Page 1 of 16

Republic of the Philippines
HOUSE OF THE REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No. 1506

Introduced by REPRESENTATIVES ALFREDO A. GARBIN, Jr. and
ELIZALDY S. CO

EXPLANATORY NOTE

This bill seeks to mandate the creation of a government reinsurance facility to
provide reinsurance coverage to insurance companies following a declared terrorism
event. It is a short-term measure designed to help the insurance market recover from
terrorist acts of rebel groups in our country, and develop solutions to insuring terrorism.
It seeks to establish a national insurance program to administer a system of shared
public/private compensation for insured losses resulting from acts of terrorism in order
to protect local investors and create transitional period for private insurance markets to
stabilize.

Business insurers generally neither charged for nor specifically excluded
terrorism coverage. The scope of the recent terrorist attacks and the resulting multi-
billion estimated financial costs changed perceptions dramatically. Much of the financial
costs from the terrorist attacks fell on reinsurers (that further spread the risk assumed
by primary insurers). Unable to accurately model or price terrorism exposures,
reinsurers largely withdrew from the market for terrorism coverage. Without reinsurance,
primary insurers were then compelled to exclude terrorism. This created an unfair
situation where foreign investors are covered by insurance provided by multilateral
agencies based abroad for risks including terrorism while local investors continue to be
not covered by any insurance against terrorist activities.

Many businesses were not able to purchase insurance protection against future
terrorist attacks. This situation was a serious threat to industries where lenders and
investors required terrorism protection for their investments. Real estate, transportation,
construction, energy, and utility sectors of the economy were vulnerable, creating
broader threats to the national economy.

Congress should therefore respond by enacting this bill to provide a government
reinsurance backstop in case of large-scale terrorist attacks, requiring that business
insurers offer terrorism coverage for the types of insurance included in the act

Under this bill, the national government would help insurers cover losses in the
event of a terrorist attack under certain conditions, and would also impose assessments
on the insurance industry to recover all or a portion of the insurance payments.

In view of the above circumstances, the swift passage of the bill is earnestly
sought.

S.cO



Page 2 of 16

Republic of the Philippines
HOUSE OF THE REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No. 1506

Introduced by REPRESENTATIVES ALFREDO A. GARBIN, Jr. and
ELIZALDY S. CO

AN ACT TO ENSURE THE CONTINUED FINANCIAL CAPACITY OF INSURERS TO
PROVIDE COVERAGE FOR RISKS FROM TERRORISM, PROVIDING FUNDS
THEREFOR, AND FOR OTHER PURPOSE

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 “Terrorism Risk Insurance Act of
2016"

Section 2. Declaration of Policy. It is the declared policy of the State to establish a
temporary program that provides for a transparent system of shared public and private
compensation for insured losses resulting from acts of terrorism, in order to (1) protect
consumers by addressing market disruptions and ensure the continued widespread
availability and affordability of property and casualty insurance for terrorism risk; and (2)
allow for a transitional period for the private markets to stabilize, resume pricing of such
insurance, and build capacity to absorb any future losses, while preserving insurance
regulation and consumer protections.

Section 3. Definitions. In this title, the following definitions shall apply:
(A) ACT OF TERRORISM- The term ‘act of terrorism’ means any act that is certified
by the President, after an endorsement of the Secretary of Interior and Local
Government and the Chief, Philippine National Police

(1) To be an act of terrorism;

(2) To be a violent act or an act that is dangerous to human life, property, or
infrastructure;

(3) To have resulted in damage within the Philippines, or outside of the
Philippines in the case of an air cartier or vessel described in (E)(2), or the
premises of a Philippine mission; and

(4) to have been committed by an individual or individuals acting on behalf of any
foreign/local person or foreign/local interest, as part of an effort to coerce the
civilian population of the Philippines, or to influence the policy or affect the
conduct of the Philippine Government by coercion.

Provided that, in the certification by the above agencies, the following conditions
shall apply:
(1) No act shall be certified by the President as an act of terrorism if:


Page 3 of 16

(a) the act is committed as part of the course of a war declared by the
Congress, except that this clause shall not apply with respect to any
coverage for workers’ compensation; or

(b) property and casualty insurance losses resulting from the act, in the
aggregate, do not exceed P1,000,000.

(2) Any certification of, or determination not to certify, an act as an act of
terrorism under this paragraph shall be final, and shall not be subject to
judicial review

(3) The President may not delegate or designate to any other officer, employee,
or person, any determination under this paragraph of whether, during the
effective period of the Program, an act of terrorism has occurred.

(B) AFFILIATE- The term ‘affiliate’ means, with respect to an insurer, any entity that
controls, is controlled by, or is under common control with the insurer.

(C) CONTROL- An entity has ‘control’ over another entity, if--

(1) the entity directly or indirectly or acting through 1 or more other persons
‘owns, controls, or has power to vote 25 percent or more of any class of voting
securities of the other entity;

(2) the entity controls in any manner the election of a majority of the directors or
trustees of the other entity; or

(3) the President determines, after notice and opportunity for hearing, that the
entity directly or indirectly exercises a controlling influence over the
management or policies of the other entity

(0) DIRECT EARNED PREMIUM- The term ‘direct earned premium’ means a direct
earned premium for property and casualty insurance issued by any insurer for
insurance against losses occurring at the locations described in subparagraphs
(1) and (2) of paragraph (E).

(E) INSURED LOSS- The term ‘insured loss’ means any loss resulting from an act of
terrorism (including an act of war, in the case of workers’ compensation) that is
covered by primary or excess property and casualty insurance issued by an
insurer if such loss—

(1) occurs within the Philippines; or

(2) occurs to an air carrier, to a Philippine flag vessel (or a vessel based
principally in the Philippines, on which Philippine income tax is paid and
whose insurance coverage is subject to regulation in the Philippines),
regardless of where the loss occurs, or at the premises of any Philippine
mission

(F) INSURER- The term ‘insurer’ means any entity, including any affiliate thereof
that is:

(1) licensed or admitted to engage in the business of providing primary or excess
insurance;

(2) not licensed or admitted as described in clause (F) (1), if it is an eligible
surplus line carrier approved for the purpose of offering property and casualty
insurance by a government agency in connection with maritime, energy, or
aviation activity;


Page 4 of 16

(3) a residual market insurance entity or workers’ compensation fund; or

(4) any other entity described in section 4(f), to the extent provided in the rules of
the Insurance Commission issued under section 4(f);

(5) that receives direct earned premiums for any type of commercial property and
casualty insurance coverage, other than in the case of entities described in
sections 4(d) and 4(f); and

(6) that meets any other criteria that the Insurance Commission may reasonably
prescribe.

(G) INSURER DEDUCTIBLE- The term “insurer deductible’ means—

(1) for the Transition Period, the value of an insurer's direct earned premiums
over the calendar year immediately preceding the date of enactment of this
Act, multiplied by 1 percent;

(2) for Program Year 1, the value of an insurer's direct earned premiums over the
calendar year immediately preceding Program Year 1, multiplied by 7
percent;

(3) for Program Year 2, the value of an insurer's direct earned premiums over the
calendar year immediately preceding Program Year 2, multiplied by 10
percent;

(4) for Program Year 3, the value of an insurer's direct earned premiums over the
calendar year immediately preceding Program Year 3, multiplied by 15
percent; and

(5) notwithstanding subparagraphs (1) through (4), for the Transition Period,
Program Year 1, Program Year 2, or Program Year 3, if an insurer has not
had a full year of operations during the calendar year immediately preceding
such Period or Program Year, such portion of the direct earned premiums of
the insurer as the Insurance Commission determines appropriate, subject to
appropriate methodologies established by the Insurance Commission for
measuring such direct earned premiums.

(H) PERSON- The term “person’ means any individual, business or nonprofit entity
(including those organized in the form of a partnership, limited liability company,
corporation, or association), trust or estate, or political subdivision or other
governmental unit.

(I) PROGRAM- The term ‘Program’ means the Terrorism Insurance Program
established by this title. (10) PROGRAM YEARS-

(1) TRANSITION PERIOD- The term “Transition Period' means the period
beginning on the date of enactment of this Act and ending on December 31,
2014.

(2) PROGRAM YEAR 1- The term "Program Year 1’ means the period beginning
on January 1, 2015 and ending on December 31, 2015.

(3) PROGRAM YEAR 2- The term ‘Program Year 2' means the period beginning
on January 1, 2016 and ending on December 31, 2016.

(4) PROGRAM YEAR 3- The term "Program Year 3' means the period beginning
on January 1, 2017 and ending on December 31, 2017.


Page 5 of 16

(J) PROPERTY AND CASUALTY INSURANCE- The term ‘property and casualty
insurance'—

(1) means commercial lines of property and casualty insurance, including excess
insurance, workers’ compensation insurance, and surety insurance; and

(2) does not include—

(a) crop insurance issued or reinsured, or any other type of crop or livestock
insurance that is privately issued or reinsured;

(b) private mortgage insurance or title insurance;

(c) financial guaranty insurance issued by monoline financial guaranty
insurance corporations;

(d) insurance for medical malpractice;

(€) health or life insurance, including group life insurance;
(f flood insurance; or

(Q) reinsurance or retrocessional reinsurance.

(K) RULE OF CONSTRUCTION FOR DATES- With respect to any reference to a
date in this title, such day shall be construed--

(1) to begin at 12:01 a.m. on that date; and
(2) to end at midnight on that date.
Section 4. Terrorism Insurance Program.
(A) ESTABLISHMENT OF PROGRAM-

(1) IN GENERAL- There is established in the Insurance Commission the
Terrorism Insurance Program.

(2) AUTHORITY OF THE COMMISSIONER- Notwithstanding any other provision
of law, the Commissioner shall administer the Program, and shall pay the
government share of compensation for insured losses in accordance with
subsection (E).

(3) MANDATORY PARTICIPATION- Each entity that meets the definition of an
insurer under this title shall participate in the Program.

(B) CONDITIONS FOR PAYMENTS- No payment may be made by the Insurance
Commission under this section with respect to an insured loss that is covered by
an insurer, unless—

(1) the person that suffers the insured loss, or a person acting on behalf of that
person, files a claim with the insurer;

(2) the insurer provides clear and conspicuous disclosure to the policyholder of
the premium charged for insured losses covered by the Program and the
government share of compensation for insured losses under the Program—


Page 6 of 16

(a) in the case of any policy that is issued before the date of enactment of this
Act, not later than 90 days after that date of enactment;

(b) in the case of any policy that is issued within 90 days of the date of
enactment of this Act, at the time of offer, purchase, and renewal of the
policy; and

(c) in the case of any policy that is issued more than 90 days after the date of
enactment of this Act, on a separate line item in the policy, at the time of
offer, purchase, and renewal of the policy;

(3) the insurer processes the claim for the insured loss in accordance with
appropriate business practices, and any reasonable procedures that the
Insurance Commission may prescribe; and

(4) the insurer submits to the Insurance Commission, in accordance with such
reasonable procedures as the Insurance Commission may establish—

(a) a claim for payment of the government share of compensation for insured
losses under the Program;

(b) written certification
(i) of the underlying claim; and
(ii) of all payments made for insured losses; and
(c) certification of its compliance with the provisions of this subsection.
(C) MANDATORY AVAILABILITY-

(1) INITIAL PROGRAM PERIODS- During the period beginning on the first day of
the Transition Period and ending on the last day of Program Year 2, each
entity that meets the definition of an insurer under section 3--

(a) shall make available, in all of its property and casualty insurance policies,
coverage for insured losses; and

(b) shall make available property and casualty insurance coverage for insured
losses that does not differ materially from the terms, amounts, and other
coverage limitations applicable to losses arising from events other than
acts of terrorism.

(2) PROGRAM YEAR 3- Not later than September 1, 2016, the Insurance
Commission shall, based on the factors referred to in section 9(D)(1),
determine whether the provisions of subparagraphs (a) and (b) of paragraph
(1) should be extended through Program Year 3.

(D) RESIDUAL MARKET INSURANCE ENTITIES-

(1) IN GENERAL- The Insurance Commission shall issue regulations, as soon as
practicable after the date of enactment of this Act, that apply the provisions of
this title to residual market insurance entities and workers’ compensation
funds.

(2) TREATMENT OF CERTAIN ENTITIES- For purposes of the regulations
issued pursuant to paragraph (1)—-


Page 7 of 16

(A) a residual market insurance entity that does not share its profits and
losses with private sector insurers shall be treated as a separate insurer;
and

(B) a_ residual market insurance entity that shares its profits and losses with
private sector insurers shall not be treated as a separate insurer, and shall
report to each private sector insurance participant its share of the insured
losses of the entity, which shall be included in each private sector insurer's
insured losses.

(3) TREATMENT OF PARTICIPATION IN CERTAIN ENTITIES- Any insurer that
participates in sharing profits and losses of a residual market insurance entity
shall include in its calculations of premiums any premiums distributed to the
insurer by the residual market insurance entity.

(E) INSURED LOSS SHARED COMPENSATION-
(1) GOVERNMENT SHARE-

(A) IN GENERAL- The government share of compensation under the
Program to be paid by the Insurance Commission for insured losses of an
insurer during the Transition Period and each Program Year shall be equal
to 90 percent of that portion of the amount of such insured losses that
exceeds the applicable insurer deductible required to be paid during such
Transition Period or such Program Year.

(B) PROHIBITION ON DUPLICATIVE COMPENSATION- The government
share of compensation for insured losses under the Program shall be
reduced by the amount of compensation provided by the local government
to any person under any other program for those insured losses.

(2) CAP ON ANNUAL LIABILITY-

(a) IN GENERAL- Notwithstanding paragraph (1) or any other provision of
law, if the aggregate insured losses exceed P100,000,000,000, during the
period beginning on the first day of the Transition Period and ending on
the last day of Program Year 1, or during Program Year 2 or Program
Year 3 (until such time as the Congress may act otherwise with respect to
such losses)--

(i) the Insurance Commission shall not make any payment under this
title for any portion of the amount of such losses that exceeds
P100,000,000,000; and

(ii) no insurer that has met its insurer deductible shalll be liable for the
payment of any portion of that amount that exceeds
P100,000,000,000.

(b) INSURER SHARE- For purposes of subparagraph (A), the Insurance
Commission shall determine the pro rata share of insured losses to be
paid by each insurer that incurs insured losses under the Program.

(3) NOTICE TO CONGRESS- The Insurance Commission shall notify the
Congress if estimated or actual aggregate insured losses exceed
P100,000,000,000 during the period beginning on the first day of the Transition
Period and ending on the last day of Program Year 1, or during Program Year 2
or Program Year 3, and the Congress shall determine the procedures for and the
source of any payments for such excess insured losses


Page 8 of 16

(4) FINAL NETTING- The Insurance Commission shall have sole discretion to
determine the time at which claims relating to any insured loss or act of terrorism
shall become final.

(5) DETERMINATIONS FINAL- Any determination of the Insurance Commission
under this subsection shall be final, unless expressly provided, and shall not be
subject to judicial review.

(6) INSURANCE MARKETPLACE AGGREGATE RETENTION AMOUNT- For
purposes of paragraph (7), the insurance marketplace aggregate retention
amount shall be~

(a) for the period beginning on the first day of the Transition Period and
ending on the last day of Program Year 1, the lesser of- -

(i) P10,000,000,000; and

(ii) the aggregate amount, for all insurers, of insured losses during
such period;

(b) for Program Year 2, the lesser of—
(i) P12,500,000,000; and

(ii) the aggregate amount, for all insurers, of insured losses during
such Program Year; and

(c) for Program Year 3, the lesser of—
(i) P15,000,000,000; and

(ii) the aggregate amount, for all insurers, of insured losses during
such Program Year.

(7) RECOUPMENT OF GOVERNMENT SHARE-

(a) MANDATORY RECOUPMENT AMOUNT- For purposes of this paragraph,
the mandatory recoupment amount for each of the periods referred to in
subparagraphs (a), (b), and (c) of paragraph (6) shall be the difference
between—

()) the insurance marketplace aggregate retention amount under
paragraph (6) for such period; and

(ii) the aggregate amount, for all insurers, of insured losses during
such period that are not compensated by the National Government
because such losses—

(I) are within the insurer deductible for the insurer subject to the
losses; or

(Il) are within the portion of losses of the insurer that exceed the
insurer deductible, but are not compensated pursuant to
paragraph (1)

(b) NO MANDATORY RECOUPMENT IF UNCOMPENSATED LOSSES
EXCEED INSURANCE MARKETPLACE RETENTION- Notwithstanding
subparagraph (a), if the aggregate amount of uncompensated insured
losses referred to in clause (ji) of such subparagraph for any period


Page 9 of 16

referred to in subparagraph (a), (b), or (c) of paragraph (6) is greater than
the insurance marketplace aggregate retention amount under paragraph
(6) for such period, the mandatory recoupment amount shall be zero.

(c) MANDATORY ESTABLISHMENT OF SURCHARGES TO RECOUP
MANDATORY RECOUPMENT AMOUNT- The Insurance Commission
shall collect, for repayment of the government financial assistance
provided in connection with all acts of terrorism (or acts of war, in the case
of workers compensation) occurring during any of the periods referred to
in subparagraph (a), (b), or (c) of paragraph (6), terrorism loss risk-
spreading premiums in an amount equal to any mandatory recoupment
amount for such period.

(4) DISCRETIONARY RECOUPMENT OF REMAINDER OF FINANCIAL
ASSISTANCE: To the extent that the amount of government financial
assistance provided exceeds any mandatory recoupment amount, the
Insurance Commission may recoup, through terrorism loss risk-spreading
premiums, such additional amounts that the Insurance Commissioner
believes can be recouped, based on--

(i) the ultimate costs to taxpayers of no additional recoupment;

(ii) the economic conditions in the commercial marketplace, including
the capitalization, profitability, and investment returns of the
insurance industry and the current cycle of the insurance markets;

(iii) the affordability of commercial insurance for small- and medium-
sized businesses; and

(iv) such other factors as the Insurance Commission considers
appropriate

(8) POLICY SURCHARGE FOR TERRORISM LOSS RISK- SPREADING
PREMIUMS-

(a) POLICYHOLDER PREMIUM- Any amount established by the Insurance
Commission as a terrorism loss risk-spreading premium shall—

(i) be imposed as a policyholder premium surcharge on property and
casualty insurance policies in force after the date of such
establishment;

(ii) begin with such period of coverage during the year as the Insurance
Commission determines appropriate; and

(iii) be based on a percentage of the premium amount charged for
property and casualty insurance coverage under the policy.

(b) COLLECTION- The Insurance Commission shall provide for insurers to
collect terrorism loss risk-spreading premiums and remit such amounts
collected to the Insurance Commission.

(c) PERCENTAGE LIMITATION- A terrorism loss risk- spreading premium
(including any additional amount included in such premium on a
discretionary basis pursuant to paragraph (7)(d)) may not exceed, on an
annual basis, the amount equal to 3 percent (3%) of the premium charged
for property and casualty insurance coverage under the policy


Page 10 of 16

(d) ADJUSTMENT FOR URBAN AND SMALLER COMMERCIAL AND
RURAL AREAS AND DIFFERENT LINES OF INSURANCE-

(i) ADJUSTMENTS- In determining the method and manner of
imposing terrorism loss risk-spreading premiums, including the
amount of such premiums, the Insurance Commission shall take
into consideration—

(I) the economic impact on commercial centers of urban areas,
including the effect on commercial rents and commercial
insurance premiums, particularly rents and premiums charged
to small businesses, and the availability of lease space and
commercial insurance within urban areas;

(Il) the risk factors related to rural areas and smaller commercial
centers, including the potential exposure to loss and the likely
magnitude of such loss, as well as any resulting cross-
subsidization that might result; and

(Ill) the various exposures to terrorism risk for different lines of
insurance.

(ii) RECOUPMENT OF ADJUSTMENTS- Any mandatory recoupment
amounts not collected by the Insurance Commission because of
adjustments under this subparagraph shall be recouped through
additional terrorism loss risk-spreading premiums.

(e) TIMING OF PREMIUMS- The Insurance Commission may adjust the
timing of terrorism loss risk-spreading premiums to provide for equivalent
application of the provisions of this title to policies that are not based on a
calendar year, or to apply such provisions on a daily, monthly, or quarterly
basis, as appropriate.

() CAPTIVE INSURERS AND OTHER _ SELF-INSURANCE
ARRANGEMENTS- The Insurance Commission, apply the provisions of
this title, as appropriate, to other classes or types of captive insurers and
other self-insurance arrangements by municipalities and other entities
(such as workers’ compensation self-insurance programs and workers’
compensation reinsurance pools), but only if such application is
determined before the occurrence of an act of terrorism in which such an
entity incurs an insured loss and all of the provisions of this title are
applied comparably to such entities.

(g) REINSURANCE TO COVER EXPOSURE-

(1) OBTAINING COVERAGE- This title may not be construed to limit or
prevent insurers from obtaining reinsurance coverage for insurer
deductibles or insured losses retained by insurers pursuant to this
section, nor shall the obtaining of such coverage affect the calculation
of such deductibles or retentions.

(2) LIMITATION ON FINANCIAL ASSISTANCE- The amount of financial
assistance provided pursuant to this section shall not be reduced by
reinsurance paid or payable to an insurer from other sources, except
that recoveries from such other sources, taken together with financial
assistance for the Transition Period or a Program Year provided
pursuant to this section, may not exceed the aggregate amount of the
insurer's insured losses for such period. If such recoveries and
financial assistance for the Transition Period or a Program Year


Page 11 of 16

exceed such aggregate amount of insured losses for that period and
there is no agreement between the insurer and any reinsurer to the
contrary, an amount in excess of such aggregate insured losses shall
be returned to the Insurance Commission

(h) GROUP LIFE INSURANCE STUDY-

(1) STUDY- The Insurance Commission shall study, on an expedited
basis, whether adequate and affordable catastrophe reinsurance for
acts of terrorism is available to life insurers that issue group life
insurance, and the extent to which the threat of terrorism is reducing
the availability of group life insurance coverage for consumers

(2) CONDITIONAL COVERAGE- To the extent that the Insurance
Commission determines that such coverage is not or will not be
reasonably available to both such insurers and consumers, the
Insurance Commission—

(A) apply the provisions of this title, as appropriate, to providers of
group life insurance; and

(B) provide such restrictions, limitations, or conditions with respect
to any financial assistance provided that the Insurance
Commission deems appropriate, based on the study under
paragraph (1).

(i) STUDY AND REPORT-

(1) STUDY- The Insurance Commission, representatives of the insurance
industry, and other experts in the insurance field, shall conduct a study
of the potential effects of acts of terrorism on the availability of life
insurance and other lines of insurance coverage, including personal
lines.

(2) REPORT- Not later than nine (9) months after the date of enactment of
this Act, the Insurance Commission shall submit a report to the
Congress on the results of the study conducted under paragraph (1).

SECTION. 5. GENERAL AUTHORITY AND ADMINISTRATION OF CLAIMS.

(A) GENERAL AUTHORITY: The Insurance Commission shall have the powers and
authorities necessary to carry out the Program, including authority—

(1) to investigate and audit all claims under the Program; and

(2) to prescribe regulations and procedures to effectively administer and
implement the Program, and to ensure that all insurers and self-insured
entities that participate in the Program are treated comparably under the
Program

(B) INTERIM RULES AND PROCEDURES- The Insurance Commission may issue
interim final rules or procedures specifying the manner in which—

(1) insurers may file and certify claims under the Program;
(2) the government share of compensation for insured losses will be paid under

the Program, including payments based on estimates of or actual insured
losses;


Page 12 of 16

(3) the Insurance Commission may, at any time, seek repayment from or
reimburse any insurer, based on estimates of insured losses under the
Program, to effectuate the insured loss sharing provisions in section 4; and

(4) the Insurance Commission will determine any final netting of payments under
the Program, including payments owed to the National Government from any
insurer and any government share of compensation for insured losses owed
to any insurer, to effectuate the insured loss sharing provisions in section 4.

(C) CONTRACTS FOR SERVICES- The Insurance Commission may employ
persons or contract for services as may be necessary to implement the Program.

(D) CIVIL PENALTIES-

(1) IN GENERAL- The Insurance Commission may assess a civil monetary
penalty in an amount not exceeding the amount under paragraph (2) against
any insurer that the Insurance Commission determines, on the record after
opportunity for a hearing—

(A) has failed to charge, collect, or remit terrorism loss risk- spreading
premiums under section 4(E) in accordance with the requirements of, or
regulations issued under, this title;

(8) has intentionally provided to the Insurance Commission erroneous
information regarding premium or loss amounts;

(C) submits to the Insurance Commission fraudulent claims under the
Program for insured losses;

(D) has failed to provide the disclosures required under subsection (E); or

(E) has otherwise failed to comply with the provisions of, or the regulations
issued under, this title.

(2) AMOUNT- The amount under this paragraph is the greater of P1,000,000
and, in the case of any failure to pay, charge, collect, or remit amounts in
accordance with this title or the regulations issued under this title, such
amount in dispute.

(3) RECOVERY OF AMOUNT IN DISPUTE- A penalty under this subsection for
any failure to pay, charge, collect, or remit amounts in accordance with this
title or the regulations under this title shall be in addition to any such amounts
recovered by the Insurance Commission.

(E) SUBMISSION OF PREMIUM INFORMATION-

(1) IN GENERAL- The Insurance Commission shall annually compile information
on the terrorism risk insurance premium rates of insurers for the preceding
year.

(2) ACCESS TO INFORMATION- To the extent that such information is not
otherwise available, the Insurance Commission may require each insurer to
submit terrorism risk insurance premium rates, as necessary to carry out
paragraph (1).

(3) AVAILABILITY TO CONGRESS- The Insurance Commission shall make
information compiled under this subsection available to the Congress, upon
request.


Page 13 of 16

(F) FUNDING-

(1) GOVERNMENT PAYMENTS- There are hereby appropriated, out of funds in
the national budget not otherwise appropriated, such sums as may be
necessary to pay the government share of compensation for insured losses
under the Program.

(2) ADMINISTRATIVE EXPENSES- There are hereby appropriated, out of funds
in the national budget not otherwise appropriated, such sums as may be
necessary to pay reasonable costs of administering the Program.

SECTION 6. PREEMPTION AND NULLIFICATION OF PRE-EXISTING TERRORISM
EXCLUSIONS.

(A) GENERAL NULLIFICATION- Any terrorism exclusion in a contract for property
and casualty insurance that is in force on the date of enactment of this Act shall
be void to the extent that it excludes losses that would otherwise be insured
losses.

(B) GENERAL PREEMPTION- Any government approval of any terrorism exclusion
from a contract for property and casualty insurance that is in force on the date of
enactment of this Act, shall be void to the extent that it excludes losses that
would otherwise be insured losses.

(C) REINSTATEMENT OF TERRORISM EXCLUSIONS- Notwithstanding
subsections (A) and (B) or any provision of law, an insurer may reinstate a
preexisting provision in a contract for property and casualty insurance that is in
force on the date of enactment of this Act and that excludes coverage for an act
of terrorism only

(1) if the insurer has received a written statement from the insured that
affirmatively authorizes such reinstatement; or

(2) if

(a) the insured fails to pay any increased premium charged by the insurer
for providing such terrorism coverage; and

(b) the insurer provided notice, at least 30 days before any such
reinstatement, of—

(i) the increased premium for such terrorism coverage; and

(ii) the rights of the insured with respect to such coverage, including
any date upon which the exclusion would be reinstated if no
payment is received.

SECTION 7. PRESERVATION PROVISIONS.

(A) Nothing in this title shall affect the jurisdiction or regulatory authority of the
insurance commissioner over any insurer or other person—

(1) except as specifically provided in this title; and
(2) except that—

(a) the definition of the term ‘act of terrorism’ in section 3 shall be the
exclusive definition of that term for purposes of compensation for


Page 14 of 16

insured losses under this title, and shall preempt any provision of law
that is inconsistent with that definition, to the extent that such provision
of law would otherwise apply to any type of insurance covered by this
title;

(b) during the period beginning on the date of enactment of this Act and
ending on December 31, 2015, rates and forms for terrorism risk
insurance covered by this title and filed shall not be subject to prior
approval or a waiting period under any law that would otherwise be
applicable, except that nothing in this title affects the ability of the
government to invalidate a rate as excessive, inadequate, or unfairly
discriminatory, and, with respect to forms, where the government has
prior approval authority, it shall apply to allow subsequent review of
such forms; and

(c) during the period beginning on the date of enactment of this Act and for
so long as the Program is in effect, as provided in section 9, including
authority in subsection 9(B), books and records of any insurer that are
relevant to the Program shall be provided, or caused to be provided, to
the Secretary, upon request by the Secretary, notwithstanding any
provision of the laws prohibiting or limiting such access.

(B) EXISTING REINSURANCE AGREEMENTS- Nothing in this title shall be construed

to alter, amend, or expand the terms of coverage under any reinsurance agreement
in effect on the date of enactment of this Act. The terms and conditions of such an
agreement shall be determined by the language of that agreement.

SECTION 8. LITIGATION MANAGEMENT.
(A) PROCEDURES AND DAMAGES-

(1) IN GENERAL- If the President makes a determination pursuant to section 3 that
an act of terrorism has occurred, there shall exist a cause of action for property
damage, personal injury, or death arising out of or resulting from such act of
terrorism, which shall be the exclusive cause of action and remedy for claims for
property damage, personal injury, or death arising out of or relating to such act of
terrorism, except as provided in subsection (B).

(2) PREEMPTION OF ACTIONS- All causes of action of any kind for property
damage, personal injury, or death arising out of or resulting from an act of
terrorism that are otherwise available under the law are hereby preempted,
except as provided in subsection (B)

(3) SUBSTANTIVE LAW- The substantive law for decision in any such action
described in paragraph (A) shall be derived from the law, including choice of law
principles, in which such act of terrorism occurred, unless such law is otherwise
inconsistent with or preempted by this law.

(4) JURISDICTION- For each determination described in paragraph (A), not later
than 90 days after the occurrence of an act of terrorism, the Supreme Court shall
designate a special court in the region where the act of terrorism occurred, that
shall have original and exclusive jurisdiction over all actions for any claim
(including any claim for loss of property, personal injury, or death) relating to or
arising out of an act of terrorism subject to this section. The Supreme Court shall
select and assign the special court or courts in every region of the country, based
on the convenience of the parties and the just and efficient conduct of the
proceedings.


Page 15 of 16

(5) PUNITIVE DAMAGES- Any amounts awarded in an action under paragraph (1)
that are attributable to punitive damages shall not count as insured losses for
purposes of this title.

(8) EXCLUSION- Nothing in this section shall in any way limit the liability of any
government, an organization, or person who knowingly participates in, conspires to
commit, aids and abets, or commits any act of terrorism with respect to which a
determination described in subsection (A)(1) was made.

(C) RIGHT OF SUBROGATION- The Philippine Government shall have the right of
subrogation with respect to any payment or claim paid by the Philippine Government
under this title.

(D) RELATIONSHIP TO OTHER LAW- Nothing in this section shall be construed to
affect any party's contractual right to arbitrate a dispute.

(E) EFFECTIVE PERIOD- This section shall apply only to actions described in
subsection (A)(1) that arise out of or result from acts of terrorism that occur or
occurred during the effective period of the Program.

SECTION 9. TERMINATION OF PROGRAM.

(A) TERMINATION OF PROGRAM- The Program shall terminate on December 31,
2017.

(B) CONTINUING AUTHORITY TO PAY OR ADJUST COMPENSATION- Following
the termination of the Program, the Insurance Commission may take such
actions as may be necessary to ensure payment, recoupment, reimbursement, or
adjustment of compensation for insured losses arising out of any act of terrorism
occurring during the period in which the Program was in effect under this title, in
accordance with the provisions of section 4 and regulations promulgated
thereunder

(C) REPEAL; SAVINGS CLAUSE- This title is repealed on the final termination date
of the Program under subsection (A), except that such repeal shall not be
construed—

(1) to prevent the Insurance Commission from taking, or causing to be taken,
such actions under subsection (B) of this section, paragraph (4), (5), (6), (7),
or (8) of section 4(e), or subsection (A)(1), (c), (d), or (e) of section 5, as in
effect on the day before the date of such repeal, or applicable regulations
promulgated thereunder, during any period in which the authority of the
Insurance under subsection (B) of this section is in effect; or

(2) to prevent the availability of funding during any period in which the authority of
the Insurance Commission under subsection (B) of this section is in effect.

(D) STUDY AND REPORT ON THE PROGRAM-

(1) STUDY- The Insurance Commission, representatives of the insurance
industry and of policy holders, other experts in the insurance field, and other
experts as needed, shall assess the effectiveness of the Program and the
likely capacity of the property and casualty insurance industry to offer
insurance for terrorism risk after termination of the Program, and the
availability and affordability of such insurance for various policyholders,
including railroads, trucking, and public transit.


Page 16 of 16

(2) REPORT- The Insurance Commission shall submit a report to the Congress
on the results of the study conducted under paragraph (1) not later than June
30, 2017.

SECTION 10. SATISFACTION OF JUDGMENTS FROM BLOCKED ASSETS OF
TERRORISTS, TERRORIST ORGANIZATIONS, AND STATE SPONSORS OF
TERRORISM.

(A) IN GENERAL- Notwithstanding any other provision of law, and except as
provided in subsection (B), in every case in which a person has obtained a
judgment against a terrorist party on a claim based upon an act of terrorism, or
for which a terrorist party is not immune under international law, the blocked
assets of that terrorist party (including the blocked assets of any agency or
instrumentality of that terrorist party) shall be subject to execution or attachment
in aid of execution in order to satisfy such judgment to the extent of any
compensatory damages for which such terrorist party has been adjudged liable.

(B) PRESIDENTIAL WAIVER-

(1) IN GENERAL- Subject to paragraph (2), upon determining on an asset-by-
asset basis that a waiver is necessary in the national security interest, the
President may waive the requirements of subsection (A) in connection with
(and prior to the enforcement of) any judicial order directing attachment in aid
of execution or execution against any property subject to the Vienna
Convention on Diplomatic Relations or the Vienna Convention on Consular
Relations.

(2) EXCEPTION- A waiver under this subsection shall not apply to—

(a) property subject to the Vienna Convention on Diplomatic Relations or the
Vienna Convention on Consular Relations that has been used by the
Philippines for any nondiplomatic purpose (including use as rental
property), or the proceeds of such use; or

(b) the proceeds of any sale or transfer for value to a third party of any asset
subject to the Vienna Convention on Diplomatic Relations or the Vienna
Convention on Consular Relations.

SECTION 11. Implementing Rules and Regulations. - The Department of Finance, in
coordination with the NEDA, Insurance Commission, NGOs and POs shall issue the
necessary rules and regulations within sixty (60) days from the effectivity of this Act.

SECTION 12. Appropriations. - The amount of One billion pesos (P1,000,000,000.00)
necessary to implement the provisions of this Act shall be initially charged against the
appropriations of the DOF, NEDA and the Insurance Commission under the General
Appropriations Act. Thereafter, such sums as may be necessary for its continued
implementation shall be included in the annual General Appropriations Act

SECTION 13. Separability Clause. - In case any provision of this Act is declared
unconstitutional, the other provisions shall remain in full force and effect.

SECTION 14. Effectivity.- This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in at least two newspapers of general circulation,
whichever comes earlier.

Approved:

Approved.