THIRTEETH CONGRESS OF THE REPUBLIC 
First Regular Session 
1 
‘04 nu; -3 nil .O? 
6 
OF THE PHILIPPINES 
S.B. sENATf5 
No. 
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BY’------- 
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)EXPLANATORY NOTE 
At present, there are over fifty (50) corporations engaged in the sale of pre-need 
plans. Their assets total a combined almost one hundred billion pesos with three and a 
half million plans sold since pre-need plans have been transacted. 
The proliferation of pre-need corporations has raised questions on the industry’s 
financial capabilities specially on its ability to provide security to its investors and 
planholders. There have been problems reported involving and questioning the stability 
of some players in the pre-need market. 
There is a need to regulate the industry to 
protect its investors and planholders from fraud. There is likewise a need to regulate the 
industry to protect it from unscrupulous pre-need corporations who may take advantage 
of the good name of the honest members of the industry. There is need to provide 
regulatory standards within the industry to ensure a level playing field to enable 
potential purchaser true freedom of choice. Finally, there is a need to strengthen 
government’s regulatory capabilities to insure that the industry serves it purpose does 
not become a forum abuse. 
This legislation have the following objectives and policy aims: 
1. To provide the necessary legal framework Ithat will govern the pre-need 
industry, define their responsibilities and hnctions and extent of services 
they can offer to hture plan holders. 
2. To provide a regulatory standard for the industry. 
3. To strengthen the government’s regulatory capabilities. 
4. To provide effective protection for plan holders. 
To ensure the achievement of the above-mentioned objectives and policy aims, 
the bill is higblighted by the following provisions: 
1. The Insurance Commission shall be the regulatory agency for the pre-need 
industry. 
2. A minimum paid-up capital of one hundred million pesos (PlOO,OOO,OOO.OO) 
and margin of solvency of at least PI0 million is required. 
3. Safeguards for the investments of the trust hnd have been provided. 
4. To ensure effective protection for Planholders, a Liquidity Reserve Fund 
and a Planholders Protect ion Fund shall be established. 
5. Pre-need companies are required to publish their annual statement and trust 
fund annual statement. 
6. To effectively regulate the pre-need companies, financial accounting 
standards have been provided. 
The immediate approval of this legislative 


THIRTEENTH CONGRESS OF THE REPUBLIC 
First Regular Session 
OF THE PHILIPPINES 
S E N A T E  
S.B. No. 
15 
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Introduced by Senator Mugsqsay, Jr. 
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AN ACT ESTABLISHING THE PRE-NEED PLAN CODE OF THE 
PHILIPPINES 
Be enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Title - This Act shall be known asithe Pre-Need Plan Code of the 
Philippines of 2004. 
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to 
regulate the establishment of pre-need companies and to ,place their operation on sound, 
efficient and stable basis to defive the optimum advantages from them in the 
mobilization of savings and to prevent and mitigate, as far as practicable, practices 
prejudicial to public interest and the protection of planholders. 
SEC. 3. Definition of Terms - Whenever used in this Code, the following terms 
shall have their respective meanings: 
(a) “Commission” refers to the Insurance Commission. 
(b) “Pre-need plans” are contracts which provide for the performance of f q h e  
servicelservices or payment of monetary consideration at the time of actual 
need, payable either in cash or installment by planholders at prices stated in 
the contract, such as life/memorial plans, pension plans, education plans, 
cremation plans, internment plans and similar contracts and investments. 
(c) “Pre-need company” is any corporation registered with the Commission and 
authorized licensed to sell or offer for sale pre-need plans. 
(d) “Planholder” is any natural or juridical person who purchases pre-need plans 
for whom or for whose beneficiaries’ future serviceslpayments are to be 
rendered or made at the time of need or paymenthnefits to be delivered as 
stipulated and guaranteed by the pre-need company at the time of need or 
maturity of the contract. 


(e) “Traditional or actual cost plans” are plans wherein the benefits or services 
at the time they are guaranteed, regardless of any increase in cost fiom the 
originally assumed values since the date of issue of the pre-need plan, on 
account of inflation, interest yield rate fluctuation, or other similar causes. 
(0 “Fixed value plans’’ are plans whose benefits and costs are fixed and pre- 
determined at the inception or purchase of the plan. 
(g) “Sales agentshepresentatives” are natural persons who are engaged in the 
sale, or offers to sell, or counsels prospective planholders for the purpose of 
selling, whether or not on commission basis, of pre-need plans upon 
authority of the pre-need company, and registered and licensed by the 
Commission to engage in the business of selling said pre-need plans and 
contracts. 
(h) ‘7n force plan” is a plan for which the pre-need company has an outstanding 
obligation, either for (1) the delivery of benefits or services, or (2) the 
payment of termination value, such as plan which is up-to-date in the 
payment of installments; a fully delivered; or a lapsed or cancelled plan, the 
termination value of which has not yet been paid. 
(i) “Lapsed plan” is a plan that is delinquent in payment of installments 
provided for the contract, the delinquency of which extends beyond the 
grace period provided for in plan or contract and foe which the planholder 
has been duly notified. 
6) “Cancelled plan” is a lapsed plan can no longer be reinstated by reason of 
delinquency in the payment of installments for (2) years or more, counted, 
from the expiry of the grace period provided for in the plan or contract, and 
for which the planholder has been duly notified. 
(k) “Trust fund” is a fund set up fiom the plant holder’s payments, separate and 
distinct form the paid-up capital of the pre-need company, property as 
provided for in the contracts. 
(1) “Actuarial reserve liabilities” refer to the measure of the liabilities, of the 
pre-need company for its in-force plans as of valuhtion date. 
The terms not otherwise defined under this Codelshall be constructed of the pre- 
need company for its-in-forced plans as of valuation date. 
SEC. 4. Supervision All pre-need companies shall be under the supervision 
and regulation of the Insurance Commission. The Commission shall create a new 
department within its control to regulate and supervise the operations and activities of 
pre-need plan companies in the country. 


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SEC. 5. Paid-up Capital - A pre-need company shall have a paid-up capital of 
at the least One hundred million pesos (PlOO,OOO,OOO.OO) in cash or property: Provided, 
That the Commission may increase such minimum paid-up capital stock under such 
terms and conditions it may impose, to an amount which in its opinion, would 
reasonably assure the safety of the interest of the planholders and the public. Pre-need 
companies which are currently licensed as such with paid-up capital of less than One 
hundred million pesos (P 100,000,000.00) may be allowed to continue to operate as 
such but shall be required to build-up capital within a period of two(2) years from the 
enactment ofthis Code. If, after the build-up period, a pre-need company 
CHAPTER I1 
REGISTRATION REQUIREMENTS 
SEC 6. Registration Requirements for Pre-Need Companies. (a) Any 
company organized or otherwise created under the laws of the Philippines may register 
for purposes of this Code by filing with the Commission an application to do business 
as a pre-need company under oath in such form as the commission may prescribe which 
shall include, but not liited to the following: 
1. The names, addresses and business experience for the last five (5)years of the 
directors and offices of the pre-need company; 
2. A statement whether any of the persons referred to in paragraph (1) is subject to 
any ineligibility enumerated in Section 8 of this Code; 
3. The articles of incorporation and by laws of the pre-need company; 
4. A statement of the capitalization of the pre-need company including the 
authorized and subscribed capital stock and the amount paid thereon: the 
number and classes of shares, the description of the respective right, voting 
powers, preferences and restriction of the class, and 
5. Any other information which the Commission may deem necessary to be 
disclosed. 
(b) Within sixty (60) days after tiling the application, the Commission shall 
grant the license, or institute proclaim to determine whether to deny the 
application. The order of the Commission granting the license shall 
become effective after completion of the pation thereof at the expense of 
the applicant, once a week for two (2) consecutive weeks in two (2) 
newspapers of general circulation in the Philippines. 
(c) The Commission may, after due notice and hearing, deny an application 
for registration as pre-need company as it finds that: 


1. The pre-need company made or caused to be made a materially false or 
misleading statement in its application to do business as pre-need 
company, or omitted to state to state in such application a material fact 
which was required to be stated therein, 
2. The pre-need company or any affiliated person thereof not comply with the 
provision of the Code or the rules of the Commission thereunder, or iti the 
case of an affiliated person would be subject to an ineligibility enumerated 
in Section 8 ofl this Code if such company was registered pre-need 
company; or 
3. The pre-need company has not paid the registration fee prescribed by the 
Commission 
(d) Whenever the Commission on its own motion or upon application, finds 
that a license pre-need company has ceased to operate as a pre-need 
company, it shall so declare. Upon the effectivity of such order, the 
license of such company shall cease to beiin effect. 
(e) Every license under this Section shall expire every thirty-fist (317day 
of December, gut may be renewed upon application under oath, payment 
of the fee and !the submission of the required documents. Application 
for renewals must he made not less than thirty (30) days before the day 
of the ensurihg year otherwise, they shall be treated as original 
applications. 
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SEC. 7. Registration' of Pre-Need ContraetsRlans - (a) Within a period of 
forty-five (45) days after the &ant of license to do business as a pre-need company, the 
conipany shall file with the Cbmmission a registration statement pursuant to this Code. 
The Commission may promulgate rules governing the content of the registration 
statement, including any prospectous mde a part thereof or annexed thereto, or may 
require additional information of documents including written statement ftom an expert, 
depending on the necessity thereof for the protection of planholders and the general 
public. 
(b) It appears to the Commission that a pre-need company has failed to file the 
registration statement required by this Section or licensed a repoi required pursuant to 
Chapter VHI or has filed such registration statement or report hut omitted thereftom 
materials facts required to be stated herein or necessary to make such statements not 
misleading, the Commission, afterdue notice and hearing upon such conditions and with 
such exemptions as it deem! appropriate for the protection of planholders, may by 
order, suspend the registration.of such company until such statement or report is filed or 
corrected, or. may, by order, revoke such registration if the evidence fmds that such 
revocation is in the public interest. 
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(c) The Commission may, by order, d e r  notice and hearing, suspend, revoke or 
cancel the registration of a pre-need contract if it fmds that the pre-need company was 
not so licensed or its application to do business as a pre-need company would be subject 
to denial under Section 6. 
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SEC. 8 Ineligibility of Certain Persons. It shall be unlawful for any of the 
following persons to serve or act in the capacity of officer, employee, director, sales 
counselors or solicitor for any pre-need company: 
1. Any person who has been convicted of any felony or misdemeanor involving 
the purchase or sale of any pre-need plan, security or proprietary or 
nonproprietary membership certificate, commodity future contract, pension 
plan, life plan; 
2. Any person who, by reason of any misconduct1 is permanently or temporarily 
enjoined by order, judgment or decree of any court or quasi-judicial body of 
competent jurisdiction from acting as an underwriter, broker, dealer, investment 
company manager, investment adviser, htures commission merchant, 
commodity trading advisor, floor broker, or as an affiliated person, salesman or 
employee of any of the foregoing from engaging in or continuing any conduct 
or practice in connection with any such activity or continuing any conduct or 
practice in connection with any such activity or in connection with the purchase 
or any plan or security; 
3. Any person found guilty of an offense involving moral turpitude or involving 
fraud, or embezzlement, theft, estafa or other friiudulent acts or transactions; 
4. Any person found to have willfully violated or willfully aided, abetted, 
counseled, commanded, induced, or procured the violation of this code or any 
existing laws and any Commission rules or orders thereunder, or who has filed a 
materially false or misleading application, report or registration statement with 
the Commission required to be filed under this Code, the Securities kegulation 
Code, or other laws; 
5. Any person judicially declared to be insolvent oriincapacitated to contract; or 
6. Any person found guilty by a foreign court or equivalent financial regulatory 
authority of the acts or violations similar to any of the acts or misconduct 
enumerated in paragraphs (1) to (5) above. 
SEC. 9. Licensing of Sales Agents / Representatives - (a) No person shall 
engage in the business of selling or offering to sell, pre-need contracts or plans, or act as 
a sales agent, sales representative, sales counselor of any pre-need company, unless 
licensed by the Commission. License shall be issued upon passing of licensing 
examination to be designed and administered by the Commission. Administration of 
the examination may be delegated to an independent organization under the supervision 
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of the Commission. 
association of pre-need companies. 
Training for such examination may be undertaken by the 
(b) No registered or licensed pre-need company shall employ sales agents, sales 
representative or sales counselors unless licensed as such by the Commission. 
(c) Registration of a sales agenurepresentative of a licensed pre-need company 
may be made upon written application in such form and containing such information 
and documents concerning such sales agenthepresentative as the Commission shall 
prescribed. The application shall be signed and certified by the pre-need company to 
which such sales agenthepresentative is to become affiliated. Applications filed under 
this subsection shall be accompanied by a registration fee in such reasonable amount as 
the commission by rule shall prescribed. 
(d) The names and addresses of all sales agentdrepresentatives a d  all orders of 
the Commission with respect thereto shall be recorded in a register of pre-need industry 
professionals kept in the office of the Commission which shall be open to public 
inspection. 
(e) Such registration shall automatically cease upon termination of the agency 
contract of such sales agenthepresentative by the pre-need company: Provided, That it 
may be renewed for the ensuing year upon payment of an annual fee at such time and in 
such reasonable amount as the commission may prescribe. 
See. 10. 
Refusal, Suspension, Revocation of a License of a Sales 
AgentlRepresentative - An application for the issuance or renewal of a license to act 
as saleshepresentative may be refused, or such license, if already issued or renewed, 
shall be suspended or revoked if the Commission iinds that the applicant for, or holder 
of, such license: 
1. Has willfully violated any provision of this Code; 
2. Has intentionally made a material misstatement in the application to qualify 
for such license; 
3. Has obtained or attempted to obtain a license by fiaud or misinterpretation; 
4. Has been guilty of fiaudulent or dishonest practices; 
5. Has misappropriation or converted to his own use or illegally moneys 
required to be held in fiduciary capacity; 
6. Has not demomated trustworthiness and competence to transact business 
as a plan adviser in such manner as to safeguard the public; 
7. Has materially misrepresented the terms and conditions of a pre-need plan 
which he seeks to sell or has sold; 
8. Has been found to be ineligible under any of the provisions of Section 8; or 
9. Has been terminated as a sales agnetkepresentative by the pre-need company 
with whom he or she has an agency contract. 


CHAPTER IV 
SUSPENSION/REVOCATION OF LICENSE 
SEC. 11. Suspension of License or Permit - if at any time the information 
contained in the plan agreement or prospectus has been found to be misleading, 
incorrect, inadequate or incomplete, or the sale or offering for sale of the plans or 
contracts may work or tend to work a bud, the Commission m y  
require fiom the pre- 
need company additional information necessary to enable the Commission to ascertain 
whether the registration of such of pre-need contract/plan should be revoked on any 
ground specified in Section 12 of this code. The Commission may also suspend the 
right to sell such plan pen ding further investigation by entering an order specifying the 
grounds for such action with due notice by mail or by personal service, on pre-nee 
company. Rehsal to fiunish information required by the commission within thirty(30) 
days may he proper ground for the entry of such order of suspension. Upon entry of 
such order of suspension, nor further sales of such plan shall be made until the 
Commission orders otherwise. 
Upon entry of such order of suspension, the Commission shall conduct a hearing 
with proper notice to the parties to determine whether the sale of such plan should be 
revoked on any ground under Section 12 of this Code. It shall make he necessary 
fmdmgs and enter the fmd order prohibiting the sale of such plans or contract whenever 
proper. If, however, the Commission finds that the s ale of the plans or contracts is not 
fiaudulent nor will result in fraud, it shall forthwith enter an order revoking the 
suspension. 
SEC. 12. Ground for Revocation of Permit or License of a Pre-Need 
Company. The Commission may be order, after due notice and hearing, revoke the 
license of a pre-need company, if upon examination it shall appear that the pre-need 
company. 
1. Is insolvent; 
2. Has violated any of the provision of this code, or the d e s  promulgated pursuant 
thereto, or any order of the Commission of which the pre-need company had 
notice; 
3. Has been or is engaged or is about to engage in fiaudulent transaction; 
4. He has made eaudulent representation in any prospectus, circular, literature or 
other form of broadcast or media communication concerning its plans; or 
5. Does not conduct its business in accordance with law; 
The Commission may compel the production of all books and records of the pre- 
need company and may administer oaths and examine the officers or employees of the 
pre-need company. 


Failure by the pre-need company to submit the statements or books required or 
reksal to permit any examination thereof by the Commission shall be proper grounds 
for the revocation of the registration of and permit to s ell its pre-need plants. 
If the Commission deems it necessary, it m y  issue an order suspending the right 
to sell plans pending any investigation stating the grounds therefore. Upon the issuance 
thereof, nor further sale of such pre-need plan shall be made until the suspension order 
is lifted or set aside by the Commission. Any such sa1es.h the interim shall be void. 
Notice of such suspension or lifting therefore shall be made expressly or by 
personal service upon the pre-need company who have notified the Commission of his 
intention to sell such pre-need plan, 
SEC. 13. Withdrawal of Registration. A !registration statement may be 
revoked by the Commission upon petition made for its withdrawal by the pre-need 
company as herein provided. An application for the withdrawal of a registration 
statement should be accompanied by the following: 
I. Petitiotl or application for withdrawal of the license/permit to sell plans to the 
public, stating the reasons therefore; 
2. Proof of publication of notice to planholders of said revocatiodwithdrawal 
3. Board resolution approving such application for ;withdrawal certified under oath 
by the corporate secretary and attested to by the president; 
4. List of all planholders, with their corresponding complete addresses and 
telephone numbers; 
5. A certification under oath by the treasurer attested to by the president that the 
planholders contributions were refunded and their claims fully settled; 
6. A joint and several assumption of liability executed by the president and 
treasurer of the pre-need company for settlement of all claims that may arise a 
result of said Withdrawal; and 
7. Proof of suficiency of trust fund to cover the pre-need company's actuarial 
reserve liabilities, plus interest at legal rate. 
Upon payment of a filiig fee of One thousand pesos (I' 
l,OOO.OO), the petition 
shall be published by the Commission, at the 'expense of the issuer in two (2) 
newspapers of general circulation, once a week for two (2) consecutive weeks, with 
notice to the general public, planholders, stockholders or other persons affected by said 
withdrawal, who may file their claims with the pre-needicompany and the Commission. 
After publication and upon findings of the Commission that the petition with all 
papers and documents attached thereto is on its face complete and that no party stands 
to suffer damage thereby, it shall issue an order revoking said registration / license to 
sell plans to the public. 
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CHAPTER V 
PLANHOLDER'S PROTECTION 
SEC. 14. Approval of Contract Forms. No pre-need contracts or certificates 
shall be issued or delivered within the Philippines unless in the form previously 
approved by the Commission and no application form shall be use with, and no rider, 
clause, warranty or endorsement shall be attached to, print to, stamped upon such 
contract or certificate unless the form of such application, rider cause, warranty or 
endorsement has been approved by the Commission. 
SEC 15. Pre-Need Advertising Code - Pre-Need plans shall be advertised and 
sold in an appropriate non-misleading manner in accordance with a uniform Pre-Need 
Advertising Code to be designed by the Commission. 
Any person who sells or offers to sell any pre-need plan or contract by any 
means or instruments of communication in violation of ,this Section shall be liable to 
the person purchasing such pre-need contract who may sue to recover the consideration 
paid for such pre-need contract with interest thereon. 
SEC. 16. Default. /Reinstatement Period. The pre-need company must 
provide in all contracts issued) to planholders, a grace period of at least two (2) months 
within which to pay accrued1 installments. Non-payment of a plan within the grace 
period shall render the plan allapsed plan, as defined under section 3, paragraph (i) of 
this code. Any payment by b e  planholder after the grace period for the purpose of 
liquidating the accrued installments on the plan, shall be reimbursed forthwith unless 
the planholder expresses his d, k sire that such payments be treated as initial payment for 
the reinstatement of his plan. i ,The planholder shall be allowed a period of not less than 
two (2) years within which to reinstate his plan. No cancellation of plans shall be made 
by issuer during such period when reinstatement may be effected. 
SEC. 17. Termination Values. A plan holder may terminate his in-force plan, 
including a lapsed or cancelleh plan, at any time hy giving written notice to the issuer 
and said planholder shall be eititled to termination values which should not be less than 
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the following: 
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PAYMENT RECEIV~D 
MINIMUM TERMINATION VALUES 
Less than 20% of gross pre-need price 
20% or over but not exceeding 
40% of gross pre-need price 
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Over 40Y0but not exceeding 
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60% of gross.pre-need price 
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- 50% oftotal payments 
- 30% of total payments 
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- 40% of total payments 
Over 60% but not exceeding I 
80% of gross pre-need price 
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- 60% of total payments 


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Over 80% but not less than 100% 
of gross pre-need price 
-65% of total payments 
For a fully-paid p b '  the minimum termination value shall be the actuarial 
reserve liability on such plan at the date of termination, less a surrender charge of ten 
percent (10%) of such liability. 
SEC 18. Amendments to the Plan, Contract or Other Documents -No plan 
agreement, contract or other documents pertinent to the plan shall be amended or 
modified without the prior approval of the Commission, and such amendment or 
modification shall neither affect adversely, the planholders thereof nor impair any term 
or condition in the plan or other related documents. 
CHAPTER VI 
TRUST FUND 
SEC 19. Trust Fund - To ensure the delivery of the guarantee benefits and 
services provided under a pre-need plan contract a trust fund per pre-need plan category 
shall be established independently with and shall be managed and administered either 
by a reputable bank, trust company or any entity authorized to perform trust hnctions in 
the Philippines. The trust fund per-pre-need category shall at all times be sufficient to 
cover the actuarial reserve liabilities corresponding to the in-force plans under the said 
category. No withdrawal shall be made fiom the trust fund except for payment of the 
cost of benefits or service&, cash surrendedtermination values payable to the 
planholders, the cost of service rendered for the management of the fund, taxes on trust 
funds, and other cost necessary to ensure the delivery of benefits or services. 
SEC 20. Deposits in the Trust Fund - The pre-need company shall make 
monthly deposits in the trust fund an amount determined by a Commission accredited 
actuary sufficient to pay the benefits promised under the contract, but in no case shall 
the amount of trust fund deposits be less than sixty-five percent (65%) of the gross pre- 
need price of the plan. For plans full paid in cash, the amount of the trust hnd deposits 
shall be made of the gross pre-need price of the plan. For plans full paid in cash, the 
amount of the trust fund deposits shall be made within sixty (60) days fkom receipt of 
payment. For plans sold on installment basis, the trust fund deposit shall be made 
within sixty (60) days following the end of each quarter of the fiscal year of the pre- 
need company. 
SEC 21. Investment of the Trust Fund -Investment out of the trust fund shall 
be limited to the following: 
1. Bonds or other evidences or indebtedness of the government of the 
Philippines or its subdivisions authorized by law to issue bonds: Provided, 
That said investments shall not less than ten percent (10%) of the trust h& 


2. Savings/time deposits and common trust h d  with commercial bank with 
satisfactory examination rating as of the last examination by the Bangko 
Sentral ng Pilipinas 
3. Commercial papers duly registered with the Securities and Exchange 
Commission (SEC) with a credit rating of “1” for short term and “Aaa” for 
long term based on the rating scale of Philippine Rating Corporation or its 
equivalent if rated by other local credit rating agency at the time of 
investment. Provided, That the maximum exposure to long term commercial 
papers shall not exceed fifteen percent (15%) of the total trnst fund and the 
exposure to each commercial paper issuer shall no exceed ten percent (10%) 
of the allocated amount; 
4. Direct loans, with a maximum tem of two (2) years, to corporations which 
are financially stable, have recorded profits for the last three(3) years and 
have not defaulted in the payment of interest on any three (3) including the 
last two (2) of the five (5) fiscal years next preceding the date of loan: 
Provided, That the loans shall be fully secured by a real estate mortgage up 
to the extent of s k y  percent (60%) of the appraised value of the property 
shall be covered by a Transfer Certificate of Title registered in the name of 
the mortgagor, fie& form liens and encumbrances, and Provided, fmlly, 
.>,W~, :
That the maximu! amount to be allocated for direct loans shall not exceed 
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five percent(5Y0) of the total trust fund and the amount to be granted to each 
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corporate borrower shall not exceed ten percent (10%) of the amount 
allocated, 
5. Mutual funds duly registered with the SEC and where funds are invested 
only in fvred income instruments and blue chips subject to the limitations 
prescribed by law; 
6. Common stocks of any listed corporation created under the laws, of the 
Philippines which shall have recorded profits for at least three (3) years next 
preceding the purchase of such stock and regular dividends on the stocks 
shall have been paid for three (3) years out of the last five (5), including the 
last two (2) next preceding the purchase of such stocks: provided, further, 
That the investment in any particular issue1 shall not exceed ten percent 
(10%) of the allocated amount and Provided, finally, That the stocks 
invested in is not in exceeds of twenty percent (20%) of the common stocks 
of the issuing entity; 
7. Real estate properties located in strategic areas of cities and first class 
municipalities, excluding those used by the company to conduct its business: 
Provided, That the Transfer Certificate of Title (TCT) is registered in the 


name of the seller, f?ee f?om liens and encumbrances and shall be transferred 
in the name of the trustee in trust for the planholders unless the 
seller/transferor is the pre-nee company wherein an annotation to the TCT 
relative to the sale/transfer may be allowed Provided, further, that the real 
estate shall be appraised every five (5) years by a licensed real estate 
appraiser, accredited by the industry association, the value of which shall be 
recorded in the books as prescribed by the Commission: Provided, finally, 
That the total recorded value of the real estate investment shall not exceed 
twenty-five (25%) of the total trust fund equity of the pre-need company; 
and 
8. Such other investments as may be allowed by. the Commission. 
SEC, 22. Actuarial Valuation of the Reserve Liabilities of the Pre-Need 
Company. An actual valuation to determine all contractual liabilities of the pre-need 
company shall be made and submitted to the Commission within one hundred five (105) 
days from the end of the first cal year of the pre-need company. The actuarial valuation 
report shall contain the actuarial assumption, methodology, formulas used; a summary 
of the pre-need plans that were subject of the actuarial valuation; and the results of such 
Valuation. 
The report should be duly certified by an actuary accredited by the 
Commission, The bases and limits of the assumptions to be sued in the valuation of 
reserves shall be prescribed by the Commission. Any deficiency in the trust fund, when 
compare to the actuarial reserve liabilities as reported in the actuarial valuation report, 
shall be funded by the pre-need company within one hundred fifty (1 50) days after the 
end of the fiscal year, including interest based on the highest rate assumed in the 
actuarial valuation of the particular plan, computed ftom the effective date of valuation 
to the date of deposit. Any excess of the trust fund over the actuarial reserve liabilities 
shall be credited to future deposit in requirements. 
SEC. 23. Trust Agreements - (a) The agreement creating the trust fund shall 
be submitted to approval of the Commission and shall contain, among others, the 
following provisions: 
1. Manner in which the trust fund is to be operated; 
2. Investment powers of the trustee with respect to the trust deposits, including 
the character and kind of investment; 
3. Allocation, appointment, distribution dates of income, profits and losses; 
4. Terms and conditions governing the admission and withdrawal of 
investment or participation in the fund; 
5. Auditing and settlement of accounts of the trustee with respect to the fund; 
6. Basis upon which the fund may be terminated; 
7. Provisions for withdrawal of the fund; and 


8. Such other matters as may he necessary to define clearly the rights if the 
issuer with regard to the trust fund. 
(h) 
No tmst agreement shall be amended, modified or terminated without the 
prior approval of the Commission, and such amendment, modification or 
termination shall neither affect adversely the plan holder nor impair any 
term or condition of the trust agreement. 
Trustee’s fees and any other charges shall he based oh income generated 
by the same trustees as approved by the Commission: Provided, That 
total fees and charges shall in no case I exceed ten percent (10%) of 
income generated. 
(c) 
SEC. 24. Liquidity Reserve Fund - The trustee shall at all times maintain a 
liquidity reserve fund sufficietit to cover at least ten percent (10%) of the trust fund but 
no case less than the amount of the availiig plans for succeeding year. The reserve 
fund shall be invested only in the following transactions: 
1. Loans secured by a hold-out on assignment or pledge deposits maintained 
either with the trustee or other banks, or of deposit substitutes of the trustee 
itself or mortgage and chattel mortgage bonds issued by the trustee; 
2. Short-term government securities or bonds and such other evidences of 
indebtedness or obligations, the servicing and repayment of which are fully 
guaranteed by the Republic of the Philippines; 
3. Repurchase agreements with any of those mentioned in item “‘2‘‘ above, as 
underlying instruments thereof; 
4. Savings or time deposits with agreement-owned banks or commercial banks: 
Provided, that in no case shall such savings or time deposit account be 
accepted or allowed under a “Bearer”, “Numbered Account” or other similar 
arrangements; and 
5. Other investments as the Commission may allow. 
SEC 25. Limitation of Trust Fund Investment - The trustee shall not use the 
fund to invest in or extend any loan or credit accommodation to the pre-need company, 
its directors, stockholders and related interest as well as enterprises owned or controlled 
by said company, its directors, officers and stockholders. 
CHAPTER VI1 
ACTUARIES FOR PRE-NEED COMPANIES 
SEC. 26 Required Actuary - No pre-need company shall be licensed to do 
business in the Philippines k r  shall any preOneed company doing business in the 
Philippines be allowed to c&tinue doing such business unless it shall engage the 


services of either a resident or consulting actuary duly accredited with the Commission 
who shall, during his tenure of office, be directly responsible for the direction and 
supervision of all actuarial work connected with or that may be involved in the business 
of the pre-need company. 
SEC. 27. Qualification of the actuary - A person shall be officially accredited 
by the Commission to act as an actuary in any pre-need company upon application 
therefore and the payment of the corresponding fee: Provided, That: (1) he is a fellow of 
good standing of the Actuarial Society of the Philippines at the t h e  of his appointment 
and remains in such good standing during the tenure of his engagement; or (2) in the 
case of one who is not a fellow of the Actuarial Society of the Philippines, he should 
meet all the requirements of the said for accreditation as a fellow of the Society. 
SEC. 28. Renewal of Certificates - No certificate of registration issued this 
Chapter shall be valid after the thirty fvst (3 la) day of December of the year following 
its issuance unless it has been renewed by the Commission. 
SEC. 29. Certification of Required Reports - The actuary shall certify to the 
correctness of the following documents, are submitted to the Commission by a pre-need 
company: 
1. Report on the actuarial valuation of all liabilities pertaining to pre-need 
issued; 
Annual fmancial statement of the pre-need company pertaining to valuation 
of liabilities and other reserve items; 
Statement on the sufficiency and accuracy of the asset share studies used in 
the pricing of the pre-need product. These are necessary for approval of a 
new product, for repricing of an existing product, or an enhancement of an 
existing product; and 
Report on the sufficiency of trust h d s  vis-&vis the computed actuarial 
reserve liabilities of the pre-need company. 
2. 
3. 
4. 
SEC. 30. Exception - Any pre-need company may employ any person who is 
not officially under either of the qualifications for any kind of actuarial work Provided, 
That he shall not, any the, have the authority to certify to the correctness of the 
foregoing documents. 
CHAPTER VIII 
REPORTS 
SEC. 31. 
Actuarial Valuation Report - Every pre-need company shall 
annually make a valuation of all pre-need plans in order to determine its fmancial 
stability and sol vency. All such valuation shall be made by an accredited actuary in 
accordance with actuarially sound and accepted principles and subject to the minimum 
I 


standard of valuation and guidelines set by the Commission. The results of such 
valuation shall be reported to the Commission accompanied by a sworn statement of 
opinion of the company's tesident actuary or consulting actuary within one hundred five 
(10%) days affer the end ofeach fiscal period. 
SEC. 32. Annual Statement. Every pre-need company shall terminate its 
fiscal period on the thirty-fxst (319 day of December every year on its chosen fiscal 
years. Within one hundred five (105) days after the calender of fiscal year, the pre-need 
company shall render to ht Commission an audited statement signed and sworn to by 
the chief officer and accredited actuary of such company in accordance with a uniform 
accounting system that may be prescribed by the Commission, showing in such form 
and details, the exact condition of its affairs. 
Any entry in the statement which is found to be false shall constitute a 
misdemeanor and the officer signing such statement shall be subject to the penalty 
provided for under this Code. 
SEC 33. Annual Statement of Trust Fund - Every pre-need company shall 
file with the Commission an annual statement o f  its trust for each type of plan. Such 
statement shall be in a form prescribed or approved by the Commission and shall 
include details as to all of the income, disbursement, assets and liability items of and 
associated with the said trust fund accounts. Said statement shall be under oath of two 
(2) officers of the company and shall be filed simultaneously with the annnal statement 
required by the preceding Section. 
SEC. 34. Publication of Annual Statement. I Within thirty (30) days after 
receipt o f  the annual statement approved by the Commission, every pre-need company 
shall publish in two (2) newspapers of general circulation a full synopsis of its annual 
fmancial statement, including the trust fund annual statement showing fully the 
condition of its business, and setting forth its resources and liabilities in a standardized 
format to be designed by the Commission. 
CHAPTER 1X 
FINANCIAL ACCOUNTING STANDARDS 
SEC. 35. Admitted Assets - In any determination o f  the financial condition of 
any pre-need company, there shall be allowed and admitted as assets only such assets 
owned by the pre-need company concerned and which consist of: 
1. Cash in the possession of the pre-need company or in transit under its control, 
'and the true and duly verified balance of any deposit of such company in a 
fmancially 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 and unrealized thereftom or 
accrued thereon; 
3. Loans granted by the pre-need company concerned to the extent of the portion 
thereof adequately secured by non-speculative  assets with readily realizable 
values in accordance &ith the subject to the limitations imposed by applicable 
provisions of this Code 
4. Loans and other assets and liens on pre-need contracts or certificates of a pre- 
need company, in an &ount not exceeding trust fund reserves and other plan 
liabilities carried on each individual preOneed contract or certificate; 
5. Deposits or amounts recoverable fiom underwriting associations, syndicates and 
reinsurance funds, or .from any suspended banking institution, to the extent 
deemed by the Commission to be available for the repayment of losses and 
claims and values to be determined by him; 
6. Electronic data processing machines, as may be authorized by the Commission 
to be acquired by the' pre-need company concerned, the acquisition cost of 
which to be amortized; in equal annual amomts within period of five (5) years 
fiom the date of acquisition thereof; and 
7. Other assets, not incodsistent with the provisions of paragraph (1) to (6) hereof, 
which are deemed !by the Commission to be readily realizable and 
available for the paymint of losses and claims at ivalues to be determined by the 
Commission. . 
SEC. 36. Non-Admitted Assets -(a) The following assets shall not be allowed 
as admitted assets of a pre-need company in any determination of its financial 
condition: 
1. Goodwill, trade names and other l i e  intangible assets; 
2. Prepaid expenses and commissions; 
3. Advances to officers which are not adequately secured and which are not 
previously authorized by the Commission, as well as advances to employees, 
agents and other persons on mere personal security; 
4. Shares of stick of such pre-need company, owned by it, or any equity therein 
as well as loans secured thereby, or any proportionate interest in such shares 
of stock through the ownership by such pre-need company of an interst in 
another corporation or business unit; 
5. Furniture, furnishing, fixtures, safes, equipment, library, stationary, literature 
and supplies; 


6. Items of bank credits representing checks, drafts or notes returned unpaid 
after the date of statement; and 
7. The amount if any, by which the aggregate value of investments as carried in 
the ledger assets of such pre-need company exceed the aggregate value 
thereof as determined in accordance with the provisions of this Code or the 
rules of commission. 
(b) 
All non-admitted assets and all other assets doubtful value or character 
included as ledger on non-ledger assets in any statement submitted by a 
pre-need company to the Commission shall also be reported, to the extent 
of the value disallowed as deductions fiom the gross assets of such pre- 
need company, except where the Commission permits a reserved to be 
carried among the liabilities of such pre-need company in lieu of any such 
deduction. 
CHAPTER X 
MARGING OF SOLVENCY 
SEC 37. Margin of Solvency - A pre-need company shall at all times maintain 
a margin of solvency equivalent to the excess of the value of its admitted assets of its 
paid up capital, over the amoht of its liabilities: Provided, that such margin shall in no 
event less than ten million pesos (P 10,000,000.00) or ten percent (10%) of its 
paid-up capital whichever is higher, and Provided, huther, That the term “paid-up 
capital” shall not include contributed surplus and capital in excess of par value. 
Whenever the aforementioned margin shall be found to be less than herein required to 
be maintained, the Commission shall forthwith direct the company to make good any 
such deficiency by increasing its outstanding capital lcash to be contributed by all 
stockholders of record in proportion to their respective interest, and paid to the treasurer 
of the company, within thirty (30) days fiom receipt of the notice from the Commission: 
Provided, That the company, in the interim shall not be permitted to take any new risk 
of any kind of character such as further selling of pre-need plans or contracts unless and 
until it make good any such deficiency. 
SEC 38. Distribution of Profits - No pre-need company shall declare or 
distribute any dividend on its outstanding stocks except upon approval by the 
Commission and fiom profits attested in a sworn statement to the Commission by the 
President or treasurer of the pre-need company to be remaining on hand retaining 
unimpaired the following: 
1. Ten percent (1 0%) of the capital stock; 
2. The margin of solvency required by Section 38; and 


3. 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 shall be reported to the Commission within 
thirty (30) days alter such declaration or distribution. 
If the Commission finds that any such pre-need company has declared or 
distributed dividend in violation of this section, he may order such company to cease 
and desist &om doing business until the amount of such.dividend or the portion thereof 
in excess of the amount allowed under this Section ahs been restored to said company. 
CHAPTER IX 
CLAIMS SETTLEMENT 
SEC.39 Unfair Claims Settlement Practices - (a) No pre-need company shall 
refused, without just cause, to pay settle claims arising under coverages provided by it 
plans, nor shall any such company engage in unfair claim settlement practices. Any of 
the following acts by a pre-need company, if committed without just cause shall 
constitute unfair claim settlement practices: 
1. Knowingly misrepresentation to claimants pertinent facts or plaii provisions 
relating to coverages at issue; 
2. Failing to acknowledge with reasonable promptness pertinent communications 
with respect to claims arising under its plan; 
3. Failing to adopt and implement reasonable standards for the prompt 
investigation of claims arising under its plan; 
4. Not attempting in good faith to effectuate prompt, fair and equitable settlement 
of claims submitted in which liability has become reasonably clear; or 
5. Compelling planholders to institute suits or recover amounts due under its plan 
by offering without justifiable reason substantially less than amounts ultimately 
recovered in suits brought by them. 
b) Evidence as to the number and types of valid and justifiable complaints to the 
Commission against a pre-need company shall be deemed admissible in an 
administrative or judicial proceeding brought under this Section. 
c) It is found, alter notice and an opportunity to be heard, that a pre-need company ahs 
violated this Section, each instance of noncompliance with paragraph (1) may be treated 
as a separate violation of this Section and shall be considered sufficient cause for the 
suspension or revocation of the company’s license and operation. 
SEC. 40. Payment of Plan Proceeds - The proceeds of the plan shall be 
immediately upon maturing of the policy, unless such proceeds are made payable in 
instaflments or as an annuity, in which case the installments or annuities shall be paid as 
they become due. Refusal or failure to pay the claim within fifteen (15) days from 


maturity or due date will entitle beneficiary to collect interest on the proceeds of the 
plan for the duration of the delay of the rate twice the legal interest, unless such failure 
or refusal to pay is based on the ground that the claim is fiaudulent. 
I 
SEC. 41. 
Jurisdiction - The Commission, through its newly created 
department shall have jurisdiction to hear and decide cases involving claims arising 
fiom any loss damage or liability for which a pre-need company may be answerable 
under the pre-need contract. In case of any litigation for the enforcement of any 
pre-need contract, it shall be duty of the Commission to make a fmding as to whether 
the payment of the claim of the plan holder has been unreasonably denied or withheld. 
In the affirmative case, the pre-need company shall be adjudge to pay damages which 
shall consist of attorney’s fees and other expenses incurred by the planholder or his 
beneficiary by reason of such unreasonable denial or withholding of payment plus 
interest of the amount of the claim due the planholder or his beneficiary fiom the date 
the plan I filed until the claim is fully satisfied: Provided, That the failure to pay any 
such claim within the time prescribed in said sections shall be considered prima facie 
evidence of unreasonable delay in payment and subject to administrative sanctions in 
Section 5 1. 
, 
CHAPTER XI1 
EXAMINATION OF PRE-NEED COMPANIES 
SEC. 42 Keeping of Records - The Commission shall require every pre-need 
company to keep its books, records, accounts and vouchers in such manner that the 
Commission’s authorized representative may readily verify the company’s annual 
statements and ascertain whether the company is solvent and has complied with the 
provision of this code or the circular, instructions, rulimgs or decisions of the 
Commission. 
SEC. 43. Examination - The Commission shall at least once a year and 
whenever it considers that the public interest s o demands, cause an examination to be 
made into the affairs, fmancial condition and method of business of every pre-need 
company, and of any other person, firm or corporation managing the trust fund or 
affairs and/or property of such pre-need company. Such company, as well as its 
managing person, firm or co$oration shall submit all such books, papers and securities 
as the Commission may require. The Commission shall also have the power to examine 
the officers of such company’under oath not matters relating to the business and the 
company’s financial condition> The authority to transact business in the Philippines of 
any such company shall be suspended by the Commission if such examination is 
refused and such company shall not thereafter be allowed to transact further business in 
the Philippines until it has fully complied with the provisions of this Section. 


CHAPTER XI11 
PLANHOLDERS’ PROTECTION FUND 
SEC. 44. Establishment of Planholders’ Protection Fund - There is hereby 
created a planholders’ Protection Fund hereinaeer referred to as Protection Fund, which 
shall be sued for the payment of claims against a pre-need company remaining unpaid 
by reason of insolvency of such company. No payment on any one claim shall exceed 
Fifty thousand pesos (P 50,000.00). The Protection Fund shall consist of all payments 
made thereto pre-need companies. The Protection Fund shall be held and administered 
by the Commission in accordance with the provision of this Chapter. 
SEC. 45. Contributions; Disbursements - (a) All pre-need companies shall 
contribute and aggregate amount of Twenty-five million pesos (P 25,000,000.00) to the 
Protection Fund. The contributions of the pre-need companies shall be at least five 
hundred thousand pesos (500,000.00) in accordance with the schedule and amount of 
contribution as may be determined by the Commission. 
(b) The Protection Fund consisting of all the payments made thereto by the pre- 
need companies shall remain as assets in their books and any disbursements therekom 
shall be deducted proportionately from the contributions of each company. Any 
earnings of the Protection Fund shall be turned over to the contributing companies in 
proportion to their contributions. 
(c) In case of any disbursement from the Fund as provided in the preceding 
paragraph, the pre-need companies shall contribute equally to replenish the amount 
disbursed. 
SEC. 46. Custodian of the Planholder’s Protection Fund - The treasurer of 
the Philippines shall be the custodian of the Fund; and a11 disbursement shall be made 
by the Treasurer of the Philippines upon vouchers signed by the commissioner or his 
deputy, as hereinafter provided. The moneys of said Fund may be invested by the 
commissioner only in bonds or other evidences of debt of the Government of the 
Philippines or its politics subdivisions or instrumentalities. The commissioner may sell 
any of the securities in which Fund is invested, if advisable, for its proper 
administration or in the best interest of such Fund. 
SEC. 47. 
Administration Expense - The expense of administering the 
Protection Fund shall be paid out of such fund. The commissioner shall serve as 
administrator of the Fund without additional compensation; however, expenses incurred 
in the performance of his duties in connection with said fund may be allowed and paid 
from the Fund. The compensations of those persons employed by the commissioner 
shall include in his annual report to the Secretary of Finance a statement of he expenses 
of administration ofthe Fund for the preceding year. 


SEC. 48. Role of the Commissioner - The Commissioner may adopt, amend 
and enforce all reasonable rules and regulations necessary for the proper administration 
of the Fund. In the event any pre-need company shall fail to make any payment 
required under this Chapter, or that any payment is incorrect, he shall have full authority 
to examine all books and records of the pre-need company for the purpose of 
ascertaining the facts that shall determine the correct amount to be paid and may 
proceed in any court of competent jurisdiction to recover for the benefit of the Fund any 
sum shown to be due upon such examination and determination. Any pre-need 
company which fails to make any payment to the Fund when due, shall thereby forfeit 
to aid fund a penalty of five percent (5%) of the amount determined to be due as 
provided by this chapter, plus one percent (I%), after the expiration of the first month 
of such delay. The commissioner, if satisfied that the delay was excusable, may remit 
any part of such penalty to the Fund. The commissioner, in his discretion, may suspend 
or revoke the certificate of authority to do business in the Philippines of any pr-need 
company which shall fail comply with this Chapter or to pay any penalty imposed in 
accordance herewith. 
CHAPTER XIV 
PROCEEDINGS IN RECEIVERSHIP 
SEC. 49. Proceedings Receivership - (a) Whenever, upon examination or 
other evidence, it shall be disclosed that the condition of any pre-need company doing 
business in the Philippines is insolvent or that it continuance in business would be 
hazardous would be hazardous to its planholders and creditors, the Commission shall 
forthwith order the company to cease and desist fiom transacting business in the 
Philippines. The Commission shall designate a receiver to immediately take charge of 
all assets and liabilities, administer the same for the benefit of its planholders and 
creditors, and exercise all powers necessary for these purpose including, but not limited 
to bringing suits and foreclosing mortgages in the name of the pre-need company. 
(b) The Commission shall thereupon determined within thirty (30) days whether 
the pre-need company may be recognized or otherwise placed in such condition so that 
it may be permitted to resume business with security to its plan holders and creditor s 
and shall prescribe the conditions under which such resumption of business shall take 
place as well as the time for fulfillment of such conditions. In such case, the expenses 
and fees in the collection and administration of the pre-need company shall be 
determined by the Commission and shall be paid out of the assets of such company. 
(c) The receiver designated under the provisions of this Chapter shall not be 
subject to any action, claim or demand by, or liability to, any person in respect of 


anything done or omitted to be done in good faith in the exercise or in connection with 
the exercise of the powers conferred on such receiver. 
CHAPTER XV 
ADMINISTRATIVE SANCTIONS 
SEC:50. Administrative Sanctions - (a) If, after proper notice and hearing, the 
Commission finds that there is a violation of any of the provisions of this Code, or that 
any pre-need company has, in a registration statement : and its supporting papers and 
other reports required to be filed with the Commission, made any untrue statement of a 
material fact, or omitted to state any material fact required to be stated therein or 
necessary to make the statements therein not misleading, lor refused to permit any lawful 
examination into its affairs, it shall, in its discretion, impose any or all of the following 
sanctions: 
1. Cease and desist order; 
2. Suspension or revocation of its license and registration to sell pre-need 
plans/contacts; 
~ 
3. A fine of not less than five thousand pesos (P 5,000.00) plus an additional 
five hundred pesos (p 500.00) but not more than two thousand pesos (P 
2,000.00) for each:day of continuing violation, with a maximum penalty of 
not dore than five million pesos (p 5,000,000.00) andor imprisonment of 
six (6) years to twelve (12) years; 
4. Disqualification fkom being an officer, member of the board of directors or 
principal stockholder of a pre-need company; or 
5. Other penalties within the power ofthe commission under existing laws. 
The imposition of the foregoing administrative sanctions shall be without 
prejudice to the filling of criminal charges against the, individual responsible for the 
violation. 
(b) 
The sale of pre-need plan not authorized under a permit/license or 
overpricing thereof shall subject the issuer to h e  as follows: 
1. First Violation - 30% of the aggregate gross pre-need price of the plans sold; 
2. Second Violation - 40% of the aggregate gross pre-need of the plans sold; 
atid 
3. Third Violation - Suspension or revocation of license. 
Failure to pay fmes within three (3) months fkom receipt of notice to pay will 
cause the Commission to issue a suspension order. 


CHAPTER XVI 
TRANSITORY PROVISIONS 
SEC 51. Implementing Rules and Regulations - The Commission shall adopt 
such rules and regulations for the proper and effective implementation of this Code 
within three (3) months from approval hereof The Commission shall publish the rules 
and regulations once a week for two (2) consecutive weeks in two (2) newspapers of 
general circulation. 
SEC 52. Effect on Existing Law - The rights and remedies provided by this 
Code shall be in addition to any and all other rights land remedies that exist under 
existing laws. 
SEC 53. Repealing Clause. All acts, laws, executive orders and/or rules and 
regulations or any part thereof which are incbnsistent with the provisions of this Code 
are hereby repealed or modified accordingly. 
SEC.54 Effectivity Clause - This Code shall take effect upon its approval. 
Approved,