G REPRESEN

RECEIVED
DATHAR_1 1 2020 Fa

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 5565

Introduced by: “KUYA” JOSE ANTONIO R. SY-ALVARADO

EXPLANATORY NOTE

The Philippine insurance industry is presently regulated by the Insurance
Commission in accordance with its statutory mandate per Republic Act No. 10607,
otherwise known as the “Insurance Code of the Philippines”. The banking industry and
non-bank financial institutions with quasi-banking functions are presently regulated by the
Bangko Sentral ng Pilipinas.

These financial services are vital to the country’s economic stability. This
representation believes that the same should be supervised by a single financial regulator
for purposes of unity in financial policy direction and uniform application of rules and
regulations towards achieving the country's financial and economic objectives. Moreover,
this representation has observed a trend in the leading economies of Southeast Asia that
similar financial services are supervised by a single authority.

Moreover, there is likewise a pressing need for the following: (1) the inclusion of
Parametric Insurance, Catastrophe Insurance, and Agri-Insurance to address the ever-
evolving insurance industry and needs of the insuring public; (2) inclusion of Takaful
Insurance governed by Sharia Law to protect the interests of our Muslim brothers and
sisters, as Islamic law does not allow conventional insurance; and (3) the strengthening
of consumer protection provisions of Republic Act No. 10607.

It is the position of this representation that given the above-mentioned
considerations, the transfer of the powers and functions, applicable funds and
appropriations, records, equipment, property, and all career personnel of the Insurance
Commission to the Bangko Sentral ng Pilipinas as a division of the latter, and the
amendment of Sections 2, 77, 189, 193, 200, 201, 202, 204 to 207, 219, 221, and 441 of
Republic Act No. 10607, are not only necessary for the growth of the Philippines’ financial
‘sector and its economy, in general, but are likewise beneficial.

In view of the foregoing, the approval of this bill is earnestly requested.

“KUYA” JOSE ANTONIO R. SY-ALVARADOY
Representative
First District of Bulacan


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No. _°259 _

Introduced by: “KUYA” JOSE ANTONIO R. SY-ALVARADO

AN ACT
TRANSFERRING THE POWERS AND FUNCTIONS OF THE INSURANCE
COMMISSION TO THE BANGKO SENTRAL NG PILIPINAS AND FURTHER
STRENGTHENING THE INSURANCE INDUSTRY, AMENDING SECTIONS 2, 77, 189,
193, 200, 201, 202, 204 TO 207, 219, 221, AND 441 OF REPUBLIC ACT NO. 10607,
OTHERWISE KNOWN AS THE INSURANCE CODE, AS AMENDED BY
PRESIDENTIAL DECREE NOS. 612, 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:

CHAPTER |
TRANSFER OF POWERS AND FUNCTIONS
OF THE INSURANCE COMMISSION TO
THE BANGKO SENTRAL NG PILIPINAS

Section 1. Transfer of Powers and Functions of the Insurance Commission to
the Bangko Sentral ng Pilipinas. - The powers and functions of the Insurance
Commission under Republic Act No. 10607, otherwise known as the “Insurance Code of
the Philippines,” its applicable funds and appropriations, records, equipment, property,
and all its career personnel are hereby transferred to the Bangko Sentral ng Pilipinas.

All previous references to the “Insurance Commissioner’, “Commissioner’, or
“Commission” in Republic Act No. 10607 shall hereby refer to the Bangko Sentral ng
Pilipinas

Section 2. Structure and Staffing Pattern. - The Bangko Sentral ng Pilipinas
shall determine its organizational structure and create new divisions or units as it may
deem necessary, and shall appoint officers and employees thereunder in accordance with
the civil service law, rules, and regulations.

The laws and rules on government reorganization as provided for in Republic Act
No. 6656, otherwise known as the Reorganization Law, shall govern the reorganization
process under this Act, insofar as applicable.

Section 3. Separation and Retirement from Service. - Employees who are
separated from service within one (1) year of the effectivity of this Act as a result of the
consolidation and/or reorganization under the provisions of this Act, if any, shall receive
separation benefits to which they may be entitled under Executive Order No. 366, s. 2004:
Provided, That those who are qualified to retire under existing retirement laws shall be
allowed to retire and receive retirement benefits to which they may be entitled under
applicable laws and issuances.

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Section 4. Transition Period. — The transfer of functions, assets, funds,
equipment, property, transactions, and career personnel of the Insurance Commission to
the Bangko Sentral ng Pilipinas, and the formulation of the internal organic structure,
staffing pattern, operating system, and revised budget of the Bangko Sentral ng Pilipinas,
shall be completed within one (1) year from the effectivity of this Act. During said time,
the existing personnel of the Insurance Commission shall continue to assume their posts
in holdover capacities until appointments to the newly created positions are issued.

Section 5. Implementing Rules and Regulations. — The Bangko Sentral ng
Pilipinas, in consultation with the Insurance Commission, shall issue within sixty (60) days
from the effectivity of this Act, the necessary rules and regulations for the effective
implementation of this Act.

Section 6. Transition Costs. - The amount needed for the implementation of this
Act shall be taken from the Insurance Fund of the Insurance Commission.

CHAPTER II
OTHER AMENDMENTS,

Section 7. Section 2, paragraph (a) of Republic Act No. 10607 is hereby amended
to read as follows:

“Section 2. x x x
(a) xxx

A CONTRACT OF INSURANCE MAY ALSO REFER TO THE
FOLLOWING AS HEREIN DEFINED:

(A) (1) PARAMETRIC INSURANCE - AN AGREEMENT
WHEREBY ONE UNDERTAKES FOR A CONSIDERATION TO
INDEMNIFY ANOTHER AGAINST LOSS, DAMAGE, OR LIABILITY
ARISING FROM AN UNKNOWN OR CONTINGENT EVENT OR TO PAY
OUT BENEFITS OR LOSSES TO ANOTHER ON THE BASIS OF A
PREDETERMINED INDEX OR PARAMETER.

(A) (2) ISLAMIC INSURANCE — A FORM OF INSURANCE BASED
ON SHARIA OR ISLAMIC RELIGIOUS LAW AND ON PRINCIPLES OF
MUTUALITY AND COOPERATION, ENCOMPASSING THE ELEMENT
OF SHARED RESPONSIBILITY, JOINT INDEMNITY COMMON
INTEREST AND SOLIDARITY.

(A) (3) CATASTROPHE INSURANCE -A CONTRACT OF
INSURANCE THAT AIMS TO COVER CATASTROPHE RISK.
CATASTROPHE RISK IS THE RISK OF LOSS, OR OF ADVERSE
CHANGE IN VALUE OF INSURANCE LIABILITIES, RESULTING FROM
SIGNIFICANT UNCERTAINTY OF PRICING AND PROVISIONING
ASSUMPTIONS RELATED TO EXTREME OR EXCEPTIONAL EVENTS.

(A) (4) AGRI-INSURANCE - AN INSURANCE PRODUCT THAT
PROTECTS FARMERS AGAINST LOSSES OR DAMAGES TO CROPS
OR LIVESTOCK.

(b) xxx"

Section 8. Section 77 of Republic Act No. 10607 is hereby amended to read as
follows:

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“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 full premium thereof has been paid, EXCEPT IN THE CASE
WHERE THERE IS AN INSTALLMENT PREMIUM PAYMENT
ARRANGEMENT BETWEEN THE INSURANCE COMPANY AND THE
POLICYHOLDER, OR IN THE CASE OF A LIFE OR AN INDUSTRIAL
LIFE POLICY WHENEVER THE GRACE PERIOD PROVISION
APPLIES.”

Section 9. Section 189 of Republic Act No. 10607 is hereby amended to read as
follows:

“Section 189. All companies regulated by the BANGKO SENTRAL
NG PILIPINAS, unless otherwise required by law, should comply with the
financial reporting frameworks adopted by the BANGKO SENTRAL NG
PILIPINAS for purposes of creating the statutory financial reports and the
annual statements to be submitted to the BANGKO SENTRAL NG
PILIPINAS. 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 BANGKO SENTRAL NG
PILIPINAS. 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 BANGKO SENTRAL NG
PILIPINAS shall take into account international standards concerning
solvency, GROUP-WIDE SUPERVISION, and insurance company
reporting as well as generally accepted actuarial principles concerning
financial reporting promulgated by the Actuarial Society of the Philippines.

THE BANGKO SENTRAL NG PILIPINAS SHALL HAVE THE
AUTHORITY TO MAKE, AMEND, AND RESCIND SUCH ACCOUNTING
RULES AND REGULATIONS AS MAY BE NECESSARY TO CARRY
OUT THE PROVISIONS OF THIS CODE, AND DEFINE ACCOUNTING,
TECHNICAL AND TRADE TERMS USED IN THIS CODE.

THE ASSETS AND INVESTMENTS 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.”

Section 10. Section 193 of Republic Act No. 10607 is hereby amended to read as
follows:

“Section 193. 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 BANGKO SENTRAL NG PILIPINAS
upon application therefor and payment by the company concerned of the
fees hereinafter prescribed.

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“The BANGKO SENTRAL NG PILIPINAS may refuse to issue a
certificate of authority to any insurance company if, in ITS 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
BANGKO SENTRAL NG PILIPINAS shall have satisfied ITSELF by such
examination as IT may make and such evidence as IT 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 local 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,
reasonably assure the safety of the interests of the policyholders and the
public.

“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 BANGKO
SENTRAL NG PILIPINAS. In addition hereto, the BANGKO SENTRAL NG
PILIPINAS shall prescribe the qualifications of directors, 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.

“Before issuing such certificate of authority, the BANGKO
SENTRAL NG PILIPINAS 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 BANGKO SENTRAL NG PILIPINAS 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 BANGKO SENTRAL NG
PILIPINAS shall expire on the last day of December, three (3) years
following its date of issuance, and shall be renewable every three (3) years
thereafter, subject to the company’s continuing compliance with the
provisions of this Code, circulars, instructions, rulings or decisions of the
BANGKO SENTRAL NG PILIPINAS.

“Every company receiving any such certificates of authority shall be
subject to the provisions of this Code and other related laws and to the
jurisdiction and supervision of the BANGKO SENTRAL NG PILIPINAS

“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
shall be deemed to include health, accident and disability insurance.

Xxx
“No insurance company issued with a valid certificate of authority to

transact insurance business anywhere in the Philippines by the BANGKO.
SENTRAL NG PILIPINAS shall be barred, prevented, or disenfranchised

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from issuing any insurance policy or from transacting any insurance
business within the scope or coverage of its certificate of authority,
anywhere in the Philippines, by any local government unit or authority, for
whatever guise or reason whatsoever, including under any kind of
ordinance, accreditation system, or scheme. Any local ordinance or local
government unit regulatory issuance imposing such restriction or
disenfranchisement on any insurance company shall be deemed null and
void ab initio.”

Section 11. Sections 200-201 of Republic Act No. 10607 are hereby amended to
read as follows:

“Section 200. An insurance company doing business in the
Philippines shall at all times maintain the minimum paid-up capital, NET
WORTH REQUIREMENTS AS REQUIRED IN SECTION 194, AND THE
SOLVENCY AND SUPERVISORY REQUIREMENTS AS PRESCRIBED
BY THE BANGKO SENTRAL NG PILIPINAS. Such solvency
requirements shall be based on internationally accepted solvency
frameworks, INCLUDING GROUP-WIDE SUPERVISION, and adopted
only after due consultation with the insurance industry associations.

Whenever the aforementioned requirement be found to be less than
that herein required to be maintained, the BANGKO SENTRAL NG
PILIPINAS 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 interests, and paid to the treasurer of the
company, within fifteen (15) days from receipt of the order: x x x"

“Section 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 194
AND SOLVENCY AND SUPERVISORY REQUIREMENTS UNDER
SECTION 200 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:

(a) The entire paid-up capital stock;
(b) The solvency requirements defined by Section 200;

(c) In the case of life insurance corporations, the legal reserve fund
required by Section 217;

(d) In the case of corporations other than life, the legal reserve fund
required by Section 219; and

(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 BANGKO SENTRAL NG PILIPINAS within thirty
(30) days after such declaration or distribution.

If the BANGKO SENTRAL NG PILIPINAS finds that any such
corporation has declared or distributed any such dividend in violation of this
section, IT may order such corporation to cease and desist from doing
business until the amount of such dividend or the portion thereof in excess

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of the amount allowed under this section has been restored to said
corporation

The BANGKO SENTRAL NG PILIPINAS shall prescribe solvency
requirements for branches of foreign insurance companies operating in the
Philippines.”

Section 12. Section 202 of Republic Act No. 10607 is hereby amended to read as

follows:

anew

“Section 202. WITHOUT PREJUDICE TO THE REQUIREMENTS
UNDER SECTION 200 OF THIS CODE, THE BANGKO SENTRAL NG
PILIPINAS SHALL PROVIDE REGULATIONS TO DETERMINE THE
LISTS, RECOGNITION AND VALUATION OF ASSETS REQUIRED ON
THE RISK BASED AND GROUP-WIDE SUPERVISORY FRAMEWORK.
SUCH DETERMINATION OF THE REQUIREMENTS SHALL BE BASED
ON INTERNATIONALLY ACCEPTED SOLVENCY AND SUPERVISORY
FRAMEWORKS.”

Section 13. Sections 204-207 of Republic Act No. 10607 are hereby deleted; and

provision, Section 204, is inserted to read as follows:

“Section 204. THE BANGKO SENTRAL NG PILIPINAS SHALL
PRESCRIBE IN ITS REGULATIONS, EITHER GENERALLY OR IN SUCH
CIRCUMSTANCES AND TO SUCH EXTENT AS MAY BE PRESCRIBED
OR SPECIFIED:

(A) THE MANNER IN WHICH THE ASSETS OF ANY INSURANCE
FUND OF A LICENSED INSURER ARE TO BE INVESTED AND
THE PLACES IN WHICH SUCH ASSETS ARE TO BE
MAINTAINED; AND

(B) THE NATURE OF THE ASSETS THAT IS APPROPRIATE IN
RELATION TO THE CURRENCY IN WHICH THE LIABILITIES
OF THE INSURER ARE OR MAY BE REQUIRED TO BE MET.

THE BANGKO SENTRAL NG PILIPINAS, IN ESTABLISHING THE
REQUIREMENTS FOR INVESTMENTS OF INSURANCE COMPANIES,
SHALL ADDRESS AT A MINIMUM, THE SECURITY, LIQUIDITY, AND
DIVERSIFICATION OF AN INSURER’S PORTFOLIO OF INVESTMENTS
AS A WHOLE, INCLUDING GROUP-WIDE INVESTMENT
SUPERVISION.

THE RECOGNITION, MEASUREMENT, AND VALUATION OF
INVESTMENTS SHALL BE BASED ON THE FINANCIAL REPORTING
FRAMEWORK AS ISSUED BY THE BANGKO SENTRAL NG PILIPINAS
UNDER CHAPTER II-A OF THIS CODE.”

Section 14. Section 219 of Republic Act No. 10607 is hereby amended to read as
follows:

“Section 219. EVERY NON-LIFE INSURANCE COMPANY SHALL
MAINTAIN AN ‘UNEARNED PREMIUM’ RESERVE AND ‘INCURRED
BUT NOT YET REPORTED’ RESERVE ON ITS POLICIES IN FORCE,
WHICH SHALL BE CHARGED AS A _ LIABILITY IN ANY
DETERMINATION OF ITS FINANCIAL CONDITION. THE ‘UNEARNED
PREMIUM’ AND ‘INCOME BUT NOT YET REPORTED’ RESERVES

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SHALL BE BASED ON GENERALLY ACCEPTED NON-LIFE
RESERVING PRINCIPLES AS DETERMINED BY THE BANGKO
SENTRAL NG PILIPINAS.”

Section 15. Section 221 of Republic Act No. 10607 is hereby amended to read as
follows:

“Section 221. THE BANGKO SENTRAL NG PILIPINAS MAY
ISSUE RULES AND REGULATIONS PROVIDING FOR A MAXIMUM
LIMIT ON THE OVERALL RETAINED RISKS OF INSURERS TO SERVE
AS A CATASTROPHE COVER REQUIREMENT FOR THE SAME.”

Section 16. Section 231-A is hereby inserted to Republic Act No. 10607, which
shall read as follows:

“SECTION 231-A. THE BANGKO SENTRAL NG PILIPINAS
SHALL ISSUE REGULATIONS REQUIRING INSURERS TO DISCLOSE
RELEVANT, COMPREHENSIVE AND ADEQUATE INFORMATION ON A
TIMELY BASIS IN ORDER TO GIVE POLICYHOLDERS AND MARKET
PARTICIPANTS A CLEAR VIEW OF THEIR BUSINESS ACTIVITIES,
PERFORMANCE AND FINANCIAL POSITION. THESE REGULATIONS
SHALL BE FORMULATED WITH A VIEW OF ENHANCING MARKET
DISCIPLINE AND AN UNDERSTANDING OF THE RISKS TO WHICH AN
INSURER IS EXPOSED AND THE MANNER IN WHICH THOSE RISKS
ARE MANAGED.”

Section 17. Section 251-A is hereby inserted to Republic Act No. 10607, which
shall read as follows:

“SECTION 251-A. THE BANGKO SENTRAL NG PILIPINAS
SHALL ENSURE AND REQUIRE THAT INSURERS AND
INTERMEDIARIES TAKE EFFECTIVE MEASURES TO DETER,
PREVENT, DETECT, REPORT, AND REMEDY FRAUD IN INSURANCE.

THE BANGKO SENTRAL NG PILIPINAS SHALL ISSUE A
SUPERVISORY FRAMEWORK TO MONITOR AND ENFORCE
COMPLIANCE BY INSURERS AND INTERMEDIARIES WITH THE
REQUIREMENTS TO COUNTER FRAUD IN INSURANCE.”

Section 18. A new section, Section 252-A, is hereby inserted to Republic Act No.
10607 to read as follows:

“SECTION 252-A. EVERY COMPANY DOING TAKAFUL
INSURANCE BUSINESS IN THE PHILIPPINES SHALL ANNUALLY
MAKE A VALUATION OF ALL POLICIES IN ACCORDANCE WITH THE
APPLICABLE STANDARDS REQUIRED BY SHARIA AND MUSLIM
LAWS.

SUCH STANDARDS OF VALUATION SHALL ONLY BE ISSUED
BY THE BANGKO SENTRAL NG PILIPINAS UPON CONSULTATION
WITH THE INDUSTRY.”

Section 19. Section 441 of Republic Act No. 10607 is hereby deleted.

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CHAPTER Ill
FINAL PROVISIONS

Section 20. 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 21. Repealing Clause. — All provisions of Republic Act No. 10607, other
laws, decrees, executive orders, rules and regulations, and other issuances, or parts
thereof, which are inconsistent with this Act are hereby repealed, amended, or modified
accordingly.

its

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