EIGHTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
Third Regular Session 
)
SENATE
S. No. 2411
FILED
Nub
Introduced by Senator Manuel "Lito" M. Lapid
AN ACT
AMENDING SECTIONS 48,77,176,181494 and 238 OF 
PRESIDENTIAL DECREE NO. 612, OTHERWISE KNOWN AS "THE 
INSURANCE CODE", AS AMENDED
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 
(Pl,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, to five hundred fifty million pesos 
(P550,000,000.00) in December 31, 2016 , to nine hundred million pesos 
(P900,000,000.00 in December 31, 2019 and to one billion three hundred thousand 
pesos (Pl,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.
The bill seeks to complement Senate Bill 2063 which I earlier filed to strengthen 
the functions of the Insurance Commission and transforming it to a collegial body to 
better exercise its functions and responsibilities.
In view of the foregoing, the approval of this bill is earnestly requested.
LITOw M. LAPID
Senator


EIGHTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
Third Regular Session 
)
SENATE
S. No.
2411
FILED
iNO-fcX
Introduced by Senator Manuel "Lito" M. Lapid
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AN ACT
AMENDING SECTIONS 48,77,176,181,194 and 238 OF 
PRESIDENTIAL DECREE NO. 612, OTHERWISE KNOWN AS "THE 
INSURANCE CODE", AS AMENDED
Be it enacted by the Senate and the 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."


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SECTION 2. Section 77 of Presidential Decree No. 612, as amended, is hereby 
further amended to read as foilows:
"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 ioss 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 
substantiaiiy similar kinds of insurance.
WHERE THE HEALTH INSURANCE CONTRACT PROVIDES THAT 
ALL OR A PORTION OF INDEMNITIES PROVIDED BY ANY SUCH 
POLICY ON ACCOUNT OF HOSPITAL, NURSING, MEDICAL OR 
SURGICAL SERVICES, OR UPON THE CONSENT OF THE INSURED 
OR GROUP POLICYHOLDER, POLICY BENEFITS MAYBE 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.


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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 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 INDEMNIFY 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 IN 
THIS CODE SHALL PROHIBIT THE INSURER TO PROVIDE OR 
ARRANGE MEDICAL SERVICES INCIDENTAL TO THE PRIMARY 
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; 
by-DGCcmber- 31,2022, and-additional-Four-hundred million
pesos] 1.
SUCH DOMESTIC INSURANCE COMPANY SHALL MEET AND 
COMPLY WITH THE RISK-BASED CAPITAL STANDARDS AS MAY 
BE PRESCRIBED BY THE COMMISSION AS PREREQUISITE IN THE 
RENEWAL OF ITS CERTIFICATE OF AUTHORITY AND CONDITION 
FOR ITS CONTINUED OPERATION.
XXX.


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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 AS CONTRACT OF INSURANCE WITH 
INEXTRICABLE INVESTMENT FEATURES AND AS SUCH SHALL BE 
EXCLUSIVELY REGULATED BY THE COMMISSION AND 
GOVERNED BY THE INSURANCE CODE."
XXX.
SECTION. 7. Separability Clause. - If 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,