FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
1 
7 JiJi. 
-4 f’i 
:\I 
First Regular Session 
) 
S E N A T E  
s . N ~ .  1094 
Iptroduced by Senator Loren Legarda 
- EXPLANATORY NOTE 
Every Filipino desires to work at the prime of his/her life with the hope that 
his/her twilight years will be covered by the fruits of their hard labor. The pre-need 
plan industry has stepped into the realm of this hope and has established the likes of 
educational, memorial and pension plans which have gained recognition as the answer 
to every filipino’s better retirement years. 
Through the years, the pre-need plan 
industry has grown with over sixty (60) firms presently engaged actively in the sale of 
pre-need plan securities. With such overgrowth, there arises a need to regulate the pre- 
need industry to ensure a more secure, stable and assured return of investment for 
every thriving Filipino. 
With the upsurge of emergence of many pre-need plan companies, it is 
imperative for the government to regulate its operation and activities and ensure their 
liquidity and solvency for the protection of the public. Thus this Bill seeks to establish a 
Pre Need Plan Securities Code to govern the business, undertakings, operations and 
activities of pre-need plan companies which issues and/or sells pre-need plans or 
similar contracts to the public. 
This bill aims vest upon the Insurance Commission the authority to supervise 
and regulate the operation and activities of these pre-need plan companies ensuring 
that both the plan holder and the issuer are protected and neither is placed at a 
disadvantaged or losing stance.Since these plans serve as contracts between plan holder 
and issuer, a third party must be enjoined to regulate qnd protect both parties, ensuring 
that both benefit from such pre-need contract. 
Moreover, this bill seeks to establish a Planholders’ Protection Fund to ensure 
that in case of extreme business losses or insolvency, every plan holder is protected and 
compensated. After all, the substance of a pre-need plan is their investment for an 
assured future; hence, this future must be secured and assured. 
Finally, this bill aims to create a Trust Fund to ensure liquidity and solvency. At 
least 10% of the Fund of every pre-need company, but in no case lower than P500,000, 
should be set aside and m.aintained as Liquidity Reserve Fund. In addition thereto, 
pre-need companies shall set aside another 10% of their Fund for lending to 
Countryside and Business Enterprises established under RA 6810 and low-cost housing 
programs of the government. 
In view of the foregoing, approval of this bill is earnestly urged. 
Senator 


FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
1 
3 JUL -4 1' 3 '0 ! 
First Regular Session 
) 
~I~~~~~~~~ 
w:, .-+-.-- 
S. No. 
E "fiM4 
Introduced by Senator Loren Legarda 
AN ACT 
ESTABLISHING THE PRE-NEED PLAN SECURITIES CODE 
Be it enacted by the Senate and the House of Repuesentatizies of the Philippines in 
Congress assembled: 
. .  
SECTION 1. Title. - This Act shall be known as the "PRE-NEED PLAN 
SECURITIES CODE. 
SECTION 2. Definition of Terms. - Wherever used in this Code, the following 
terms shall have the respective meanings hereafter set forth, unless the context 
otherwise requires : 
(a) "Commission" means the Insurance Commission 
(b) "he-need Plans" are contracts which provide for the performance / delivery 
of future services and / or payment of monetary consideration / benefits at 
the time of actual need or maturity of the contract, payable either in cash or 
installment, with or without insurance coverage, by planholders at prices 
stated in the contract, such as life memorial plans, pension plans, education 
plans, interment plans, and similar contracts and investments. 
(c) "Issuer" means any corporation registered with the Commission and 
authorized / licensed to sell or offer for sale pre-need plans and / or similar 
contracts and investments. 
(d) "Planholder" means any natural or juridical person who purchases pre-need 
plans or similar contracts and investments for whom or for whose 
beneficiaries fu&re services are to be rendered or payments / benefits 
delivered as guaranteed by the issuer at the time of need or maturity of the 
contract. 
(e) "Traditional or actual cost plans" refer to such plans whose corresponding 
benefits / services are guaranteed in spite of increase in costs of such benefits 
/ services at the time of availment on account of the contingencies of inflation 
and interest yield rate fluctuations, among others. 


(f) "Fixed Value Plans" refer to plans whose benefits and costs of services are 
fixed at the time of purchase of the plan. 
SECTION 3. Supemision b Regulation. - Every pre-need company shall be subject 
to the supervision and regulation of the Insurance Commission. The Commission shall 
create a new department within its control, headed by a director to regulate and 
supervise the operation and activities of pre-need plan companies in the country. For 
this purpose, an amount equivalent to twenty percent (20%) of the fees, charges, and 
other income derived from the pre-need industry shall be allocated and retained by the 
Commission. 
The Commission shall have the authority to determine the number of pre-need 
companies in order to prevent industry overcrowding and undue competition. 
CHAPTER 11. REGISTRATION 
SECTION 4. RegiStration. - No corporation shall issue or sell pre-need plans or 
similar contracts and investments unless such securities shall have been registered and 
licensed pursuant to the provisions of the Revised Securities Act. 
SECTION 5. Registration Procedure. - All pre-need plans or similar contracts and 
investments shall be registered and licensed through the filing by the issuer with the 
Commission of a sworn registration statement containing the documents required by 
the Commission and an actuarial viability of the plan duly certified by an accredited 
actuary. 
Upon filing of the registration statement, the registrant shall pay to the 
Commission a minimum fee of one tenth of one percent of the maximum aggregate 
price at which such plans or contracts are proposed to be sold, but not less than One 
Thousand Pesos (Pl,OOO.OO), and the fact of such filing shall be immediately published 
by the Commission at the expense of registrant in two (2) newspapers of general 
circulation in the Philippines, once a week for two (2) consecutive weeks, reciting that a 
registration statement for the sale of such .plans or contracts has been filed with it, and 
that the aforesaid registration statement, as well as the papers attached thereto, are open 
for inspection during business hours by interested parties. 
Any interested party may file an opposition to the registration within ten (10) 
days from the date of the last publication. 
SECTION 6. Capital. - The issuer engaged in the issue and sale of pre-need plans 
or similar contracts or investments shall have a minimum unimpaired capital of at least 
Ten Million Pesos (PlO,OOO,OOO.OO) 
plus Five Million Pesos (P5,000,000.00) for every 
additional pre-need product, in cash or property. The Commission may increase such 
minimum paid-up capital stock, under such terms and conditions as it may impose, to 
an amount which, in its discretion, would reasonably assure the safety of the interests of 
the planholders and the public. 
, SECTION 7. Federation Membership. - All pre-need plan companies shall be 
registered members of the federation of pre-need plan companies. 
CHAPTER 111. TRUST FUND 


SECTION 8. Trust Fund. - To ensure the delivery of the guaranteed benefits and 
services provided under a pre-need plan contract, a trust fund shall be established 
independently with and shall be administered and managed by a reputable bank 
authorized to perform trust functions in the Philippines. No withdrawal shall be made 
from the trust fund except for paying the cost of service rendered or property delivered, 
bank charges and investment expenses in the operation of the trust fund, expenses in 
the delivery of the benefiis or services, cash surrender/ termination values payable to 
the planholders, annuities, conpibutions to the fund of cancelled plans, taxes on trust 
funds, and other costs necessary to insure the delivery of benefits or services. 
SECTION 9. Deposits in the Trust Fund. - The issuer shall make periodic deposits 
in the trust fund in an amount not less than forty percent (40%) of the gross pre-need 
price of the plan, if sold for cash, within sixty (60) 'days upon receipt of payment. For 
plans sold on installment basis, the following minimurr. percentages on quarterly gross 
collections shall be deposited within sixty (60) days following the end of each quarter of 
the fiscal year of the issuer, as follows: 
I 
(a) collections on the first 20% of plan value 
- 5% 
(b) collections on the second 20% of plan value - 5% 
(c) collections on the third 20% of plan value 
- 60% 
(d) collections on the fourth 20% of plan value 
- 65% 
(e) collections on thelifth 20% of plan value 
- 65% 
If the above trust fund deposit rates are not sufficient in accordance with the 
actuarial viability study of the plan prepared by the Commission-accredited actuary, 
the approved trust fund deposit rates appearing in the approved actuarial pricing by 
the Commission shall be the required basis for the periodic deposits to the trust fund. 
The proceed$ of insurance coverage taken from an insurance company shall in 
appropriate cases be considered as collections, but shall not be subject to commission. 
SECTION 10. Actuarial Valuation ofthe Trust Fund. - An actuarial valuation report 
of the sufficiency of the trust fund to pay the contractual liabilities'of the issuer under 
the plans issued, duly certified by an accredited actuary, shall be submitted to the 
Commission within one hundred twenty (120) days after the end of every fiscal year. 
The Commission shall refer the report to its'actuarial consultant, if there is one, or to an 
independent actuary for verification and re-examination. 
The expenses incurred 
therefore shall be charged to the issuer. 
Upon approval by the Commission of the 
actuarial computation, any deficiency in the actuarially valued reserve liabilities shall 
be covered through additional deposits within thirty (30) days, or such longer 
additional deposits within.thirty (30) days, or such longer period as the Commission 
may allow, after receipt of notice of deficiency from the Commission. Any excess in the 
trust fund over the actuarial reserve liabilities may be applied to prospective required 
deposits to the trust fund. 
SECTION 11. Trust Agreement. - The agreement creating the trust fund which 
shall be submitted for approval of the Commission shall define the investment policy 
and portfolio mix taking into consideration the factors of security of the ' principal 
growth, yield and liquidity in accordance with the prevailing economic conditions; 
manner in which the trust fund is to be operated; the investment powers of the trustee; 
allocation and apportionment of income, profits and losses; terms and conditions 


governing the admission and withdrawal of the fund; and such other matters as may be 
necessary or proper to define clearly the rights of the issuer with regard to the trust 
fund. 
SECTION 12. Limits on Trust Fund Investment. - The trustee shall not use the trust 
fund to extend any loan to nor to invest in the pre-need company, its directors, officers, 
stockholders and related interests nor to any other entity directly or indirectly 
controlled by the above mentioned; Provided, however; That pre-need companies shall 
set aside ten percent (10%) of the trust fund for lending to Countryside and Business 
Enterprises established under R.A. No. 6810 and low-cost housing programs of the 
government. 
SECTION 13. Liquidity Reserve Fund. - At least ten percent (10%) of the trust fund 
but in no case less than Five Hundred Thousand Pesos (P500,OOO.OO) must be set aside 
and maintained as a liquidity reserve fund which shall be invested only in the following 
transactions: 
Loans secured by a hold-out on, assignment or pledge of deposits 
maintained either with the trustee or other banks, or of deposit substitutes 
of the trustee itself or mortgage and chattel mortgage bonds issued by the 
trustee; 
Short-term government securities or bonds, and such other evidences of 
indebtedness or obligations, the servicing and repayment of which are 
fully guaranteed by the Republic of the Philippines; 
Repurchase agreements with any of those mentioned in item (b) above, as 
underlying instruments thereof; 
Savings or time deposits with government-owned banks or commercial 
banks; Provided, That in no case shall any such savings or time deposit 
account be accepted or allowed under a “bearer”, ”numbered account” or 
other similar arrangements; and 
Other investments as the Commission may allow. 
CH,APTER IV. PLAN AGREEMENT, AMENDMENT AND PUBLICATIONS 
SECTION 14. Compliance 70ith the Contract. - Upon full payment of the contract 
price by the plan holder, the issuer shall render to him or his assigns the services or give 
value thereof or deliver the property as stipulated in the contract. 
SECTION 15. Amendments to the Plan Agreements, Contracts, or Ofhev Documents 
Pertinent to Registration. - No plan agreement, trust agreement, contract or other 
documents of the plan or contracts shall be amended or modified without prior 
approval of the Commission, and the planholders. 
SECTION 16. Default: Reinstatement Period. - Every issuer must provide in all 
contracts issued to planhcdders, a grace period of at 1ea.t three (3) months within which 
to pay accrued installments. Non-payment beyond the grace period shall render the 
plans without further force and effect. Any payment by the planholder after the grace 
period shall be reimbursed forthwith. The planholder shall be allowed a period of not 


less than two (2) years within which to reinstate his plan. No cancellation of plans shall 
be made by the issuer during such period when reinstatement may be effected. 
The planholder of cancelled or lapsed plans shall be entitled to termination 
values as provided in the following section. 
SECTION 17. Termination Values. - Holders of surrendered and lapsed or 
cancelled policies are entitled to such values in accordance with a schedule of minimum 
termination values that the Commission may formulate to protect the equities of 
planholders. 
CHAPTER V. ACTUARIES 
SECTION 18. Requived Actuary: - No pre-need company shall be licensed to do 
business in the Philippines nor shall any pre-need company doing business in the 
Philippines be allowed to continue doing-such business unless they shall engage the 
services of either a resident or consulting actuary duly accredited with the Commission 
who shall, during his tenure of office, be directly responsible for the direction and 
supervision of all actuarial work connected with or that may be involved in the business 
of the pre-need company. 
SECTION 19. Qualifcations of the Actuary. - Any person who is a fellow of good 
standing in the Actuarial Society of the Philippines may be officially accredited by the 
Commission to act as an actuary in any pre-need company upon application therefore 
and the payment of the prescribed fee. 
CHAPTER VI. REPORTS 
SECTION 20. 
Actuarial Valuation Report. - Every pre-need company shall 
annually make a valuation of all pre-need plans in order to determine its financial 
stability and solvency. The valuation shall be made in accordance with the minimum 
standards of valuation for pre-need plans prepared by the Actuarial Society of the 
Philippines and adopted by the Commission. The results of such valuation shall be 
reported to the Commission accompanied by a sworn statement of opinion of the 
company’s resident actuary or consulting actuary within one hundred twenty (120) 
days after the end of each fiscal period. 
SECTION 21. Audited Financial Statement. - Every pre-need company doing 
business in the Philippines shall annually render to the Commission within one 
hundred twenty (120) days after the end of each fiscal period a statement signed and 
sworn to by the chief officer of such company showing the exact condition of its 
financial affairs in accordance with a uniform accounting system that may be prescribed 
by the Commission. 
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 this Act. 
SECTION 22. Annual Statement of Tvust Fund. - Every issuer shall file with the 
Commission an annual statement of its operations with special focus on its trust fund 
within one hundred twenty (120) days after the end of each fiscal period. 
Such 


statement shall be on a form prescribed or approved by the Commission and shall 
include details as to all of the income, disbursements, assets and liability items of and 
associated with the said trust fund accounts. Said statement shall be under oath of two 
officers of the company and shall be filed simultaneously with the annual statement 
required in the preceding section. 
SECTION 23. Publication of the Annual Financial Statement. - Within thirty (30) 
days after receipt of the annual statement approved by the Commission, every pre-need 
company doing business in the Philippines shall publish in two (2) newspapers of 
general circulation a full synopsis of its annual financial statement showing fully the 
conditions of its business, and setting forth its resources and liabilities. 
CHAPTER VII. SUSl'ENSION/REVOCATION OF LICENSE OR PERMIT 
SECTION 24. Suspension of License or Permit. - If at any time the information 
contained in the statement filed has been found to be misleading, incorrect, inadequate 
or incomplete or the sale or offering for sale of the plans or contracts may work or tend 
to work a fraud, the Commission may require from the person filing such statement 
further information as may, in its judgment, be necessary to enable :he Commission to 
ascertain whether the registration of such security should be revoked on any ground 
specified in the Revised Securities Act, and the Commission may also suspend the right 
to sell such security pending further investigation, by entering an order specifying the 
grounds for such action and by notifying, expressly or by personal service, the person 
filing such statement and every broker who shall have notified the Commission of an 
intention to sell such security. 
Refusal to furnish information requircd by the 
Commission within a reasonable time to be fixed by the Commission, may be a proper 
ground for the entry of such order of suspension. 
Upon entry of such order of suspension, no further sales of such security shall be 
made until the Commission orders otherwise. 
Upon entry of such order of suspension, the Commission shall conduct a hearing 
with proper notice 'to the parties to determine whether the sale of any such security 
should be revoked on any ground under the Revised Securities Act. It shall make the 
necessary findings and enter a final order prohibiting the sale of such plans or contracts 
whenever proper. If, however, the Commission finds that the sale of the, plans or 
contracts is not fraudulent or will not result in fraud, it shall forthwith enter an order 
revoking the suspension, and such plan or contract shall be restored to its status as a 
security registered under the Revised Securities Act, as of the date of such order of 
revocation of suspension. 
SECTION 25. Grounds for Revocation of Permit or License. - The Commission may, 
after due notice and hearing, revoke the registration of pre-need plan and the permit to 
sell such security by issuing an order to such effect, setting forth its findings in respect 
thereto, if upon examination it shall appear that the issuer: 
(a) 
is insolvent; 
(b) 
has violated any of the provisions of the Revised Securities Act, or the 
rules promulgated pursuant thereto, or any order of the Commission of 
which the issuer had notice; 
has been or is engaged or is about to engage in fraudulent transactions; 
(c) 


(d) 
has made fraudulent representatidh in any prospectus, circular, literature 
or other form of broadcast or media communication concerning its plans 
or securities; or 
does not conduct its business in accordance with law. 
(e) 
The Commission may compel the production of all books and records of the 
issuer, and may administer oaths and examine the officers or employees of the issuer. 
Failure by the issuer to submit the statements or books required or refusal to 
permit any examination thereof by the Commission shall be proper grounds for the 
revocation of the registration of and permit to sell its securities. 
If the Commission deems it necessary, it may issue an order suspending the right 
to sell securities pending any investigation stating the grounds therefore. Upon the 
issuance thereof, no further sale of such security shall be made until the suspension 
order is lifted or set aside by the Commission. Any such sales in the interim shall be 
void. 
Notice of such suspension order or lifting thereof shall be made expressly or by 
personal service upon the issuer and every dealer or broker or by personal service upon 
the issuer and every dealer or broker who shall have notified the Commission of his 
intention to sell such security. 
SECTION 26. Wifkdruzual of Registration by the Issuer. - A registration statement 
may be revoked by the Commission upon petition made for its withdrawal by the 
issuer. 
An application for the withdrawal of a registration statement shall be 
accompanied by the following: 
petition or application withdrawal of the License/Permit to Sell Securities 
to the public, stating the reasons therefore; 
proof of publication of Notice to Stockholders/Investors of said 
revocation/ withdrawal; 
Board resolution approving such application for withdrawal, certified 
under oath by the Corporate Secretary and attested to by the President; 
list of all stockholders/planholders/ investors; 
for pre-need plan issuers, a certification under oath by the Treasurer 
attested to hy the President that the planholders’ contributions were 
refunded and their claims fully settled; 
a joint and several assumption of liability executed by the President and 
Treasurer of the issuer for settlement of all proved claims that mdy arise as 
a result of said withdrawal; and 
sufficiency of trust fund .to cover payment of cash surrender/termination 
values. 
Upon payment of filing fee to be determined by the.Commission but not lower 
than One Thousand Pesos (Pl,OOO.OO), 
the petition shall be published by the 
Commission, at the expense of the issuer in two (2) newspapers of general circulation, 
once a week for two (2) consecutive weeks, with notice to the general public, 


planholders, stockholders or other persons affected by said withdrawal, who may file 
their claims with the issuer and the Commission. 
After publication'and upon findings of the Commission that the petition with all 
papers and documents attached thereto is on its face complete and that no party stands 
to suffer damage thereby, it shall issue an order revoking said Registration/License or 
Permit to Sell Securities to the public. 
SECTIION 27. jurisdiction omr Cases. - The Commission shall have jurisdiction to 
adjudicate over all complaints filed by planholders against or by pre-need sales 
associates, solicitors and/or issuers of pre-need companies against one another. 
SECTION 28. 
Penalty for Issuance/Sale or Overpricing of Plans in Excess of 
Authorized Amount. - The issuance/sale of pre-need plans and similar contracts and 
investments in excess of the amount authorized under a permit/license shall subject the 
issuer, to a fine, as follows: 
' (a) 
first violation - 3/10 of 1% of the aggregate gross pre-need price of the 
plans sold. 
second violation - 4/10 of 1% of the aggregate gross pre-need price of the 
plans sold. 
third violation -'suspension or revocation of license. 
(b) 
(c) 
The recurrence of all violations shall be computed over a three year period. 
The Commission shall act within a period of sixty (60) days from submission of 
' completed applications, for price upgrading and/or downgrading of sales values of any 
plan. 
Overpricing of plans above the amounts stated under said permit/license shall 
be penalized, by a fine based on the price difference realized from such sales, as follows: 
first violation - 3/10 of 1% of the difference between the authorized plan 
value and the value of the overpriced plan. 
second violation - 4/10 of 1% of the difference between the authorized 
plan value and the value of the overpriced plan. 
third violation - suspension or revocation of license. 
(a) 
(b) 
(c) 
CHAPTER VIII. PLANHOLERS' PROTECTION FUND 
SECTION 29. The Commission may establish or facilitate the establishent of a 
planholders' protection fund for the purpose of compensating planholders for the 
extraordinary losses or damage they may suffer due to business failure or insolvency of 
a pre-need company, under such rules as the CommisFion may prescribe in the public 
interest. For this purpose, pre-need companies shall be required to contribute to the 
fund. The Commission may, having due regard to the public interest or the protection 
of planholders, regulate, supervise, examine, suspend, or otherwise discontinue such 
fund which may include taking custody and management of the fund itself as well as 
investments in and disbursements from the fund under such forms and control and 
supervision by the Commission. 


CHAPTER IX. ADMINISTRATIVE SANCTIONS 
SECTION 30. - Administrative Sanctions. - If, after proper notice and hearing, the 
Commission finds that there is a violation of the provision of this Code, or that any 
registrant has, in a registration statement and its supporting papers and other reports 
required to be filed with the commission, made any untrue statement of a material fact, 
or omitted to state any material fact required to be stated therein or necessary to make 
the statements therein not misleading, or refused to permit any lawful examination into 
its affairs, it shall, in its discretion, impose any or all of t!xe following sanctions: 
(a) suspension or revocation of its certificate of registration and permit to offer 
securities; 
(b) a fine of no less than Two Hundred Pesos (P200.00) nor more than Fifty 
Thousand Pesos (P50,OOO.OO) for each day of continuing violation; 
(c) disqualification from being an officer, member of the board of directors or 
principal stockholder of an issuer whose securities are r3r are about to be 
registered pursuant to this Act; and 
(d) other penalties within the power of the Commission under existing laws. 
The imposition of the foregoing administrative sanctions shall be without 
prejudice to the filing of criminal charges against the individual responsible for the 
.violation. 
CHAPTER X. MISCELLANEOUS PROVISIONS 
SECTION 31. Transitory Provisions. - Any issuer who at the time of the effectivity 
of this Act has been registered and licensed to issue pre-need plans and similar 
contracts and investments, shall be considered as registered and licensed under the 
provisions of this Act and its implementing rules and regulations and shall be subject to 
and governed by the provisions hereof. 
SECTION 32. Implementing Rules and Regulations. - The Commission shall adopt 
such rules and regulations for the proper and effective implementation of this Act 
within sixty (60) days from approval hereof. The Commission shall publish once a week 
for two (2) consecutive weeks in two newspapers of general circulation the rules and 
regulations promulgated pursuant to the preceding section. 
SECTION 33. Effect on Existing Lazo. - The rights and remedies provided by this 
Act shall be in addition to any and all other rights and remedies that exist under the 
Revised Securities Act and other existing laws. 
SECTION 34. Repealing Clause. - All acts, laws, executive orders or rules and 
regulations or any part thereof which are inconsistent with the provisions of this Act are 
hereby repealed or modified accordingly. 
SECTION 35. Efectivity Clause. - This Act shall take effect upon its approval, 
Approved,