Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

502

H. B. No.

Introduced by HONORABLE JUAN EDGARDO “SONNY” M. ANGARA

EXPLANATORY NOTE

The Philippine insurance laws are embodied in Presidential Decree No. 1460 (PD 1460),
otherwise known as “The Insurance Code of 1978". PD 1460 consolidated all insurance laws
into a single Code and it basically reenacted Presidential Decree No. 612 (PD 612) which was
promulgated on December 18, 1974. PD 612 ordained and instituted the Insurance Code of the
Philippines. Except for certain amendments effected under Presidential Decree No. 1814 (PD
1814) on January 16, 1981 and Batas Pambansa Big. 874 (BP 874) on June 12, 1985, the
Insurance Code of 1978 has not undergone any significant revision, PD 1814 amended
Sections 305 (c), 373 (c), 378 (f), 373, 377, 379 and 384 of the Insurance Code of 1978. When
the unicameral legislative assembly was convened during the Martial Law regime, the Batasang
Pambansa further amended Sections 27, 45, 180-A, 184 and 416 of PD 1460, These
amendments were necessitated by the prevailing economic conditions at that time and were
undertaken to ensure the due execution and performance of insurance contracts in the interests
of the sound development of the national economy. Over the years since these amendments
were made, the Philippine economy has undergone significant changes. The recent financial
turmoil calls for a review of our laws which impact our economic development such as our
insurance laws to ensure that the insurance industry becomes more efficient and effective in
bringing about financial stability and growth and consumers continue to be protected. It is not
heretical to say that the Insurance Code of 1978 has become inadequate, and at times even
obsolete, to cope with the changing business environment and economic progress. This
development renders the proposed amendments absolutely necessary and inevitable if the
insurance industry is to remain an engine of economic growth and the consumer continues to
have confidence in the Industry.

The amendments proposed in this bill were motivated and guided by 32 years of
experience under the Insurance Code of 1978 and by the rapid developments in the world of
commerce, trade and industry during the recent decades. All over the world, the regulatory
regime is undergoing a serious review and determined efforts are being made to make the laws
and regulations more relevant and responsive. We do not have to look outside to convince us of
this development since our very own Congress has undertaken similar legislative initiatives in
other financial fronts such as in banking, securities, investments, credit, finance together with
pre-need and succeeded in passing much needed legislations to support these industries.
There is no question that these legislative interventions and structural reforms have revitalized
activities and production within banking and other financial sectors and consumers have also
benefited from these laws. Amending the Insurance Code of 1978 is in keeping with our national
policy to preserve the gains of the insurance industry and accelerate its further growth and
development and ensure consumers are allowed choices as well as fair and equitable
treatment.

It cannot be disputed that the insurance industry is a major pillar of the Philippine
economy. Insurance mobilizes savings in long term investments. It is indispensable in
promoting capital market development and saving mobilization. It is an efficient form of raising


capital which is used to fuel our economy. The insurance industry is among the largest
investors in the bond market and similar instruments. Its long term placements offer more ideal
source of financing that suit the needs of both the government and the private sector. Life
insurance companies through their pension plans and retirement products supplement, if not
substitute, for state-provided social security programs. Thus, aside from fulfilling its critical role
of providing protection and financial security to our people, the insurance industry's
contributions is immense and immeasurable. It is an indispensable partner of the government in
national development,

It is our collective desire to craft and fashion an insurance code which our insurers and
their intermediaries can utilize to attain more efficiently their economic ends and to expand more
effectively their insurance activities that will assure the insuring public greater insurance
protection and financial security. This proposed bill introduces significant changes in practically
all tiles and chapters of the Code. However, despite the numerous changes to PD 1460 which
have been adopted in this proposed measure, many provisions of the existing Code were
retained. This revision has also considered the relevant circulars and regulations issued by the
Insurance Commission in the exercise of its regulatory and supervisory powers under the laws.
Furthermore, in keeping with the growth of commerce and trade, new insurance activities which
were not mentioned at all in the existing Code such as micro-insurance, bancassurance and
other recent developments in the industry are now provided for. Moreover, this bill aims to
reinforce the Insurance Commission in performing its functions as the principal regulator of the
insurance industry consisting of the life and non-life companies, reinsurers, and allied entities,
intermediaries and insurance professionals such as the mutual benefit associations, micro-
insurers, bancassurance, brokers, general agents, individual agents, adjusters, actuaries, rating
organizations, and others, and to augment their management, operations and practices on an
even sounder, stable and professional basis.

This bill shall further promote and develop a strong national insurance industry which
can assist the ability of the Industry to compete with foreign players when the ASEAN Economic
Market opens up sometime in 2015. Itis therefore imperative that this bill be passed into law.

In view of the foregoing, an early enactment of this measure is earnestly requested.

Va

JAN EDGARDO “SONNY” M. ANGARA

Lone District, Province of Aurora


FIFTEENTH CONGRESS OF THE)
REPUBLIC OF THE PHILIPPINES —)
First Regular Session )
ak 502

od

H. B. No.

Introduced by Honorable JUAN EDGARDO “SONNY” M. ANGARA

AN ACT
AMENDING PRESIDENTIAL DECREE NO. 612, OTHERWISE KNOWN AS THE
INSURANCE CODE, AS AMENDED BY PRESIDENTIAL DECREE NOS. 1141, 1280,
1455, 1460, 1814, AND 1981, AND BATAS PAMBANSA BLG. 874, AND FOR
OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Title. - This Act shall be known as "The Insurance Code of 2010".

SEC. 2. Section 1 of The Insurance Code, as amended, is hereby amended to
read as follows:

“Section 1. This Act shall be known as ‘The Insurance Code of 2010."

SEC. 3. Section 2, paragraph 2 (d) of The Insurance Code, as amended, is
hereby amended to read as follows:

“(d) doing or proposing to do any business in substance equivalent to any of the
foregoing in a manner designed to evade the provisions of this Code, including
the practice of self-insurance by any person or entity extending life insurance or
similar protection to its borrowers, depositors, clients or third parties.”

SEC 4. Section 3 of The Insurance Code, as amended, is hereby amended to
read as follows:

“Sec. 3. Any contingent or unknown event, whether past or future, which
may damnify a person having an insurable interest or create a liability against
him, may be insured against, subject to the provisions of this chapter.

“The consent of the spouse is not necessary for the validity of an
insurance policy taken out by a married person on his or her life or that of his or
her children.


“All rights, title and interest in the policy of insurance taken out by an
original owner on the life or health of the person insured shall automatically vest
in the latter upon the death of the original owner, unless otherwise provided for in
the policy.”

SEC. 5. Section 6 of The Insurance Code, as amended, is hereby amended to
read as follows:

“Sec. 6. Every corporation, partnership, or association duly authorized to
transact insurance business as elsewhere provided in this code, may be an
insurer.”

SEC. 6. Section 12 of The Insurance Code, as amended, is hereby amended to
read as follows:

“Sec. 12. The interest of a beneficiary in a life insurance policy shall be forfeited
when the beneficiary is the principal, accomplice, or accessory in willfully bringing
about the death of the insured. In such a case, the share forfeited shall pass on to
the other beneficiaries, unless otherwise disqualified. In the absence of other
beneficiaries, the proceeds shall be paid in accordance with the policy contract. If
the policy contract is silent, the proceeds shall be paid to the insured's estate.”

SEC. 7. Section 45 of The Insurance Code, as amended, is hereby amended to
read as follows:

“Sec. 45. If a representation is false in a material point, whether affirmative
or promissory, the injured party is entitled to rescind the contract from the time
when the representation becomes false.”

SEC. 8. The last paragraph of Section 50 of The Insurance Code, as amended,
is hereby deleted.

SEC. 9. Section 60 of the Insurance Code, as amended, is hereby amended to
read as follows:

“Sec. 60. An open policy is one in which the value of the thing insured is not
agreed upon, and the amount of the insurance merely represents the insurer's


maximum liability. The value of such thing insured shall be ascertained at the time

of the loss.”

SEC. 10. Section 64, paragraph (f) of The Insurance Code, as amended, is

hereby amended to read as follows:

“(f) discovery of other insurance coverage that makes the total insurance
in excess of the value of the property insured; or a determination by the
Commissioner that the continuation of the policy would violate or would place the
insurer in violation of this Code.”

SEC. 11. Section 65 of The Insurance Code, as amended, is hereby amended to
read as follows:

“Sec. 65. All notices of cancellation mentioned in the preceding section shall be
in writing, mailed or delivered to the named insured at the address shown in the
policy or to his broker, and shall state (a) which of the grounds set forth in section
sixty-four is relied upon and (b) that, upon written request of the named insured,
the insurer will furnish the facts on which the cancellation is based.

SEC. 12. Section 77 of The Insurance Code, as amended, is hereby amended to
read as follows:

“Sec. 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, except in the case of a life or an industrial life policy whenever the
grace period provision applies, or whenever under the agency agreements with
duly licensed intermediaries, a 90-day credit extension is given. No credit
extension to a duly licensed intermediary should exceed 90-days from date of
issuance of the policy. Payments of premium to brokers are not considered
payment of premium to the insurers.”

SEC. 13. A new Section 78 of The Insurance Code, as amended, is hereby
added to read as follows:


“Sec. 78. An employee of the Republic of the Philippines, including its
political subdivisions and instrumentalities, and government owned or controlled
corporations, may pay his insurance premium and loan obligations through salary
deduction: Provided, the treasurer, cashier, paymaster or official of the entity
employing the government employee is authorized, notwithstanding the
provisions of any existing law, rules and regulations to the contrary, to make
deductions from the salary, wage or income of the latter pursuant to the
agreement between the insurer and the government employee and to remit such
deductions to the insurer concerned, and collect such reasonable fee for its
services.”

SEC. 14. The old Section 78 of The Insurance Code, as amended, is hereby
renumbered as Section 79 and the sections subsequent thereto are accordingly
renumbered until Section 80, which shall be renumbered as Section 81.

SEC. 15. Section 81 of The Insurance Code, as amended, is hereby
renumbered as Section 82 and amended to read as follows:

“Sec. 82. A person insured is entitled to return of the premium when the
contract is voidable and subsequently annulled under the provisions of the Civil
Code; or, on account of fraud or intentional misrepresentation of the insurer, or of
his agent, or on account of facts, the existence of which the insured was ignorant
without his fault; or when by any default of the insured other than actual fraud,
the insurer never incurred any liability under the policy.

“A person insured is not entitled to a return of premium if the policy is
annulled, rescinded or if a claim is denied by reason of his fraud or
misrepresentation.”

SEC. 16. Section 82 of The Insurance Code, as amended, is hereby
renumbered as Section 83 and amended to read as follows:

“Sec. 83. In case of an over-insurance by several insurers other than life,
the insured is entitled to a ratable return of the premium, proportioned to the
amount by which the aggregate sum insured in all the policies exceeds the
insurable value of the thing at risk.”

SEC. 17. A new Section 84 of The Insurance Code, as amended, is hereby
added to read as follows:


“Sec. 84. An insurer may contract and accept payments, in addition to
regular premium, for the purpose of paying future premiums on the policy or to
increase the benefits thereof”

SEC. 18. The old Section 83 of The Insurance Code, as amended, is hereby
renumbered as Section 85 and the sections subsequent thereto are accordingly
renumbered until Section 87, which shall be renumbered as Section 89.

SEC. 19. Section 88 of The Insurance Code, as amended, is hereby
renumbered as Section 90 and amended to read as follows:

“Sec. 90. In case of loss, an insurer is exonerated, if notice thereof be not
given to him by an insured, or some person entitled to the benefit of the
insurance, without unnecessary delay from occurrence of the loss. In case of
death, an insurer is likewise exonerated if notice thereof be not given the insurer
without unnecessary delay from discovery of death.”

SEC. 20. The old Section 89 of The Insurance Code, as amended, is hereby
renumbered as Section 91 and the sections subsequent thereto are accordingly
renumbered until Section 93, which shall be renumbered as Section 95.

SEC. 21. Section 94 of The Insurance Code, as amended, is hereby
renumbered as Section 96 and amended to read as follows:

“Sec. 96. Where the insured, in a policy other than life, is overinsured by
double insurance:

“(a) The insured, unless the policy otherwise provides, may claim payment from
the insurers in such order as he may select, up to the amount for which the
insurers are severally liable under their respective contracts;

“(b) Where the policy under which the insured claims is a valued policy,
any sum received by him under any other policy shall be deducted from the value
of the policy without regard to the actual value of the subject matter insured;

“(c) Where the policy under which the insured claims is an unvalued policy
any sum received by him under any policy shall be deducted against the full
insurable value, for any sum received by him under any policy;

“(d) Where the insured receives any sum in excess of the valuation in the
case of valued policies, or of the insurable value in the case of unvalued policies,
he must hold such sum in trust for the insurers, according to their right of
contribution among themselves;


“(e) Each insurer is bound, as between himself and the other insurers, to
contribute ratably to the loss in proportion to the amount for which he is liable
under his contract.”

SEC. 22. The old Section 95 of The Insurance Code, as amended, is hereby
renumbered as Section 97 and the sections subsequent thereto are accordingly
renumbered until Section 178, which shall be renumbered as Section 180.

SEC. 23. Section 179 of The Insurance Code, as amended, is hereby
renumbered as Section 181 and amended to read as follows

"Sec. 181. Life insurance is insurance on human lives and insurance
appertaining thereto or connected therewith.

“Every contract or undertaking for the payments 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.

“A life insurance policy may also be taken by an individual who intends to travel
by ship or airplane. Such policy shall be effective only during the course of the
travel.”

SEC. 24. Section 180 of The Insurance Code, as amended, is hereby
renumbered as Section 182 and amended to read as follows:

“Sec. 182. An insurance upon life may be made payable on the death of
the person, or on his surviving a specified period, or otherwise contingently on
the continuance or cessation of life.

“Every contract or pledge for the payment of endowments or annuities
shall be considered a life insurance contract for purpose of this Code.

“In the absence of a judicial guardian, the father, or in the latter's absence
or incapacity, the mother, or any minor, who is an insured or a beneficiary under
a contract of life, health or accident insurance, may exercise, in behalf of said
minor, any right under the policy, without necessity of court authority or the giving
of a bond, where the interest of the minor in the particular act involved does not
exceed two hundred fifty thousand pesos or in such amount as may be
determined by the Commissioner. Such right may include, but shall not be limited
to, obtaining a policy loan, surrendering the policy, receiving the proceeds of the
policy, and giving the minor's consent to any transaction on the policy

“In the absence or in case of the incapacity of the father or mother, the
grandparent, the eldest brother or sister at least eighteen years of age, or any


relative who has actual custody of the minor insured or beneficiary, shall act as a

guardian without need of a court order or judicial appointment as such guardian,

as long as such person is not otherwise disqualified or incapacitated. Payment

made by the insurer pursuant to this section shall relieve it of any liability under

the contract.”

SEC. 25. The old Section 180-A of The Insurance Code, as amended, is hereby
renumbered as Section 183 and the sections subsequent thereto are accordingly
renumbered until Section 183, which shall be renumbered as Section 186.

SEC. 26. A new Title on Microinsurance and a new Section 187 of The

Insurance Code, as amended, are hereby added to read as follows:

“Title 6
“MICROINSURANCE

“Sec. 187. The term “microinsurance" shall mean an activity providing specific
insurance, insurance-like and other similar products and services that meet the
needs of the low-income sector for risk protection and relief against distress,
misfortune and other contingent events. This shall include all forms of insurance,
insurance-like and other similar activities with the following features:

a. Premiums, contributions, fees or charges are collected/deducted prior to
the occurrence of the a contingent event; and

b. Guaranteed benefits are provided upon occurrence of a contingent event.

“No insurance company shall engage in the business of microinsurance
unless it possesses all the requirements as may be prescribed by the
Commissioner. The Commissioner shall issue such rules and regulations
governing microinsurance.”

SEC. 27. Section 184 of The Insurance Code, as amended, is hereby
renumbered as Section 188 and amended to read as follows:

“Sec. 188. For purposes of this Code, the term “insurer” or “insurance
company" shall include all partnerships, associations, or corporations, including
government-owned or controlled corporations or entities, engaged as principals
in the insurance business. Unless the context otherwise requires, the terms shall


also include professional reinsurers defined in section [two hundred eighty].
"Domestic company” shall include companies formed, organized or existing
under the laws of the Philippines. "Foreign company" when used without
limitation shall include companies formed, organized, or existing under any laws

other than those of the Philippines.”

SEC. 28. Section 185 of The Insurance Code, as amended, is hereby
renumbered as Section 189 and amended to read as follows:

“Sec. 189. The provisions of the Corporation Code, as amended, shall apply to
all insurance corporations now or hereafter engaged in business in the
Philippines insofar as they do not conflict with the provisions of this chapter.”

SEC. 29. Section 186 of The Insurance Code, as amended, is hereby
renumbered as Section 190 and amended to read as follows:

“Sec. 190. No corporation, partnership, or association of persons shall
transact any insurance business in the Philippines except as agent of a
corporation, partnership or association authorized to do the business of
insurance in the Philippines, unless possessed of the capital and assets required
of an insurance corporation doing the same kind of business in the Philippines
and invested in the same manner; nor unless the Commissioner shall have
granted to it a certificate to the effect that it has complied with all the provisions of
this Code.

“Every corporation, partnership, or association receiving any such
certificate of authority shall be subject to the insurance and other applicable laws
of the Philippines and to the jurisdiction and supervision of the Commissioner
and other appropriate government agencies.”

SEC. 30. Section 187 of The Insurance Code, as amended, is hereby
renumbered as Section 191 and amended to read as follows:

“Sec. 191. 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 Commissioner upon application therefor and payment by the
company concerned of the fees hereinafter prescribed.

“The Commissioner may refuse to issue a certificate of authority to any
insurance company if, in his 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 Commissioner shall have satisfied himself by such


examination as he may make and such evidence as he 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 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 Commissioner. In addition
hereto, the Commissioner 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 Commissioner 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, in
accordance with the provisions of the Corporation Code on the use of corporate
names.

“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 Commissioner and other appropriate
government agencies.

“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.

“No insurance company shall have equity in an adjustment company and
neither shall an adjustment company have equity in an insurance company.”

SEC. 31. Section 188 of The Insurance Code, as amended, is hereby
renumbered as Section 192 and amended to read as follows:


“Sec. 192. No domestic stock insurance company shall engage in
insurance or reinsurance business in the Philippines unless possessed of the
required capitalization which includes minimum net worth and paid-up capital, as
defined and provided under applicable orders and/or circulars issued by the
Secretary of Finance, upon recommendation of the Insurance Commissioner.
The Secretary of Finance may change such minimum net worth and paid-up
capital stock requirement, under such terms and conditions as he may impose, to
an amount which, in his opinion, would reasonably assure the safety of the
interests of the policyholders and the public.

“The Commissioner may, as a pre-licensing requirement of a new
insurance company, in addition to the paid-up capital stock, require the
stockholders to pay in cash to the company in proportion to their subscription
interests a contributed surplus fund in an amount as may be fixed inapplicable
orders and circulars duly issued by the Commissioner. He may also require such
company or already existing companies, to submit to him a capital build-up
program or a business plan showing the company's estimated receipts and
disbursements, as well as the basis therefor, for the next succeeding three years.

“If organized as a mutual company, in lieu of such capital stock, it must
have available cash assets in an amount not less than that required under
present or future applicable orders or circulars issued by the Secretary of
Finance, upon recommendation of the Commissioner. These required cash
assets must be net of all liabilities for losses reported, expenses, taxes, legal
reserve, and reinsurance of all outstanding risks, and the contributed surplus
fund must be equal to the amounts required of stock corporations. A stock
insurance company doing business in the Philippines may, subject to the
pertinent laws and regulations which now are of hereafter may be in force, alter
its organization and transform itself into a mutual insurance company.”

SEC. 32. The old Section 189 of The Insurance Code, as amended, is hereby
renumbered as Section 193 and the sections subsequent thereto are accordingly
renumbered until Section 190, which shall be renumbered as Section 194.

SEC. 33. Section 191 of The Insurance Code, as amended, is hereby
renumbered as Section 195 and amended to read as follows:

“Sec. 195. No insurance company organized or existing under the
government or laws other than those of the Philippines shall engage in business
in the Philippines unless possessed of paid-up unimpaired capital or assets and
reserve not less than that required of domestic insurance companies under

10


“(b) In the case of life insurance corporation, the legal reserve fund required by
section [two hundred eleven];
“(c) In the case of corporations other than life, the legal reserve fund required by
section [two hundred thirteen];
“(d) 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 Commissioner within thirty days after such declaration or
distribution,

“If the Commissioner finds that any such corporation has declared or
distributed any such dividend in violation of this section, he may order such
corporation to cease and desist from doing business until the amount of such
dividend or the portion thereof in excess of the amount allowed under this section
has been restored to said corporation.”

SEC. 38. Section 196 of The Insurance Code, as amended, is hereby
renumbered as Section 200 and amended to read as follows:

“Sec. 200. In any determination of the financial condition of any insurance
company doing business in the Philippines, there shall be allowed and admitted
as assets only such assets legally or beneficially owned by the insurance
company concerned as determined by external auditors accredited by the
Commissioner who examined the financial statements of the insurance company
concerned and which consist of:

“1. Cash in the possession of the insurance company or in transit under its
control, and the true and duly verified balance of any deposit of such company in a
financially sound commercial bank or trust company.

“2. Investments in securities, including money market instruments, and in
real property acquired or held in accordance with and subject to the applicable
provisions of this Code and the income realized therefrom or accrued thereon.

“3. Loans granted by the insurance company concerned to the extent of
that portion thereof adequately secured by non-speculative assets with readily
realizable values in accordance with and subject to the limitations imposed by
applicable provisions of this Code.

“4. Policy loans and other policy assets and liens on policies, contracts or
certificates of a life insurance company, in an amount not exceeding legal
reserves and other policy liabilities carried on each individual life insurance
policy, contract or certificate.

13


applicable or order or circulars of the Commissioner, nor until it shall have
deposited with the Commissioner for the benefit and security of the policyholders
and creditors of such company in the Philippines, securities satisfactory to the
Commissioner consisting of good securities of the Philippines, including new
issues of stock of "registered enterprises", as this term is defined in Omnibus
Investments Code, as amended, to the actual market value of not less than the
minimum paid-up capital required of domestic insurance companies: Provided,
That at least fifty per centum of such securities shall consist of bonds or other
evidences of debt of the Government of the Philippines, its political subdivisions
and instrumentalities, or of government-owned or controlled corporations and
entities, including the Bangko Sentral ng Pilipinas. Provided further, that the total
investment of a foreign insurance company in any registered enterprise shall not
‘exceed twenty per centum of the net worth of said foreign insurance company
nor twenty per centum of the capital of the registered enterprise, unless
previously authorized in writing by the Commissioner.

“For purposes of this Code, the net worth of a foreign insurance company
shall refer only to its net worth in the Philippines.”

SEC. 34. Section 192 of The Insurance Code, as amended, is hereby
renumbered as Section 196 and amended to read as follows:

“Sec. 196. The Commissioner shall hold the securities, deposited as
required in the immediately preceding section, for the benefit and security of all
the policyholders and creditors of the company depositing the same. Provided,
That the Commissioner may, as long as the company is solvent, permit it to
collect the interest or dividends on the securities so deposited, and, from time to
time, with his assent, to withdraw any of such securities, upon depositing with
said Commissioner other like securities, the market value of which shall be equal
to the market value of such as may be withdrawn. In the event of any company
ceasing to do business in the Philippines, the securities deposited as aforesaid
shall be returned upon the company, upon the Commissioner's written approval
and only after the company has duly proven in its application therefor that it has
no further liability whatsoever under any of its policies nor to any of its creditors
in the Philippines.”

SEC. 35. The old Section 193 of The Insurance Code, as amended, is hereby
renumbered as Section 197.


SEC. 36. Section 194 of The Insurance Code, as amended, is hereby
renumbered as Section 198 and amended to read as follows:

“Sec. 198. An insurance company doing business in the Philippines shall
at all times maintain the minimum paid-up capital and networth requirements as
prescribed by the Commissioner. Such requirements shall be based on
internationally accepted solvency frameworks and adopted only after due
consultation with and consideration of the recommendations of the insurance
industry associations.

Such assets, liabilities and reserves shall exclude assets, liabilities and reserves
included in separate accounts established in accordance with section [two
hundred thirty-seven]. Whenever the aforementioned margin be found to be less
than that herein required to be maintained, the Commissioner 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 interest, and paid to
the treasurer of the company, within fifteen days from receipt of the order:
Provided, That the company in the interim shall not be permitted to take any new
risk of any kind or character unless and until it make good any such deficiency:
Provided, further, that a stockholder who aside from paying the contribution due
from him, pays the contribution due from the another stockholder by reason of
the failure or refusal of the latter to do so, shall have a lien on the certificates of
stock of the insurance company concerned appearing in its books in the name of
the defaulting stockholder on the date of default, as well as on any interests or
dividends that have accrued or will accrue to the said certificates of stock, until
the corresponding payment or reimbursement is made by the defaulting
stockholder.”

SEC. 37. Section 195 of The Insurance Code, as amended, is hereby
renumbered as Section 199 and amended to read as follows:

“Sec. 199. 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 One Hundred Ninety Eight 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;

12


“5. The net amount of uncollected and deferred premiums and annuity
considerations in the case of a life insurance company which carries the full
mean tabular reserve liability.

“6. Reinsurance recoverable by the ceding insurer: (a) from an insurer
authorized to transact business in this country, the full amount thereof; or (b)
from an insurer not authorized in this country, in an amount not exceeding the
liabilities carried by the ceding insurer for amounts withheld under a reinsurance
treaty with such unauthorized insurer as security for the payment of obligations
thereunder if such funds are held subject to withdrawal by, and under the control
of, the ceding insurer. The Commissioner may prescribe the conditions under
which a ceding insurer may be allowed credit, as an asset or as a deduction from
loss and unearned premium reserves, for reinsurance recoverable from an
insurer not authorized in this country but which presents satisfactory evidence
that it meets the applicable standards of solvency required in this country.

“7. Funds withheld by a ceding insurer under a reinsurance treaty,
provided reserves for unpaid losses and unearned premiums are adequately
provided.

“8. Deposits or amounts recoverable from underwriting associations,
syndicates and reinsurance funds, or from any suspended banking institution, to
the extent deemed by the Commissioner to be available for the payment of
losses and claims and values to be determined by him.

“9. Electronic data processing machines, as may be authorized by the
Commissioner to be acquired by the insurance company concerned, the
acquisition cost of which to be amortized in equal annual amounts within a period
of five years from the date of acquisition thereof.

“10. Mutual funds, real estate investment trusts, unit investment trust
funds and special deposit accounts.

“11, Other assets, not inconsistent with the provisions of paragraphs 1 to
10 hereof, which are deemed by the Commissioner to be readily realizable and
available for the payment of losses and claims at values to be determined by him
in a circular, rule or regulation.

“12, Other investments not otherwise covered by the above, provided that
such may be reclassified as non-admitted assets after a subsequent audit
conducted by the Commissioner.”

SEC. 39. The old Section 197 of The Insurance Code, as amended, is hereby
renumbered as Section 201


SEC. 40. Section 198 of The Insurance Code, as amended, is hereby
renumbered as Section 202 and amended to read as follows:

“Sec. 202. A life insurance company may lend to any of its policyholders
upon the security of the value of its policy such sum as may be determined
pursuant to the provisions of the policy.

"No insurance company shall loan any of its money or deposits to any
person, corporation or association, except upon the security of any of the
following:

*a) first mortgage or deeds of trust of registered, unencumbered, improved
or unimproved real estate, including condominiums, in cities and centers of
population of municipalities in the Philippines; or

“p) first mortgages or deeds of trust of actually cultivated, improved and
unencumbered agricultural lands in the Philippines; or

“c) purchase money mortgages, lease purchase agreements or similar
securities executed or received by it on account of the sale or exchange of real
property acquired pursuant to sections [two hundred and two hundred two]; or

“d) bonds or other evidences of indebtedness issued or guaranteed by the
of the Government of the Philippines or its political subdivisions authorized by
law to incur such obligations or issue such guarantees or of government-owned
or controlled corporations and instrumentalities including the Bangko Sentral ng
Pilipinas; or

“e) obligations issued or guaranteed by universal banks, commercial
banks, offshore banking units, investment houses or other financial
intermediaries duly registered with the Bangko Sentral ng Pilipinas; or

“f) obligations issued or guaranteed by foreign banks or corporations, each
of which shall have total assets of one billion US dollars, as shown in their
financial statements as of the immediately preceding fiscal year; or

“g) assignments of monetary instruments such as cash deposits,
promissory notes, deposit certificates or other similar instruments of universal
banks, commercial banks, investments houses or other financial intermediaries
duly registered with the Bangko Sentral ng Pilipinas;

“h) pledges of shares of stock, bonds or other evidences of indebtedness
specified in section [two hundred thirty-four];

“i) chattel mortgages over equipment not more than three years old; and

‘j) such other security as may be approved by the Commissioner.

15


“The loans provided in the preceding subsection shall be subject to the
following conditions:

*a) The amount of loan secured by real estate mortgage over a non-
agricultural land shall not exceed eighty per centum of its appraised value, and in
the case of a loan secured by a real estate mortgage over an agricultural land,
the amount of loan shall not exceed forty per centrum of its market value.
Provided that, in no case shalll such loan have a maturity period in excess of
twenty-five years;

“b) Unless approved by the Commission, no loan may be granted upon
the security of a mortgage on improved real estate if the improvements thereon
do not belong the owner of the land and the owner of the improvements does not
signed the deed of mortgage. However, if the owner of the land is the
Government of the Philippines or any or its political subdivisions and a long term
lease has been executed in favor of the owner of the improvements, the owner of
the land need not be a party to the deed of mortgage. The expiration date of the
lease shall not, however, precede the maturity of the loan. The phrase “improved
real estate” as used herein shall mean land with permanent building or buildings
erected thereon;

“c) Purchase money mortgage, lease-agreements or similar securities
received on the sale of real estate property shall not exceed one hundred per
centum of the selling price of said property, or one hundred per centum of its
market value at the time of its disposition, whichever amount is lower. However,
in no case shall such mortgage or agreement have a maturity period of twenty-
five years;

“d) Loans secured by pledges of shares of stock of solvent
corporations or institutions shall not exceed fifty per centum of:

1) The latest selling price of such stocks listed in the stock exchange or
unlisted stock traded elsewhere;

2) The book value of said stock, in case of stocks which are neither listed
in any stock exchange nor transacted elsewhere; but the stock
certificates for the shares pledge shall be endorsed or assigned to the

16


lending insurance company. The phrase “solvent corporation” as used
herein shall mean a corporation or entity which has recorded profits for
a period of at least three years immediately preceding the date of the

loan;

“e) Loans secured by the chattel mortgages over equipment shall not
exceed seventy-five per centum of the market value of said equipment; and
“) Venture capital investments, equity on loans, shall not exceed, per
investment, forty per centum of the insurance company's net worth as shown in
its latest financial statement approved by the Commission.”
SEC. 41. Section 199 of The Insurance Code, as amended, is hereby
renumbered as Section 203 and amended to read as follows:

"Sec. 203. No loan by any insurance company on the security of real estate shall
be made unless the title to such real estate shall have first been registered in
accordance with the existing Land Registration Act, or shall have been previously
registered under the provisions of the existing Mortgage Law and the lien or
interest of the insurance company as mortgagee has been registered.”

SEC. 42. Section 200 of The Insurance Code, as amended, is hereby
renumbered as Section 204 and amended to read as follows:

“Sec. 204. (1) An insurance company may purchase, hold, own and
convey such property, real and personal, as may have been mortgaged, pledged,
or conveyed to it in good faith in trust for its benefit by reason of money loaned
by it in pursuance of the regular business of the company, and such real or
personal property as may have been purchased by it at sales under pledges,
mortgages or deeds of trust for its benefit on account of money loaned by it; and
‘such real and personal property as may have been conveyed to it by borrowers
in satisfaction and discharge of loans made by the company in payment or by
reason of any loan made by it shall be sold by the company within twenty years
after the title thereto has been vested in it.

“(2) An insurance company may purchase, hold, own and convey real and
personal property as follows:

“(a) The real property in which the company conducts and carries on its
business; Provided, That no domestic non-life insurance company shall invest in
the kinds permitted under this section an amount in excess of twenty per centum
of the net worth of such insurer as shown by its latest financial statement
approved by the Board.

17


“(b) Bonds or other evidence of indebtedness of the Government of the
Philippines or its political subdivisions authorized by law to issue bonds at the
reasonable market value thereof.

“(c) Bonds or other evidences of debt of the government-owned or
controlled corporations and entities, including the Bangko Sentral ng Pilipinas.

“(d) Bonds, debentures or other evidences of indebtedness of any solvent
corporations or institution created or existing under the laws of the Philippines:
Provided, however, That the issuing, assuming or guaranteeing entity or its
predecessors shall not have defaulted in the payment of interest on any of its
securities and that during each of any three including the last two of the five fiscal
years next preceding the date of acquisition by such insurance company of such
bonds, debentures, or other evidences of indebtedness, the net earnings of the
issuing, assuming or guaranteeing institution available for its fixed charges, as
hereinafter defined, shall have been not less than one and one-quarter times the
total of its fixed charges for such year; and Provided, further, that no life
insurance company shall invest in or loan upon the obligations of any one
institution in the kinds permitted under this sub-section an amount in excess of
twenty-five per centum of the total admitted assets of such insurer as of
December thirty-first next preceding the date of such investment.

“As used in this sub-section the term "net earnings available for fixed
charges" shall mean net income after deducting operating and maintenance
expenses, taxes other than income taxes, depreciation and depletion; but
excluding extraordinary non-recurring items of income or expense appearing in
the regular financial statement of the issuing, assuming or guaranteeing
institution. The term "fixed charges" shall include interest on funded and
unfunded debt, amortization of debt discount, and rentals for leased properties.

“(e@) Preferred or guaranteed stocks of any solvent corporation or
institution created or existing under the laws of the Philippines; Provided, That if
the stocks are guaranteed, the amount of stocks so guaranteed is not excess of
fifty per centum of the amount of the preferred or common stocks, as the case
may be, of the guaranteeing corporation; and Provided, finally, That no life
insurance company shall invest in or loan upon obligations of any one institution
in the kinds permitted under this sub-section an amount in excess of ten per
centum of the total admitted assets of such insurer as of December thirty-first
next preceding the date of such investment.

“(f) Common stocks of any solvent corporation or institution created or
existing under the laws of the Philippines; Provided, however, That no life

insurance company shall invest in or loan upon the obligations of any one

18


corporation or institution in the kinds permitted under this sub-section an amount
in excess of ten per centum of the total admitted assets of such insurer as of
December thirty-first next preceding the date of such investment.

“(g) Securities issued by an “registered enterprise”, as this term is defined
in Republic Act No. 5186, otherwise known as the Investment Incentives Act, as
amended, provided that the total investment of a domestic non life insurance
company in any registered enterprise shall not exceed fifty per centum of the net
worth of said insurance company as shown by its aforesaid financial statement
unless previously authorized by the Commissioner.

“(h) Certificates, notes and other obligations issued by the trustees or
receivers of any institution created or existing under the laws of the Philippines
which, or the assets of which, are being administered under the direction of any
court having jurisdiction; Provided, however, That such certificates, notes or
other obligations are adequately secured as to principal and interests.

“(i) Equipment trust obligations or certificates which are adequately
secured or other adequately secured instruments evidencing an interest in
equipment wholly or in part within the Philippines: Provided, however, That there
is a right to receive determined portions of rental, purchase or other fixed
obligatory payments for the use or purchase of such equipment.

“@) Any obligation of any corporation or institution created or existing
under the laws of the Philippines which is, on the date of acquisition by the
insurer, adequately secured and has qualities and characteristics wherein the
speculative elements are not predominant.

“(k) Such other securities as may be approved by the Commissioner.

“(3) Any domestic insurer which has outstanding insurance, annuity or reinsurance
contracts in currencies other than the national currency of the Philippines may invest
in, or otherwise acquire or loan upon securities and investments in such currency
which are substantially of the same kinds, classes and investment grades as those
eligible for investment under the foregoing subdivisions of this section; but the
aggregate amount of such investment and of such cash in such currency which is at
anytime held by such insurer shall not exceed one and one-half times the amount of
its reserves and other obligations under such contracts or the amount of its reserves
and other obligations under such contracts or the amount which such insurer is
required by the law of any country outside the Republic of the Philippines to be
invest in such country, whichever shall be greater.”

SEC. 43. Section 201 of The Insurance Code, as amended, is hereby
renumbered as Section 205 and amended to read as follows:

19


“Sec. 205. An insurance company may (1) invest in equities of other
financial institutions, and (2) engage in the buying and selling of short-term debt
instruments: Provided, That any or all of such investments shall be with the prior
approval of the Commissioner, except listed equities of other financial
institutions.”

SEC. 44. Section 202 of The Insurance Code, as amended, is hereby
renumbered as Section 206 and its paragraph (a) is hereby amended to read as follows:

*(a) Acquire or construct housing projects and, in connection with any such project, may acquire land or any interest
therein by purchase, lease or otherwise, or use land acquired pursuant to any other provision of this Code, Such company
‘may thereafter own, maintain, manage, colect or receive income from, or sell and convey, any land or interest therein so
‘acquired and any improvements thereon. The aggregate book value of the investments of any such company in all such
projects shall not exceed at the time of such investments twenty five per centum of the total admitted assets of such
‘company on the thirty-first day of December next preceding; Provided, That the funds of the company for the payment of
Pending claims and obligations shall not be used for such investments,”

SEC. 45. The old Section 203 of The Insurance Code, as amended, is hereby
renumbered as Section 207 and the sections subsequent thereto are accordingly
renumbered until Section 207, which shall be renumbered as Section 211

SEC. 46. Section 208 of The Insurance Code, as amended, is hereby
renumbered as Section 212 and amended to read as follows:

“Sec, 212. (1) All bonds or other evidences of indebtedness having a fixed
term and rate of interest and held by any life insurance company authorized to do
business in this country, if amply secured and if not in default as to principal or
interest, shall be valued based on their amortized cost using effective interest
method less impairment and unrecoverable amount based on appropriate
measurement methods which are generally accepted in the industry and
accepted by the Commission. The Commissioner shall have the power to
determine the eligibility of any such investments for valuation on the basis of
amortization, and may by regulation prescribe or limit the classes of securities so
eligible for amortization. All bonds or other evidences of indebtedness which in
the judgment of the Commissioner are not amply secured shall not be eligible for
amortization and shall be valued in accordance with paragraph two. The
Commissioner may, if he finds that the interest of policy holders so permit or
require, by official regulation permit or require any class or classes of insurers,
other than life insurance companies, authorized to do business in this country, to

20


value their bonds or other evidences of indebtedness in accordance with the
foregoing rule

“(2) The investments of all insurers authorized to do business in this
country, except securities subject to amortization and except as otherwise
provided in this chapter, shall be valued, in the discretion of the Commissioner, at
their market value at their amortized cost using effective interest method less
impairment and unrecoverable amount or at valuation representing their fair
market value. If the Commissioner finds that in view of the character of
investments of any insurer authorized to do business in this country it would be
prudent for such insurer to establish a special reserve for possible losses or
fluctuations in the values of its investments, he may require such insurer to
establish such reserve, reasonable in amount, and include a report thereon in
any statement or report of the financial condition of such insurer. The
Commissioner may, in connection with any examination or required financial
statement of an authorized insurer, require such insurer to furnish him complete
financial statements and audited report of the financial condition of any
corporation of which the securities are owned wholly or partly by such insurer
and may cause an examination to be made of any subsidiary or affiliate of such
insurer as appropriate to specific investments as provided in appropriate circulars
issued by the Commissioner.

“(3) The stock of an insurance company shall be valued as follows: a)
listed stocks shall be valued at market value and periodically adjusted to reflect
market changes through a special valuation account to reflect their realizable
value when sold; b) unlisted stocks shall be valued at book value based on the
latest unqualified audited financial statements of the company which issued such
stocks; and c) stocks of a corporation under the control of the insurer shall be
valued using the equity method which is the cost plus or minus the share of the
controlling company in the earnings or losses of the controlled company after
acquisition of such stocks.

“(4) The stock of an insurance company shall be valued at the lesser of its
market value or its book value as shown by its last approved audited financial
statements or the last report on examination, whichever is more recent. The book
value of a share of common stock of an insurance company shall be ascertained
by dividing (a) the amount of its capital and surplus less the value of all of its
preferred stock, if any, outstanding, by (b) the number of shares of its common
stock issued and outstanding. Notwithstanding the foregoing provisions, an
insurer may, at its option, value its holdings of stock in a subsidiary insurance

21


company in an amount not less than acquisition cost if such acquisition cost is
less than the value determined as hereinbefore provided.

“(6) Real estate required by foreclosure or by deed in lieu thereof, in the
absence of a recent appraisal deemed by the Commissioner to be reliable, shall
not be valued at an amount greater than the unpaid principal of the defaulted
loan at the date of such foreclosure or deed, together with any taxes and
expenses paid or incurred by such insurer at such time in connection with such
acquisition, and the cost of additions or improvements thereafter paid by such
insurer and any amount or amounts thereafter paid by such insurer on any
assessments levied for improvements in connection with the property.

“(6) Purchase money mortgages received on dispositions of real property
held pursuant to section [one hundred ninety-eight] shall be valued in an amount
equivalent to ninety per centum of the value of such real property. Purchase
money mortgages received on disposition of real property otherwise held shall be
valued in an amount not exceeding ninety per centum of the value of such real
property as determined by an appraisal made by an appraiser at or about the
time of disposition of such real property.

“(7) The stock of a subsidiary of an insurer shall be valued on the basis of
the greater of (i) the value of only such subsidiary of the assets of such
subsidiary as would constitute lawful investments for the insurer if acquired or
held directly by the insurer or (ii) such other value determined pursuant to
standards and cumulative limitations, contained in a regulation to be promulgated
by the Commissioner.

“(8) Notwithstanding any provision contained in this section or elsewhere
in this chapter, if the Commissioner find that the interests of policyholders so
permit or require, he may permit or require any class or classes of insurers
authorized to do business in this country to value their investments or any class
or classes thereof as of any date heretofore or hereafter in accordance with any
applicable valuation or method.”

SEC. 47. The old Section 209 of The Insurance Code, as amended, is hereby
renumbered as Section 213.

SEC. 48. Section 210 of The Insurance Code, as amended, is hereby
renumbered as Section 214 and amended to read as follows:

“Sec. 214. Every life insurance company, doing business in the

Philippines, shall annually make a valuation of all policies, additions thereto,

unpaid dividends, and all other obligations outstanding on the thirty-first day of

22


December of the preceding year. All such valuations shall be made according to
the standard adopted by the company, as prescribed by the Commissioner in
accordance with internationally accepted actuarial standards, which standard
shall be stated in its annual report.

“Such standard of valuation shall be according to a standard table of
mortality with interest at not more than six per centum compound interest. When
the preliminary term basis is used, the term insurance shall be limited to the first
policy year. ‘

“The results of such valuations shall be reported to the Commissioner on
or before the thirtieth day of April of each year accompanied by a sworn
statement of the company's actuary certifying to the figures and stating upon
what mortality table it is based, upon what rate of interest the valuation is made,
and the methods used in arriving at the result obtained.”

SEC. 49. The old Section 211 of The Insurance Code, as amended, is hereby
renumbered as Section 212 and the sections subsequent thereto are accordingly
renumbered until Section 218, which shall be renumbered as Section 222.

SEC. 50. Section 219 of The Insurance Code, as amended, is hereby
renumbered as Section 223 and amended to read as follows:

“Sec. 223. Any insurance company doing business in the Philippines

desiring to cede their excess risks to foreign insurance or reinsurance companies

not authorized to transact business in the Philippines may do so under such

terms and conditions which the Commissioner may prescribe.

“Should any reinsurance agreement be for any reason cancelled o terminated, the ceding company concerned shal
Inform the Commissioner in wing of such cancelation or termination within tity days from the date of such cancelation
0 termination or tom the date notice or information of such cancellation or termination is received by such company a8
the case may be.”

SEC. 51. Section 220 of The Insurance Code, as amended, is hereby
renumbered as Section 224 and amended to read as follows:

“Sec. 224, Every insurance company authorized to do business in the
Philippines shall report to the Commissioner on forms prescribed by him the
particulars of reinsurance treaties or any new treaties or changes in existing
treaties within six months from their effectivity.”


SEC. 52. The old Section 221 of The Insurance Code, as amended, is hereby
renumbered as Section 225 and the sections subsequent thereto are accordingly
renumbered until Section 224, which shall be renumbered as Section 228.

SEC. 53. Section 225 of The Insurance Code, as amended, is hereby
renumbered as Section 229 and amended to read as follows:

“Sec, 229. Within thirty days after the approval of the Board of Directors, every
insurance company doing business in the Philippines shall publish in a
newspaper of general circulation a sypnosis of its audited annual financial
statements showing fully the conditions of its business and setting forth its
resources and liabilities, in accordance with such form prescribed by the

Commissioner.”

SEC. 54. A new Section 230 of The Insurance Code, as amended, is hereby
added to read as follows:

“Sec. 230. The Commissioner 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, provided that such shall be in accordance with internationally
accepted accounting standards. Among other things, the Commissioner may
prescribe the form or forms in which required information shall be set forth, the
items or details to be shown in the balance sheet and income statement, and the
methods to be followed in the preparation of accounts, appraisal or valuation of

assets and liabilities, determination of recurring and nonrecurring income,
differentiation of investment and operating income, and in the preparation, where
the Commissioner deems it necessary or desirable, of consolidated balance
sheets or income accounts of any person directly or indirectly controlling or

controlled by the insurance company.”

SEC. 55. The old Section 226 of The Insurance Code, as amended, is hereby
renumbered as Section 231 and the sections subsequent thereto are accordingly
renumbered until Section 227, which shall be renumbered as Section 231.

SEC. 56. Section 228 of The Insurance Code, as amended, is hereby
renumbered as Section 232 and its paragraphs (g) and (i) are hereby amended to read
as follows

24


*(g) A provision that the insurer will issue to the policyholder for delivery to
each person insured a statement as to the insurance protection to which he is
entitled, to whom the insurance benefits are payable, and the rights set forth in
paragraphs (h), (i) and (j) following;” and

(i) A provision that if the group policy terminates or is amended so as to
terminate the insurance of any class of insured persons, every person insured
thereunder at the date of such termination whose insurance terminates and who
has been so insured for five years prior to such termination date shall be entitled
to have issued to him by the insurer an individual policy of life insurance subject
to the same limitations as set forth in paragraph (h), except that the group policy
may provide that the amount of such individual policy shall not exceed the
amount of the person's life insurance protection ceasing;”

SEC. 57. The old Section 229 of The Insurance Code, as amended, is hereby
renumbered as Section 233 and the sections subsequent thereto are accordingly
renumbered until Section 244, which shall be renumbered as Section 248.

SEC. 58. A new Section 249 of The Insurance Code, as amended, is hereby
added to read as follows:

“Sec. 249. It is unlawful to: a) present or cause to be presented any false or
fraudulent claim for the payment of a loss under a contract of insurance; and b)
prepare, make or subscribe any writing with intent to present or use the same, or
to allow it to be presented or used in support of any such claim. Any person who
violates this section shall be punished by a fine not exceeding twice the amount
claimed or imprisonment of five years or both at the discretion of the Court.”

SEC. 59. The old Section 245 of The Insurance Code, as amended, is hereby
renumbered as Section 250 and the sections subsequent thereto are accordingly
renumbered until Section 247, which shall be renumbered as Section 252.

SEC. 60. Section 248 of The Insurance Code, as amended, is hereby
renumbered as Section 253 and a new last paragraph is added to read as follows:

“No insurance company, life or non-life, or any professional reinsurer, ordered to
be liquidated by the Commissioner under the provisions hereunder may be

25


rehabilitated or authorized to transact anew, insurance or reinsurance business,

as the case may be.”

SEC. 61. The old Section 249 of The Insurance Code, as amended, is hereby
renumbered as Section 254 and the sections subsequent thereto are accordingly
renumbered until Section 270, which shall be renumbered as Section 276

SEC. 62. Section 271 of The Insurance Code, as amended, is hereby
renumbered as Section 277 and its paragraphs (4) and (8) are amended to read as
follows:

“(4) The presence in person or by proxy of five per centum of the members
entitled to vote at any meeting shall constitute a quorum for the transaction of
business, including the amendment of the Articles of Incorporation and/or the by-
laws, unless otherwise provided by the by-laws.” and

“(8) All insurers mutualized under the provisions of this chapter shall be subject
to all other applicable provisions of this Code. The provisions of the Corporation
Code shall apply in a suppletory manner.”

SEC. 63. The old Section 272 of The Insurance Code, as amended, is hereby
renumbered as Section 278.

SEC. 64. A new Section 279 of The Insurance Code, as amended, is hereby
added to read as follows:

“Sec. 279. A domestic mutual life insurance company doing business in the
Philippines may convert itself into an incorporated stock life insurance company
by demutualization. To that end, it may provide and carry out a plan for the
conversion by complying with the requirements of this Title.

“The conversion of a domestic mutual life insurance company to an
incorporated stock life insurance company shall be carried out pursuant to a
conversion plan duly approved by the Commissioner.

“The Commissioner shall promulgate such rules and regulations as he or
she may deem necessary to carry out the provisions of this Title, after due
consultation with representatives of the insurance industry.

26


“All converted insurers under the provisions of this Title shall be subject to all
other applicable provisions of Code. The provisions of the Corporation Code

shall apply in a suppletory manner.”

SEC. 65. The old Section 273 of The Insurance Code, as amended, is hereby
renumbered as Section 280 and the sections subsequent thereto are accordingly
renumbered until Section 275, which shall be renumbered as Section 282.

SEC. 66. Section 276 of The Insurance Code, as amended, is hereby
renumbered as Section 283 and amended to read as follows:

“Sec. 283. The Commissioner shall cause an examination of the books and
records of the withdrawing company, and if, upon such examination, the
Commissioner finds that the insurer has no outstanding liabilities to policyholders
and creditors in the Philippines, and no policies uncancelled; or its primary
liabilities have not been reinsured and assumed by another insurance company
authorized to transact business in the Philippines, as required in the preceding
section, it shall cancel the withdrawing company's certificate of authority, if
unexpired, and shall permit the insurer to withdraw. The cost and expenses of all
such examination shall be paid as prescribed in section [four hundred
seventeen].”

SEC. 67. The old Section 277 of The Insurance Code, as amended, is hereby
renumbered as Section 284 and the sections subsequent thereto are accordingly
renumbered until Section 279, which shall be renumbered as Section 286.

SEC. 68. Section 280 of The Insurance Code, as amended, is hereby
renumbered as Section 287 and amended to read as follows:

“Sec. 287. Except as otherwise provided in this Code, no person,
partnership, association or corporation shall transact any business in the
Philippines as a professional reinsurer until it shall have obtained a certificate of
authority for that purpose from the Commissioner upon the application therefor
and payment by such person, partnership, association or corporation of the fees
hereinafter prescribed. As used in this Code, the term “professional reinsurer”
shall mean any person, partnership, association or corporation that transacts
solely and exclusively reinsurance business in the Philippines.

27


“The Commissioner may refuse to issue a certificate of authority to any
partnership, association or corporation if, in his judgment, such refusal will best
promote public interest. No such certificate of authority shall be granted to any
such partnership, association or corporation unless and until the Commissioner
shall have satisfied himself by such examination as he may make and such
evidence as he may require that such partnership, association or corporation is
qualified by the laws of the Philippines to transact business therein as a
professional reinsurer.

“Before issuing such certificate of authority of the Commissioner must be
satisfied that the name of the applicant is not that of any other known company
transacting insurance or reinsurance business in the Philippines, or a name so
similar as to be calculated to mislead the public.

“The certificate of authority shall be valid unless sooner revoked or
cancelled by the Commissioner.

“Every such partnership, association, or corporation receiving such
certificate of authority shall be subject to the provisions of this Code and other
related laws, and to the jurisdiction and supervision of the Commissioner.”

SEC. 69. Section 281 of The Insurance Code, as amended, is hereby
renumbered as Section 288 and amended to read as follows:

“Sec. 288. Any partnership, association, or corporation authorized to
transact solely reinsurance business must have a capitalization of at least two
billion pesos, paid in cash, of which at least fifty per centum consists of paid-up
capital and the remaining portion thereof as contributed surplus, which in no case
shall be less than four hundred million pesos or such capitalization as may be
determined by the Secretary of Finance, upon the recommendation of the
Commissioner; Provided, That twenty-five per centum of the paid-up capital must
be invested in securities satisfactory to the Commissioner, consisting of bonds or
other evidences of debt of the Government of the Philippines or its political
subdivisions or instrumentalities, or of government-owned or controlled
corporations and entities, including the Bangko Sentral ng Pilipinas, and
deposited with the Commissioner, and the remaining seventy-five per centum in
such other securities as may be allowed and permitted by the Commissioner,
which securities shall at all times be maintained free from any lien or
encumbrance: Provided, That the aforesaid capital requirement is without
Prejudice to other requirements to be imposed under any risk-based capital
method that may be adopted by the Commissioner: Provided, Finally, That the

28


provisions of this chapter applicable to insurance companies shall so far as
practicable be likewise applicable to professional reinsurers.”

SEC. 70. The old Section 282 of The Insurance Code, as amended, is hereby
renumbered as Section 289 and the sections subsequent thereto are accordingly
renumbered until Section 298, which shall be renumbered as Section 305.

SEC. 71. Section 299 of The Insurance Code, as amended, is hereby
renumbered as Section 306 and its second paragraph is amended to read as follows:

“No insurance company doing business in the Philippines, nor any agent
thereof, shall pay any commission or other compensation to any person for
services in obtaining insurance, unless such person shall have first procured
from the Commissioner a license to act as an insurance agent of such company
or as an insurance broker as hereinafter provided. An insurance agent is an
independent contractor and not an employee of the company represented
“Insurance agent’ includes agency leader, agency manager, or their equivalent.

“No person shall act as an insurance agent or as an insurance broker in the
solicitation or procurement of applications for insurance, or receive for services in
obtaining insurance, any commission or other compensation from any insurance
company doing business in the Philippines, or any agent thereof, without first
procuring a license to act from the Commissioner, which must be renewed every
five years thereafter. Such license, which shall ipso facto expire upon termination
of the agent's agreement with the insurance company, shall be issued by the
Commissioner only upon the written application of the person desiring it, such
application if for a license to act as insurance agent, being approved and
countersigned by the company such person desires to represent, and shall be
upon a form prescribed by the Commissioner giving such information as he may
require, and upon payment of the corresponding fee hereinafter prescribed. The
Commissioner shall satisfy himself as to competence and trustworthiness of the
applicant and shall have the right to refuse to issue or renew and to suspend or
revoke any such license in his discretion.”

SEC. 72. A new Section 299-A of The Insurance Code, as amended, is hereby
added to read as follows
“The provisions of Sections 299 and 300 shall apply to an employee who
shall be engaged to sell insurance products by an insurance company.

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“Since the insurance industry is imbued with public interest, the insurance
companies upon approval of the Commission may exercise wide latitude in
supervising the activities of their insurance agents to ensure the protection of the

insuring public.”

SEC. 73. The old Section 300 of The Insurance Code, as amended, is hereby
renumbered as Section 307 and the sections subsequent thereto are accordingly
renumbered until Section 316, which shall be renumbered as Section 323.

SEC. 74, Section 317 of The Insurance Code, as amended, is hereby
renumbered as Section 324 and its first paragraph is amended to read as follows:

“A certificate of registration issued to a resident agent shall expire on the thirtieth
day of June of the fifth year following its issuance unless it is renewed.”

SEC. 75. The old Section 318 of The Insurance Code, as amended, is hereby
renumbered as Section 325 and the sections subsequent thereto are accordingly
renumbered until Section 327, which shall be renumbered as Section 334.

SEC. 76. Section 328 of The Insurance Code, as amended, is hereby
renumbered as Section 335 and amended to read as follows:

“Sec. 335. Any adjuster's license issued hereunder shall be valid until after the
thirtieth day of June of the fifth year following the issuance of such license unless
it is renewed; Provided that, such license shall ipso facto expire upon termination
of the independent adjuster’s agreement with the insurance company, or of the
public adjuster's agreement with the insured, as the case may be.”

SEC. 77. The old Section 329 of The Insurance Code, as amended, is hereby
renumbered as Section 336 and the sections subsequent thereto are accordingly

renumbered until Section 335, which shall be renumbered as Section 342

SEC. 78. Section 336 of The Insurance Code, as amended, is hereby
renumbered as Section 343 and its second paragraph is amended to read as follows

“No certificate of registration issued under this title shall be valid after the thirtieth
day of June of the fifth year following its issuance unless it is renewed.”

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SEC. 79. The old Section 337 of The Insurance Code, as amended, is hereby
renumbered as Section 344 and the sections subsequent thereto are accordingly
renumbered until Section 364, which shall be renumbered as Section 371.

SEC. 80. A new Section 372 of The Insurance Code, as amended, is hereby

added to read as follows:

“Sec. 372. The Commissioner, in consultation with the duly accredited
associations representing the insurance industry, shall adopt and promulgate a
code of conduct to promote integrity, honesty and ethical business practices

among insurance agents, distributors and other intermediaries.”

SEC. 81. A new Title on Bancassurance and Sections 373 to 375 of The
Insurance Code, as amended, are hereby added to read as follows:

“Title 9
“BANCASSURANCE

“Sec. 373. The term “bancassurance” shall mean the presentation and
sale to bank customers by an insurance company of its insurance products within
or outside the premises of the head office of such bank duly licensed by the
Bangko Sentral ng Pilipinas or any of its branches under such rules and
regulations which the Commission may promulgate. To engage in
bancassurance, the bank is not required to have equity ownership of the
insurance company. No insurance company shall engage in the business of
bancassurance unless it possesses all the requirements as may be prescribed by
the Commission.

“No insurance product under this Section, whether life or non-life, shall be
issued or delivered unless in the form previously approved by the Commission

“Sec. 374. Personnel tasked to present and sell insurance products within

the bank premises shall be duly licensed by the Commission and shall be subject
to the rules and regulations of this Act.

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“Sec. 375. The Commission, in coordination with the Bangko Sentral ng
Pilipinas, shall promulgate rules and regulations to effectively supervise the

business of bancassurance.”

SEC. 82. Chapter of the Insurance Code, “Security Fund’, consisting of Sections
365 up to 372 is hereby deleted.

SEC. 83. The old Section 373 of the Insurance Code, as amended, is hereby
renumbered as Section 376 and the sections subsequent thereto are accordingly
renumbered until Section 412, which shall be renumbered as Section 415

SEC. 84, Section 413 of The Insurance Code, as amended, is hereby
renumbered as Section 424 and amended to read as follows:
“Sec. 416. All trustees shall, before entering in the performance of the
duties of their trust, obtain a certificate of registration from the Commissioner.
“All provisions of this Code governing mutual benefit associations and
such other provisions herein, whenever practicable and necessary, shall be
applicable to trusts for charitable uses.”

SEC. 85. A new Section 425 of The Insurance Code, as amended, is hereby
added to read as follows:
“Sec. 417. The treasurer of a charitable trust shall file a fidelity bond in the
amount commensurate with the value of the trust property in his custody, as may
be determined by the Commissioner.”

SEC. 86.. A new Chapter on Trust Business in General and Section 418 to 422
of The Insurance Code, as amended, are hereby added to read as follows:

“Chapter VIII
“TRUST BUSINESS IN GENERAL

“Sec. 418. An insurance company duly authorized by the Insurance
Commission may engage in trust business, which trust business shall be separate
and distinct from the general business of the insurance company, without need of
securing a license from the Bangko Sentral ng Pilipinas. The insurance company
shall act as a trustee or administer any trust or hold property in trust or on deposit for
the use, benefit, or behoof of others. For purposes of this Act, such separate, distinct
and duly authorized trust business shall be referred to as a trust entity.

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“Sec. 419. A trust entity shall administer property under its custody with
the diligence that a prudent man would exercise in the conduct of an enterprise
of a like character and with similar aims. No trust entity shall, for the account of
the trustor or the beneficiary of the trust, purchase or acquire property from, or
sell, transfer, assign or lend money or property to, or purchase debt instruments
of, any of the departments, directors, officers, stockholders, or employees of the
trust entity, relatives within the first degree of consanguinity or affinity, or the
related interests, of such directors, officers and stockholders, unless prior to the
transaction, such transaction is specifically authorized by the trustor and the
relationship between the trustee and the other party involved in the transaction is
fully disclosed to the trustor or beneficiary of the trust. The Insurance
Commission shall promulgate such rules and regulations as may be necessary to
regulate the conduct of trust business by insurance companies.

“Sec. 420. The trust business and all funds, properties or securities
received by any trust entity as executor, administrator, trustee, receiver, or
depositary shall be kept separate and distinct from the general business of the
insurance company, or allied insurance company including all other funds,
properties, and assets of such trust entity. The accounts of all such funds,
properties, or securities shall likewise be kept separate and distinct from the
accounts of the general business of the trust entity.

“Sec. 421. Unless otherwise directed by the instrument creating the trust,
the lending and investment of funds and other assets acquired by a trust entity as
executor, administrator, or trustee, shall be limited to loans or investments as
may be prescribed by law, and/or the Insurance Commission.

“Sec. 422. No assets held by a trust entity in its capacity as trustee shall
be subject to any claims other than those of the parties interested in the specific
trusts.”

SEC. 87. A new Chapter on Registration, Responsibilities and Oversight of Self-
Regulatory Organizations and Sections 423 to 429 of The Insurance Code, as

amended, are hereby added to read as follows:

“Chapter IX

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“REGISTRATION, RESPONSIBILITIES AND OVERSIGHT OF SELF-
REGULATORY ORGANIZATIONS

“Sec. 423. The Commissioner shall have the power to register as a self-
regulatory organization, or otherwise grant licenses, and to regulate, supervise,
examine, suspend or otherwise discontinue, as a condition for the operation of
organizations whose operations are related to or connected with the insurance
market such as but not limited to associations of insurance companies, whether
life or non-life, reinsurers, actuaries, agents, brokers, dealers, mutual benefit
associations, trusts, rating agencies, and other persons regulated by the
Commissioner, which are engaged in the business regulated by this Code.

“The Commissioner may prescribe rules and regulations which are
necessary or appropriate in the public interest or for the protection of investors to
govern self-regulatory organizations and other organizations licensed or
regulated pursuant to the authority granted in hereunder, including but not limited
to the requirement of cooperation within and among alll participants in the
insurance market to ensure transparency and facilitate exchange of information

“Sec. 424. An association cannot be registered as a self-regulatory
organization unless the Commissioner determines that:

“(a) The association is so organized and has the capacity to be able to
carry out the purposes of this Code and to comply with, and to enforce
compliance by its members and persons associated with its members, with the
provisions of this Code, the rules and regulations thereunder, and the rules of the
association.

“(b) The rules of the association, notwithstanding anything in the
Corporation Code to the contrary, provide that:

(i) Any entity possessing the qualifications set out in the rules and none of
the disqualifications may become a member of the association;

(ii) There exists a fair representation of its members to serve on the Board of
Directors of the association and in the administration of its affairs, and that
any natural person associated with a juridical entity that is a member shall
himself be deemed to be a member for this purpose;

(ili) The Board of Directors of the association includes in its composition: (a)
the president of the association and (b) at least 2 independent directors;

(iv) For the equitable allocation of reasonable dues, fees, and other charges
among members and other persons using any facility or system which the
association operates or controls;

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(v) _ For the prevention of fraudulent and manipulative acts and practices, the
promotion of just and equitable principles of business, and, in general, the
protection of the insuring public;

(vi) That its members and persons associated with its members shall be
appropriately disciplined for violation of any provision of this Code, the
tules or regulations thereunder, or the rules of the association;

(vii) That a fair procedure for the disciplining of members and persons
associated with members, the denial of membership to any person
seeking membership therein, the barring of any person from becoming
associated with a member thereof, and the prohibition or limitation by the
association of any person with respect to access to services offered by the
association or a member thereof.

“Sec. 425. A self-regulatory organization may examine and verify the

qualifications of an applicant to become a member in accordance with

procedures established by the rules of the association.

“A self-regulatory organization shall deny membership or condition the
membership of, an entity, if the entity:

(i) Does not meet the standards of financial responsibility, operational
capability, training, experience, or competence that are prescribed by the
tules of the association; or

(ii) | Has engaged, and there is a reasonable likelihood it will again engage, in
acts or practices inconsistent with just and equitable principles of fair
trade.

“A self-regulatory organization may deny membership to an entity not engaged in

a type of business in which the rules of the association require members to be

engaged.

“Sec 426. Upon the filing of an application for registration as a self-
regulatory organization under this Title, the Commissioner shall have ninety (90)
days within which to either grant registration or institute a proceeding to
determine whether registration should be denied. In the event proceedings are
instituted, the Commissioner shall have two hundred seventy (270) days within
which to conclude such proceedings at which time it shall, by order, grant or deny
such registration.

“Sec. 427. Every self-regulatory organization shall comply with the
provisions of this Code, the rules and regulations thereunder, and its own rules,
and enforce compliance therewith, notwithstanding any provision of the
Corporation Code to the contrary, by its members, persons associated with its
members or its participants.

35


“Sec. 428. Each self-regulatory organization shall submit to the
Commissioner for prior approval any proposed rule or amendment thereto,
together with a concise statement of the reason and effect of the proposed
amendment.

“Within sixty (60) days after submission of a proposed amendment, the
Commissioner shall, by order, approve the proposed amendment. Otherwise, the
same may be made effective by the self-regulatory organization.

“In the event of an emergency requiring action for the protection of the
insuring public, a self-regulatory organization may put a proposed amendment
into effect summarily: Provided, however, That a copy of the same shall be
immediately submitted to the Commissioner.

“The Commissioner is further authorized, if after making appropriate
request in writing to a self-regulatory organization that such organization effect
‘on its own behalf specified changes in its rules and practices and, after due
notice and hearing it determines that such changes have not been effected, and
that such changes are necessary, by rule or regulation or by order, may alter,
abrogate or supplement the rules of such self-regulatory organization in so far as
necessary or appropriate to effect such changes in respect of such matters as:

“(a) Safeguards in respect of the financial responsibility of members
and adequate provision against the evasion of financial responsibility through the
use of corporate forms or special partnerships;

“(b) The supervision of market practices;

“(c) The manner, method, and place of soliciting busines:

“(d) The fixing of reasonable rates of fees, interest, listing and other
charges, but not rates of commission; and self-regulatory organization

“(e) The supervision, auditing and disciplining of members.

“In addition to the general powers of the Commissioner over the entities
under his/her supervision, the Commissioner, after due notice and hearing, is
authorized, in the public interest and to protect insuring public:

*(a) To suspend for a period not exceeding twelve (12) months or to
revoke the registration of a self-regulatory organization, or to censure or impose
limitations on the activities, functions, and operations of such self-regulatory
organization, if the Commission finds that such a self-regulatory organization has
willfully violated or is unable to comply with any provision of this Code or of the
rules and regulations thereunder, or its own rules, or has failed to enforce
compliance therewith by a member of, person associated with a member, or a
participant in such self-regulatory organization:

36


“(b) To expel from a self-regulatory organization any member thereof or
any participant therein who is found to have willfully violated any provision of this
Code or suspend for a period not exceeding twelve (12) months for violation of
any provision of this Code or any other laws administered by the Commission, or
the rules and regulations thereunder, or effected, directly or indirectly, any
transaction for any person who, such member or participant had reason to
believe, was violating in respect of such transaction any of such provisions; and

“(c) To remove from office or censure any officer or director of a self-
regulatory organization if it finds that such officer or director has violated any
provision of this Code, any other law administered by the Commissioner, the
rules or regulations thereunder, or the rules of such self-regulatory organization,
abused his authority, or without reasonable justification or excuse has failed to
enforce compliance with any of such provisions.

“Sec. 429. (a) A self-regulatory organization is authorized to discipline a
member of or participant in such self-regulatory organization, or any person
associated with a member, including the suspension or expulsion of such
member or participant, and the suspension or bar from being associated with a
member, if such person has engaged in acts or practices inconsistent with just
and equitable principles of fairness or in willful violation of any provision of the
Code, any other law administered by the Commission, the rules or regulations
thereunder, or the rules of the self-regulatory organization. In any disciplinary
proceeding by a self-regulatory organization (other than a summary proceeding
pursuant to paragraph (b) of this subsection) the self-regulatory organization
shall bring specific charges, provide notice to the person charged, afford the
person charged with an opportunity to defend against the charges, and keep a
record of the proceedings. A determination to impose a disciplinary sanction shall
be supported by a written statement of the offense, a summary of the evidence
presented and a statement of the sanction imposed.

“(b) A self-regulatory organization may summarily: (i) suspend a
member, participant or person associated with a member who has been or is
expelled or suspended from any other self-regulatory organization; or (ii)
suspend a member who the self-regulatory organization finds to be in such
financial or operating difficulty that the member or participant cannot be permitted
to continue to do business as a member with safety to investors, creditors, other
members, participants or the self-regulatory organization: Provided, That the self-
regulatory organization immediately notifies the Commission of the action taken.
Any person aggrieved by a summary action pursuant to this paragraph shall be
promptly afforded an opportunity for a hearing by the association in accordance

37


with the provisions of paragraph (a) of this subsection. The Commissioner, by
order, may stay a summary action on its own motion or upon application by any
person aggrieved thereby, if the Commissioner determines summarily or after
due notice and hearing (which hearing may consist solely of the submission of
affidavits or presentation of oral arguments) that a stay is consistent with the
public interest and the protection of the insuring public.

“(c) A self-regulatory organization shall promptly notify the, Commission of
any disciplinary sanction on any member thereof or participant therein, any denial
of membership or participation in such organization, or the imposition of any
disciplinary sanction on a person associated with a member or a bar of such
person from becoming so associated. Within thirty (30) days after such notice,
any aggrieved person may appeal to the Commissioner from, or the
Commissioner on its own motion within such period, may institute review of, the
decision of the self-regulatory organization, at the conclusion of which, after due
notice and hearing (which may consist solely of review of the record before the
self-regulatory organization), the Commissioner shall affirm, modify or set aside
the sanction. In such proceeding the Commissioner shall determine whether the
aggrieved person has engaged or omitted to engage in the acts and practices as
found by the self-regulatory organization, whether such acts and practices
constitute willful violations of this Code, any other law administered by the
Commission, the rules or regulations thereunder, or the rules of the self-
regulatory organization as specified by such organization, whether such
provisions were applied in a manner consistent with the purposes of this Code,
and whether, with due regard for the public interest and the protection of
investors the sanction is excessive or oppressive.”

SEC. 88. A new Chapter on Confidentiality and a new Section 430 of The
Insurance Code, as amended, are hereby added to read as follows:

“Chapter X
“CONFIDENTIALITY

“Sec. 430. Allllife insurance companies doing business in the Philippines
are hereby required to inform persons applying for life insurance as well as
persons proposed for insurance that as part of the underwriting procedure, a
report may be obtained by the insurance company that will provide it with
applicable and relevant information regarding the person's health, mode of living,
and other personal background as gathered from the person himself, from the

38


results of any required physical examination, from the reports obtained from
physicians or other medical personnel, institutions or facilities where the person
had been attended, or, in general, from any other sources.

“All these information in relation to the person's insurability shall be treated
as confidential and shall not be disclosed by the life insurance company, its
directors, officers, employees, agents, brokers, or other business partners, in any
form or manner, unless otherwise required by law, by lawful order of a Court of
competent jurisdiction, or upon the written permission of the person himself,
provided, however, that the insurance company may release information in its file
to other life insurance companies to whom the person may apply for life, accident
or health insurance, or to whom a claim for benefits may be submitted.”

SEC. 89. A new Chapter on Taxation and a new Section 431 of The Insurance
Code, as amended, are hereby added to read as follows:

“Chapter XI
“TAXATION

“Sec. 431. The death benefits received under a life insurance policy shall
be exempt from all taxes.”

SEC. 90. Chapter Vill on The Insurance Commissioner of The Insurance Code,
as amended, is hereby renumbered as Chapter XII

SEC. 91. Section 414 of The Insurance Code, as amended, is hereby
renumbered as Section 432 and amended to read as follows:

“Sec. 432. The Insurance Commissioner shall have the duty to see that all
laws relating to insurance, insurance companies and other insurance matters,
mutual benefit associations, and trusts for charitable uses are faithfully executed
and to perform the duties imposed upon him by this Code, and shall,
notwithstanding any existing laws to the contrary, have sole and exclusive
authority to regulate the issuance and sale of variable contracts as defined in
section [two hundred thirty-two] and to provide for the licensing of persons selling
such contracts, and to issue such reasonable rules and regulations governing the
same.

“The Commissioner may issue such rulings, instructions, circulars, orders
and decision as he may deem necessary to secure the enforcement of the

39


provisions of this Code, to ensure the efficient regulation of the insurance
industry in accordance with global best practices and to protect the insuring
public, subject to the approval of the Secretary of Finance. Except as otherwise
specified, decisions made by the Commissioner shall be appealable to the
Secretary of Finance.

“In addition to the foregoing, the Commissioner shall have the following
powers and functions:

“a) Formulate policies and recommendations on issues concerning the
insurance industry, advise Congress and other government agencies on all
aspects of the insurance industry and propose legislation and amendments
thereto;

“b) Approve, reject, suspend revoke or require amendments to registration
and licensing applications provided for by this Code;

“c) Impose sanctions for the violation of laws and the rules, regulations
and orders issued pursuant thereto;

“d) Prepare, approve, amend or repeal rules, regulations and order, and
issue opinions and provide guidance on and supervise compliance with such
rules, regulations and orders;

“e) Enlist and aid and support of and/or deputize any and all enforcement
agencies of the Government, civil or military as well as any private institution,
corporation, firm, association or person in the implementation of its powers and
functions under this Code;

“f) Issue cease and desist orders to prevent fraud or injury to the insuring
public;

“g) Punish for contempt of the Commission, both direct and indirect, in
accordance with the pertinent provisions of and penalties prescribed by the Rules
of Court;

“h) Compel the officers of any registered insurance corporation or
association to call meetings of stockholders or members thereof under its

supervisions;

40


*i) Issue subpoena duces tecum and summon witnesses to appear in any
proceedings of the Commission and in appropriate cases, order the examination,
search and seizure of all documents, papers, files and records, tax returns, and
books of accounts of any entity or person under investigation as may be
necessary for the proper disposition of the cases before it, subject to the
provision of existing laws;

“)) Suspend or revoke, after proper notice and hearing the license or
certificate of authority of any entity or person under its regulation, upon any of the
grounds provided by law;

“k) Conduct of examination to determine compliance with laws and
regulations if the circumstances so warrant as determined by appropriate rules
and regulations;

“I) Regular investigation which shall not be oftener than once a year from
the last date of examination to determine whether an institution is conducting its
business on a safe an sound basis; Provided, That, the deficiencies/irregularities
found by or discovered by an audit shall be immediately addressed;

“m) Inquire into the solvency and liquidity of the institutions under its
supervision and enforce prompt corrective action; and

“k) Exercise such other powers as may be provided by law as well as
those which may be implied from, or which are necessary or incidental to the
carrying out of, the express powers granted the Commission to achieve the
objectives and purposes of these laws.”

SEC. 92. The old Section 415 of The Insurance Code, as amended, is hereby
renumbered as Section 433 and the sections subsequent thereto are accordingly
renumbered until Section 424, which shall be renumbered as Section 442.

SEC. 93. This Act shall also amend the section numbers referred to in The

Insurance Code to reflect the renumbering resulting from the amendments brought
about by this Act.

4a


SEC. 94. Separability Clause. If any provision or part hereof, is held invalid or
unconstitutional, the remainder of the law or the provision not otherwise affected shall

remain valid and subsisting.

SEC. 95. Repealing Clause. All laws, decrees, orders, rules and regulations or
parts thereof, inconsistent with this Act are hereby amended or modified accordingly.

SEC. 96. Effectivity. This Act shall take effect fifteen (15) days following the
completion of its publication in the Official Gazette or in two (2) national newspapers of

general circulation

Approved,

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