment.

(f) Common stocks of any solvent corporation or institution created or existing under

the laws of the Philippines. [upon which regular dividends shall have been paid for the

three years next preceding the purchase of such stock:] Provided, however, That no life
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insurance company shall invest in or loan upon the obligations of any one corporation
or institution in the kinds permitted under this sub-section an amount in excess of ten
per centum of the total admitted assets of such insurer as of December thirty-first
next preceding the date of such investment.

(g) SECURITIES ISSUED BY A “REGISTERED ENTERPRISE”, AS THIS TERM IS DEFINED
IN REPUBLIC ACT NO, 5186, OTHERWISE KNOWN AS THE INVESTMENT INCENTIVES
ACT, AS AMENDED, PROVIDED THAT THE TOTAL INVESTMENT OF A DOMESTIC
NON-LIFE INSURANCE COMPANY IN ANY REGISTERED ENTERPRISE SHALL NOT
EXCEED FIFTY PER CENT (50%) OF THE NET WORTH OF SAID INSURANCE COMPANY
AS SHOWN BY ITS AFORESAID FINANCIAL STATEMENT UNLESS PREVIOUSLY
AUTHORIZED BY THE COMMISSIONER.

{gl (H) Certificates, notes and other obligations issued by the trustees or receivers of
any institution created or existing under the laws of the Philippines which, or the

assets of which, are being administered under the direction of any court having

jurisdiction; Provided, however, That such certificates, notes or other obligations are
adequately secured as to principal and interests.

{h] (I) Equipment trust obligations or certificates which are adequately secured or
other adequately secured instruments evidencing an interest in equipment wholly or
in part within the Philippines: Provided, however, that there is a right to receive
determined portions of rental, purchase or other fixed obligatory payments for the
use or purchase of such equipment.

{i] @) Any obligation of any corporation or institution created or existing under the
Jaws of the Philippines which is, on the date of acquisition by the insurer, adequately
secured and has qualities and characteristics wherein the speculative elements are

not predominant.
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{iJ (K) Such other sect

ities as may be approved by the Commissioner.
(3) Any domestic insurer which has outstanding insurance, annuity or reinsurance contracts
in currencies other than the national currency of the Philippines may invest in, or otherwise
acquire or loan upon securities and investments in such currency which are substantially of
the same kinds, classes and investment grades as those eligible for investment under the
foregoing subdivisions of this section; but the aggregate amount of such investment and of
such cash in such currency which js at anytime held by such insurer shall not exceed one and
one-half times the amount ofits reserves and other obligations under such contracts or the
amount which such Insurer is required by the law of any country or possession outside the
Republic of the Philippines to be [invest] INVESTED in such country oF possession, whichever
shall be greater.
see. {201} 207. An insurance company may (1) invest in equities of other financial

institutions, and (2) engage in the buying and selling of long-term debt instruments:
provided, That any or all of such investments EXCEPT LISTED EQUITIES OF OTHER
FINANCIAL INSTITUTIONS shall be with the prior approval of the Commissioner.

Sec. [202] 208. Any life insurance company may:

(a) Acquire or construct housing projects and, in connection with any such project,

may acquire fand or any interest therein by purchase, lease or otherwise, or use land

a of this Code. Such company may thereafter

acquired pursuant to any other prov
‘own, maintain, manage, collect or receive income from, or sell and convey, any land or
interest therein so acquired and any improvements thereon, The aggregate book
value of the investments of any such company in all such projects shall not exceed at
the time of such investments twenty-five per centum of the total admitted assets of

such company on the thirty-first day of December next preceding: PROVIDED, THAT

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THE FUNDS OF THE COMPANY FOR THE PAYMENT OF PENDING CLAIMS AND
OBLIGATIONS SHALL NOT BE USED FOR SUCH INVESTMENTS;

(b) Acquire real property, other than property to be used primarily for providing
housing and property for 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 pursuant to a program therefor, subject to the condition
that the cost of each parcel of real property so acquired under the authority of this
paragraph (b), including the estimated cost to the company of the improvement or
development thereof, when added to the book value of all other real property held by
its pursuant to this paragraph (b), shall not exceed twenty-five per centum of its
admitted assets as of the thirty-first day of December next preceding,

Sec.[203] 209. Every domestic insurance company shall, to the extent of an amount
equal in value to twenty-five per centum of the minimum paid-up capital required uncer
section one hundred [eighty-eight] NINETY FOUR, invest its funds only in securities,
satisfactory to the Commissioner, consisting of bonds or other evidences of debt of the
Government of the Philippines or its political subdivisions or instrumentalities, or of
government-owned of controlled corporations and entities, including the [Central Bank of
the Philippines] BANGKO SENTRAL NG PILIPINAS: Provided, That such investments. shall at
all times be maintained free from any lien or encumbrance; and Provided, further, That such
securities shall be deposited with and held by the Commissioner for the faithful
performance by the depositing insurer of all its obligations under its insurance contracts.
‘The provisions of section one hundred ninety-{two] EIGHT shall, so far as practicable, apply
to the securities deposited under this section.

Except as otherwise provided in this Code, no judgment creditor or other claimant

shall have the right to levy upon any of the securities of the insurer held on deposit under
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this section or held on deposit pursuant to the requirement of the Commissioner. {(As
amended by Presidential Decree No. 1455).]

Sec. [204] 210. After satisfying the requirements contained in the preceding section,
any domestic non-life insurance company, shall invest, to an amount prescribed below, its
funds in, or otherwise, acquire or loan upon, only the classes of investments described in
section two hundred SIX, including securities issued by any "registered enterprise”, as this
term is defined in Republic Act No. 5186, otherwise known as the Investment Incentives Act,
and such other classes of investments as may be authorized by the Commissioner for
purposes of this section: Provided, That (a) no more than twenty per centum of the net
worth of such company as shown by its latest financial statement approved by the
Commissioner shall be invested in the fot and building in which the insurance company
conducts its business and (b) the total investment of an insurance company in any
registered enterprise shall not exceed twenty per centum of the net worth of said insurance
company as shown by its aforesaid financial statement nor twenty per centum of the pald-
up capital of the registered enterprise excluding the intended investment, unless
previously authorized by the Commissioner: and, Provided, further, That such investments
free from any lien or encumbrance, shall be at least equal in amount to the aggregate

led in section two hundred [thirteen] NINETEEN,

amount of (a) its legal reserve, as pro.
and (b) its reserve fund held for reinsurance as provided for in the pertinent treaty provision
in the case of reinsurance ceded to authorized insurers, [(As amended by Presidential
Decree No. 1455).]

Sec. [205] 211, After satisfying the requirements contained in sections one hundred
ninety-{one] SEVEN, one hundred ninety-{three] NINE, two hundred [three] NINE and two
hundred {four] TEN, any non-life insurance company may invest any portion of its funds

representing earned surplus in any of the investments described in sections [one] TWO
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hundred {ninety-eight] FOUR, two hundred SIX and two hundred [one] SEVEN, or in any
securities issued by a “registered enterprise” mentioned in the preceding sections: Provided,
That no investment in stocks or bonds of any single entity shall in the aggregate, exceed
twenty per centum of the net worth of the insurance company as shown In its latest
financial statement approved by the Commissioner or twenty per centum of the paid-up
capital of the issuing company, whichever is lesser, unless otherwise approved by the
Commissioner.

Sec. [206] 212. After satisfying the minimum capital investment required in section
two hundred [three] NINE, any life insurance company may invest its legal policy reserve, as
provided in section two hundred [eleven] SEVENTEEN or in section two hundred [twelve]
EIGHTEEN, in any of the classes of securities or types of investments described in sections
[one] TWO hundred [ninety-eight] FOUR, two hundred SIX, two hundred fone] SEVEN and
two hundred [two] EIGHT, subject to the limitations therein contained, and in any securities
issued by any "registered enterprise" mentioned in section two hundred [four] TEN, free
from any lien or encumbrance, in such amounts as may be approved by the Commissioner.
Such company may likewise invest any portion of its earned surplus in the aforesaid
securities or investments subject to the aforesaid limitations.

Sec, [207] 213. Any investment made in violation of the applicable provisions of this
title shall be considered non-admitted assets.

Sec, (208] 214. (1) All bonds or other evidences of indebtedness having a fixed term
and rate of interest and held by any life insurance company authorized to do business in this
country, if amply secured and if not in default as to principal or interest, shall be valued [as
follows: If purchased at par, at the par value; if purchased above or below par, on the basis
of the purchase price adjusted so as to bring the value to par at maturity and so as to yield

in the meantime the effective rate of interest at which the purchase was made, or in the
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discretion of the Commissioner, on the basis of the method of calculation commonly known

as the pro-rata method. In applying the foregoing rule the purchase price shall in no case be

taken at a higher figure than the actual market value at the time of acquisition.] BASED ON
THEIR AMORTIZED COST USING FFFECTIVE INTEREST METHOD LESS IMPAIRMENT AND
UNRECOVERABLE AMOUNT BASED ON APPROPRIATE MEASUREMENT METHODS WHICH
[ARE GENERALLY ACCEPTED IN THE INDUSTRY AND ACCEPTED BY THE COMMISSIONER. The

Commissioner shall have the power to determine the eligibility of any such investments for

valuation on the basis of amortization, and may by regulation prescribe or limit the classes
of securities so eligible for amortization, All bonds or other evidences of indebtedness which
in the judgment of the Commissioner are not amply secured shall not be eligible for

amortization and shall be valued in accordance with paragraph two. The Commissioner may,

if he finds that the interest of policy holders so permit or require, by official regu
permit or require any class or classes of Insurers, other than life insurance companies,
authorized to do business in this country, to value their bonds or other evidences of
indebtedness in accordance with the foregoing rule.

(2) The investments of all insurers authorized to do business in this country, except
securities subject to amortization and except as otherwise provided in this chapter, shall be
valued, in the discretion of the Commissioner, at their market value, or at their appraised
value, or at prices determined by him as] AT THEIR AMORTIZED COST USING EFFECTIVE
INTEREST METHOD LESS IMPAIRMENT AND UNRECOVERABLE AMOUNT OR AT
VALUATION representing their fair market value. If the Commissioner finds that in view of

country it

the character of investments of any insurer authorized to do business in tt
would be prudent for such insurer to establish a special reserve for possible losses or
fluctuations in the values of its investments, he may require such Insurer to establish such

reserve, reasonable in amount, AND INCLUDE A REPORT THEREON [and may require that
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such reserve be maintained and reported] in any statement or report of the financial
condition of such insurer, The Commissioner may, in connection with any examination or
required financial statement of an authorized insurer, require such Insurer to furnish him

complete financial statements and audited report of the financial condition of any

corporation of which the securities are owned wholly or partly by such insurer and may
cause an examination to be made of any subsidiary or affiliate of such insurer AS
APPROPRIATE TO SPECIFIC INVESTMENTS AS PROVIDED IN APPROPRIATE CIRCULARS
ISSUED BY THE COMMISSIONER.
(3) INVESTMENTS IN EQUITY OF AN INSURANCE COMPANY SHALL BE VALUED AS
FOLLOWS:
{a) LISTED STOCKS SHALL BE VALUED AT MARKET VALUE AND PERIODICALLY
ADJUSTED TO REFLECT ‘MARKET CHANGES THROUGH A SPECIAL VALUATION
ACCOUNT TO REFLECT THEIR REALIZABLE VALUE WHEN SOLD;
{b) UNLISTED STOCKS SHALL BE VALUED AT ADJUSTED BOOK VALUE BASED
ON THE LATEST UNQUALIFIED AUDITED FINANCIAL STATEMENTS OF THE
COMPANY WHICH ISSUED SUCH STOCKS; AND
{c) STOCKS OF A CORPORATION UNDER THE CONTROL OF THE INSURER
SHALL BE VALUED USING THE EQUITY METHOD WHICH IS THE COST PLUS OR
MINUS THE SHARE OF THE CONTROLLING COMPANY IN THE EARNINGS OR
LOSSES OF THE CONTROLLED COMPANY AFTER ACQUISITION OF SUCH STOCKS.
[3] (4) The stock of an insurance company shall be valued at the lesser of its market
value or its book value as shown by its last approved annual statement or the last report
on examination, whichever is more recent. The book value of a share of common stock of

an insurance company shall be ascertained by dividing (a) the amount of its capital and

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surplus less the value of all ofits preferred stack, if any, outstanding, by (b) the number of
shares of its common stock issued and outstanding.

Notwithstanding the foregoing provisions, an insurer may, at its option, value its
holdings of stock in a subsidiary insurance company in an amount not less than acquisition
costif such acquisition cost is less than the value determined as hereinbefore provided.

[4] (5) Real estate required by foreclosure or by deed in lieu thereof, in the absence
ofa recent appraisal deemed by the Commissioner to be reliable, shall not be valued at an
amount greater than the unpaid principal of the defaulted loan at the date of such
foreclosure or deed, together with any taxes and expenses paid or incurred by such
insurer at such time in connection with such acquisition, and the cost of additions or
improvements thereafter paid by such insurer and any amount or amounts thereafter paid
by such insurer or any assessments levied for improvements in connection with the
property.

[5] (6) Purchase money mortgages received on dispositions of real property held
pursuant to section two hundred {two] EIGHT shall be valued in an amount equivalent to
ninety per centum of the value of such real property. Purchase money mortgages received
con disposition of real property otherwise held shall be valued in an amount not exceeding
ninety per centum of the value of such real property as deterinined by an appraisal made
by an appraiser at or about the time of disposition of such real property.

{61 (7) The stock of a subsidiary of an insurer shall be valued on the basis of the
greater of (i) the value of only such [subsidiary] of the assets of such subsidiary as would
constitute lawful investments for the insurer if acquired or held directly by the insurer or
(il) such other value determined pursuant to standards and cumulative limitations,

contained in a regulation to be promulgated by the Commissioner.

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(8) Notwithstanding any provision contained in this section or elsewhere in this
chapter, if the Commissioner find that the interests of policyholders so permit or require,
he may permit or require any class or classes of insurers authorized to do business in this
country to value their investments or any class or classes thereof as of any date heretofore
or hereafter in accordance with any applicable valuation or method.

Sec. [209] 215. It shall be the duty of the officers of the insurance company to report
within the first fifteen days of every month all such investments as may be made by them
during the preceding month, and the Commissioner may, if such investments or any of
them seem injudicious to him, require the sale or disposal of the same. The report shall
also include a list of investments sold or disposed of by the company during the same
period.

Title 5
RESERVES

Sec. [210] 216. Every life insurance company, doing business in the Philippines, shall
annually make a valuation of all policies, RESERVE LIABILITY, additions thereto, unpaid
dividends, and all other obligations outstanding on the thirty-first day of December of the
preceding year. All such valuations shall be made [upon the net premiums basis, according
to the standard adopted by the company,] USING ASSUMPTIONS AND METHODS IN
[ACCORDANCE WITH STANDARDS PRESCRIBED BY THE COMMISSIONER, WHICH
STANDARDS SHALL BE IN ACCORDANCE WITH INTERNATIONALLY ACCEPTABLE ACTUARIAL
STANDARDS, AND which standard shail be stated in its annual report.

Such standard of valuation {whether of the net level premium, full preliminary term,
any modified preliminary term, or select and ultimate reserve basis,] shall be according to a
standard table of [mortality] CONTINGENCY with interest AT A MAXIMUM TO BE

PRESCRIBED BY THE COMMISSIONER BUT IN NO CASE [at not] more than six per centum
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compound interest. [When the preliminary term basis is used, the term insurance shall be
limited to the first policy year.)

The results of such valuations shall be reported to the Commissioner on or before
the thirtieth day of April of each year accompanied by a sworn statement OF A DESIGNATED
COMPANY OFFICER AND STATING THE METHODS AND ASSUMPTIONS USED IN ARRIVING
AT THE VALUES REPORTED [of the company’s actuary certifying to the figures and stating
upon what mortality table itis based, upon what rate of interest the valuation is made, and
the methods used in arriving at the result obtained].

Sec. [211] 217. The aggregate net value so ascertained of the policies of such
company shall be deemed its reserve liability, to provide for which it shall hold funds in
secure investments equal to such net value, above all its other liabilities; and it shall be the
duty of the Commissioner, after having verified, to such an extent as he may deem
necessary, the valuation of all policies in force, to satisfy himself that the company has such
amount in safe legal securities after all other debts and claims against it have been provided
for.

The reserve liability for variable contracts defined in section two hundred thirty-
[two] EIGHT shall be established in accordance with actuarial procedures that recognize the
variable nature of the benefits provided, and shall be approved by the Commissioner.

sec. [212] 218. Every [domestic] life insurance company, conducted on the mutual
pian or a plan in which policyholders are by the terms of their policies entitled to share In
the profits or surplus shall, on all policies of life insurance heretofore or hereafter Issued,
under the conditions of which the distribution of surplus is deferred to a fixed or specified
time and contingent upon the policy being in force and the insured living at that time,
annually ascertain the amount of the surplus to which all such policies as separate class are

entitled, and shall annually apportion to such policies as a class the amount of the surplus so
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ascertained, and carry the amount of such apportioned surplus, plus the actual interest

earnings and accretions to such fund, as a distinct and separate liability to such class of

policies on and for which the same was accumulated, and no company or any of Its officers
shall be permitted to use any part of such apportioned surplus fund for any purpose
whatsoever other than for the express purpose for which the same was accumulated.

Sec. [213] 219. THE COMMISSIONER MAY SPECIFY THE RESERVE ITEMS THAT MUST
BE CERTIFIED BY AN ACCREDITED ACTUARY. [Every insurance company, other than life,
shall maintain a reserve for unearned premiums on its policies in force, which shall be
charged as a liability in any determination of its financial condition.] Such reserve shall
REPRESENT THE UNEXPIRED PORTION OF THE PREMIUM CALCULATED ON A PRORATA
BASIS OVER THE PERIOD OF COVERAGE OF THE POLICY [be equal to forty per centum of the
gross premiums, ess returns and cancellations, received on policies or risks having not more
than a year to run, and pro rata on all gross premiums received on policies or risks having
more than a year to run: Provided, That for marine cargo risks the reserve shall be equal to
forty per centum of the premiums written in the policies upon yearly risks, and the full
‘amount of the premiums written during the last two months of the calendar year upon all
other marine risks not terminated].

Sec, [214] 220. In addition to its liabilities and reserves on contracts of insurance
issued by it, every insurance company shall be charged with the estimated amount of all of
its other liabilities, including taxes, expenses and other obligations due or accrued at the
date of statement, and including any special reserves required by the Commissioner
pursuant to the provisions of this Code.

Title 6

LIMIT OF SINGLE RISK

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Sec. [215] 221. No insurance company other than life, whether foreign or domestic,

shail retain any risk on any one subject of insurance in an amount exceeding twenty per

centum of its net worth. For purposes of this section, the term "subject of insurance” shall
include all properties or risks insured by the same insurer that customarily are considered by
non-life company underwriters to be subject to loss or damage from the same occurrence of
any hazard insured against.

THE COMMISSIONER MAY ISSUE REGULATIONS PROVIDING FOR A MAXIMUM
LIMIT ON THE OVERALL RETAINED RISKS OF INSURERS TO SERVE AS A CATASTROPHE
COVER REQUIREMENT FOR THE SAME.

jing title shall be deducted in

Reinsurance ceded as authorized under the succee
determining the risk retained, As to surety risk, deduction shalt also be made of the
amount assumed by any other company authorized to transact surety business and the
value of any security mortgage, pledged, or held subject to the surety's control and for the
surety's protection.

Title 7
REINSURANCE TRANSACTIONS.

Sec. (216) 222. An insurance company doing business in the Philippines may accept
reinsurances only of such risks, and retain risk thereon within such limits, as it is otherwise
authorized to insure.

Sec. [217] 223. No insurance company doing business in the Philippines shall cede all
or part of any risks situated in the Philippines by way of reinsurance directly to any foreign
insurer not authorized to do business in the Philippines unless such foreign insurer or, if the
services of a non-resident broker are utilized, such non-resident broker is represented in the
Philippines by a resident agent duly registered with the Commissioner as required in this

Code.
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‘The resident agent of such unauthorized foreign insurer or non- resident broker shall
immediately upon registration furnish the Commissioner with the annual statement of such
insurer, or of such company or companies where such broker may place Philippine business
as of the year preceding such registration, and annually thereafter as soon as available,

Sec. [218] 224, All insurance companies, both life and non-life, authorized to do
business in the Philippines shall cede their excess risks to other companies similarly
authorized to do business in the Philippines in such amounts and under such arrangements
‘as would be consistent with sound underwriting practices before they enter into
reinsurance arrangements with unauthorized foreign insurers.

Sec. [219] 225. Any insurance company doing business in the Philippines desiring to
cede their excess risks to foreign insurance or reinsurance companies not authorized to
transact business in the Philippines may do so under {the following conditions:}

[(1) Except in facultative reinsurance and excess of loss covers, the full amount of the
reserve fund required by law shall be set up in the books of and held by the ceding
company for so long as the risk concerned is in force: Provided, That in case of
facultative insurance, the ceding company shall show to the satisfaction of the
Commissioner that the Philippine market cannot provide the facilities sought abroad

(2) The reserve fund withheld shall be invested in bonds or other evidences of debt of
the Government of the Philippines or its political subdivisions or instrumentalities, or
of government-owned or controlled corporations and entities, including the Central

Bank, and/or other securities acceptable under section two hundred.] SUCH TERMS

AND CONDITIONS WHICH THE COMMISSIONER MAY PRESCRIBE.

Should any reinsurance agreement be for any reason cancelled or terminated, the
ceding company concerned shall inform the Commissioner in writing of such cancellation or
termination within thirty days from the date of such cancellation or termination or from the

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date notice or information of such cancellation or termination is received by such company
as the case may be. .

Sec. [220] 226. Every insurance company authorized to do business in the Philippines
shall report to the Commissioner on forms prescribed by him the particulars of reinsurance
treaties [as of the first day of January of the year following the approval of this Code and
shall thereafter similarly report to the Commissioner particulars of] OR any new treaties or
‘changes in existing treaties WITHIN SIX MONTHS FROM THEIR EFFECTIVITY.

Sec. [221] 227. No credit shall be allowed as an admitted asset or as a deduction
from liability, to any ceding insurer for reinsurance made, ceded, renewed, or otherwise
becoming effective after January first, nineteen hundred seventy-five, unless the

reinsurance shall be payable by the assuming insurer on the basis of the liability of the

ceding insurer under the contract or contracts reinsured without diminution because of the
insolvency of the ceding insurer nor unless under the contract or contracts of reinsurance

the liability for such reinsurance is assumed by the assuming insurer or insurers as of the

same effective date; nor unless the reinsurance agreement provides that payments by the
assuming insurer shall be made directly to the ceding insurer or to its liquidator, receiver, or
statutory successor except (a) where the contract specifically provides another payee of
such reinsurance in the event of the insolvency of the ceding insurer and (b) where the
assuming insurer with the consent of the direct insured or insureds has assumed such policy
obligations of the ceding insurer as direct obligations of the assuming insurer to the payees
under such policies and in substitution for the obligations of the ceding insurer to such
payees.
Sec. [222] 228. No life insurance company doing business in the Philippines shall

reinsure its whole risk on any individual life or joint lives, or substantially all of its

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insurance in force, without having first obtained the written permi:
Commissioner.
Title 8
ANNUAL STATEMENT

Sec, [223] 229. Every insurance company doing business in the Philippines shall
terminate its fiscal period on the thirty-first day of December every year, and shall annually
on or before the thirtieth day of April of each year render to the Commissioner a statement
signed and sworn to by the chief officer of such company showing, in such form and details

as may be prescribed by the Commissioner, the exact condition of its affairs on the

preceding thirty-first day of December.

THE ANNUAL STATEMENT SHALL BE PREPARED IN ACCORDANCE WITH THE
FINANCIAL REPORTING FRAMEWORK AS DETERMINED BY THE COMMISSIONER. IN
ADDITION, THE COMMISSIONER MAY REQUIRE OTHER RELEVANT INFORMATION. THE
FORM AND DETAILS OF SUCH OTHER RELEVANT INFORMATION SHALL BE PRESCRIBED BY
THE COMMISSIONER AND SHALL FORM PART OF THE SUPPLEMENTARY SCHEDULES TO
‘THE ANNUAL STATEMENT. .

Any entry in the statement which is found to be false shall constitute a
misdemeanor and the officer signing such statement shall be subject to the penalty
provided for under section four hundred [nineteen] THIRTY FIVE.

Sec. [224] 230. Every insurance company authorized under title ten of this chapter to
issue, deliver or use variable contracts shall annually file with the Commissioner separate
annual statement of its separate variable accounts. Such statement shall be on a form
prescribed or approved by the Commissioner and shall include details as to all of the

income, disbursements, assets and liability items of and associated with the said separate

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oath of two officers of the company and Shall be filed simultaneously with the annual
statement required by the preceding section.

Sec. [225] 231. Within thirty days after receipt of the annual statement approved by
the Commissioner, every insurance company doing business in the Philippines shall publish
in A [two] newspaper[s] of general circulation [in the City of Manila, one published in
English and one in Pilipino], a full synopsis of its annual financial statement showing fully the
conditions of its business, and setting forth its resources and liabilities IN ACCORDANCE

WITH SUCH FORM PRESCRIBED BY THE COMMISSIONER.

Title 9
POLICY FORMS

Sec. [226] 232. No policy, certificate or contract of insurance shall be issued or
delivered within the Philippines unless in the form previously approved by the
‘Commissioner, and no application form shall be used with, and no rider, clause, warranty or
endorsement shall be attached to, printed or stamped upon such policy, certificate or
contract unless the.form of such application, rider, clause, warranty or endorsement has
been approved by the Commissioner.

Sec. [227] 233. In the case of individual life or endowment insurance, the policy shall
contain in substance the following conditions:

{a) A provision that the policyholder is entitled to a grace period either of thirty days

or of one month within which the payment of any premium after the first may be

made, subject at the option of the insurer to an interest charge.not in excess of six

per centum per annum for the number of days of grace elapsing before the payment

of the premium, during which period of grace the policy shall continue in full force,

but in case the policy becomes a claim during the said period of grace before the
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overdue premium is paid, the amount of such premium with interest may [de] BE
deducted from the amount payable under the policy in settlement;
{b) A provision that the policy shail be incontestable after it shall have been in force
during the lifetime of the insured for a period of two years from its date of issue as
shown in the policy, or date of approval of last reinstatement, except for non
payment of premium and except for violation of the conditions of the policy relating
to military or naval service in ime of war;
{c) A provision that the policy shall constitute the entire contract between the
parties, but if the company desires to make the application a part of the contract it
may do so provided a copy of such application shall be indorsed upon or attached {0
the policy when issued, and in such case the policy shall contain a provision that the
policy and the application therefor shall constitute the entire contract between the
parties;
{d) A provision that if the age of the insured Is considered in determining the
premium and the benefits accruing under the policy, and the age of the insured has,
been misstated, the amount payable under the policy shall be such as the premium
would have purchased at the correct age;
(e) If the policy is participating, a provision that the company shall periodically
ascertain and apportion any divisible surplus accruing on the policy under conditions
specified therein;

(f) A provision specifying the options to which the policyholder is entitled to in the

event of default in a premium payment after three full annual premiums shall have

been paid. Such option shall consist of:
(2) A cash surrender value payable upon surrender of the policy which shall

not be less than the reserve on the policy, the basis of which shall be
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indicated, for the then current policy year and any dividend additions thereto,

reduced by a surrender charge which shall not be more than one-fifth of the

entire reserve or two and one-half per centum of the amount insured and any

dividend additions thereto;

(2) One or more paid-up benefits on a plan or plans specified in the policy of

such value as may be purchased by the cash surrender value;
(g) A provision that at anytime after a cash surrender value is available under the
policy and while the policy is in force, the company will, advance, on proper
assignment or pledge of the policy and on sole security thereof, a sum equal to, or at
the option of the owner of the policy, less than the cash surrender value on the
policy, at a specified rate of interest, not more than the maximum allowed by law, to
be determined by the company from time to time, but not more often than once a
year, subject to the approval of the Commissioner; and that the company will deduct

from such loan value any existing indebtedness on the policy and,any unpaid balance

of the premium for the current policy year, and may collect interest in advance on the
loan to the end of the current policy year, which provision may further provide that
such loan may be deferred for not exceeding six months after the application
therefor is made;

(h) A table showing in figures cash surrender values and paid-up options available
under the policy each year upon default in premium payments, during at least twenty
years of the policy beginning with the year in which the values and options first
become available, together with a provision that in the event of the failure of the
policyholder to elect one of the said options within the time specified in the policy,
‘one of said options shall automatically take effect and no policyholder shall ever

forfeit his right to same by reason of his failure to so elect;
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(i) tn case the proceeds of a policy are payable in installments or as an annuity, a table
showing the minimum amounts of the installments or annuity payments;

i) A provision that the policyholder shall be entitled to have the policy reinstated at
any time within three years from the date of default of premium payment unless the
cash surrender value has been duly paid, or the extension period has expired, upon
production of evidence of insurability satisfactory to the company and upon payment
of all overdue premiums and any indebtedness to the company upon said policy,
with interest rate not exceeding that which would have been applicable to said
premiums and indebtedness in the policy years prior to reinstatement.

Any of the foregoing provisions or portions thereof not applicable to single premium
or term policies shal to that extent not be incorporated therein; and any such policy may be
issued and delivered in the Philippines which in the opinion of the Commissioner contains
provisions on any one or more of the foregoing requirements more favorable to the
policyholder than hereinbefore required.

This section shall not apply to policies of group life or industrial life insurance.

sec. [228] 234. No policy of group life insurance shall be issued and delivered in the
philippines unless it contains in substance the following provisions, or provisions which In
the opinion of the Commissioner are more favorable to the persons insured, or at least 35
favorable to the persons insured and more favorable to the policy-holders:

{a) A provision that the policyholder is entitled to a grace period of elther thirty days

or of one month for the payment of any premium due after the first, during which

grace period the death benefit coverage shall continue in force, unless the
policyholder shall have given the insurer written notice of discontinuance in advance

of the date of discontinuance and in accordance with the terms of the policy. The

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policy may provide that the policyholder shall be liable for the payment of a pro rata
premium for the time the policy is in force during such grace period;

{b) A provision that the validity of the policy shall not be contested, except for non-
payment of premiums after it has been in force for two years from its date of issue;
and that no statement made by any insured under the policy relating to his
insurability shall be used in contesting the validity of the insurance with respect to

which such statement was made after such insurance has been

force prior to the
contest for a period of two years during such person's lifetime nor unless contained in

written instrument signed by him;

{c) A provision that a copy of the application, if any, of the p

attached to the policy when issued, that all statements made by the policyholder or

by persons insured shall be deemed representations and not warranties, and that no

statement made by any insured shall be used in any contest unless a copy of the
instrument containing the statement is or has been furnished to such person or to his
beneficiary;

{d) A provision setting forth the conditions, if any, under which the insurer reserves

the right to require a person eligible for insurance to furnish evidence of individual

insurability satisfactory to the insurer as a condition to part or all of his coverage;

(e) A provision specifying an equitable adjustment of premiums or of benefits or of
both to be made in the event that the age of a person insured has been misstated,
such provision to contain a clear statement of the method of adjustment to be used;
(f) A provision that any sum becoming due by reason of death of the person insured
shall be payable to the beneficiary designated by the insured, subject to the

provisions of the policy in the event that there is no designated beneficiary, as to all

or any part of such sum, living at the death of the insured, and subject to any right
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reserved by the insurer in ‘the policy and set forth in the certificate to pay at its
option a part of such sum not exceeding five hundred pesos to any person appearing
to the insurer to be equitably entitled thereto by reason of having incurred funeral or
other expenses incident to the last illness or death of the person insured;
(@) A provision that the insurer will issue to the policyholder for delivery to each
person insured [an individual certificate setting forth] a statement as to the insurance
protection to which he is entitled, to whom the insurance benefits are payable, and
the rights set forth in paragraphs (h), (i) and (j following:
{h) A provision ‘that if the insurance, or any portion of it, on a person covered under
the policy ceases because of termination of employment or of membership in the
class or classes eligible for coverage under the policy, such person shall be entitled to
have issued to him by the insurer, without evidence of insurability, an individual
policy of life insurance without disability or other supplementary benefits, provided
application for the individual policy and payment of the first_ premium to the insurer
shall be made within thirty days after such termination and provided further that:
(2) the individual policy shall be on any one of the forms, except term
insurance, then customarily issued by the insurer at the age and for an
‘amount not in excess of the coverage under the group policy; and
(2) the premium on the individual policy shall be at the insurer's then
customary rate applicable to the form and amount of the individual policy, to
the class of risk to which such person then belongs, and to his age attained

on the effective date of the individual policy.

(i) Aprovision that if the group policy terminates or is amended so as to terminate the
insurance of any class of insured persons, every person insured thereunder at the

date of such termination whose insurance terminates and who has been so insured
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for five years prior to such termination date shall be entitled to have issued to him by

the insurer an individual policy of life insurance subject to the same limitations as set

forth in paragraph (h), except that the group policy may provide that the amount of

such individual policy shall not exceed [the smaller of (a)] the amount of the person's

insurance protection ceasing {less the amount of any life insurance for what he is
or becomes eligible under any group policy issued or reinstated by the same or
another reinsurer within thirty days after such termination, and (b) two thousand
pesos];
{j) A provision that if a person insured under the group policy dies during the thirty-
day period within which he would have been entitled to an individual policy issued to
him in accordance with (h) and (i) above and before such individual policy shall have
become effective, the amount of life insurance which he would have been entitled to
have issued to him as an individual policy shall be payable as claim under the group
policy whether or not application for the individual policy or the payment of the first
premium has been made;
{k) In the case of a policy issued to a creditor to insure debtors of such creditor,
provision that the insurer will furnish to the policyholder for delivery to each debtor
insured under the policy a form which will contain a statement that the life of the
debtor is insured under the policy and that any death benefit paid thereunder by
reason of his death shall be applied to reduce or extinguish indebtedness.

The provisions of paragraphs (f) to (j) shall not apply to policies issued to a creditor

to insure his debtors. if a group life policy is on a plan of insurance other than term, it shall
contain a nor-forfeiture provision or provisions which in the opinion of the Commissioner is

or are equitable to the insured or the policyholder: Provided, That nothing herein contained

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shall be so construed as to require group life policies to contain the same non-forfeiture
provisions as are required of individual life policies.

Sec. [228] 235. The term “industrial life insurance" as used in this Code shall mean
that form of fife insurance under which the premiums are payable either monthly or
oftener, if the face amount of insurance provided in any policy is not more than five
hundred times that of the current statutory minimum daily wage in the City of Manila, and if
the words “industrial policy” are printed upon the policy as part of the descriptive matter.

‘An industrial life policy shall not lapse for non-payment of premium if such non-
payment was due to the failure of the company to send its representative or agent to the
insured at the residence of the insured or at some other place indicated by him for the
purpose of collecting such premium: Provided, That the provisions of this paragraph shall
not apply when the premium on the policy remains unpaid for a period of three months or
twelve weeks after the grace period has expired.

Sec. [230] 236. In the case of industrial life insurance, the policy shall contain in
substance the following provisions:

{a) A provision that the insured is entitled to a grace period of four weeks within
wich the payment of any premium after the first may be made, except that where
premiums are payable monthly, the period of grace shall be either one month or
thirty days; and that during the period of grace, the policy shall continue in full force,
put if during such grace period the policy becomes a claim, then any overdue and
unpaid premiums may be deducted from any amount payable under the policy in
settlement;

(b) A provision that the policy shail be incontestable after it has been in force during

the

time of the insured for a specified period, not more than two years from its

date of issue, except for non-payment of premiums and except for violation of the
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conditions of the policy relating to naval or military service, or services auxiliary
thereto, and except as to provisions relating to benefits in the event of disability as
defined in the policy, and those granting additional insurance specifically against
death by accident or by accidental means, or to additional insurance against loss of,
of loss of use of, specific members of the body;

(€1 A provision that the policy shall constitute the entire contract between the
patties, ot if a copy of the application is endorsed upon and attached to the policy
when issued, a provision that the policy and the application therefor shall constitute
the entire contract between the patties, and in the latter case, a provision that all
statements made by the insured shall, in the absence of fraud, be deemed
representations and not warranties;

(d) A provision that if the age of the ‘person insured, or the age of any person,

considered in determining the premium, or the benefits accruing under the policy,
has been misstated, any amount payable or benefit accruing under the policy shall
be such as the premium paid would have purchased at the correct age;

(e) A provision that if the policy is a participating policy, the company shall
periodically ascertain and apportion any divisible surplus accruing on the policy
under the conditions specified therein;

(f) A provision that in the event of default in premium payments after three full
years’ premiums have been paid, the policy shall be converted into @ stipulated form
of insurance, and that in the event of default in premium payments after five full
years! premiums have been paid, a specified cash surrender value shall Be available,
in feu of the stipulated form of insurance, at the option of the policyholder. The net
value of such stipulated form of insurance and the amount of such cash value shall

ot be less than the reserve on the policy and dividend additions thereto, if any, at
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the end of the last completed policy year for which premiums shall have been paid
(the policy to specify the mortality table, rate of interest and method of valuation
adopted to compute such reserve), exclusive of any reserve on disability benefits and
accidental death benefits, less an amount not to exceed two and one-half per

ividend additions

centum of the maximum amount insured by the policy and
thereto, if any, at the end of the last completed policy year for which premiums shall
have been paid (the policy to specify the mortality table, rate of interest and method
of valuation adopted to compute such reserve), exclusive of any reserve on disability
benefits and accidental death benefits, less an amount not to exceed two and one-
half per centum of the maximum amount insured by the policy and dividend
additions thereto, if any, when the issue age is under ten years, and less an amount
not to exceed two and one-half per centum of the current amount insured by the
policy and dividend additions thereto, if any, if the issue age is ten years or older,
and less any existing indebtedness to the company on or secured by the policy;

(g) Aprovision that the policy may be surrendered to the company at its home office
within a period of not less than sixty days after the due date of a premium in default
for the specified cash value, provided that the insurer may defer payment for not
more than six months after the application therefor is made;

(h) A table that shows in figures the non-forfeiture benefits available under the
policy every year upon default in payment of premiums during at least the first
twenty years of the policy, such table to begin with the year in which such values
become available, and a provision that the company will furnish upon request an
extension of such table beyond the year shown in the policy;

(i) A provision that specifies which one of the stipulated forms of insurance provided

for under the provision of paragraph (f) of this section shall take effect in the event
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of the insured’s failure, within sixty days from the due date of the premium in
default, to notify the insurer in writing as to which one of such forms he has
selected;

i) A provision that the policy may be reinstated at any time within two years from
the due date of the premium in default unless the cash surrender value has been
paid or the period of extended term insurance expired, upon production of evidence
of insurability satisfactory to the company and payment of arrears of premiums with
interest at a rate not exceeding six per centum per annum payable annually;

(k) A provision that when a policy shall become a claim by death of the insured,
settlement shall be made upon receipt of due proof of death, or not later than two
months after receipt of such proof;

(I) Atitle on the face and on the back of the policy correctly describing its form;

(m) A space on the front or the back of the policy for the name of the beneficiary
designated by the insured with a reservation of the insured's right to designate or
change the beneficiary after the issuance of the policy. The policy may also provide
that no designation or change of beneficiary shall be binding on the insurer until
-endorsed on the policy by the insurer, and that the insurer may refuse to endorse

the name of any proposed beneficiary who does not appear to the insurer to have an

insurable interest in the life of the insured. Such policy may also contain a provision

that if the beneficiary designated in the policy does not surrender the policy with
due proof of death within the period stated in the policy, which shall not be less than
thirty days after the death of the insured, or if the beneficiary is the estate of the
insured, or is a minor, or dies before the insured, or is not legally competent to give

valid release, then the insurer may make any payment thereunder to the executor or

administrator of the insured, or to any of the insured's relatives by blood or legal
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adoption or connections by marriage or to any person appearing to the insurer to be

equitably entitled thereto by reason of having incurred expense for the

maintenance, medical attention or burial of the insured; and

(n) A provision that when an industrial life insurance policy is issued providing for

‘accidental or health benefits, or both, in addition to life insurance, the foregoing

provisions shall apply only to the life insurance portion of the policy.

‘Any of the foregoing provisions or portions thereof not applicable to non-
participating or term policies shall to that extent not be incorporated therein. The foregoing
provisions shall not apply to policies issued or granted pursuant to the non-forfeiture
provisions prescribed in provisions of paragraphs (f) and (i) of this section, nor shall
provisions of paragraphs (f),(g),(h, and (i) hereof be required in term insurance of twenty
years or less but such term policies shall specify the mortality table, rate of interest, and
method of computing reserves.

Sec. [231] 237. No policy of industrial life insurance shall be issued or delivered in
the Philippines if it contains any of the following provisions:

(a) A provision that gives the insurer the right to declare the policy void because the

insured has had any disease or ailment, whether specified or not, or because the

insured has received institutional, hospital, medical or surgical treatment or
attention, except a provision which gives the insurer the right to declare the policy

if the insured has, within two years prior to the issuance of the policy, received

voi
institutional hospital, medical or surgical treatment or attention and if the insured or
the claimant under the policy falls to show that the condition occasioning such
treatment or attention was not of a serious nature or was not material to the risk;

(b) A provision that gives the insurer the right to declare the policy void because the

insured has been rejected for insurance, unless such right be conditioned upon a
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showing by the insurer that knowledge of such rejection would have led to a refusal

by the insurer to make such contract;

{c) A provision that allows the company to pay the proceeds of the policy at the

death of the insured to any person other than the named beneficiary, except in

accordance with a standard provision as specified under the provisions of paragraph

(m) of the preceding section;

{d} A provision that limits the time within which any action at law or in equity may be

commenced to less than six years after the cause of action shall acerue; and

(e) A provision that specifies any mode of settlement at maturity of less value than

the amount insured by the policy plus dividend additions, if any, less any

indebtedness to the company on the policy and fess any premium that may’by the

terms of the policy be deducted, payments to be made in accordance with the terms

of the policy.

Nothing contained in this section nor in the provision of paragraph (b) of the
preceding section, relating to incontestability, shall be construed as prohibiting the life
insurance company from placing in its industrial life policies provisions limiting Its lability

n other than as a fare-paying passenger on a

with respect to: (1) death resulting from avia
regularly scheduled route between definitely established airports; and (2) military or naval
service: Provided, That if the liability of the company is limited as herein provided, such
liability shall in no event be fixed at an amount less than the reserve on the policy(excluding
the reserve for any additional benefits in the event of death by accident or accidental means
or for benefits in the event of any type of disablity)-less any indebtedness on or secured by
such policy; nor shall any provision of this section apply to any provision in an industrial life
insurance policy for additional benefits in the event of death by accident or accidental

means.
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Title 10
VARIABLE CONTRACTS

Sec. [232] 238, (1) No insurance company authorized to transact business in the
Philippines shall issue, deliver, sell or use any variable contract in the Philippines, unless and
until such company shall have satisfied the Commissioner that its financial and general
condition and its methods of operations, including the issue and sale of variable contracts,
are not and will not be hazardous to the public or to its policy and contract owners. No
foreign insurance company shall be authorized to issue, deliver or sell any variable contract
in the Philippines, untess it is ikewise authorized to do so by the laws of its domicile
(2) The term “variable contract" shall mean any policy or contract on either a group or on an
individual basis issued by an insurance company providing for benefits or other contractual
payments or values thereunder to vary so as to reflect investment results of any segregated
portfolio of investments or of a designated separate account in which amounts received in
connection with such contracts shall have been placed and accounted for separately and
apart from other investments and accounts. This contract may also provide benefits or
values incidental thereto payabie in fixed or variable amounts, or both. It shall not be
deemed to be a "security" or "securities" as defined in The Securities Act, as amended, or in
the [The] Investment Company Act, as amended, nor subject to regulation under said Acts,
{3) In determining the qualifications of @ company requesting authority to issue, deliver, sell
or use variable contracts, the Commissioner shall always consider the following: (a) the
history, financial and general condition of the company: Provided, That such company, Ifa
foreign company, must have deposited with the Commissioner for the benefit and security
of its variable contract owners in the Philippines, securities satisfactory to the Commissioner
consisting of bonds of the Government of the Philippines or its instrumentalities with an

actual market value of two million pesos; (b) the character, responsibility and fitness of the
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officers and directors of the company; and (c)-the law and regulation under which the
company is authorized in the state of domicile to issue such contracts,
(4) tf after notice and hearing, the Commissioner shall find that the company is qualified to
issue, deliver, sell or use variable contracts in accordance with this Code and the regulations
‘and rules issued thereunder, the corresponding order of authorization shall be issued. Any
decision or order denying authority to issue, detiver, sell or use variable contracts shall
clearly and distinctly state the reasons and grounds on which it is based

Sec. (233] 239, Any:insurance company issuing variable contracts pursuant to this
code may in its discretion issue contracts providing a combination of fixed amount and
variable amount of benefits and for option lump-sum payment of benefits.

sec, [234] 240. Every variable contract form delivered or issued for delivery In the
Philippines, and every certified form evidencing variable benefits issued pursuant to any
such contract on a group basis, and the application, rider and endorsement forms applicable
thereto and used in connection therewith, shall be subject to the prior approval of the
Commissioner.

see, [235] 241. Illustration of benefits payable under any variable contract shall not
include or involve projections of past investment experience into the future and shall
conform with the rules and regulations promulgated by the Commissioner.

sec. [236] 242. Variable contracts may be issued on the industrial life basis, provided

that the pertinent provisions of this Code and of the rules and regulations of the

Commissioner governing variable contracts are complied with in connection wi such

contracts.
Sec. (237] 243. Every life insurance company authorized under the provisions of this
Code to issue, deliver, sell or use variable contracts shalt, in connection with same, establish

‘one or more separate accounts to be known as separate variable accounts. All amounts
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received by the company in connection with any such contracts which are required by the
terms thereof, to be collected or applied to one or more designated separate variable
accounts shall be placed in such designated account or accounts. The assets and liabilities of
each such separate variable account shall at all times be clearly identifiable and

di

\guishable from the assets and liabilities in all other accounts of the company.

Notwithstanding any provision of law to the contrary, the assets held in any such separate

variable account shall not be chargeable with liabilities arising out of any other business the
company conduct but shall be held and applied exclusively for the benefit of the owners oF
beneficiaries of the variable contracts applicable thereto. In the event of the insolvency of
the company, the assets of each such separate variable account shall be applied to the
contractual claims of the owners or beneficiaries of the variable contracts applicable
thereto. Except as otherwise specifically provided by the contract, no sale, exchange or
other transfer of assets may be made by a company, between any of its separate accounts
or between any other investment account and one or more of its separate accounts, unless
in the case ofa transfer into separate account, such transfer is made solely to establish the
account of to support the operation of the contacts with respect to the separate account fo
hich the transfer is made, or in case of a transfer from a separate account, such transfer
would not cause the remaining assets of the account to become less than the reserves and
other contract liabilities with respect to such separate account. Such transfer, whether into
or from a separate account, shall be made by a transfer of cash, or by a transfer of securities
having a valuation which could be readily determined in the market place, provided that
such transfer of securities is approved by the Commissioner. The Commissioner m2y
authorize other transfers among such accounts, if, in his opinion, such transfer would not be

inequitable. All amounts and assets allocated to any such separate variable account shall be

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owned by the company and with respect to THE same the company shall not be nor hold
itself out to be a trustee.

sec. [238] 244, Any insurance company which has established one or more separate
varlable accounts pursuant to the preceding section may invest and re-invest all or any part
of the assets allocated to any such account in the securities and investments authorized by
sections one] TWO hundred {ninety-eight] FOUR, two hundred SIX, two hundred {one}
SEVEN and two hundred [two] EIGHT for any of the funds of an insurance company in such
amount or amounts as may be approved by the Commissioner. In addition thereto, such
company may also invest in common stocks or other equities which are listed on or
admitted to trading in a securities exchange located in the Philippines, or which are publicly
held and traded In the "over-the-counter market" as defined by the Commissioner and as t0
which market quotations have been available: Provided, however, That no such company
shall invest in excess of ten per centum of the assets of any such separate variable accounts
in any one corporation issuing such common stock. The assets and investments of such
separate variable accounts shall not be taken into account in applying the quantitative
investment limitations applicable to other investments of the company. in the purchase of
common capital stock or other equities, the insurer shall designate to the broker, or to the
seller if the purchase is not made through a broker, the specific variable account for which
the investment is made.

Sec. [239] 245. Assets allocated to any separate variable account shall be valued at
their market value on the date of any valuation, or if there is no readily available market
VALUE then in accordance with the terms of the variable contract applicable to such assets,
or if there are no such contract terms: then in such manner as may be prescribed by the

rules and regulations of the Commissioner.

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Sec. [240] 246. The reserve liability for variable contracts shall be established in
accordance with actuarial procedures that recognize the variable nature of the benefits
provided, and shall be approved by the Commissioner.

Title 11
CLAIMS SETTLEMENT

Sec. [241] 247. (1) No insurance company doing business in the PI

ippines shall
refuse, without just cause, to pay or settle claims arising under coverages provided by Its
policies, nor shall any such company engage in unfair claim settlement practices. Any of the
following acts by an insurance company, if committed without just cause and performed
with such frequency as to indicate a general business practice, shall constitute unfair claim
settlement practices:
(a) knowingly misrepresenting to claimants pertinent facts or policy provisions
relating to coverage at issue;
(b) falling to acknowledge with reasonable promptness pertinent communications
with respect to claims arising under its policies;
{c) failing to adopt and implement reasonable standards for the prompt investigation
of claims arising under its policies;
(4) not attempting in good faith to effectuate prompt, fair and equitable settlement
of claims submitted in which liability has become reasonably clear; or
(e) compelling policyholders to institute suits to recover amounts due ‘under its
policies by offering without justifiable reason substantially less than the amounts
ultimately recovered in suits brought by them,
(2) Evidence as to numbers and types of valid and justifiable complaints to the

Commissioner against an insurance company, and the Commissioner's complaint experience

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with other insurance companies writing similar lines of insurance shall be admissible in
evidence in an administrative or judicial proceeding brought under this section.
{3) itis found, ater notice and an opportunity to be heard, that an insurance 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 company's certificate of authority.

Sec. [242] 248. The proceeds of a life insurance policy shall be paid immediately
upon maturity of the policy, unless such proceeds are made payable in installments or 25 2"
annuity, in which case the installments, or annuities shall be paid as they become due:
provided, however, That in the case of a policy maturing by the death of the insured, the
proceeds thereof shall be paid within sixty days after presentation of the claim and filing of
the proof of the death of the insured. Refusal or failure to pay the claim within the time
prescribed herein will entitle the beneficiary to collect interest on the proceeds of the policy

for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary

Board, unless such failure or refusal to pay is based on the ground that the claim
fraudulent.

‘the proceeds of the policy maturing by the death of the insured payable fo the
peneficiary shall include the discounted value of all premiums paid in advance of their due
dates, but are not due and payable at maturity.

Sec, [243] 249, The amount of any loss or damage for which an insurer may be lable,
under any policy other than life insurance policy, shall be paid within thirty days after proof
OF loss is received by the insurer and ascertainment of the loss or damage is made either by
agreement between the insured and the insurer or by arbitration; but if such ascercalnment
is not had or made within sixty days after such receipt by the insurer of the proof of loss,

then the loss or damage shall be paid within ninety days after such receipt. Refusal or failure
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to pay the loss or damage within the time prescribed herein will entitle the assured to
collect interest on the proceeds of the policy for the duration of the delay at the rate of
twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay 's
based on the ground that the claim is fraudulent.

Sec. [244] 250. In case of any litigation for the enforcement of any policy or contract
of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, (0
make a finding as to whether the payment of the claim of the Insured has been
unreasonably denied or withheld; and in the affirmative case, the insurance company shall
be adjudged to pay damages which shall consist of attorney's fees and other expenses
incurred by the insured person by reason of such unreasonable denial or withholding of
payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount
of the claim due the insured, from the date following the time prescribed in section two

hundred forty-{two] EIGHT or in section two hundred forty-{three] NINE, as the case may

bbe, until the claim is fully satisfied; Provided, That the failure to pay any such claim within
the time prescribed in said sections shall be considered prima facie evidence of

unreasonable delay in payment.

Title 12
EXAMINATION OF COMPANIES
Sec, [245] 254. The Commissioner shall require every insurance company doing
business in the Philippines to keep its books, records, accounts and vouchers in such manner
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 Commissioner.

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Sec. [246] 252. The Commissioner shall at least once @ year and whenever he
considers the public interest so demands, cause an examination to be made into the affairs,
financial condition and method of business of every insurance company authorized to
transact business in the Philippines and of any other person, firm or corporation managing
the affairs and/or property of such insurance company. Such company, as well as such
managing person, firm or corporation, shall submit to the examiner all such books, papers
and securities as he may require and such examiner shall also have the power to examine
the officers of such company under oath touching its business and financial condition, and
the authority to transact business in the Philippines of any such company shall be
suspended by the Commissioner if such examination is refused and such company shall not
thereafter be allowed to transact further business in the Philippines until it has fully
‘complied with the provisions of this section.

Government-owned or controlled corporations or entities engaged in social private
insurance shall similarly be subject to such examination by the Commissioner unless their
respective charters otherwise provide.

Title 13
SUSPENSION OR REVOCATION OF AUTHORITY

see. [247] 253. if the Commissioner is of the opinion upon examination of other
evidence that any domestic or foreign insurance company Is in an unsound condition, or
that it has failed to comply with the provisions of faw or regulations obligatory upon it, or

that its condition or method of business is such as to render Its proceedings hazardous to

the public oF to Its policyholders, or that its paid-up capital stock, in the case of a domestic

stock company, of its available cash assets, in the case of a domestic mutual company, oF its

security deposits, in the case of a foreign company, is impaired or deficient, or that the

margin of solvency required of such company is deficient, the Commissioner is authorized to
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suspend or revoke all certificates of authority granted to such insurance company, its
officers and agents, and no new business shall thereafter be done by such company or for
such company by its agent in the Philippines while such suspension, revocation or disability
continues or until its authority to do business is restored by the Commissioner. Before
restoring such authority, the Commissioner shall require the company concerned to submit
to him a business plan showing the company's estimated receipts and disbursements, as
well as the basis therefor, for the next succeeding three years. [(As amended by
Presidential Decree No. 1455).]
Title 14
APPOINTMENT OF CONSERVATOR

sec. [248] 254, If at any time before, of after, the suspension or revocation of the
certificate of authority of an insurance company as provided in the preceding title, the
commissioner finds that such company is in a state of continuing inability or unwillingness
to maintain a condition of solvency or liquidity deemed adequate to protect the interest of
policy holders and creditors, he may appoint a conservator to take charge the assets,
tlablties, and the management of such company, collect all moneys and debts due said
company and exercise all powers necessary to preserve the assets of said company,
reorganize the management thereof, and restore its viability. The sald 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 ofthe articles of incorporation or by:
laws of the company, to the contrary notwithstanding, and such other powers 25 the
Commissioner shall deem necessary.

‘The conservator may be another insurance company doing business In the

philippines, by officer or officers of such company, or any other competent and qualified

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person, firm or corporation, The remuneration of the conservator and other-expenses
attendant to the conservation shall be borne by the insurance company concerned.

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 Commissioner until
such time as the Commissioner is satisfied that the insurance company can continue to
operate on its own and the conservatorship shall likewise be terminated should [be] THE
Commissioner, on the basis of the report of the conservator or of his own findings,
determine that the continuance in business of the insurance company would be hazardous
to policy holders and creditors, in which case the provisions of Title 15 shall apply.

NO INSURANCE COMPANY, LIFE OR NON-LIFE, OR ANY PROFESSIONAL REINSURER,
ORDERED TO BE LIQUIDATED BY THE COMMISSIONER UNDER THE PROVISIONS
HEREUNDER MAY BE REHABILITATED OR AUTHORIZED TO TRANSACT ANEW, INSURANCE
OR REINSURANCE BUSINESS, AS THE CASE MAY BE.

Title 15
PROCEEDINGS UPON INSOLVENCY
Sec. [249] 255. Whenever, upon examination or other evidence, it shall be disclosed

ion of any insurance company doing business in the Philippines is one of

that the con
insolvency, or that its continuance in business would be hazardous to its policyholders and
creditors, the Commissioner shall forthwith order the company to cease and desist from
transacting business in the Philippines and shall designate a receiver to immediately take
charge of its assets and liabilities, as expeditiously as possible collect and gather all the

assets and administer the same for the benefit of its policyholders and creditors, and

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‘exercise all the powers necessary for these purposes including, but not limited to, bringing
suits and foreclosing mortgages in the name of the insurance company.

The Commissioner shail thereupon determine within [thirty] NINETY days whether
the insurance company may be reorganized or otherwise placed in such condition so that it
may be permitted to resume business with safety to its poticyholders 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 insurance company shall be determined by the
Commissioner and shall be paid out of the assets of such company.

If the Commissioner shall determine and confirm within the said period that the
insurance company is solvent, as defined hereunder, or cannot resume business with safety
to its policyholders and creditors, he shall, if the public interest requires, order its
liquidation, indicate the manner of its fiquidation and approve a liquidation plan and
implement it immediately. The Commissioner 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, reinsure all its outstanding policies, convert the assets of the
insurance company to cash, or sell, assign or otherwise dispose of the same to the
policyholders, 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 Insurance company, and to do such other acts as may be necessary to complete the

liquidation as ordered by the Commissioner.

The provisions of any law to the contrary notwithstanding, the actions of the
Commissioner 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
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plainly arbitrary and made in bad faith. The Commissioner, through the Solicitor General,
shall then file the corresponding answer reciting the proceeding taken and praying the

assistance of the Court in the liquidation of the company. No restr

¥g order or injunction
shall be issued by the Court enjoining the Commissioner from implementing his actions
under this Section, unless there is convincing proof that the action of the Commissioner is
plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the Clerk or
Judge of the Court in which the action is pending a bond executed in favor of the
Commissioner in an amount to be fixed by the Court. The restraining order or injunction
shall be refused or, if granted, shall be dissolved upon filing by the Commissioner, if he so
desires, of a bond in an amount twice the amount of the bond of the petitioner or plaintiff
conditioned that it will pay the damages which the petition or plaintiff may suffer by the
refusal or the dissolution of the injunction, The provisions of Rule 58 of the New Rules of

suance and dissolution of the

Court insofar as they are applicable shall govern the
restraining order or injunction contemplated in this Section.

All proceedings under this Title shall be given preference in the Courts, The
Commissioner shall not be required to pay any fee to any public officer for filing, recording,
orin any manner authenticating any paper or instrument relating to the proceedings.

As used in this Title, the term “Insolvency” shall mean the inability of an insurance
company to pay its lawful obligations as they fall due in the usual and ordinary course of
business as may be shown by its failure to maintain the [margin of] solvency [required]
REQUIREMENTS under Section [194] TWO HUNDRED of this Code. [(As amended by
Presidential Decree No. 1455).]

[Sec 250 . in case of liquidation of an insurance company, after payment of the cost

of the proceedings, including reasonable expenses and fees incurred in the liquidation to be

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allowed by the Court, the Commissioner shall pay all allowed cl

\s against such company,
under order of the Court, in accordance with their legal priority.)

SEC. 256, IT IS UNLAWFUL TO (A) PRESENT OR CAUSE TO BE PRESENTED ANY
FRAUDULENT CLAIM FOR THE PAYMENT OF A LOSS UNDER A CONTRACT OF INSURANCE;
AND (B) FRAUDULENTLY PREPARE, MAKE OR SUBSCRIBE ANY WRITING WITH INTENT TO
PRESENT OR USE THE SAME, OR TO ALLOW IT TO BE PRESENTED IN SUPPORT OF ANY
SUCH CLAIM, ANY PERSON WHO VIOLATES THIS SECTION SHALL BE PUNISHED BY A FINE
NOT EXCEEDING TWICE THE AMOUNT CLAIMED OR IMPRISONMENT OF TWO YEARS OR
BOTH AT THE DISCRETION OF THE COURT.

Sec. [251] 257. The receiver or the liquidator, as the case may be, designated under the
provisions of this title shall not be subject to any action, claim or demand by, or lability to,
any person in respect of anything done or omitted to be done in good faith in the exercise,
orin connection with the exercise, of the powers conferred on such receiver or liquidator.

Title 16
CONSOLIDATION AND MERGER OF INSURANCE COMPANIES:

Sec. [252] 258. Upon prior notice to the Commissioner, two or more domestic
insurance companies, acting through thelr respective boards of directors, may negotiate to
merge into a single corporation which shall be one of the constituent corporations, or
consolidate into a single corporation which shall be a new corporation to be formed by the
consolidation. A common agreement of the proposed merger or consolidation shall be
drawn up for submission to the stockholders or members of the constituent companies for
adoption and approved in accordance with the provisions of the respective by-laws of the
constituent companies and all existing faws that may be pertinent.

Sec. [253] 259. Such agreement shall include, aside from the proposed merger or

consolidation, provisions relative to the manner of transfer of assets to and assumption of
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liabilities by the absorbing or acquiring company from the absorbed or dissolved company
or companies; the proposed articles of merger or consolidation and by-laws of the surviving
or acquiring company; the corporate name to be adopted which should not be that of any
other existing company transacting similar business or one so similar as to be calculated to
mislead the public; the rights of the stockholders or members of the absorbed or dissolved
companies; date of effectivity of the merger or consolidation; and such particulars as may
be necessary to explain and make manifest the objects and purposes of the absorbing or
acquiring company.

sec. [254] 260. Upon execution of such agreement to merge or consolidate by and
between or among the boards of directors of the constituent companies, notice thereof
shall be mailed immediately to their policyholders and creditors. The company or companies
to be absorbed or dissolved shall discharge all its accrued liabilities; otherwise, such
liabilities shalt, with the consent of its creditors, be transferred to and assumed by the
absorbing or acquiring company, oF such liabilities be reinsured by the latter. In the case of
such policies as are subject to cancellation by the company or companies to be absorbed or
dissolved, same may be cancelled pursuant to the terms thereof in lieu of such transfer,
assumption, or reinsurance.

sec, {255] 261. Upon approval or adoption in the meetings of the stockholders or
members called for the purpose in each of the constituent companies of the agreement to
merge oF consolidate, all stockholders or members dissenting or objecting to merger or
consolidation shall be paid the value of their shares by the company concerned in
accordance with the by-laws thereof.

Sec. [256] 262. Upon the approval or adoption of the agreement to merge oF
consolidate by the stockholders or members of the constituent companies, the

corresponding articles of merger or of consolidation shall be duly executed by the
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presidents and attested by the corporate secretaries and shall bear the corporate seals of
the merging or consolidating companies setting forth:

(1) The plan of merger or the plan of consolidation;

(2) As to each corporation, the number of shares outstanding, or in case of mutual

corporations, the number of members; and

(3) As to each corporation, the number of shares or members voted for and against

such plan respectively. Thereafter, a certified copy of such articles of merger or

consolidation, together with a certificate of approval or adoption by the stockholders

or members of such articles of merger or consolidation, verified by affidavits of such

officers and under the seal of the constituent companies, shall be submitted to the

Commissioner, together with such other papers or documents which the

Commissioner may require, for his consideration.

sec. {257] 263. The articles of merger or of consolidation, signed and verified as
hereinabove required, shall be filed with the Securities and Exchange Commission for its
examination and approval.

sec, [258] 264. Upon receipt from the Securities and Exchange Commission of the
certificate of merger or of consolidation, the constituent companies shall surrender to the
Commissioner their respective certificates of authority to transact insurance business. The
absorbing or surviving company in case of merger, or the newly formed company in case of
consolidation, shall immediately file with the [c]Commissioner the corresponding
application for issuance of a new certificate of authority to transact insurance business,
together with a certified copy of the certificate of merger or of consolidation, and of the
certificate of increase of stocks, if there is any, issued by the Securities and Exchange

‘Commission.

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Sec. [259] 265. Nothing in this title shall be construed to enlarge the powers of the
absorbing or surviving company in case of merger, or the newly formed company in case of

consolidation, except those conferred by the certificate of merger or of consolidation and

the articles of merger of consolidation, or the amended articles of incorporation, as
registered with the Securities and Exchange Commission.

Sec. [260] 266. No director, officer, or stockholder of any such constituent
companies shall receive any fee, commission, compensation, or other valuable
consideration whatsoever, directly or indirectly, or in any manner aiding, promoting or
assisting in such merger or consolidation.

Sec, [261] 267. The merger of consolidation of companies under, this Code shail be
subject to the provisions of the Corporation [Law] CODE, and, in those cases specified in
Republic Act No. 5455, as amended, be further subject to the provisions of said law.

Title 17
MUTUALIZATION OF STOCK LIFE INSURANCE COMPANIES

Sec. [262] 268. Any domestic stock life insurance company doing business in the
Philippines may convert itself into an incorporated mutual Iife insurer. To that end it may
provide and carry out a plan for the acquisition of the outstanding shares of its capital stock
for the benefit of its policyholders, or any class or classes of its policyholders, by complying
with the requirements of this chapter.

Sec. [263] 269. Such plan shail include appropriate proceedings for amending the
insurer's articles of incorporation to give effect to the acquisition, by said insurer, for the
benefit of its policyholders or any class or classes thereof, of the outstanding shares of its
capital stock and the conversion of the insurer from a stock corporation into a non-stock

corporation for the benefit of its members. The members of such non-stock corporation

shall be the policyholders from time to time of the class or classes for whose bent it the

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stock of the insurer was acquired, and the policyholders of such other class or classes as

2 may be specified in such corporation's articles of incorporation as they may be amended

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from time to time. Such plan shall be:

(1) Adopted by a vote of a majority of the directors;

(2) Approved by the vote of the holders of at least a majority of the outstanding
shares at a special meeting of shareholders called for that purpose, or by the written
consent of such shareholders;

(3) Submitted to the Commissioner and approved by him in weiting;

(4) Approved by a majority vote of all the policyholders of the class or classes for
whose benefit the stock is to be acquired voting at an election by the policyholders
called for that purpose, subject to the provisions of section two hundred [sixty-five]
SEVENTY ONE, The terms "policyholder" or “policyholders” as used in this chapter
shall be deemed to mean the person or persons insured under an individual policy of
life insurance, or of health and accident insurance, or of any combination of life,
health and accident insurance. They shall also include the person or persons to
whom any annuity or pure endowment is presently or prospectively payable by the
terms of an individual annuity or pure endowment contract, except where the policy
or contract declares some other person to be the owner or holder thereof, in which
case such other person shall be deemed policyholder. In any case where a policy or
contract names two or more persons as joint insured, payees, owners or holders
thereof, the persons so named shall be deemed collectively to be one policyholder
for the purpose of this chapter. In any case where a policy or contract shall have
been assigned by assignment absolute on its face to an assignee other than the
insurer, and such assignment shall have been filed at the principal office of the

insurer at least thirty days prior to the date of any election or meeting referred to in
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this chapter, then such assignee shall be deemed at such election or meeting to be
the policyholder. For the purpose of this chapter the terms “policyholder” and
"policyholders" include the employer to whom, or a president, secretary or other

executive officer of any corporation or asso

on to which a master group policy
has been issued, but exclude the holders of certificates or policies issued under or in
connection with a master group policy. Beneficiaries under unmatured contracts
shall not as such be deemed to be policyholders;

(5) Flled with the Commissioner after having been approved as provided in this

section.

see. {264] 270. The Commissioner shall examine the plan submitted to him under
the provisions of sub-paragraph three of section two hundred sixty-three] NINE. He shalt
not approve such plan unless in his opinion the rights and interest of the Insurer, its
policyholders and shareholders are protected nor unless he is satisfied that the plan will be
fair and equitable in its operation.

Sec. [265] 271. The election prescribed by sub-paragraph four of section two
hundred sixty-{three] NINE shall be called by the board of directors or the president, and
every policyholder of the class or classes for whose henefit the stock is to be acquired,
Whose insurance shall have been in force for at least one year prior to such election shall
have one vote, regardless of the number of policies or amount of insurance he holds, and
regardless of whether such policies are policies of life insurance or policies of health and
accident insurance of annuity contracts. Notice of such election shall be given to
policyholders entitled to vote by mai from the principal office of such insurer at least thirty
days prior to the date set for such election, in a sealed envelope, postage prepaid,
addressed to each such policyholder at his last known address.

Voting shall be by one of the following methods:
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(2) At a meeting of such policyholders, held pursuant to such notice, by ballot in

person or by proxy.

(2) If not by the method described in the prece

ig sub-paragraph, then by mail
pursuant to a procedure and on forms to be prescribed by such plan.

Such election shall be conducted under the direction and supervision of three
impartial and disinterested inspectors appointed by the insurer and approved by the
Commissioner. In case any person appointed as inspector fails to appear at such meeting or
fails or refuses to act at such election, the vacancy, if accurring In advance of the convening
of the meeting or in advance of the opening of the mail vote, may be filled in the manner

prescribed for the appointment of inspectors and, if occurring at the meeting or during the

canvass of the mail vote, may be filled by the person acting as chairman of said meeting or
designated for that purpose in such plan. The decision, act or certificate of a majority of the
inspectors shall be effective in all respects as the decision, act or certificate of all, The
inspectors of election shall determine the number of policyholders, the voting power of
each, the policyholders represented at the meeting or voting by mail, the existence of @
quorum and the authenticity, validity and effect of proxies. They shall receivefs] votes, hear
and determine all challenges and questions in any way arising in connection with the right
to vote, count and tabulate all votes, determine the result, and do such other acts as are
proper to conduct the vote with faimess to all policyholders. The inspectors of election
shall, before commencing performance of their duties, subscribe to and file with the insurer
‘and with the Commissioner on oath that they, and each of them, will perform their duties
impartially, in good faith, to the best of their ability and as expeditiously as in practicable.
On the request of the insurer, the Commissioner, a policyholder or his proxy, the inspectors
shall make a report in writing of any challenge or question or matter determined by them

and execute a certificate of any fact found by them. They shall also certify the result of such
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vote to the insurer and to the Commissioner. Any report or certificate made by them shall
be prima facie evidence of facts stated therein. All necessary expenses incurred in
connection with such election shall be paid by the insurer. For the purpose of this section, @
quorum shall consist of five per centum of the policyholders of such insurer entitled to vote
at such election.

Sec. [266] 272. in carrying out any such plan, the insurer may acquire any shares of
its own stock by gift, bequest or purchase. Any shares 50 acquired shall, unless as a result of
such acquisition all of the shares of the insurer shall have been acquired, be acquired in
trust for the policyholders of the class or classes for whose benefit the plan provides that
the stock of the insurer shall be acquired as hereinafter provided. Such shares shall be
assigned and transferred on the books of such insurer and approved by the Commissioner.
such trustees shall hold such stock in trust until all of the outstanding shares of capital stock
of such insurer have been acquired, but for not longer than thirty years with such extensions
of not more than five years each as may be granted by the Commissioner. Such extensions
may be granted by the Commissioner ifthe plan so provides and if in his opinion the plan of
acquisition of all of such stock can be completed within a reasonable period. Such trustees
shall vote such stock at all corporate meetings at which stockholders have the right to vote.
When all the outstanding shares of capital stock of such insurer have been acquired, all said
shares shall be cancelled, the certificate of amendment of the insurer's articles of
incorporation giving effect thereto shall be filed in accordance with the provisions of the
Corporation [Law] CODE, and the insurer shall become @ non-stock corporation for the
profit of its members and such trust shall thereupon terminate. ‘Thereafter such corporation
shall be conducted for the mutual benefit, ratably, ofits policyholders of the class or classes
for whose benefit the stock was acquired and shall have power to issue non-assessable

policies on a reserve basis subject to all provisions of law applicable to Incorporated life
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insurers issuing non-assessable policies ona reserve basis. Policies so issued may be upon
the basis of full or partial participation therein as agreed between the insurer and the
insured.

Upon the termination of any such voting trust, either in accordance with Its terms or

as hereinabove pro

.d, such plan of mutualization shall terminate, unless theretofore
completed. Upon such termination, unless the plan of mutualization provides for the
disposition of the shares acquired by the insurer under such plan or for the disposition of

the proceeds thereof, the shares held by such trustees shall be disposed of

accordance
with an order of the court of competent jurisdiction in the judicial district in which is located
the principal office of such insurer, made upon a verified petition of the Commissioner.

Sec, [267] 273. Any such plan of mutualization may provide for the creation of @
voting trust under a trust agreement for the holding and voting by three or more trustees of
any portion or all of the shares of the insurer not required upon the adoption of such plan.
‘The voting trustees shall be named in accordance with such plan or, if no provision is rade
therein for the naming of such trustees, then by the insurer. The voting trust agreement and
voting trustees shall be subject to the approval of the Commissioner. Any or all of the
trustees under such voting trust agreement may be the same person or persons as any oF all
of the trustees referred to in section two hundred [sixty-six] SEVENTY TWO. Such voting
trust agreement shall provide that in the event of acquisition by the Insurer of any of the

shares of stock held thereunder in accordance with the provisions of the plan, such shares

so acquired together with the voting rights thereof shall be transferred by the trustees
named under the provisions of this section to the trustees named under the provisions of
section two hundred [sixty-six] SEVENTY TWO. Any voting trust agreement created pursuant
to the provisions of this section may be made Irrevocable for not longer than thirty years

and thereafter until the termination of the trust provided for in section two hundred [sixty
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six] SEVENTY TWO. The trust created pursuant to the provisions of thls section shall
terminate in any event upon termination of the trust provided for in section two hundred
[sixty-sie] SEVENTY TWO. Upon the termination of the trust created pursuant to the
provisions of this section, any shares held in such trust shall revert to the persons entitied
thereto by law.

Sec. [268] 274. Every payment for the acquisition of any shares of the capita stock of
such Insurer, the purchase price of which is not fixed by such plan, shall be subject to the
prior approval of the Commissioner. Neither such plan, nor any such payment, may be
approved by the Commisslorier unless he finds that the rights and interests of the insurer,
its policyholders, and shareholders are protected.

Sec. {269] 275. The trustees referred to in section two hundred [sixty-six] SEVENTY
‘TWO shall file with such insurer and with the Commissioner a verified acceptance of their
appointments and verified declarations that they will faithfully discharge their duties as such
trustees. All dividends and other sums received by sald trustees on the shares held by them,
after paying the necessary expenses of executing their trust, shall be immediately repaid to
such insurer for the benefit of all who are, or may become, policyholders of such insurance
of the class or classes for whose benefit the stock of such insurer was acquired and entitled
to participate in the profits thereof and shall be added to and become part of the assets of
such insurer.

Sec. {269-A] 276'if, at any time within the period provided in the plan for the
acquisition of the outstanding shares of stock of the insurer, ninety percent thereof has
already been acquired and transferred to the trustees under the plan, the insurer by a vote
of a majority of the directors may determine to make an offer, with the permission of the

Commissioner and subject to such requirement as he may specify, to acquire by purchase all

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of the shares not theretofore acquired under the plan, ata specified price which the insurer
considers to be their fair value as of the date of making such offer.

If the offer to acquire is permitted by the Commissioner, the insurer shall make a
written offer by registered mail to each shareholder whose shares have not theretofore
been acquired under the plan or otherwise, offering to acquire all his shares at such price if
accepted in writing within thirty days after the mailing of such offer. Any shareholder
accepting such offer, within the time therefor shall, within sixty days after his acceptance,
transfer to the insurer the certificates representing such shares and, upon doing so, shall be
paid by the insurer the amount. of such offer for his shares. Any share so acquired shall be
assigned and transferred to the trustees under the plan and held by them as shares
acquired pursuant to the plan.

Each shareholder who does not accept such offer to acquire his shares within the
time stated in such offer for acceptance thereof shall within fifteen days after the expiration
of such offer apply to the Secretary of Finance for determination of the fair value of his
shares as of the date of making such offer. The Secretary of Finance may himself, after due
notice and hearing, determine upon the evidence received the fair value of the shares as of
the date of making such offer, or appoint three impartial and disinterested persons to
appraise the falr value of such shares with such direction as he shall deem proper and
necessary to expedite the proceedings. Upon completion of the appraisal proceedings, the

appraisers shall file with the Secretary of Finance thei

report in writing stating the fair value
of such shares as of the date of the making of such offer and setting forth their findings in

support of such statement{:] (.) The appraisers shall furnish each party to the proceedings

copy of their appraisal report, and within ten days after receipt thereof any such party may
signify his objection, if any, to the report or move for the approval thereof. Upon the

expiration of the period of ten days referred to above, the report shall be set for hearing,
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after which the Secretary of Finance shail issue an order adopting, modifying or rejecting the

report in whole or in part or he may receive further evidence or may recommit it with
instructions. Whenever the Secretary of Finance shail determine in any manner, as
aforesaid, the fair value of such shares, he may also determine the terms of payment
thereof by the insurer. The expenses incidental to the proceedings including charges of the
appraisers, if any, shall be paid equally by the insurer and the shareholder.

The findings of the Secretary of Finance on all questions of fact raised at the hearing
of the application for determination of the fair value of such shares shall be conclusive upon
all parties to the proceedings. The order of the Secretary of Finance determining the fair
value of the shares and the terms of payment thereof shall have the force and effect of 2
judgment which shall be appealable on any question of law. Such order shall Become final
and executory fifteen days after receipt thereof by the parties to the proceedings.

Upon any such order becoming final and from which no appeal is pending, or when
the time to appeal therefrom has expired, each shareholder party to the proceedings shal
transfer his shares to the insurer and surrender to the said insurer the certificates
representing such shares and the insurer shall make payment therefor a5 provided in such
order. Any shares so acquired by the insurer shall be assigned and transferred to the
trustees and held by them as shares acquired pursuant to the plan.

‘any shareholder who does not apply to the Secretary of Finance in the manner and
within the time hereinbefore prescribed shall be deemed to have accepted the offer
referred to above, effective, however, upon the expiration of the time hereinabove
prescribed for making such application, and such shareholder's time for accepting such offer

shall, for that purpose only, be deemed to have been extended accordingly.

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Any offer to acquire shares made pursuant to this section shall, except as otherwise
provided herein, be irrevocable until all proceedings upon such offer have been completed
orall shares have otherwise been earlier acquired by the insurer.

Any shareholder who has expressly or impliedly accepted the plan or the offer to
acquire his shares not theretofore acquired under the plan, and any shareholder who has
rejected such plan or such offer and has applied, as aforesaid, to the Secretary of
Finance for a determination of the fair value of his shares subsequent to which an
agreement has been reached or a final order issued fixing such fair value but who fails to
surrender his certificates for cancellation upon payment of the amount to which he is
entitled, may be compelled to do so by an order of the Secretary of Finance for that
purpose and such order may provide that upon failure of such shareholder to
surrender such certificates for cancellation such order shall stand in lieu of such surrender
and cancellation. [(As amended by Presidential Decree No. 1280).]

Sec. {270} 277. Such insurer, after mutualization, shall be a continuation of the
original insurer, and such mutualization shall not affect such insurer's certificate of authority
nor existing suits, rights or contracts except as provided in said plan for the acquisition of
the outstanding shares of the capital stock of such insurer, approved as provided in this
chapter. Such insurer, after mutualization, shall exercise all the rights and powers and shall
perform all the duties conferred or imposed by law upon insurers writing the classes of
insurance written by it, and to protect rights and contracts existing prior to mutualization,
subject to the effect of said plan. The board of directors of such insurer, prior to
mutualization, may adopt amendments to its by-laws to take effect upon mutualization.

sec. (274] 278. (1) An annual meeting of members shall be held at ten o'clock in the
morning of the fourth Tuesday of March of each year at the principal office of the insurer,

unless a different time or place (be] IS provided in the by-laws.
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(2) Special meetings of the members, for any purpose or purposes whatsoever, may be
called at any time by the president, or by the board of directors, or by one or more
members holding not less than one-fifth of the voting power of such insurer, or by such
other officers or persons as the by-laws authorize.
(3) Notice of all meetings ‘of members whether annual or special shall be given in writing to
the members entitled to vote by the secretary, or an assistant secretary, or other person
charged with that duty, or if there be no such officer, or in case of his neglect or refusal, by
any director or member. At the option of the insurer such notice may be Imprinted on
premium notices of receipts ar on both.

Anotice may be given by such insurer to any member either personally, or by mail,
‘or other means of written communication, charges prepaid, addressed to such member at
his address appearing on the books of the Insurer, or given by him to the insurer for the
purpose of notice. if a member gives no address, notice shall be deemed to have been given
him if sent by mail or other means of written communication addressed to the place where
‘the principal office of the insurer is situated, or if published at least once in some newspaper
of general circulation in the place in which said office is located.

Notice of any meeting of members shall be sent to each member entitled thereto
not less than seven days before such meeting, unless the by-laws provide otherwise.

Notice of any meeting of members shall specify the place, the day and the hour of
the meeting and the general nature of the business to be transacted.

Notice of an annual meeting to be held at the time and place specified in sub-

paragraph one of this section shall be sufficiently given if published at least once in each of
four successive weeks in a newspaper of general circulation in the place in which the
principal office of such insurer is located, and if so published no other notice of such

meeting shall be required.
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{4) The presence in person or by proxy of five per centum of the members entitled to vote at
any meeting shall constitute @ quorum for the transaction of business, INCLUDING THE
AMENDMENT OF THE ARTICLES OF INCORPORATION AND/OR THE BY-LAWS unless
otherwise provided by the by-laws.

(5) Each such member shall have one vote at any meeting of members regardless of the

number of policies or the amount of insurance that such member holds and regardless of

whether such policies are policies of life insurance, or of health and accident insurance, or
both. Any member entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a written proxy executed by such person or his duly
authorized agent and filed with the secretary of such insurer.

(6) The directors of the insurer in office at the time the insurer is mutualized as provided in
this chapter shall continue in office until the first annual meeting of members. At the first
annual meeting of members and at each annual meeting thereafter directors shall be
elected by the members for the term or terms authorized by this chapter.

(7) The articles of incorporation or the (bay]BY-laws may provide that the directors may be
divided into two or more classes whose terms of office shall expire at different times, but no
terms shall continue longer than six years. In the absence of such provisions, each director,
except members of the board of directors at the time the insurer is mutualized, shall be
elected for a term of one year. All directors shall hold office for a term for which they are
elected and until their successors are elected and qualified. A director may, but need not be
a member or policyholder of the insurer of which he is acting as director. Vacancies in the
board of directors may be filed by a majority of the remaining directors, though less than @

quorum, and each director so elected shall hold office until the next annual meeting.

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(8) All insurers mutualized under the provisions of this chapter shall be subject to all other
applicable provisions of this Code [and of the Corporation Law]. THE PROVISIONS OF THE
CORPORATION CODE SHALL APPLY IN A SUPPLETORY MANNER.

Sec. [272] 279. The provisions of Commonwealth Act No. 83, otherwise known as the
Securities Act, as amended, shall not apply to any of the following:

(a) Shares of the capital stock of such insurer acquired as provided in section two

hundred [sixty-six] SEVENTY TWO and assigned and transferred to the trustees as is

provided in said section, and the assignment and transfer of said shares as so

provided;

(b) Any certificate or other instrument issued to a policyholder of such mutualized

insurer conferring or evidencing membership in such mutualized insurer or

conferring or evidencing such member's right to participate in the profits or share in

the assets of such mutualized insurer by the virtue of his membership therein, and

the issuance of such certificate or other instrument;

{¢) The plan for the acquisition of the outstanding shares of the capital stock of such

insurer authorized by the provisions of this chapter, the submission of said plan to

the Commissioner and to the policyholders of such insurer as provided in this

chapter, and the approval and carrying out of said plan or any part thereof In

accordance with the provisions of this chapter.

SEC. 280. A DOMESTIC MUTUAL LIFE INSURANCE COMPANY DOING BUSINESS IN
‘THE PHILIPPINES MAY CONVERT ITSELF INTO AN INCORPORATED STOCK LIFE INSURANCE
COMPANY BY. DEMUTUALIZATION. TO THAT END, IT MAY PROVIDE AND CARRY OUT A

PLAN FOR THE CONVERSION BY COMPLYING WITH THE REQUIREMENTS OF THIS TITLE.

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THE CONVERSION OF A DOMESTIC MUTUAL LIFE INSURANCE COMPANY TO AN
INCORPORATED STOCK LIFE INSURANCE COMPANY SHALL BE CARRIED OUT PURSUANT TO.
A CONVERSION PLAN DULY APPROVED BY THE COMMISSIONER.

THE COMMISSIONER SHALL PROMULGATE SUCH RULES AND REGULATIONS AS HE
OR SHE MAY DEEM NECESSARY TO CARRY OUT THE PROVISIONS OF THIS TITLE, AFTER
DUE CONSULTATION WITH REPRESENTATIVES OF THE INSURANCE INDUSTRY.

ALL CONVERTED INSURERS UNDER THE PROVISIONS OF THIS TITLE SHALL BE
SUBJECT TO ALL OTHER APPLICABLE PROVISIONS OF CODE. THE PROVISIONS OF THE
CORPORATION CODE SHALL APPLY IN A SUPPLETORY MANNER.

Title 18
WITHDRAWAL OF FOREIGN INSURANCE COMPANIES

Sec. [273] 281. A foreign insurance company doing business in the Philippines, upon
payment of the fee hereinafter prescribed and surrender to the Commissioner of its
certificate of authority, may, apply to withdraw from the Philippines. Such application shall
be duly executed in writing, accompanied by evidence of due authority for such execution,
properly acknowledged.

Sec. [274] 282 The Commissioner shall publish the application for withdrawal [daily
for a period of one week in two] ONCE A WEEK FOR THREE CONSECUTIVE WEEKS IN A
newspaper[s] of general circulation in the [City of Manita] PHILIPPINES. [, one in English and
the other in Pilipino] The expenses ‘of such publication shall be paid by the insurance
company filing such application.

Sec. [275] 283. Every foreign insurance company desiring to withdraw from the
Philippines shall, prior to such withdrawal, discharge its liabilities to policyholders and
creditors in this country. In case of its policies insuring residents of the Philippines, it shall

cause the primary liabilities under such policies to be reinsured and assumed by another
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insurance company authorized to transact business in the Philippines. In the case of such
policies as are subject to cancellation by the withdrawing company, it may cancel such
policies pursuant to the terms thereof in liew of such reinsurance and assumption of
liabilities.

Sec. [276] 284. The Commissioner shall [make] CAUSE an examination of the books
and records of the withdrawing company, and if, upon such examination, the Commissioner
finds that the insurer has no outstanding liabilities to [residents of the Philippines}
POLICYHOLDERS AND CREDITORS IN THE PHILIPPINES, AND NO POLICIES UNCANCELLED;
OR ITS PRIMARY LIABILITIES HAVE BEEN REINSURED OR ASSUMED BY ANOTHER
INSURANCE COMPANY AUTHORIZED TO TRANSACT BUSINESS IN THE PHILIPPINES, AS
REQUIRED IN THE PRECEDING SECTION, it shall cancel the withdrawing company's
certificate of authority, if unexpired, and shall permit the Insurer to withdraw. The cost and
expenses of all such examination shall be paid as prescribed in section [four hundred
seventeen} THIRTY THREE.

Sec. [277] 285. Upon the failure of such withdrawing insurance company or its
agents in the Philippines to pay the expenses of such publication within thirty days after the
presentation of the bill therefor, the Commissioner shall collect such fee from the deposit
furnished in accordance with the provisions of section one hundred ninety-[one] SEVEN.

sec. [278] 286. A foreign life insurance company that withdraws from the Philippines
shall be considered a “servicing insurance company” if ts business transactions are confined
to accepting periodic premium payments from, or granting policy loans and paying cash
surrender values of outstanding policies to, or reviving lapsed policies of, Philippine
policyholders, and such other related services.

Sec. [279] 287. No company shall act as 2 servicing insurance company until after it

shall have obtained a special certification of authority to act as such from the Commissioner
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upon application therefor and payment by the company of the fees hereinafter prescribed.
Such certificate shall expire on the last day of [June] DECEMBER of THE THIRD [each] year
and shalt be renewed [annually], while the company continues to service its policyholders,
and to comply with all the applicable provisions of law and regulations.
Title 19
PROFESSIONAL REINSURERS

Sec, [280] 288, Except as otherwise provided in this Code, no [person,] partnership,

association or corporation shall transact any business in the Philippines as 2 professional

reinsurer until it shall have obtained a certificate of authority for that purpose from the

Commissioner upon the application therefor and payment by such person, partners
association or corporation of the fees hereinafter prescribed. As used in this Code, the term
“professional reinsurer" shall mean any person, partnership, association or corporation that
transacts solely and exclusively reinsurance business in the Philippines.

‘The Commissioner may refuse to issue a certificate of authority to any such {person.]
partnership, association or corporation if in his judgment, such refusal will best promote
public interest. No such certificate of authority shall be granted to any such [person]
partnership, association or corporation unless and until the Commissioner shall have

satisfied himself by such examination as he may make and such evidence as he may require

that such [person,] partnership, association or corporation is qualified by the laws of the
Philippines to transact business therein as a professional reinsurer.

Before issuing such certificate of authority, [of] the Commissioner must be satisfied
that the name of the applicant is not that of any other known company transacting,

insurance or reinsurance business in the Philippines, or a name so similar as to be calculated

to mislead the public.

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such certificate of authority shall expire on DECEMBER 32 {the last day of June] of
THE THIRD [each] year and shall be renewed {annually} if such person, partnership,
association, or corporation is continuing to comply with provisions of this Code, or the
circulars, instructions, rulings, or decisions of the Commissioner and such other pertinent
law, rules and regulations.

Every such {person,] partnership, association, or corporation receiving such
certificate of authority shall be subject to the provisions of this Code and other related laws,
and to the Jurisdiction and supervision of the Commissioner.

Sec. [281] 289. Any [person,] partnership, association, or corporation authorized to
transact solely reinsurance business must have a [paid-up capital stock]
CAPITALIZATION of at least {ten million] TWO BILLION pesos PAID IN CASH  {twenty-
five per centum] of which AT LEAST FIFTY PER CENTUM CONSISTS OF PAID-UP CAPITAL
AND THE REMAINING PORTION THEREOF AS CONTRIBUTED SURPLUS, WHICH IN NO CASE
SHALL BE LESS THAN FOUR HUNDRED MILLION PESOS OR SUCH CAPITALIZATION AS MAY
BE DETERMINED BY THE SECRETARY OF FINANCE, UPON THE RECOMMENDATION OF THE
COMMISSIONER; PROVIDED, THAT TWENTY-FIVE PER CENTUM OF THE PAID-UP CAPITAL
must be invested in securities satisfactory to the Commissioner, consisting of bonds or
other evidences of debt of the Government of the Philippines or its political subdivisions or
instrumentalities, or of government-owned or controlled corporations and entities,
including the {Central Bank of the Philippines] BANGKO SENTRAL NG PILIPINAS, and
deposited with the Commissioner, and the remaining seventy-five per centum in such other
securities as may be allowed and permitted by the Commissioner, which securities shall at
all times be maintained free from any lien or encumbrance: Provided, THAT THE AFORESAID
CAPITAL REQUIREMENT IS WITHOUT PREJUDICE TO OTHER REQUIREMENTS TO BE

IMPOSED UNDER ANY RISK BASED CAPITAL METHOD AND OTHER SOLVENCY STANDARDS
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THAT MAY BE ADOPTED BY THE COMMISSIONER [That reinsurers already doing business as
such in the Philippines shall comply with the requirement of this section by increasing their
respective capital as herein provided not later than December thirty-one, nineteen hundred
eighty}: Provided,[Further] FINALLY, That the provisions of this chapter applicable to
insurance companies shall so far as practicable be likewise applicable to professional

reinsurers. [(As amended by Presidential Decree No. 1455).]

Title 20
HOLDING COMPANIES
Sec. [282} 290. As used in this title, the following terms shall have the respective
meanings hereinafter set forth unless the context shall otherwise require:
(a) “Person” means an individual, partnership, firm, association, corporation, trust,
any similar entity or any combination of the foregoing acting in concert;
{b) "contro, including the terms "controlling", "controlled by" and “under common
control with", means the possession directly or indirectly of the power te direct or
cause the direction of the management and policies of a person, whether through

the ownership of voting securities by a contract other than a commercial contract for

goods or non-management services or otherwise. Subject to section two hundred
[eight-four] NINETY TWO, control shall be presumed to exist if any person directly or
indirectly owns, controls or holds with the power to vote forty per centum or more
of the voting securities of any other person: Provided, That no person shall be
deemed to control another person solely by reason of his being an officer or director
of such other person;

(c) “Holding company" means any person who directly or indirectly controls any

authorized insurer;
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(4) “Controlled insurer" means an authorized insurer controlled directly or indirectly

bya holding company;

{e) "Controlled person” means any person, other than a controlled insurer, who is

controlled directly or indirectly by a holding company;

(f) "Holding company system" means a holding company together with its controlled

insurers and controlled persons.

Sec. [283] 281. Notwithstanding paragraph (b) of section two hundred [eighty-two]
NINETY, the Commissioner may determine after notice and opportunity to be heard, that a
person exercises directly or indirectly either alone or pursuant to an agreement with one or
more other persons such a controlling influence over the management or policies of an
authorized insurer as to make it necessary or appropriate in the public interest or for the
protection of policyholders or stockholders of the insurer that the person be deemed to
control the insurer.

Sec, [284] 292. The Commissioner may determine upon application that any person,
either alone or pursuant to agreement with one or more other persons, does not or will not

upon the taking of some proposed action control another person. The filing of an

application hereunder in good faith by any person shall relieve the applicant from any
obligation or liability imposed by this title with respect to the subject of the application,
except as contained in section {two} THREE hundred [ninety-four] TWO, until the
Commissioner has acted upon the application. Within thirty days or such further period as
he may prescribe, the Commissioner may prospectively revoke or modify his determination,
after notice and opportunity to be heard, whenever in his judgment revocation or
modification is consistent with his title.

Sec. [285] 293. Notwithstanding any other provisions of this tile, the following shall

not be deemed holding companies:
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(a) authorized insurers or reinsurers or their subsi

ies;

(b) the Government of the Philippines, or any political subdivision, agency or

instrumentality thereof, or any corporation which is wholly owned directly or

indirectly by one or more of the foregoing.

‘The Commissioner may conditionally or unconditionally exempt any specified person
or class of persons from any of the obligations or liabilities imposed under this title, if and to
the extent he finds the exemption necessary to appropriate in the public interest or not
adverse to the interests of policyholders or stockholders and consistent with the purposes
of this title.

Sec. [286] 294. (1) Every person who on the date this Code takes effect is a
controlled insurer and every person who theréafter becomes a controlled insurer, shall,

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sixty days thereafter, or within thirty days after becoming a controlled insurer,
whichever Is later, register with the Commissioner. Such registration shall be amended
within thirty days following any change in the identity of its holding company, The
Commissioner may grant one or more reasonable extensions of the time to register.

(2) Every registrant shall furnish the Commissioner with the following information
concerning its holding company: (a) a copy of its charter or articles of incorporation and its

by-laws, (b) the identities of its principal shareholders, officers, directors and controlled

in, and a

persons, and (c) information as to its capital structure and financial condi
description of its principal business activities.

Sec. [287] 295. Every controlled insurer shallfile with the Commissioner such reports
or matefial as he may direct for the purpose of disclosing information concerning the

operations of persons within the holding company system which may materially affect the

operations, management or financial condition of the insurer.

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Sec. [288] 296. Every holding company and every controlled person

in a holding,
company system shall be subject to examination by order of the Commissioner if he has
cause to believe that the operations of such persons may materially affect the operations,
management or financial condition of any controlled insurer with the system and that he is
unable to obtain relevant information from such controlled insurer. The grounds relied upon
by the Commissioner for such examination shall be stated in his order, which order shall be
subject to judicial review only at the instance of the person sought to be examined. Such
examination shall be confined to matters specified in the order. The cost of such
examination shall be assessed against the person examined and no portion thereof shall
thereafter be reimbursed to it directly or indirectly by the controlled insurer.

Sec. [289] 297. The Commissioner shall keep the contents of each report made

pursuant to this title and any informa

n obtained by him in connection therewith
confidential and shall not make the same public without the prior written consent of the
controlled insurer to which it pertains unless the Commissioner after notice and an
opportunity to be heard shall determine that the interests of policyholders, stockholders or
the public will be served by the publication thereof. In any action or proceeding by the
Commissioner against the person examined or any other person within the same holding
company system a report of such examination published by him shall be admissible as
evidence of the facts stated therein,

Sec. [290] 298. Transactions within a holding company system to which a controlled
insurer is a party shall be subject to the following:

(a) The terms shall be fair and equitable;

(b) Charges or fees for services performed shall be reasonable;

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(c) expenses incurred and payments received shall be allocated to the insurer on an
equitable basis in conformity with customary insurance accounting practices
consistently applied.

‘The books, accounts and records of each party to all such transactions shall be
maintained as to clearly and accurately disclose the nature and details of the transactions
including such accounting information as is necessary to support the reasonableness of the
charges or fees to the respective parties.

See. [291] 299. The prior written approval of the Commissioner shall be required for
the following transactions between a controlled insurer and any person in its holding
company system: sales, purchases, exchanges, loans or extensions of credit, or investments,
involving five per centum or more of the insurer's admitted assets as of the thirty-first day
of December next preceding.

Sec. [292] 300. The following transactions between a controlled insurer and any
person in Its holding company system may not be entered into unless the insurer has
notified the Commissioner in writing of its intention to enter into any such transaction at
least thirty days prior thereto, or such shorter period as he may permit, and he has not
disapproved it within such period:

(a) sales, purchases, exchanges, loans or extensions of credit, or investments,

involving more than one-half of one per centum but less than five per centum of the

insurer's admitted assets as of the thirty-first day of December next preceding;

(b) reinsurance treaties or agreements;

(c) rendering of services on a regular or systematic basis; or

(d) any material transaction, specified by regulation, which the Commissioner

determines may adversely affect the interest of the insurer's policyholders or

stockholders or of the public.
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Nothing herein contained shall be deemed to authorize or permit any transaction
which, in the case of a non-controlled insurer, would be otherwise contrary to law.

See. [293] 301. The Commissioner, in reviewing transactions pursuant to sections
two hundred ninety-[one] NINE and THREE [two] hundred [ninety-two], shall consider
whether the transactions comply with the standard set forth in section two hundred ninety
EIGHT and whether they may adversely affect the interests of policyholders. This section
shall not apply to transactions subject to other sections of this Code which impose notice or
approval requirements greater than those prescribed by this title.

Sec. [294] 302. (1) No person, other than an authorized insurer, shall acquire control

of any domestic insurer, whether by purchase of its securities or otherwise, except (a) after
twenty days written notice to its insurer or such shorter period as the Commissioner may
permit, of its intention to acquire control, and (b) with the prior written approval of the
Commissioner.
(2) The Commissioner shall disapprove the acquisition of control of a domestic insurer if he
determines, after notice and an opportunity to be heard, that such action is reasonably
necessary to protect the interest of the people of this country. The following shall be the
only factors to be considered by him in reaching the foregoing determination:

(a) the financial condition of the acquiring person or and the insurer;

(b) the trustworthiness of the acquiring person or any of its officers or directors;

(c)a plan for the proper and effective conduct of the insurer's operations;

(d) the source of the funds or assets for the acquisition;

(e) the fairness of any exchange of stock, assets, cash or other consideration for the

stock or assets to be received;

(f) whether the effect of the acquisition may be substantially to lessen competition in

any line of commerce in insurance or to tend to create a monopoly therein; and
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(g) whether the acquisition is likely to be hazardous or prejudicial to the insurer's
policyholders or stockholders.
{3) The following conditions affecting any controlled insurer, regardless of when such
control has been acquired, are violations of this title: (a) the controlling person or any of its
officers or directors have demonstrated untrustworthiness; and (b) the effect of retention of
control may be substantially to lessen competition in any line of commerce in insurance in
this country or to tend to create a monopoly therein. If, after notice and an opportunity to

be heard, the Commissioner determines that any of the foregoing violations exists, he shall

reduce his findings to writing and shall issue an order based thereon and cause the same to.
be served upon the insurer and upon all persons affected thereby directing any person
found to be in violation thereof to take appropriate action to cure such violation. Upon the
failure of any such person to comply with such order, section [two] THREE hundred [ninety-
eight] SIX shall become applicable.

(4) The Commissioner may require the submission of such information as he deems
necessary to determine whether any acquisition or retention of control complies with this
title and may require, as a condition of approval of such acquisition dr retention of control,
that all or any portion of such information be disclosed to the insurer's stockholders,

(5) Unless subject to registration under section two hundred [eighty-six] NINETY FOUR or
unless acquisition of its control is subject to paragraphs one and two hereof, every

urer shall [, on or before the first day of July, nineteen hundred seventy-five,

authorize:
or within thirty days after any event requiring notice hereunder, whichever is later,] notify
the Commissioner in writing of the identity of any person whom the insurer then knows or

has reason to believe controls or has taken any action, other than preliminary negotiations

or discussion, to acquire control of the insurer.

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Sec. [295] 303. (1) Notwithstanding the contro! of an authorized insurer by any

Person, the officers and directors of the insurer shall not thereby be relieved of any
obligation or liability to which they would otherwise be subject by law, and the insurer shall
be managed so as to assure its separate operating identity consistent with this title,
(2) Nothing herein shall preclude an authorized insurer from having or sharing a common
management or cooperative or joint use of personnel, property or services with one or
more other persons under arrangements meeting the standards of section two hundred
ninety EIGHT,

Sec. [296] 304, To the extent that any information or material is set forth in forms or
other matter on file with any government agency or in a registration form filed with the
‘Commissioner by another person within the same holding company system, the controlled
insurer may comply with the registration or reporting requirements of this title by referring
in its registration form or report to such other filed matter and attaching a copy thereof
Certified by the insurer as a true and complete copy, to such registration form or report or, if
such other filed matter is on file with the Commissioner, incorporating such matter by
reference.

Sec. [297] 305. No holding company or controlled person shall directly or indirectly
or through another person do or cause to be done for or in behalf of the controlled insurer
any act Intended to affect the insurance operations of the insurer which, if done by the
insurer, would violate any provision ofthis Code.

Sec. [298] 306. In addition to any other penalty provided by law, the Commissioner
‘may, upon the willful failure of any person within a holding company system to comply with
this title or any regulation or order promulgated hereunder:

{a) proceed under title fourteen or title fifteen, Chapter Ill, of this Code with respect

to insurer within the holding company system; or
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(b) revoke or refuse to renew the authority to do business in this country of an

insurer within the holding company system or refuse to issue such authority to any

other insurer in the system; or

(c) direct that, in addition to any other penalty provided by law, such person forfeit

to the people of this country a sum not LESS THAN [exceeding] five THOUSAND

{hundred] pesos for a first violation and TWENTY FIVE [two} thousand [five hundred]

esos for any subsequent violation. An additional sum not LESS THAN TWENTY FIVE

{exceeding two] thousand [five hundred] pesos shall be imposed for each month

during which any such violation shail continue.

Chapter IV.
SALES AGENCIES AND TECHNICAL SERVICES
Title 1
INSURANCE AGENTS AND INSURANCE BROKERS

Sec. [299] 307. No insurance company doing business in the Philippines, nor any
agent thereof, shall pay any commission or other compensation to any person for services
in obtaining insurance, unless such person shall have first procured from the Commissioner
a license to act as an insurance agent of such company or as an insurance broker as
hereinafter provided,
No person shall act as an insurance agent or as an insurance broker in the solicitation
or procurement of applications for insurance, or receive for services in obtaining insurance,
any commission or other compensation from any insurance company doing business in the
Philippines, or any agent thereof, without first procuring a license to act from the
Commissioner, which must be renewed [annually on the first day of January, or within six
months thereafter] EVERY THREE (3) YEARS ON THE BIRTH MONTH OF THE INSURANCE

AGENT AND EVERY THREE (3) YEARS THEREAFTER, Such license shall be issued by the
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Commissioner only upon the written application of the person desiring it, such application it
for a license to act as insurance agent, being approved and countersigned by the company
Such person desires to represent, and shall be upon a form prescribed by the Commissioner
Biving such information as he may require, and upon payment of thie corresponding fee
hereinafter prescribed. The Commissioner shall satisfy himself as to competence and
trustworthiness of the applicant and shall have the right to refuse to issue or renew and to
Suspend or revoke any such license in his discretion. No such license shall be valid, AFTER

THE DATE OF ITS EXPIRATION ON THE THIRD YEAR [after the thirtieth day of June of the

year] following its issuance unless OTHERWISE [it is] renewed. [(As amended by
Presidential Decree No. 1455).]

LICENSES MAY Be RENEWED IN THE CASE OF THE COMPANY REPRESENTED BY
SUCH AGENTS, AND IN THE CASE OF INSURANCE BROKERS, UPON THE APPLICATION OF
THE SAID BROKERS, THEMSELVES.

SEC. 307-A. THE PROVISIONS OF SECTIONS 307 AND 308 SHALL APPLY TO AN
EMPLOYEE WHO SHALL BE ENGAGED TO SELL INSURANCE PRODUCTS BY (AN INSURANCE
COMPANY.

SINCE THE INSURANCE INDUSTRY IS IMBUED WITH PUBLIC INTEREST, THE
INSURANCE COMPANIES UPON APPROVAL OF THE COMMISSIONER MAY EXERCISE WIDE
LATITUDE IN SUPERVISING THE ACTIVITIES OF THEIR INSURANCE AGENTS TO ENSURE THE
PROTECTION OF THE INSURING PUBLIC.

Sec. [300] 308. Any person who for compensation solicits or obtains insurance on
behalf of any insurance company or transmits for a person other than himself an application
for a policy or contract of insurance to or from such company or offers or assumes to act in

the negotiating of such insurance shall be an insurance agent within the intent of this

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section and shall thereby become liable to all the duties, requirements, liabilities and
penalties to which an insurance agent is subject.

‘Sec. [301] 309. Any person who for any compensation, commission or other thing of
value acts or aids in any manner in soliciting, negotiating or procuring the making of any
insurance contract or in placing risk or taking out insurance, on behalf of an insured other
than himself, shall be an insurance broker within the intent of this Code, and shall thereby
become liable to all the duties, requirements, liabilities and penalties to which an insurance
broker is subject.

Sec. [302] 310. Every applicant for an insurance broker's license shall file with the
application and shall thereafter maintain in force while so licensed, a bond in favor of the
people of the Republic of the Philippines executed by a company authorized to become
surety upon official recognizances, stipulations, bonds and undertakings. The bond shall be
in such amount as may be fixed by the Commissioner, but in no case less than [one] FIVE
hundred thousand pesos, and shall be conditioned upon full accounting and due payment to
the person entitled thereto of funds coming into the broker's possession through insurance
transactions under license. The bond shail remain in force until released by the
Commissioner, or until cancelled by the surety. Without prejudice to any liability previously
incurred thereunder, the surety may cancel the bond on thirty days advance written notice
to both the broker and the Commissioner.

Upon approval of the application, the applicant must also file two errors and
‘omissions (professional liability or professional indemnity) policies issued separately by two
insurance companies authorized to do business in the Philippines, satisfactory to the
‘Commissioner to indemnify the applicant against any claim or claims for breach of duty as
insurance broker which may be made against him by reason of any negligent act, error or

omission, whenever or wherever committed or alleged to have been committed, on the part
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of the applicant or any person who has been, is now, or may hereafter during the
Subsistence of the policies be employed by the said applicant in his capacity as insurance
broker, provided that the filing of any claim or claims under one of such policies shall
Preclude the filing of the said claim or claims under the other policy. The said policies shall
be in such amounts as may be prescribed by the [Insurance] Commissioner, depending upon
the size or amount of the broking business of the applicant, but in no case shall the amount
of each of such policies be less than five hundred thousand pesos. [(As amended by
Presidential Decree No. 1455).]

Sec, [303] 311. The Commissioner shall, in order to determine the competence of
every applicant have the kind of license applied for, require such applicant to submit to a
written examination and to pass the same to the satisfaction of the Commissioner. (Such
examination shall be held at such times and places as the Commissioner shall from time to
time determine] THE COMMISSIONER MAY DELEGATE OR AUTHORIZE THE
ADMINISTRATION OF THE EXAMINATION TO AN INDEPENDENT ORGANIZATION, SUBJECT

‘TO SUCH CONDITIONS THAT THE COMMISSIONER MAY PROVIDE.

Sec. [304] 312. An applicant for the written examination mentioned in the preceding
section must be of good moral character and must not have been convicted of any crime
involving moral turpitude. He must satisfactorily show to the Commissioner that he has
been trained in the kind of insurance contemplated in the license applied for. Such
examination may be waived if it is shown to the satisfaction of the Commissioner that the
applicant has undergone extensive education and/or training in insurance.

Sec. [305] 313. An application for the issuance or renewal of a license to act as an

insurance agent or insurance broker may be refused, or such license, if already issued or

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renewed, shall be suspended or revoked if the Commissioner finds that the applicant for, or
holder of, such license:

(a) has willfully violated any provision of this Code; or

(b) has intentionally made a material misstatement in the application to qualify for

such license; or

{c) has obtained or attempted to obtain a license by fraud or misrepresentation; or

(4) has been guilty of fraudulent or dishonest practices; or

(e) has misappropriated or converted to his own use or illegally withheld moneys

required to be.held in a fiduciary capacity;

(f has not demonstrated trustworthiness and competence to transact business as an

insurance agent or insurance broker in such manner as to safeguard the public; or

(g) has materially misrepresented the terms and conditions of policies or contracts of

insurance which he seeks to sell or has sold; or

(h) has failed to pass the written examination prescribed, if not otherwise exempt

from taking the same.

In addition to the foregoing causes, no license to act as insurance agent or insurance broker
shall be renewed if the holder thereof has not been actively engaged as such agent or
broker in accordance with such rules as the Commissioner may prescribe. [(As amended by
Presidential Decree No. 1814).}

Sec. [306] 314. The premium, or any portion thereof, which an insurance agent or
insurance broker collects from an insured and which is to be paid to an insurance company
because of the assumption of liability through the issuance of policies or contracts of
insurance, shall be held by the agent or broker in a fiduciary capacity and shall not be

misappropriated or converted to his own use or illegally withheld by the agent or broker.

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Any insurance company which delivers to an insurance agent or insurance broker a

'y of contract of insurance shall be deemed to have authorized such agent or broker to

receive on

behalf payment of any premium which is due on such policy or contract of
insurance at the time of its issuance or delivery or which becomes due thereon.

See. [307] 315. Any provision of existing laws to the contrary notwithstanding, no
person shail, within the Philippines, sell or offer for sale a variable contract or do or perform
any act or thing in the sale, negotiation, making or consummating of any variable contract
other than for himself unless such person shall have a valid and current license from the
Commissioner authorizing such person to act as a variable contract agent. No such license
shall be issued unless and until the Commissioner is satisfied, after examination that such
Person is by training, knowledge, ability and character-qualified to act as such agent. Any
such license may be withdrawn and cancelled by the Commissioner after notice and hearing,
if he shall find that the holder thereof does not then have the qualifications required for the
issuance of such license.

Sec. [308] 316. It Shall be unlawful for any person, company or corporation in the

ippines to act as general agent of any insurance company unless he is empowered by a

written power of attorney duly executed by such insurance company, and registered with
the Commissioner to receive notices, summons and legal processes for and in behalf of the

t

insurance company concerned in connection with actions or other legal proceedings agai
said insurance company. It shall be the duty of said general agent to notify the
Commissioner of his post office address in the Philippines, or any change thereof. Notices,
summons, or processes of any kind sent by registered mail to the last registered address of

such general agent of the company concerned or to the Commissioner shall be sufficient

service and deemed as if served on the insurance company itself.

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Sec. [309] 317. Except as otherwise provided by law or treaty, it shall be unlawful for

any Person, partnership, association or corporation in the Philippines, for himself or itself, or
for some other person, partnership, association of corporation, either to procure, receive or
forward applications of insurance in, or to issue or to deliver or accept policies or contracts
of insurance of or for, any insurance company or companies not authorized to transact
business in the Philippines, covering risks, life or nonife, situated in the Philippines; and any
Such person, partnership, association or corporation violating the provisions of this section
shall be deemed guilty of a penal offense, and upon conviction thereof, shall for each such
offense be punished by a fine of {ten] TWO HUNDRED FIFTY thousand pesos, or
imprisonment of six months, or both at the discretion of the court: Provided, That the
provisions of this section shall not apply to reinsurance.
Title 2
REINSURANCE BROKERS

Sec. [310] 318. Except as provided in the next succeeding title, no person shall act as

reinsurance broker in the Philippines unless he is authorized as such by the Commissioner.
A reinsurance broker is one who, for compensation, not being a duly authorized agent,
‘employee or officer of an insurer in which any reinsurance is effected, [act] ACTS or aids in
any manner in negotiating contracts of reinsurance, or placing risks of effecting reinsurance,
for any insurance company authorized to do business in the Philippines.

See. (312] 319. Upon application and payment of the corresponding fee hereinafter
prescribed, and the filing of two errors and omissions (professional liability or professional
indemnity) policies hereinafter described, a person may, if found qualified, be issued a
license to act as reinsurance broker by the Commissioner. No such license shall be valid
after DECEMBER 31 [the thirtieth day of June] of the THIRD year following its issuance

unless it is renewed. [(As amended by Presidential Decree No. 1455).]
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The errors and omissions (professional liability or professional indemnity) policies
mentioned above shall indemnify the applicant against any claim or claims for breach of
duty as reinsurance broker which may be made against him by reason of any negligent act,
error or omission, whenever or wherever committed or alleged to have been committed, on
the part of the applicant or any person who has been, is now, or may hereafter during the
subsistence of the policies be employed by the said applicant in his capacity as reinsurance
broker; Provided, That the filing of any claim or claims under one of such policies shall
preclude the filing of the said claim or claims under the other policy. The said policies shall
be issued separately by two insurance companies authorized to do business in the
Philippines and shall be in such amounts as may be prescribed by the Insurance
Commissioner, depending upon the size or amount of the broking business of the applicant,
but in no case shall the amount of each of such policies be less than five hundred thousand
pesos. [(As amended by Presidential Decree No. 1455),]

Sec. [312] 320. The Commissioner may recall, suspend or revoke the license granted
to a reinsurance broker for violation of any existing law, rule and regulation, or any
provision of this Cade after due notice and hearing.

Title 3
RESIDENT AGENTS

Sec, [313] 321. No person shall act as resident agent, as hereinafter defined, unless
he is registered as such with the Commissioner.

Sec. [314] 322. The term "resident agent”, as used in this title, is one duly appointed
by a foreign insurer or broker not authorized to do business in the Philippines to receive in
its behalf notices, summons and legal processes in connection with actions or other legal

proceedings against such foreign insurer or broker.

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Sec. [315] 323. The application for a certificate of registration as resident agent filed
with the Commissioner must be accompanied with [:

(a)] a copy of the power of attorney, duly notarized and authenticated by the

Philippine Consul in the place where such foreign insurer or broker is domiciled,

empowering the applicant to act as resident agent and to receive notices, summons
and legal processes for and in behalf of such foreign insurer or broker in connection
with any action or legal proceeding against such foreign insurer or broker(;](.) fand
{b) 2 copy of the corresponding certificate issued by the Board of Investments as
required under Section 4 of Republic Act No. 5455, if such foreign insurer or broker is
not otherwise exempt from such requirement.]

Sec. [316] 324. It shall be the duty of such resident agent to notify immediately the
Commissioner of any change of his office address,

Sec. [317] 325. A certificate of registration issued to a resident agent shall expire on
the thirtieth day of [June] DECEMBER of the THIRD year following its issuance unless it is
renewed.

The Commissioner may, after due notice and hearing, recall or cancel the certificate of
registration issued to a resident agent for violation of any existing law, rule or regulation, or

any provision of this Code. [(As amended by Presidential Decree No. 1455).]

Title 4
NON-LIFE COMPANY UNDERWRITER
Sec. [318] 326. No person shall act, and no company shall employ any person, as
non-life company underwriter, whose duty and responsibility it shall be to select, evaluate

and accept risks for, and to determine the terms and conditions, including those pertaining

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to amounts of retentions, under which such risks are to be accepted by the company, unless
such underwriter is registered as such with the Commissioner,

Sec, [319] 327. Every non-life insurance company doing business in the PI

pines
‘must maintain at all times a register of risks accepted and a claims register for each line of
risks engaged in by such non-life insurance company with such entries therein as are now or
as may hereafter be required by the Commissioner, and it shall be the responsibility of the
underwriter on the particular line or risk involved to see to it that the said registers are well
maintained and kept, and that all entries therein are properly and correctly recorded. Such
registers shall be open to inspection and examination of duly authorized representative of
the Commissioner at all times during business hours,

Sec. [320] 328. No person shall be registered with the Commissioner, unless such
person shall be at least twenty-one years of age on the date of such registration; a resident
of the Philippines; of good moral character and with no conviction of any crime involving
moral turpitude; has had at the’ time such registration is made at least two years of
underwriting work in the particular line or risk involved; and has passed such qualifying
written examination that the Commissioner shall conduct at such time and in such place as
he may decide to hold for applicants desiring to act as underwriters.

Such examination shall not be required of any person who has served as non-life
company underwriter for a period of at least five years, if the Commissioner is satisfied of
the applicant's competence as shown by the results of his underwriting work in the non-life
Insurance company or companies that employed him in that capacity. The minimum
underwriting experience herein required may be reduced or waived if it is shown to the
satisfaction of the Commissioner that the non-life company underwriter has undergone

extensive education and/or training in insurance.

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Sec, [321] 329, Any applicant who misrepresents or omits any material fact in his
application for registration as a non-life company underwriter, or commits any dishonest act
In taking or in connection with the qualifying written examination for underwriters, shall be
barred from being registered as such non-life company underwriter and, if already

registered, his registration shall be cancelled and the certificate of registration issued in his

favor shall be recalled immediately by the Commissioner.

In the event that the certificate of authority of a non-life insurance company to
transact business is suspended or revoked due to business failure arising largely from the
imprudent and injudicious acceptance of risks by the underwriter concerned, the
registration of such underwriter shall likewise be cancelled and his certificate of registration
shall be recalled by the Commissioner, and no similar certificate shall thereafter be issued in
his favor.

Sec. [322] 330. No certificate of registration issued to an underwriter shall be valid
after DECEMBER 31 [the thirtieth day of June] of the THIRD year following its issuance
unless it is renewed.

The Commissioner may, after due notice and hearing, also suspend or cancel such
certificate for violation of existing laws, rules and regulations or of any provisions of this

Code. {(As amended by Presidential Decree No. 1455).]

Titles

ADJUSTERS
Sec. [323] 331. No person, ‘partnership, association, or corporation shail act as an
adjuster, as hereinafter defined, unless authorized so to act by virtue of a license issued or

renewed by the Commissioner pursuant to the provisions of this Code: Provided, That in the

case of a natural person, he must be a Filipino citizen and in the case of a partnership,
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association or corporation, at least sixty per centum of its capital must be owned by citizens
of the Philippines.

Sec. [324] 332. An adjuster may be an independent adjuster or a public adjuster,

The term “independent adjuster" means any person, partnership, association or
corporation which, for money, commission or any other thing of value, acts for or on behalf
of an insurer in the adjusting of claims arising under insurance contracts or policies issued by
such insurer.

The term "public adjuster" means any person, partnership, association or
corporation which, for money, commission or any other thing of value, acts on behalf of an

insured in negotiating for, or effecting, the settlement of a claim or claims of the said

insured arising under insurance contracts or policies, or which advertises for or solicit
employment as an adjuster of such claims.

Sec. [325] 333. For every line of insurance claim adjustment, adjusters shall be
licensed either as independent adjusters or as public adjusters. No adjuster shall act on
behalf of an insurer unless said adjuster is licensed as an independent adjuster; and no
adjuster shall act on behalf of an insured unless said adjuster is licensed as a public adjuster:
Provided, however, That when a firm or person has been licensed as public adjuster, he shall
not be granted another license as independent adjuster and vice versa.

No license, however, shall be required of any company adjuster who is a salaried
employee of an insurance company for the adjustment of claims filed under policies issued
by such insurance company.

Sec. [326] 334. Such license or any renewal thereof may be issued by the

Commissioner upon written application filed by the person interested on the form or forms

prescribed by the Commissioner, which shall contain such information as he may req

and upon payment of the corresponding fee hereinafter prescribed.
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Sec. [327] 335. The Commissioner shall conduct, at such times, and in such places as
he may decide to hold, written examinations to determine the competence and ability of
applicants desiring to act as adjuster of insurance claims,

Sec. [328] 336. [Every] NO adjuster's license issued hereunder shall be valid AFTER
DECEMBER 31 [until after the thirtieth day of June] of the THIRD year following the issuance
of such license unless itis renewed. {(As amended by Presidential Decree No. 1455).]

Sec, [329] 337. Nothing contained in this title shall apply to any duly licensed
attorney-at-law who acts or aids in adjusting insurance claims as an incident to the practice
of his profession and who does not advertise himself as an adjuster.

Sec, [330] 338. The Commissioner may suspend or revoke any adjuster's license if,
after giving notice and hearing to the adjuster concerned, the Commissioner finds that the
said adjuster:

(1) has violated any provision of this Code and of the circulars, rulings and

instructions of the Commissioner or has violated any law in the course of his dealings

as an adjuster; or

(2) has made a material misstatement in the application for such license; or

(3) has been guilty of fraudulent or dishonest practices; or

(4) has demonstrated his incompetence or untrustworthiness to act as adjuster; or

(5) has made patently unjust valuation of loss; or

(6) has failed to make a report of the adjustment he proposed within sixty days from

the date of the filing of the claim by the insured with the insurer, unless prevented

so to do by reasons beyond his control; or

(7) has refused to allow an examination into his affairs or method of doing business

as hereinafter provided:

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Sec. [331] 339. Every adjuster shall submit to the Commissioner a quarterly report of
all losses which are the subject of adjustment effected by him during each month in the
form prescribed by the Commissioner. The report shall be filed within one month after the
end of each quarter,

Sec, [382] 340. Every adjuster shall keep his or its books, records, reports, accounts,
and vouchers in such manner that the Commissioner or his duly authorized representatives
may readily verify the quarterly reports of the said adjuster and ascertain whether the said
adjuster has complied with the provisions of law or regulations obligatory upon him or
whether the method of doing business of the said adjuster has been fair, just and honest.

Sec. [333] 341. The Commissioner shall, at least once a year and whenever he
considers the public interest so demands, cause an examination to be made into the affairs
and method of doing business of every adjuster.

Sec. [384] 342, Any violation of any provision of this title shall be punished by a fine
of not LESS (more) than ten thousand pesos, or by imprisonment in the discretion of the
court; Provided, That, in case of a partnership, association or corporation, the said penalty

shall be imposed upon the partner, president, manager, managing director, director or

person in charge of its business or responsible for the

Title 6
ACTUARIES:

See. [335] 343. No life insurance company shall be licensed to do business in the
Philippines nor shall any life insurance 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 Commissioner who shall, during his tenure of office, be directly

responsible for the direction and supervision of all actuarial work connected with or that
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may be involved in the business ofthe insurance company. THE COMMISSIONER MAY ALSO
REQUIRE NON-LIFE INSURANCE COMPANIES TO ENGAGE THE SERVICES OF AN
ACCREDITED ACTUARY, IN ACCORDANCE WITH THE RULES AND REGULATIONS THAT THE
COMMISSIONER WILL FORMULATE,

See: [336] 344. Any person may be officially accredited by the Commissioner to act
38 any actuary in any life insurance company, NON-LIFE INSURANCE COMPANY or in any
mutual benefit association authorized to do business in the Philippines upon application
therefor and the payment of the corresponding fee hereinafter prescribed: Provided, That:
(2) he is a fellow of good standing of the Actuarial Society of the Philippines at the time of
his appointment and remains in such good standing during the tenure of his engagement; or
(2) in the case of ane who is not a fellow of the Actuarial Society of the Philippines, he meets
all the requirements of the said Society for accreditation as a fellow of the Society, and has
been given permission by the pertinent government authorities in the Philippines to render
services in the Philippines, in the event that he is not a citizen of the Philippines.

No certificate of registration issued under this title shall be Valid after DECEMBER 31.
{the thirtieth day of June] of the THIRD year following its issuance unless itis renewed. {(As
amended by Presidential Decree No. 1455).}

Sec. [337] 345. The following documents, which are from time to time submitted to
the Commissioner by a life insurance company authorized to do business in the Philippines,
shall be duly certified by an accredited actuary employed by such company:

1. Policy reserves, CLAIMS OR LOSS RESERVES and net due and deferred premiums.

2, Statements of bases and net premiums, loading for gross premiums, and on non-

forfeiture values and reserves, when applying for approval of gross premiums,

reserves and non-forfeiture values.

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3. Policies of insurance under any plan submitted to the Commissioner as required

by law.

4. Annual statements and valuation reports submitted to the Commissioner as

required by law,

5. Financial projection showing the probable income and outgo and reserve

requirements, enumerating the actuarial assumptions and bases of projections.

6. Valuation of annuity funds or retirement plans.

THE COMMISSIONER MAY ALSO. REQUIRE NON-LIFE INSURANCE COMPANIES TO
SUBMIT, FROM TIME TO TIME, SIMILAR DOCUMENTS WHICH SHALL BE DULY CERTIFIED BY
AN ACCREDITED ACTUARY EMPLOYED BY SUCH COMPANY.

Any life insurance company authorized to do business in the Philippines may employ
any person who is not officially accredited under either of the qualifications for any kind of
actuarial work, provided that he shall not, at any time, have the authority to certify to the
correctness of the foregoing documents,

Sec. [338] 346. No accredited actuary shall serve more than one client or employer
at the same time. However, one already in the employ of an insurance company may be
allowed by the Commissioner to serve a mutual benefit association or any other insurance
company, provided the following conditions are first complied with: (a) that the request to
engage his services by the other employer is in writing; (b) that his present employer

copies of said

acquiesced to it in writing; and (c) that he furnishes the Commissioner
request and acquiescence.

SEC, 347. THE REGISTRATION OF THE ACTUARY MAY BE SUSPENDED OR
REVOKED BY THE COMMISSIONER AFTER DUE NOTICE AND HEARING BASED ON THE

FOLLOWING GROUNDS:

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1. FAILURE TO ADEQUATELY PERFORM HIS REQUIRED FUNCTIONS AND DUTIES
UNDER THIS CODE;
2, FAILURE TO DISCLOSE CONFLICT OF INTEREST;
3. FAILURE TO COMPLY WITH THE CODE OF CONDUCT OF THE ACTUARIAL SOCIETY OF
THE PHILIPPINES; OR
4, SUCH OTHER GROUNDS THAT MAY BE DETERMINED BY THE COMMISSIONER.
NO ACTUARY ENGAGED BY A LIFE INSURANCE COMPANY SHALL BE AT THE SAME TIME A
MAJORITY OR CONTROLLING STOCKHOLDER OR SERVE AS A CHIEF EXECUTIVE OFFICER OF
THE COMPANY OR ANY POSITION THAT THE COMMISSIONER MAY DETERMINE TO HAVE
AN INHERENT CONFLICT OF INTEREST TO THE POSITION OF AN ACTUARY.
Title 7
RATING ORGANIZATION AND RATE MAKING
Sec. [339] 348, Every organization which now exists or which may hereafter be
formed for the purpose of making rates to be used by more than one insurance company
authorized to do business in the Philippines shall be known as a “rating organization." The
term “rate” as used in this title shall generally mean the ratio of the premium to the amount
insured and shail include, as the context may require, either the consideration to be paid or
charged for insurance contracts, including surety bonds, or the elements and factors
forming the basis for the determination or application of the same, or both.
Sec. [340] 349, Every rating organization which now exists or which may hereafter be
formed shall be subject to the provisions of this title.
Sec. [341] 350. No rating organization hereafter formed shall commence rate-
making operations until it shall.have obtained a license from the Commissioner. Before

obtaining such license, such rating organization shall file with the Commissioner a notice of

its intention to commence rate-making operations, a copy of its constitution, articles of
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agreement or association, or of incorporation, and its by-laws, alist of insurance companies
that have agreed to become members or subscribers, and such other information
concerning such rating organization and its operations as may be required by the
Commissioner. If the Commissioner finds that the organization has complied with the
Provisions of law and that it has a sufficient number of members or subscribers and is
otherwise qualified to function as a rating organization, the Commissioner may issue a
\icense to such rating organization authorizing it to make rates for the kinds of insurance or
subdivisions thereof as may be specified in such license. No license issued to 2 rating
organization shall be valid after DECEMBER 31 [the thirtieth day of June] of the THIRD year
following its issuance unless it is renewed, No rating organization which now exists and is
not licensed pursuant to this section shall continue rate-making operations until it shall have
obtained from the Commissioner a license which he may issue if satisfied that such
organization is complying with the provisions af this title. Every rating organization shall
notify the Commissioner promptly of every change in (1) its constitution, its articles of
‘agreement or association or its certificate of incorporation, and its by-laws rules and
regulations governing the conduct of its business, and (2) its list of members and
subscribers.

‘A "member" means an insurer who participates in or is entitled to participate in the
management of a rating organization.

A “subscriber” means an insurer which is furnished at its request with rates and
rating manuals by a rating organization of which it is not a member. [(As amended by
Presidential Decree No. 1455).]

Sec. [342] 351. Each rating organization shall furnish its rating service -without
discrimination to all of its members and subscribers, and shall, subject to reasonable rules

and regulations, permit any insurance company doing business in the Philippines, not
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admitted to membership, to become a subscriber to its rating services for any kind of
insurance or subdivisions thereof. Notice of proposed changes in such rules and regulations
shall be given to subscribers, The reasonableness of any rule or regulation in its application
to subscribers, or the refusal of any rating organization to admit an insurance company as a
Subscriber, shall, at the request of any subscriber or any such insurance company, be
reviewed by the Commissioner at a hearing held upon at least ten days' written notice to
such rating organization and to such subscriber or insurance company. The Commissioner
may, after such hearing, issue an appropriate order.

Sec. [343] 352. No rating organization or any other association shail refuse to do
business with, or prohibit or prevent the payment of commissions to, any person licensed as
an insurance broker pursuant to the provisions of title one of this chapter.

Sec, [344] 353. Rating organization shall be subject to examination by the
Commissioner, as often as he may deem such examination expedient, pursuant to the
provisions of this Code applicable to the examination of insurance companies. He shall
cause such an examination of each rating organization to be made at least once in every five
years.

Sec. [345] 354. The Commissioner may suspend or revoke the license of any rating
organization which fails to comply with his order within the time limited by such order, or
any extension thereof which he may grant. The Commissioner may determine when a
suspension of license shall become effective and it shall remain in effect for the period fixed
by him, unless he modifies or rescinds such suspension.

Sec, [346] 355. Any rating organization may subscribe for or purchase actuarial,
technical or other services, and such services shall be available to all members and

subscribers without discrimination,

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Sec. [347] 356. Any rating organization may provide for the examination of poli

daily reports, binders, renewal certificates, endorsements or other evidences of insurance,

or the cancellation thereof, and may make reasonable rules governing their submission.

Such rules shall contain a provision that in the event an insurance company does not within
sixty days furnish satisfactory evidence to the rating organization of the correction of any
error or omission previously called to its attention by the rating organization, it shall be the
duty of the rating organization to notify the Commissioner thereof. All information so
submitted for examination shall be confidential.

Sec. [348] 357. Cooperation among rating organizations or among rating

organizations and insurers in'rate making or in other matters within the scope of this title is

hereby authorized, provided the filings resulting from such cooperation are subject to all

Provisions of this title which are applicable to filings generally. The Commissioner may
review such cooperative activities and practices and if he finds that any such activity or
Practice is unfair or unreasonable or otherwise inconsistent with the provisions of this title,
he may issue a written order specifying in what respects such activity or practice is unfair or

unreasonable or otherwise inconsistent with the provisions of this title, and requiring the

discontinuance of such activity or practice,
Sec. [349] 358. Every rating organization and every insurance company which makes
and files its own rates, shall make rates for all risks rated by such organization or insurance
company in accordance with the following provisions:
{a) Basic classification, manual, minimum, class, or schedule rates or rating plans,
shall be made and adopted for all such risks. Any departure from such rates shall be

in accordance with schedules, rating plans and rules filed with the Commissioner;

(b) Rates shall be reasonable and adequate for the class of risks to which they apply;

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1 {c) No rate shall discriminate unfairly between risks Involving essentially the same

2 hazards and expense elements or between risks in the application of like charges and
3 credits;
4 {d) Consideration shall be given to the past and prospective loss experience,
5 including the conflagration and catastrophe hazards, if any, to all factors reasonably
6 attributable to the class of risks, to a reasonable profit, to commissions paid during
7 the most recent annual period and to past and prospective other expenses. In case
8 of fire insurance rates, consideration shall be given to the experience of the fire
9 insurance business during a period of not less than five years next preceding the
10 ‘year in which the review is made;
un {e) Risk may be grouped by classifications for the establishment of rates and
2 minimum premiums. Classification rates may be modified to produce rates for
B individual risks in accordance with rating plans which establish standards for
14 ‘measuring variations in hazards or expense provisions, or both. Such standards may
18 ‘measure any difference among risks that can be demonstrated to have a probable
16 effect upon losses or expenses.
ru Sec. [350] 359. No rating organization and no insurance company which makes and

18 files its own rates shall make or promulgate any rate or schedule of rates which is to be
19 applied to any fire risk on the condition that the whole amount of insurance on any risk or
20 any specified part thereof shall be placed with the members of or subscribers to such rating
21 organization or with such insurer.

22 Sec. [351] 360. Every insurance company doing business in the Philippines shall
23 annually file with the rating organization of which it is a member or subscriber, or with such

24 other agency as the Commissioner may designate, a statistical report showing a

25 classification schedule of its premiums and losses on all kinds or types of insurance business
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to which three hundred [forty-nine] FIFTY EIGHT is applicable, and such other information
as the Commissioner may deem necessary or expedient for the administration of the
Provisions of this title,

Sec. [352] 361. Every non-life rating organization and every non-life insurance
company doing business in the Philippines shall file with the Commissioner, except as to
risks which by general custom of the business are not written according to manual rates or
rating plans, every rate manual, schedule of rates, classification of risks, rating plan, and
every other rating rule and every modification of any of the foregoing which it proposes to
use. An insurance company may satisfy its obligation to make such filings for any kind or
type of insurance by becoming a member of or subscriber to a rating organization which
makes such filings for such kind-or type of insurance, and by authorizing the Commissioner
to accept such filings of the rating organization on behalf of such insurance company.

Sec. [353] 362. Every manual or schedule of rates and every rating plan filed as
provided in the preceding section shall state or clearly indicate the character and extent of
the coverage to which any such rate or any modification thereof will be applied.

"Sec. [354] 363. The Commissioner shall review filings as soon as reasonably possible

after they have been made in order to determine whether they meet the requirements of

this title. When a filing is not accompanied by the information upon which the insurance

company supports such filing, and the Commissioner does not have sufficient information to

ments of this title, he shall require such

determine whether such filing meets the req
insurance company to furnish the information upon which it supports such filing. The
information furnished in support of a filing may include: (1) the experience or judgment of
the insurance company or rating organization making the filing; (2) its interpretation of any
statistical data it relies upon; (3) the experience of other insurance companies or rating

organization; or (4) any other relevant factors,
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Sec. [355] 364. If the Commissioner finds that any rate filings theretofore filed with
him do not comply with the provisions of this title or that they provide rates or rules which
are inadequate, excessive, unfairly discriminatory or otherwise unreasonable, he may order
the same withdrawn and at the expiration of sixty days thereafter the same shall be deemed
no longer on file. Before making any such finding and order, the Commissioner shall give
notice, not less than ten days'in advance, and a hearing, to the rating organization, or to the

insurer, which filed the same. Such order shall not affect any contract or policy made or

issued prior to the expiration of such sixty day period.

Sec. [356] 365. No member or subscriber of 2 rating organization, and no insurance
company doing business in the Philippines, or agent, employee or other representative of
such company, and no insurance broker shall charge or demand a rate or receive a premium
which deviates from the rates, rating plans, classifications, schedules, rules and standards,
made and last filed by a rating organization or by or on behalf of the insurance company, or
shall issue or make any policy or contract involving violation of such raté filings.

See. [357] 366. Notwithstanding any other provisions of this title, upon the written
application of the insurer, stating his reasons therefor, filed with and approved by the
Commissioner, a rate in excess of that provided by a filing otherwise applicable may be used
on any specific risk.

Sec, [358] 367. Whenever the Commissioner shall determine, after notice and a
hearing, that the rates charged or filed on any class of risks are excessive, discriminatory,
inadequate or unreasonable, he shall order that such rates be appropriately adjusted. For
the purpose of applying the provisions of this section, the Commissioner may from time to
time approve reasonable classifications of risks for any or all such classes, having due regard

to the past and prospective loss experience, including conflagration or catastrophe hazards,

if any, to all other relevant factors and to a reasonable profit.
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See. [359] 368, Nothing contained in ths ttle shall be construed as requiring any
insurer to become a member of or subscriber to any rating organization,

Sec. [360] 369. Agreements may be made among insurance companies with respect
to the equitable apportionment among them of insurance which may be afforded applicants
who are in good faith entitled to but are unable to procure such insurance through ordinary
methods and such insurance companies may agree among themselves on the use of
reasonable rates and modifications for such insurance, such agreements and rate
modifications to be subject to the approval of the Commissioner; Provided, however, That
the provisions of this section shall not be deemed to apply to workmen's compensation
insurance.

See. [361] 370. No insurance company doing business in the Philippines or any agent
thereof, no insurance broker, and no employee or other representative of any such
insurance company, agent, or broker, shall make, procure or negotiate any contract of
insurance or agreement as to policy contract, other than is plainly expressed in the policy or
other written contract issued or to be issued as evidence thereof, or shall directly or
indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or
offer to pay or allow to the insured or to any employee of such insured, either as an
inducement to the making of such insurance or after such insurance has been effected, any
rebate from the premium which is specified in the policy, or any special favor or advantage
in the dividends or other benefits to accrue thereon, or shall give or offer to give any
valuable consideration or inducement of any kind, directly or indirectly, which is not

specified in such policy or contract of insurance; nor shall any such company, or any agent

thereof, as to any policy or contract of insurance issued, make any discrimination against
any Filipino in the sense that he is given less advantageous rates, dividends or other policy

Conditions or privileges than are accorded to other nationals because of his race.
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Sec. [362] 371. No insurance company doing business in the Philippines, and no
officer, director, or agent thereof, and no insurance broker or any other person, partnership

or corporation shall issue or circulate or cause or permit to be issued or circulated any

literature, illustration, circular or statement of any sort misrepresenting the terms of any
policy issued by any insurance company of the benefits or advantages promised thereby, or
any misleading estimate of the dividends or share of surplus to be received thereon, or shall
use any name or title of any policy or class of policies misrepresenting the true nature
thereof; nor shall any such company or agent thereof, or any other person, partnership or

corporation make any misleading representation or incomplete comparison of policies to

any person insured in such company for the purpose of inducing or tending to induce such

person to lapse, forfeit, or surrender his said insurance.

Sec. [363] 372. If the Commissioner, after notice and hearing, finds that any
insurance company, rating organization, agent, broker or other person has violated any of
the provisions of this title, it shall order the payment of a fine not to exceed TWENTY FIVE
THOUSAND [five hundred] pesos for each such offense, and shall immediately revoke, the
ficense issued to such insurance company, rating organization, agent, or broker, The
issuance, procurement or negotiation of a single policy or contract of insurance shall be

deemed a separate offense.

le8
PROVISION COMMON TO AGENTS, BROKERS,
AND ADJUSTERS
Sec. [364] 373. A license issued to a partnership, association or corporation to act as
an insurance agent, general agent, insurance broker, reinsurance broker, or adjuster shall
authorize only the individual named in the license who shall qualify therefor as though an

jioner shall charge, and the licensee shall pay, a full
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additional license fee as to each respective individual so named in such license in excess of
one.

Licenses and certificates of registration issued under the provisions of this chapter
may be renewed by the filing of notices of intention on forms to be prescribed by the
Commissioner and payment of the fees therefor. [(As amended by Presidential Decree No.
1455).]

SEC. 374, THE COMMISSIONER, IN CONSULTATION WITH THE DULY AccREDITED
ASSOCIATIONS REPRESENTING THE INSURANCE INDUSTRY, SHALL ADOPT Ano
PROMULGATE A CODE OF CONDUCT 10 PROMOTE INTEGRITY, HONESTY AND ETHICAL
BUSINESS PRACTICES AMONG INSURANCE AGENTS, DISTRIBUTORS AND OTHER
(INTERMEDIARIES.

Title 9
BANCASSURANCE

SEC. 375. THE TERM “BANCASSURANCE” SHALL MEAN THE PRESENTATION AND
SALE TO BANK CUSTOMERS BY AN INSURANCE COMPANY OF ITS INSURANCE PRODUCTS
WITHIN THE PREMISES OF THE HEAD OFFICE OF SUCH BANK DULY LICENSED BY THE
BANGKO SENTRAL NG PILIPINAS OR ANY OF ITS BRANCHES UNDER SUCH RULES AND
REGULATIONS WHICH THE COMMISSIONER AND THE BANGKO SENTRAL NG PILIPINAS
MAY PROMULGATE. TO ENGAGE IN BANCASSURANCE ARRANGEMENT, A BANK IS NOT
REQUIRED TO HAVE EQUITY OWNERSHIP OF THE INSURANCE COMPANY. NO INSURANCE
COMPANY SHALL ENTER INTO A BANCASSURANCE ARRANGEMENT UNLESS IT POSSESSES
ALL THE REQUIREMENTS AS MAY BE PRESCRIBED BY THE COMMISSIONER AND THE
BANGKO SENTRAL NG PILIPINAS.

AN INSURANCE COMPANY SHALL BE ALLOWED TO ENTER INTO BANCASSURANCE

ARRANGEMENTS WITH ONE OR MORE BANKS, WHICH BANKS MAY BE INDEPENDENT OF
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OR RELATED TO EACH OTHER. NO BANCASSURANCE AGREEMENT SHALL PROHIBIT A
BANK FROM ENTERING INTO BANCASSURANCE ARRANGEMENTS WITH OTHER
INSURANCE COMPANIES.

NO INSURANCE COMPANY SHALL BE ALLOWED TO ENTER INTO OR MAINTAIN
BANCASSURANCE ARRANGEMENTS WHICH PROHIBIT THE BANK FROM ENTERING INTO
BANCASSURANCE ARRANGEMENTS WITH OTHER INSURANCE COMPANIES. LIKEWISE, NO
INSURANCE COMPANY SHALL BE ALLOWED TO ENTER INTO OR MAINTAIN
BANCASSURANCE ARRANGEMENTS WHICH PROHIBIT THE INSURANCE COMPANY FROM
ENTERING INTO BANCASSURANCE ARRANGEMENTS WITH OTHER BANKS.

THE COMMISSIONER SHALL PRESCRIBE A PERIOD FOR THE REVISION OF ANY
EXISTING ARRANGEMENTS WHICH VIOLATE THIS PROVISION, WHICH PERIOD SHALL IN NO
CASE BE LONGER THAN FIVE (5) YEARS FROM THE EFFECTIVITY OF THIS CODE.

NO INSURANCE PRODUCT UNDER THIS SECTION, WHETHER LIFE OR NON-LIFE, SHALL
BE ISSUED OR DELIVERED UNLESS IN THE FORM PREVIOUSLY APPROVED BY THE
COMMISSIONER.

‘SEC, 376. PERSONNEL TASKED TO PRESENT AND SELL INSURANCE PRODUCTS WITHIN
THE BANK PREMISES SHALL BE DULY LICENSED BY THE COMMISSIONER AND SHALL BE
SUBJECT TO THE RULES AND REGULATIONS OF THIS ACT.

SEC. 377, THE COMMISSIONER AND THE BANGKO SENTRAL NG PILIPINAS SHALL
PROMULGATE RULES AND REGULATIONS TO EFFECTIVELY SUPERVISE THE BUSINESS OF
BANCASSURANCE.

Chapter V
SECURITY FUND
Sec, [365] 378. There is hereby created a fund to be known as the “Security Fund”

which shall be used in the payment of allowed claims against an insurance company
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authorized to transact business in the Philippines remaining unpaid by reason of the
Solvency of such company. The said Fund may also be used to reinsure the policy of the
Insolvent insurer in any solvent insurer authorized to do business in the Philippines as
Provided in section two hundred [forty-nine] FIFTY FIVE. [in the event of national
emergency oF calamity,) [t]The Fund may likewise be used to pay insured claims which
otherwise would not be compensable under the provisions of the policy. No payment from
the Security Fund shall, however, be made to any person who owns or controls ten per
Centum or more of the voting shares of stock of the insolvent insurer and no payment on
‘any one claim shall exceed twenty thousand pesos,

Sec. [366] 379, Such Fund shall consist of all payments made to the Fund by
insurance companies authorized to do business in the Philippines. Payments made by life
insurance companies shall be treated separately from those made by non-life insurance
companies and the corresponding fund shall be called "Life Account” and “Non-Life
Account", respectively, and shall be held and administered as such by the Commissioner in
accordance with the provisions of this title. The "Life Account" shall be utilized exclusively
for disbursements that refer to life insurance companies, while the "Non-Life Account" shall
be utilized exclusively for disbursements that refer to non-life insurance companies.

Sec. [367] 380. All insurance companies doing business in the Philippines shall
contribute to the Security Fund, Life or Non-Life Account, as the case may be, [on or before
the fifteenth day of June, nineteen hundred and seventy-five,] the aggregate amount of five
million pesos for each Account. The contributions of the life insurance companies and of the
noriife insurance companies shall be in direct proportion to the ratio between a particular

life insurance company or a particular non-life insurance company's net worth and the

aggregate net worth of all life insurance companies or all non-life insurance companies, as

the case may be, as shown in their latest financial statements approved by the
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Commissioner. This proportion applied to the five million pesos shall be the contribution of
a particular company to the corresponding Account of the Security Fund.

The amount of five milion pesos in each Account shall be in the form of a revolving
‘rust fund. The respective contributions of the companies shall remain as admitted assets in
‘heir books and any disbursement therefrom shall be deducted Proportionately from the
Contributions of each company which will be allowed as deductions for income tax
Purposes. Any earnings of the Fund shall be turned over to the contributing companies in
proportion to their contributions,

In the case of disbursements of funds from the Fund as provided in the foregoing
Paragraph, the life and non-life companies, as the case may be, shall replenish the amount
Gisbursed in direct proportion to the individual company's net worth and the aggregate net
‘worth ofthe life or nonfe companies, a the case may be. However, in no case shal the
Fund exceed the aggregate amount of ten million pesos, or five million pesos for each
Account,

Should the Fund, Life of Non-Life Account, as the case may be, be inadequate for a
Gisbursement as provided for, then the Life or Non-Life companies, as the case may be, shall
contribute to the Fund their respective shares in the proportion previously mentioned.

See: [368] 381. The Commissioner may adopt, amend, and enforce all reasonable
rules and regulations necessary for the proper administration of the Fund and of the

Accounts, In the event any insurer shall fal to make any payment required by this title, or

correct, he shall have full authority to examine all the books

that any payment made
and records ofthe insurer for the purpose of ascertaining the facts and shall determine the
correct amount to be paid and may proceed” in any court of competent jurisdiction to
“ecover fr the benefit of the Fund or of the Account concerned any Sum shown to be due

pon such examination and determination. Any insurer which falls to make any payment to
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the Fund or to the Account concerned when due, shall thereby forfeit to said Fund or
Account concerned a penalty of five per centum of the amount determined to be due as
Provided by this title, plus one per centum of such amount for each month of delay or
fraction thereof, after the expiration of the first month of such delay, but ‘the Commissioner,
If satisfied that the delay was excusable, may remit all or any part of such penalty, The
Commissioner, in his discretion, may suspend or revoke the certificate of authority to do
business in the Philippines of any insurance company which shall fail to comply with this
title or to pay any penalty imposed in accordance therewith,

Sec. [369] 382. The Accounts created by this tite shall be separate and apart from
each other and from any other fund, The Treasurer of the Philippines shall be the custodian
Of the Life Account and Non-Life Account of the Security Fund; and all disbursements from
any Account shall be made by the Treasurer of the Philippines upon vouchers signed by the
Commissioner or his deputy, as hereinafter provided. The moneys of said Account may be
invested by the Commissioner only in bonds or other evidences of debt of the government
of the Philippines or its political subdivisions or instrumentalities. The Commissioner may
sell any of the securities in which an Account is {in vested] INVESTED, if advisable, for its
proper administration or in the best interest of such Account.

Sec. [370] 383. Payments from either the Life Insurance Account or Non-Life

Account, as the case may be, shall be made by the Treasurer of the Philippines to the

Commissioner, upon the authority of appropriate certificate filed with by the

Commissioner acting in such capacity.

Sec. (371] 384. The Commissioner may, in his discretion, designate or appoint a duly
authorized representative or representatives to appear and defend before any court or
other body or official having jurisdiction any or all actions or proceedings against principals

or assureds on insurance policies or contracts issued to them where the insurer has become
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insolvent or unable to meet its insurance obligations. The Commissioner shall have, as of the
date of insolvency of such insurer or as of the date of its inability meet its insurance
obligations, only the rights which such insurer would have had if it had not become
Insolvent or unable to meet its insurance obligations, For the Purpose of this title the
Commissioner shall have power to employ such counsel, clerks and assistants as he may
deem necessary.

Sec, [372] 385. The expense of administering an Account shail be paid out of the
Account concerned. The Commissioner shall serve as administrator of the Fund and of the
Accounts without additional compensation, but may be allowed and paid from the Account
concerned expenses incurred in the performance of his duties in connection with said
Account, The compensation of those persons employed payable from the Account
concerned. The Commissioner shall include in his annual report to the Secretary of Finance a
statement of the expenses of administration of the Fund and of the Life Account and Non-
Life Account for the preceding year. .

Chapter Vi
COMPULSORY MOTOR VEHICLE
UABILITY INSURANCE

Sec. [373] 386. For purposes of this chapter:

(a) “Motor Vehicle" is any vehicle as defined in section three, paragraph (a) of Republic Act
Numbered Four Thousand One Hundred Thirty-Six, Otherwise known as the “Land
Transportation and Traffic Code."

(b) "Passenger" is any fare paying person being transported and conveyed in and by a motor

vehicle for transportation of passengers for compensation, including persons expressly

authorized by law or by the vehicle's operator or his agents to ride without fare.

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(¢) "Third-Party" is any person other than a passenger as defined in this section and shall
also exclude @ member of the household, or a member of the family within the second
degree of consanguinity or affinity, of a motor vehicle owner or land transportation
operator, as likewise defined herein, or his employee in respect of death, bodily injury, or
damage to property arising out of and in the course of employment. [(As amended by
Presidential Decree No, 1814 and 1981),}
(4) “Owner” or "motor vehicle owner" means the actual legal owner of a motor vehicle, in
whose name such vehicle is duly registered with the Land Transportation Commission;
(e) “Land transportation operator" means the owner or owners of motor vehicles for
transportation of passengers for compensation, including school buses;
(“insurance policy" or "Policy" refers to a contract of insurance against passenger and
thirty-party liability for death or bodily injuries and damaged to property arising from motor
vehicle accidents. [(As amended by Presidential Decree No. 1455 and 1814),]

Sec. [374] 387. it shall be unlawful for any land transportation operator or owner of

force in

@ motor vehicle to operate the same in the public highways unless there i
relation’ thereto a policy of insurance or guaranty in cash or surety bond issued in
accordance with the provisions of this chapter to indemnify the death, bodily injury, and/or
damage to property of a third-party or passenger, as the case may be, arising from the use
thereof. [(As amended by Presidential Decree No. 1455 and 1814),}

Sec. (375] 388. The Commissioner shall furnish the Land Transportation
Commissioner with a list of insurance companies authorized.to issue the policy of insurance
or surety bond required by this chapter. ((As amended by Presidential Decree No. 1814).]

Sec. [376] 389. The Land Transportation Commission shall not allow the registration
or renewal of registration of any motor vehicle without first requiring from the land

transportation operator or motor vehicle owner concerned the presentation and filing of a
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Substantiating documentation in a form approved by the Commissioner evidencing that the
Policy of insurance or guaranty in cash or surety bond required by this chapter is in effect.
[(As amended by Presidential Decree No. 1455).]

Sec. [377] 390. Every land transportation operator and every owner of a motor
vehicle shall, before applying for the registration or renewal of registration of any motor
vehicle, at his option, either secure an insurance policy or surety bond issued by any
insurance company authorized by the Commissioner or make a cash deposit in such amount
as herein required as limit of liability for purposes specified in section three hundred
[seventy-four] EIGHTY SEVEN.

(1) In the case of a land transportation operator, the insurance guaranty in cash or
surety bond shall cover liability for death or bodily injuries of third-parties and/or
Passengers arising out of the use of such vehicle in the amount not less than twelve
thousand pesos per passenger or third party and an amount, for each of such categories, in
any one accident of not less than that set forth in the following scale:

{a) Motor vehicles with an authorized capacity of twenty-six or more passengers:

Fifty thousand pesos;

{b) Motor vehictes with an authorized capacity of from twelve to twenty-five

passengers: Forty thousand pesos;

{c) Motor vehicles with an authorized capacity of from six to eleven passengers:

Thirty thousand pesos;

(d) Motor vehicles with an authorized capacity of five ‘or less passengers: Five

thousand pesos multiplied by the authorized capacity.

Provided, however, That such cash deposit made to, or surety bond posted with, the
Commissioner shall be resorted to by him in cases of accidents the indemnities for which to

third-parties and/or passengers are not settled accordingly by the land transportation
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operator and, in that event, the said cash deposit shall be replenished or such surety bond
shall be restored with sixty days after impairment or expiry, as the case may be, by such
land transportation operator, otherwise, he shall secure the insurance policy required by
this chapter. The aforesaid cash deposit may be invested by the Commissioner in readily
marketable government bonds and/or securities,
(2) In the case of an owner of a motor vehicle, the insurance or guaranty in cash or
surety bond shall cover fiability for death or injury to third parties in an amount not less
than that set forth in the following scale in any one accident:
|, Private Cars
(a) Bantam: Twenty thousand pesos;
(b) Light: Twenty thousand pesos;
(c) Heavy: Thirty thousand pesos;

|, Other Private Vehicles

{a) Tricycles, motorcycles, and scooters: Twelve thousand pesos;

(b) Vehicles with an untaden weight of 2,600 kilos or less: Twenty thousand

pesos;

an unladen weight of between 2,601 kilos and 3,930 kilos:

(c) Vehicles
Thirty thousand pesos;
(d) Vehicles with an unladen weight over 3,930 kilos: Fifty thousand pesos,
The Commissioner may, if warranted, set forth schedule of indemnities for the
Payment of claims for death or bodily injuries with the coverages set forth herein. [(As
amended by Presidential Decree No. 1455 and 1814).]
Sec. [378] 391. Any claim for death or injury to any passenger or third party pursuant
{0 the provisions of this chapter shall be paid without the necessity of proving fault or

negligence of any kind; Provided, That for purposes of this section:
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{i) The total indemnity in respect of any person shall not BE LESS THAN FIFTEEN
[exceed five] thousand pesos;
(ii) The following proofs of loss, when submitted under oath, shall be sufficient
evidence to substantiate the claim:
(a) Police report of accident; and
(b) Death certificate and evidence sufficient to establish the proper payee; or
(c) Medical report and evidence of medical or hospital disbursement in respect
of which refund is claimed;
{tti) Claim may be made against one motor vehicle only. In the case of an occupant of
a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is
riding, mounting or dismounting from, In any other case, claim shall fie against the
Insurer of the directly offending vehicle. in all cases, the right of the party paying the
claim to recover against the owner of the vehicle responsible for the accident shall
be maintained.
Sec, [379] 392. No land transportation operator or owner of motor vehicle shall be
unreasonably denied the policy of insurance or surety bond required by this chapter by the

ion

insurance companies authorized to issue the same, otherwise, the Land Transport:
‘Commission shail require from said land transportation operator or owner of the vehicle, in
lieu of a policy of insurance or surety bond, a certificate that a cash deposit has been made
with the Commissioner in such amount fequired as limits of indemnity in section three
hundred [seventy-seven] NINETY to answer for the Passenger and/or third-party liability of
such land transportation operator or owner of the vehicle.

‘No Insurance company may issue the policy of insurance or surety bond required

under this chapter unless so authorized under existing laws.

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The authority to engage in the casualty and/or Surety lines of business of an
insurance company that refuses to issue or renew, without just cause, the insurance policy
or surety bond therein required shall be withdrawn immediately. {(As amended by
Presidential Decree No, 1455 and 1814),]

See. [380] 393. No cancellation of the policy shall be valid unless written notice
thereof is given to the land transportation Operator or owner of the vehicle and to the Land

date

Transportation Commission at least fifteen days prior to the intended effecti
thereof. Upon receipt of such notice, the Land Transportation Commission, unless it
‘ecelves evidence of a new valid insurance ar guaranty in cash or surety bond as prescribed
in this chapter, or an endorsement of revival ofthe cancelled one, shall order the immediate
confiscation of the plates of the motor vehicle covered by such cancelled policy, The same
may be re-issued only upon presentation of a new insurance policy or that a guaranty in
cash or surety band has been made or posted with the Commissioner and which meets the
Tequirements of this chapter, or an endorsement or revival of the cancelled one. {las
amended by Presidential Decree No. 1455).]

See, [381] 294. If the cancellation ofthe policy or surety bond is contemplated by the
‘and transportation operator or owner of the vehicle, he shall, before the policy or surety
bond ceases to be effective, secure a similar policy of insurance or surety bond to replace
the policy or surety bond to be cancelled or make a.cash deposit in sufficient amount with
the Commissioner and without any gap, file the required documentation with the Land
Transportation Commission, and notify the insurance company concerned of the
cancellation ofits policy or surety bond. [(As amended by Presidential Decree No. 1455)-]

Sec, [382] 395. In case of change of ownership of a motor vehicle, or change of the
engine of an insured vehicle, there shall be no need of issuing a new policy until the next

date of registration or renewal of registration of such vehicle, and provided that the
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insurance company shall agree to continue the policy, such change of ownership or such
change of the engine shall be indicated in a corresponding endorsement by the insurance
company concerned, and a signed duplicate of such endorsement shall, within a reasonable
time, be filed with the Land Transportation Commission.

Sec. [383] 396. In the settlement and payment of claims, the indemnity shall not be
availed of by any accident victim or claimant as an instrument of enrichment by reason of an
accident, but as an assistance or restitution insofar as can fairly be ascertained.

‘Sec. [384] 397. Any person having any claim upon the policy issued pursuant to this
Chapter shall, without any unnecessary delay, present to the insurance company
concerned a written notice of claim setting forth the nature, extent and duration of
the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed
within six months from date of accident, otherwise, the claim shall be deemed waived.
Action or suit for recovery of damage due to loss or injury must be brought, in proper cases,
with the Commissioner or the Courts within one year from denial of the claim, otherwise,
the claimant's right of action shall prescribe. {(As amended by Presidential Decree 1814 and
Batas Pambansa Big. 874).}

Sec. [385] 398. The insurance company concerned shall forthwith ascertain the truth
and extent of the claim and make payment within five working days after reaching an
agreement. if no agreement is reached, the insurance company shall pay only the “no-fault”
indemnity provided in section three hundred [seventy-eight] NINETY ONE without
prejudice to the claimant from pursuing his claim further, in which case, he shall not be
required or compelled by the insurance company to execute any quit claim or document
releasing it from liability under the policy of insurance or surety bond issued. [(As amended

by Presidential Decree No. 1455).]

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In case of any dispute in the enforcement of the provisions of any policy issued
pursuant to this chapter, the adjudication of such dispute shall be within the original and
exclusive jurisdiction of the Commissioner, subject to the limitations provided in section
four hundred [sixteen] THIRTY TWO.

Sec. [386] 399, it shall be untawful for a land transportation operator or owner of
motor vehicle to require his or its drivers or other employees to contribute in the payment
of premiums.

Sec. [387] 400. No government office or agency having the duty of implementing the
Provisions of this chapter nor any official or employee thereof shall act as agent in procuring
the insurance policy or surety bond provided for herein, The commission of an agent
Procuring the said policy or bond shall in no case exceed ten per centum of the amount of
the premiums therefor.

Sec. [388] 401. Any land transportation operator or owner of motor vehicle or any
other person violating any of the provisions of the preceding sections shall be punished by a
fine of not less than five hundred pesos [but not more than one thousand pesos} and/or
Imprisonment for not more than six months, The violation .of section three hundred
[seventy-seven] NINETY by a land transportation operator shall be a sufficient cause for the
revocation of the certificate of public convenience issued by the Board of Transportation

covering the vehicle concerned.

Sec. [389] 402. Whenever any violation of the provisions of chapter i
committed by a corporation or association, or by a government office or entity, the
executive officer or officers of said corporation, association or government office or entity

who shall have knowingly permitted, or failed to prevent, said violation shall be held liable

as principals.

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Chapter Vil
MUTUAL BENEFIT ASSOCIATIONS AND TRUSTS
FOR CHARITABLE USES
Title 1
MUTUAL BENEFIT ASSOCIATIONS

Sec. [390] 403. Any society, association or corporation, without capital stock, formed
or organized not for profi but mainly forthe purpose of paying sick benefits to members, or
of furnishing financial support to members while out of employment, or of paying to
relatives of deceased members of fixed or any sum of money, irrespective of whether such
aim or purpose is carried out by means of fixed dues or assessments collected regularly
from the members, or of providing, by the issuance of certificates of insurance, payment of
Its members of accident or life insurance benefits out of such fixed and regular dues or
assessments, but in no case shall include any society, association, or corporation with such
mutual benefit features and which shall be carried out purely from voluntary contributions
collected not regularly and or no fixed amount from whomsoever may contribute, shall be
known as a mutual benefit association within the intent of this Code.

Any society, association, or corporation principally organized as labor union shall be
governed by the Labor Code notwithstanding any mutual benefit feature provisions in its
charter as incident to its organization,

Inno case shall a mutual benefit association be organized and authorized to transact
business as a charitable or benevolent organization, and whenever it has this feature as
incident to its existence, the corresponding charter provision shall be revised to conform
with the provision of this section. Mutual benefit association, already licensed to transact
business as such on the date this Code becomes effective, having charitable or benevolent

feature shall abandon such incidental purpose upon effectivity of this Code if they desire to
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continue operating as such mutual benefit associations. [(As amended by Presidential
Decree No. 1455).]

Sec. [391] 404. A mutual benefit association, before it may transact as such, must
first secure a license from the Commissioner. The application for such license shall be filed
with the Commissioner together with certified true copies of the articles of incorporation or
the constitution and by-laws of the association, and all amendments thereto, and such other
documents or testimonies as the Commissioner may require.

No license shall be granted to a mutual benefit association until the Commissioner
shall have been satisfied by such examination as may make and such evidence as he may
require that the association is qualified under existing laws to operate and transact business
as such. The Commissioner may refuse to issue a license to any mutual benefit association if,
in his judgment, such refusal will best promote the interest of the members of such
association and of the people of this country. Any license issued shall expire on the last day
of [June] DECEMBER of the THIRD year following its issuance and, upon proper application,
may be renewed if the association is continuing to comply with existing laws, rules and
regulations, orders, instructions, rulings and decisions of the Commissioner. Every

8 any such license shall be subject to the supervision of the

association recei

Commissioner: Provided, That no such license shall be granted to any such associatio!

Such association has no actuary.

All mutual benefit association existing and licensed as such under the provisions of

Article Eight, Chapter Forty-One of the Revised Administrative Code, as amended by Act No.
3612, shall, upon effectivity of this Code, surrender their respective licenses to the
Cornmissioner and apply for new licenses under the provisions of this code if they still desire

to continue operating as such mutual benefit associations.

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Sec, [392] 405. No mutual benefit association shall be issued a license to operate as
such unless it has constituted and established a Guaranty Fund by depositing with the
Commissioner an initial minimum amount of [ten thousand] FIVE MILLION pesos in cash, or
in government securities with a total value equal to such amount, to answer for any valid
benefit claim of any of its members.

All moneys received by the Commissioner for this purpose must be deposited by him
in interest-bearing deposits with any bank or banks authorized to transact business in the
Philippines for the account of the particular association constituting the Guaranty Fund.

‘Any accrual to such fund, be it interest earned or dividend additions on moneys or

securities so deposited, may, with the prior approval of the Commissioner, be withdrawn by

the association if there is no pending benefit claim against it, including interest thereon or
dividend additions thereto,

The Commissioner, prior to or after licensing a mutual benefit association, may
require such association to increase its Guaranty Fund from the initial minimum amount
required to’ an amount equal to (at least ten per centum of its assets, if such assets exceed
‘one hundred thousand pesos, but in no case shall such increase exceed the maximum.
amount of] capital investment required of (a] AN EXISTING domestic insurance company
under section two hundred and [three] NINE of this Code. [(As amended by Presidential
Decree No. 1455).

Sec. [393] 406. Every mutual benefit association licensed to do business as such shall

issue membership certificates to its members specifying the benefits to which such

members are entitled.

Such certificates, together with the articles of incorporation of the association or its

constitution and by-laws, and alt existing laws as may be pertinent shall constitute the

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agreement, as of the date of its issuance, between the association and the member, The
membership certificate shall be in a form previously approved by the Commissioner.

Sec. [394] 407. A mutual benefit association may, by reinsurance agreement, ced

whole or in part any individual risk or risks under certificates of insurance issued by it, only
to a life insurance company authorized to transact business or to a professional reinsurer
authorized to accept life risks in the Philippines: Provided, That copy of the draft of such
reinsurance agreement shail be submitted to the Commissioner for his approval. The
association may take credit for the reserves on such ceded risks to the extent reinsured.

Sec. [395] 408. The constitution or by-laws of a mutual benefit association must
distinctly state the purpose for which dues and/or assessments are made and collected and
the portion thereof which may be used for expenses,

Death benefit and other relief funds shall be created and used exclusively for paying
benefits due the members under their respective membership certificates. A general fund
shall likewise be created and used for expenses of administration of the association.

A MUTUAL BENEFIT ASSOCIATION SHALL ONLY MAINTAIN FREE AND UNASSIGNED
SURPLUS NOT MORE THAN 20% OF ITS TOTAL LIABILITIES AS VERIFIED BY THE
COMMISSIONER. ANY AMOUNT IN EXCESS SHALL BE RETURNED TO THE MEMBERS BY
WAY OF DIVIDENDS, ENHANCING THE EQUITY VALUE OR PROVIDING BENEFITS IN KIND
AND OTHER RELEVANT SERVICES. IN ADDITION, SUBJECT TO THE APPROVAL OF THE
COMMISSIONER, A MUTUAL BENEFIT ASSOCIATION MAY ALLOCATE A PORTION FOR
CAPACITY BUILDING AND RESEARCH AND DEVELOPMENT SUCH AS DEVELOPING NEW
PRODUCTS AND SERVICES, UPGRADING AND IMPROVING OPERATING SYSTEMS AND
EQUIPMENT AND CONTINUING MEMBER EDUCATION.

Sec. [396] 409. Every outstanding membership certificate must havel, after three full

years of being continuously in force,] an equity value equivalent to at least fifty per centum
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of the total (membership dues] CONTRIBUTIONS collected thereon, THE EQUITY VALUE
ONLY APPLIES TO BASIC LIFE INSURANCE PRODUCT AND EXCLUDES OPTIONAL PRODUCTS.

Sec, [397] 410. Every mutual benefit association must accumulate and maintain, out
of the periodic dues collected from its members, sufficient reserves for the payment of
claims or obligations for which it shall hold funds in securities satisfactory to the
Commissioner consisting of bonds of the Government of the Philippines, or any of its
political subdivisions and instrumentalities, or in such other good securities as may be
approved by the Commissioner.

The reserve liability shall be established in accordance with actuarial procedures and
shall be approved by the Commissioner.

The articles of incorporation or the constitution and by-laws of a mutual benefit
association must provide that if its reserve as to all or any class of certificates becomes
impaired, Its board of directors or trustees may require that there shall be pald by the
members to the association the amount of the members’ equitable proportion of such
deficiency as ascertained by said board and that if the payment be not made it shal stand as
an indebtedness against the membership certificates of the defaulting members and draw
Interest not to exceed five per centum per annum compounded annually.

Sec. [398] 411. A mutual benefit association may invest such Portion of its funds as
shail not be required to meet pending claims and other obligations in any of the classes of
investments or types of securities in which life insurance companies doing business in the
Philippines may invest.

It may also grant loans to members on the security of a pledge or chattel mortgage
of personal properties of the borrowers, or in the absence thereof, on the security of the
membership certificate of the borrowing members, in which event such loan shall become a

first lien on the proceed thereof.
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Sec. [399] 412. The Commissioner or any of his duly designated representatives,
shall have the power of visitation, audit and examination into the affairs, financial condition,
and methods of doing business of ail mutual benefit associations, and he shall cause such
examination to be made at least once every two years or whenever it may be deemed
proper and necessary. Free access to the books, records and documents of the association
shall Be accorded to the Commissioner, to his representatives, in such manner that the
Commissioner or his representatives may readily verify or determine the true affairs,
financial condition, and method of doing business of such association. In the course of such

examination, the Commissioner or his duly designated representatives shall have auth

to administer oaths and take testimony or other evidence on any matter relating to the
affairs of the association,

All minutes of the proceedings of the board of directors or trustees of the
association, and those of the regular or special meetings of the members, shall be taken,
and a copy thereof, in English or in Pilipino, shall be submitted to the Commissioner's
representatives or examiners in the course of such examination,

‘A copy of the findings of such examination, together with the recommendations of
the Commissioner, shall be furnished the association for its information and compliance,
and the same shall be taken up immediately in the meetings of the board of directors or
trustees and of the members of the association.

Sec, [400] 413. Every mutual benefit association shall, annually on or before the
thirtieth day of April of each year, render to the Commissioner an annual statement in such
form and details as may be préscribed by the Commissioner, signed and sworn to by the
president, secretary, treasurer, and actuary of the association, showing the exact condition

of its affairs on the preceding thirty-first day of December.

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Sec, [401] 414. No money, aid or benefit to be paid, provided or tendered by any
mutual benefit association, shall be liable to attachment, garnishment, or other process, or
bbe seized, taken, appropriated, or applied by any legal or equitable process to pay any debt
of ‘lability of a member or beneficiary, or any other person who may have a right
thereunder, either before or after payment.

Sec. [402] 415. Any member of a mutual benefit association shall have the right at all
times to change the beneficiary or beneficiaries or add another beneficiary or other

beneficiaries in accordance with the rules and regulations of the association unless he has

expressly waived this right in the membership certificate. Every association may, under such
rules as it may adopt, limit the scope of beneficiaries and provide that no beneficiary shall
have or obtain any vested interest in the proceeds of any certificate until the certificate has
become due and payable under the terms of the membership certificate.

Sec. [403] 416. Any chapter affiliate independently licensed as a mutual benefit
association may consolidate or merge with any other similar chapter affiliate or with the
mother association.

Sec. {404] 417. Any mutual benefit association may be converted into and licensed as
a mutual life insurance company by complyirig with the requirements of the pertinent
provisions of this Code and submitting the specific plan for such conversion to the
Commissioner for his approval. Such plan, as approved, shall then be submitted to the
members either in the regular meeting or in a special meeting called for the purpose for
their adoption. The affirmative vote of at least two-thirds of all the members shall be
necessary in order to consider such plan as adopted.

No such conversion shail take effect unless and until approved by the Commissioner.

Sec. [405] 418. No mutual benefit association shall be dissolved without first notifying

the Commissioner and furnishing him with a certified copy of the resolution authorizing the
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dissolution, duly adopted by the affirmative vote of two-thirds of the members at a meeting
called for that purpose, the financial statements as of the date of ‘the resolution, and such
other papers or documents as may be required by the Commissioner.

No dissolution shatt proceed until and unless approved by the Commissioner and all
Proceedings in connection therewith shall be witnessed and attested by his duly designated
representative,

No mutual benefit association shall be officially declared as dissolved until after the
Commissioner so certifies that all outstanding claims against the association have been duly
settled and liquidated.

Sec. [406] 419. The Commissioner shall after notice and hearing, have the power
either to suspend or revoke the licensed issued to a mutual benefit association if he finds
that the association has:

(a) failed to comply with any provision of this Code;

{b) failed to comply with any other law or regulation obligatory upon it;

{c) failed to comply with any order, ruling, instruction, requirement, or

recommendation of the Comi

ioner;

(d) exceeded its power to the prejudice of its members;

{e) conducted its business fraudulently or hazardously;

(f rendered its affairs and condition to one of insolvency; or

(g) failed to carry out its aims and purposes for which it was organized due to any

cause,

After receipt of the order from the Commissioner suspending or revoking the license,
the association must immediately exert efforts to remove such cause or causes which
brought about the order, and, upon proper showing, may apply with the Commissioner for

the lifting of the order and restoration or revival of the license so revoked or suspended,
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Sec. [407] 420, For failure to remove such cause or causes which brought about the
suspension or revocation of the license of a mutual benefit association, the Commissioner
shall apply urider this Code for an order from the proper court to liquidate such association.
The provisions of titles fourteen and fifteen, chapter three, pertaining to the appointment of
a conservator and proceedings upon insolvency of an insurance company, shall, insofar as
practicable, apply to mutual benefit associations.

Sec. [408] 421, To secure the enforcement of any provision under this title, the
Commissioner may issue such rules, rulings, instructions, orders and circulars [, subject to
the approval of the Secretary of Finance).

Sec. [409] 422, The violation of any provision of this title shall subject the person
violating or the officer of the association responsible therefor to a fine of not LESS THAN
[exceeding one] TEN thousand pesos, or imprisonment of not exceeding three years, or
both such fine and imprisonment, at the discretion of the court.

SEC. 423. ALL PROVISIONS OF THIS CODE GOVERNING LIFE INSURANCE
COMPANIES AND SUCH OTHER PROVISIONS WHENEVER PRACTICABLE AND NECESSARY,
SHALL BE APPLICABLE TO MUTUAL BENEFIT ASSOCIATIONS.

Title 2
TRUSTS FOR CHARITABLE USES

Sec. [410] 424, The term "trust for charitable uses", within the intent of this Code,
shall include, all the real or personal properties or funds, as well as those acquired with the
fruits or income therefrom or in exchange or substitution thereof, given to or received by
any person, corporation, association, foundation, or entity, except the National
Government, its instrumentalities or political subdivisions, for charitable, benevolent,
educational, pious, religious, or other uses for the benefit of the public at large or a

particular portion thereof or for the benefit of an indefinite number of persons,
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Sec, [411] 425. The term "trustee" shall include any individual, corporation,
association, foundation, or entity, except the National Government, its instrumentalities or
Political subdivisions, in charge of, or acting for, or concerned with the administration of,
the trust referred to in the section immediately preceding and with the proper application
of trust property.

Sec. [412] 426. The term "trust property” shall include all real or personal properties
or funds pertaining to the trust as well as those acquired with the fruits or income
therefrom or in exchange or substitution thereof.

Sec. [413] 427. All trustees shall, before entering in the performance of the duties of
their trust, obtain a certificate of registration from the Commissioner.

All provisions of this Code governing mutual benefit associations and such other
provisions herein, whenever practicable and necessary, shall be applicable to trusts for
charitable uses.

SEC. 428, THE TREASURER OF A CHARITABLE TRUST SHALL FILE A FIDELITY BOND
IN THE AMOUNT COMMENSURATE WITH THE VALUE OF THE TRUST PROPERTY IN HIS
‘CUSTODY, AS MAY BE DETERMINED BY THE COMMISSIONER.

CHAPTER VI
“TRUST BUSINESS IN GENERAL

SEC. 429. AN INSURANCE COMPANY MAY ENGAGE IN LIMITED TRUST BUSINESS,
CONSISTING OF MANAGING FUNDS PERTAINING ONLY TO RETIREMENT AND PRE-NEED
PLANS, PROVIDED IT HAS SECURED A LICENSE TO DO SO FROM THE BANGKO SENTRAL NG
PILIPINAS, THIS TRUST BUSINESS SHALL BE SEPARATE AND DISTINCT FROM THE GENERAL
BUSINESS OF THE INSURANCE COMPANY AND SHALL BE SUBJECT TO RULES AND
REGULATIONS AS MAY BE PROMULGATED BY THE BANGKO SENTRAL NG PILIPINAS IN

CONSULTATION WITH THE COMMISSIONER.
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Chapter [Vit] IX
‘THE INSURANCE COMMISSIONER
Title 2
ADMINISTRATIVE AND ADJUDICATORY POWERS

SEC. [414] 430, THE INSURANCE COMMISSIONER SHALL BE APPOINTED BY THE
PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES FOR A TERM OF SIX (6) YEARS AND
UNTIL THE SUCCESSOR SHALL HAVE BEEN APPOINTED AND QUALIFIED, UNLESS SOONER
REMOVED ON GROUNDS PROVIDED BY LAW, AND ANY SUCH DECISION SHALL STATE THE
REASONS FOR SUCH REMOVAL.

The Insurance Commissioner shall have the duty to see that all laws relating to
insurance, insurance companies and other insurance matters, mutual benefit associations,
and trusts for charitable uses are faithfully executed and to perform the duties imposed
upon him by this Code, and shall, notwithstanding any existing laws to the contrary, have
sole and exclusive authority to regulate the issuance and sale of variable contracts as
defined in section two hundred thirty-[two] EIGHT and to provide for the licensing of
persons selling such contracts; and to issue such reasonable rules and regulations governing
the same.

ns, circulars, orders and decision

The Commissioner may issue such rulings, instru

as he may deem necessary to secure the enforcement of the provisions of this Code, TO
ENSURE THE EFFICIENT REGULATION OF THE INSURANCE INDUSTRY IN ACCORDANCE
WITH GLOBAL BEST PRACTICES AND TO PROTECT THE INSURING PUBLIC [subject to the
approval of the Secretary of Finance]. Except as otherwise specified, decisions made by the

Commissioner shall be appealable to the Secretary of Finance.

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IN ADDITION TO THE FOREGOING, THE COMMISSIONER SHALL HAVE THE
FOLLOWING POWERS AND FUNCTIONS:

A) FORMULATE POLICIES AND RECOMMENDATIONS ON ISSUES CONCERNING THE
INSURANCE INDUSTRY, ADVISE CONGRESS AND OTHER GOVERNMENT AGENCIES ON ALL
ASPECTS OF THE INSURANCE INDUSTRY AND PROPOSE LEGISLATION AND AMENDMENTS
THERETO; ,

B) ISSUE, APPROVE, RENEW, SUSPEND, REINSTATE OR REVOKE LICENSES OR
CERTIFICATES OF REGISTRATION PROVIDED FOR BY THIS CODE;

C) IMPOSE SANCTIONS FOR THE VIOLATION OF LAWS AND THE RULES, REGULATIONS
AND ORDERS ISSUED PURSUANT THERETO;

0) PREPARE, APPROVE, AMEND OR REPEAL RULES, REGULATIONS AND ORDER, AND
ISSUE OPINIONS AND PROVIDE GUIDANCE ON AND SUPERVISE COMPLIANCE WITH SUCH
RULES, REGULATIONS AND ORDERS;

£) ENLIST THE AID AND SUPPORT OF AND/OR DEPUTIZE ANY AND ALL
ENFORCEMENT AGENCIES OF THE GOVERNMENT, CIVIL OR MILITARY AS WELL AS ANY
PRIVATE INSTITUTION, CORPORATION, FIRM, ASSOCIATION OR PERSON IN THE
IMPLEMENTATION OF ITS POWERS AND FUNCTIONS UNDER THIS CODE;

F) ISSUE CEASE AND DESIST ORDERS TO PREVENT FRAUD OR INJURY TO THE
INSURING PUBLIC;

G) PUNISH FOR CONTEMPT OF THE COMMISSIONER, BOTH DIRECT AND INDIRECT, IN
ACCORDANCE WITH THE PERTINENT PROVISIONS OF AND PENALTIES PRESCRIBED BY THE
RULES OF COURT;

H) COMPEL THE OFFICERS OF ANY REGISTERED INSURANCE CORPORATION OR
ASSOCIATION TO CALL MEETINGS OF STOCKHOLDERS OR MEMBERS THEREOF UNDER ITS

SUPERVISION;
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|) ISSUE SUBPOENA DUCES TECUM AND SUMMON WITNESSES TO APPEAR IN ANY
PROCEEDINGS OF THE COMMISSIONER AND IN APPROPRIATE CASES, ORDER THE
PRODUCTION AND EXAMINATION, SEARCH AND SEIZURE OF ALL DOCUMENTS, PAPERS,
FILES AND RECORDS, TAX RETURNS, AND BOOKS OF ACCOUNTS OF ANY ENTITY OR
PERSON UNDER INVESTIGATION AS MAY BE NECESSARY FOR THE PROPER DISPOSITION OF
THE CASES BEFORE IT, SUBJECT TO THE PROVISION OF EXISTING LAWS;

J) SUSPEND OR REVOKE, AFTER PROPER NOTICE AND HEARING THE LICENSE OR
CERTIFICATE OF AUTHORITY OF ANY ENTITY OR PERSON UNDER ITS REGULATION, UPON
ANY OF THE GROUNDS PROVIDED BY LAW;

kK) CONDUCT AN EXAMINATION TO DETERMINE COMPLIANCE WITH LAWS AND
REGULATIONS IF THE CIRCUMSTANCES SO WARRANT AS DETERMINED BY APPROPRIATE
RULES AND REGULATIONS;

1) CONDUCT A REGULAR INVESTIGATION WHICH SHALL NOT BE OFTENER THAN ONCE
A YEAR FROM THE LAST DATE OF EXAMINATION TO DETERMINE WHETHER AN
INSTITUTION IS CONDUCTING ITS BUSINESS ON A SAFE AND SOUND BASIS; PROVIDED,
THAT, THE DEFICIENCIES/IRREGULARITIES FOUND BY OR DISCOVERED BY AN AUDIT SHALL
BE IMMEDIATELY ADDRESSED;

M) RETAIN AND UTILIZE, IN ACCORDANCE WITH THE RULES AND REGULATIONS OF THE
DEPARTMENT OF BUDGET AND MANAGEMENT AND OTHER RELEVANT REGULATORY
AGENCIES, ALL FEES, CHARGES, AND OTHER INCOME DERIVED FROM ITS REGULATION OF
INSURANCE COMPANIES AND OTHER SUPERVISED PERSONS AND ENTITIES;

N) INQUIRE INTO THE SOLVENCY AND LIQUIDITY OF THE INSTITUTIONS UNDER ITS
SUPERVISION AND ENFORCE PROMPT CORRECTIVE ACTION;

0) FIX AND ASSESS FEES, CHARGES AND PENALTIES AS THE COMMISSIONER MAY FIND

REASONABLE IN THE EXERCISE OF REGULATION; AND.
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P) 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 THE
CARRYING OUT OF, THE EXPRESS POWERS GRANTED THE COMMISSIONER TO ACHIEVE
‘THE OBJECTIVES AND PURPOSES OF THESE LAWS,

THE COMMISSION SHALL INDEMNIFY THE COMMISSIONER, DEPUTY
COMMISSIONER, AND OTHER OFFICIAL OF THE COMMISSION, INCLUDING PERSONNEL
PERFORMING SUPERVISION AND EXAMINATION FUNCTIONS, FOR ALL COSTS AND
EXPENSES REASONABLY INCURRED BY SUCH PERSONS IN CONNECTION WITH ANY CIVIL
OR CRIMINAL ACTIONS, SUITS OR PROCEEDINGS TO WHICH THEY MAY BE MADE A PARTY
TO BY THE REASON OF THE PERFORMANCE OF THEIR DUTIES AND FUNCTIONS, UNLESS
THEY ARE FINALLY ADJUDGED IN SUCH ACTIONS, SUITS OR PROCEEDINGS TO BE LIABLE
FOR NEGLIGENCE OR MISCONDUCT.

IN THE EVENT OF SETTLEMENT OR COMPROMISE, INDEMNIFICATION SHALL BE
PROVIDED ONLY IN CONNECTION WITH SUCH MATTERS COVERED BY THE SETTLEMENT AS
TO WHICH THE COMMISSION IS ADVISED BY EXTERNAL COUNSEL THAT THE PERSONS TO
BE INDEMNIFIED DID NOT COMMIT ANY NEGLIGENCE OR MISCONDUCT,

THE COSTS AND EXPENSES INCURRED IN DEFENDING THE AFOREMENTIONED
ACTION, SUIT OR PROCEEDING MAY BE PAID BY THE COMMISSION IN ADVANCE OF THE
FINAL DISPOSITION OF SUCH ACTION, SUIT OR PROCEEDING UPON RECEIPT OF AN
UNDERTAKING BY OR ON BEHALF OF THE COMMISSIONER, DEPUTY COMMISSIONER,
OFFICER OR EMPLOYEE TO REPAY THE AMOUNT ADVANCED SHOULD IT ULTIMATELY Be
DETERMINED BY THE COMMISSION THAT THE PERSON IS NOT ENTITLED TO BE
INDEMNIFIED,

See. [415] 431. In addition to the administrative sanctions provided elsewhere in this

Code, the Insurance Commissioner is hereby authorized, at his discretion, to impose upon
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the insurance companies, their directors and/or officers and/or agents, for any willful failure
oF refusal to comply with, or violation of any provision of this Code, or any order,
instruction, regulation, or ruling of the Insurance Commissioner, or any commission or
Irregularities, and/or conducting business in an unsafe or unsound manner as may be
determined by the Insurance Commissioner, the following:

{a) fines not LESS THAN FIVE THOUSAND PESOS AND NOT MORE THAN TWO

HUNDRED THOUSAND PESOS [in excess of five hundred pesos a dayl; and
(b) suspension, or after due hearing, removal of directors and/or officers and/or
agents.

Sec. [416] 432. The Commissioner shall have the power to adjudicate claims and

complaints involving any loss, damage or liability for which [in] AN insurer may be
answerable under any kind of policy or contract of insurance, or for which such insurer may

be liable under a contract of suretyship, or for which a reinsurer may be sued under any

Contract of reinsurance it may have entered into; or for which a mutual benefit association
may be held liable under the membership certificates it has issued to its members, where
the amount of any such loss, damage or liability, excluding interest, cost and attorney's fees,
being claimed or sued upon any kind of insurance, bond, reinsurance contract, or
membership certificate does not.exceed in any ‘single claim FIVE MILLION [one hundred
thousand] pesos.

THE POWER OF THE COMMISSIONER DOES NOT COVER THE RELATIONSHIP
BETWEEN THE INSURANCE COMPANY AND ITS AGENTS/BROKERS BUT IS LIMITED TO
ADJUDICATING CLAIMS AND COMPLAINTS FILED BY THE’ INSURED AGAINST THE
INSURANCE COMPANY.

THE COMMISSIONER MAY AUTHORIZE ANY OFFICER OR GROUP OF OFFICERS UNDER

HIM TO CONDUCT INVESTIGATION, INQUIRY AND/OR HEARING AND DECIDE CLAIMS AND
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HE MAY ISSUE RULES GOVERNING THE CONDUCT OF ADJUDICATION AND RESOLUTION OF
CASES. THE RULES OF court SHALL HAVE SUPPLETORY APPLICATION.

{The insurer or surety may, inthe same action file @ counterclaim against the insured
or the obligee. The insurer or surety may also file a cross-claim against a party for any claim
arising out of the transaction or occurrence that is the ‘subject matter of the original action
or of a counterclaim therein.] .

[With leave of the Commissioner, an insurer or surety may file a third-party
complaint against its reinsurers for indemnification, contribution, subrogation or any other
relief, in respect of the transaction that is the subject matter of the original action filed with
the Commissioner.}

The party filing an action pursuant to the provisions of this section thereby submits
his person to the jurisdiction of the Commissioner. The Commissioner shall acquire
jurisdiction over the person of the impleaded party or parties in accordance with and
pursuant to the provisions of the Rules of Court.

The authority to adjudicate granted to the Commissioner under this section shall be
concurrent with that of the civil courts, but the filing of a complaint with the Commissioner
shall preclude the civil courts from taking cognizance of a suit involving the same subject
matter.

Any decision, order or ruling rendered by the Commissioner after a hearing shall
have the force and effect of a judgment. Any party may appeal from a final order, ruling or
decision of the Commissioner by filing with the Commissioner within thirty days from
receipt of copy of such order, ruling or decision a notice of appeal to the [Intermediate
Appellate] Court OF APPEALS in the manner provided for in the Rules of Court for appeals
from the Regional Trial Court to the [Intermediate Appellate] Court OF APPEALS. [(As

amended by Batas Pambansa Big. 874).]
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[As soon as a decision, order or ruling has become final and executory, the
Commissioner shall motu proprio or on motion of the interested party, issue a writ of
execution requiring the sheriff or the proper officer to whom it is directed to execute said
decision, order or award, pursuant to Rule thirty-nine of the Rules of Court.)

For the purpose of any proceeding under this section, the Commissioner, or any
officer thereof designated by him{,] IS empowered to administer oaths and affirmation,
subpoena witnesses, compel their attendance, take evidence, and require the production of
any books, papers, documents, or contracts or other records which are relevant or material
to the inquiry. [In case of contumacy by, or refusal to obey a subpoena issued to any person,
the Commissioner may invoke the aid of any court of first instance within the jurisdiction of
which such proceeding is carried on, where such person resides or carries on his own
business, in requiring the attendance and testimony of witnesses and the production of
books, papers, documents, contracts or other records. And such court may issue an order
requiring such person to appear before the Commissioner, or officer designated by the
Commissioner, there to produce records, if so ordered or to give testimony touching the
matter In Question. Any failure to obey such order of the court may be published by such
court as a contempt thereof.}

A full and complete record shall be kept of all proceedings had before the
{clCommissioner, or the officers thereof designated by him, and all testimony shall be taken
down and transcribed by a stenographer appointed by the Commissioner,

IA transcribed copy of the evidence and proceeding, or any specific part thereof, of
any hearing taken by a stenographer appointed by the Commissioner, being certified by
such stenographer to be a true and correct transcript of the testimony on this hearing of a
particular witness, or of a specific proof thereof, carefully compared by him from his original

notes, and to be a correct statement of evidence and proceeding had in such hearing so
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purporting to be taken and subscribed, may be received as evidence by the Commissioner
and by any court with the same effect as if such stenographer were present and testified to
the facts so certified.] [(As amended by Presidential Decree No. 1455),]

IN ORDER TO PROMOTE PARTY AUTONOMY IN THE RESOLUTION OF CASES, THE
COMMISSIONER SHALL ESTABLISH A SYSTEM FOR RESOLVING CASES THROUGH THE USE
OF ALTERNATIVE DISPUTE RESOLUTION.

Title 2
FEES AND OTHER SOURCES OF FUNDS

Sec. [417] 433, (1) For the issuance or renewal of certificates of authority, ticenses
and certificates of registration, pursuant to pertinent provisions of this Code, the
Commissioner shall collect and receive fees which shall be not less than the following:

For each certificate of authority issued to an insurance company doing business in

the Philippines, two hundred pesos.

For each special certificate of authority issued to a servicing insurance company, one

hundred pesos.

For each license issued to a general agent of an insurance company, fifty pesos.

For each license issued to an insurance agent, twenty-five pesos.

For each license issued to an agent of variable contract policy, twenty-five pesos.

For each license Issued to an insurance broker, one hundred pesos.

For each license issued to [an] A reinsurance broker, one hundred pesos.

For each license issued to an insurance adjuster, one hundred pesos.
For each certificate of registration issued to an actuary, fifty pesos.
For each certificate of registration issued to a resident agent, fifty pesos.

For each license issued to a rating organization, one hundred pesos.

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For each certificate of registration issued to a non-life company underwriter, fifty

pesos.

For each license issued to a mutual benefit association, ten pesos.

For each certificate of registration issued to a trust for charitable uses, ten pesos.

All certificates of authority and all other licenses, as well as all certificates of

registration, issued to any person, partnership, association or corporation under the
pertinent provisions of this Code for which no expiration date has been prescribed, shall
expire on the fast day of [June] DECEMBER of THE THIRD [each] year FROM ITS ISSUANCE
and shall be renewed [annually] upon application therefor and payment of the
corresponding fee, if the licensee or holder of such license or certificate is continuing to
comply with all the applicable provisions of existing laws, and of rules, instructions, orders
and decisions of the Commissioner.
(2) For the filing of the annual statement referred to in section two hundred twenty-[three]
NINE, the Commissioner shall collect and receive from the insurance company so filing a fee
of NOT LESS THAN five hundred pesos: Provided, That a fine of NOT LESS THAN one
hundred pesos shall be imposed and collected by the Commissioner for each week of delay,
or any fraction thereof, in the filing of the annual statement.

For the filing of annual statement referred to in section four hundred THIRTEEN, the

‘Commissioner shall collect and receive from the mutual benefit association so filing a fee of

NOT LESS THAN ten pesos: Provided, That a fine of NOT LESS THAN ten pesos shall be
imposed and collected by the Commissioner for each week of delay, or any fraction thereof,
in the filing of the annual statement.

(3) For the examination prescribed in Section two hundred [forty-six] FIFTY TWO, the

Commissioner shall collect and receive fees according to the amount of its total assets, in

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the case of a domestic company, or of its assets in the Philippines, in the case of a foreign
company, NOT LESS THAN THE AMOUNT as follows:
(a) Two million pesos or more but less than four million pesos, Four hundred pesos;
(b) Four million pesos or more but less than six million pesos, Eight hundred pesos;
(c) Six million pesos or more but less than eight million pesos, One thousand two
hundred pesos;
(d) Eight million pesos or more but less than ten million pesos, One thousand six
hundred pesos;
(e) Ten million pesos or more, Two thousand pesos;
Provided, That if the said examination is made in places outside the Metropolitan Manila

area, besides these fees, the Commissioner shall require of the company examined the

payment of the actual and necessary travelling and subsistence expenses of the exa!
examiners concerned.

For the examination prescribed in section [three] FOUR hundred [ninety-nine]
TWELVE, the Commissioner shall collect and receive a minimum fee of NOT LESS THAN one
hundred pesos from the mutual benefit association examined: Provided, That if such

association has total assets of more than one hundred thousand pesos, an additional fee of

NOT LESS THAN ten pesos for every fifty thousand pesos in excess thereof shall be imposed:
[Provided, further, That such fee shall not exceed two thousand pesos.]

(4) For the filing of an application to withdraw from the Philippines under title eighteen, the
Commissioner shall collect and receive from the foreign company so withdrawing a fee of
NOT LESS THAN one thousand pesos.

(5) The Commissioner may fix and collect fees or charges for documents, transcripts, or
other materials which may be furnished by him not in excess of reasonable cost. [(As

amended by Presidential Decree No. 1455).]
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Sec. [418] 434. {ifthe total expenses of the Insurance Commissioner for every fiscal
year exceed the aggregate amount of the fees collected under the pertinent provisions of
this Code, the excess shall be charged against] THE COMMISSIONER, IN ACCORDANCE
WITH THE RULES AND REGULATIONS OF THE DEPARTMENT OF BUDGET AND
MANAGEMENT AND OTHER RELEVANT REGULATORY AGENCIES, SHALL SOURCE THE
SALARY, ALLOWANCES AND OTHER EXPENSES FROM THE RETAINED AMOUNT OF THE
FEES, CHARGES, PENALTIES AND OTHER INCOME FROM THE REGULATION OF INSURANCE
COMPANIES AND OTHER COVERED PERSONS AND ENTITIES, AND FROM the Insurance
Fund, which IS {shall hereafter be] created out of the proceeds of taxes on insurance
premiums mentioned in section two hundred fifty-five of the National internal Revenue
Code, as amended [: Provided, however, That pending the creation of said Insurance Fund,
the provisions of section two, three and four of Republic Act Numbered Two Hundred
Seventy-Five, shall continue to remain in force and effect}.

MISCELLANEOUS PROVISIONS.

Sec. [419] 435. Any person, company or corporation subject to the supervision and
control of the Commissioner who violates any provision of this Code, for which no penalty is
provided, shall be deemed guilty of a penal offense, and upon conviction be punished by a
fine not exceeding [ten] TWO HUNDRED thousand pesos or imprisonment of six months, or
both, at the discretion of the court.

If the offense is committed by a company or corporation, the officers, directors, or

other persons responsible for its operation, management, or administration, unless it can be

proved that they have taken no part in the commission of the offense, shall likewise be
guilty of a penal offense, and upon conviction be punished by a fine not exceeding [ten]
‘TWO HUNDRED thousand pesos or imprisonment of six months, or both, at the discretion of

the court.
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See, [428] 436. All criminal actions for the violation of any of the provisions of this
Code shall prescribe{d] after three years from the discovery of such violation: Provided, That
such actions shall in any event prescribe after ten years from the commission of such
violation,

Sec. (42a 437. Any person, partnership, association or corporation heretofore
authorized, licensed or registered: by the [Insurance] Commissioner shall be deemed to have
been authorized, licensed or registered under the provisions of this Code and shall be
governed by the provisions thereof: Provided, however, That where any such person,
partnership, association or corporation is affected by the new requirements of this Code,
said person, partnership association or corporation shall, unless otherwise herein provided,
be given a period of one year from the effectivity of this Code within which to comply with
the same.

Sec. [422] 438. REPEALING CLAUSE. Except as expressly provided by this Code, all
laws, DECREES, ORDERS, RULES AND REGULATIONS or parts thereof, inconsistent with any
provision of this Code shall be deemed repealed, AMENDED OR MODIFIED ACCORDINGLY.

Sec, [423] 439. SEPARABILITY CLAUSE. [Should] IF any provision{s] of this Code or
any part [thereof] HEREOF be declared invalid OR UNCONSTITUTIONAL, the REMAINDER OF
THE LAW OR other provisions, NOT OTHERWISE AFFECTED [so far as they are separable
from the invalid ones}, shall remain {in force] VALID AND SUBSISTING.

Sec. [424] 440, [This Code shall take effect immediately.] THIS CODE SHALL TAKE
EFFECT FIFTEEN (15) DAYS FOLLOWING ITS PUBLICATION IN A NEWSPAPER OF GENERAL
CIRCULATION, PROVIDED THAT THE TAX INCENTIVES GRANTED HEREUNDER SHALL TAKE
EFFECT ON

Approved,

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