NINETEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
Senate
nftlic j&i crftar/
72 SEP 27 P2:l0
SENATE
S. No. 1348
Introduced by Senator MANUEL "LITO" M. LAPID
AN ACT
AMENDING SECTIONS 48, 77, 176, 181,194 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 miliion 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 biliion three hundred thousand pesos (PI,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 reasonabie safeguard to measure the capacity of a company to meet 
its financial obligations.
The 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 obiigations. Thus, a reprieve from the iegislative 
imposition of the final minimum capitalization is needed to help the industry face its challenges 
more reasonably and equitably. Moving forward, pubiic interest is stiii 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 incontestabiiity 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
IANUEL"LITO" M. LAPID
Senator


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NINETEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
SENATE
S. No. 1348
*ae SEP 27 P2 .10
RtCtIVB) BY:
Introduced by Senator Manuel "Lito" M. Lapid
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AN ACT
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AMENDING SECTIONS 48, 77, 176, 181, 194 AND 238 OF PRESIDENTIAL
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DECREE NO. 612, OTHERWISE KNOWN AS "THE INSURANCE CODE", AS
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AMENDED
Be it enacted by the Senate and the House of Representatives of the Philippines 
in Congress assembled:
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SECTION 1. Section 48 of Presidential Decree No. 612, as amended, is hereby
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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


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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
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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."
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SECTION 3. Section 176 of Presidential Decree No. 612, as amended, is hereby
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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, employer's liability insurance, motor vehicle 
liability insurance, plate glass insurance, burglary and theft 
insurance, personal accident and health insurance as


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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 ON 
ACCOUNT OF HOSPITAL, NURSING, MEDICAL 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.''
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SECTION 4. Section 181 of Presidential Decree No. 612, as amended, is hereby
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further amended to read as follows:
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"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 
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


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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."
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SECTION 5. Section 194 of Presidential Decree No. 612, as amended, is hereby
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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 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
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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."
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XXX.


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