Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
NINETEENTH CONGRESS
First Regular Session
HOUsE:I-L[-No.5214
INTRODUCED BY HON. DANILO A. DOMINGO
EXPLANATORY NOTE
Insurance is vital to the nation and our people.  It has proven to be a source of
security and protection during critical times. The growth and stability of this industry is
anchored  on  an  effective  framework  of laws  and  rules  that addresses  current  and
future developments.  It is for this reason that Presidential Decree No. 612, otherwise
known as the Insurance Code, which was enacted almost 47 years ago, was amended
by several  laws through the years, the  most recent of which was Republic Act (RA)
10607 enacted on August 15, 2013.
Various   improvements   in   compliance   standards   and   practices   were   set
including  financial  and  governance  requirements.  The  trust  and  confidence  of the
insuring  public,  the ability  of the  industry to  provide  better services and  a  nurturing
regulatory environment are sought to  be achieved.  The  past years showed  evident
success in the attainment of its objectives.
However, to further build on such gains, there are certain amendments to the
law  that  need  to  be  made,  most  critical  of which  is  the  requirement  for  insurance
companies to have a minimum net worth of One billion three hundred thousand pesos
(P1,300,000,000.00) by December 31, 2022.
To   further   ensure   financial   stability,   the   Insurance   Code   has   gradually
increased  the  required  capitalization  of  insurance  companies  to  Two  hundred  fifty
million  pesos  (P250,000,000.00)  in  June  30,  2013,  Five  hundred  fifty  million  pesos
(P550,000,000.00)     in     December     31,     2016,     Nine     hundred     million     pesos
(P900,000,000.00) in December 31, 2019, and to One billion three hundred thousand
pesos (P1,300,000,000.00) by December 31, 2022.
A review of comparative and advanced markets, particularly in ASEAN, would
show that the final increase in the required capitalization by December 31, 2022 would
make the Philippine requirement the highest in the region considering our market size.
Furthermore,  our  net worth  requirements  are  more  stringent than  the fixed  paid-up
capital required in other ASEAN countries. The Risk-Based Capital Framework as set


forth  in  the  Insurance  Code  has  continued  to  be  a  more  reasonable  safeguard  to
measure the capacity of a company to meet its financial obligations.
The    ongoing    COVID-19    epidemic    has    had    far-reaching    effects    and
consequences   to   our  economy,   the   insurance   industry   is   no   exception.   While
remaining   resilient  and   compliant,   the   industry   needs   to   continuously   meet   its
obligations.  Thus,  a  reprieve  from  the  legislative  imposition  of  the  final  minimum
capitalization is needed to help the industry face its challenges more reasonably and
equitably.   Moving   forward,   public   interest   is   still   adequately   served   since   the
mechanism to determine and impose the subsequent capitalization requirements are
provided for in the Insurance Code.
There  are  other amendments  to  the  Insurance  Code  that  are  necessary  to
improve  services  to   the   insuring   public.   These   include  the   ability  of  insurance
companies to directly pay healthcare providers and expand their range of insurance
products  to  offer.  The  bill  also  seeks  to  clarify  the  issue  on  the  incontestability  of
coverage as affected  by the death of the insured within the two-year incontestability
period and when premium payment impacts on the contract as valid and binding. The
bill also clarifies that the definition and feature of variable contracts are not collective
investment scheme and properly construed as insurance products.
In view of the foregoing, the approval of this bill is earnestly requested.
- :`,`':.`;1.     .       .`,`          -


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
NINETEENTH CONGRESS
First Regular Session
HOUsEbiL~L`No.5214
INTRODUCED BY HON. DANILO A. DOIvllNGO
AN ACT
AMENDING SECTIONS 48, 77,176,181,194, AND 238 0F PRESIDENTIAL
DECREE NO. 612, OTHERWISE KNOWN AS ''THE INSURANCE CODE`., AS
AMENDED
B_e  it  enacted  by  the  Senate  and  House  of  Representatives  of the  Philippines  in
Congress assembled:
SECTION 1. Section 48 of Presidential Decree No. 612, as amended, is hereby
further amended to read as follows:
"Section 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 (2) years from the date of its issue or of its last
reinstatement,  the  insurer cannot prove that the  policy is void ab
initio or is rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.
THE   DEATH   OF   THE   INSURED   DURING   THE   TWO-YEAR
PERIOD FROM THE DATE OF THE ISSUANCE OF THE POLICY
OR OF ITS LAST REINSTATEMENT SHALL NOT RENDER THE
POLICY INCONTESTABLE."
SECTION 2. Section 77 of Presidential Decree No. 612, as amended, is hereby
further amended to read as follows:
"Section  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, OR IN
THE CASE OF INSTALLMENT MODE OF PAYMENT ALLOWED
BY  THE  INSURER,  THE  INITIAL  INSTALLMENT  PREMIUM  IS
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 ninety (90)-day credit extension is given. No credit
extension to a duly licensed intermediary should exceed ninety (90)
days from date of issuance of the policy."
SECTION  3.  Section   176  of  Presidential  Decree  No.  612,  as  amended,  is
hereby further amended to read as follows:
"Section   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, emp[oyer'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.
WHERE  THE  HEALTH   INSURANCE  CONTRACT  PROVIDES
THAT  ALL  OR  A  PORTION  OF  INDEMNITIES  PROVIDED  BY
ANY SUCH  POLICY 0N  ACCOUNT  OF  HOSPITAL,  NURSING,
IVIEDICAL     OR    SURGICAL     SERVICES,     OR     UPON     THE
CONSENT  OF  THE  INSURED  OR  GROUP  POLICYHOLDER,
POLICY    BENEFITS    MAY    BE    PAID    DIRECTLY    TO    THE
HOSPITAL,  MEDICAL  FACILITIES  OR  PERSON  RENDERING
SuCH SERVICES."
SECTION  4.    Section  181  of  Presidential  Decree  No.  612,  as  amended,  is
hereby further amended to read as follows:
"Section   181.   Life  insurance  is  insurance  on   human   lives  and
insurance appertaining thereto or connected therewith.
Every contract or undertaking for the payment of annuities including
contracts for the payment of lump sums under a retirement program
where a life insurance company manages or acts as a trustee for
such   retirement  program  shall   be  considered   a   life   insurance
contract for purposes of this Code.
HEALTH INSURANCE, APPERTAINING OR CONNECTED TO A
LIFE INSURANCE CONTRACT, TO INDEIVINIFY THE INSURED
FOR   MEDICAL   EXPENSES,   THROUGH   ASSUMPTION   OF
FINANCIAL   RISK   AND    POOLING   OF   FUNDS   FOR   RISK
DISTRIBUTION,     SHALL     BE     CONSIDERED    AS    A     LIFE
INSURANCE  CONTRACT.   NOTHING   ]N  THIS  CODE  SHALL
PROHIBIT    THE    INSURER    TO    PROVIDE    OR    ARRANGE
MEDICAL     SERVICES     INCIDENTAL     TO     THE     PRIIVIARY
PuRPOSE  OF  INDEMNIFYING  AGAINST  LOSS,  DAMAGE  OR


LIABILITY  UPON  THE  OCCURRENCE  OF AN  UNKNOWN  OR
CONTINGENT EVENT OR ILLNESS."
SECTION  5.  Section   194  of  Presidential  Decree  No.  612,  as  amended,  is
hereby further amended to read as follows:
"Section 194. Except as provided in Section 289, no new domestic
life  or  non-life  insurance  company  shall,  in  a  stock  corporation,
engage in business in the Philippines unless possessed of a paid-
up capital equal to at least One billion pesos (P1,000,000,000.00):
Provided,   That  a   domestic   insurance   company  already  doing
business in the Philippines shall have a net worth by June 30, 2013
of Two hundred fifty million pesos (P250,000,000.00). Furthermore,
said  company  must  have  by  December  31,  2016,  an  additional
Three hundred million pesos (P300,000,000.00) in net worth AND;
by  December  31,  2019,  an  additional  Three  hundred  fifty  million
pesos   (P350,000,000.00)   in   net   worth;   [and   by   December
31,2022, and additional Four hundred million pesos].
SUCH DOMESTIC INSURANCE COMPANY SHALL MEET AND
COMPLY WITH  THE  RISK-BASED  CAPITAL STANDARDS  AS
MAY      BE      PRESCRIBED      BY     THE      COMMISSION      AS
PREREQUISITE FOR THE RENEWAL OF ITS CERTIFICATE OF
AUTHORITY     AND      CONDITION      FOR     ITS     CONTINUED
OPERATION.
xxx.„
SECTION  6.  Section  238  of  Presidential  Decree  No.  612,  as  amended,  is
hereby further amended to read as follows:
``xxx.
"Section 238(b). The term variable contract shall  mean any policy
or contract with either a group or an  individual  basis issued  by an
insurance  company  providing  for  benefits  or  other  contractual
payments or values thereunder to vary so as to reflect investments
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  investment  and
accounts.   This   contract   may   also   provide   benefits   or  values
incidental thereto payable 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 Investment Company Act, as
amended,  nor  subject  to  regulation  under  said  Acts.  NEITHER
SHALL   IT   BE   DEEMED   AS   A   COLLECTIVE   INVESTMENT
SCHEME CONSIDERING THAT IT IS, AS HEREBY DEFINED, A
CONTRACT       OF       INSURANCE       WITH       INEXTRICABLE


INVESTMENT     FEATURES    AND     AS     SUCH     SHALL     BE
EXCLUSIVELY   REGULATED    BY   THE    COIVIMISSION    AND
GOVERNED BY THE INSURANCE CODE."
SECTION.  7.  Separability  Clause.  -  lf any  provision  of this  Act  shall  be  held
unconstitutional or invalid, the other provisions not otherwise affected shall remain in
full force and effect.
SECTION 8.  Repealing Clause. -All laws, decrees, executive orders, rules and
regulations  or  parts  thereof which  are  contrary  to  or  inconsistent  with  this Act  are
hereby repealed, amended or modified accordingly.
SECTION  9.  Effectivity.   -This Act shall  take effect fifteen  (15) days after its
complete  publication  either  in  the  Official  Gazette  or  in  a  newspaper  of  general
circulation.
Approved,