Republic of the Philippines

Congress of the Philippines

Metro Manila
Fifteenth Congress
Third Regular Session
Begun and held in Metro Manila, on Monday, the twenty-third day of July, two
thousand twele!
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Be it enacted by the Senate and 0ouse of Representaties of the Philippines in
Congress asse<bled=
S#CT&)( *! Presidential 1ecree (o! ,*3, as a<ended, is hereby further
a<ended to read as follows=
6/#(#R'% PR)>&S&)(S
6S#CT&)( *! This 1ecree shall be ?nown as @The &nsurance CodeA!
6S#C! 3! 4heneer used in this Code, the following ter<s shall hae the
respectie <eanings hereinafter set forth or indicated, unless the conteBt
otherwise reCuires=
6DaE ' contract of insurance is an agree<ent whereby one underta?es for a
consideration to inde<nify another against loss, da<age or liability arising fro<
an un?nown or contingent eent!
6' contract of suretyship shall be dee<ed to be an insurance contract, within the
<eaning of this Code, only if <ade by a surety who or which, as such, is doing
an insurance business as hereinafter proided!
6DbE The ter< doing an insurance business or transacting an insurance business,
within the <eaning of this Code, shall include=
6D*E Ma?ing or proposing to <a?e, as insurer, any insurance contractF
6D3E Ma?ing or proposing to <a?e, as surety, any contract of suretyship as a
ocation and not as <erely incidental to any other legiti<ate business or actiity
of the suretyF
6DGE 1oing any ?ind of business, including a reinsurance business, specifically
recogniHed as constituting the doing of an insurance business within the <eaning
of this CodeF
6D8E 1oing or proposing to do any business in substance eCuialent to any of the
foregoing in a <anner designed to eade the proisions of this Code!
6&n the application of the proisions of this Code, the fact that no profit is deried
fro< the <a?ing of insurance contracts, agree<ents or transactions or that no
separate or direct consideration is receied therefor, shall not be dee<ed
conclusie to show that the <a?ing thereof does not constitute the doing or
transacting of an insurance business!
6DcE 's used in this Code, the ter< Co<<issioner <eans the &nsurance
Co<<issioner!
6C0'PT#R &
6T0# C)(TR'CT )F &(S$R'(C#
6T&T%# *
640'T M'2 B# &(S$R#1
6S#C! G! 'ny contingent or un?nown eent, whether past or future, which <ay
da<nify a person haing an insurable interest, or create a liability against hi<,
<ay be insured against, subIect to the proisions of this chapter!
6The consent of the spouse is not necessary for the alidity of an insurance
policy ta?en out by a <arried person on his or her life or that of his or her
children!
6'll rights, title and interest in the policy of insurance ta?en out by an original
owner on the life or health of the person insured shall auto<atically est in the
latter upon the death of the original owner, unless otherwise proided for in the
policy!
6S#C! 8! The preceding section does not authoriHe an insurance for or against
the drawing of any lottery, or for or against any chance or tic?et in a lottery
drawing a priHe!
6S#C! :! 'll ?inds of insurance are subIect to the proisions of this chapter so far
as the proisions can apply!
6T&T%# 3
6P'RT&#S T) T0# C)(TR'CT
6S#C! ,! #ery corporation, partnership, or association, duly authoriHed to
transact insurance business as elsewhere proided in this Code, <ay be an
insurer!
6S#C! -! 'nyone eBcept a public ene<y <ay be insured!
6S#C! 9! $nless the policy otherwise proides, where a <ortgagor of property
effects insurance in his own na<e proiding that the loss shall be payable to the
<ortgagee, or assigns a policy of insurance to a <ortgagee, the insurance is
dee<ed to be upon the interest of the <ortgagor, who does not cease to be a
party to the original contract, and any act of his, prior to the loss, which would
otherwise aoid the insurance, will hae the sa<e effect, although the property is
in the hands of the <ortgagee, but any act which, under the contract of
insurance, is to be perfor<ed by the <ortgagor, <ay be perfor<ed by the
<ortgagee therein na<ed, with the sa<e effect as if it had been perfor<ed by
the <ortgagor!
6S#C! ;! &f an insurer assents to the transfer of an insurance fro< a <ortgagor to
a <ortgagee, and, at the ti<e of his assent, i<poses further obligations on the
assignee, <a?ing a new contract with hi<, the acts of the <ortgagor cannot
affect the rights of said assignee!
6T&T%# G
6&(S$R'B%# &(T#R#ST
6S#C! *+! #ery person has an insurable interest in the life and health=
6DaE )f hi<self, of his spouse and of his childrenF
6DbE )f any person on who< he depends wholly or in part for education or
support, or in who< he has a pecuniary interestF
6DcE )f any person under a legal obligation to hi< for the pay<ent of <oney, or
respecting property or serices, of which death or illness <ight delay or preent
the perfor<anceF and
6DdE )f any person upon whose life any estate or interest ested in hi< depends!
6S#C! **! The insured shall hae the right to change the beneficiary he
designated in the policy, unless he has eBpressly waied this right in said policy!
(otwithstanding the foregoing, in the eent the insured does not change the
beneficiary during his lifeti<e, the designation shall be dee<ed irreocable!
6S#C! *3! The interest of a beneficiary in a life insurance policy shall be forfeited
when the beneficiary is the principal, acco<plice, or accessory in willfully bringing
about the death of the insured! &n such a case, the share forfeited shall pass on
to the other beneficiaries, unless otherwise disCualified! &n the absence of other
beneficiaries, the proceeds shall be paid in accordance with the policy contract! &f
the policy contract is silent, the proceeds shall be paid to the estate of the
insured!
6S#C! *G! #ery interest in property, whether real or personal, or any relation
thereto, or liability in respect thereof, of such nature that a conte<plated peril
<ight directly da<nify the insured, is an insurable interest!
6S#C! *8! 'n insurable interest in property <ay consist in=
6DaE 'n eBisting interestF
6DbE 'n inchoate interest founded on an eBisting interestF or
6DcE 'n eBpectancy, coupled with an eBisting interest in that out of which the
eBpectancy arises!
6S#C! *:! ' carrier or depository of any ?ind has an insurable interest in a thing
held by hi< as such, to the eBtent of his liability but not to eBceed the alue
thereof!
6S#C! *,! ' <ere contingent or eBpectant interest in any thing, not founded on an
actual right to the thing, nor upon any alid contract for it, is not insurable!
6S#C! *-! The <easure of an insurable interest in property is the eBtent to which
the insured <ight be da<nified by loss or inIury thereof!
6S#C! *9! (o contract or policy of insurance on property shall be enforceable
eBcept for the benefit of so<e person haing an insurable interest in the property
insured!
6S#C! *;! 'n interest in property insured <ust eBist when the insurance ta?es
effect, and when the loss occurs, but need not eBist in the <eanti<eF and interest
in the life or health of a person insured <ust eBist when the insurance ta?es
effect, but need not eBist thereafter or when the loss occurs!
6S#C! 3+! #Bcept in the cases specified in the neBt four sections, and in the
cases of life, accident, and health insurance, a change of interest in any part of a
thing insured unacco<panied by a corresponding change of interest in the
insurance, suspends the insurance to an eCuialent eBtent, until the interest in
the thing and the interest in the insurance are ested in the sa<e person!
6S#C! 3*! ' change of interest in a thing insured, after the occurrence of an inIury
which results in a loss, does not affect the right of the insured to inde<nity for the
loss!
6S#C! 33! ' change of interest in one or <ore of seeral distinct things,
separately insured by one policy, does not aoid the insurance as to the others!
6S#C! 3G! ' change of interest, by will or succession, on the death of the insured,
does not aoid an insuranceF and his interest in the insurance passes to the
person ta?ing his interest in the thing insured!
6S#C! 38! ' transfer of interest by one of seeral partners, Ioint owners, or
owners in co<<on, who are Iointly insured, to the others, does not aoid an
insurance een though it has been agreed that the insurance shall cease upon
an alienation of the thing insured!
6S#C! 3:! #ery stipulation in a policy of insurance for the pay<ent of loss
whether the person insured has or has not any interest in the property insured, or
that the policy shall be receied as proof of such interest, and eery policy
eBecuted by way of ga<ing or wagering, is oid!
6T&T%# 8
6C)(C#'%M#(T
6S#C! 3,! ' neglect to co<<unicate that which a party ?nows and ought to
co<<unicate, is called a conceal<ent!
6S#C! 3-! ' conceal<ent whether intentional or unintentional entitles the inIured
party to rescind a contract of insurance!
6S#C! 39! #ach party to a contract of insurance <ust co<<unicate to the other,
in good faith, all facts within his ?nowledge which are <aterial to the contract and
as to which he <a?es no warranty, and which the other has not the <eans of
ascertaining!
6S#C! 3;! 'n intentional and fraudulent o<ission, on the part of one insured, to
co<<unicate infor<ation of <atters proing or tending to proe the falsity of a
warranty, entitles the insurer to rescind!
6S#C! G+! (either party to a contract of insurance is bound to co<<unicate
infor<ation of the <atters following, eBcept in answer to the inCuiries of the other=
6DaE Those which the other ?nowsF
6DbE Those which, in the eBercise of ordinary care, the other ought to ?now, and of
which the for<er has no reason to suppose hi< ignorantF
6DcE Those of which the other waies co<<unicationF
6DdE Those which proe or tend to proe the eBistence of a ris? eBcluded by a
warranty, and which are not otherwise <aterialF and
6DeE Those which relate to a ris? eBcepted fro< the policy and which are not
otherwise <aterial!
6S#C! G*! Materiality is to be deter<ined not by the eent, but solely by the
probable and reasonable influence of the facts upon the party to who< the
co<<unication is due, in for<ing his esti<ate of the disadantages of the
proposed contract, or in <a?ing his inCuiries!
6S#C! G3! #ach party to a contract of insurance is bound to ?now all the general
causes which are open to his inCuiry, eCually with that of the other, and which
<ay affect the political or <aterial perils conte<platedF and all general usages of
trade!
6S#C! GG! The right to infor<ation of <aterial facts <ay be waied, either by the
ter<s of insurance or by neglect to <a?e inCuiry as to such facts, where they are
distinctly i<plied in other facts of which infor<ation is co<<unicated!
6S#C! G8! &nfor<ation of the nature or a<ount of the interest of one insured need
not be co<<unicated unless in answer to an inCuiry, eBcept as prescribed by
Section :*!
6S#C! G:! (either party to a contract of insurance is bound to co<<unicate, een
upon inCuiry, infor<ation of his own Iudg<ent upon the <atters in Cuestion!
6T&T%# :
6R#PR#S#(T'T&)(
6S#C! G,! ' representation <ay be oral or written!
6S#C! G-! ' representation <ay be <ade at the ti<e of, or before, issuance of
the policy!
6S#C! G9! The language of a representation is to be interpreted by the sa<e
rules as the language of contracts in general!
6S#C! G;! ' representation as to the future is to be dee<ed a pro<ise, unless it
appears that it was <erely a state<ent of belief or eBpectation!
6S#C! 8+! ' representation cannot Cualify an eBpress proision in a contract of
insurance, but it <ay Cualify an i<plied warranty!
6S#C! 8*! ' representation <ay be altered or withdrawn before the insurance is
effected, but not afterwards!
6S#C! 83! ' representation <ust be presu<ed to refer to the date on which the
contract goes into effect!
6S#C! 8G! 4hen a person insured has no personal ?nowledge of a fact, he <ay
neertheless repeat infor<ation which he has upon the subIect, and which he
beliees to be true, with the eBplanation that he does so on the infor<ation of
othersF or he <ay sub<it the infor<ation, in its whole eBtent, to the insurerF and
in neither case is he responsible for its truth, unless it proceeds fro< an agent of
the insured, whose duty it is to gie the infor<ation!
6S#C! 88! ' representation is to be dee<ed false when the facts fail to
correspond with its assertions or stipulations!
6S#C! 8:! &f a representation is false in a <aterial point, whether affir<atie or
pro<issory, the inIured party is entitled to rescind the contract fro< the ti<e when
the representation beco<es false!
6S#C! 8,! The <ateriality of a representation is deter<ined by the sa<e rules as
the <ateriality of a conceal<ent!
6S#C! 8-! The proisions of this chapter apply as well to a <odification of a
contract of insurance as to its original for<ation!
6S#C! 89! 4heneer a right to rescind a contract of insurance is gien to the
insurer by any proision of this chapter, such right <ust be eBercised preious to
the co<<ence<ent of an action on the contract!
6'fter a policy of life insurance <ade payable on the death of the insured shall
hae been in force during the lifeti<e of the insured for a period of two D3E years
fro< the date of its issue or of its last reinstate<ent, the insurer cannot proe that
the policy is oid ab initio or is rescindable by reason of the fraudulent
conceal<ent or <isrepresentation of the insured or his agent!
6T&T%# ,
6T0# P)%&C2
6S#C! 8;! The written instru<ent in which a contract of insurance is set forth, is
called a policy of insurance!
6S#C! :+! The policy shall be in printed for< which <ay contain blan? spacesF
and any word, phrase, clause, <ar?, sign, sy<bol, signature, nu<ber, or word
necessary to co<plete the contract of insurance shall be written on the blan?
spaces proided therein!
6'ny rider, clause, warranty or endorse<ent purporting to be part of the contract
of insurance and which is pasted or attached to said policy is not binding on the
insured, unless the descriptie title or na<e of the rider, clause, warranty or
endorse<ent is also <entioned and written on the blan? spaces proided in the
policy!
6$nless applied for by the insured or owner, any rider, clause, warranty or
endorse<ent issued after the original policy shall be countersigned by the
insured or owner, which countersignature shall be ta?en as his agree<ent to the
contents of such rider, clause, warranty or endorse<ent!
6(otwithstanding the foregoing, the policy <ay be in electronic for< subIect to
the pertinent proisions of Republic 'ct (o! 9-;3, otherwise ?nown as the
@#lectronic Co<<erce 'ctA and to such rules and regulations as <ay be
prescribed by the Co<<issioner!
6S#C! :*! ' policy of insurance <ust specify=
6DaE The parties between who< the contract is <adeF
6DbE The a<ount to be insured eBcept in the cases of open or running policiesF
6DcE The pre<iu<, or if the insurance is of a character where the eBact pre<iu<
is only deter<inable upon the ter<ination of the contract, a state<ent of the
basis and rates upon which the final pre<iu< is to be deter<inedF
6DdE The property or life insuredF
6DeE The interest of the insured in property insured, if he is not the absolute owner
thereofF
6DfE The ris?s insured againstF and
6DgE The period during which the insurance is to continue!
6S#C! :3! Coer notes <ay be issued to bind insurance te<porarily pending the
issuance of the policy! 4ithin siBty D,+E days after issue of a coer note, a policy
shall be issued in lieu thereof, including within its ter<s the identical insurance
bound under the coer note and the pre<iu< therefor!
6Coer notes <ay be eBtended or renewed beyond such siBty D,+E days with the
written approal of the Co<<issioner if he deter<ines that such eBtension is not
contrary to and is not for the purpose of iolating any proisions of this Code! The
Co<<issioner <ay pro<ulgate rules and regulations goerning such eBtensions
for the purpose of preenting such iolations and <ay by such rules and
regulations dispense with the reCuire<ent of written approal by hi< in the case
of eBtension in co<pliance with such rules and regulations!
6S#C! :G! The insurance proceeds shall be applied eBclusiely to the proper
interest of the person in whose na<e or for whose benefit it is <ade unless
otherwise specified in the policy!
6S#C! :8! 4hen an insurance contract is eBecuted with an agent or trustee as
the insured, the fact that his principal or beneficiary is the real party in interest
<ay be indicated by describing the insured as agent or trustee, or by other
general words in the policy!
6S#C! ::! To render an insurance effected by one partner or part-owner,
applicable to the interest of his co-partners or other part-owners, it is necessary
that the ter<s of the policy should be such as are applicable to the Ioint or
co<<on interest!
6S#C! :,! 4hen the description of the insured in a policy is so general that it <ay
co<prehend any person or any class of persons, only he who can show that it
was intended to include hi<, can clai< the benefit of the policy!
6S#C! :-! ' policy <ay be so fra<ed that it will inure to the benefit of
who<soeer, during the continuance of the ris?, <ay beco<e the owner of the
interest insured!
6S#C! :9! The <ere transfer of a thing insured does not transfer the policy, but
suspends it until the sa<e person beco<es the owner of both the policy and the
thing insured!
6S#C! :;! ' policy is either open, alued or running!
6S#C! ,+! 'n open policy is one in which the alue of the thing insured is not
agreed upon, and the a<ount of the insurance <erely represents the insurerAs
<aBi<u< liability! The alue of such thing insured shall be ascertained at the
ti<e of the loss!
6S#C! ,*! ' alued policy is one which eBpresses on its face an agree<ent that
the thing insured shall be alued at a specific su<!
6S#C! ,3! ' running policy is one which conte<plates successie insurances,
and which proides that the obIect of the policy <ay be fro< ti<e to ti<e defined,
especially as to the subIects of insurance, by additional state<ents or
indorse<ents!
6S#C! ,G! ' condition, stipulation, or agree<ent in any policy of insurance,
li<iting the ti<e for co<<encing an action thereunder to a period of less than
one D*E year fro< the ti<e when the cause of action accrues, is oid!
6S#C! ,8! (o policy of insurance other than life shall be cancelled by the insurer
eBcept upon prior notice thereof to the insured, and no notice of cancellation shall
be effectie unless it is based on the occurrence, after the effectie date of the
policy, of one or <ore of the following=
6DaE (onpay<ent of pre<iu<F
6DbE Coniction of a cri<e arising out of acts increasing the haHard insured
againstF
6DcE 1iscoery of fraud or <aterial <isrepresentationF
6DdE 1iscoery of willful or rec?less acts or o<issions increasing the haHard
insured againstF
6DeE Physical changes in the property insured which result in the property
beco<ing uninsurableF
6DfE 1iscoery of other insurance coerage that <a?es the total insurance in
eBcess of the alue of the property insuredF or
6DgE ' deter<ination by the Co<<issioner that the continuation of the policy
would iolate or would place the insurer in iolation of this Code!
6S#C! ,:! 'll notices of cancellation <entioned in the preceding section shall be
in writing, <ailed or deliered to the na<ed insured at the address shown in the
policy, or to his bro?er proided the bro?er is authoriHed in writing by the policy
owner to receie the notice of cancellation on his behalf, and shall state=
6DaE 4hich of the grounds set forth in Section ,8 is relied uponF and
6DbE That, upon written reCuest of the na<ed insured, the insurer will furnish the
facts on which the cancellation is based!
6S#C! ,,! &n case of insurance other than life, unless the insurer at least forty-fie
D8:E days in adance of the end of the policy period <ails or deliers to the
na<ed insured at the address shown in the policy notice of its intention not to
renew the policy or to condition its renewal upon reduction of li<its or eli<ination
of coerages, the na<ed insured shall be entitled to renew the policy upon
pay<ent of the pre<iu< due on the effectie date of the renewal! 'ny policy
written for a ter< of less than one D*E year shall be considered as if written for a
ter< of one D*E year! 'ny policy written for a ter< longer than one D*E year or any
policy with no fiBed eBpiration date shall be considered as if written for
successie policy periods or ter<s of one D*E year!
6T&T%# -
64'RR'(T&#S
6S#C! ,-! ' warranty is either eBpressed or i<plied!
6S#C! ,9! ' warranty <ay relate to the past, the present, the future, or to any or
all of these!
6S#C! ,;! (o particular for< of words is necessary to create a warranty!
6S#C! -+! 4ithout preIudice to Section :*, eery eBpress warranty, <ade at or
before the eBecution of a policy, <ust be contained in the policy itself, or in
another instru<ent signed by the insured and referred to in the policy as <a?ing
a part of it!
6S#C! -*! ' state<ent in a policy, of a <atter relating to the person or thing
insured, or to the ris?, as fact, is an eBpress warranty thereof!
6S#C! -3! ' state<ent in a policy, which i<parts that it is intended to do or not to
do a thing which <aterially affects the ris?, is a warranty that such act or
o<ission shall ta?e place!
6S#C! -G! 4hen, before the ti<e arries for the perfor<ance of a warranty
relating to the future, a loss insured against happens, or perfor<ance beco<es
unlawful at the place of the contract, or i<possible, the o<ission to fulfill the
warranty does not aoid the policy!
6S#C! -8! The iolation of a <aterial warranty, or other <aterial proision of a
policy, on the part of either party thereto, entitles the other to rescind!
6S#C! -:! ' policy <ay declare that a iolation of specified proisions thereof
shall aoid it, otherwise the breach of an i<<aterial proision does not aoid the
policy!
6S#C! -,! ' breach of warranty without fraud <erely eBonerates an insurer fro<
the ti<e that it occurs, or where it is bro?en in its inception, preents the policy
fro< attaching to the ris?!
6T&T%# 9
6PR#M&$M
6S#C! --! 'n insurer is entitled to pay<ent of the pre<iu< as soon as the thing
insured is eBposed to the peril insured against! (otwithstanding any agree<ent
to the contrary, no policy or contract of insurance issued by an insurance
co<pany is alid and binding unless and until the pre<iu< thereof has been
paid, eBcept in the case of a life or an industrial life policy wheneer the grace
period proision applies, or wheneer under the bro?er and agency agree<ents
with duly licensed inter<ediaries, a ninety D;+E-day credit eBtension is gien! (o
credit eBtension to a duly licensed inter<ediary should eBceed ninety D;+E days
fro< date of issuance of the policy!
6S#C! -9! #<ployees of the Republic of the Philippines, including its political
subdiisions and instru<entalities, and goern<ent-owned or -controlled
corporations, <ay pay their insurance pre<iu<s and loan obligations through
salary deduction= Proided, That the treasurer, cashier, pay<aster or official of
the entity e<ploying the goern<ent e<ployee is authoriHed, notwithstanding the
proisions of any eBisting law, rules and regulations to the contrary, to <a?e
deductions fro< the salary, wage or inco<e of the latter pursuant to the
agree<ent between the insurer and the goern<ent e<ployee and to re<it such
deductions to the insurer concerned, and collect such reasonable fee for its
serices!
6S#C! -;! 'n ac?nowledg<ent in a policy or contract of insurance or the receipt
of pre<iu< is conclusie eidence of its pay<ent, so far as to <a?e the policy
binding, notwithstanding any stipulation therein that it shall not be binding until
the pre<iu< is actually paid!
6S#C! 9+! ' person insured is entitled to a return of pre<iu<, as follows=
6DaE To the whole pre<iu< if no part of his interest in the thing insured be
eBposed to any of the perils insured againstF
6DbE 4here the insurance is <ade for a definite period of ti<e and the insured
surrenders his policy, to such portion of the pre<iu< as corresponds with the
uneBpired ti<e, at a pro rata rate, unless a short period rate has been agreed
upon and appears on the face of the policy, after deducting fro< the whole
pre<iu< any clai< for loss or da<age under the policy which has preiously
accrued= Proided, That no holder of a life insurance policy <ay aail hi<self of
the priileges of this paragraph without sufficient cause as otherwise proided by
law!
6S#C! 9*! &f a peril insured against has eBisted, and the insurer has been liable
for any period, howeer short, the insured is not entitled to return of pre<iu<s,
so far as that particular ris? is concerned!
6S#C! 93! ' person insured is entitled to a return of the pre<iu< when the
contract is oidable, and subseCuently annulled under the proisions of the Ciil
CodeF or on account of the fraud or <isrepresentation of the insurer, or of his
agent, or on account of facts, or the eBistence of which the insured was ignorant
of without his faultF or when by any default of the insured other than actual fraud,
the insurer neer incurred any liability under the policy!
6' person insured is not entitled to a return of pre<iu< if the policy is annulled,
rescinded or if a clai< is denied by reason of fraud!
6S#C! 9G! &n case of an oer insurance by seeral insurers other than life, the
insured is entitled to a ratable return of the pre<iu<, proportioned to the a<ount
by which the aggregate su< insured in all the policies eBceeds the insurable
alue of the thing at ris?!
6S#C! 98! 'n insurer <ay contract and accept pay<ents, in addition to regular
pre<iu<, for the purpose of paying future pre<iu<s on the policy or to increase
the benefits thereof!
6T&T%# ;
6%)SS
6S#C! 9:! 'n agree<ent not to transfer the clai< of the insured against the
insurer after the loss has happened, is oid if <ade before the loss eBcept as
otherwise proided in the case of life insurance!
6S#C! 9,! $nless otherwise proided by the policy, an insurer is liable for a loss
of which a peril insured against was the proBi<ate cause, although a peril not
conte<plated by the contract <ay hae been a re<ote cause of the lossF but he
is not liable for a loss of which the peril insured against was only a re<ote cause!
6S#C! 9-! 'n insurer is liable where the thing insured is rescued fro< a peril
insured against that would otherwise hae caused a loss, if, in the course of such
rescue, the thing is eBposed to a peril not insured against, which per<anently
depries the insured of its possession, in whole or in partF or where a loss is
caused by efforts to rescue the thing insured fro< a peril insured against!
6S#C! 99! 4here a peril is especially eBcepted in a contract of insurance, a loss,
which would not hae occurred but for such peril, is thereby eBcepted although
the i<<ediate cause of the loss was a peril which was not eBcepted!
6S#C! 9;! 'n insurer is not liable for a loss caused by the willful act or through
the conniance of the insuredF but he is not eBonerated by the negligence of the
insured, or of the insurance agents or others!
6T&T%# *+
6()T&C# )F %)SS
6S#C! ;+! &n case of loss upon an insurance against fire, an insurer is
eBonerated, if written notice thereof be not gien to hi< by an insured, or so<e
person entitled to the benefit of the insurance, without unnecessary delay! For
other non-life insurance, the Co<<issioner <ay specify the period for the
sub<ission of the notice of loss!
6S#C! ;*! 4hen a preli<inary proof of loss is reCuired by a policy, the insured is
not bound to gie such proof as would be necessary in a court of IusticeF but it is
sufficient for hi< to gie the best eidence which he has in his power at the ti<e!
6S#C! ;3! 'll defects in a notice of loss, or in preli<inary proof thereof, which the
insured <ight re<edy, and which the insurer o<its to specify to hi<, without
unnecessary delay, as grounds of obIection, are waied!
6S#C! ;G! 1elay in the presentation to an insurer of notice or proof of loss is
waied if caused by any act of hi<, or if he o<its to ta?e obIection pro<ptly and
specifically upon that ground!
6S#C! ;8! &f the policy reCuires, by way of preli<inary proof of loss, the certificate
or testi<ony of a person other than the insured, it is sufficient for the insured to
use reasonable diligence to procure it, and in case of the refusal of such person
to gie it, then to furnish reasonable eidence to the insurer that such refusal was
not induced by any Iust grounds of disbelief in the facts necessary to be certified
or testified!
6T&T%# **
61)$B%# &(S$R'(C#
6S#C! ;:! ' double insurance eBists where the sa<e person is insured by
seeral insurers separately in respect to the sa<e subIect and interest!
6S#C! ;,! 4here the insured in a policy other than life is oer insured by double
insurance=
6DaE The insured, unless the policy otherwise proides, <ay clai< pay<ent fro<
the insurers in such order as he <ay select, up to the a<ount for which the
insurers are seerally liable under their respectie contractsF
6DbE 4here the policy under which the insured clai<s is a alued policy, any su<
receied by hi< under any other policy shall be deducted fro< the alue of the
policy without regard to the actual alue of the subIect <atter insuredF
6DcE 4here the policy under which the insured clai<s is an unalued policy, any
su< receied by hi< under any policy shall be deducted against the full insurable
alue, for any su< receied by hi< under any policyF
6DdE 4here the insured receies any su< in eBcess of the aluation in the case of
alued policies, or of the insurable alue in the case of unalued policies, he
<ust hold such su< in trust for the insurers, according to their right of
contribution a<ong the<selesF
6DeE #ach insurer is bound, as between hi<self and the other insurers, to
contribute ratably to the loss in proportion to the a<ount for which he is liable
under his contract!
6T&T%# *3
6R#&(S$R'(C#
6S#C! ;-! ' contract of reinsurance is one by which an insurer procures a third
person to insure hi< against loss or liability by reason of such original insurance!
6S#C! ;9! 4here an insurer obtains reinsurance, eBcept under auto<atic
reinsurance treaties, he <ust co<<unicate all the representations of the original
insured, and also all the ?nowledge and infor<ation he possesses, whether
preiously or subseCuently acCuired, which are <aterial to the ris?!
6S#C! ;;! ' reinsurance is presu<ed to be a contract of inde<nity against
liability, and not <erely against da<age!
6S#C! *++! The original insured has no interest in a contract of reinsurance!
6C0'PT#R &&
6C%'SS#S )F &(S$R'(C#
6T&T%# &
6M'R&(# &(S$R'(C#
6S$B-T&T%# *-'
61#F&(&T&)(
6S#C! *+*! Marine &nsurance includes=
6DaE &nsurance against loss of or da<age to=
6D*E >essels, craft, aircraft, ehicles, goods, freights, cargoes, <erchandise,
effects, disburse<ents, profits, <oneys, securities, choses in action, instru<ents
of debts, aluable papers, botto<ry, and respondentia interests and all other
?inds of property and interests therein, in respect to, appertaining to or in
connection with any and all ris?s or perils of naigation, transit or transportation,
or while being asse<bled, pac?ed, crated, baled, co<pressed or si<ilarly
prepared for ship<ent or while awaiting ship<ent, or during any delays, storage,
tranship<ent, or reship<ent incident thereto, including war ris?s, <arine builderAs
ris?s, and all personal property floater ris?sF
6D3E Person or property in connection with or appertaining to a <arine, inland
<arine, transit or transportation insurance, including liability for loss of or da<age
arising out of or in connection with the construction, repair, operation,
<aintenance or use of the subIect <atter of such insurance Dbut not including life
insurance or surety bonds nor insurance against loss by reason of bodily inIury to
any person arising out of ownership, <aintenance, or use of auto<obilesEF
6DGE Precious stones, Iewels, Iewelry, precious <etals, whether in course of
transportation or otherwiseF and
6D8E Bridges, tunnels and other instru<entalities of transportation and
co<<unication DeBcluding buildings, their furniture and furnishings, fiBed
contents and supplies held in storageEF piers, whares, doc?s and slips, and
other aids to naigation and transportation, including dry doc?s and <arine
railways, da<s and appurtenant facilities for the control of waterways!
6DbE Marine protection and inde<nity insurance, <eaning insurance against, or
against legal liability of the insured for loss, da<age, or eBpense incident to
ownership, operation, chartering, <aintenance, use, repair, or construction of any
essel, craft or instru<entality in use of ocean or inland waterways, including
liability of the insured for personal inIury, illness or death or for loss of or da<age
to the property of another person!
6S$B-T&T%# *-B
6&(S$R'B%# &(T#R#ST
6S#C! *+3! The owner of a ship has in all cases an insurable interest in it, een
when it has been chartered by one who coenants to pay hi< its alue in case of
loss= Proided, That in this case the insurer shall be liable for only that part of the
loss which the insured cannot recoer fro< the charterer!
6S#C! *+G! The insurable interest of the owner of the ship hypothecated by
botto<ry is only the eBcess of its alue oer the a<ount secured by botto<ry!
6S#C! *+8! Freightage, in the sense of a policy of <arine insurance, signifies all
the benefits deried by the owner, either fro< the chartering of the ship or its
e<ploy<ent for the carriage of his own goods or those of others!
6S#C! *+:! The owner of a ship has an insurable interest in eBpected freightage
which according to the ordinary and probable course of things he would hae
earned but for the interention of a peril insured against or other peril incident to
the oyage!
6S#C! *+,! The interest <entioned in the last section eBists, in case of a charter
party, when the ship has bro?en ground on the chartered oyage! &f a price is to
be paid for the carriage of goods it eBists when they are actually on board, or
there is so<e contract for putting the< on board, and both ship and goods are
ready for the specified oyage!
6S#C! *+-! )ne who has an interest in the thing fro< which profits are eBpected
to proceed has an insurable interest in the profits!
6S#C! *+9! The charterer of a ship has an insurable interest in it, to the eBtent
that he is liable to be da<nified by its loss!
6S$B-T&T%# *-C
6C)(C#'%M#(T
6S#C! *+;! &n <arine insurance, each party is bound to co<<unicate, in addition
to what is reCuired by Section 39, all the infor<ation which he possesses,
<aterial to the ris?, eBcept such as is <entioned in Section G+, and to state the
eBact and whole truth in relation to all <atters that he represents, or upon inCuiry
discloses or assu<es to disclose!
6S#C! **+! &n <arine insurance, infor<ation of the belief or eBpectation of a third
person, in reference to a <aterial fact, is <aterial!
6S#C! ***! ' person insured by a contract of <arine insurance is presu<ed to
hae ?nowledge, at the ti<e of insuring, of a prior loss, if the infor<ation <ight
possibly hae reached hi< in the usual <ode of trans<ission and at the usual
rate of co<<unication!
6S#C! **3! ' conceal<ent in a <arine insurance, in respect to any of the
following <atters, does not itiate the entire contract, but <erely eBonerates the
insurer fro< a loss resulting fro< the ris? concealed=
6DaE The national character of the insuredF
6DbE The liability of the thing insured to capture and detentionF
6DcE The liability to seiHure fro< breach of foreign laws of tradeF
6DdE The want of necessary docu<entsF and
6DeE The use of false and si<ulated papers!
6S$B-T&T%# *-1
6R#PR#S#(T'T&)(
6S#C! **G! &f a representation by a person insured by a contract of <arine
insurance, is intentionally false in any <aterial respect, or in respect of any fact
on which the character and nature of the ris? depends, the insurer <ay rescind
the entire contract!
6S#C! **8! The eentual falsity of a representation as to eBpectation does not, in
the absence of fraud, aoid a contract of <arine insurance!
6S$B-T&T%# *-#
6&MP%&#1 4'RR'(T&#S
6S#C! **:! &n eery <arine insurance upon a ship or freight, or freightage, or
upon any thing which is the subIect of <arine insurance, a warranty is i<plied
that the ship is seaworthy!
6S#C! **,! ' ship is seaworthy when reasonably fit to perfor< the serice and to
encounter the ordinary perils of the oyage conte<plated by the parties to the
policy!
6S#C! **-! 'n i<plied warranty of seaworthiness is co<plied with if the ship be
seaworthy at the ti<e of the co<<ence<ent of the ris?, eBcept in the following
cases=
6DaE 4hen the insurance is <ade for a specified length of ti<e, the i<plied
warranty is not co<plied with unless the ship be seaworthy at the
co<<ence<ent of eery oyage it underta?es during that ti<eF
6DbE 4hen the insurance is upon the cargo which, by the ter<s of the policy,
description of the oyage, or established custo< of the trade, is to be
transhipped at an inter<ediate port, the i<plied warranty is not co<plied with
unless each essel upon which the cargo is shipped, or transhipped, be
seaworthy at the co<<ence<ent of each particular oyage!
6S#C! **9! ' warranty of seaworthiness eBtends not only to the condition of the
structure of the ship itself, but reCuires that it be properly laden, and proided
with a co<petent <aster, a sufficient nu<ber of co<petent officers and sea<en,
and the reCuisite appurtenances and eCuip<ent, such as ballasts, cables and
anchors, cordage and sails, food, water, fuel and lights, and other necessary or
proper stores and i<ple<ents for the oyage!
6S#C! **;! 4here different portions of the oyage conte<plated by a policy differ
in respect to the things reCuisite to <a?e the ship seaworthy therefor, a warranty
of seaworthiness is co<plied with if, at the co<<ence<ent of each portion, the
ship is seaworthy with reference to that portion!
6S#C! *3+! 4hen the ship beco<es unseaworthy during the oyage to which an
insurance relates, an unreasonable delay in repairing the defect eBonerates the
insurer on ship or shipownerAs interest fro< liability fro< any loss arising
therefro<!
6S#C! *3*! ' ship which is seaworthy for the purpose of an insurance upon the
ship <ay, neertheless, by reason of being unfitted to receie the cargo, be
unseaworthy for the purpose of insurance upon the cargo!
6S#C! *33! 4here the nationality or neutrality of a ship or cargo is eBpressly
warranted, it is i<plied that the ship will carry the reCuisite docu<ents to show
such nationality or neutrality and that it will not carry any docu<ents which cast
reasonable suspicion thereon!
6S$B-T&T%# *-F
6T0# >)2'/# '(1 1#>&'T&)(
6S#C! *3G! 4hen the oyage conte<plated by a <arine insurance policy is
described by the places of beginning and ending, the oyage insured is one
which confor<s to the course of sailing fiBed by <ercantile usage between those
places!
6S#C! *38! &f the course of sailing is not fiBed by <ercantile usage, the oyage
insured by a <arine insurance policy is that way between the places specified,
which to a <aster of ordinary s?ill and discretion, would <ean the <ost natural,
direct and adantageous!
6S#C! *3:! 1eiation is a departure fro< the course of the oyage insured,
<entioned in the last two D3E sections, or an unreasonable delay in pursuing the
oyage or the co<<ence<ent of an entirely different oyage!
6S#C! *3,! ' deiation is proper=
6DaE 4hen caused by circu<stances oer which neither the <aster nor the owner
of the ship has any controlF
6DbE 4hen necessary to co<ply with a warranty, or to aoid a peril, whether or not
the peril is insured againstF
6DcE 4hen <ade in good faith, and upon reasonable grounds of belief in its
necessity to aoid a perilF or
6DdE 4hen <ade in good faith, for the purpose of saing hu<an life or relieing
another essel in distress!
6S#C! *3-! #ery deiation not specified in the last section is i<proper!
6S#C! *39! 'n insurer is not liable for any loss happening to the thing insured
subseCuent to an i<proper deiation!
6S$B-T&T%# *-/
6%)SS
6S#C! *3;! ' loss <ay be either total or partial!
6S#C! *G+! #ery loss which is not total is partial!
6S#C! *G*! ' total loss <ay be either actual or constructie!
6S#C! *G3! 'n actual total loss is caused by=
6DaE ' total destruction of the thing insuredF
6DbE The irretrieable loss of the thing by sin?ing, or by being bro?en upF
6DcE 'ny da<age to the thing which renders it alueless to the owner for the
purpose for which he held itF or
6DdE 'ny other eent which effectiely depries the owner of the possession, at
the port of destination, of the thing insured!
6S#C! *GG! ' constructie total loss is one which gies to a person insured a right
to abandon, under Section *8*!
6S#C! *G8! 'n actual loss <ay be presu<ed fro< the continued absence of a
ship without being heard of! The length of ti<e which is sufficient to raise this
presu<ption depends on the circu<stances of the case!
6S#C! *G:! 4hen a ship is preented, at an inter<ediate port, fro< co<pleting
the oyage, by the perils insured against, the liability of a <arine insurer on the
cargo continues after they are thus reshipped!
6(othing in this section shall preent an insurer fro< reCuiring an additional
pre<iu< if the haHard be increased by this eBtension of liability!
6S#C! *G,! &n addition to the liability <entioned in the last section, a <arine
insurer is bound for da<ages, eBpenses of discharging, storage, reship<ent,
eBtra freightage, and all other eBpenses incurred in saing cargo reshipped
pursuant to the last section, up to the a<ount insured!
6(othing in this or in the preceding section shall render a <arine insurer liable for
any a<ount in eBcess of the insured alue or, if there be none, of the insurable
alue!
6S#C! *G-! $pon an actual total loss, a person insured is entitled to pay<ent
without notice of abandon<ent!
6S#C! *G9! 4here it has been agreed that an insurance upon a particular thing,
or class of things, shall be free fro< particular aerage, a <arine insurer is not
liable for any particular aerage loss not depriing the insured of the possession,
at the port of destination, of the whole of such thing, or class of things, een
though it beco<es entirely worthlessF but such insurer is liable for his proportion
of all general aerage loss assessed upon the thing insured!
6S#C! *G;! 'n insurance confined in ter<s to an actual loss does not coer a
constructie total loss, but coers any loss, which necessarily results in depriing
the insured of the possession, at the port of destination, of the entire thing
insured!
6S$B-T&T%# *-0
6'B'(1)(M#(T
6S#C! *8+! 'bandon<ent, in <arine insurance, is the act of the insured by which,
after a constructie total loss, he declares the relinCuish<ent to the insurer of his
interest in the thing insured!
6S#C! *8*! ' person insured by a contract of <arine insurance <ay abandon the
thing insured, or any particular portion thereof separately alued by the policy, or
otherwise separately insured, and recoer for a total loss thereof, when the
cause of the loss is a peril insured against=
6DaE &f <ore than three-fourths DJE thereof in alue is actually lost, or would hae
to be eBpended to recoer it fro< the perilF
6DbE &f it is inIured to such an eBtent as to reduce its alue <ore than three-fourths
DJEF
6DcE &f the thing insured is a ship, and the conte<plated oyage cannot be lawfully
perfor<ed without incurring either an eBpense to the insured of <ore than three-
fourths DJE the alue of the thing abandoned or a ris? which a prudent <an would
not ta?e under the circu<stancesF or
6DdE &f the thing insured, being cargo or freightage, and the oyage cannot be
perfor<ed, nor another ship procured by the <aster, within a reasonable ti<e
and with reasonable diligence, to forward the cargo, without incurring the li?e
eBpense or ris? <entioned in the preceding subparagraph! But freightage cannot
in any case be abandoned unless the ship is also abandoned!
6S#C! *83! 'n abandon<ent <ust be neither partial nor conditional!
6S#C! *8G! 'n abandon<ent <ust be <ade within a reasonable ti<e after receipt
of reliable infor<ation of the loss, but where the infor<ation is of a doubtful
character, the insured is entitled to a reasonable ti<e to <a?e inCuiry!
6S#C! *88! 4here the infor<ation upon which an abandon<ent has been <ade
proes incorrect, or the thing insured was so far restored when the abandon<ent
was <ade that there was then in fact no total loss, the abandon<ent beco<es
ineffectual!
6S#C! *8:! 'bandon<ent is <ade by giing notice thereof to the insurer, which
<ay be done orally, or in writing= Proided, That if the notice be done orally, a
written notice of such abandon<ent shall be sub<itted within seen D-E days
fro< such oral notice!
6S#C! *8,! ' notice of abandon<ent <ust be eBplicit, and <ust specify the
particular cause of the abandon<ent, but need state only enough to show that
there is probable cause therefor, and need not be acco<panied with proof of
interest or of loss!
6S#C! *8-! 'n abandon<ent can be sustained only upon the cause specified in
the notice thereof!
6S#C! *89! 'n abandon<ent is eCuialent to a transfer by the insured of his
interest to the insurer, with all the chances of recoery and inde<nity!
6S#C! *8;! &f a <arine insurer pays for a loss as if it were an actual total loss, he
is entitled to whateer <ay re<ain of the thing insured, or its proceeds or
salage, as if there had been a for<al abandon<ent!
6S#C! *:+! $pon an abandon<ent, acts done in good faith by those who were
agents of the insured in respect to the thing insured, subseCuent to the loss, are
at the ris? of the insurer, and for his benefit!
6S#C! *:*! 4here notice of abandon<ent is properly gien, the rights of the
insured are not preIudiced by the fact that the insurer refuses to accept the
abandon<ent!
6S#C! *:3! The acceptance of an abandon<ent <ay be either eBpress or i<plied
fro< the conduct of the insurer! The <ere silence of the insurer for an
unreasonable length of ti<e after notice shall be construed as an acceptance!
6S#C! *:G! The acceptance of an abandon<ent, whether eBpress or i<plied, is
conclusie upon the parties, and ad<its the loss and the sufficiency of the
abandon<ent!
6S#C! *:8! 'n abandon<ent once <ade and accepted is irreocable, unless the
ground upon which it was <ade proes to be unfounded!
6S#C! *::! )n an accepted abandon<ent of a ship, freightage earned preious
to the loss belongs to the insurer of said freightageF but freightage subseCuently
earned belongs to the insurer of the ship!
6S#C! *:,! &f an insurer refuses to accept a alid abandon<ent, he is liable as
upon an actual total loss, deducting fro< the a<ount any proceeds of the thing
insured which <ay hae co<e to the hands of the insured!
6S#C! *:-! &f a person insured o<its to abandon, he <ay neertheless recoer
his actual loss!
6S$B-T&T%# *-&
6M#'S$R# )F &(1#M(&T2
6S#C! *:9! ' aluation in a policy of <arine insurance is conclusie between the
parties thereto in the adIust<ent of either a partial or total loss, if the insured has
so<e interest at ris?, and there is no fraud on his partF eBcept that when a thing
has been hypothecated by botto<ry or respondentia, before its insurance, and
without the ?nowledge of the person actually procuring the insurance, he <ay
show the real alue! But a aluation fraudulent in fact, entitles the insurer to
rescind the contract!
6S#C! *:;! ' <arine insurer is liable upon a partial loss, only for such proportion
of the a<ount insured by hi< as the loss bears to the alue of the whole interest
of the insured in the property insured!
6S#C! *,+! 4here profits are separately insured in a contract of <arine
insurance, the insured is entitled to recoer, in case of loss, a proportion of such
profits eCuialent to the proportion which the alue of the property lost bears to
the alue of the whole!
6S#C! *,*! &n case of a alued policy of <arine insurance on freightage or cargo,
if a part only of the subIect is eBposed to ris?, the aluation applies only in
proportion to such part!
6S#C! *,3! 4hen profits are alued and insured by a contract of <arine
insurance, a loss of the< is conclusiely presu<ed fro< a loss of the property
out of which they are eBpected to arise, and the aluation fiBes their a<ount!
6S#C! *,G! &n esti<ating a loss under an open policy of <arine insurance the
following rules are to be obsered=
6DaE The alue of a ship is its alue at the beginning of the ris?, including all
articles or charges which add to its per<anent alue or which are necessary to
prepare it for the oyage insuredF
6DbE The alue of the cargo is its actual cost to the insured, when laden on board,
or where the cost cannot be ascertained, its <ar?et alue at the ti<e and place
of lading, adding the charges incurred in purchasing and placing it on board, but
without reference to any loss incurred in raising <oney for its purchase, or to any
drawbac? on its eBportation, or to the fluctuation of the <ar?et at the port of
destination, or to eBpenses incurred on the way or on arrialF
6DcE The alue of freightage is the gross freightage, eBclusie of pri<age, without
reference to the cost of earning itF and
6DdE The cost of insurance is in each case to be added to the alue thus
esti<ated!
6S#C! *,8! &f cargo insured against partial loss arries at the port of destination in
a da<aged condition, the loss of the insured is dee<ed to be the sa<e
proportion of the alue which the <ar?et price at that port, of the thing so
da<aged, bears to the <ar?et price it would hae brought if sound!
6S#C! *,:! ' <arine insurer is liable for all the eBpenses attendant upon a loss
which forces the ship into port to be repairedF and where it is stipulated in the
policy that the insured shall labor for the recoery of the property, the insurer is
liable for the eBpense incurred thereby, such eBpense, in either case, being in
addition to a total loss, if that afterwards occurs!
6S#C! *,,! ' <arine insurer is liable for a loss falling upon the insured, through a
contribution in respect to the thing insured, reCuired to be <ade by hi< towards a
general aerage loss called for by a peril insured against= Proided, That the
liability of the insurer shall be li<ited to the proportion of contribution attaching to
his policy alue where this is less than the contributing alue of the thing insured!
6S#C! *,-! 4hen a person insured by a contract of <arine insurance has a
de<and against others for contribution, he <ay clai< the whole loss fro< the
insurer, subrogating hi< to his own right to contribution! But no such clai< can be
<ade upon the insurer after the separation of the interests liable to contribution,
nor when the insured, haing the right and opportunity to enforce contribution
fro< others, has neglected or waied the eBercise of that right!
6S#C! *,9! &n the case of a partial loss of ship or its eCuip<ent, the old <aterials
are to be applied towards pay<ent for the new! $nless otherwise stipulated in the
policy, a <arine insurer is liable for only two-thirds D3KGE of the re<aining cost of
repairs after such deduction, eBcept that anchors <ust be paid in full!
6T&T%# 3
6F&R# &(S$R'(C#
6S#C! *,;! 's used in this Code, the ter< fire insurance shall include insurance
against loss by fire, lightning, windstor<, tornado or earthCua?e and other allied
ris?s, when such ris?s are coered by eBtension to fire insurance policies or
under separate policies!
6S#C! *-+! 'n alteration in the use or condition of a thing insured fro< that to
which it is li<ited by the policy <ade without the consent of the insurer, by <eans
within the control of the insured, and increasing the ris?s, entitles an insurer to
rescind a contract of fire insurance!
6S#C! *-*! 'n alteration in the use or condition of a thing insured fro< that to
which it is li<ited by the policy, which does not increase the ris?, does not affect a
contract of fire insurance!
6S#C! *-3! ' contract of fire insurance is not affected by any act of the insured
subseCuent to the eBecution of the policy, which does not iolate its proisions,
een though it increases the ris? and is the cause of the loss!
6S#C! *-G! &f there is no aluation in the policy, the <easure of inde<nity in an
insurance against fire is the eBpense it would be to the insured at the ti<e of the
co<<ence<ent of the fire to replace the thing lost or inIured in the condition in
which it was at the ti<e of the inIuryF but if there is a aluation in a policy of fire
insurance, the effect shall be the sa<e as in a policy of <arine insurance!
6S#C! *-8! 4heneer the insured desires to hae a aluation na<ed in his
policy, insuring any building or structure against fire, he <ay reCuire such
building or structure to be eBa<ined by an independent appraiser and the alue
of the insuredAs interest therein <ay then be fiBed as between the insurer and the
insured! The cost of such eBa<ination shall be paid for by the insured! ' clause
shall be inserted in such policy stating substantially that the alue of the insuredAs
interest in such building or structure has been thus fiBed! &n the absence of any
change increasing the ris? without the consent of the insurer or of fraud on the
part of the insured, then in case of a total loss under such policy, the whole
a<ount so insured upon the insuredAs interest in such building or structure, as
stated in the policy upon which the insurers hae receied a pre<iu<, shall be
paid, and in case of a partial loss the full a<ount of the partial loss shall be so
paid, and in case there are two D3E or <ore policies coering the insuredAs
interest therein, each policy shall contribute pro rata to the pay<ent of such
whole or partial loss! But in no case shall the insurer be reCuired to pay <ore
than the a<ount thus stated in such policy! This section shall not preent the
parties fro< stipulating in such policies concerning the repairing, rebuilding or
replacing of buildings or structures wholly or partially da<aged or destroyed!
6S#C! *-:! (o policy of fire insurance shall be pledged, hypothecated, or
transferred to any person, fir< or co<pany who acts as agent for or otherwise
represents the issuing co<pany, and any such pledge, hypothecation, or transfer
hereafter <ade shall be oid and of no effect insofar as it <ay affect other
creditors of the insured!
6T&T%# G
6C'S$'%T2 &(S$R'(C#
6S#C! *-,! Casualty insurance is insurance coering loss or liability arising fro<
accident or <ishap, eBcluding certain types of loss which by law or custo< are
considered as falling eBclusiely within the scope of other types of insurance
such as fire or <arine! &t includes, but is not li<ited to, e<ployerAs liability
insurance, <otor ehicle liability insurance, plate glass insurance, burglary and
theft insurance, personal accident and health insurance as written by non-life
insurance co<panies, and other substantially si<ilar ?inds of insurance!
6T&T%# 8
6S$R#T2S0&P
6S#C! *--! ' contract of suretyship is an agree<ent whereby a party called the
surety guarantees the perfor<ance by another party called the principal or
obligor of an obligation or underta?ing in faor of a third party called the obligee!
&t includes official recogniHances, stipulations, bonds or underta?ings issued by
any co<pany by irtue of and under the proisions of 'ct (o! :G,, as a<ended
by 'ct (o! 33+,!
6S#C! *-9! The liability of the surety or sureties shall be Ioint and seeral with the
obligor and shall be li<ited to the a<ount of the bond! &t is deter<ined strictly by
the ter<s of the contract of suretyship in relation to the principal contract
between the obligor and the obligee!
6S#C! *-;! The surety is entitled to pay<ent of the pre<iu< as soon as the
contract of suretyship or bond is perfected and deliered to the obligor! (o
contract of suretyship or bonding shall be alid and binding unless and until the
pre<iu< therefor has been paid, eBcept where the obligee has accepted the
bond, in which case the bond beco<es alid and enforceable irrespectie of
whether or not the pre<iu< has been paid by the obligor to the surety= Proided,
That if the contract of suretyship or bond is not accepted by, or filed with the
obligee, the surety shall collect only a reasonable a<ount, not eBceeding fifty
percent D:+LE of the pre<iu< due thereon as serice fee plus the cost of sta<ps
or other taBes i<posed for the issuance of the contract or bond= Proided,
howeer, That if the nonacceptance of the bond be due to the fault or negligence
of the surety, no such serice fee, sta<ps or taBes shall be collected!
6&n the case of a continuing bond, the obligor shall pay the subseCuent annual
pre<iu< as it falls due until the contract of suretyship is cancelled by the obligee
or by the Co<<issioner or by a court of co<petent Iurisdiction, as the case <ay
be!
6S#C! *9+! Pertinent proisions of the Ciil Code of the Philippines shall be
applied in a suppletory character wheneer necessary in interpreting the
proisions of a contract of suretyship!
6T&T%# :
6%&F# &(S$R'(C#
6S#C! *9*! %ife insurance is insurance on hu<an lies and insurance
appertaining thereto or connected therewith!
6#ery contract or underta?ing for the pay<ent of annuities including contracts
for the pay<ent of lu<p su<s under a retire<ent progra< where a life insurance
co<pany <anages or acts as a trustee for such retire<ent progra< shall be
considered a life insurance contract for purposes of this Code!
6S#C! *93! 'n insurance upon life <ay be <ade payable on the death of the
person, or on his suriing a specified period, or otherwise contingently on the
continuance or cessation of life!
6#ery contract or pledge for the pay<ent of endow<ents or annuities shall be
considered a life insurance contract for purposes of this Code!
6&n the absence of a Iudicial guardian, the father, or in the latterAs absence or
incapacity, the <other, of any <inor, who is an insured or a beneficiary under a
contract of life, health, or accident insurance, <ay eBercise, in behalf of said
<inor, any right under the policy, without necessity of court authority or the giing
of a bond, where the interest of the <inor in the particular act inoled does not
eBceed Fie hundred thousand pesos DP:++,+++!++E or in such reasonable
a<ount as <ay be deter<ined by the Co<<issioner! Such right <ay include, but
shall not be li<ited to, obtaining a policy loan, surrendering the policy, receiing
the proceeds of the Policy, and giing the <inorAs consent to any transaction on
the policy!
6&n the absence or in case of the incapacity of the father or <other, the
grandparent, the eldest brother or sister at least eighteen D*9E years of age, or
any relatie who has actual custody of the <inor insured or beneficiary, shall act
as a guardian without need of a court order or Iudicial appoint<ent as such
guardian, as long as such person is not otherwise disCualified or incapacitated!
Pay<ent <ade by the insurer pursuant to this section shall reliee such insurer
of any liability under the contract!
6S#C! *9G! The insurer in a life insurance contract shall be liable in case of
suicide only when it is co<<itted after the policy has been in force for a period of
two D3E years fro< the date of its issue or of its last reinstate<ent, unless the
policy proides a shorter period= Proided, howeer, That suicide co<<itted in
the state of insanity shall be co<pensable regardless of the date of co<<ission!
6S#C! *98! ' policy of insurance upon life or health <ay pass by transfer, will or
succession to any person, whether he has an insurable interest or not, and such
person <ay recoer upon it whateer the insured <ight hae recoered!
6S#C! *9:! (otice to an insurer of a transfer or beCuest thereof is not necessary
to presere the alidity of a policy of insurance upon life or health, unless thereby
eBpressly reCuired!
6S#C! *9,! $nless the interest of a person insured is susceptible of eBact
pecuniary <easure<ent, the <easure of inde<nity under a policy of insurance
upon life or health is the su< fiBed in the policy!
6T&T%# ,
6M&CR)&(S$R'(C#
6S#C! *9-! Microinsurance is a financial product or serice that <eets the ris?
protection needs of the poor where=
6DaE The a<ount of contributions, pre<iu<s, fees or charges, co<puted on a
daily basis, does not eBceed seen and a half percent D-!:LE of the current daily
<ini<u< wage rate for nonagricultural wor?ers in Metro ManilaF and
6DbE The <aBi<u< su< of guaranteed benefits is not <ore than one thousand
D*,+++E ti<es of the current daily <ini<u< wage rate for nonagricultural wor?ers
in Metro Manila!
6S#C! *99! (o insurance co<pany or <utual benefit association shall engage in
the business of <icroinsurance unless it possesses all the reCuire<ents as <ay
be prescribed by the Co<<issioner! The Co<<issioner shall issue such rules
and regulations goerning <icroinsurance!
6C0'PT#R &&-'
6F&('(C&'% R#P)RT&(/ FR'M#4)R5
6S#C! *9;! 'll co<panies regulated by the Co<<ission, unless otherwise
reCuired by law, should co<ply with the financial reporting fra<ewor?s adopted
by the Co<<ission for purposes of creating the statutory financial reports and
the annual state<ents to be sub<itted to the Co<<ission! Financial reporting
fra<ewor? <eans a set of accounting and reporting principles, standards,
interpretations and pronounce<ents that <ust be adopted in the preparation and
sub<ission of the statutory financial state<ents and reports reCuired by the
Co<<ission! This financial reporting fra<ewor? is not the sa<e as the financial
reporting fra<ewor? used to prepare the financial state<ents that the Securities
and #Bchange Co<<ission <ay reCuire! The <ain purpose of the statutory
state<ents is to present i<portant infor<ation about the leel of ris? and
solency situation of insurers! &n prescribing the applicable statutory financial
reporting fra<ewor?, the Co<<issioner shall ta?e into account international
standards concerning solency and insurance co<pany reporting as well as
generally accepted actuarial principles concerning financial reporting
pro<ulgated by the 'ctuarial Society of the Philippines!
6The assets and inest<ents discussed in Sections 3+8 to 3*: shall be
accounted for in accordance with this section!
6The aluation of reseres shall be accounted for in accordance with Title : of
this Code!
6C0'PT#R &&&
6T0# B$S&(#SS )F &(S$R'(C#
6T&T%# *
6&(S$R'(C# C)MP'(&#S, )R/'(&M'T&)(,
C'P&T'%&M'T&)( '(1 '$T0)R&M'T&)(
6S#C! *;+! For purposes of this Code, the ter< insurer or insurance co<pany
shall include all partnerships, associations, cooperaties or corporations,
including goern<ent-owned or -controlled corporations or entities, engaged as
principals in the insurance business, eBcepting <utual benefit associations!
$nless the conteBt otherwise reCuires, the ter< shall also include professional
reinsurers defined in Section 399! 1o<estic co<pany shall include co<panies
for<ed, organiHed or eBisting under the laws of the Philippines! Foreign co<pany
when used without li<itation shall include co<panies for<ed, organiHed, or
eBisting under any laws other than those of the Philippines!
6S#C! *;*! The proisions of the Corporation Code, as a<ended, shall apply to
all insurance corporations now or hereafter engaged in business in the
Philippines insofar as they do not conflict with the proisions of this chapter!
6S#C! *;3! (o corporation, partnership, or association of persons shall transact
any insurance business in the Philippines eBcept as agent of a corporation,
partnership or association authoriHed to do the business of insurance in the
Philippines, unless possessed of the capital and assets reCuired of an insurance
corporation doing the sa<e ?ind of business in the Philippines and inested in
the sa<e <annerF unless the Co<<issioner shall hae granted it a certificate to
the effect that it has co<plied with all the proisions of this Code!
6#ery entity receiing any such certificate of authority shall be subIect to the
insurance and other applicable laws of the Philippines and to the Iurisdiction and
superision of the Co<<issioner!
6S#C! *;G! (o insurance co<pany shall transact any insurance business in the
Philippines until after it shall hae obtained a certificate of authority for that
purpose fro< the Co<<issioner upon application therefor and pay<ent by the
co<pany concerned of the fees hereinafter prescribed!
6The Co<<issioner <ay refuse to issue a certificate of authority to any insurance
co<pany if, in his Iudg<ent, such refusal will best pro<ote the interest of the
people of this country! (o such certificate of authority shall be granted to any
such co<pany until the Co<<issioner shall hae satisfied hi<self by such
eBa<ination as he <ay <a?e and such eidence as he <ay reCuire that such
co<pany is Cualified by the laws of the Philippines to transact business therein,
that the grant of such authority appears to be Iustified in the light of local
econo<ic reCuire<ents, and that the direction and ad<inistration, as well as the
integrity and responsibility of the organiHers and ad<inistrators, the financial
organiHation and the a<ount of capital, reasonably assure the safety of the
interests of the policyholders and the public!
6&n order to <aintain the Cuality of the <anage<ent of the insurance co<panies
and afford better protection to policyholders and the public in general, any person
of good <oral character, unCuestioned integrity and recogniHed co<petence <ay
be elected or appointed director or officer of insurance co<panies in accordance
with the pertinent proisions contained in the corporate goernance circulars
prescribed by the Co<<issioner! &n addition hereto, the Co<<issioner shall
prescribe the Cualifications of directors, eBecutie officers and other ?ey officials
of insurance co<panies for purposes of this section!
6(o person shall concurrently be a 1irector andKor )fficer of an insurance
co<pany and an adIust<ent co<pany!
6Before issuing such certificate of authority, the Co<<issioner <ust be satisfied
that the na<e of the co<pany is not that of any other ?nown co<pany
transacting a si<ilar business in the Philippines, or a na<e so si<ilar as to be
calculated to <islead the public! The Co<<issioner <ay issue rules and
regulations on the use of na<es of insurance co<panies and other superised
persons or entities!
6The certificate of authority issued by the Co<<issioner shall eBpire on the last
day of 1ece<ber, three DGE years following its date of issuance, and shall be
renewable eery three DGE years thereafter, subIect to the co<panyAs continuing
co<pliance with the proisions of this Code, circulars, instructions, rulings or
decisions of the Co<<ission!
6#ery co<pany receiing any such certificates of authority shall be subIect to
the proisions of this Code and other related laws and to the Iurisdiction and
superision of the Co<<issioner!
6(o insurance co<pany <ay be authoriHed to transact in the Philippines the
business of life and non-life insurance concurrently, unless specifically authoriHed
to do so by the Co<<issioner= Proided, That the ter<s life and non-life
insurance shall be dee<ed to include health, accident and disability insurance!
6(o insurance co<pany shall hae eCuity in an adIust<ent co<pany and neither
shall an adIust<ent co<pany hae eCuity in an insurance co<pany!
6(o insurance co<pany issued with a alid certificate of authority to transact
insurance business anywhere in the Philippines by the &nsurance Co<<issioner,
shall be barred, preented, or disenfranchised fro< issuing any insurance policy
or fro< transacting any insurance business within the scope or coerage of its
certificate of authority, anywhere in the Philippines, by any local goern<ent unit
or authority, for whateer guise or reason whatsoeer, including under any ?ind of
ordinance, accreditation syste<, or sche<e! 'ny local ordinance or local
goern<ent unit regulatory issuance i<posing such restriction or
disenfranchise<ent on any insurance co<pany shall be dee<ed null and oid ab
initio!
6S#C! *;8! #Bcept as proided in Section 39;, no new do<estic life or non-life
insurance co<pany shall, in a stoc? corporation, engage in business in the
Philippines unless possessed of a paid-up capital eCual to at least )ne billion
pesos DP*,+++,+++,+++!++E= Proided, That a do<estic insurance co<pany
already doing business in the Philippines shall hae a net worth by June G+,
3+*G of Two hundred fifty <illion pesos DP3:+,+++,+++!++E! Further<ore, said
co<pany <ust hae by 1ece<ber G*, 3+*,, an additional Three hundred <illion
pesos DPG++,+++,+++!++E in net worthF by 1ece<ber G*, 3+*;, an additional
Three hundred fifty <illion pesos DPG:+,+++,+++!++E in net worthF and by
1ece<ber G*, 3+33, an additional Four hundred <illion pesos DP8++,+++,+++!++E
in net worth!
6The Co<<issioner <ay, as a pre-licensing reCuire<ent of a new insurance
co<pany, in addition to the paid-up capital stoc?, reCuire the stoc?holders to pay
in cash to the co<pany in proportion to their subscription interests a contributed
surplus fund of not less than )ne hundred <illion pesos DP*++,+++,+++!++E! 0e
<ay also reCuire such co<pany to sub<it to hi< a business plan showing the
co<panyAs esti<ated receipts and disburse<ents, as well as the basis therefor,
for the neBt succeeding three DGE years!
6&f organiHed as a <utual co<pany, in lieu of such net worth, it <ust hae
aailable total <e<bers eCuity in an a<ount to be deter<ined by the &nsurance
Co<<ission aboe all liabilities for losses reportedF eBpenses, taBes, legal
resere, and reinsurance of all outstanding ris?s, and the contributed surplus
fund eCual to the a<ounts reCuired of stoc? corporations! ' stoc? insurance
co<pany doing business in the Philippines <ay, subIect to the pertinent law and
regulation which now or hereafter <ay be in force, alter its organiHation and
transfor< itself into a <utual insurance co<pany!
6The Secretary of Finance <ay, upon reco<<endation of the Co<<issioner,
increase such <ini<u< paid-up capital stoc? or cash assets reCuire<ent under
such ter<s and conditions as he <ay i<pose, to an a<ount which, in his opinion,
would reasonably assure the safety of the interests of the policyholders and the
public! The <ini<u< paid-up capital and net worth reCuire<ent <ust re<ain
uni<paired for the continuance of the license! The Co<<issioner <ay reCuire
the adoption of the ris?-based capital approach and other internationally
accepted for<s of capital fra<ewor?!
6For the purpose of this section, net worth shall consist of=
6DaE Paid-up capitalF
6DbE Retained earningsF
6DcE $ni<paired surplusF and
6DdE Realuation of assets as <ay be approed by the Co<<issioner!
6The Co<<ission <ay adopt for purposes of co<pliance with capital build up
reCuire<ent under this Code the recognition as part of the capital account,
capital notes or debentures which are subordinate to all credits and senior only to
co<<on capital stoc?s!
6The President of the Philippines <ay order a periodic reiew eery two D3E years
the capital structure set out aboe to deter<ine the capital adeCuacy of the local
insurance industry fro< and after the integration and liberaliHation of the financial
serices, including insurance, in the 'S#'( Region! For this purpose, a reiew
co<<ittee consisting of representaties fro< the 1epart<ent of Finance D1)FE,
the &nsurance Co<<ission D&CE, the (ational #cono<ic and 1eelop<ent
'uthority D(#1'E, the Securities and #Bchange Co<<ission DS#CE and other
agencies which the President <ay designate shall conduct the reiew and <ay
reco<<end to the President to adopt for i<ple<entation the necessary capital
adIust<ent!
6S#C! *;:! #ery co<pany <ust, before engaging in the business of insurance
in the Philippines, file with the Co<<issioner the following=
6DaE ' certified copy of the last annual state<ent or a erified financial state<ent
eBhibiting the condition and affairs of such co<panyF
6DbE &f incorporated under the laws of the Philippines, a copy of the articles of
incorporation and bylaws, and any a<end<ents to either, certified by the
Securities and #Bchange Co<<ission to be a copy of that which is filed in its
)fficeF
6DcE &f incorporated under any laws other than those of the Philippines, a
certificate fro< the Securities and #Bchange Co<<ission showing that it is duly
registered in the <ercantile registry of that Co<<ission in accordance with the
Corporation Code! ' copy of the articles of incorporation and bylaws, and any
a<end<ents to either, if organiHed or for<ed under any law reCuiring such to be
filed, duly certified by the officer haing the custody of sa<e, or if not so
organiHed, a copy of the law, charter or deed of settle<ent under which the deed
of organiHation is <ade, duly certified by the proper custodian thereof, or proed
by affidait to be a copyF also, a certificate under the hand and seal of the proper
officer of such state or country haing superision of insurance business therein,
if any there be, that such corporation or co<pany is organiHed under the laws of
such state or country, with the a<ount of capital stoc? or assets and legal
resere reCuired by this CodeF
6DdE &f not incorporated and of foreign do<icile, aside fro< the certificate
<entioned in paragraph DcE of this section, a certificate setting forth the nature
and character of the business, the location of the principal office, the na<e of the
indiidual or na<es of the persons co<posing the partnership or association, the
a<ount of actual capital e<ployed or to be e<ployed therein, and the na<es of
all officers and persons by who< the business is or <ay be <anaged!
6The certificate <ust be erified by the affidait of the chief officer, secretary,
agent, or <anager of the co<panyF and if there are any written articles of
agree<ent of the co<pany, a copy thereof <ust acco<pany such certificate!
6S#C! *;,! The Co<<issioner <ust reCuire as a condition precedent to the
transaction of insurance business in the Philippines by any foreign insurance
co<pany, that such co<pany file in his office a written power of attorney
designating so<e person who shall be a resident of the Philippines as its general
agent, on who< any notice proided by law or by any insurance policy, proof of
loss, su<<ons and other legal processes <ay be sered in all actions or other
legal proceedings against such co<pany, and consenting that serice upon such
general agent shall be ad<itted and held as alid as if sered upon the foreign
co<pany at its ho<e office! 'ny such foreign co<pany shall, as further condition
precedent to the transaction of insurance business in the Philippines, <a?e and
file with the Co<<issioner an agree<ent or stipulation, eBecuted by the proper
authorities of said co<pany in for< and substance as follows=
6The Dna<e of co<panyE does hereby stipulate and agree in consideration of the
per<ission granted by the &nsurance Co<<issioner to transact business in the
Philippines, that if at any ti<e said co<pany shall leae the Philippines, or cease
to transact business therein, or shall be without any agent in the Philippines on
who< any notice, proof of loss, su<<ons, or legal process <ay be sered, then
in any action or proceeding arising out of any business or transaction which
occurred in the Philippines, serice of any notice proided by law, or insurance
policy, proof of loss, su<<ons, or other legal process <ay be <ade upon the
&nsurance Co<<issioner, and that such serice upon the &nsurance
Co<<issioner shall hae the sa<e force and effect as if <ade upon the
co<pany!
64heneer such serice of notice, proof of loss, su<<ons, or other legal process
shall be <ade upon the Co<<issioner, he <ust, within ten D*+E days thereafter,
trans<it by <ail, postage paid, a copy of such notice, proof of loss, su<<ons, or
other legal process to the co<pany at its ho<e or principal office! The sending of
such copy by the Co<<issioner shall be a necessary part of the serice of the
notice, proof of loss, or other legal process!
6S#C! *;-! (o insurance co<pany organiHed or eBisting under the goern<ent
or laws other than those of the Philippines shall engage in business in the
Philippines unless possessed of uni<paired capital or assets and resere of not
less than )ne billion pesos DP*,+++,+++,+++!++E, nor until it shall hae deposited
with the Co<<issioner for the benefit and security of the policyholders and
creditors of such co<pany in the Philippines, securities satisfactory to the
Co<<issioner consisting of good securities of the Philippines, including new
issues of stoc? of registered enterprises, as this ter< is defined in #Becutie
)rder (o! 33, of *;9-, as a<ended, to the actual <ar?et alue of not less than
the a<ount herein reCuired= Proided, That at least fifty percent D:+LE of such
securities shall consist of bonds or other instru<ents of debt of the /oern<ent
of the Philippines, its political subdiisions and instru<entalities, or of
goern<ent-owned or -controlled corporations and entities, including the Bang?o
Sentral ng Pilipinas= Proided, further, That the total inest<ent of a foreign
insurance co<pany in any registered enterprise shall not eBceed twenty percent
D3+LE of the net worth of said foreign insurance co<pany nor twenty percent
D3+LE of the capital of the registered enterprise, unless preiously authoriHed in
writing by the Co<<issioner!
6The Co<<issioner <ay, as a pre-licensing reCuire<ent of a new branch office of
a foreign insurance co<pany, in addition to the reCuired asset or net worth,
reCuire the co<pany to hae an additional surplus fund in an a<ount to be
deter<ined by the &nsurance Co<<ission!
6For purposes of this Code, the net worth of a foreign insurance co<pany shall
refer only to its net worth in the Philippines!
6S#C! *;9! The Co<<issioner shall hold the securities, deposited as reCuired in
the i<<ediately preceding section, for the benefit and security of all the
policyholders and creditors of the co<pany depositing the sa<e= Proided, That
the Co<<issioner <ay as long as the co<pany is solent, per<it the co<pany to
collect the interest or diidends on the securities so deposited, and, fro< ti<e to
ti<e, with his assent, to withdraw any of such securities, upon depositing with
said Co<<issioner other li?e securities, the <ar?et alue of which shall be eCual
to the <ar?et alue of such as <ay be withdrawn! &n the eent of any co<pany
ceasing to do business in the Philippines, the securities deposited as aforesaid
shall be returned to the co<pany upon the Co<<issionerAs written approal and
only after the co<pany has duly proen in its application therefor that it has no
further liability whatsoeer under any of its policies nor to any of its creditors in
the Philippines!
6S#C! *;;! #ery foreign co<pany doing business in the Philippines shall set
aside an a<ount corresponding to the legal reseres of the policies written in the
Philippines and inest and ?eep the sa<e therein in accordance with the
proisions of this section! The legal resere therein reCuired to be set aside shall
be inested only in the classes of Philippine securities described in Section 3+,=
Proided, howeer, That no inest<ent in stoc?s or bonds of any single entity
shall, in the aggregate eBceed twenty percent D3+LE of the net worth of the
inesting co<pany or twenty percent D3+LE of the capital of the issuing co<pany,
whicheer is the lesser, unless otherwise approed in writing by the
Co<<issioner! The securities purchased and ?ept in the Philippines under this
section, shall not be sent out of the territorial Iurisdiction of the Philippines without
the written consent of the Co<<issioner!
6T&T%# 3
6S)%>#(C2
6S#C! 3++! 'n insurance co<pany doing business in the Philippines shall at all
ti<es <aintain the <ini<u< paid-up capital, and net worth reCuire<ents as
prescribed by the Co<<issioner! Such solency reCuire<ents shall be based on
internationally accepted solency fra<ewor?s and adopted only after due
consultation with the insurance industry associations!
64heneer the afore<entioned reCuire<ent be found to be less than that herein
reCuired to be <aintained, the Co<<issioner shall forthwith direct the co<pany
to <a?e good any such deficiency by cash, to be contributed by all stoc?holders
of record in proportion to their respectie interests, and paid to the treasurer of
the co<pany, within fifteen D*:E days fro< receipt of the order= Proided, That the
co<pany in the interi< shall not be per<itted to ta?e any new ris? of any ?ind or
character unless and until it <a?e good any such deficiency= ProidedF further,
That a stoc?holder who aside fro< paying the contribution due fro< hi<, pays
the contribution due fro< another stoc?holder by reason of the failure or refusal
of the latter to do so, shall hae a lien on the certificates of stoc? of the insurance
co<pany concerned appearing in its boo?s in the na<e of the defaulting
stoc?holder on the date of default, as well as on any interests or diidends that
hae accrued or will accrue to the said certificates of stoc?, until the
corresponding pay<ent or rei<burse<ent is <ade by the defaulting stoc?holder!
6S#C! 3+*! (o do<estic insurance corporation shall declare or distribute any
diidend on its outstanding stoc?s unless it has <et the <ini<u< paid-up capital
and net worth reCuire<ents under Section *;8 and eBcept fro< profits attested in
a sworn state<ent to the Co<<issioner by the president or treasurer of the
corporation to be re<aining on hand after retaining uni<paired=
6DaE The entire paid-up capital stoc?F
6DbE The solency reCuire<ents defined by Section 3++F
6DcE &n the case of life insurance corporations, the legal resere fund reCuired by
Section 3*-F
6DdE &n the case of corporations other than life, the legal resere fund reCuired by
Section 3*;F and
6DeE ' su< sufficient to pay all net losses reported, or in the course of settle<ent,
and all liabilities for eBpenses and taBes!
6'ny diidend declared or distributed under the preceding paragraph shall be
reported to the Co<<issioner within thirty DG+E days after such declaration or
distribution!
6&f the Co<<issioner finds that any such corporation has declared or distributed
any such diidend in iolation of this section, he <ay order such corporation to
cease and desist fro< doing business until the a<ount of such diidend or the
portion thereof in eBcess of the a<ount allowed under this section has been
restored to said corporation!
6The Co<<issioner shall prescribe solency reCuire<ents for branches of
foreign insurance co<panies operating in the Philippines!
6T&T%# G
6'SS#TS
6S#C! 3+3! &n any deter<ination of the financial condition of any insurance
co<pany doing business in the Philippines, there shall be allowed and ad<itted
as assets only such assets legally or beneficially owned by the insurance
co<pany concerned as deter<ined by the Co<<issioner which consist of=
6DaE Cash in the possession of the insurance co<pany or in transit under its
control, and the true and duly erified balance of any deposit of such co<pany in
a financially sound ban? or trust co<pany duly authoriHed by the Bang?o Sentral
ng Pilipinas!
6DbE &nest<ents in securities, including <oney <ar?et instru<ents, and in real
property acCuired or held in accordance with and subIect to the applicable
proisions of this Code and the inco<e realiHed therefro< or accrued thereon!
6DcE %oans granted by the insurance co<pany concerned to the eBtent of that
portion thereof adeCuately secured by non-speculatie assets with readily
realiHable alues in accordance with and subIect to the li<itations i<posed by
applicable proisions of this Code!
6DdE Policy loans and other policy assets and liens on policies, contracts or
certificates of a life insurance co<pany, in an a<ount not eBceeding legal
reseres and other policy liabilities carried on each indiidual life insurance
policy, contract or certificate!
6DeE The net a<ount of uncollected and deferred pre<iu<s and annuity
considerations in the case of a life insurance co<pany which carries the full
<ean tabular resere liability!
6DfE Reinsurance recoerable by the ceding insurer=
6D*E Fro< an insurer authoriHed to transact business in this country, the full
a<ount thereofF or
6D3E Fro< an insurer not authoriHed in this country, in an a<ount not eBceeding
the liabilities carried by the ceding insurer for a<ounts withheld under a
reinsurance treaty with such unauthoriHed insurer as security for the pay<ent of
obligations thereunder if such funds are held subIect to withdrawal by, and under
the control of, the ceding insurer! The Co<<issioner <ay prescribe the
conditions under which a ceding insurer <ay be allowed credit, as an asset or as
a deduction fro< loss and unearned pre<iu< reseres, for reinsurance
recoerable fro< an insurer not authoriHed in this country but which presents
satisfactory eidence that it <eets the applicable standards of solency reCuired
in this country!
6DgE Funds withheld by a ceding insurer under a reinsurance treaty, proided
reseres for unpaid losses and unearned pre<iu<s are adeCuately proided!
6DhE 1eposits or a<ounts recoerable fro< underwriting associations, syndicates
and reinsurance funds, or fro< any suspended ban?ing institution, to the eBtent
dee<ed by the Co<<issioner to be aailable for the pay<ent of losses and
clai<s and alues to be deter<ined by hi<!
6DiE #lectronic data processing <achines, as <ay be authoriHed by the
Co<<issioner to be acCuired by the insurance co<pany concerned, the
acCuisition cost of which to be a<ortiHed in eCual annual a<ounts within a period
of fie D:E years fro< the date of acCuisition thereof!
6DIE &nest<ents in <utual funds, real estate inest<ent trusts, salary loans, unit
inest<ent trust funds and special deposit accounts, subIect to the conditions as
<ay be proided for by the Co<<issioner!
6D?E )ther assets, not inconsistent with the proisions of paragraphs DaE to DIE
hereof, which are dee<ed by the Co<<issioner to be readily realiHable and
aailable for the pay<ent of losses and clai<s at alues to be deter<ined by hi<
in a circular, rule or regulation!
6S#C! 3+G! &n addition to such assets as the Co<<issioner <ay fro< ti<e to
ti<e deter<ine to be non-ad<itted assets of insurance co<panies doing
business in the Philippines, the following assets shall in no case be allowed as
ad<itted assets of an insurance co<pany doing business in the Philippines, in
any deter<ination of its financial condition=
6DaE /oodwill, trade na<es, and other li?e intangible assets!
6DbE Prepaid or deferred charges for eBpenses and co<<issions paid by such
insurance co<pany!
6DcE 'dances to officers Dother than policy loansE, which are not adeCuately
secured and which are not preiously authoriHed by the Co<<issioner, as well
as adances to e<ployees, agents, and other persons on <ere personal
security!
6DdE Shares of stoc? of such insurance co<pany, owned by it, or any eCuity
therein as well as loans secured thereby, or any proportionate interest in such
shares of stoc? through the ownership by such insurance co<pany of an interest
in another corporation or business unit!
6DeE Furniture, furnishing, fiBtures, safes, eCuip<ent, library, stationery, literature,
and supplies!
6DfE &te<s of ban? credits representing chec?s, drafts or notes returned unpaid
after the date of state<ent!
6DgE The a<ount, if any, by which the aggregate alue of inest<ents as carried
in the ledger assets of such insurance co<pany eBceeds the aggregate alue
thereof as deter<ined in accordance with the proisions of this Code andKor the
rules of the Co<<issioner!
6'll non-ad<itted assets and all other assets of doubtful alue or character
included as ledger or non-ledger assets in any state<ent sub<itted by an
insurance co<pany to the Co<<issioner, or in any insurance eBa<inerAs report
to hi<, shall also be reported, to the eBtent of the alue disallowed as deductions
fro< the gross assets of such insurance co<pany, eBcept where the
Co<<issioner per<its a resere to be carried a<ong the liabilities of such
insurance co<pany in lieu of any such deduction!
6T&T%# 8
6&(>#STM#(TS
6S#C! 3+8! ' life insurance co<pany <ay lend to any of its policyholders upon
the security of the alue of its policy such su< as <ay be deter<ined pursuant to
the proisions of the policy!
6(o insurance co<pany shall loan any of its <oney or deposits to any person,
corporation or association, eBcept upon the security of any of the following=
6DaE First <ortgage or deeds of trust of registered, unencu<bered, i<proed or
uni<proed real estate, including condo<iniu<sF
6DbE First <ortgages or deeds of trust of actually cultiated, i<proed and
unencu<bered agricultural lands in the PhilippinesF
6DcE Purchase <oney <ortgages, lease purchase agree<ents or si<ilar
securities eBecuted or receied by it on account of the sale or eBchange of real
property acCuired pursuant to Sections 3+, and 3+9F
6DdE Bonds or other instru<ents of indebtedness issued or guaranteed by the
/oern<ent of the Philippines or its political subdiisions authoriHed by law to
incur such obligations or issue such guarantees or of goern<ent-owned or
-controlled corporations and instru<entalities including the Bang?o Sentral ng
PilipinasF or
6DeE )bligations issued or guaranteed by uniersal ban?s, co<<ercial ban?s,
offshore ban?ing units, inest<ent houses or other financial inter<ediaries duly
registered with the Bang?o Sentral ng PilipinasF or
6DfE )bligations issued or guaranteed by foreign ban?s or corporations, each of
which shall hae total net worth of at least )ne hundred fifty <illion $S dollars
DN$S*:+,+++,+++!++E or such other higher net worth as <ay be prescribed by the
&nsurance Co<<ission, as shown in their financial state<ents as of the
i<<ediately preceding fiscal yearF or
6DgE 'ssign<ents of <onetary instru<ents such as cash deposits, deposit
certificates or other si<ilar instru<ents of uniersal ban?s, co<<ercial ban?s,
inest<ent houses or other financial inter<ediaries duly registered with the
Bang?o Sentral ng PilipinasF or
6DhE Pledges of shares of stoc?, bonds or other instru<ents of indebtedness
specified in Section 3+;F or
6DiE Chattel <ortgages oer eCuip<ent not <ore than three DGE years oldF and
6DIE Such other security as <ay be approed by the Co<<issioner!
6The loans proided in the preceding subsection shall be subIect to the following
conditions=
6D*E The a<ount of loan secured by real estate <ortgage oer a non-agricultural
land shall not eBceed seenty percent D-+LE of its appraised alue, and in the
case of a loan secured by a real estate <ortgage oer an agricultural land, the
a<ount of loan shall not eBceed forty percent D8+LE of its <ar?et alue=
Proided, That, in no case shall such loan hae a <aturity period in eBcess of
twenty-fie D3:E yearsF
6D3E $nless approed by the Co<<issioner, no loan <ay be granted upon the
security of a <ortgage on i<proed real estate if the i<proe<ents thereon do
not belong to the owner of the land, and the owner of the i<proe<ents does not
sign the deed of <ortgage! 0oweer, if the owner of the land is the /oern<ent
of the Philippines or any of its political subdiisions and a long-ter< lease has
been eBecuted in faor of the owner of the i<proe<ents, the owner of the land
need not be a party to the deed of <ortgage! The eBpiration date of the lease
shall not, howeer, precede the <aturity of the loan! The phrase @i<proed real
estateA as used herein shall <ean land with per<anent building or buildings
erected thereonF
6DGE %ease-agree<ents or si<ilar securities receied on the sale of real estate
property shall not eBceed one hundred percent D*++LE of the selling price of said
property, or one hundred percent D*++LE of its <ar?et alue at the ti<e of its
disposition, whicheer a<ount is lower! 0oweer, in no case shall such
agree<ent hae a <aturity period not eBceeding thirty DG+E yearsF
6D8E %oans secured by shares of stoc? of solent corporations or institutions shall
not eBceed fifty percent D:+LE of=
6DiE The weighted aerage <ar?et price for the one hundred eighty D*9+E days
preceding the approal of the loan for shares listed in the stoc? eBchangeF and
6DiiE For unlisted shares, the adIusted boo? alue of such shares!
6D:E %oans secured by the chattel <ortgages oer eCuip<ent shall not eBceed
seenty percent D-+LE of the <ar?et alue of said eCuip<ent!
6S#C! 3+:! (o loan by any insurance co<pany on the security of real estate shall
be <ade unless the title to such real estate shall hae first been registered in
accordance with the eBisting %and Registration 'ct, or shall hae been preiously
registered under the proisions of the eBisting Mortgage %aw and the lien or
interest of the insurance co<pany as <ortgagee has been registered!
6S#C! 3+,! DaE 'n insurance co<pany <ay purchase, hold, own and coney such
property, real and personal, as <ay hae been <ortgaged, pledged, or coneyed
to it in good faith in trust for its benefit by reason of <oney loaned by it in
pursuance of the regular business of the co<pany, and such real or personal
property as <ay hae been purchased by it at sales under pledges, <ortgages or
deeds of trust for its benefit on account of <oney loaned by itF and such real and
personal property as <ay hae been coneyed to it by borrowers in satisfaction
and discharge of loans <ade by the co<pany in pay<ent or by reason of any
loan <ade by the co<pany in pay<ent or by reason of any loan <ade by it shall
be sold by the co<pany within twenty D3+E years after the title thereto has been
ested in it!
6DbE 'n insurance co<pany <ay purchase, hold, and own the following=
6D*E Real properties which sere as its <ain place of business andKor branch
offices= Proided, That such inest<ent shall not in the oerall eBceed twenty
percent D3+LE of its net worth as shown by its latest financial state<ent approed
by the Co<<issioner!
6D3E Bonds or other instru<ents of indebtedness of the /oern<ent of the
Philippines or its political subdiisions authoriHed by law to issue bonds at the
reasonable <ar?et alue thereof!
6DGE Bonds or other instru<ents of debt of goern<ent-owned or -controlled
corporations and entities, including the Bang?o Sentral ng Pilipinas!
6D8E Bonds, debentures or other instru<ents of indebtedness of any solent
corporation or institution created or eBisting under the laws of the Philippines=
Proided, howeer, That the issuing, assu<ing or guaranteeing entity or its
predecessors shall not hae defaulted in the pay<ent of interest on any of its
securities and that during each of any three DGE including the last two D3E of the
fie D:E fiscal years neBt preceding the date of acCuisition by such insurance
co<pany of such bonds, debentures, or other instru<ents of indebtedness, the
net earnings of the issuing, assu<ing or guaranteeing institution aailable for its
fiBed charges, as hereinafter defined, shall hae been not less than one and one-
Cuarter D*OE ti<es the total of its fiBed charges for such year= Proided, further,
That no life insurance co<pany shall inest in or loan upon the obligations of any
one institution in the ?inds per<itted under this subsection an a<ount in eBcess
of twenty-fie percent D3:LE of the total ad<itted assets of such insurer as of
1ece<ber thirty-first neBt preceding the date of such inest<ent!
6's used in this subsection the ter< net earnings aailable for fiBed charges shall
<ean net inco<e after deducting operating and <aintenance eBpenses, taBes
other than inco<e taBes, depreciation and depletionF but eBcluding eBtraordinary
nonrecurring ite<s of inco<e or eBpense appearing in the regular financial
state<ent of the issuing, assu<ing or guaranteeing institution! The ter< fiBed
charges shall include interest on funded and unfunded debt, a<ortiHation of debt
discount, and rentals for leased properties!
6D:E Preferred or guaranteed stoc?s of any solent corporation or institution
created or eBisting under the laws of the Philippines= Proided, That if the stoc?s
are guaranteed, the a<ount of stoc?s so guaranteed is not in eBcess of fifty
percent D:+LE of the a<ount of the preferred or co<<on stoc?s, as the case
<ay be, of the guaranteeing corporation= Proided, finally, That no life insurance
co<pany shall inest in or loan upon obligations of any one institution in the
?inds per<itted under this subsection an a<ount in eBcess of ten percent D*+LE
of the total ad<itted assets of such insurer as of 1ece<ber thirty-first neBt
preceding the date of such inest<ent!
6D,E Co<<on stoc?s of any solent corporation or institution created or eBisting
under the laws of the Philippines= Proided, howeer, That no life insurance
co<pany shall inest in or loan upon the obligations of any one corporation or
institution in the ?inds per<itted under this subsection an a<ount in eBcess of ten
percent D*+LE of the total ad<itted assets of such insurer as of 1ece<ber thirty-
first neBt preceding the date of such inest<ent!
6D-E Securities issued by a registered enterprise, as this ter< is defined in
#Becutie )rder (o! 33,, otherwise ?nown as the )<nibus &nest<ents Code of
*;9-, as a<ended= Proided, That the total inest<ent of a do<estic non-life
insurance co<pany in any registered enterprise shall not eBceed twenty percent
D3+LE of the net worth of said insurance co<pany as shown by its aforesaid
financial state<ent unless preiously authoriHed by the Co<<issioner!
6D9E Certificates, notes and other obligations issued by the trustees or receiers
of any institution created or eBisting under the laws of the Philippines which, or
the assets of which, are being ad<inistered under the direction of any court
haing Iurisdiction= Proided, howeer, That such certificates, notes or other
obligations are adeCuately secured as to principal and interests!
6D;E #Cuip<ent trust obligations or certificates which are adeCuately secured or
other adeCuately secured instru<ents eidencing an interest in eCuip<ent wholly
or in part within the Philippines= Proided, howeer, That there is a right to
receie deter<ined portions of rental, purchase or other fiBed obligatory
pay<ents for the use or purchase of such eCuip<ent!
6D*+E 'ny obligation of any corporation or institution created or eBisting under the
laws of the Philippines which is, on the date of acCuisition by the insurer,
adeCuately secured and has Cualities and characteristics wherein the speculatie
ele<ents are not predo<inant!
6D**E Such other securities as <ay be approed by the Co<<issioner!
6DcE 'ny do<estic insurer which has outstanding insurance, annuity or
reinsurance contracts in currencies other than the national currency of the
Philippines <ay inest in, or otherwise acCuire or loan upon securities and
inest<ents in such currency which are substantially of the sa<e ?inds, classes
and inest<ent grades as those eligible for inest<ent under the foregoing
subdiisions of this sectionF but the aggregate a<ount of such inest<ents and
of such cash in such currency which is at any ti<e held by such insurer shall not
eBceed one and one-half D*PE ti<es the a<ount of its reseres and other
obligations under such contracts or the a<ount which such insurer is reCuired by
the law of any country or possession outside the Republic of the Philippines to be
inested in such country or possession, whicheer shall be greater!
6S#C! 3+-! 'n insurance co<pany <ay=
6D*E &nest in eCuities of other financial institutionsF and
6D3E #ngage in the buying and selling of long-ter< debt instru<ents= Proided,
That any or all of such inest<ents shall be with the prior approal of the
Co<<issioner! &nsurance co<panies <ay, howeer, inest in listed eCuities of
other financial institutions without need of prior approal by the Co<<issioner!
6S#C! 3+9! 'ny life insurance co<pany <ay=
6DaE 'cCuire or construct housing proIects and, in connection with any such
proIect, <ay acCuire land or any interest therein by purchase, lease or otherwise,
or use land acCuired pursuant to any other proision of this Code! Such co<pany
<ay thereafter own, <aintain, <anage, collect or receie inco<e fro<, or sell
and coney, any land or interest therein so acCuired and any i<proe<ents
thereon! The aggregate boo? alue of the inest<ents of any such co<pany in
all such proIects shall not eBceed at the ti<e of such inest<ents twenty-fie
percent D3:LE of the total ad<itted assets of such co<pany on the thirty-first day
of 1ece<ber neBt preceding= Proided, That the funds of the co<pany for the
pay<ent of pending clai<s and obligations shall not be used for such
inest<ents!
6DbE 'cCuire real property, other than property to be used pri<arily for proiding
housing and property for acco<<odation of its own business, as an inest<ent
for the production of inco<e, or <ay acCuire real property to be i<proed or
deeloped for such inest<ent purpose pursuant to a progra< therefor, subIect
to the condition that the cost of each parcel of real property so acCuired under
the authority of this paragraph DbE, including the esti<ated cost to the co<pany of
the i<proe<ent or deelop<ent thereof, when added to the boo? alue of all
other real property held by it pursuant to this paragraph DbE, shall not eBceed
twenty-fie percent D3:LE of its ad<itted assets as of the thirty-first day of
1ece<ber neBt preceding!
6S#C! 3+;! #ery do<estic insurance co<pany shall, to the eBtent of an a<ount
eCual in alue to twenty-fie percent D3:LE of the <ini<u< net worth reCuired
under Section *;8, inest its funds only in securities, satisfactory to the
Co<<issioner, consisting of bonds or other instru<ents of debt of the
/oern<ent of the Philippines or its political subdiisions or instru<entalities, or
of goern<ent-owned or -controlled corporations and entities, including the
Bang?o Sentral ng Pilipinas= Proided, That such inest<ents shall at all ti<es
be <aintained free fro< any lien or encu<brance= Proided, further, That such
securities shall be deposited with and held by the Co<<issioner for the faithful
perfor<ance by the depositing insurer of all its obligations under its insurance
contracts! The proisions of Section *;9 shall, so far as practicable, apply to the
securities deposited under this section!
6#Bcept as otherwise proided in this Code, no Iudg<ent creditor or other
clai<ant shall hae the right to ley upon any of the securities of the insurer held
on deposit under this section or held on deposit pursuant to the reCuire<ent of
the Co<<issioner!
6S#C! 3*+! 'fter satisfying the reCuire<ents contained in the preceding section,
any do<estic non-life insurance co<pany, shall inest, to an a<ount prescribed
below, its funds in, or otherwise, acCuire or loan upon, only the classes of
inest<ents described in Section 3+,, including securities issued by any
registered enterprise, as this ter< is defined in #Becutie )rder (o! 33,,
otherwise ?nown as @The )<nibus &nest<ents Code of *;9-Q and such other
classes of inest<ents as <ay be authoriHed by the Co<<issioner for purposes
of this section= Proided, That=
6DaE (o <ore than twenty percent D3+LE of the net worth of such co<pany as
shown by its latest financial state<ent approed by the Co<<issioner shall be
inested in the lot and building in which the insurance co<pany conducts its
businessF and
6DbE The total inest<ent of an insurance co<pany in any registered enterprise
shall not eBceed twenty percent D3+LE of the net worth of said insurance
co<pany as shown by its aforesaid financial state<ent nor twenty percent D3+LE
of the paid-up capital of the registered enterprise eBcluding the intended
inest<ent, unless preiously authoriHed by the Co<<issioner= Proided, further,
That such inest<ents, free fro< any lien or encu<brance, shall be at least
eCual in a<ount to the aggregate a<ount of= D*E its legal resere, as proided in
Section 3*;, and D3E its resere fund held for reinsurance as proided for in the
pertinent treaty proision in the case of reinsurance ceded to authoriHed insurers!
6S#C! 3**! 'fter satisfying the reCuire<ents contained in Sections *;-, *;;, 3+;
and 3*+, any non-life insurance co<pany <ay inest any portion of its funds
representing earned surplus in any of the inest<ents described in Sections 3+8,
3+, and 3+-, or in any securities issued by a registered enterprise <entioned in
the preceding sections= Proided, That no inest<ent in stoc?s or bonds of any
single entity shall in the aggregate, eBceed twenty percent D3+LE of the net worth
of the insurance co<pany as shown in its latest financial state<ent approed by
the Co<<issioner or twenty percent D3+LE of the paid-up capital of the issuing
co<pany, whicheer is lesser, unless otherwise approed by the Co<<issioner!
6S#C! 3*3! 'fter satisfying the <ini<u< capital inest<ent reCuired in Section
3+;, any life insurance co<pany <ay inest its legal policy resere, as proided
in Section 3*- or in Section 3*9, in any of the classes of securities or types of
inest<ents described in Sections 3+8, 3+,, 3+- and 3+9, subIect to the
li<itations therein contained, and in any securities issued by any registered
enterprise <entioned in Section 3*+, free fro< any lien or encu<brance, in such
a<ounts as <ay be approed by the Co<<issioner! Such co<pany <ay li?ewise
inest any portion of its earned surplus in the aforesaid securities or inest<ents
subIect to the aforesaid li<itations!
6S#C! 3*G! 'ny inest<ent <ade in iolation of the applicable proisions of this
title shall be considered non-ad<itted assets!
6S#C! 3*8! DaE 'll bonds or other instru<ents of indebtedness haing a fiBed ter<
and rate of interest and held by any life insurance co<pany authoriHed to do
business in this country, if a<ply secured and if not in default as to principal or
interest, shall be alued based on their a<ortiHed cost using effectie interest
<ethod less i<pair<ent and unrecoerable a<ount based on appropriate
<easure<ent <ethods which are generally accepted in the industry and
accepted by the Co<<issioner! The Co<<issioner shall hae the power to
deter<ine the eligibility of any such inest<ents for aluation on the basis of
a<ortiHation, and <ay by regulation prescribe or li<it the classes of securities so
eligible for a<ortiHation! 'll bonds or other instru<ents of indebtedness which in
the Iudg<ent of the Co<<issioner are not a<ply secured shall not be eligible for
a<ortiHation and shall be alued in accordance with paragraph two! The
Co<<issioner <ay, if he finds that the interest of policyholders so per<it or
reCuire, by official regulation per<it or reCuire any class or classes of insurers,
other than life insurance co<panies authoriHed to do business in this country, to
alue their bonds or other instru<ents of indebtedness in accordance with the
foregoing rule!
6DbE The inest<ents of all insurers authoriHed to do business in this country,
eBcept securities subIect to a<ortiHation and eBcept as otherwise proided in this
chapter, shall be alued, in the discretion of the Co<<issioner, at their a<ortiHed
cost using effectie interest <ethod less i<pair<ent and unrecoerable a<ount
or at aluation representing their fair <ar?et alue! &f the Co<<issioner finds that
in iew of the character of inest<ents of any insurer authoriHed to do business
in this country it would be prudent for such insurer to establish a special resere
for possible losses or fluctuations in the alues of its inest<ents, he <ay reCuire
such insurer to establish such resere, reasonable in a<ount, and include a
report thereon in any state<ent or report of the financial condition of such
insurer! The Co<<issioner <ay, in connection with any eBa<ination or reCuired
financial state<ent of an authoriHed insurer, reCuire such insurer to furnish hi<
co<plete financial state<ents and audited report of the financial condition of any
corporation of which the securities are owned wholly or partly by such insurer
and <ay cause an eBa<ination to be <ade of any subsidiary or affiliate of such
insurer as appropriate to specific inest<ents as proided in appropriate circulars
issued by the Co<<issioner!
6DcE &nest<ents in eCuity of an insurance co<pany shall be alued as follows=
6D*E %isted stoc?s shall be alued at <ar?et alue and periodically adIusted to
reflect <ar?et changes through a special aluation account to reflect their
realiHable alue when soldF
6D3E $nlisted stoc?s shall be alued at adIusted boo? alue based on the latest
unCualified audited financial state<ents of the co<pany which issued such
stoc?sF and
6DGE Stoc?s of a corporation under the control of the insurer shall be alued using
the eCuity <ethod which is the cost plus or <inus the share of the controlling
co<pany in the earnings or losses of the controlled co<pany after acCuisition of
such stoc?s!
6DdE The stoc? of an insurance co<pany shall be alued at the lesser of its
<ar?et alue or its boo? alue as shown by its last approed audited financial
state<ent or the last report on eBa<ination, whicheer is <ore recent! The boo?
alue of a share of co<<on stoc? of an insurance co<pany shall be ascertained
by diiding D*E the a<ount of its capital and surplus less the alue of all of its
preferred stoc?, if any, outstanding, by D3E the nu<ber of shares of its co<<on
stoc? issued and outstanding!
6(otwithstanding the foregoing proisions, an insurer <ay, at its option, alue its
holdings of stoc? in a subsidiary insurance co<pany in an a<ount not less than
acCuisition cost if such acCuisition cost is less than the alue deter<ined as
hereinbefore proided!
6DeE Real estate acCuired by foreclosure or by deed in lieu thereof, in the absence
of a recent appraisal dee<ed by the Co<<issioner to be reliable, shall not be
alued at an a<ount greater than the unpaid principal of the defaulted loan at the
date of such foreclosure or deed, together with any taBes and eBpenses paid or
incurred by such insurer at such ti<e in connection with such acCuisition, and the
cost of additions or i<proe<ents thereafter paid by such insurer and any
a<ount or a<ounts thereafter paid by such insurer or any assess<ents leied for
i<proe<ents in connection with the property!
6DfE Purchase <oney <ortgages receied on dispositions of real property held
pursuant to Section 3+9 shall be alued in an a<ount eCuialent to ninety
percent D;+LE of the alue of such real property! Purchase <oney <ortgages
receied on disposition of real property otherwise held shall be alued in an
a<ount not eBceeding ninety percent D;+LE of the alue of such real property as
deter<ined by an appraisal <ade by an appraiser at or about the ti<e of
disposition of such real property!
6DgE The stoc? of a subsidiary of an insurer shall be alued on the basis of the
greater of=
6D*E The alue of only such of the assets of such subsidiary as would constitute
lawful inest<ents for the insurer if acCuired or held directly by the insurerF or
6D3E Such other alue deter<ined pursuant to standards and cu<ulatie
li<itations, contained in a regulation to be pro<ulgated by the Co<<issioner!
6DhE (otwithstanding any proision contained in this section or elsewhere in this
chapter, if the Co<<issioner finds that the interests of policyholders so per<it or
reCuire, he <ay per<it or reCuire any class or classes of insurers authoriHed to
do business in this country to alue their inest<ents or any class or classes
thereof as of any date heretofore or hereafter in accordance with any applicable
aluation or <ethod!
6S#C! 3*:! &t shall be the duty of the officers of the insurance co<pany to report
within the first fifteen D*:E days of eery <onth all such inest<ents as <ay be
<ade by the< during the preceding <onth, and the Co<<issioner <ay, if such
inest<ents or any of the< see< inIudicious to hi<, reCuire the sale or disposal
of the sa<e! The report shall also include a list of inest<ents sold or disposed
of by the co<pany during the sa<e period!
6T&T%# :
6R#S#R>#S
6S#C! 3*,! #ery life insurance co<pany, doing business in the Philippines, shall
annually <a?e a aluation of all policies, additions thereto, unpaid diidends, and
all other obligations outstanding on the thirty-first day of 1ece<ber of the
preceding year! 'll such aluations shall be <ade according to the standard
adopted by the co<pany, as prescribed by the Co<<issioner in accordance with
internationally accepted actuarial standards, which standard shall be stated in its
annual report!
6Such standard of aluations shall be according to a standard table of <ortality
with interest to be deter<ined by the &nsurance Co<<issioner! 4hen the
preli<inary ter< basis is used, the ter< insurance shall be li<ited to the first
policy year!
6The results of such aluations shall be reported to the Co<<issioner on or
before the thirtieth day of 'pril of each year acco<panied by a sworn state<ent
of a designated co<pany officer and stating the <ethods and assu<ptions used
in arriing at the alues reported!
6S#C! 3*-! The aggregate net alue so ascertained of the policies of such
co<pany shall be dee<ed its resere liability, to proide for which it shall hold
funds in secure inest<ents eCual to such net alue, aboe all its other liabilitiesF
and it shall be the duty of the Co<<issioner, after haing erified, to such an
eBtent as he <ay dee< necessary, the aluation of all policies in force, to satisfy
hi<self that the co<pany has such a<ount in safe legal securities after all other
debts and clai<s against it hae been proided for!
6The resere liability for ariable contracts defined in Section 3G9 shall be
established in accordance with actuarial procedures that recogniHe the ariable
nature of the benefits proided, and shall be approed by the Co<<issioner!
6S#C! 3*9! #ery life insurance co<pany, conducted on the <utual plan or a
plan in which policyholders are by the ter<s of their policies entitled to share in
the profits or surplus shall, on all policies of life insurance heretofore or hereafter
issued, under the conditions of which the distribution of surplus is deferred to a
fiBed or specified ti<e and contingent upon the policy being in force and the
insured liing at that ti<e, annually ascertain the a<ount of the surplus to which
all such policies as a separate class are entitled, and shall annually apportion to
such policies as a class the a<ount of the surplus so ascertained, and carry the
a<ount of such apportioned surplus, plus the actual interest earnings and
accretions to such fund, as a distinct and separate liability to such class of
policies on and for which the sa<e was accu<ulated, and no co<pany or any of
its officers shall be per<itted to use any part of such apportioned surplus fund for
any purpose whatsoeer other than for the eBpress purpose for which the sa<e
was accu<ulated!
6S#C! 3*;! #ery insurance co<pany, other than life, shall <aintain a resere for
unearned pre<iu<s on its policies in force, which shall be charged as a liability in
any deter<ination of its financial condition! Such resere shall be calculated
based on the twenty-fourth D38thE <ethod!
6S#C! 33+! &n addition to its liabilities and reseres on contracts of insurance
issued by it, eery insurance co<pany shall be charged with the esti<ated
a<ount of all of its other liabilities, including taBes, eBpenses and other
obligations due or accrued at the date of state<ent, and including any special
reseres reCuired by the Co<<issioner pursuant to the proisions of this Code!
T&T%# ,
6%&M&T )F S&(/%# R&S5
6S#C! 33*! (o insurance co<pany other than life, whether foreign or do<estic,
shall retain any ris? on any one subIect of insurance in an a<ount eBceeding
twenty percent D3+LE of its net worth! For purposes of this section, the ter<
subIect of insurance shall include all properties or ris?s insured by the sa<e
insurer that custo<arily are considered by non-life co<pany underwriters to be
subIect to loss or da<age fro< the sa<e occurrence of any haHard insured
against!
6The Co<<issioner <ay issue regulations proiding for a <aBi<u< li<it on the
oerall retained ris?s of insurers to sere as a catastrophe coer reCuire<ent for
the sa<e!
6Reinsurance ceded as authoriHed under the succeeding title shall be deducted
in deter<ining the ris? retained! 's to surety ris?, deduction shall also be <ade of
the a<ount assu<ed by any other co<pany authoriHed to transact surety
business and the alue of any security <ortgaged, pledged, or held subIect to the
suretyAs control and for the suretyAs protection!
6T&T%# -
6R#&(S$R'(C# TR'(S'CT&)(S
6S#C! 333! 'n insurance co<pany doing business in the Philippines <ay accept
reinsurances only of such ris?s, and retain ris? thereon within such li<its, as it is
otherwise authoriHed to insure!
6S#C! 33G! (o insurance co<pany doing business in the Philippines shall cede
all or part of any ris?s situated in the Philippines by way of reinsurance directly to
any foreign insurer not authoriHed to do business in the Philippines unless such
foreign insurer or, if the serices of a nonresident bro?er are utiliHed, such
nonresident bro?er is represented in the Philippines by a resident agent duly
registered with the Co<<issioner as reCuired in this Code!
6The resident agent of such unauthoriHed foreign insurer or nonresident bro?er
shall i<<ediately upon registration furnish the Co<<issioner with the annual
state<ent of such insurer, or of such co<pany or co<panies where such bro?er
<ay place Philippine business as of the year preceding such registration, and
annually thereafter as soon as aailable!
6S#C! 338! 'll insurance co<panies, both life and non-life, authoriHed to do
business in the Philippines shall cede their eBcess ris?s to other co<panies
si<ilarly authoriHed to do business in the Philippines in such a<ounts and under
such arrange<ents as would be consistent with sound underwriting practices
before they enter into reinsurance arrange<ents with unauthoriHed foreign
insurers!
6S#C! 33:! 'ny insurance co<pany doing business in the Philippines desiring to
cede their eBcess ris?s to foreign insurance or reinsurance co<panies not
authoriHed to transact business in the Philippines <ay do so under such ter<s
and conditions which the Co<<issioner <ay prescribe!
6Should any reinsurance agree<ent be for any reason cancelled or ter<inated,
the ceding co<pany concerned shall infor< the Co<<issioner in writing of such
cancellation or ter<ination within thirty DG+E days fro< the date of such
cancellation or ter<ination or fro< the date notice or infor<ation of such
cancellation or ter<ination is receied by such co<pany as the case <ay be!
6S#C! 33,! #ery insurance co<pany authoriHed to do business in the
Philippines shall report to the Co<<issioner on for<s prescribed by hi< the
particulars of reinsurance treaties or any new treaties or changes in eBisting
treaties within three DGE <onths fro< their effectiity!
6S#C! 33-! (o credit shall be allowed as an ad<itted asset or as a deduction
fro< liability, to any ceding insurer for reinsurance <ade, ceded, renewed, or
otherwise beco<ing effectie after January *, *;-:, unless the reinsurance shall
be payable by the assu<ing insurer on the basis of the liability of the ceding
insurer under the contract or contracts reinsured without di<inution because of
the insolency of the ceding insurer nor unless under the contract or contracts of
reinsurance the liability for such reinsurance is assu<ed by the assu<ing insurer
or insurers as of the sa<e effectie dateF nor unless the reinsurance agree<ent
proides that pay<ents by the assu<ing insurer shall be <ade directly to the
ceding insurer or to its liCuidator, receier, or statutory successor eBcept=
6DaE 4here the contract specifically proides another payee of such reinsurance
in the eent of the insolency of the ceding insurerF and
6DbE 4here the assu<ing insurer with the consent of the direct insured or
insureds has assu<ed such policy obligations of the ceding insurer as direct
obligations of the assu<ing insurer to the payees under such policies and in
substitution for the obligations of the ceding insurer to such payees!
6S#C! 339! (o life insurance co<pany doing business in the Philippines shall
reinsure its whole ris? on any indiidual life or Ioint lies, or substantially all of its
insurance in force, without haing first obtained the written per<ission of the
Co<<issioner!
6T&T%# 9
6'(($'% ST'T#M#(T
6S#C! 33;! #ery insurance co<pany doing business in the Philippines shall
ter<inate its fiscal period on the thirty-first day of 1ece<ber eery year, and shall
annually on or before the thirtieth day of 'pril of each year render to the
Co<<issioner a state<ent signed and sworn to by the chief officer of such
co<pany showing, in such for< and details as <ay be prescribed by the
Co<<issioner, the eBact condition of its affairs on the preceding thirty-first day of
1ece<ber!
6The annual state<ent shall be prepared in accordance with the financial
reporting fra<ewor? as deter<ined by the Co<<issioner! &n addition, the
Co<<issioner <ay reCuire other releant infor<ation! The for< and details of
such other releant infor<ation shall be prescribed by the Co<<issioner and
shall for< part of the supple<entary schedules to the annual state<ent!
6'ny entry in the state<ent which is found to be false shall constitute a
<isde<eanor and the officer signing such state<ent shall be subIect to the
penalty proided for under Section 883!
6S#C! 3G+! #ery insurance co<pany authoriHed under Title *+ of this chapter to
issue, delier or use ariable contracts shall annually file with the Co<<issioner
separate annual state<ent of its separate ariable accounts! Such state<ent
shall be on a for< prescribed or approed by the Co<<issioner and shall include
details as to all of the inco<e, disburse<ents, assets and liability ite<s of and
associated with the said separate ariable accounts! Said state<ent shall be
under oath of two D3E officers of the co<pany and shall be filed si<ultaneously
with the annual state<ent reCuired by the preceding section!
6S#C! 3G*! 4ithin thirty DG+E days after receipt of the annual state<ent approed
by the Co<<issioner, eery insurance co<pany doing business in the
Philippines shall publish in a newspaper of general circulation, a full synopsis of
its annual financial state<ent showing fully the conditions of its business, and
setting forth its resources and liabilities in accordance with such for< prescribed
by the Co<<issioner!
6The Co<<issioner shall hae the authority to <a?e, a<end, and rescind such
accounting rules and regulations as <ay be necessary to carry out the proisions
of this Code, and define accounting, technical and trade ter<s used in this Code=
Proided, That such shall be in accordance with internationally accepted
accounting standards! '<ong other things, the Co<<issioner <ay prescribe the
for< or for<s in which reCuired infor<ation shall be set forth, the ite<s or details
to be shown in the balance sheet and inco<e state<ent, and the <ethods to be
followed in the preparation of accounts, appraisal or aluation of assets and
liabilities, deter<ination of recurring and nonrecurring inco<e, differentiation of
inest<ent and operating inco<e, and in the preparation, where the
Co<<issioner dee<s it necessary or desirable, of consolidated balance sheets
or inco<e accounts of any person directly or indirectly controlling or controlled by
the insurance co<pany!
6T&T%# ;
6P)%&C2 F)RMS
6S#C! 3G3! (o policy, certificate or contract of insurance shall be issued or
deliered within the Philippines unless in the for< preiously approed by the
Co<<issioner, and no application for< shall be used with, and no rider, clause,
warranty or endorse<ent shall be attached to, printed or sta<ped upon such
policy, certificate or contract unless the for< of such application, rider, clause,
warranty or endorse<ent has been approed by the Co<<issioner!
6S#C! 3GG! &n the case of indiidual life or endow<ent insurance, the policy shall
contain in substance the following conditions=
6DaE ' proision that the policyholder is entitled to a grace period either of thirty
DG+E days or of one D*E <onth within which the pay<ent of any pre<iu< after the
first <ay be <ade, subIect at the option of the insurer to an interest charge not in
eBcess of siB percent D,LE per annu< for the nu<ber of days of grace elapsing
before the pay<ent of the pre<iu<, during which period of grace the policy shall
continue in full force, but in case the policy beco<es a clai< during the said
period of grace before the oerdue pre<iu< is paid, the a<ount of such pre<iu<
with interest <ay be deducted fro< the a<ount payable under the policy in
settle<entF
6DbE ' proision that the policy shall be incontestable after it shall hae been in
force during the lifeti<e of the insured for a period of two D3E years fro< its date
of issue as shown in the policy, or date of approal of last reinstate<ent, eBcept
for nonpay<ent of pre<iu< and eBcept for iolation of the conditions of the policy
relating to <ilitary or naal serice in ti<e of warF
6DcE ' proision that the policy shall constitute the entire contract between the
parties, but if the co<pany desires to <a?e the application a part of the contract
it <ay do so proided a copy of such application shall be indorsed upon or
attached to the policy when issued, and in such case the policy shall contain a
proision that the policy and the application therefor shall constitute the entire
contract between the partiesF
6DdE ' proision that if the age of the insured is considered in deter<ining the
pre<iu< and the benefits accruing under the policy, and the age of the insured
has been <isstated, the a<ount payable under the policy shall be such as the
pre<iu< would hae purchased at the correct ageF
6DeE &f the policy is participating, a proision that the co<pany shall periodically
ascertain and apportion any diisible surplus accruing on the policy under
conditions specified thereinF
6DfE ' proision specifying the options to which the policyholder is entitled to in the
eent of default in a pre<iu< pay<ent after three DGE full annual pre<iu<s shall
hae been paid! Such option shall consist of=
6D*E ' cash surrender alue payable upon surrender of the policy which shall not
be less than the resere on the policy, the basis of which shall be indicated, for
the then current policy year and any diidend additions thereto, reduced by a
surrender charge which shall not be <ore than one-fifth D*K:E of the entire
resere or two and one-half percent D3PLE of the a<ount insured and any
diidend additions theretoF and
6D3E )ne or <ore paid-up benefits on a plan or plans specified in the policy of
such alue as <ay be purchased by the cash surrender alue!
6DgE ' proision that at any ti<e after a cash surrender alue is aailable under
the policy and while the policy is in force, the co<pany will adance, on proper
assign<ent or pledge of the policy and on sole security thereof, a su< eCual to,
or at the option of the owner of the policy, less than the cash surrender alue on
the policy, at a specified rate of interest, not <ore than the <aBi<u< allowed by
law, to be deter<ined by the co<pany fro< ti<e to ti<e, but not <ore often than
once a year, subIect to the approal of the Co<<issionerF and that the co<pany
will deduct fro< such loan alue any eBisting indebtedness on the policy and any
unpaid balance of the pre<iu< for the current policy year, and <ay collect
interest in adance on the loan to the end of the current policy year, which
proision <ay further proide that such loan <ay be deferred for not eBceeding
siB D,E <onths after the application therefor is <adeF
6DhE ' table showing in figures cash surrender alues and paid-up options
aailable under the policy each year upon default in pre<iu< pay<ents, during
at least twenty D3+E years of the policy beginning with the year in which the
alues and options first beco<e aailable, together with a proision that in the
eent of the failure of the policyholder to elect one of the said options within the
ti<e specified in the policy, one of said options shall auto<atically ta?e effect and
no policyholder shall eer forfeit his right to sa<e by reason of his failure to so
electF
6DiE &n case the proceeds of a policy are payable in install<ents or as an annuity,
a table showing the <ini<u< a<ounts of the install<ents or annuity pay<entsF
6DIE ' proision that the policyholder shall be entitled to hae the policy reinstated
at any ti<e within three DGE years fro< the date of default of pre<iu< pay<ent
unless the cash surrender alue has been duly paid, or the eBtension period has
eBpired, upon production of eidence of insurability satisfactory to the co<pany
and upon pay<ent of all oerdue pre<iu<s and any indebtedness to the
co<pany upon said policy, with interest rate not eBceeding that which would hae
been applicable to said pre<iu<s and indebtedness in the policy years prior to
reinstate<ent!
6'ny of the foregoing proisions or portions thereof not applicable to single
pre<iu< or ter< policies shall to that eBtent not be incorporated thereinF and any
such policy <ay be issued and deliered in the Philippines which in the opinion of
the Co<<issioner contains proisions on any one or <ore of the foregoing
reCuire<ents <ore faorable to the policyholder than hereinbefore reCuired!
6This section shall not apply to policies of group life or industrial life insurance!
6S#C! 3G8! (o policy of group life insurance shall be issued and deliered in the
Philippines unless it contains in substance the following proisions, or proisions
which in the opinion of the Co<<issioner are <ore faorable to the persons
insured, or at least as faorable to the persons insured and <ore faorable to the
policyholders=
6DaE ' proision that the policyholder is entitled to a grace period of either thirty
DG+E days or of one D*E <onth for the pay<ent of any pre<iu< due after the first,
during which grace period the death benefit coerage shall continue in force,
unless the policyholder shall hae gien the insurer written notice of
discontinuance in adance of the date of discontinuance and in accordance with
the ter<s of the policy! The policy <ay proide that the policyholder shall be
liable for the pay<ent of a pro rata pre<iu< for the ti<e the policy is in force
during such grace periodF
6DbE ' proision that the alidity of the policy shall not be contested, eBcept for
nonpay<ent of pre<iu<s after it has been in force for two D3E years fro< its date
of issueF and that no state<ent <ade by any insured under the policy relating to
his insurability shall be used in contesting the alidity of the insurance with
respect to which such state<ent was <ade after such insurance has been in
force prior to the contest for a period of two D3E years during such personAs
lifeti<e nor unless contained in a written instru<ent signed by hi<F
6DcE ' proision that a copy of the application, if any, of the policyholder shall be
attached to the policy when issued, that all state<ents <ade by the policyholder
or by persons insured shall be dee<ed representations and not warranties, and
that no state<ent <ade by any insured shall be used in any contest unless a
copy of the instru<ent containing the state<ent is or has been furnished to such
person or to his beneficiaryF
6DdE ' proision setting forth the conditions, if any, under which the insurer
reseres the right to reCuire a person eligible for insurance to furnish eidence of
indiidual insurability satisfactory to the insurer as a condition to part or all of his
coerageF
6DeE ' proision specifying an eCuitable adIust<ent of pre<iu<s or of benefits or
of both to be <ade in the eent that the age of a person insured has been
<isstated, such proision to contain a clear state<ent of the <ethod of
adIust<ent to be usedF
6DfE ' proision that any su< beco<ing due by reason of death of the person
insured shall be payable to the beneficiary designated by the insured, subIect to
the proisions of the policy in the eent that there is no designated beneficiary, as
to all or any part of such su<, liing at the death of the insured, and subIect to
any right resered by the insurer in the policy and set forth in the certificate to
pay at its option a part of such su< not eBceeding Fie hundred pesos DP:++!++E
to any person appearing to the insurer to be eCuitably entitled thereto by reason
of haing incurred funeral or other eBpenses incident to the last illness or, death
of the person insuredF
6DgE ' proision that the insurer will issue to the policyholder for deliery to each
person insured a state<ent as to the insurance protection to which he is entitled,
to who< the insurance benefits are payable, and the rights set forth in
paragraphs DhE, DiE and DIE followingF
6DhE ' proision that if the insurance, or any portion of it, on a person coered
under the policy ceases because of ter<ination of e<ploy<ent or of <e<bership
in the class or classes eligible for coerage under the policy, such person shall
be entitled to hae issued to hi< by the insurer, without eidence of insurability,
an indiidual policy of life insurance without disability or other supple<entary
benefits, proided application for the indiidual policy and pay<ent of the first
pre<iu< to the insurer shall be <ade within thirty DG+E days after such
ter<ination, and proided further that=
6D*E The indiidual policy shall be on any one of the for<s, eBcept ter<
insurance, then custo<arily issued by the insurer at the age and for an a<ount
not in eBcess of the coerage under the group policyF and
6D3E The pre<iu< on the indiidual policy shall be at the insurerAs then custo<ary
rate applicable to the for< and a<ount of the indiidual policy, to the class of ris?
to which such person then belongs, and to his age attained on the effectie date
of the indiidual policy!
6DiE ' proision that if the group policy ter<inates or is a<ended so as to
ter<inate the insurance of any class of insured persons, eery person insured
thereunder at the date of such ter<ination whose insurance ter<inates and who
has been so insured for fie D:E years prior to such ter<ination date shall be
entitled to hae issued to hi< by the insurer an indiidual policy of life insurance
subIect to the sa<e li<itations as set forth in paragraph DhE, eBcept that the group
policy <ay proide that the a<ount of such indiidual policy shall not eBceed the
a<ount of the personAs life insurance protection ceasingF
6DIE ' proision that if a person insured under the group policy dies during the
thirty DG+E-day period within which he would hae been entitled to an indiidual
policy issued to hi< in accordance with paragraphs DhE and DiE aboe and before
such indiidual policy shall hae beco<e effectie, the a<ount of life insurance
which he would hae been entitled to hae issued to hi< as an indiidual policy
shall be payable as a clai< under the group policy whether or not application for
the indiidual policy or the pay<ent of the first pre<iu< has been <adeF
6D?E &n the case of a policy issued to a creditor to insure debtors of such creditor,
a proision that the insurer will furnish to the policyholder for deliery to each
debtor insured under the policy a for< which will contain a state<ent that the life
of the debtor is insured under the policy and that any death benefit paid
thereunder by reason of his death shall be applied to reduce or eBtinguish
indebtedness!
6The proisions of paragraphs DfE to DIE shall not apply to policies issued to a
creditor to insure his debtors! &f a group life policy is on a plan of insurance other
than ter<, it shall contain a non-forfeiture proision or proisions which in the
opinion of the Co<<issioner is or are eCuitable to the insured or the policyholder=
Proided, That nothing herein contained shall be so construed as to reCuire
group life policies to contain the sa<e non-forfeiture proisions as are reCuired of
indiidual life policies!
6S#C! 3G:! The ter< industrial life insurance as used in this Code shall <ean
that for< of life insurance under which the pre<iu<s are payable either <onthly
or oftener, if the face a<ount of insurance proided in any policy is not <ore than
fie hundred ti<es that of the current statutory <ini<u< daily wage in the City of
Manila, and if the words industrial policy are printed upon the policy as part of the
descriptie <atter!
6'n industrial life policy shall not lapse for nonpay<ent of pre<iu< if such
nonpay<ent was due to the failure of the co<pany to send its representatie or
agent to the insured at the residence of the insured or at so<e other place
indicated by hi< for the purpose of collecting such pre<iu<= Proided, That the
proisions of this paragraph shall not apply when the pre<iu< on the policy
re<ains unpaid for a period of three DGE <onths or twele D*3E wee?s after the
grace period has eBpired!
6S#C! 3G,! &n the case of industrial life insurance, the policy shall contain in
substance the following proisions=
6DaE ' proision that the insured is entitled to a grace period of four D8E wee?s
within which the pay<ent of any pre<iu< after the first <ay be <ade, eBcept that
where pre<iu<s are payable <onthly, the period of grace shall be either one D*E
<onth or thirty DG+E daysF and that during the period of grace, the policy shall
continue in full force, but if during such grace period the policy beco<es a clai<,
then any oerdue and unpaid pre<iu<s <ay be deducted fro< any a<ount
payable under the policy in settle<entF
6DbE ' proision that the policy shall be incontestable after it has been in force
during the lifeti<e of the insured for a specified period, not <ore than two D3E
years fro< its date of issue, eBcept for nonpay<ent of pre<iu<s and eBcept for
iolation of the conditions of the policy relating to naal or <ilitary serice, or
serices auBiliary thereto, and eBcept as to proisions relating to benefits in the
eent of disability as defined in the policy, and those granting additional
insurance specifically against death by accident or by accidental <eans, or to
additional insurance against loss of, or loss of use of, specific <e<bers of the
bodyF
6DcE ' proision that the policy shall constitute the entire contract between the
parties, or if a copy of the application is endorsed upon and attached to the policy
when issued, a proision that the policy and the application therefor shall
constitute the entire contract between the parties, and in the latter case, a
proision that all state<ents <ade by the insured shall, in the absence of fraud,
be dee<ed representations and not warrantiesF
6DdE ' proision that if the age of the person insured, or the age of any person,
considered in deter<ining the pre<iu<, or the benefits accruing under the policy,
has been <isstated, any a<ount payable or benefit accruing under the policy
shall be such as the pre<iu< paid would hae purchased at the correct ageF
6DeE ' proision that if the policy is a participating policy, the co<pany shall
periodically ascertain and apportion any diisible surplus accruing on the policy
under the conditions specified thereinF
6DfE ' proision that in the eent of default in pre<iu< pay<ents after three DGE full
yearsA pre<iu<s hae been paid, the policy shall be conerted into a stipulated
for< of insurance, and that in the eent of default in pre<iu< pay<ents after fie
D:E full yearsA pre<iu<s hae been paid, a specified cash surrender alue shall
be aailable, in lieu of the stipulated for< of insurance, at the option of the
policyholder! The net alue of such stipulated for< of insurance and the a<ount
of such cash alue shall not be less than the resere on the policy and diidend
additions thereto, if any, at the end of the last co<pleted policy year for which
pre<iu<s shall hae been paid Dthe policy to specify the <ortality table, rate of
interest and <ethod of aluation adopted to co<pute such resereE, eBclusie of
any resere on disability benefits and accidental death benefits, less an a<ount
not to eBceed two and one-half percent D3PLE of the <aBi<u< a<ount insured
by the policy and diidend additions thereto, if any, when the issue age is under
ten D*+E years, and less an a<ount not to eBceed two and one-half percent D3P
LE of the current a<ount insured by the policy and diidend additions thereto, if
any, if the issue age is ten D*+E years or older, and less any eBisting indebtedness
to the co<pany on or secured by the policyF
6DgE ' proision that the policy <ay be surrendered to the co<pany at its ho<e
office within a period of not less than siBty D,+E days after the due date of a
pre<iu< in default for the specified cash alue= Proided, That the insurer <ay
defer pay<ent for not <ore than siB D,E <onths after the application therefor is
<adeF
6DhE ' table that shows in figures the nonforfeiture benefits aailable under the
policy eery year upon default in pay<ent of pre<iu<s during at least the first
twenty D3+E years of the policy, such table to begin with the year in which such
alues beco<e aailable, and a proision that the co<pany will furnish upon
reCuest an eBtension of such table beyond the year shown in the policyF
6DiE ' proision that specifies which one of the stipulated for<s of insurance
proided for under the proision of paragraph DfE of this section shall ta?e effect in
the eent of the insuredAs failure, within siBty D,+E days fro< the due date of the
pre<iu< in default, to notify the insurer in writing as to which one of such for<s
he has selectedF
6DIE ' proision that the policy <ay be reinstated at any ti<e within two D3E years
fro< the due date of the pre<iu< in default unless the cash surrender alue has
been paid or the period of eBtended ter< insurance eBpired, upon production of
eidence of insurability satisfactory to the co<pany and pay<ent of arrears of
pre<iu<s with interest at a rate not eBceeding siB percent D,LE per annu<
payable annuallyF
6D?E ' proision that when a policy shall beco<e a clai< by death of the insured,
settle<ent shall be <ade upon receipt of due proof of death, or not later than two
D3E <onths after receipt of such proofF
6DlE ' title on the face and on the bac? of the policy correctly describing its for<F
6D<E ' space on the front or the bac? of the policy for the na<e of the beneficiary
designated by the insured with a reseration of the insuredAs right to designate or
change the beneficiary after the issuance of the policy! The policy <ay also
proide that no designation or change of beneficiary shall be binding on the
insurer until endorsed on the policy by the insurer, and that the insurer <ay
refuse to endorse the na<e of any proposed beneficiary who does not appear to
the insurer to hae an insurable interest in the life of the insured! Such policy
<ay also contain a proision that if the beneficiary designated in the policy does
not surrender the policy with due proof of death within the period stated in the
policy, which shall not be less than thirty DG+E days after the death of the insured,
or if the beneficiary is the estate of the insured, or is a <inor, or dies before the
insured, or is not legally co<petent to gie alid release, then the insurer <ay
<a?e any pay<ent thereunder to the eBecutor or ad<inistrator of the insured, or
to any of the insuredAs relaties by blood or legal adoption or connections by
<arriage or to any person appearing to the insurer to be eCuitably entitled thereto
by reason of haing incurred eBpense for the <aintenance, <edical attention or
burial of the insuredF and
6DnE ' proision that when an industrial life insurance policy is issued proiding for
accidental or health benefits, or both, in addition to life insurance, the foregoing
proisions shall apply only to the life insurance portion of the policy!
6'ny of the foregoing proisions or portions thereof not applicable to
nonparticipating or ter< policies shall to that eBtent not be incorporated therein!
The foregoing proisions shall not apply to policies issued or granted pursuant to
the nonforfeiture proisions prescribed in proisions of paragraphs DfE and DiE of
this section, nor shall proisions of paragraphs DfE, DgE, DhE, and DiE hereof be
reCuired in ter< insurance of twenty D3+E years or less but such ter< policies
shall specify the <ortality table, rate of interest, and <ethod of co<puting
reseres!
6S#C! 3G-! (o policy of industrial life insurance shall be issued or deliered in the
Philippines if it contains any of the following proisions=
6DaE ' proision that gies the insurer the right to declare the policy oid because
the insured has had any disease or ail<ent, whether specified or not, or because
the insured has receied institutional, hospital, <edical or surgical treat<ent or
attention, eBcept a proision which gies the insurer the right to declare the policy
oid if the insured has, within two D3E years prior to the issuance of the policy,
receied institutional, hospital, <edical or surgical treat<ent or attention and if
the insured or the clai<ant under the policy fails to show that the condition
occasioning such treat<ent or attention was not of a serious nature or was not
<aterial to the ris?F
6DbE ' proision that gies the insurer the right to declare the policy oid because
the insured has been reIected for insurance, unless such right be conditioned
upon a showing by the insurer that ?nowledge of such reIection would hae led to
a refusal by the insurer to <a?e such contractF
6DcE ' proision that allows the co<pany to pay the proceeds of the policy at the
death of the insured to any person other than the na<ed beneficiary, eBcept in
accordance with a standard proision as specified under the proisions of
paragraph D<E of the preceding sectionF
6DdE ' proision that li<its the ti<e within which any action at law or in eCuity <ay
be co<<enced to less than siB D,E years after the cause of action shall accrueF
and
6DeE ' proision that specifies any <ode of settle<ent at <aturity of less alue
than the a<ount insured by the policy plus diidend additions, if any, less any
indebtedness to the co<pany on the policy and less any pre<iu< that <ay by
the ter<s of the policy be deducted, pay<ents to be <ade in accordance with the
ter<s of the policy!
6(othing contained in this section nor in the proision of paragraph DbE of the
preceding section, relating to incontestability, shall be construed as prohibiting
the life insurance co<pany fro< placing in its industrial life policies proisions
li<iting its liability with respect to=
6D*E 1eath resulting fro< aiation other than as a fare-paying passenger on a
regularly scheduled route between definitely established airportsF and
6D3E Military or naal serice= Proided, That if the liability of the co<pany is
li<ited as herein proided, such liability shall in no eent be fiBed at an a<ount
less than the resere on the policy DeBcluding the resere for any additional
benefits in the eent of death by accident or accidental <eans or for benefits in
the eent of any type of disabilityE, less any indebtedness on or secured by such
policyF nor shall any proision of this section apply to any proision in an
industrial life insurance policy for additional benefits in the eent of death by
accident or accidental <eans!
6T&T%# *+
6>'R&'B%# C)(TR'CTS
6S#C! 3G9! DaE (o insurance co<pany authoriHed to transact business in the
Philippines shall issue, delier, sell or use any ariable contract in the Philippines,
unless and until such co<pany shall hae satisfied the Co<<issioner that its
financial and general condition and its <ethods of operations, including the issue
and sale of ariable contracts, are not and will not be haHardous to the public or
to its policy and contract owners! (o foreign insurance co<pany shall be
authoriHed to issue, delier or sell any ariable contract in the Philippines, unless
it is li?ewise authoriHed to do so by the laws of its do<icile!
6DbE The ter< ariable contract shall <ean any policy or contract on either a
group or on an indiidual basis issued by an insurance co<pany proiding for
benefits or other contractual pay<ents or alues thereunder to ary so as to
reflect inest<ent results of any segregated portfolio of inest<ents or of a
designated separate account in which a<ounts receied in connection with such
contracts shall hae been placed and accounted for separately and apart fro<
other inest<ents and accounts! This contract <ay also proide benefits or
alues incidental thereto payable in fiBed or ariable a<ounts, or both! &t shall not
be dee<ed to be a security or securities as defined in The Securities 'ct, as
a<ended, or in the &nest<ent Co<pany 'ct, as a<ended, nor subIect to
regulations under said 'cts!
6DcE &n deter<ining the Cualifications of a co<pany reCuesting authority to issue,
delier, sell or use ariable contracts, the Co<<issioner shall always consider
the following=
6D*E The history, financial and general condition of the co<pany= Proided, That
such co<pany, if a foreign co<pany, <ust hae deposited with the
Co<<issioner for the benefit and security of its ariable contract owners in the
Philippines, securities satisfactory to the Co<<issioner consisting of bonds of
the /oern<ent of the Philippines or its instru<entalities with an actual <ar?et
alue of Two <illion pesos DP3,+++,+++!++EF
6D3E The character, responsibility and fitness of the officers and directors of the
co<panyF and
6DGE The law and regulation under which the co<pany is authoriHed in the state of
do<icile to issue such contracts!
6DdE &f after notice and hearing, the Co<<issioner shall find that the co<pany is
Cualified to issue, delier, sell or use ariable contracts in accordance with this
Code and the regulations and rules issued thereunder, the corresponding order
of authoriHation shall be issued! 'ny decision or order denying authority to issue,
delier, sell or use ariable contracts shall clearly and distinctly state the reasons
and grounds on which it is based!
6S#C! 3G;! 'ny insurance co<pany issuing ariable contracts pursuant to this
Code <ay in its discretion issue contracts proiding a co<bination of fiBed
a<ount and ariable a<ount of benefits and for option lu<p-su< pay<ent of
benefits!
6S#C! 38+! #ery ariable contract for< deliered or issued for deliery in the
Philippines, and eery certified for< eidencing ariable benefits issued pursuant
to any such contract on a group basis, and the application, rider and
endorse<ent for<s applicable thereto and used in connection therewith, shall be
subIect to the prior approal of the Co<<issioner!
6S#C! 38*! &llustration of benefits payable under any ariable contract shall not
include or inole proIections of past inest<ent eBperience into the future and
shall confor< with the rules and regulations pro<ulgated by the Co<<issioner!
6S#C! 383! >ariable contracts <ay be issued on the industrial life basis, proided
that the pertinent proisions of this Code and of the rules and regulations of the
Co<<issioner goerning ariable contracts are co<plied with in connection with
such contracts!
6S#C! 38G! #ery life insurance co<pany authoriHed under the proisions of this
Code to issue, delier, sell or use ariable contracts shall, in connection with the
sa<e, establish one or <ore separate accounts to be ?nown as separate
ariable accounts! 'll a<ounts receied by the co<pany in connection with any
such contracts which are reCuired by the ter<s thereof, to be allocated or applied
to one or <ore designated separate ariable accounts shall be placed in such
designated account or accounts! The assets and liabilities of each such separate
ariable account shall at all ti<es be clearly identifiable and distinguishable fro<
the assets and liabilities in all other accounts of the co<pany! (otwithstanding
any proision of law to the contrary, the assets held in any such separate ariable
account shall not be chargeable with liabilities arising out of any other business
the co<pany <ay conduct but shall be held and applied eBclusiely for the
benefit of the owners or beneficiaries of the ariable contracts applicable thereto!
&n the eent of the insolency of the co<pany, the assets of each such separate
ariable account shall be applied to the contractual clai<s of the owners or
beneficiaries of the ariable contracts applicable thereto! #Bcept as otherwise
specifically proided by the contract, no sale, eBchange or other transfer of
assets <ay be <ade by a co<pany, between any of its separate accounts or
between any other inest<ent account and one or <ore of its separate accounts,
unless in the case of a transfer into a separate account, such transfer is <ade
solely to establish the account or to support the operation of the contracts with
respect to the separate account to which the transfer is <ade, or in case of a
transfer fro< a separate account, such transfer would not cause the re<aining
assets of the account to beco<e less than the reseres and other contract
liabilities with respect to such separate account! Such transfer, whether into or
fro< a separate account, shall be <ade by a transfer of cash, or by a transfer of
securities haing a aluation which could be readily deter<ined in the <ar?et
place= Proided, That such transfer of securities is approed by the
Co<<issioner! The Co<<issioner <ay authoriHe other transfers a<ong such
accounts, if, in his opinion, such transfers would not be ineCuitable! 'll a<ounts
and assets allocated to any such separate ariable account shall be owned by
the co<pany and with respect to the sa<e the co<pany shall not be nor hold
itself out to be a trustee!
6S#C! 388! 'ny insurance co<pany which has established one or <ore separate
ariable accounts pursuant to the preceding section <ay inest and reinest all
or any part of the assets allocated to any such account in the securities and
inest<ents authoriHed by Sections 3+8, 3+,, 3+- and 3+9 for any of the funds of
an insurance co<pany in such a<ount or a<ounts as <ay be approed by the
Co<<issioner! &n addition thereto, such co<pany <ay also inest in co<<on
stoc?s or other eCuities which are listed on or ad<itted to trading in a securities
eBchange located in the Philippines, or which are publicly held and traded in the
oer-the-counter <ar?et as defined by the Co<<issioner and as to which <ar?et
Cuotations hae been aailable= Proided, howeer, That no such co<pany shall
inest in eBcess of ten percent D*+LE of the assets of any such separate ariable
accounts in any one corporation issuing such co<<on stoc?! The assets and
inest<ents of such separate ariable accounts shall not be ta?en into account in
applying the Cuantitatie inest<ent li<itations applicable to other inest<ents of
the co<pany! &n the purchase of co<<on capital stoc? or other eCuities, the
insurer shall designate to the bro?er, or to the seller if the purchase is not <ade
through a bro?er, the specific ariable account for which the inest<ent is <ade!
6S#C! 38:! 'ssets allocated to any separate ariable account shall be alued at
their <ar?et alue on the date of any aluation, or if there is no readily aailable
<ar?et alue then in accordance with the ter<s of the ariable contract
applicable to such assets, or if there are no such contract ter<s then in such
<anner as <ay be prescribed by the rules and regulations of the Co<<issioner!
6S#C! 38,! The resere liability for ariable contracts shall be established in
accordance with actuarial procedures that recogniHe the ariable nature of the
benefits proided, and shall be approed by the Co<<issioner!
6T&T%# **
6C%'&MS S#TT%#M#(T
6S#C! 38-! DaE (o insurance co<pany doing business in the Philippines shall
refuse, without Iust cause, to pay or settle clai<s arising under coerages
proided by its policies, nor shall any such co<pany engage in unfair clai<
settle<ent practices! 'ny of the following acts by an insurance co<pany, if
co<<itted without Iust cause and perfor<ed with such freCuency as to indicate a
general business practice, shall constitute unfair clai< settle<ent practices=
6D*E 5nowingly <isrepresenting to clai<ants pertinent facts or policy proisions
relating to coerage at issueF
6D3E Failing to ac?nowledge with reasonable pro<ptness pertinent
co<<unications with respect to clai<s arising under its policiesF
6DGE Failing to adopt and i<ple<ent reasonable standards for the pro<pt
inestigation of clai<s arising under its policiesF
6D8E (ot atte<pting in good faith to effectuate pro<pt, fair and eCuitable
settle<ent of clai<s sub<itted in which liability has beco<e reasonably clearF or
6D:E Co<pelling policyholders to institute suits to recoer a<ounts due under its
policies by offering without Iustifiable reason substantially less than the a<ounts
ulti<ately recoered in suits brought by the<!
6DbE #idence as to nu<bers and types of alid and Iustifiable co<plaints to the
Co<<issioner against an insurance co<pany, and the Co<<issionerAs
co<plaint eBperience with other insurance co<panies writing si<ilar lines of
insurance shall be ad<issible in eidence in an ad<inistratie or Iudicial
proceeding brought under this section!
6DcE &f it is found, after notice and an opportunity to be heard, that an insurance
co<pany has iolated this section, each instance of nonco<pliance with
paragraph DaE <ay be treated as a separate iolation of this section and shall be
considered sufficient cause for the suspension or reocation of the co<panyAs
certificate of authority!
6S#C! 389! The proceeds of a life insurance policy shall be paid i<<ediately
upon <aturity of the policy, unless such proceeds are <ade payable in
install<ents or as an annuity, in which case the install<ents, or annuities shall be
paid as they beco<e due= Proided, howeer, That in the case of a policy
<aturing by the death of the insured, the proceeds thereof shall be paid within
siBty D,+E days after presentation of the clai< and filing of the proof of death of
the insured! Refusal or failure to pay the clai< within the ti<e prescribed herein
will entitle the beneficiary to collect interest on the proceeds of the policy for the
duration of the delay at the rate of twice the ceiling prescribed by the Monetary
Board, unless such failure or refusal to pay is based on the ground that the clai<
is fraudulent!
6The proceeds of the policy <aturing by the death of the insured payable to the
beneficiary shall include the discounted alue of all pre<iu<s paid in adance of
their due dates, but are not due and payable at <aturity!
6S#C! 38;! The a<ount of any loss or da<age for which an insurer <ay be
liable, under any policy other than life insurance policy, shall be paid within thirty
DG+E days after proof of loss is receied by the insurer and ascertain<ent of the
loss or da<age is <ade either by agree<ent between the insured and the
insurer or by arbitrationF but if such ascertain<ent is not had or <ade within siBty
D,+E days after such receipt by the insurer of the proof of loss, then the loss or
da<age shall be paid within ninety D;+E days after such receipt! Refusal or failure
to pay the loss or da<age within the ti<e prescribed herein will entitle the
assured to collect interest on the proceeds of the policy for the duration of the
delay at the rate of twice the ceiling prescribed by the Monetary Board, unless
such failure or refusal to pay is based on the ground that the clai< is fraudulent!
6S#C! 3:+! &n case of any litigation for the enforce<ent of any policy or contract
of insurance, it shall be the duty of the Co<<issioner or the Court, as the case
<ay be, to <a?e a finding as to whether the pay<ent of the clai< of the insured
has been unreasonably denied or withheldF and in the affir<atie case, the
insurance co<pany shall be adIudged to pay da<ages which shall consist of
attorneyAs fees and other eBpenses incurred by the insured person by reason of
such unreasonable denial or withholding of pay<ent plus interest of twice the
ceiling prescribed by the Monetary Board of the a<ount of the clai< due the
insured, fro< the date following the ti<e prescribed in Section 389 or in Section
38;, as the case <ay be, until the clai< is fully satisfied= Proided, That failure to
pay any such clai< within the ti<e prescribed in said sections shall be
considered pri<a facie eidence of unreasonable delay in pay<ent!
6S#C! 3:*! &t is unlawful to=
6DaE Present or cause to be presented any fraudulent clai< for the pay<ent of a
loss under a contract of insuranceF and
6DbE Fraudulently prepare, <a?e or subscribe any writing with intent to present or
use the sa<e, or to allow it to be presented in support of any such clai<! 'ny
person who iolates this section shall be punished by a fine not eBceeding twice
the a<ount clai<ed or i<prison<ent of two D3E years, or both, at the discretion of
the court!
6T&T%# *3
6#R'M&('T&)( )F C)MP'(&#S
6S#C! 3:3! The Co<<issioner shall reCuire eery insurance co<pany doing
business in the Philippines to ?eep its boo?s, records, accounts and ouchers in
such <anner that he or his authoriHed representaties <ay readily erify its
annual state<ents and ascertain whether the co<pany is solent and has
co<plied with the proisions of this Code or the circulars, instructions, rulings or
decisions of the Co<<issioner!
6S#C! 3:G! The Co<<issioner shall at least once a year and wheneer he
considers the public interest so de<ands, cause an eBa<ination to be <ade into
the affairs, financial condition and <ethod of business of eery insurance
co<pany authoriHed to transact business in the Philippines and of any other
person, fir< or corporation <anaging the affairs andKor property of such
insurance co<pany! Such co<pany, as well as such <anaging person, fir< or
corporation, shall sub<it to the eBa<iner all such boo?s, papers and securities
as he <ay reCuire and such eBa<iner shall also hae the power to eBa<ine the
officers of such co<pany under oath touching its business and financial
condition, and the authority to transact business in the Philippines of any such
co<pany shall be suspended by the Co<<issioner if such eBa<ination is
refused and such co<pany shall not thereafter be allowed to transact further
business in the Philippines until it has fully co<plied with the proisions of this
section!
6/oern<ent-owned or -controlled corporations or entities engaged in social or
priate insurance shall si<ilarly be subIect to such eBa<ination by the
Co<<issioner unless their respectie charters otherwise proide!
6T&T%# *G
6S$SP#(S&)( )R R#>)C'T&)( )F '$T0)R&T2
6S#C! 3:8! &f the Co<<issioner is of the opinion upon eBa<ination of other
eidence that any do<estic or foreign insurance co<pany is in an unsound
condition, or that it has failed to co<ply with the proisions of law or regulations
obligatory upon it, or that its condition or <ethod of business is such as to render
its proceedings haHardous to the public or to its policyholders, or that its net
worth reCuire<ent, in the case of a do<estic stoc? co<pany, or its aailable cash
assets, in the case of a do<estic <utual co<pany, or its security deposits, in the
case of a foreign co<pany, is i<paired or deficient, or that the <argin of solency
reCuired of such co<pany is deficient, the Co<<issioner is authoriHed to
suspend or reo?e all certificates of authority granted to such insurance
co<pany, its officers and agents, and no new business shall thereafter be done
by such co<pany or for such co<pany by its agent in the Philippines while such
suspension, reocation or disability continues or until its authority to do business
is restored by the Co<<issioner! Before restoring such authority, the
Co<<issioner shall reCuire the co<pany concerned to sub<it to hi< a business
plan showing the co<panyAs esti<ated receipts and disburse<ents, as well as
the basis therefor, for the neBt succeeding three DGE years!
6T&T%# *8
6'PP)&(TM#(T )F C)(S#R>'T)R
6S#C! 3::! &f at any ti<e before, or after, the suspension or reocation of the
certificate of authority of an insurance co<pany as proided in the preceding title,
the Co<<issioner finds that such co<pany is in a state of continuing inability or
unwillingness to <aintain a condition of solency or liCuidity dee<ed adeCuate to
protect the interest of policyholders and creditors, he <ay appoint a conserator
to ta?e charge of the assets, liabilities, and the <anage<ent of such co<pany,
collect all <oneys and debts due to said co<pany and eBercise all powers
necessary to presere the assets of said co<pany, reorganiHe the <anage<ent
thereof, and restore its iability! The said conserator shall hae the power to
oerrule or reo?e the actions of the preious <anage<ent and board of
directors of the said co<pany, any proision of law, or of the articles of
incorporation or bylaws of the co<pany, to the contrary notwithstanding, and
such other powers as the Co<<issioner shall dee< necessary!
6The conserator <ay be another insurance co<pany doing business in the
Philippines, any officer or officers of such co<pany, or any other co<petent and
Cualified person, fir< or corporation! The re<uneration of the conserator and
other eBpenses attendant to the conseration shall be borne by the insurance
co<pany concerned!
6The conserator shall not be subIect to any action, clai< or de<and by, or
liability to, any person in respect of anything done or o<itted to be done in good
faith in the eBercise, or in connection with the eBercise, of the powers conferred
on the conserator!
6The conserator appointed shall report and be responsible to the Co<<issioner
until such ti<e as the Co<<issioner is satisfied that the insurance co<pany can
continue to operate on its own and the conseratorship shall li?ewise be
ter<inated should the Co<<issioner, on the basis of the report of the
conserator or of his own findings, deter<ine that the continuance in business of
the insurance co<pany would be haHardous to policyholders and creditors, in
which case the proisions of Title *: shall apply!
6(o insurance co<pany, life or non-life, or any professional reinsurer, ordered to
be liCuidated by the Co<<issioner under the proisions hereunder <ay be
rehabilitated or authoriHed to transact anew, insurance or reinsurance business,
as the case <ay be!
6T&T%# *:
6PR)C##1&(/S $P)( &(S)%>#(C2
6S#C! 3:,! 4heneer, upon eBa<ination or other eidence, it shall be disclosed
that the condition of any insurance co<pany doing business in the Philippines is
one of insolency, or that its continuance in business would be haHardous to its
policyholders and creditors, the Co<<issioner shall forthwith order the co<pany
to cease and desist fro< transacting business in the Philippines and shall
designate a receier to i<<ediately ta?e charge of its assets and liabilities, as
eBpeditiously as possible collect and gather all the assets and ad<inister the
sa<e for the benefit of its policyholders and creditors, and eBercise all the
powers necessary for these purposes including, but not li<ited to, bringing suits
and foreclosing <ortgages in the na<e of the insurance co<pany!
6The Co<<issioner shall thereupon deter<ine within ninety D;+E days whether
the insurance co<pany <ay be reorganiHed or otherwise placed in such
condition so that it <ay be per<itted to resu<e business with safety to its
policyholders and creditors and shall prescribe the conditions under which such
resu<ption of business shall ta?e place as well as the ti<e for fulfill<ent of such
conditions! &n such case, the eBpenses and fees in the collection and
ad<inistration of the insurance co<pany shall be deter<ined by the
Co<<issioner and shall be paid out of the assets of such co<pany!
6&f the Co<<issioner shall deter<ine and confir< within the said period that the
insurance co<pany is insolent, as defined hereunder, or cannot resu<e
business with safety to its policyholders and creditors, he shall, if the public
interest reCuires, order its liCuidation, indicate the <anner of its liCuidation and
approe a liCuidation plan and i<ple<ent it i<<ediately! The Co<<issioner shall
designate a co<petent and Cualified person as liCuidator who shall ta?e oer the
functions of the receier preiously designated and, with all conenient speed,
reinsure all its outstanding policies, conert the assets of the insurance co<pany
to cash, or sell, assign or otherwise dispose of the sa<e to the policyholders,
creditors and other parties for the purpose of settling the liabilities or paying the
debts of such co<pany and he <ay, in the na<e of the co<pany, institute such
actions as <ay be necessary in the appropriate court to collect and recoer
accounts and assets of the insurance co<pany, and to do such other acts as
<ay be necessary to co<plete the liCuidation as ordered by the Co<<issioner!
6The proisions of any law to the contrary notwithstanding, the actions of the
Co<<issioner under this section shall be final and eBecutory, and can be set
aside by the court upon petition by the co<pany and only if there is conincing
proof that the action is plainly arbitrary and <ade in bad faith! The Co<<issioner,
through the Solicitor /eneral, shall then file the corresponding answer reciting
the proceeding ta?en and praying the assistance of the court in the liCuidation of
the co<pany! (o restraining order or inIunction shall be issued by the court
enIoining the Co<<issioner fro< i<ple<enting his actions under this section,
unless there is conincing proof that the action of the Co<<issioner is plainly
arbitrary and <ade in bad faith and the petitioner or plaintiff files with the Cler? or
Judge of the Court in which the action is pending a bond eBecuted in faor of the
Co<<issioner in an a<ount to be fiBed by the court! The restraining order or
inIunction shall be refused or, if granted, shall be dissoled upon filing by the
Co<<issioner, if he so desires, of a bond in an a<ount twice the a<ount of the
bond of the petitioner or plaintiff conditioned that it will pay the da<ages which
the petition or plaintiff <ay suffer by the refusal or the dissolution of the
inIunction! The proisions of Rule :9 of the (ew Rules of Court insofar as they
are applicable shall goern the issuance and dissolution of the restraining order
or inIunction conte<plated in this section!
6'll proceedings under this title shall be gien preference in the courts! The
Co<<issioner shall not be reCuired to pay any fee to any public officer for filing,
recording, or in any <anner authenticating any paper or instru<ent relating to the
proceedings!
6's used in this title, the ter< &nsolency shall <ean the inability of an insurance
co<pany to pay its lawful obligations as they fall due in the usual and ordinary
course of business as <ay be shown by its failure to <aintain the solency
reCuire<ents under Section 3++ of this Code!
6S#C! 3:-! The receier or the liCuidator, as the case <ay be, designated under
the proisions of this title, shall not be subIect to any action, clai< or de<and by,
or liability to, any person in respect of anything done or o<itted to be done in
good faith in the eBercise, or in connection with the eBercise, of the powers
conferred on such receier or liCuidator!
6T&T%# *,
6C)(S)%&1'T&)( '(1 M#R/#R )F
&(S$R'(C# C)MP'(&#S
6S#C! 3:9! $pon prior notice to the Co<<issioner, two D3E or <ore do<estic
insurance co<panies, acting through their respectie boards of directors, <ay
negotiate to <erge into a single corporation which shall be one of the constituent
corporations, or consolidate into a single corporation which shall be a new
corporation to be for<ed by the consolidation! ' co<<on agree<ent of the
proposed <erger or consolidation shall be drawn up for sub<ission to the
stoc?holders or <e<bers of the constituent co<panies for adoption and approal
in accordance with the proisions of the respectie bylaws of the constituent
co<panies and all eBisting laws that <ay be pertinent!
6S#C! 3:;! Such agree<ent shall include, aside fro< the proposed <erger or
consolidation, proisions relatie to the <anner of transfer of assets to and
assu<ption of liabilities by the absorbing or acCuiring co<pany fro< the
absorbed or dissoled co<pany or co<paniesF the proposed articles of <erger or
consolidation and bylaws of the suriing or acCuiring co<panyF the corporate
na<e to be adopted which should not be that of any other eBisting co<pany
transacting si<ilar business or one so si<ilar as to be calculated to <islead the
publicF the rights of the stoc?holders or <e<bers of the absorbed or dissoled
co<paniesF date of effectiity of the <erger or consolidationF and such particulars
as <ay be necessary to eBplain and <a?e <anifest the obIects and purposes of
the absorbing or acCuiring co<pany!
6S#C! 3,+! $pon eBecution of such agree<ent to <erge or consolidate by and
between or a<ong the boards of directors of the constituent co<panies, notice
thereof shall be <ailed i<<ediately to their policyholders and creditors! The
co<pany or co<panies to be absorbed or dissoled shall discharge all its
accrued liabilitiesF otherwise, such liabilities shall, with the consent of its
creditors, be transferred to and assu<ed by the absorbing or acCuiring co<pany,
or such liabilities be reinsured by the latter! &n the case of such policies as are
subIect to cancellation by the co<pany or co<panies to be absorbed or
dissoled, sa<e <ay be cancelled pursuant to the ter<s thereof in lieu of such
transfer, assu<ption, or reinsurance!
6S#C! 3,*! $pon approal or adoption in the <eetings of the stoc?holders or
<e<bers called for the purpose in each of the constituent co<panies of the
agree<ent to <erge or consolidate, all stoc?holders or <e<bers dissenting or
obIecting to the <erger or consolidation shall be paid the alue of their shares by
the co<pany concerned in accordance with the bylaws thereof!
6S#C! 3,3! $pon approal or adoption of the agree<ent to <erge or consolidate
by the stoc?holders or <e<bers of the constituent co<panies, the corresponding
articles of <erger or of consolidation shall be duly eBecuted by the presidents
and attested by the corporate secretaries and shall bear the corporate seals of
the <erging or consolidating co<panies setting forth=
6DaE The plan of <erger or the plan of consolidationF
6DbE 's to each corporation, the nu<ber of shares outstanding, or in case of
<utual corporations, the nu<ber of <e<bersF and
6DcE 's to each corporation, the nu<ber of shares or <e<bers oted for and
against such plan, respectiely! Thereafter, a certified copy of such articles of
<erger or consolidation, together with a certificate of approal or adoption by the
stoc?holders or <e<bers of such articles of <erger or consolidation, erified by
affidaits of such officers and under the seal of the constituent co<panies, shall
be sub<itted to the Co<<issioner, together with such other papers or
docu<ents which the Co<<issioner <ay reCuire, for his consideration!
6S#C! 3,G! The articles of <erger or of consolidation, signed and erified as
hereinaboe reCuired, shall be filed with the Securities and #Bchange
Co<<ission for its eBa<ination and approal!
6S#C! 3,8! $pon receipt fro< the Securities and #Bchange Co<<ission of the
certificate of <erger or of consolidation, the constituent co<panies shall
surrender to the Co<<issioner their respectie certificates of authority to
transact insurance business! The absorbing or suriing co<pany in case of
<erger, or the newly for<ed co<pany in case of consolidation, shall i<<ediately
file with the Co<<issioner the corresponding application for issuance of a new
certificate of authority to transact insurance business, together with a certified
copy of the certificate of <erger or of consolidation, and of the certificate of
increase of stoc?s, if there is any, issued by the Securities and #Bchange
Co<<ission!
6S#C! 3,:! (othing in this title shall be construed to enlarge the powers of the
absorbing or suriing co<pany in case of <erger, or the newly for<ed co<pany
in case of consolidation, eBcept those conferred by the certificate of <erger or of
consolidation and the articles of <erger or of consolidation, or the a<ended
articles of incorporation, as registered with the Securities and #Bchange
Co<<ission!
6S#C! 3,,! (o director, officer, or stoc?holder of any such constituent co<panies
shall receie any fee, co<<ission, co<pensation, or other aluable consideration
whatsoeer, directly or indirectly, or in any <anner aiding, pro<oting or assisting
in such <erger or consolidation!
6S#C! 3,-! The <erger or consolidation of co<panies under this Code shall be
subIect to the proisions of the Corporation Code, and, in those cases specified
in Republic 'ct (o! :8::, as a<ended, be further subIect to the proisions of
said law!
6T&T%# *-
6M$T$'%&M'T&)( )F ST)C5 %&F#
&(S$R'(C# C)MP'(&#S
6S#C! 3,9! 'ny do<estic stoc? life insurance co<pany doing business in the
Philippines <ay conert itself into an incorporated <utual life insurer! To that end
it <ay proide and carry out a plan for the acCuisition of the outstanding shares
of its capital stoc? for the benefit of its policyholders, or any class or classes of its
policyholders, by co<plying with the reCuire<ents of this chapter!
6S#C 3,;! Such plan shall include appropriate proceedings for a<ending the
insurerAs articles of incorporation to gie effect to the acCuisition, by said insurer,
for the benefit of its policyholders or any class or classes thereof, of the
outstanding shares of its capital stoc? and the conersion of the insurer fro< a
stoc? corporation into a nonstoc? corporation for the benefit of its <e<bers! The
<e<bers of such nonstoc? corporation shall be the policyholders fro< ti<e to
ti<e of the class or classes for whose benefit the stoc? of the insurer was
acCuired, and the policyholders of such other class or classes as <ay be
specified in such corporationAs articles of incorporation as they <ay be a<ended
fro< ti<e to ti<e! Such plan shall be=
6DaE 'dopted by a ote of a <aIority of the directorsF
6DbE 'pproed by the ote of the holders of at least a <aIority of the outstanding
shares at a special <eeting of shareholders called for that purpose, or by the
written consent of such shareholdersF
6DcE Sub<itted to the Co<<issioner and approed by hi< in writingF
6DdE 'pproed by a <aIority ote of all the policyholders of the class or classes for
whose benefit the stoc? is to be acCuired oting at an election by the
policyholders called for that purpose, subIect to the proisions of Section 3-*!
The ter<s policyholder or policyholders as used in this chapter shall be dee<ed
to <ean the person or persons insured under an indiidual policy of life
insurance, or of health and accident insurance, or of any co<bination of life,
health and accident insurance! They shall also include the person or persons to
who< any annuity or pure endow<ent is presently or prospectiely payable by
the ter<s of an indiidual annuity or pure endow<ent contract, eBcept where the
policy or contract declares so<e other person to be the owner or holder thereof,
in which case such other person shall be dee<ed policyholder! &n any case
where a policy or contract na<es two or <ore persons as Ioint insured, payees,
owners or holders thereof, the persons so na<ed shall be dee<ed collectiely to
be one D*E policyholder for the purpose of this chapter! &n any case where a
policy or contract shall hae been assigned by assign<ent absolute on its face to
an assignee other than the insurer, and such assign<ent shall hae been filed at
the principal office of the insurer at least thirty DG+E days prior to the date of any
election or <eeting referred to in this chapter, then such assignee shall be
dee<ed at such election or <eeting to be the policyholder! For the purpose of
this chapter the ter<s policyholder and policyholders include the e<ployer to
who<, or a president, secretary or other eBecutie officer of any corporation or
association to which a <aster group policy has been issued, but eBclude the
holders of certificates or policies issued under or in connection with a <aster
group policy! Beneficiaries under un<atured contracts shall not as such be
dee<ed to be policyholdersF and
6DeE Filed with the Co<<issioner after haing been approed as proided in this
section!
6S#C! 3-+! The Co<<issioner shall eBa<ine the plan sub<itted to hi< under the
proisions of subparagraph DcE of Section 3,;! 0e shall not approe such plan
unless in his opinion the rights and interests of the insurer, its policyholders and
shareholders are protected nor unless he is satisfied that the plan will be fair and
eCuitable in its operation!
6S#C! 3-*! The election prescribed by subparagraph DdE of Section 3,; shall be
called by the board of directors or the president, and eery policyholder of the
class or classes for whose benefit the stoc? is to be acCuired, whose insurance
shall hae been in force for at least one D*E year prior to such election shall hae
one ote, regardless of the nu<ber of policies or a<ount of insurance he holds,
and regardless of whether such policies are policies of life insurance or policies
of health and accident insurance or annuity contracts! (otice of such election
shall be gien to policyholders entitled to ote by <ail fro< the principal office of
such insurer at least thirty DG+E days prior to the date set for such election, in a
sealed enelope, postage prepaid, addressed to each such policyholder at his
last ?nown address!
6>oting shall be by one of the following <ethods=
6DaE 't a <eeting of such policyholders, held pursuant to such notice, by ballot in
person or by proBy!
6DbE &f not by the <ethod described in the preceding subparagraph, then by <ail
pursuant to a procedure and on for<s to be prescribed by such plan!
6Such election shall be conducted under the direction and superision of three DGE
i<partial and disinterested inspectors appointed by the insurer and approed by
the Co<<issioner! &n case any person appointed as inspector fails to appear at
such <eeting or fails or refuses to act at such election, the acancy, if occurring
in adance of the conening of the <eeting or in adance of the opening of the
<ail ote, <ay be filled in the <anner prescribed for the appoint<ent of
inspectors and, if occurring at the <eeting or during the canass of the <ail ote,
<ay be filled by the person acting as chair<an of said <eeting or designated for
that purpose in such plan! The decision, act or certificate of a <aIority of the
inspectors shall be effectie in all respects as the decision, act or certificate of all!
The inspectors of election shall deter<ine the nu<ber of policyholders, the oting
power of each, the policyholders represented at the <eeting or oting by <ail,
the eBistence of a Cuoru< and the authenticity, alidity and effect of proBies!
They shall receie otes, hear and deter<ine all challenges and Cuestions in any
way arising in connection with the right to ote, count and tabulate all otes,
deter<ine the result, and do such other acts as are proper to conduct the ote
with fairness to all policyholders! The inspectors of election shall, before
co<<encing perfor<ance of their duties, subscribe to and file with the insurer
and with the Co<<issioner an oath that they, and each of the<, will perfor< their
duties i<partially, in good faith, to the best of their ability and as eBpeditiously as
is practicable! )n the reCuest of the insurer, the Co<<issioner, a policyholder or
his proBy, the inspectors shall <a?e a report in writing of any challenge or
Cuestion or <atter deter<ined by the< and eBecute a certificate of any fact found
by the<! They shall also certify the result of such ote to the insurer and to the
Co<<issioner! 'ny report or certificate <ade by the< shall be pri<a facie
eidence of facts stated therein! 'll necessary eBpenses incurred in connection
with such election shall be paid by the insurer! For the purpose of this section, a
Cuoru< shall consist of fie percent D:LE of the policyholders of such insurer
entitled to ote at such election!
6S#C! 3-3! &n carrying out any such plan, the insurer <ay acCuire any shares of
its own stoc? by gift, beCuest or purchase! 'ny shares so acCuired shall, unless
as a result of such acCuisition all of the shares of the insurer shall hae been
acCuired, be acCuired in trust for the policyholders of the class or classes for
whose benefit the plan proides that the stoc? of the insurer shall be acCuired as
hereinafter proided! Such shares shall be assigned and transferred on the
boo?s of such insurer and approed by the Co<<issioner! Such trustees shall
hold such stoc? in trust until all of the outstanding shares of capital stoc? of such
insurer hae been acCuired, but for not longer than thirty DG+E years with such
eBtensions of not <ore than fie D:E years each as <ay be granted by the
Co<<issioner! Such eBtensions <ay be granted by the Co<<issioner if the plan
so proides and if in his opinion the plan of acCuisition of all of such stoc? can be
co<pleted within a reasonable period! Such trustees shall ote such stoc? at all
corporate <eetings at which stoc?holders hae the right to ote! 4hen all the
outstanding shares of capital stoc? of such insurer hae been acCuired, all said
shares shall be cancelled, the certificate of a<end<ent of the insurerAs articles of
incorporation giing effect thereto shall be filed in accordance with the proisions
of the Corporation Code, and the insurer shall beco<e a nonstoc? corporation for
the profit of its <e<bers and such trust shall thereupon ter<inate! Thereafter
such corporation shall be conducted for the <utual benefit, ratably, of its
policyholders of the class or classes for whose benefit the stoc? was acCuired
and shall hae power to issue non-assessable policies on a resere basis subIect
to all proisions of law applicable to incorporated life insurers issuing non-
assessable policies on a resere basis! Policies so issued <ay be upon the basis
of full or partial participation therein as agreed between the insurer and the
insured!
6$pon the ter<ination of any such oting trust, either in accordance with its ter<s
or as hereinaboe proided, such plan of <utualiHation shall ter<inate, unless
theretofore co<pleted! $pon such ter<ination, unless the plan of <utualiHation
proides for the disposition of the shares acCuired by the insurer under such plan
or for the disposition of the proceeds thereof, the shares held by such trustees
shall be disposed of in accordance with an order of the court of co<petent
Iurisdiction in the Iudicial district in which is located the principal office of such
insurer, <ade upon a erified petition of the Co<<issioner!
6S#C! 3-G! 'ny such plan of <utualiHation <ay proide for the creation of a
oting trust under a trust agree<ent for the holding and oting by three DGE or
<ore trustees of any portion or all of the shares of the insurer not reCuired upon
the adoption of such plan! The oting trustees shall be na<ed in accordance with
such plan or, if no proision is <ade therein for the na<ing of such trustees, then
by the insurer! The oting trust agree<ent and oting trustees shall be subIect to
the approal of the Co<<issioner! 'ny or all of the trustees under such oting
trust agree<ent <ay be the sa<e person or persons as any or all of the trustees
referred to in Section 3-3! Such oting trust agree<ent shall proide that in the
eent of acCuisition by the insurer of any of the shares of stoc? held thereunder
in accordance with the proisions of the plan, such shares so acCuired together
with the oting rights thereof shall be transferred by the trustees na<ed under
the proisions of this section to the trustees na<ed under the proisions of
Section 3-3! 'ny oting trust agree<ent created pursuant to the proisions of
this section <ay be <ade irreocable for not longer than thirty DG+E years and
thereafter until the ter<ination of the trust proided for in Section 3-3! The trust
created pursuant to the proisions of this section shall ter<inate in any eent
upon ter<ination of the trust proided for in Section 3-3! $pon the ter<ination of
the trust created pursuant to the proisions of this section, any shares held in
such trust shall reert to the persons entitled thereto by law!
6S#C! 3-8! #ery pay<ent for the acCuisition of any shares of the capital stoc? of
such insurer, the purchase price of which is not fiBed by such plan, shall be
subIect to the prior approal of the Co<<issioner! (either such plan, nor any
such pay<ent, <ay be approed by the Co<<issioner unless he finds that the
rights and interests of the insurer, its policyholders, and shareholders are
protected!
6S#C! 3-:! The trustees referred to in Section 3-3 shall file with such insurer and
with the Co<<issioner a erified acceptance of their appoint<ents and erified
declarations that they will faithfully discharge their duties as such trustees! 'll
diidends and other su<s receied by said trustees on the shares held by the<,
after paying the necessary eBpenses of eBecuting their trust, shall be
i<<ediately repaid to such insurer for the benefit of all who are, or <ay beco<e,
policyholders of such insurance of the class or classes for whose benefit the
stoc? of such insurer was acCuired and entitled to participate in the profits thereof
and shall be added to and beco<e part of the assets of such insurer!
6S#C! 3-,! &f, at any ti<e within the period proided in the plan for the acCuisition
of the outstanding shares of stoc? of the insurer, ninety percent D;+LE thereof
has already been acCuired and transferred to the trustees under the plan, the
insurer by a ote of a <aIority of the directors <ay deter<ine to <a?e an offer,
with the per<ission of the Co<<issioner and subIect to such reCuire<ent as he
<ay specify, to acCuire by purchase all of the shares not theretofore acCuired
under the plan, at a specified price which the insurer considers to be their fair
alue as of the date of <a?ing such offer!
6&f the offer to acCuire is per<itted by the Co<<issioner, the insurer shall <a?e a
written offer by registered <ail to each shareholder whose shares hae not
theretofore been acCuired under the plan or otherwise, offering to acCuire all his
shares at such price if accepted in writing within thirty DG+E days after the <ailing
of such offer! 'ny shareholder accepting such offer within the ti<e therefor shall,
within siBty D,+E days after his acceptance, transfer to the insurer the certificates
representing such shares and, upon doing so, shall be paid by the insurer the
a<ount of such offer for his shares! 'ny share so acCuired shall be assigned and
transferred to the trustees under the plan and held by the< as shares acCuired
pursuant to the plan!
6#ach shareholder who does not accept such offer to acCuire his shares within
the ti<e stated in such offer for acceptance thereof shall within fifteen D*:E days
after the eBpiration of such offer apply to the Secretary of Finance for a
deter<ination of the fair alue of his shares as of the date of <a?ing such offer!
The Secretary of Finance <ay hi<self, after due notice and hearing, deter<ine
upon the eidence receied the fair alue of the shares as of the date of <a?ing
such offer, or appoint three DGE i<partial and disinterested persons to appraise
the fair alue of such shares with such direction as he shall dee< proper and
necessary to eBpedite the proceedings! $pon co<pletion of the appraisal
proceedings, the appraisers shall file with the Secretary of Finance their report in
writing stating the fair alue of such shares as of the date of the <a?ing of such
offer and setting forth their findings in support of such state<ent! The appraisers
shall furnish each party to the proceedings a copy of their appraisal report, and
within ten D*+E days after receipt thereof, any such party <ay signify his
obIection, if any, to the report or <oe for the approal thereof! $pon the
eBpiration of the period of ten D*+E days referred to aboe, the report shall be set
for hearing, after which the Secretary of Finance shall issue an order adopting,
<odifying or reIecting the report, in whole or in part, or he <ay receie further
eidence or <ay reco<<it it with instructions! 4heneer the Secretary of
Finance shall deter<ine in any <anner, as aforesaid, the fair alue of such
shares, he <ay also deter<ine the ter<s of pay<ent thereof by the insurer! The
eBpenses incidental to the proceedings including charges of the appraisers, if
any, shall be paid eCually by the insurer and the shareholder!
6The findings of the Secretary of Finance on all Cuestions of fact raised at the
hearing of the application for deter<ination of the fair alue of such shares shall
be conclusie upon all parties to the proceedings! The order of the Secretary of
Finance deter<ining the fair alue of the shares and the ter<s of pay<ent
thereof shall hae the force and effect of a Iudg<ent which shall be appealable
on any Cuestion of law! Such order shall beco<e final and eBecutory fifteen D*:E
days after receipt thereof by the parties to the proceedings!
6$pon any such order beco<ing final and fro< which no appeal is pending, or
when the ti<e to appeal therefro< has eBpired, each shareholder party to the
proceedings shall transfer his shares to the insurer and surrender to the said
insurer the certificates representing such shares and the insurer shall <a?e
pay<ent therefor as proided in such order! 'ny shares so acCuired by the
insurer shall be assigned and transferred to the trustees and held by the< as
shares acCuired pursuant to the plan!
6'ny shareholder who does not apply to the Secretary of Finance in the <anner
and within the ti<e hereinbefore prescribed shall be dee<ed to hae accepted
the offer referred to aboe, effectie, howeer, upon the eBpiration of the ti<e
hereinaboe prescribed for <a?ing such application, and such shareholderAs ti<e
for accepting such offer shall, for that purpose only, be dee<ed to hae been
eBtended accordingly!
6'ny offer to acCuire shares <ade pursuant to this section shall, eBcept as
otherwise proided herein, be irreocable until all proceedings upon such offer
hae been co<pleted or all shares hae otherwise been earlier acCuired by the
insurer!
6'ny shareholder who has eBpressly or i<pliedly accepted the plan or the offer to
acCuire his shares not theretofore acCuired under the plan, and any shareholder
who has reIected such plan or such offer and has applied, as aforesaid, to the
Secretary of Finance for a deter<ination of the fair alue of his shares
subseCuent to which an agree<ent has been reached or a final order issued
fiBing such fair alue but who fails to surrender his certificates for cancellation
upon pay<ent of the a<ount to which he is entitled, <ay be co<pelled to do so
by an order of the Secretary of Finance for that purpose and such order <ay
proide that upon failure of such shareholder to surrender such certificates for
cancellation, such order shall stand in lieu of such surrender and cancellation!
6S#C! 3--! Such insurer, after <utualiHation, shall be a continuation of the
original insurer, and such <utualiHation shall not affect such insurerAs certificate
of authority nor eBisting suits, rights or contracts eBcept as proided in said plan
for the acCuisition of the outstanding shares of the capital stoc? of such insurer,
approed as proided in this chapter! Such insurer, after <utualiHation, shall
eBercise all the rights and powers and shall perfor< all the duties conferred or
i<posed by law upon insurers writing the classes of insurance written by it, and
to protect rights and contracts eBisting prior to <utualiHation, subIect to the effect
of said plan! The board of directors of such insurer, prior to <utualiHation, <ay
adopt a<end<ents to its bylaws to ta?e effect upon <utualiHation!
6S#C! 3-9! DaE 'n annual <eeting of <e<bers shall be held at ten oAcloc? in the
<orning of the fourth Tuesday of March of each year at the principal office of the
insurer, unless a different ti<e or place is proided in the bylaws!
6DbE Special <eetings of the <e<bers, for any purpose or purposes whatsoeer,
<ay be called at any ti<e by the president, or by the board of directors, or by one
or <ore <e<bers holding not less than one-fifth D*K:E of the oting power of such
insurer, or by such other officers or persons as the bylaws authoriHe!
DcE (otice of all <eetings of <e<bers whether annual or special shall be gien in
writing to the <e<bers entitled to ote by the secretary, or an assistant secretary,
or other person charged with that duty, or if there be no such officer, or in case of
his neglect or refusal, by any director or <e<ber! 't the option of the insurer
such notice <ay be i<printed on pre<iu< notices or receipts or on both!
6' notice <ay be gien by such insurer to any <e<ber either personally, or by
<ail, or other <eans of written co<<unication, charges prepaid, addressed to
such <e<ber at his address appearing on the boo?s of the insurer, or gien by
hi< to the insurer for the purpose of notice! &f a <e<ber gies no address, notice
shall be dee<ed to hae been gien hi< if sent by <ail or other <eans of written
co<<unication addressed to the place where the principal office of the insurer is
situated, or if published at least once in so<e newspaper of general circulation in
the place in which said office is located!
6(otice of any <eeting of <e<bers shall be sent to each <e<ber entitled thereto
not less than seen D-E days before such <eeting, unless the bylaws proide
otherwise!
6(otice of any <eeting of <e<bers shall specify the place, the day and the hour
of the <eeting and the general nature of the business to be transacted!
6(otice of an annual <eeting to be held at the ti<e and place specified in
subparagraph DaE of this section shall be sufficiently gien if published at least
once in each of four D8E successie wee?s in a newspaper of general circulation
in the place in which the principal office of such insurer is located, and if so
published no other notice of such <eeting shall be reCuired!
6DdE The presence in person or by proBy of fie percent D:LE of the <e<bers
entitled to ote at any <eeting shall constitute a Cuoru< for the transaction of
business, including the a<end<ent of the articles of incorporation andKor the
bylaws unless otherwise proided by the bylaws!
6DeE #ach such <e<ber shall hae one D*E ote at any <eeting of <e<bers
regardless of the nu<ber of policies or the a<ount of insurance that such
<e<ber holds and regardless of whether such policies are policies of life
insurance, or of health and accident insurance, or both! 'ny <e<ber entitled to
ote shall hae the right to do so either in person or by an agent or agents
authoriHed by a written proBy eBecuted by such person or his duly authoriHed
agent and filed with the secretary of such insurer!
6DfE The directors of the insurer in office at the ti<e the insurer is <utualiHed as
proided in this chapter shall continue in office until the first annual <eeting of
<e<bers! 't the first annual <eeting of <e<bers and at each annual <eeting
thereafter, directors shall be elected by the <e<bers for the ter< or ter<s
authoriHed by this chapter!
6DgE The articles of incorporation or the bylaws <ay proide that the directors <ay
be diided into two D3E or <ore classes whose ter<s of office shall eBpire at
different ti<es, but no ter<s shall continue longer than siB D,E years! &n the
absence of such proisions, each director, eBcept <e<bers of the board of
directors at the ti<e the insurer is <utualiHed, shall be elected for a ter< of one
D*E year! 'll directors shall hold office for a ter< for which they are elected and
until their successors are elected and Cualified! ' director <ay, but need not be a
<e<ber or policyholder of the insurer of which he is acting as director! >acancies
in the board of directors <ay be filled by a <aIority of the re<aining directors,
though less than a Cuoru<, and each director so elected shall hold office until the
neBt annual <eeting!
6DhE 'll insurers <utualiHed under the proisions of this chapter shall be subIect to
all other applicable proisions of this Code! The proisions of the Corporation
Code shall apply in a suppletory <anner!
6S#C! 3-;! The proisions of Co<<onwealth 'ct (o! 9G, otherwise ?nown as the
Securities 'ct, as a<ended, shall not apply to any of the following=
6DaE Shares of the capital stoc? of such insurer acCuired as proided in Section
3-3 and assigned and transferred to the trustees as is proided in said section,
and the assign<ent and transfer of said shares as so proidedF
6DbE 'ny certificate or other instru<ent issued to a policyholder of such
<utualiHed insurer conferring or eidencing <e<bership in such <utualiHed
insurer or conferring or eidencing such <e<berAs right to participate in the
profits or share in the assets of such <utualiHed insurer by irtue of his
<e<bership therein, and the issuance of such certificate or other instru<entF
6DcE The plan for the acCuisition of the outstanding shares of the capital stoc? of
such insurer authoriHed by the proisions of this chapter, the sub<ission of said
plan to the Co<<issioner and to the policyholders of such insurer as proided in
this chapter, and the approal and carrying out of said plan or any part thereof in
accordance with the proisions of this chapter!
6S#C! 39+! ' do<estic <utual life insurance co<pany doing business in the
Philippines <ay conert itself into an incorporated stoc? life insurance co<pany
by de<utualiHation! To that end, it <ay proide and carry out a plan for the
conersion by co<plying with the reCuire<ents of this title!
6The conersion of a do<estic <utual life insurance co<pany to an incorporated
stoc? life insurance co<pany shall be carried out pursuant to a conersion plan
duly approed by the Co<<issioner!
6The Co<<issioner shall pro<ulgate such rules and regulations as he or she
<ay dee< necessary to carry out the proisions of this title, after due
consultation with representaties of the insurance industry!
6'll conerted insurers under the proisions of this title shall be subIect to all
other applicable proisions of this Code! The proisions of the Corporation Code
shall apply in a suppletory <anner!
6T&T%# *9
64&T01R'4'% )F F)R#&/(
&(S$R'(C# C)MP'(&#S
6S#C! 39*! ' foreign insurance co<pany doing business in the Philippines, upon
pay<ent of the fee hereinafter prescribed and surrender to the Co<<issioner of
its certificate of authority, <ay apply to withdraw fro< the Philippines! Such
application shall be duly eBecuted in writing, acco<panied by eidence of due
authority for such eBecution, properly ac?nowledged!
6S#C! 393! The Co<<issioner shall publish the application for withdrawal once a
wee? for three DGE consecutie wee?s in a newspaper of general circulation in the
Philippines! The eBpenses of such publication shall be paid by the insurance
co<pany filing such application!
6S#C! 39G! #ery foreign insurance co<pany desiring to withdraw fro< the
Philippines shall, prior to such withdrawal, discharge its liabilities to policyholders
and creditors in this country! &n case of its policies insuring residents of the
Philippines, it shall cause the pri<ary liabilities under such policies to be
reinsured and assu<ed by another insurance co<pany authoriHed to transact
business in the Philippines! &n the case of such policies as are subIect to
cancellation by the withdrawing co<pany, it <ay cancel such policies pursuant to
the ter<s thereof in lieu of such reinsurance and assu<ption of liabilities!
6S#C! 398! The Co<<issioner shall cause an eBa<ination of the boo?s and
records of the withdrawing co<pany, and if, upon such eBa<ination, the
Co<<issioner finds that the insurer has no outstanding liabilities to policyholders
and creditors in the Philippines, and no policies uncancelledF or its pri<ary
liabilities hae been reinsured or assu<ed by another insurance co<pany
authoriHed to transact business in the Philippines, as reCuired in the preceding
section, it shall cancel the withdrawing co<panyAs certificate of authority, if
uneBpired, and shall per<it the insurer to withdraw! The cost and eBpenses of all
such eBa<ination shall be paid as prescribed in Section 88+!
6S#C! 39:! $pon the failure of such withdrawing insurance co<pany or its agents
in the Philippines to pay the eBpenses of such publication within thirty DG+E days
after the presentation of the bill therefor, the Co<<issioner shall collect such fee
fro< the deposit furnished in accordance with the proisions of Section *;-!
6S#C! 39,! ' foreign life insurance co<pany that withdraws fro< the Philippines
shall be considered a sericing insurance co<pany if its business transactions
are confined to accepting periodic pre<iu< pay<ents fro<, or granting policy
loans and paying cash surrender alues of outstanding policies to, or reiing
lapsed policies of, Philippine policyholders, and such other related serices!
6S#C! 39-! (o co<pany shall act as a sericing insurance co<pany until after it
shall hae obtained a special certificate of authority to act as such fro< the
Co<<issioner upon application therefor and pay<ent by the co<pany of the
fees hereinafter prescribed! Such certificate shall eBpire on the last day of
1ece<ber of the third year and shall be renewed, while the co<pany continues
to serice its policyholders, and to co<ply with all the applicable proisions of law
and regulations!
6T&T%# *;
6PR)F#SS&)('% R#&(S$R#RS
6S#C! 399! #Bcept as otherwise proided in this Code, no partnership,
association or corporation shall transact any business in the Philippines as a
professional reinsurer until it shall hae obtained a certificate of authority for that
purpose fro< the Co<<issioner upon application therefor and pay<ent by such
entity of the fees hereinafter prescribed! 's used in this Code, the ter<
@professional reinsurerA shall <ean any entity that transacts solely and eBclusiely
reinsurance business in the Philippines!
6The Co<<issioner <ay refuse to issue a certificate of authority to any such
entity when such refusal will best pro<ote public interest! (o such certificate of
authority shall be granted to any such entity unless and until the Co<<issioner is
satisfied by such eBa<ination and such eidence as <ay be reCuired that such
entity is Cualified by the laws of the Philippines to transact business therein as a
professional reinsurer!
6Before issuing such certificate of authority, the Co<<issioner <ust be satisfied
that the na<e of the applicant is not that of any other ?nown co<pany
transacting insurance or reinsurance business in the Philippines, or a na<e so
si<ilar as to be calculated to <islead the public!
6Such certificate of authority shall eBpire on the last day of 1ece<ber the third
year following its issuance unless it is renewed!
6#ery such partnership, association, or corporation receiing such certificate of
authority shall be subIect to the proisions of this Code and other related laws,
and to the Iurisdiction and superision of the Co<<issioner!
6S#C! 39;! 'ny partnership, association, or corporation authoriHed to transact
solely reinsurance business <ust hae a capitaliHation of at least Three billion
pesos DPG,+++,+++,+++!++E paid in cash of which at least fifty percent D:+LE is
paid-up and the re<aining portion thereof is contributed surplus, which in no
case shall be less than Four hundred <illion pesos DP8++,+++,+++!++E or such
capitaliHation as <ay be deter<ined by the Secretary of Finance, upon the
reco<<endation of the Co<<issioner= Proided, That twenty-fie percent D3:LE
of the paid-up capital <ust be inested in securities satisfactory to the
Co<<issioner consisting of bonds or other instru<ents of debt of the
/oern<ent of the Philippines or its political subdiisions or instru<entalities, or
of goern<ent-owned or -controlled corporations and entities, including the
Bang?o Sentral ng Pilipinas, and deposited with the Co<<issioner, and the
re<aining seenty-fie percent D-:LE in such other securities as <ay be allowed
and per<itted by the Co<<issioner, which securities shall at all ti<es be
<aintained free fro< any lien or encu<brance= Proided, further, That the
aforesaid capital reCuire<ent is without preIudice to other reCuire<ents to be
i<posed under any ris?-based capital <ethod that <ay be adopted by the
Co<<issioner= Proided, finally, That the proisions of this chapter applicable to
insurance co<panies shall as far as practicable be li?ewise applicable to
professional reinsurers!
6T&T%# 3+
60)%1&(/ C)MP'(&#S
6S#C! 3;+! 's used in this title, the following ter<s shall hae the respectie
<eanings hereinafter set forth unless the conteBt shall otherwise reCuire=
6DaE Person <eans an indiidual, partnership, fir<, association, corporation, trust,
any si<ilar entity or any co<bination of the foregoing acting in concert!
6DbE Control, including the ter<s controlling, controlled by and under co<<on
control with, <eans the possession directly or indirectly of the power to direct or
cause the direction of the <anage<ent and policies of a person, whether through
the ownership of oting securities by a contract other than a co<<ercial contract
for goods or non-<anage<ent serices or otherwise! SubIect to Section 3;3,
control shall be presu<ed to eBist if any person directly or indirectly owns,
controls or holds with the power to ote forty percent D8+LE or <ore of the oting
securities of any other person= Proided, That no person shall be dee<ed to
control another person solely by reason of his being an officer or director of such
other person!
6DcE 0olding co<pany <eans any person who directly or indirectly controls any
authoriHed insurer!
6DdE Controlled insurer <eans an authoriHed insurer controlled directly or
indirectly by a holding co<pany!
6DeE Controlled person <eans any person, other than a controlled insurer, who is
controlled directly or indirectly by a holding co<pany!
6DfE 0olding co<pany syste< <eans a holding co<pany together with its
controlled insurers and controlled persons!
6S#C! 3;*! (otwithstanding paragraph DbE of Section 3;+, the Co<<issioner
<ay deter<ine after notice and opportunity to be heard, that a person eBercises
directly or indirectly either alone or pursuant to an agree<ent with one or <ore
other persons such a controlling influence oer the <anage<ent or policies of an
authoriHed insurer as to <a?e it necessary or appropriate in the public interest or
for the protection of policyholders or stoc?holders of the insurer that the person
be dee<ed to control the insurer!
6S#C! 3;3! The Co<<issioner <ay deter<ine upon application that any person,
either alone or pursuant to agree<ent with one or <ore other persons, does not
or will not upon the ta?ing of so<e proposed action control another person! The
filing of an application hereunder in good faith by any person shall reliee the
applicant fro< any obligation or liability i<posed by this title with respect to the
subIect of the application, eBcept as contained in Section G+3, until the
Co<<issioner has acted upon the application! 4ithin thirty DG+E days or such
further period as he <ay prescribe, the Co<<issioner <ay prospectiely reo?e
or <odify his deter<ination, after notice and opportunity to be heard, wheneer in
his Iudg<ent, reocation or <odification is consistent with this title!
6S#C! 3;G! (otwithstanding any other proisions of this title, the following shall
not be dee<ed holding co<panies=
6DaE 'uthoriHed insurers or reinsurers or their subsidiariesF and
6DbE The /oern<ent of the Philippines, or any political subdiision, agency or
instru<entality thereof, or any corporation which is wholly owned directly or
indirectly by one or <ore of the foregoing!
6The Co<<issioner <ay conditionally or unconditionally eBe<pt any specified
person or class of persons fro< any of the obligations or liabilities i<posed under
this title, if and to the eBtent he finds the eBe<ption necessary or appropriate in
the public interest or not aderse to the interests of policyholders or stoc?holders
and consistent with the purposes of this title!
6S#C! 3;8! DaE #ery person who on the date this Code ta?es effect is a
controlled insurer and eery person who thereafter beco<es a controlled insurer,
shall, within siBty D,+E days thereafter, or within thirty DG+E days after beco<ing a
controlled insurer, whicheer is later, register with the Co<<issioner! Such
registration shall be a<ended within thirty DG+E days following any change in the
identity of its holding co<pany! The Co<<issioner <ay grant one or <ore
reasonable eBtensions of the ti<e to register!
6DbE #ery registrant shall furnish the Co<<issioner with the following infor<ation
concerning its holding co<pany=
6D*E ' copy of its charter or articles of incorporation and its bylawsF
6D3E The identities of its principal shareholders, officers, directors and controlled
personsF and
6DGE &nfor<ation as to its capital structure and financial condition, and a
description of its principal business actiities!
6S#C! 3;:! #ery controlled insurer shall file with the Co<<issioner such reports
or <aterial as he <ay direct for the purpose of disclosing infor<ation concerning
the operations of persons within the holding co<pany syste< which <ay
<aterially affect the operations, <anage<ent or financial condition of the insurer!
6S#C! 3;,! #ery holding co<pany and eery controlled person within a holding
co<pany syste< shall be subIect to eBa<ination by order of the Co<<issioner if
he has cause to beliee that the operations of such persons <ay <aterially affect
the operations, <anage<ent or financial condition of any controlled insurer with
the syste< and that he is unable to obtain releant infor<ation fro< such
controlled insurer! The grounds relied upon by the Co<<issioner for such
eBa<ination shall be stated in his order, which order shall be subIect to Iudicial
reiew only at the instance of the person sought to be eBa<ined! Such
eBa<ination shall be confined to <atters specified in the order! The cost of such
eBa<ination shall be assessed against the person eBa<ined and no portion
thereof shall thereafter be rei<bursed to it directly or indirectly by the controlled
insurer!
6S#C! 3;-! The Co<<issioner shall ?eep the contents of each report <ade
pursuant to this title and any infor<ation obtained by hi< in connection therewith
confidential and shall not <a?e the sa<e public without the prior written consent
of the controlled insurer to which it pertains unless the Co<<issioner after notice
and an opportunity to be heard shall deter<ine that the interests of policyholders,
stoc?holders or the public will be sered by the publication thereof! &n any action
or proceeding by the Co<<issioner against the person eBa<ined or any other
person within the sa<e holding co<pany syste< a report of such eBa<ination
published by hi< shall be ad<issible as eidence of the facts stated therein!
6S#C! 3;9! Transactions within a holding co<pany syste< to which a controlled
insurer is a party shall be subIect to the following=
6DaE The ter<s shall be fair and eCuitableF
6DbE Charges or fees for serices perfor<ed shall be reasonableF
6DcE #Bpenses incurred and pay<ents receied shall be allocated to the insurer
on an eCuitable basis in confor<ity with custo<ary insurance accounting
practices consistently applied!
6The boo?s, accounts and records of each party to all such transactions shall be
<aintained as to clearly and accurately disclose the nature and details of the
transactions including such accounting infor<ation as is necessary to support the
reasonableness of the charges or fees to the respectie parties!
6S#C! 3;;! The prior written approal of the Co<<issioner shall be reCuired for
the following transactions between a controlled insurer and any person in its
holding co<pany syste<= sales, purchases, eBchanges, loans or eBtensions of
credit, or inest<ents, inoling fie percent D:LE or <ore of the insurerAs
ad<itted assets as of the thirty-first day of 1ece<ber neBt preceding!
6S#C! G++! The following transactions between a controlled insurer and any
person in its holding co<pany syste< <ay not be entered into unless the insurer
has notified the Co<<issioner in writing of its intention to enter into any such
transaction at least thirty DG+E days prior thereto, or such shorter period as he
<ay per<it, and he has not disapproed it within such period=
6DaE Sales, purchases, eBchanges, loans or eBtensions of credit, or inest<ents,
inoling <ore than one-half of one percent DPLE but less than fie percent D:LE
of the insurerAs ad<itted assets as of the thirty-first day of 1ece<ber neBt
precedingF
6DbE Reinsurance treaties or agree<entsF
6DcE Rendering of serices on a regular or syste<atic basisF or
6DdE 'ny <aterial transaction, specified by regulation, which the Co<<issioner
deter<ines <ay adersely affect the interest of the insurerAs policyholders or
stoc?holders or of the public!
6(othing herein contained shall be dee<ed to authoriHe or per<it any transaction
which, in the case of a non-controlled insurer, would be otherwise contrary to law!
6S#C! G+*! The Co<<issioner, in reiewing transactions pursuant to Sections
3;; and G++, shall consider whether the transactions co<ply with the standard
set forth in Section 3;9 and whether they <ay adersely affect the interests of
policyholders! This section shall not apply to transactions subIect to other
sections of this Code which i<pose notice or approal reCuire<ents greater than
those prescribed by this title!
6S#C! G+3! DaE (o person, other than an authoriHed insurer, shall acCuire control
of any do<estic insurer, whether by purchase of its securities or otherwise,
eBcept=
6D*E 'fter twenty D3+E days written notice to its insurer or such shorter period as
the Co<<issioner <ay per<it, of its intention to acCuire controlF and
6D3E 4ith the prior written approal of the Co<<issioner!
6DbE The Co<<issioner shall disapproe the acCuisition of control of a do<estic
insurer if he deter<ines, after notice and an opportunity to be heard, that such
action is reasonably necessary to protect the interest of the people of this
country! The following shall be the only factors to be considered by hi< in
reaching the foregoing deter<ination=
6D*E The financial condition of the acCuiring person and the insurerF
6D3E The trustworthiness of the acCuiring person or any of its officers or directorsF
6DGE ' plan for the proper and effectie conduct of the insurerAs operationsF
6D8E The source of the funds or assets for the acCuisitionF
6D:E The fairness of any eBchange of stoc?, assets, cash or other consideration
for the stoc? or assets to be receiedF
6D,E 4hether the effect of the acCuisition <ay be substantially to lessen
co<petition in any line of co<<erce in insurance or to tend to create a <onopoly
thereinF and
6D-E 4hether the acCuisition is li?ely to be haHardous or preIudicial to the
insurerAs policyholders or stoc?holders!
6DcE The following conditions affecting any controlled insurer, regardless of when
such control has been acCuired, are iolations of this title=
6D*E The controlling person or any of its officers or directors hae de<onstrated
untrustworthinessF and
6D3E The effect of retention of control <ay be substantially to lessen co<petition in
any line of co<<erce in insurance in this country or to tend to create a <onopoly
therein! &f, after notice and an opportunity to be heard, the Co<<issioner
deter<ines that any of the foregoing iolations eBists, he shall reduce his findings
to writing and shall issue an order based thereon and cause the sa<e to be
sered upon the insurer and upon all persons affected thereby directing any
person found to be in iolation thereof to ta?e appropriate action to cure such
iolation! $pon the failure of any such person to co<ply with such order, Section
G+, shall beco<e applicable!
6DdE The Co<<issioner <ay reCuire the sub<ission of such infor<ation as he
dee<s necessary to deter<ine whether any acCuisition or retention of control
co<plies with this title and <ay reCuire, as a condition of approal of such
acCuisition or retention of control, that all or any portion of such infor<ation be
disclosed to the insurerAs stoc?holders!
6DeE $nless subIect to registration under Section 3;8 or unless acCuisition of its
control is subIect to paragraphs DaE and DbE hereof, eery authoriHed insurer shall
notify the Co<<issioner in writing of the identity of any person who< the insurer
then ?nows or has reason to beliee controls or has ta?en any action, other than
preli<inary negotiations or discussion, to acCuire control of the insurer!
6S#C! G+G! DaE (otwithstanding the control of an authoriHed insurer by any
person, the officers and directors of the insurer shall not thereby be relieed of
any obligation or liability to which they would otherwise be subIect by law, and the
insurer shall be <anaged so as to assure its separate operating identity
consistent with this title!
6DbE (othing herein shall preclude an authoriHed insurer fro< haing or sharing a
co<<on <anage<ent or cooperatie or Ioint use of personnel, property or
serices with one or <ore other persons under arrange<ents <eeting the
standards of Section 3;9!
6S#C! G+8! To the eBtent that any infor<ation or <aterial is set forth in for<s or
other <atter on file with any goern<ent agency or in a registration for< filed
with the Co<<issioner by another person within the sa<e holding co<pany
syste<, the controlled insurer <ay co<ply with the registration or reporting
reCuire<ents of this title by referring in its registration for< or report to such other
filed <atter and attaching a copy thereof certified by the insurer as a true and
co<plete copy, to such registration for< or report or, if such other filed <atter is
on file with the Co<<issioner, incorporating such <atter by reference!
6S#C! G+:! (o holding co<pany or controlled person shall directly or indirectly or
through another person do or cause to be done for or in behalf of the controlled
insurer any act intended to affect the insurance operations of the insurer which, if
done by the insurer, would iolate any proision of this Code!
6S#C! G+,! &n addition to any other penalty proided by law, the Co<<issioner
<ay, upon the willful failure of any person within a holding co<pany syste< to
co<ply with this title or any regulation or order pro<ulgated hereunder=
6DaE Proceed under Title *8 or Title *:, Chapter &&& of this Code with respect to
insurer within the holding co<pany syste<F or
6DbE Reo?e or refuse to renew the authority to do business in this country of an
insurer within the holding co<pany syste< or refuse to issue such authority to
any other insurer in the syste<F or
6DcE 1irect that, in addition to any other penalty proided by law, such person
forfeit to the people of this country a su< not less than Fie thousand pesos
DP:,+++!++E for a first iolation and Twenty-fie thousand pesos DP3:,+++!++E for
any subseCuent iolation! 'n additional su< not less than Twenty-fie thousand
pesos DP3:,+++!++E shall be i<posed for each <onth during which any such
iolation shall continue!
6C0'PT#R &>
6S'%#S '/#(C&#S '(1 T#C0(&C'% S#R>&C#S
6T&T%# l
6&(S$R'(C# '/#(TS '(1 &(S$R'(C# BR)5#RS
6S#C! G+-! (o insurance co<pany doing business in the Philippines, nor any
agent thereof, shall pay any co<<ission or other co<pensation to any person for
serices in obtaining insurance, unless such person shall hae first procured
fro< the Co<<issioner a license to act as an insurance agent of such co<pany
or as an insurance bro?er as hereinafter proided!
6(o person shall act as an insurance agent or as an insurance bro?er in the
solicitation or procure<ent of applications for insurance, or receie for serices in
obtaining insurance, any co<<ission or other co<pensation fro< any insurance
co<pany doing business in the Philippines, or any agent thereof, without first
procuring a license so to act fro< the Co<<issioner, which <ust be renewed
eery three DGE years thereafter! Such license shall be issued by the
Co<<issioner only upon the written application of the person desiring it, such
application if for a license to act as insurance agent, being approed or endorsed
by the co<pany such person desires to represent, and shall be upon a for<
prescribed by the Co<<issioner giing such infor<ation as he <ay reCuire, and
upon pay<ent of the corresponding fee hereinafter prescribed! The
Co<<issioner shall satisfy hi<self as to the co<petence and trustworthiness of
the applicant and shall hae the right to refuse to issue or renew and to suspend
or reo?e any such license in his discretion! The license shall eBpire after the
thirty-first day of 1ece<ber of the third year following the date of issuance unless
it is renewed!
6%icenses <ay be renewed in the case of the co<pany represented by such
agents, and in the case of insurance bro?ers, upon the application of the said
bro?ers, the<seles!
6S#C! G+9! The proisions of Sections G+- and G+; shall apply to an e<ployee
who shall be engaged to sell insurance products by an insurance co<pany!
6S#C! G+;! 'ny person who for co<pensation solicits or obtains insurance on
behalf of any insurance co<pany or trans<its for a person other than hi<self an
application for a policy or contract of insurance to or fro< such co<pany or offers
or assu<es to act in the negotiating of such insurance shall be an insurance
agent within the intent of this section and shall thereby beco<e liable to all the
duties, reCuire<ents, liabilities and penalties to which an insurance agent is
subIect!
6'n insurance agent is an independent contractor and not an e<ployee of the
co<pany represented! @&nsurance agentA includes an agency leader, agency
<anager, or their eCuialent!
6Since the insurance industry is i<bued with public interest, the insurance
co<panies upon approal of the Co<<issioner <ay eBercise wide latitude in
superising the actiities of their insurance agents to ensure the protection of the
insuring public!
6S#C! G*+! 'ny person who for any co<pensation, co<<ission or other thing of
alue acts or aids in any <anner in soliciting, negotiating or procuring the <a?ing
of any insurance contract or in placing ris? or ta?ing out insurance, on behalf of
an insured other than hi<self, shall be an insurance bro?er within the intent of
this Code, and shall thereby beco<e liable to all the duties, reCuire<ents,
liabilities and penalties to which an insurance bro?er is subIect!
6S#C! G**! #ery applicant for an insurance bro?erAs license shall file with the
application and shall thereafter <aintain in force while so licensed, a bond in
faor of the people of the Republic of the Philippines eBecuted by a co<pany
authoriHed to beco<e surety upon official recogniHances, stipulations, bonds and
underta?ings! The bond shall be in such a<ount as <ay be fiBed by the
Co<<issioner, but in no case less than Fie hundred thousand pesos
DP:++,+++!++E, and shall be conditioned upon full accounting and due pay<ent to
the person entitled thereto of funds co<ing into the bro?erAs possession through
insurance transactions under license! The bond shall re<ain in force until
released by the Co<<issioner, or until cancelled by the surety! 4ithout preIudice
to any liability preiously incurred thereunder, the surety <ay cancel the bond on
thirty DG+E days adance written notice to both the bro?er and the Co<<issioner!
6$pon approal of the application, the applicant <ust also file two D3E errors and
o<issions Dprofessional liability or professional inde<nityE policies issued
separately by two D3E insurance co<panies authoriHed to do business in the
Philippines, satisfactory to the Co<<issioner to inde<nify the applicant against
any clai< or clai<s for breach of duty as insurance bro?er which <ay be <ade
against hi< by reason of any negligent act, error or o<ission, wheneer or
whereer co<<itted or alleged to hae been co<<itted, on the part of the
applicant or any person who has been, is now, or <ay hereafter during the
subsistence of the policies be e<ployed by the said applicant in his capacity as
insurance bro?er= Proided, That the filing of any clai< or clai<s under one of
such policies shall preclude the filing of the said clai< or clai<s under the other
policy! The said policies shall be in such a<ounts as <ay be prescribed by the
Co<<issioner, depending upon the siHe or a<ount of the bro?ing business of the
applicant, but in no case shall the a<ount of each of such policies be less than
Fie hundred thousand pesos DP:++,+++!++E!
6S#C! G*3! The Co<<issioner shall, in order to deter<ine the co<petence of
eery applicant to hae the ?ind of license applied for, reCuire such applicant to
sub<it to a written eBa<ination and to pass the sa<e to the satisfaction of the
Co<<issioner! The Co<<issioner <ay delegate or authoriHe the ad<inistration
of the eBa<ination to an independent organiHation, subIect to such conditions
that the Co<<issioner <ay proide!
6S#C! G*G! 'n applicant for the written eBa<ination <entioned in the preceding
section <ust be of good <oral character and <ust not hae been conicted of
any cri<e inoling <oral turpitude! 0e <ust satisfactorily show to the
Co<<issioner that he has been trained in the ?ind of insurance conte<plated in
the license applied for! Such eBa<ination <ay be waied if it is shown to the
satisfaction of the Co<<issioner that the applicant has undergone eBtensie
education andKor training in insurance!
6S#C! G*8! 'n application for the issuance or renewal of a license to act as an
insurance agent or insurance bro?er <ay be refused, or such license, if already
issued or renewed, shall be suspended or reo?ed if the Co<<issioner finds that
the applicant for, or holder of, such license=
6DaE 0as willfully iolated any proision of this CodeF or
6DbE 0as intentionally <ade a <aterial <isstate<ent in the application to Cualify
for such licenseF or
6DcE 0as obtained or atte<pted to obtain a license by fraud or <isrepresentationF
or
6DdE 0as been guilty of fraudulent or dishonest practicesF or
6DeE 0as <isappropriated or conerted to his own use or illegally withheld
<oneys reCuired to be held in a fiduciary capacityF or
6DfE 0as not de<onstrated trustworthiness and co<petence to transact business
as an insurance agent or insurance bro?er in such <anner as to safeguard the
publicF or
6DgE 0as <aterially <isrepresented the ter<s and conditions of policies or
contracts of insurance which he see?s to sell or has soldF or
6DhE 0as failed to pass the written eBa<ination prescribed, if not otherwise
eBe<pt fro< ta?ing the sa<e!
6&n addition to the foregoing causes, no license to act as insurance agent or
insurance bro?er shall be renewed if the holder thereof has not been actiely
engaged as such agent or bro?er in accordance with such rules as the
Co<<issioner <ay prescribe!
6S#C! G*:! The pre<iu<, or any portion thereof, which an insurance agent or
insurance bro?er collects fro< an insured and which is to be paid to an insurance
co<pany because of the assu<ption of liability through the issuance of policies
or contracts of insurance, shall be held by the agent or bro?er in a fiduciary
capacity and shall not be <isappropriated or conerted to his own use or illegally
withheld by the agent or bro?er!
6'ny insurance co<pany which deliers to an insurance agent or insurance
bro?er a policy or contract of insurance shall be dee<ed to hae authoriHed such
agent or bro?er to receie on its behalf pay<ent of any pre<iu< which is due on
such policy or contract of insurance at the ti<e of its issuance or deliery or
which beco<es due thereon!
6&n order to ensure faithful perfor<ance by the insurance agent or insurance
bro?er of these fiduciary responsibilities, the &nsurance Co<<issioner shall
prescribe the <ini<u< ter<s and conditions on such <atters in the standard
agency or bro?ers agree<ent between the agents andKor the bro?er with the
insurance co<panies!
6S#C! G*,! 'ny proision of eBisting laws to the contrary notwithstanding, no
person shall, within the Philippines, sell or offer for sale a ariable contract or do
or perfor< any act or thing in the sale, negotiation, <a?ing or consu<<ating of
any ariable contract other than for hi<self unless such person shall hae a alid
and current license fro< the Co<<issioner authoriHing such person to act as a
ariable contract agent! (o such license shall be issued unless and until the
Co<<issioner is satisfied, after eBa<ination that such person is by training,
?nowledge, ability and character Cualified to act as such agent! 'ny such license
<ay be withdrawn and cancelled by the Co<<issioner after notice and hearing,
if he shall find that the holder thereof does not then hae the Cualifications
reCuired for the issuance of such license!
6S#C! G*-! &t shall be unlawful for any person, co<pany or corporation in the
Philippines to act as general agent of any insurance co<pany unless he is
e<powered by a written power of attorney duly eBecuted by such insurance
co<pany, and registered with the Co<<issioner to receie notices, su<<ons
and legal processes for and in behalf of the insurance co<pany concerned in
connection with actions or other legal proceedings against said insurance
co<pany! &t shall be the duty of said general agent to notify the Co<<issioner of
his post office address in the Philippines, or any change thereof! (otices,
su<<ons, or processes of any ?ind sent by registered <ail to the last registered
address of such general agent of the co<pany concerned or to the
Co<<issioner shall be sufficient serice and dee<ed as if sered on the
insurance co<pany itself!
6S#C! G*9! #Bcept as otherwise proided by law or treaty, it shall be unlawful for
any person, partnership, association or corporation in the Philippines, for hi<self
or itself, or for so<e other person, partnership, association or corporation, either
to procure, receie or forward applications of insurance in, or to issue or to
delier or accept policies or contracts of insurance of or for, any insurance
co<pany or co<panies not authoriHed to transact business in the Philippines,
coering ris?s, life or non-life, situated in the PhilippinesF and any such person,
partnership, association or corporation iolating the proisions of this section
shall be dee<ed guilty of a penal offense, and upon coniction thereof, shall for
each such offense be punished by a fine of Two hundred fifty thousand pesos
DP3:+,+++!++E, or i<prison<ent of siB D,E <onths, or both, at the discretion of the
court= Proided, That the proisions of this section shall not apply to reinsurance!
6T&T%# 3
6R#&(S$R'(C# BR)5#RS
6S#C! G*;! #Bcept as proided in the neBt succeeding title, no person shall act
as reinsurance bro?er in the Philippines unless he is authoriHed as such by the
Co<<issioner!
6' reinsurance bro?er is one who, for co<pensation, not being a duly authoriHed
agent, e<ployee or officer of an insurer in which any reinsurance is effected, acts
or aids in any <anner in negotiating contracts of reinsurance, or placing ris?s of
effecting reinsurance, for any insurance co<pany authoriHed to do business in
the Philippines!
6S#C! G3+! $pon application and pay<ent of the corresponding fee hereinafter
prescribed, and the filing of two D3E errors and o<issions Dprofessional liability or
professional inde<nityE policies hereinafter described, a person <ay, if found
Cualified, be issued a license to act as reinsurance bro?er by the Co<<issioner!
(o such license shall be alid after 1ece<ber G* of the third year following its
issuance unless it is renewed!
6The errors and o<issions Dprofessional liability or professional inde<nityE
policies <entioned aboe shall inde<nify the applicant against any clai< or
clai<s for breach of duty as reinsurance bro?er which <ay be <ade against hi<
by reason of any negligent act, error or o<ission, wheneer or whereer
co<<itted or alleged to hae been co<<itted, on the part of the applicant or any
person who has been, is now, or <ay hereafter during the subsistence of the
policies be e<ployed by the said applicant in his capacity as reinsurance bro?er=
Proided, That the filing of any clai< or clai<s under one of such policies shall
preclude the filing of the said clai< or clai<s under the other policy! The said
policies shall be issued separately by two D3E insurance co<panies authoriHed to
do business in the Philippines and shall be in such a<ounts as <ay be
prescribed by the &nsurance Co<<issioner, depending upon the siHe or a<ount
of the bro?ing business of the applicant, but in no case shall the a<ount of each
of such policies be less than Fie hundred thousand pesos DP:++,+++!++E!
6S#C! G3*! The Co<<issioner <ay recall, suspend or reo?e the license granted
to a reinsurance bro?er for iolation of any eBisting law, rule and regulation, or
any proision of this Code after due notice and hearing!
6T&T%# G
6R#S&1#(T '/#(TS
6S#C! G33! (o person shall act as resident agent, as hereinafter defined, unless
he is registered as such with the Co<<issioner!
6S#C! G3G! The ter< resident agent, as used in this title, is one duly appointed by
a foreign insurer or bro?er not authoriHed to do business in the Philippines to
receie in its behalf notices, su<<ons and legal processes in connection with
actions or other legal proceedings against such foreign insurer or bro?er!
6S#C! G38! The application for a certificate of registration as resident agent filed
with the Co<<issioner <ust be acco<panied with a copy of the power of
attorney, duly notariHed and authenticated by the Philippine Consul in the place
where such foreign insurer or bro?er is do<iciled, e<powering the applicant to
act as resident agent and to receie notices, su<<ons and legal processes for
and in behalf of such foreign insurer or bro?er in connection with any action or
legal proceeding against such foreign insurer or bro?er!
6S#C! G3:! &t shall be the duty of such resident agent to notify i<<ediately the
Co<<issioner of any change of his office address!
6S#C! G3,! ' certificate of registration issued to a resident agent shall eBpire on
the thirty-first day of 1ece<ber of the third year following its issuance unless it is
renewed!
6The Co<<issioner <ay, after due notice and hearing, recall or cancel the
certificate of registration issued to a resident agent for iolation of any eBisting
law, rule or regulation, or any proision of this Code!
6T&T%# 8
6()(-%&F# C)MP'(2 $(1#R4R&T#R
6S#C! G3-! (o person shall act, and no co<pany shall e<ploy any person, as
non-life co<pany underwriter, whose duty and responsibility it shall be to select,
ealuate and accept ris?s for, and to deter<ine the ter<s and conditions,
including those pertaining to a<ounts of retentions, under which such ris?s are to
be accepted by the co<pany, unless such underwriter is registered as such with
the Co<<issioner!
6S#C! G39! #ery non-life insurance co<pany doing business in the Philippines
<ust <aintain at all ti<es a register of ris?s accepted and a clai<s register for
each line of ris?s engaged in by such non-life insurance co<pany with such
entries therein as are now or as <ay hereafter be reCuired by the Co<<issioner,
and it shall be the responsibility of the underwriter on the particular line of ris?
inoled to see to it that the said registers are well <aintained and ?ept, and that
all entries therein are properly and correctly recorded! Such registers shall be
open to inspection and eBa<ination of duly authoriHed representaties of the
Co<<issioner at all ti<es during business hours!
6S#C! G3;! (o person shall be registered with the Co<<issioner, unless such
person shall be at least twenty-one D3*E years of age on the date of such
registrationF a resident of the PhilippinesF of good <oral character and with no
coniction of any cri<e inoling <oral turpitudeF has had at the ti<e such
registration is <ade at least two D3E years of underwriting wor? in the particular
line of ris? inoledF and has passed such Cualifying written eBa<ination that the
Co<<issioner shall conduct at such ti<e and in such place as he <ay decide to
hold for applicants desiring to act as underwriters!
6Such eBa<ination shall not be reCuired of any person who has sered as non-
life co<pany underwriter for a period of at least fie D:E years, if the
Co<<issioner is satisfied of the applicantAs co<petence as shown by the results
of his underwriting wor? in the non-life insurance co<pany or co<panies that
e<ployed hi< in that capacity! The <ini<u< underwriting eBperience herein
reCuired <ay be reduced or waied if it is shown to the satisfaction of the
Co<<issioner that the non-life co<pany underwriter has undergone eBtensie
education andKor training in insurance!
6S#C! GG+! 'ny applicant who <isrepresents or o<its any <aterial fact in his
application for registration as a non-life co<pany underwriter, or co<<its any
dishonest act in ta?ing or in connection with the Cualifying written eBa<ination for
underwriters, shall be barred fro< being registered as such non-life co<pany
underwriter and, if already registered, his registration shall be cancelled and the
certificate of registration issued in his faor shall be recalled i<<ediately by the
Co<<issioner!
6&n the eent that the certificate of authority of a non-life insurance co<pany to
transact business is suspended or reo?ed due to business failure arising largely
fro< the i<prudent and inIudicious acceptance of ris?s by the underwriter
concerned, the registration of such underwriter shall li?ewise be cancelled and
his certificate of registration shall be recalled by the Co<<issioner, and no
si<ilar certificate shall thereafter be issued in his faor!
6S#C! GG*! (o certificate of registration issued to an underwriter shall be alid
after 1ece<ber G* of the third year following its issuance unless it is renewed!
6The Co<<issioner <ay, after due notice and hearing, also suspend or cancel
such certificate for iolation of eBisting laws, rules and regulations or of any
proisions of this Code!
6T&T%# :
6'1J$ST#RS
6S#C! GG3! (o person, partnership, association, or corporation shall act as an
adIuster, as hereinafter defined, unless authoriHed so to act by irtue of a license
issued or renewed by the Co<<issioner pursuant to the proisions of this Code=
Proided, That in the case of a natural person, he <ust be a Filipino citiHen and
in the case of a partnership, association or corporation, at least siBty percent
D,+LE of its capital <ust be owned by citiHens of the Philippines!
6S#C! GGG! 'n adIuster <ay be an independent adIuster or a public adIuster!
6The ter< independent adIuster <eans any person, partnership, association or
corporation which, for <oney, co<<ission or any other thing of alue, acts for or
on behalf of an insurer in the adIusting of clai<s arising under insurance
contracts or policies issued by such insurer!
6The ter< public adIuster <eans any person, partnership, association or
corporation which, for <oney, co<<ission or any other thing of alue, acts on
behalf of an insured in negotiating for, or effecting, the settle<ent of a clai< or
clai<s of the said insured arising under insurance contracts or policies, or which
adertises for or solicits e<ploy<ent as an adIuster of such clai<s!
6S#C! GG8! For eery line of insurance clai< adIust<ent, adIusters shall be
licensed either as independent adIusters or as public adIusters! (o adIuster shall
act on behalf of an insurer unless said adIuster is licensed as an independent
adIusterF and no adIuster shall act on behalf of an insured unless said adIuster is
licensed as a public adIuster= Proided, howeer, That when a fir< or person has
been licensed as a public adIuster, he shall not be granted another license as
independent adIuster and ice ersa!
6(o license, howeer, shall be reCuired of any co<pany adIuster who is a
salaried e<ployee of an insurance co<pany for the adIust<ent of clai<s filed
under policies issued by such insurance co<pany!
6S#C! GG:! Such license or any renewal thereof <ay be issued by the
Co<<issioner upon written application filed by the person interested on the for<
or for<s prescribed by the Co<<issioner, which shall contain such infor<ation
as he <ay reCuire, and upon pay<ent of the corresponding fee hereinafter
prescribed!
6S#C! GG,! The Co<<issioner shall conduct, at such ti<es, and in such places
as he <ay decide to hold, written eBa<inations to deter<ine the co<petence and
ability of applicants desiring to act as adIuster of insurance clai<s!
6S#C! GG-! (o adIusterAs license issued hereunder shall be alid after 1ece<ber
G* of the third year following the issuance of such license unless it is renewed!
6S#C! GG9! (othing contained in this title shall apply to any duly licensed
attorney-at-law who acts or aids in adIusting insurance clai<s as an incident to
the practice of his profession and who does not adertise hi<self as an adIuster!
6S#C! GG;! The Co<<issioner <ay suspend or reo?e any adIusterAs license if,
after giing notice and hearing to the adIuster concerned, the Co<<issioner finds
that the said adIuster=
6DaE 0as iolated any proision of this Code and of the circulars, rulings and
instructions of the Co<<issioner or has iolated any law in the course of his
dealings as an adIusterF or
6DbE 0as <ade a <aterial <isstate<ent in the application for such licenseF or
6DcE 0as been guilty of fraudulent or dishonest practicesF or
6DdE 0as de<onstrated his inco<petence or untrustworthiness to act as adIusterF
or
6DeE 0as <ade patently unIust aluation of lossF or
6DfE 0as failed to <a?e a report of the adIust<ent he proposed within siBty D,+E
days fro< the date of the filing of the clai< by the insured with the insurer, unless
preented so to do by reasons beyond his controlF or
6DgE 0as refused to allow an eBa<ination into his affairs or <ethod of doing
business as hereinafter proided!
6S#C! G8+! #ery adIuster shall sub<it to the Co<<issioner a Cuarterly report of
all losses which are the subIect of adIust<ent effected by hi< during each <onth
in the for< prescribed by the Co<<issioner! The report shall be filed within one
D*E <onth after the end of each Cuarter!
6S#C! G8*! #ery adIuster shall ?eep his or its boo?s, records, reports, accounts,
and ouchers in such <anner that the Co<<issioner or his duly authoriHed
representaties <ay readily erify the Cuarterly reports of the said adIuster and
ascertain whether the said adIuster has co<plied with the proisions of law or
regulations obligatory upon hi< or whether the <ethod of doing business of the
said adIuster has been fair, Iust and honest!
6S#C! G83! The Co<<issioner shall, at least once a year and wheneer he
considers the public interest so de<ands, cause an eBa<ination to be <ade into
the affairs and <ethod of doing business of eery adIuster!
6S#C! G8G! 'ny iolation of any proision of this title shall be punished by a fine
of not less than Ten thousand pesos DP*+,+++!++E, or by i<prison<ent at the
discretion of the court= Proided, That, in case of a partnership, association or
corporation, the said penalty shall be i<posed upon the partner, president,
<anager, <anaging director, director or person in charge of its business or
responsible for the iolation!
6T&T%# ,
6'CT$'R&#S
6S#C! G88! (o life insurance co<pany shall be licensed to do business in the
Philippines nor shall any life insurance co<pany doing business in the
Philippines be allowed to continue doing such business unless they shall engage
the serices of an actuary duly accredited with the Co<<issioner who shall,
during his tenure of office, be directly responsible for the direction and
superision of all actuarial wor? connected with or that <ay be inoled in the
business of the insurance co<pany! The Co<<issioner <ay also reCuire non-life
insurance co<panies to engage the serices of an accredited actuary, in
accordance with the rules and regulations that the Co<<issioner will for<ulate!
6S#C! G8:! 'ny person <ay be officially accredited by the Co<<issioner to act
as an actuary in any life insurance co<pany or in any <utual benefit association
authoriHed to do business in the Philippines upon application therefor and the
pay<ent of the corresponding fee hereinafter prescribed= Proided, That=
6DaE 0e is a fellow of good standing of the 'ctuarial Society of the Philippines at
the ti<e of his appoint<ent and re<ains in such good standing during the tenure
of his engage<entF or
6DbE &n the case of one who is not a fellow of the 'ctuarial Society of the
Philippines, he <eets all the reCuire<ents of the said Society for accreditation as
a fellow of the Society, and has been gien per<ission by the pertinent
goern<ent authorities in the Philippines to render serices in the Philippines, in
the eent that he is not a citiHen of the Philippines!
6The registration of the actuary shall be suspended or reo?ed by the
Co<<issioner on the following grounds=
6D*E Failure to adeCuately perfor< reCuired functions and duties under this CodeF
6D3E Failure to disclose conflict of interestF
6DGE Failure to co<ply with the Code of Conduct of the 'ctuarial Society of the
PhilippinesF or
6D8E Such other grounds that <ay be deter<ined by the Co<<issioner!
6(o actuary engaged by a life insurance co<pany shall be at the sa<e ti<e a
stoc?holder or a director of the board, chief eBecutie officer or chief financial
officer of the co<pany or hold any position that the Co<<issioner <ay deter<ine
to hae an inherent conflict of interest to the position of an actuary!
6(o certificate of registration issued under this title shall be alid after 1ece<ber
G* of the third year following its issuance unless it is renewed!
6S#C! G8,! The following docu<ents, which are fro< ti<e to ti<e sub<itted to
the Co<<issioner by a life insurance co<pany authoriHed to do business in the
Philippines, shall be duly certified by an accredited actuary e<ployed by such
co<pany=
6DaE Policy reseres, clai<s or loss reseres and net due and deferred pre<iu<s!
6DbE State<ents of bases and net pre<iu<s, loading for gross pre<iu<s, and on
non-forfeiture alues and reseres, when applying for approal of gross
pre<iu<s, reseres and non-forfeiture alues!
6DcE Policies of insurance under any plan sub<itted to the Co<<issioner as
reCuired by law!
6DdE 'nnual state<ents and aluation reports sub<itted to the Co<<issioner as
reCuired by law!
6DeE Financial proIection showing the probable inco<e and outgo and resere
reCuire<ents, enu<erating the actuarial assu<ptions and bases of proIections!
6DfE >aluation of annuity funds or retire<ent plans!
6The Co<<issioner <ay also reCuire non-life insurance co<panies to sub<it,
fro< ti<e to ti<e, si<ilar docu<ents which shall be duly certified by an
accredited actuary e<ployed by such co<pany!
6'ny life insurance co<pany authoriHed to do business in the Philippines <ay
e<ploy any person who is not officially accredited under either of the
Cualifications for any ?ind of actuarial wor?= Proided, That he shall not, at any
ti<e, hae the authority to certify to the correctness of the foregoing docu<ents!
6S#C! G8-! (o accredited actuary shall sere <ore than one client or e<ployer at
the sa<e ti<e! 0oweer, one already in the e<ploy of an insurance co<pany
<ay be allowed by the Co<<issioner to sere a <utual benefit association or
any other insurance co<pany, proided the following conditions are first co<plied
with=
6DaE That the reCuest to engage his serices by the other e<ployer is in writingF
6DbE That his present e<ployer acCuiesced to it in writingF and
6DcE That he furnishes the Co<<issioner with copies of said reCuest and
acCuiescence!
6(o eBternal auditor shall be engaged by superised persons or entities unless it
has been issued an accreditation certificate by the Co<<issioner! The
accreditation certificate shall be alid until 1ece<ber G* of the third year fro<
issuance unless it is reo?ed or suspended! The Co<<issioner shall issue rules
and regulations to goern the accreditation of the eBternal auditor and the
reocation or suspension of the accreditation!
6T&T%# -
6R'T&(/ )R/'(&M'T&)( '(1 R'T# M'5&(/
6S#C! G89! #ery organiHation which now eBists or which <ay hereafter be
for<ed for the purpose of <a?ing rates to be used by <ore than one insurance
co<pany authoriHed to do business in the Philippines shall be ?nown as a rating
organiHation! The ter< rate as used in this title shall generally <ean the ratio of
the pre<iu< to the a<ount insured and shall include, as the conteBt <ay reCuire,
either the consideration to be paid or charged for insurance contracts, including
surety bonds, or the ele<ents and factors for<ing the basis for the deter<ination
or application of the sa<e, or both!
6S#C! G8;! #ery rating organiHation which now eBists or which <ay hereafter be
for<ed shall be subIect to the proisions of this title!
6S#C! G:+! (o rating organiHation hereafter for<ed shall co<<ence rate-<a?ing
operations until it shall hae obtained a license fro< the Co<<issioner! Before
obtaining such license, such rating organiHation shall file with the Co<<issioner
a notice of its intention to co<<ence rate-<a?ing operations, a copy of its
constitution, articles of agree<ent or association, or of incorporation, and its
bylaws, a list of insurance co<panies that hae agreed to beco<e <e<bers or
subscribers, and such other infor<ation concerning such rating organiHation and
its operations as <ay be reCuired by the Co<<issioner! &f the Co<<issioner
finds that the organiHation has co<plied with the proisions of law and that it has
a sufficient nu<ber of <e<bers or subscribers and is otherwise Cualified to
function as a rating organiHation, the Co<<issioner <ay issue a license to such
rating organiHation authoriHing it to <a?e rates for the ?inds of insurance or
subdiisions thereof as <ay be specified in such license! (o license issued to a
rating organiHation shall be alid after 1ece<ber G* of the third year following its
issuance unless it is renewed! (o rating organiHation which now eBists and is not
licensed pursuant to this section shall continue rate-<a?ing operations until it
shall hae obtained fro< the Co<<issioner a license which he <ay issue if
satisfied that such organiHation is co<plying with the proisions of this title! #ery
rating organiHation shall notify the Co<<issioner pro<ptly of eery change in=
6DaE &ts constitution, its articles of agree<ent or association or its certificate of
incorporation, and its bylaws, rules and regulations goerning the conduct of its
businessF and
6DbE &ts list of <e<bers and subscribers!
6' <e<ber <eans an insurer who participates in or is entitled to participate in the
<anage<ent of a rating organiHation!
6' subscriber <eans an insurer which is furnished at its reCuest with rates and
rating <anuals by a rating organiHation of which it is not a <e<ber!
6S#C! G:*! #ach rating organiHation shall furnish its rating serice without
discri<ination to all of its <e<bers and subscribers, and shall, subIect to
reasonable rules and regulations, per<it any insurance co<pany doing business
in the Philippines, not ad<itted to <e<bership, to beco<e a subscriber to its
rating serices for any ?ind of insurance or subdiisions thereof! (otice of
proposed changes in such rules and regulations shall be gien to subscribers!
The reasonableness of any rule or regulation in its application to subscribers, or
the refusal of any rating organiHation to ad<it an insurance co<pany as a
subscriber, shall, at the reCuest of any subscriber or any such insurance
co<pany, be reiewed by the Co<<issioner at a hearing held upon at least ten
D*+E daysA written notice to such rating organiHation and to such subscriber or
insurance co<pany! The Co<<issioner <ay, after such hearing, issue an
appropriate order!
6S#C! G:3! (o rating organiHation or any other association shall refuse to do
business with, or prohibit or preent the pay<ent of co<<issions to, any person
licensed as an insurance bro?er pursuant to the proisions of Title * of this
chapter!
6S#C! G:G! Rating organiHations shall be subIect to eBa<ination by the
Co<<issioner, as often as he <ay dee< such eBa<ination eBpedient, pursuant
to the proisions of this Code applicable to the eBa<ination of insurance
co<panies! 0e shall cause such an eBa<ination of each rating organiHation to be
<ade at least once in eery fie D:E years!
6S#C! G:8! The Co<<issioner <ay suspend or reo?e the license of any rating
organiHation which fails to co<ply with his order within the ti<e li<ited by such
order, or any eBtension thereof which he <ay grant! The Co<<issioner <ay
deter<ine when a suspension of license shall beco<e effectie and it shall
re<ain in effect for the period fiBed by hi<, unless he <odifies or rescinds such
suspension!
6S#C! G::! 'ny rating organiHation <ay subscribe for or purchase actuarial,
technical or other serices, and such serices shall be aailable to all <e<bers
and subscribers without discri<ination!
6S#C! G:,! 'ny rating organiHation <ay proide for the eBa<ination of policies,
daily reports, binders, renewal certificates, endorse<ents or other instru<ents of
insurance, or the cancellation thereof, and <ay <a?e reasonable rules goerning
their sub<ission! Such rules shall contain a proision that in the eent an
insurance co<pany does not within siBty D,+E days furnish satisfactory eidence
to the rating organiHation of the correction of any error or o<ission preiously
called to its attention by the rating organiHation, it shall be the duty of the rating
organiHation to notify the Co<<issioner thereof! 'll infor<ation so sub<itted for
eBa<ination shall be confidential!
6S#C! G:-! Cooperation a<ong rating organiHations or a<ong rating
organiHations and insurers in rate <a?ing or in other <atters within the scope of
this title is hereby authoriHed, proided the filings resulting fro< such cooperation
are subIect to all proisions of this title which are applicable to filings generally!
The Co<<issioner <ay reiew such cooperatie actiities and practices and if
he finds that any such actiity or practice is unfair or unreasonable or otherwise
inconsistent with the proisions of this title, he <ay issue a written order
specifying in what respects such actiity or practice is unfair or unreasonable or
otherwise inconsistent with the proisions of this title, and reCuiring the
discontinuance of such actiity or practice!
6S#C! G:9! #ery rating organiHation and eery insurance co<pany which <a?es
and files its own rates, shall <a?e rates for all ris?s rated by such organiHation or
insurance co<pany in accordance with the following proisions=
6DaE Basic classification, <anual, <ini<u<, class, or schedule rates or rating
plans, shall be <ade and adopted for all such ris?s! 'ny departure fro< such
rates shall be in accordance with schedules, rating plans and rules filed with the
Co<<issionerF
6DbE Rates shall be reasonable and adeCuate for the class of ris?s to which they
applyF
6DcE (o rate shall discri<inate unfairly between ris?s inoling essentially the
sa<e haHards and eBpense ele<ents or between ris?s in the application of li?e
charges and creditsF
6DdE Consideration shall be gien to the past and prospectie loss eBperience,
including the conflagration and catastrophe haHards, if any, to all factors
reasonably attributable to the class of ris?s, to a reasonable profit, to
co<<issions paid during the <ost recent annual period and to past and
prospectie other eBpenses! &n case of fire insurance rates, consideration shall
be gien to the eBperience of the fire insurance business during a period of not
less than fie D:E years neBt preceding the year in which the reiew is <adeF
6DeE Ris? <ay be grouped by classifications for the establish<ent of rates and
<ini<u< pre<iu<s! Classification rates <ay be <odified to produce rates for
indiidual ris?s in accordance with rating plans which establish standards for
<easuring ariations in haHards or eBpense proisions, or both! Such standards
<ay <easure any difference a<ong ris?s that can be de<onstrated to hae a
probable effect upon losses or eBpenses!
6S#C! G:;! (o rating organiHation and no insurance co<pany which <a?es and
files its own rates shall <a?e or pro<ulgate any rate or schedule of rates which is
to be applied to any fire ris? on the condition that the whole a<ount of insurance
on any ris? or any specified part thereof shall be placed with the <e<bers of or
subscribers to such rating organiHation or with such insurer!
6S#C! G,+! #ery insurance co<pany doing business in the Philippines shall
annually file with the rating organiHation of which it is a <e<ber or subscriber, or
with such other agency as the Co<<issioner <ay designate, a statistical report
showing a classification schedule of its pre<iu<s and losses on all ?inds or types
of insurance business to which Section G:9 is applicable, and such other
infor<ation as the Co<<issioner <ay dee< necessary or eBpedient for the
ad<inistration of the proisions of this title!
6S#C! G,*! #ery non-life rating organiHation and eery non-life insurance
co<pany doing business in the Philippines shall file with the Co<<issioner,
eBcept as to ris?s which by general custo< of the business are not written
according to <anual rates or rating plans, eery rate <anual, schedule of rates,
classification of ris?s, rating plan, and eery other rating rule and eery
<odification of any of the foregoing which it proposes to use! 'n insurance
co<pany <ay satisfy its obligation to <a?e such filings for any ?ind or type of
insurance by beco<ing a <e<ber of or subscriber to a rating organiHation which
<a?es such filings for such ?ind or type of insurance, and by authoriHing the
Co<<issioner to accept such filings of the rating organiHation on behalf of such
insurance co<pany!
6S#C! G,3! #ery <anual or schedule of rates and eery rating plan filed as
proided in the preceding section shall state or clearly indicate the character and
eBtent of the coerage to which any such rate or any <odification thereof will be
applied!
6S#C! G,G! The Co<<issioner shall reiew filings as soon as reasonably
possible after they hae been <ade in order to deter<ine whether they <eet the
reCuire<ents of this title! 4hen a filing is not acco<panied by the infor<ation
upon which the insurance co<pany supports such filing, and the Co<<issioner
does not hae sufficient infor<ation to deter<ine whether such filing <eets the
reCuire<ents of this title, he shall reCuire such insurance co<pany to furnish the
infor<ation upon which it supports such filing! The infor<ation furnished in
support of a filing <ay include=
6DaE The eBperience or Iudg<ent of the insurance co<pany or rating organiHation
<a?ing the filingF
6DbE &ts interpretation of any statistical data it relies uponF
6DcE The eBperience of other insurance co<panies or rating organiHationF or
6DdE 'ny other releant factors!
6S#C! G,8! &f the Co<<issioner finds that any rate filings theretofore filed with
hi< do not co<ply with the proisions of this title or that they proide rates or
rules which are inadeCuate, eBcessie, unfairly discri<inatory or otherwise
unreasonable, he <ay order the sa<e withdrawn and at the eBpiration of siBty
D,+E days thereafter the sa<e shall be dee<ed no longer on file! Before <a?ing
any such finding and order, the Co<<issioner shall gie notice, not less than ten
D*+E days in adance, and a hearing, to the rating organiHation, or to the insurer,
which filed the sa<e! Such order shall not affect any contract or policy <ade or
issued prior to the eBpiration of such siBty D,+E-day period!
6S#C! G,:! (o <e<ber or subscriber of a rating organiHation, and no insurance
co<pany doing business in the Philippines, or agent, e<ployee or other
representatie of such co<pany, and no insurance bro?er shall charge or
de<and a rate or receie a pre<iu< which deiates fro< the rates, rating plans,
classifications, schedules, rules and standards, <ade and last filed by a rating
organiHation or by or on behalf of the insurance co<pany, or shall issue or <a?e
any policy or contract inoling a iolation of such rate filings!
6S#C! G,,! (otwithstanding any other proisions of this title, upon the written
application of the insurer, stating his reasons therefor, filed with and approed by
the Co<<issioner, a rate in eBcess of that proided by a filing otherwise
applicable <ay be used on any specific ris?!
6S#C! G,-! 4heneer the Co<<issioner shall deter<ine, after notice and a
hearing, that the rates charged or filed on any class of ris?s are eBcessie,
discri<inatory, inadeCuate or unreasonable, he shall order that such rates be
appropriately adIusted! For the purpose of applying the proisions of this section,
the Co<<issioner <ay fro< ti<e to ti<e approe reasonable classifications of
ris?s for any or all such classes, haing due regard to the past and prospectie
loss eBperience, including conflagration or catastrophe haHards, if any, to all
other releant factors and to a reasonable profit!
6S#C! G,9! (othing contained in this title shall be construed as reCuiring any
insurer to beco<e a <e<ber of or subscriber to any rating organiHation!
6S#C! G,;! 'gree<ents <ay be <ade a<ong insurance co<panies with respect
to the eCuitable apportion<ent a<ong the< of insurance which <ay be afforded
applicants who are in good faith entitled to but are unable to procure such
insurance through ordinary <ethods and such insurance co<panies <ay agree
a<ong the<seles on the use of reasonable rates and <odifications for such
insurance, such agree<ents and rate <odifications to be subIect to the approal
of the Co<<issioner= Proided, howeer, That the proisions of this section shall
not be dee<ed to apply to wor?<enAs co<pensation insurance!
6S#C! G-+! (o insurance co<pany doing business in the Philippines or any
agent thereof, no insurance bro?er, and no e<ployee or other representatie of
any such insurance co<pany, agent, or bro?er, shall <a?e, procure or negotiate
any contract of insurance or agree<ent as to policy contract, other than is plainly
eBpressed in the policy or other written contract issued or to be issued as
eidence thereof, or shall directly or indirectly, by giing or sharing a co<<ission
or in any <anner whatsoeer, pay or allow or offer to pay or allow to the insured
or to any e<ployee of such insured, either as an induce<ent to the <a?ing of
such insurance or after such insurance has been effected, any rebate fro< the
pre<iu< which is specified in the policy, or any special faor or adantage in the
diidends or other benefits to accrue thereon, or shall gie or offer to gie any
aluable consideration or induce<ent of any ?ind, directly or indirectly, which is
not specified in such policy or contract of insuranceF nor shall any such co<pany,
or any agent thereof, as to any policy or contract of insurance issued, <a?e any
discri<ination against any Filipino in the sense that he is gien less
adantageous rates, diidends or other policy conditions or priileges than are
accorded to other nationals because of his race!
6S#C! G-*! (o insurance co<pany doing business in the Philippines, and no
officer, director, or agent thereof, and no insurance bro?er or any other person,
partnership or corporation shall issue or circulate or cause or per<it to be issued
or circulated any literature, illustration, circular or state<ent of any sort
<isrepresenting the ter<s of any policy issued by any insurance co<pany of the
benefits or adantages pro<ised thereby, or any <isleading esti<ate of the
diidends or share of surplus to be receied thereon, or shall use any na<e or
title of any policy or class of policies <isrepresenting the true nature thereofF nor
shall any such co<pany or agent thereof, or any other person, partnership or
corporation <a?e any <isleading representation or inco<plete co<parison of
policies to any person insured in such co<pany for the purpose of inducing or
tending to induce such person to lapse, forfeit, or surrender his said insurance!
6S#C! G-3! &f the Co<<issioner, after notice and hearing, finds that any
insurance co<pany, rating organiHation, agent, bro?er or other person has
iolated any of the proisions of this title, it shall order the pay<ent of a fine not
to eBceed Twenty-fie thousand pesos DP3:,+++!++E for each such offense, and
shall i<<ediately suspend or reo?e the license issued to such insurance
co<pany, rating organiHation, agent, or bro?er! The issuance, procure<ent or
negotiation of a single policy or contract of insurance shall be dee<ed a separate
offense!
6T&T%# 9
6PR)>&S&)( C)MM)( T) '/#(TS,
BR)5#RS '(1 '1J$ST#RS
6S#C! G-G! ' license issued to a partnership, association or corporation to act as
an insurance agent, general agent, insurance bro?er, reinsurance bro?er, or
adIuster shall authoriHe only the indiidual na<ed in the license who shall Cualify
therefor as though an indiidual licensee! The Co<<issioner shall charge, and
the licensee shall pay, a full additional license fee as to each respectie indiidual
so na<ed in such license in eBcess of one!
6%icenses and certificates of registration issued under the proisions of this
chapter <ay be renewed by the filing of notices of intention on for<s to be
prescribed by the Co<<issioner and pay<ent of the fees therefor!
6S#C! G-8! The Co<<issioner, in consultation with the duly accredited
associations representing the insurance industry, shall adopt and pro<ulgate a
code of conduct to pro<ote integrity, honesty and ethical business practices
a<ong insurance agents, distributors and other inter<ediaries!
6T&T%# ;
6B'(C'SS$R'(C#
6S#C! G-:! The ter< bancassurance shall <ean the presentation and sale to
ban? custo<ers by an insurance co<pany of its insurance products within the
pre<ises of the head office of such ban? duly licensed by the Bang?o Sentral ng
Pilipinas or any of its branches under such rules and regulations which the
Co<<issioner and the Bang?o Sentral ng Pilipinas <ay pro<ulgate! To engage
in bancassurance arrange<ent, a ban? is not reCuired to hae eCuity ownership
of the insurance co<pany! (o insurance co<pany shall enter into a
bancassurance arrange<ent unless it possesses all the reCuire<ents as <ay be
prescribed by the Co<<issioner and the Bang?o Sentral ng Pilipinas!
6(o insurance product under this section, whether life or non-life, shall be issued
or deliered unless in the for< preiously approed by the Co<<issioner!
6S#C! G-,! Personnel tas?ed to present and sell insurance products within the
ban? pre<ises shall be duly licensed by the Co<<issioner and shall be subIect
to the rules and regulations of this 'ct!
6S#C! G--! The Co<<issioner and the Bang?o Sentral ng Pilipinas shall
pro<ulgate rules and regulations to effectiely superise the business of
bancassurance!
6C0'PT#R >
6S#C$R&T2 F$(1
6S#C! G-9! There is hereby created a fund to be ?nown as the Security Fund
which shall be used in the pay<ent of allowed clai<s against an insurance
co<pany authoriHed to transact business in the Philippines re<aining unpaid by
reason of the insolency of such co<pany! The said Fund <ay also be used to
reinsure the policy of the insolent insurer in any solent insurer authoriHed to do
business in the Philippines as proided in Section 3:,! The Fund <ay li?ewise
be used to pay insured clai<s which otherwise would not be co<pensable under
the proisions of the policy! (o pay<ent fro< the Security Fund shall, howeer,
be <ade to any person who owns or controls ten percent D*+LE or <ore of the
oting shares of stoc? of the insolent insurer and no pay<ent on any one clai<
shall eBceed Twenty thousand pesos DP3+,+++!++E!
6S#C! G-;! Such Fund shall consist of all pay<ents <ade to the Fund by
insurance co<panies authoriHed to do business in the Philippines! Pay<ents
<ade by life insurance co<panies shall be treated separately fro< those <ade
by non-life insurance co<panies and the corresponding fund shall be called %ife
'ccount and (on-%ife 'ccount, respectiely, and shall be held and ad<inistered
as such by the Co<<issioner in accordance with the proisions of this title! The
%ife 'ccount shall be utiliHed eBclusiely for disburse<ents that refer to life
insurance co<panies, while the (on-%ife 'ccount shall be utiliHed eBclusiely for
disburse<ents that refer to non-life insurance co<panies!
6S#C! G9+! 'll insurance co<panies doing business in the Philippines shall
contribute to the Security Fund, %ife or (on-%ife 'ccount, as the case <ay be,
the aggregate a<ount of Fie <illion pesos DP:,+++,+++!++E for each 'ccount!
The contributions of the life insurance co<panies and of the non-life insurance
co<panies shall be in direct proportion to the ratio between a particular life
insurance co<pany or a particular non-life insurance co<panyAs net worth and
the aggregate net worth of all life insurance co<panies or all non-life insurance
co<panies, as the case <ay be, as shown in their latest financial state<ents
approed by the Co<<issioner! This proportion applied to the Fie <illion pesos
DP:,+++,+++!++E shall be the contribution of a particular co<pany to the
corresponding 'ccount of the Security Fund!
6The a<ount of Fie <illion pesos DP:,+++,+++!++E in each 'ccount shall be in
the for< of a reoling trust fund! The respectie contributions of the co<panies
shall re<ain as ad<itted assets in their boo?s and any disburse<ent therefro<
shall be deducted proportionately fro< the contributions of each co<pany which
will be allowed as deductions for inco<e taB purposes! 'ny earnings of the Fund
shall be turned oer to the contributing co<panies in proportion to their
contributions!
6&n the case of disburse<ents of funds fro< the Fund as proided in the
foregoing paragraph, the life and non-life co<panies, as the case <ay be, shall
replenish the a<ount disbursed in direct proportion to the indiidual co<panyAs
net worth and the aggregate net worth of the life or non-life co<panies, as the
case <ay be! 0oweer, in no case shall the Fund eBceed the aggregate a<ount
of Ten <illion pesos DP*+,+++,+++!++E, or Fie <illion pesos DP:,+++,+++!++E for
each 'ccount!
6Should the Fund, %ife or (on-%ife 'ccount, as the case <ay be, be inadeCuate
for a disburse<ent as proided for, then the %ife or (on-%ife co<panies, as the
case <ay be, shall contribute to the Fund their respectie shares in the
proportion preiously <entioned!
6S#C! G9*! The Co<<issioner <ay adopt, a<end, and enforce all reasonable
rules and regulations necessary for the proper ad<inistration of the Fund and of
the 'ccounts! &n the eent any insurer shall fail to <a?e any pay<ent reCuired by
this title, or that any pay<ent <ade is incorrect, he shall hae full authority to
eBa<ine all the boo?s and records of the insurer for the purpose of ascertaining
the facts and shall deter<ine the correct a<ount to be paid and <ay proceed in
any court of co<petent Iurisdiction to recoer for the benefit of the Fund or of the
'ccount concerned any su< shown to be due upon such eBa<ination and
deter<ination! 'ny insurer which fails to <a?e any pay<ent to the Fund or to the
'ccount concerned when due, shall thereby forfeit to said Fund or 'ccount
concerned a penalty of fie percent D:LE of the a<ount deter<ined to be due as
proided by this title, plus one percent D*LE of such a<ount for each <onth of
delay or fraction thereof, after the eBpiration of the first <onth of such delay, but
the Co<<issioner, if satisfied that the delay was eBcusable, <ay re<it all or any
part of such penalty! The Co<<issioner, in his discretion, <ay suspend or reo?e
the certificate of authority to do business in the Philippines of any insurance
co<pany which shall fail to co<ply with this title or to pay any penalty i<posed in
accordance therewith!
6S#C! G93! The 'ccounts created by this title shall be separate and apart fro<
each other and fro< any other fund! The Treasurer of the Philippines shall be the
custodian of the %ife 'ccount and (on-%ife 'ccount of the Security FundF and all
disburse<ents fro< any 'ccount shall be <ade by the Treasurer of the
Philippines upon ouchers signed by the Co<<issioner or his deputy, as
hereinafter proided! The <oneys of said 'ccount <ay be inested by the
Co<<issioner only in bonds or other instru<ents of debt of the /oern<ent of
the Philippines or its political subdiisions or instru<entalities! The Co<<issioner
<ay sell any of the securities in which an 'ccount is inested, if adisable, for its
proper ad<inistration or in the best interest of such 'ccount!
6S#C! G9G! Pay<ents fro< either the %ife &nsurance 'ccount or (on-%ife
'ccount, as the case <ay be, shall be <ade by the Treasurer of the Philippines
to the Co<<issioner, upon the authority of appropriate certificate filed with hi<
by the Co<<issioner acting in such capacity!
6S#C! G98! The Co<<issioner <ay, in his discretion, designate or appoint a duly
authoriHed representatie or representaties to appear and defend before any
court or other body or official haing Iurisdiction any or all actions or proceedings
against principals or assureds on insurance policies or contracts issued to the<
where the insurer has beco<e insolent or unable to <eet its insurance
obligations! The Co<<issioner shall hae, as of the date of insolency of such
insurer or as of the date of its inability to <eet its insurance obligations, only the
rights which such insurer would hae had if it had not beco<e insolent or unable
to <eet its insurance obligations! For the purpose of this title, the Co<<issioner
shall hae power to e<ploy such counsel, cler?s and assistants as he <ay dee<
necessary!
6S#C! G9:! The eBpense of ad<inistering an 'ccount shall be paid out of the
'ccount concerned! The Co<<issioner shall sere as ad<inistrator of the Fund
and of the 'ccounts without additional co<pensation, but <ay be allowed and
paid fro< the 'ccount concerned eBpenses incurred in the perfor<ance of his
duties in connection with said 'ccount! The co<pensation of those persons
e<ployed by the Co<<issioner shall be dee<ed ad<inistration eBpense payable
fro< the 'ccount concerned! The Co<<issioner shall include in his annual report
to the Secretary of Finance a state<ent of the eBpenses of ad<inistration of the
Fund and of the %ife 'ccount and (on-%ife 'ccount for the preceding year!
6C0'PT#R >&
6C)MP$%S)R2 M)T)R >#0&C%#
%&'B&%&T2 &(S$R'(C#
6S#C! G9,! For purposes of this chapter=
6DaE Motor >ehicle is any ehicle as defined in Section G, paragraph DaE of
Republic 'ct (o! 8*G,, otherwise ?nown as the @%and Transportation and Traffic
CodeA!
6DbE Passenger is any fare paying person being transported and coneyed in and
by a <otor ehicle for transportation of passengers for co<pensation, including
persons eBpressly authoriHed by law or by the ehicleAs operator or his agents to
ride without fare!
6DcE Third party is any person other than a passenger as defined in this section
and shall also eBclude a <e<ber of the household, or a <e<ber of the fa<ily
within the second degree of consanguinity or affinity, of a <otor ehicle owner or
land transportation operator, as li?ewise defined herein, or his e<ployee in
respect of death, bodily inIury, or da<age to property arising out of and in the
course of e<ploy<ent!
6DdE )wner or <otor ehicle owner <eans the actual legal owner of a <otor
ehicle, in whose na<e such ehicle is duly registered with the %and
Transportation )fficeF
6DeE %and transportation operator <eans the owner or owners of <otor ehicles
for transportation of passengers for co<pensation, including school buses!
6DfE &nsurance policy or Policy refers to a contract of insurance against passenger
and third-party liability for death or bodily inIuries and da<age to property arising
fro< <otor ehicle accidents!
6S#C! G9-! &t shall be unlawful for any land transportation operator or owner of a
<otor ehicle to operate the sa<e in the public highways unless there is in force
in relation thereto a policy of insurance or guaranty in cash or surety bond issued
in accordance with the proisions of this chapter to inde<nify the death, bodily
inIury, andKor da<age to property of a third-party or passenger, as the case <ay
be, arising fro< the use thereof!
6S#C! G99! The Co<<issioner shall furnish the %and Transportation )ffice with a
list of insurance co<panies authoriHed to issue the policy of insurance or surety
bond reCuired by this chapter!
6S#C! G9;! The %and Transportation )ffice shall not allow the registration or
renewal of registration of any <otor ehicle without first reCuiring fro< the land
transportation operator or <otor ehicle owner concerned the presentation and
filing of a substantiating docu<entation in a for< approed by the Co<<issioner
eidencing that the policy of insurance or guaranty in cash or surety bond
reCuired by this chapter is in effect!
6S#C! G;+! #ery land transportation operator and eery owner of a <otor
ehicle shall, before applying for the registration or renewal of registration of any
<otor ehicle, at his option, either secure an insurance policy or surety bond
issued by any insurance co<pany authoriHed by the Co<<issioner or <a?e a
cash deposit in such a<ount as herein reCuired as li<it of liability for purposes
specified in Section G9-!
6DaE &n the case of a land transportation operator, the insurance guaranty in cash
or surety bond shall coer liability for death or bodily inIuries of third-parties
andKor passengers arising out of the use of such ehicle in the a<ount not less
than Twele thousand pesos DP*3,+++!++E per passenger or third-party and an
a<ount, for each of such categories, in any one accident of not less than that set
forth in the following scale=
6D*E Motor ehicles with an authoriHed capacity of twenty-siB D3,E or <ore
passengers= Fifty thousand pesos DP:+,+++!++EF
6D3E Motor ehicles with an authoriHed capacity of fro< twele D*3E to twenty-fie
D3:E passengers= Forty thousand pesos DP8+,+++!++EF
6DGE Motor ehicles with an authoriHed capacity of fro< siB D,E to eleen D**E
passengers= Thirty thousand pesos DPG+,+++!++EF
6D8E Motor ehicles with an authoriHed capacity of fie D:E or less passengers=
Fie thousand pesos DP:,+++!++E <ultiplied by the authoriHed capacity!
6Proided, howeer, That such cash deposit <ade to, or surety bond posted with,
the Co<<issioner shall be resorted to by hi< in cases of accidents the
inde<nities for which to third-parties andKor passengers are not settled
accordingly by the land transportation operator and, in that eent, the said cash
deposit shall be replenished or such surety bond shall be restored within siBty
D,+E days after i<pair<ent or eBpiry, as the case <ay be, by such land
transportation operator, otherwise, he shall secure the insurance policy reCuired
by this chapter! The aforesaid cash deposit <ay be inested by the
Co<<issioner in readily <ar?etable goern<ent bonds, andKor securities!
6DbE &n the case of an owner of a <otor ehicle, the insurance or guaranty in cash
or surety bond shall coer liability for death or inIury to third-parties in an a<ount
not less than that set forth in the following scale in any one accident=
6D*E Priate Cars
6DiE Banta<= Twenty thousand pesos DP3+,+++!++EF
6DiiE %ight= Twenty thousand pesos DP3+,+++!++EF and
6DiiiE 0eay= Thirty thousand pesos DPG+,+++!++E!
6D3E )ther Priate >ehicles
6DiE Tricycles, <otorcycles and scooters= Twele thousand pesos DP*3,+++!++EF
6DiiE >ehicles with an unladen weight of 3,,++ ?ilos or less= Twenty thousand
pesos DP3+,+++!++EF
6DiiiE >ehicles with an unladen weight of between 3,,+* ?ilos and G,;G+ ?ilos=
Thirty thousand pesos DPG+,+++!++EF and
6DiE >ehicles with an unladen weight oer G,;G+ ?ilos= Fifty thousand pesos
DP:+,+++!++E!
6The Co<<issioner <ay, if warranted, set forth schedule of inde<nities for the
pay<ent of clai<s for death or bodily inIuries with the coerages set forth herein!
6S#C! G;*! 'ny clai< for death or inIury to any passenger or third-party pursuant
to the proisions of this chapter shall be paid without the necessity of proing
fault or negligence of any ?ind= Proided, That for purposes of this section=
6DaE The total inde<nity in respect of any person shall not be less than Fifteen
thousand pesos DP*:,+++!++EF
6DbE The following proofs of loss, when sub<itted under oath, shall be sufficient
eidence to substantiate the clai<=
6D*E Police report of accidentF and
6D3E 1eath certificate and eidence sufficient to establish the proper payeeF or
6DGE Medical report and eidence of <edical or hospital disburse<ent in respect
of which refund is clai<edF
6DcE Clai< <ay be <ade against one <otor ehicle only! &n the case of an
occupant of a ehicle, clai<, shall lie against the insurer of the ehicle in which
the occupant is riding, <ounting or dis<ounting fro<! &n any other case, clai<
shall lie against the insurer of the directly offending ehicle! &n all cases, the right
of the party paying the clai< to recoer against the owner of the ehicle
responsible for the accident shall be <aintained!
6S#C! G;3! (o land transportation operator or owner of <otor ehicle shall be
unreasonably denied the policy of insurance or surety bond reCuired by this
chapter by the insurance co<panies authoriHed to issue the sa<e, otherwise, the
%and Transportation )ffice shall reCuire fro< said land transportation operator or
owner of the ehicle, in lieu of a policy of insurance or surety bond, a certificate
that a cash deposit has been <ade with the Co<<issioner in such a<ount
reCuired as li<its of inde<nity in Section G;+ to answer for the passenger andKor
third-party liability of such land transportation operator or owner of the ehicle!
6(o insurance co<pany <ay issue the policy of insurance or surety bond
reCuired under this chapter unless so authoriHed under eBisting laws!
6The authority to engage in the casualty andKor surety lines of business of an
insurance co<pany that refuses to issue or renew, without Iust cause, the
insurance policy or surety bond therein reCuired shall be withdrawn i<<ediately!
6S#C! G;G! (o cancellation of the policy shall be alid unless written notice
thereof is gien to the land transportation operator or owner of the ehicle and to
the %and Transportation )ffice at least fifteen D*:E days prior to the intended
effectie date thereof! $pon receipt of such notice, the %and Transportation
)ffice, unless it receies eidence of a new alid insurance or guaranty in cash
or surety bond as prescribed in this chapter, or an endorse<ent of reial of the
cancelled one, shall order the i<<ediate confiscation of the plates of the <otor
ehicle coered by such cancelled policy! The sa<e <ay be reissued only upon
presentation of a new insurance policy or that a guaranty in cash or surety bond
has been <ade or posted with the Co<<issioner and which <eets the
reCuire<ents of this chapter, or an endorse<ent or reial of the cancelled one!
6S#C! G;8! &f the cancellation of the policy or surety bond is conte<plated by the
land transportation operator or owner of the ehicle, he shall, before the policy or
surety bond ceases to be effectie, secure a si<ilar policy of insurance or surety
bond to replace the policy or surety bond to be cancelled or <a?e a cash deposit
in sufficient a<ount with the Co<<issioner, and without any gap, file the reCuired
docu<entation with the %and Transportation )ffice, and notify the insurance
co<pany concerned of the cancellation of its policy or surety bond!
6S#C! G;:! &n case of change of owner ship of a <otor ehicle, or change of the
engine of an insured ehicle, there shall be no need of issuing a new policy until
the neBt date of registration or renewal of registration of such ehicle, and=
Proided, That the insurance co<pany shall agree to continue the policy, such
change of ownership or such change of the engine shall be indicated in a
corresponding endorse<ent by the insurance co<pany concerned, and a signed
duplicate of such endorse<ent shall, within a reasonable ti<e, be filed with the
%and Transportation )ffice!
6S#C! G;,! &n the settle<ent and pay<ent of clai<s, the inde<nity shall not be
aailed of by any accident icti< or clai<ant as an instru<ent of enrich<ent by
reason of an accident, but as an assistance or restitution insofar as can fairly be
ascertained!
6S#C! G;-! 'ny person haing any clai< upon the policy issued pursuant to this
chapter shall, without any unnecessary delay, present to the insurance co<pany
concerned a written notice of clai< setting forth the nature, eBtent and duration of
the inIuries sustained as certified by a duly licensed physician! (otice of clai<
<ust be filed within siB D,E <onths fro< the date of accident, otherwise, the clai<
shall be dee<ed waied! 'ction or suit for recoery of da<age due to loss or
inIury <ust be brought, in proper cases, with the Co<<issioner or the courts
within one D*E year fro< denial of the clai<, otherwise, the clai<antAs right of
action shall prescribe!
6S#C! G;9! The insurance co<pany concerned shall forthwith ascertain the truth
and eBtent of the clai< and <a?e pay<ent within fie D:E wor?ing days after
reaching an agree<ent! &f no agree<ent is reached, the insurance co<pany shall
pay only the no-fault inde<nity proided in Section G;* without preIudice to the
clai<ant fro< pursuing his clai< further, in which case, he shall not be reCuired
or co<pelled by the insurance co<pany to eBecute any Cuit clai< or docu<ent
releasing it fro< liability under the policy of insurance or surety bond issued!
6&n case of any dispute in the enforce<ent of the proisions of any policy issued
pursuant to this chapter, the adIudication of such dispute shall be within the
original and eBclusie Iurisdiction of the Co<<issioner, subIect to the li<itations
proided in Section 8G;!
6S#C! G;;! &t shall be unlawful for a land transportation operator or owner of
<otor ehicle to reCuire his or its driers or other e<ployees to contribute in the
pay<ent of pre<iu<s!
6S#C! 8++! (o goern<ent office or agency haing the duty of i<ple<enting the
proisions of this chapter nor any official or e<ployee thereof shall act as agent
in procuring the insurance policy or surety bond proided for herein! The
co<<ission of an agent procuring the said policy or bond shall in no case eBceed
ten percent D*+LE of the a<ount of the pre<iu<s therefor!
6S#C! 8+*! 'ny land transportation operator or owner of <otor ehicle or any
other person iolating any of the proisions of the preceding sections shall be
punished by a fine of not less than Fie hundred pesos DP:++!++E andKor
i<prison<ent for not <ore than siB D,E <onths! The iolation of Section G;+ by a
land transportation operator shall be a sufficient cause for the reocation of the
certificate of public conenience issued by the %and Transportation Franchising
and Regulatory Board coering the ehicle concerned!
6S#C! 8+3! 4heneer any iolation of the proisions of this chapter is co<<itted
by a corporation or association, or by a goern<ent office or entity, the eBecutie
officer or officers of said corporation, association or goern<ent office or entity
who shall hae ?nowingly per<itted, or failed to preent, said iolation shall be
held liable as principals!
6C0'PT#R >&&
6M$T$'% B#(#F&T 'SS)C&'T&)(S '(1
TR$STS F)R C0'R&T'B%# $S#S
6T&T%# l
6M$T$'% B#(#F&T 'SS)C&'T&)(S
6S#C! 8+G! 'ny society, association or corporation, without capital stoc?, for<ed
or organiHed not for profit but <ainly for the purpose of paying sic? benefits to
<e<bers, or of furnishing financial support to <e<bers while out of e<ploy<ent,
or of paying to relaties of deceased <e<bers of fiBed or any su< of <oney,
irrespectie of whether such ai< or purpose is carried out by <eans of fiBed dues
or assess<ents collected regularly fro< the <e<bers, or of proiding, by the
issuance of certificates of insurance, pay<ent of its <e<bers of accident or life
insurance benefits out of such fiBed and regular dues or assess<ents, but in no
case shall include any society, association, or corporation with such <utual
benefit features and which shall be carried out purely fro< oluntary contributions
collected not regularly andKor no fiBed a<ount fro< who<soeer <ay contribute,
shall be ?nown as a <utual benefit association within the intent of this Code!
6'ny society, association, or corporation principally organiHed as a labor union
shall be goerned by the %abor Code notwithstanding any <utual benefit feature
proisions in its charter as incident to its organiHation!
6&n no case shall a <utual benefit association be organiHed and authoriHed to
transact business as a charitable or beneolent organiHation, and wheneer it
has this feature as incident to its eBistence, the corresponding charter proision
shall be reised to confor< with the proision of this section! Mutual benefit
association, already licensed to transact business as such on the date this Code
beco<es effectie, haing charitable or beneolent feature shall abandon such
incidental purpose upon effectiity of this Code if they desire to continue
operating as such <utual benefit associations!
6S#C! 8+8! ' <utual benefit association, before it <ay transact as such, <ust
first secure a license fro< the Co<<issioner! The application for such license
shall be filed with the Co<<issioner together with certified true copies of the
articles of incorporation or the constitution and bylaws of the association, and all
a<end<ents thereto, and such other docu<ents or testi<onies as the
Co<<issioner <ay reCuire!
6(o license shall be granted to a <utual benefit association until the
Co<<issioner shall hae been satisfied by such eBa<ination as he <ay <a?e
and such eidence as he <ay reCuire that the association is Cualified under
eBisting laws to operate and transact business as such! The Co<<issioner <ay
refuse to issue a license to any <utual benefit association if, in his Iudg<ent,
such refusal will best pro<ote the interest of the <e<bers of such association
and of the people of this country! 'ny license issued shall eBpire on the last day
of 1ece<ber of the third year following its issuance and, upon proper application,
<ay be renewed if the association is continuing to co<ply with eBisting laws,
rules and regulations, orders, instructions, rulings and decisions of the
Co<<issioner! #ery association receiing any such license shall be subIect to
the superision of the Co<<issioner= Proided, That no such license shall be
granted to any such association if such association has no actuary!
6S#C! 8+:! (o <utual benefit association shall be issued a license to operate as
such unless it has constituted and established a /uaranty Fund by depositing
with the Co<<issioner an initial <ini<u< a<ount of Fie <illion pesos
DP:,+++,+++!++E in cash, or in goern<ent securities with a total alue eCual to
such a<ount, to answer for any alid benefit clai< of any of its <e<bers!
6'll <oneys receied by the Co<<issioner for this purpose <ust be deposited by
hi< in interest-bearing deposits with any ban? or ban?s authoriHed to transact
business in the Philippines for the account of the particular association
constituting the /uaranty Fund!
6'ny accrual to such fund, be it interest earned or diidend additions on <oneys
or securities so deposited, <ay, with the prior approal of the Co<<issioner, be
withdrawn by the association if there is no pending benefit clai< against it,
including interest thereon or diidend additions thereto!
6The Co<<issioner, prior to or after licensing a <utual benefit association, <ay
reCuire such association to increase its /uaranty Fund fro< the initial <ini<u<
a<ount reCuired to an a<ount eCual to the capital inest<ent reCuired of an
eBisting do<estic insurance co<pany under Section 3+; of this Code!
6S#C! 8+,! #ery <utual benefit association licensed to do business as such
shall issue <e<bership certificates to its <e<bers specifying the benefits to
which such <e<bers are entitled!
6Such certificates, together with the articles of incorporation of the association or
its constitution and bylaws, and all eBisting laws as <ay be pertinent shall
constitute the agree<ent, as of the date of its issuance, between the association
and the <e<ber! The <e<bership certificate shall be in a for< preiously
approed by the Co<<issioner!
6S#C! 8+-! ' <utual benefit association <ay, by reinsurance agree<ent, cede in
whole or in part any indiidual ris? or ris?s under certificates of insurance issued
by it, only to a life insurance co<pany authoriHed to transact business or to a
professional reinsurer authoriHed to accept life ris?s in the Philippines= Proided,
That a copy of the draft of such reinsurance agree<ent shall be sub<itted to the
Co<<issioner for his approal! The association <ay ta?e credit for the reseres
on such ceded ris?s to the eBtent reinsured!
6S#C! 8+9! The constitution or bylaws of a <utual benefit association <ust
distinctly state the purpose for which dues andKor assess<ents are <ade and
collected and the portion thereof which <ay be used for eBpenses!
61eath benefit and other relief funds shall be created and used eBclusiely for
paying benefits due the <e<bers under their respectie <e<bership certificates!
' general fund shall li?ewise be created and used for eBpenses of ad<inistration
of the association!
6' <utual benefit association shall only <aintain free and unassigned surplus of
not <ore than twenty percent D3+LE of its total liabilities as erified by the
Co<<issioner! 'ny a<ount in eBcess shall be returned to the <e<bers by way
of diidends, enhancing the eCuity alue or proiding benefits in ?ind and other
releant serices! &n addition, subIect to the approal of the Co<<issioner, a
<utual benefit association <ay allocate a portion for capacity building and
research and deelop<ent such as deeloping new products and serices,
upgrading and i<proing operating syste<s and eCuip<ent and continuing
<e<ber education!
6S#C! 8+;! #ery outstanding <e<bership certificate <ust hae an eCuity alue
eCuialent to at least fifty percent D:+LE of the total contributions collected
thereon! The eCuity alue only applies to basic life insurance product and
eBcludes optional products!
6S#C! 8*+! #ery <utual benefit association <ust accu<ulate and <aintain, out
of the periodic dues collected fro< its <e<bers, sufficient reseres for the
pay<ent of clai<s or obligations for which it shall hold funds in securities
satisfactory to the Co<<issioner consisting of bonds of the /oern<ent of the
Philippines, or any of its political subdiisions and instru<entalities, or in such
other good securities as <ay be approed by the Co<<issioner!
6The resere liability shall be established in accordance with actuarial procedures
and shall be approed by the Co<<issioner!
6The articles of incorporation or the constitution and bylaws of a <utual benefit
association <ust proide that if its resere as to all or any class of certificates
beco<es i<paired, its board of directors or trustees <ay reCuire that there shall
be paid by the <e<bers to the association the a<ount of the <e<bersA eCuitable
proportion of such deficiency as ascertained by said board and that if the
pay<ent be not <ade it shall stand as an indebtedness against the <e<bership
certificates of the defaulting <e<bers and draw interest not to eBceed fie
percent D:LE per annu< co<pounded annually!
6S#C! 8**! ' <utual benefit association <ay inest such portion of its funds as
shall not be reCuired to <eet pending clai<s and other obligations in any of the
classes of inest<ents or types of securities in which life insurance co<panies
doing business in the Philippines <ay inest!
6&t <ay also grant loans to <e<bers on the security of a pledge or chattel
<ortgage of personal properties of the borrowers, or in the absence thereof, on
the security of the <e<bership certificate of the borrowing <e<bers, in which
eent such loan shall beco<e a first lien on the proceeds thereof!
6S#C! 8*3! The Co<<issioner or any of his duly designated representaties,
shall hae the power of isitation, audit and eBa<ination into the affairs, financial
condition, and <ethods of doing business of all <utual benefit associations, and
he shall cause such eBa<ination to be <ade at least once eery two D3E years or
wheneer it <ay be dee<ed proper and necessary! Free access to the boo?s,
records and docu<ents of the association shall be accorded to the
Co<<issioner, or to his representaties, in such <anner that the Co<<issioner
or his representaties <ay readily erify or deter<ine the true affairs, financial
condition, and <ethod of doing business of such association! &n the course of
such eBa<ination, the Co<<issioner or his duly designated representaties shall
hae authority to ad<inister oaths and ta?e testi<ony or other eidence on any
<atter relating to the affairs of the association!
6'll <inutes of the proceedings of the board of directors or trustees of the
association, and those of the regular or special <eetings of the <e<bers, shall
be ta?en, and a copy thereof, in #nglish or in Pilipino, shall be sub<itted to the
Co<<issionerAs representaties or eBa<iners in the course of such eBa<ination!
6' copy of the findings of such eBa<ination, together with the reco<<endations
of the Co<<issioner, shall be furnished the association for its infor<ation and
co<pliance, and the sa<e shall be ta?en up i<<ediately in the <eetings of the
board of directors or trustees and of the <e<bers of the association!
6S#C! 8*G! #ery <utual benefit association shall, annually on or before the
thirtieth day of 'pril of each year, render to the Co<<issioner an annual
state<ent in such for< and detail as <ay be prescribed by the Co<<issioner,
signed and sworn to by the president, secretary, treasurer, and actuary of the
association, showing the eBact condition of its affairs on the preceding thirty-first
day of 1ece<ber!
6S#C! 8*8! (o <oney, aid or benefit to be paid, proided or tendered by any
<utual benefit association, shall be liable to attach<ent, garnish<ent, or other
process, or be seiHed, ta?en, appropriated, or applied by any legal or eCuitable
process to pay any debt or liability of a <e<ber or beneficiary, or any other
person who <ay hae a right thereunder, either before or after pay<ent!
6S#C! 8*:! 'ny <e<ber of a <utual benefit association shall hae the right at all
ti<es to change the beneficiary or beneficiaries or add another beneficiary or
other beneficiaries in accordance with the rules and regulations of the
association unless he has eBpressly waied this right in the <e<bership
certificate! #ery association <ay, under such rules as it <ay adopt, li<it the
scope of beneficiaries and proide that no beneficiary shall hae or obtain any
ested interest in the proceeds of any certificate until the certificate has beco<e
due and payable under the ter<s of the <e<bership certificate!
6S#C! 8*,! 'ny chapter affiliate independently licensed as a <utual benefit
association <ay consolidate or <erge with any other si<ilar chapter affiliate or
with the <other association!
6S#C! 8*-! 'ny <utual benefit association <ay be conerted into and licensed
as a <utual life insurance co<pany by co<plying with the reCuire<ents of the
pertinent proisions of this Code and sub<itting the specific plan for such
conersion to the Co<<issioner for his approal! Such plan, as approed, shall
then be sub<itted to the <e<bers either in the regular <eeting or in a special
<eeting called for the purpose for their adoption! The affir<atie ote of at least
two-thirds D3KGE of all the <e<bers shall be necessary in order to consider such
plan as adopted!
6(o such conersion shall ta?e effect unless and until approed by the
Co<<issioner!
6S#C! 8*9! (o <utual benefit association shall be dissoled without first notifying
the Co<<issioner and furnishing hi< with a certified copy of the resolution
authoriHing the dissolution, duly adopted by the affir<atie ote of two-thirds D3KGE
of the <e<bers at a <eeting called for that purpose, the financial state<ents as
of the date of the resolution, and such other papers or docu<ents as <ay be
reCuired by the Co<<issioner!
6(o dissolution shall proceed until and unless approed by the Co<<issioner
and all proceedings in connection therewith shall be witnessed and attested by
his duly designated representatie!
6(o <utual benefit association shall be officially declared as dissoled until after
the Co<<issioner so certifies that all outstanding clai<s against the association
hae been duly settled and liCuidated!
6S#C! 8*;! The Co<<issioner shall, after notice and hearing, hae the power
either to suspend or reo?e the license issued to a <utual benefit association if
he finds that the association has=
6DaE Failed to co<ply with any proision of this CodeF
6DbE Failed to co<ply with any other law or regulation obligatory upon itF
6DcE Failed to co<ply with any order, ruling, instruction, reCuire<ent or
reco<<endation of the Co<<issionerF
6DdE #Bceeded its power to the preIudice of its <e<bersF
6DeE Conducted its business fraudulently or haHardouslyF
6DfE Rendered its affairs and condition to one of insolencyF or
6DgE Failed to carry out its ai<s and purposes for which it was organiHed due to
any cause!
6'fter receipt of the order fro< the Co<<issioner suspending or reo?ing the
license, the association <ust i<<ediately eBert efforts to re<oe such cause or
causes which brought about the order and, upon proper showing, <ay apply with
the Co<<issioner for the lifting of the order and restoration or reial of the
license so reo?ed or suspended!
6S#C! 83+! For failure to re<oe such cause or causes which brought about the
suspension or reocation of the license of a <utual benefit association, the
Co<<issioner shall apply under this Code for an order fro< the proper court to
liCuidate such association!
6The proisions of Titles *8 and *:, Chapter &&&, pertaining to the appoint<ent of a
conserator and proceedings upon insolency of an insurance co<pany shall,
insofar as practicable, apply to <utual benefit associations!
6S#C! 83*! To secure the enforce<ent of any proision under this title, the
Co<<issioner <ay issue such rules, rulings, instructions, orders and circulars!
6S#C! 833! The iolation of any proision of this title shall subIect the person
iolating or the officer of the association responsible therefor to a fine of not less
than Ten thousand pesos DP*+,+++!++E, or i<prison<ent of not eBceeding three
DGE years, or both such fine and i<prison<ent, at the discretion of the court!
6S#C! 83G! 'll proisions of this Code goerning life insurance co<panies and
such other proisions wheneer practicable and necessary, shall be applicable to
<utual benefit associations!
6T&T%# 3
6TR$STS F)R C0'R&T'B%# $S#S
6S#C! 838! The ter< trust for charitable uses, within the intent of this Code, shall
include, all the real or personal properties or funds, as well as those acCuired
with the fruits or inco<e therefro< or in eBchange or substitution thereof, gien to
or receied by any person, corporation, association, foundation, or entity, eBcept
the (ational /oern<ent, its instru<entalities or political subdiisions, for
charitable, beneolent, educational, pious, religious, or other uses for the benefit
of the public at large or a particular portion thereof or for the benefit of an
indefinite nu<ber of persons!
6S#C! 83:! The ter< trustee shall include any indiidual, corporation,
association, foundation, or entity, eBcept the (ational /oern<ent, its
instru<entalities or political subdiisions, in charge of, or acting for, or concerned
with the ad<inistration of, the trust referred to in the section i<<ediately
preceding and with the proper application of trust property!
6S#C! 83,! The ter< trust property shall include all real or personal properties or
funds pertaining to the trust as well as those acCuired with the fruits or inco<e
therefro< or in eBchange or substitution thereof!
6S#C! 83-! 'll trustees shall, before entering in the perfor<ance of the duties of
their trust, obtain a certificate of registration fro< the Co<<issioner! The
registration shall eBpire on 1ece<ber G* of the third year following its issuance
unless it is renewed!
6'll proisions of this Code goerning <utual benefit associations and such other
proisions herein, wheneer practicable and necessary, shall be applicable to
trusts for charitable uses!
6S#C! 839! The treasurer of a charitable trust shall file a fidelity bond in the
a<ount co<<ensurate with the alue of the trust property in his custody, as <ay
be deter<ined by the Co<<issioner!
6C0'PT#R >&&&
6TR$ST B$S&(#SS &( /#(#R'%
6S#C! 83;! 'n insurance co<pany <ay engage in li<ited trust business,
consisting of <anaging funds pertaining only to retire<ent and pre-need plans,
proided it has secured a license to do so fro< the Bang?o Sentral ng Pilipinas!
This trust business shall be separate and distinct fro< the general business of
the insurance co<pany and shall be subIect to rules and regulations as <ay be
pro<ulgated by the Bang?o Sentral ng Pilipinas in consultation with the
Co<<issioner!
6C0'PT#R &R
6R#/&STR'T&)(, R#SP)(S&B&%&T&#S '(1
)>#RS&/0T )F S#%F-R#/$%'T)R2
)R/'(&M'T&)(S
6S#C 8G+! The Co<<issioner shall hae the power to register as a self-
regulatory organiHation, or otherwise grant licenses, and to regulate, superise,
eBa<ine, suspend or otherwise discontinue, as a condition for the operation of
organiHations whose operations are related to or connected with the insurance
<ar?et such as, but not li<ited to, associations of insurance co<panies, whether
life or non-life, reinsurers, actuaries, agents, bro?ers, dealers, <utual benefit
associations, trusts, rating agencies, and other persons regulated by the
Co<<issioner, which are engaged in the business regulated by this Code!
6The Co<<issioner <ay prescribe rules and regulations which are necessary or
appropriate in the public interest or for the protection of inestors to goern self-
regulatory organiHations and other organiHations licensed or regulated pursuant
to the authority granted hereunder including, but not li<ited to, the reCuire<ent of
cooperation within and a<ong all participants in the insurance <ar?et to ensure
transparency and facilitate eBchange of infor<ation!
6S#C! 8G*! 'n association cannot be registered as a self-regulatory organiHation
unless the Co<<issioner deter<ines that=
6DaE The association is so organiHed and has the capacity to be able to carry out
the purposes of this Code and to co<ply with, and to enforce co<pliance by its
<e<bers and persons associated with its <e<bers, with the proisions of this
Code, the rules and regulations thereunder, and the rules of the association!
6DbE The rules of the association, notwithstanding anything in the Corporation
Code to the contrary, proide the following=
6D*E Sualifications and the disCualifications on <e<bership of the associationF
6D3E ' fair representation of its <e<bers to sere on the board of directors of the
association and the ad<inistration of its affairs, and that any natural person
associated with a Iuridical entity that is a <e<ber shall also be dee<ed to be a
<e<ber for this purposeF
6DGE The president of the association and at least two D3E independent directors
as <e<bers of the board of directors of the associationF
6D8E #Cuitable allocation of reasonable dues, fees, and other charges a<ong
<e<bers and other persons using any facility or syste< which the association
operates or controlsF
6D:E The preention of fraudulent and <anipulatie acts and practices to protect
the insuring public and the pro<otion of Iust and eCuitable principles of businessF
6D,E Me<bers and persons associated with its <e<bers subIect to discipline for
iolation of any proision of this Code, the rules or regulations thereunder, or the
rules of the associationF
6D-E Fair procedure for the disciplining of <e<bers and persons associated with
<e<bersF and
6D9E The prohibition or li<itation of access to serices offered by the association
or a <e<ber thereof!
6S#C! 8G3! ' self-regulatory organiHation <ay eBa<ine and erify the
Cualifications of an applicant to beco<e a <e<ber in accordance with
procedures established by the rules of the association!
6' self-regulatory organiHation shall deny <e<bership or condition the
<e<bership of an entity, if it does not <eet the standards of financial
responsibility, operational capability, training, eBperience, or co<petence that are
prescribed by the rules of the associationF or has engaged, and there is a
reasonable li?elihood it will again engage, in acts or practices inconsistent with
Iust and eCuitable principles of fair trade!
6' self-regulatory organiHation <ay deny <e<bership to an entity not engaged in
a type of business in which the rules of the association reCuire <e<bers to be
engaged!
6S#C! 8GG! $pon the filing of an application for registration as a self-regulatory
organiHation under this title, the Co<<issioner shall hae ninety D;+E days within
which to either grant registration or institute a proceeding to deter<ine whether
registration should be denied! &n the eent proceedings are instituted, the
Co<<issioner shall hae two hundred seenty D3-+E days within which to
conclude such proceedings at which ti<e he shall, by order, grant or deny such
registration!
6S#C! 8G8! #ery self-regulatory organiHation shall co<ply with the proisions of
this Code, the rules and regulations thereunder, and its own rules, and enforce
co<pliance therewith by its <e<bers, persons associated with its <e<bers or its
participants, notwithstanding any proision of the Corporation Code to the
contrary!
6S#C! 8G:! #ach self-regulatory organiHation shall sub<it to the Co<<issioner
for prior approal any proposed rule or a<end<ent thereto, together with a
concise state<ent of the reason and effect of the proposed a<end<ent!
64ithin siBty D,+E days after sub<ission of a proposed a<end<ent, the
Co<<issioner shall, by order, approe the proposed a<end<ent! )therwise, the
sa<e <ay be <ade effectie by the self-regulatory organiHation!
6&n the eent of an e<ergency reCuiring action for the protection of the insuring
public, a self-regulatory organiHation <ay put a proposed a<end<ent into effect
su<<arily= Proided, howeer, That a copy of the sa<e shall be i<<ediately
sub<itted to the Co<<issioner!
6The Co<<issioner is further authoriHed, if after <a?ing appropriate reCuest in
writing to a self-regulatory organiHation that such organiHation effect on its own
behalf specified changes in its rules and practices and, after due notice and
hearing, it deter<ines that such changes hae not been effected, and that such
changes are necessary, by rule or regulation or by order, <ay alter, abrogate or
supple<ent the rules of such self-regulatory organiHation insofar as necessary or
appropriate to effect such changes in respect of such <atters as=
6DaE Safeguards in respect of the financial responsibility of <e<bers and
adeCuate proision against the easion of financial responsibility through the use
of corporate for<s or special partnershipsF
6DbE The superision of <ar?et practicesF
6DcE The <anner, <ethod and place of soliciting businessF
6DdE The fiBing of reasonable rates of fees, interest, listing and other charges, but
not rates of co<<issionF and self-regulatory organiHationF and
6DeE The superision, auditing and disciplining of <e<bers!
6&n addition to the general powers of the Co<<issioner oer the entities under
superision, the Co<<issioner, after due notice and hearing, is authoriHed, in the
public interest and to protect the insuring public=
6D*E To suspend for a period not eBceeding twele D*3E <onths or to reo?e the
registration of a self-regulatory organiHation, or to censure or i<pose li<itations
on the actiities, functions and operations of such self-regulatory organiHation, if
the Co<<ission finds that such a self-regulatory organiHation has willfully
iolated or is unable to co<ply with any proision of this Code or of the rules and
regulations thereunder, or its own rules, or has failed to enforce co<pliance
therewith by a <e<ber of, person associated with a <e<ber, or a participant in
such self-regulatory organiHationF
6D3E To eBpel fro< a self-regulatory organiHation any <e<ber thereof or any
participant therein who is found to hae willfully iolated any proision of this
Code or suspend for a period not eBceeding twele D*3E <onths for iolation of
any proision of this Code or any other law ad<inistered by the Co<<ission, or
the rules and regulations thereunder, or effected, directly or indirectly, any
transaction for any person who, such <e<ber or participant had reason to
beliee, was iolating in respect of such transaction any of such proisionsF and
6DGE To re<oe fro< office or censure any officer or director of a self-regulatory
organiHation if it finds that such officer or director has iolated any proision of
this Code, any other law ad<inistered by the Co<<issioner, the rules or
regulations thereunder and the rules of such self-regulatory organiHation, or has
abused his authority, or without reasonable Iustification or eBcuse has failed to
enforce co<pliance with any of such proisions!
6S#C! 8G,! DaE ' self-regulatory organiHation is authoriHed to discipline a <e<ber
of or participant in such self-regulatory organiHation, or any person associated
with a <e<ber, including suspending or eBpelling such <e<ber or participant, or
suspending or barring such person fro< being associated with a <e<ber, if
engaged in acts or practices inconsistent with Iust and eCuitable principles of
fairness or in willful iolation of any proision of this Code, any other law
ad<inistered by the Co<<ission, the rules or regulations thereunder, or the rules
of the self-regulatory organiHation! &n any disciplinary proceeding by a self-
regulatory organiHation Dother than a su<<ary proceeding pursuant to paragraph
DbE of this sectionE the self-regulatory organiHation shall bring specific charges,
proide notice to the person charged, afford the person charged with an
opportunity to defend against the charges, and ?eep a record of the proceedings!
' deter<ination to i<pose a disciplinary sanction shall be supported by a written
state<ent of the offense, a su<<ary of the eidence presented and a state<ent
of the sanction i<posed!
6DbE ' self-regulatory organiHation <ay su<<arily=
6D*E Suspend a <e<ber, participant or person associated with a <e<ber who
has been or is eBpelled or suspended fro< any other self-regulatory organiHationF
or
6D3E Suspend a <e<ber who the self-regulatory organiHation finds to be in such
financial or operating difficulty that the <e<ber or participant cannot be per<itted
to continue to do business as a <e<ber with safety to inestors, creditors, other
<e<bers, participants or the self-regulatory organiHation= Proided, That the self-
regulatory organiHation i<<ediately notifies the Co<<ission of the action ta?en!
'ny person aggrieed by a su<<ary action pursuant to this paragraph shall be
pro<ptly afforded an opportunity for a hearing by the association in accordance
with the preceding paragraph! The Co<<issioner, by order, <ay stay a su<<ary
action on his own or upon application by any person aggrieed thereby, if the
Co<<issioner deter<ines su<<arily or after due notice and hearing Dwhich
hearing <ay consist solely of the sub<ission of affidaits or presentation of oral
argu<entsE, that a stay is consistent with the public interest and the protection of
the insuring public!
6DcE ' self-regulatory organiHation shall pro<ptly notify the Co<<ission of any
disciplinary sanction on any <e<ber thereof or participant therein, any denial of
<e<bership or participation in such organiHation, or the i<position of any
disciplinary sanction on a person associated with a <e<ber or a bar of such
person fro< beco<ing so associated! 4ithin thirty DG+E days after such notice,
any aggrieed person <ay appeal to the Co<<issioner fro<, or the
Co<<issioner on its own <otion within such period, <ay institute reiew of, the
decision of the self-regulatory organiHation, at the conclusion of which, after due
notice and hearing Dwhich <ay consist solely of reiew of the record before the
self-regulatory organiHationE, the Co<<issioner shall affir<, <odify or set aside
the sanction! &n such proceeding, the Co<<issioner shall deter<ine whether the
aggrieed person has engaged or o<itted to engage in the acts and practices as
found by the self-regulatory organiHation, whether such acts and practices
constitute willful iolations of this Code, any other law ad<inistered by the
Co<<ission, the rules or regulations thereunder, or the rules of the self-
regulatory organiHation as specified by such organiHation, whether such
proisions were applied in a <anner consistent with the purposes of this Code,
and whether, with due regard for the public interest and the protection of
inestors, the sanction is eBcessie or oppressie!
6C0'PT#R R
6T0# &(S$R'(C# C)MM&SS&)(#R
6T&T%# l
6'1M&(&STR'T&># '(1 '1J$1&C'T)R2 P)4#RS
6S#C! 8G-! The &nsurance Co<<issioner shall be appointed by the President of
the Republic of the Philippines for a ter< of siB D,E years without reappoint<ent
and who shall sere as such until the successor shall hae been appointed and
Cualified! &f the &nsurance Co<<issioner is re<oed before the eBpiration of his
ter< of office, the reason for the re<oal <ust be published!
6The &nsurance Co<<issioner shall hae the duty to see that all laws relating to
insurance, insurance co<panies and other insurance <atters, <utual benefit
associations, and trusts for charitable uses are faithfully eBecuted and to perfor<
the duties i<posed upon hi< by this Code, and shall, notwithstanding any
eBisting laws to the contrary, hae sole and eBclusie authority to regulate the
issuance and sale of ariable contracts as defined in Section 3G9 hereof and to
proide for the licensing of persons selling such contracts, and to issue such
reasonable rules and regulations goerning the sa<e!
6The Co<<issioner <ay issue such rulings, instructions, circulars, orders and
decisions as <ay be dee<ed necessary to secure the enforce<ent of the
proisions of this Code, to ensure the efficient regulation of the insurance
industry in accordance with global best practices and to protect the insuring
public! #Bcept as otherwise specified, decisions <ade by the Co<<issioner shall
be appealable to the Secretary of Finance!
6&n addition to the foregoing, the Co<<issioner shall hae the following powers
and functions=
6DaE For<ulate policies and reco<<endations on issues concerning the
insurance industry, adise Congress and other goern<ent agencies on all
aspects of the insurance industry and propose legislation and a<end<ents
theretoF
6DbE 'pproe, reIect, suspend or reo?e licenses or certificates of registration
proided for by this CodeF
6DcE &<pose sanctions for the iolation of laws and the rules, regulations and
orders issued pursuant theretoF
6DdE Prepare, approe, a<end or repeal rules, regulations and orders, and issue
opinions and proide guidance on and superise co<pliance with such rules,
regulations and ordersF
6DeE #nlist the aid and support of, andKor deputiHe any and all enforce<ent
agencies of the goern<ent in the i<ple<entation of its powers and functions
under this CodeF
6DfE &ssue cease and desist orders to preent fraud or inIury to the insuring publicF
6DgE Punish for conte<pt of the Co<<issioner, both direct and indirect, in
accordance with the pertinent proisions of and penalties prescribed by the Rules
of CourtF
6DhE Co<pel the officers of any registered insurance corporation or association to
call <eetings of stoc?holders or <e<bers thereof under its superisionF
6DiE &ssue subpoena duces tecu< and su<<on witnesses to appear in any
proceeding of the Co<<ission and, in appropriate cases, order the eBa<ination,
search and seiHure of all docu<ents, papers, files and records, taB returns, and
boo?s of accounts of any entity or person under inestigation as <ay be
necessary for the proper disposition of the cases before it, subIect to the
proisions of eBisting lawsF
6DIE Suspend or reo?e, after proper notice and hearing, the license or certificate
of authority of any entity or person under its regulation, upon any of the grounds
proided by lawF
6D?E Conduct an eBa<ination to deter<ine co<pliance with laws and regulations if
the circu<stances so warrant as deter<ined by appropriate rules and
regulationsF
6DlE &nestigate not oftener than once a year fro< the last date of eBa<ination to
deter<ine whether an institution is conducting its business on a safe and sound
basis= Proided, That, the deficienciesKirregularities found by or discoered by an
audit shall be i<<ediately addressedF
6D<E &nCuire into the solency and liCuidity of the institutions under its superision
and enforce pro<pt correctie actionF
6DnE To retain and utiliHe, in addition to its annual budget, all fees, charges and
other inco<e deried fro< the regulation of insurance co<panies and other
superised persons or entitiesF
6DoE To fiB and assess fees, charges and penalties as the Co<<issioner <ay find
reasonable in the eBercise of regulationF and
6DpE #Bercise such other powers as <ay be proided by law as well as those
which <ay be i<plied fro<, or which are necessary or incidental to the eBpress
powers granted the Co<<ission to achiee the obIecties and purposes of this
Code!
6The Co<<ission shall inde<nify the Co<<issioner, 1eputy Co<<issioner, and
other officials of the Co<<ission, including personnel perfor<ing superision and
eBa<ination functions, for all costs and eBpenses reasonably incurred by such
persons in connection with any ciil or cri<inal actions, suits or proceedings to
which they <ay be <ade a party to by the reason of the perfor<ance of their
duties and functions, unless they are finally adIudged in such actions, suits or
proceedings to be liable for negligence or <isconduct!
6&n the eent of settle<ent or co<pro<ise, inde<nification shall be proided only
in connection with such <atters coered by the settle<ent as to which the
Co<<ission is adised by eBternal counsel that the persons to be inde<nified
did not co<<it any negligence or <isconduct=
6The costs and eBpenses incurred in defending the afore<entioned action, suit or
proceeding <ay be paid by the Co<<ission in adance of the final disposition of
such action, suit or proceeding upon receipt of an underta?ing by or on behalf of
the Co<<issioner, 1eputy Co<<issioner, officer or e<ployee to repay the
a<ount adanced should it ulti<ately be deter<ined by the Co<<ission that the
person is not entitled to be inde<nified!
6S#C! 8G9! &n addition to the ad<inistratie sanctions proided elsewhere in this
Code, the &nsurance Co<<issioner is hereby authoriHed, at his discretion, to
i<pose upon insurance co<panies, their directors andKor officers andKor agents,
for any willful failure or refusal to co<ply with, or iolation of any proision of this
Code, or any order, instruction, regulation, or ruling of the &nsurance
Co<<issioner, or any co<<ission or irregularities, andKor conducting business in
an unsafe or unsound <anner as <ay be deter<ined by the &nsurance
Co<<issioner, the following=
6DaE Fines not less than Fie thousand pesos DP:,+++!++E and not <ore than Two
hundred thousand pesos DP3++,+++!++EF and
6DbE Suspension, or after due hearing, re<oal of directors andKor officers andKor
agents!
6S#C! 8G;! The Co<<issioner shall hae the power to adIudicate clai<s and
co<plaints inoling any loss, da<age or liability for which an insurer <ay be
answerable under any ?ind of policy or contract of insurance, or for which such
insurer <ay be liable under a contract of suretyship, or for which a reinsurer <ay
be sued under any contract of reinsurance it <ay hae entered intoF or for which
a <utual benefit association <ay be held liable under the <e<bership
certificates it has issued to its <e<bers, where the a<ount of any such loss,
da<age or liability, eBcluding interest, cost and attorneyAs fees, being clai<ed or
sued upon any ?ind of insurance, bond, reinsurance contract, or <e<bership
certificate does not eBceed in any single clai< Fie <illion pesos
DP:,+++,+++!++E!
6The power of the Co<<issioner does not coer the relationship between the
insurance co<pany and its agentsKbro?ers but is li<ited to adIudicating clai<s
and co<plaints filed by the insured against the insurance co<pany!
6The Co<<issioner <ay authoriHe any officer or group of officers under hi< to
conduct inestigation, inCuiry andKor hearing and decide clai<s and he <ay issue
rules goerning the conduct of adIudication and resolution of cases! The Rules of
Court shall hae suppletory application!
6The party filing an action pursuant to the proisions of this section thereby
sub<its his person to the Iurisdiction of the Co<<issioner! The Co<<issioner
shall acCuire Iurisdiction oer the person of the i<pleaded party or parties in
accordance with and pursuant to the proisions of the Rules of Court!
6The authority to adIudicate granted to the Co<<issioner under this section shall
be concurrent with that of the ciil courts, but the filing of a co<plaint with the
Co<<issioner shall preclude the ciil courts fro< ta?ing cogniHance of a suit
inoling the sa<e subIect <atter!
6'ny decision, order or ruling rendered by the Co<<issioner after a hearing shall
hae the force and effect of a Iudg<ent! 'ny party <ay appeal fro< a final order,
ruling or decision of the Co<<issioner by filing with the Co<<issioner within
thirty DG+E days fro< receipt of copy of such order, ruling or decision a notice of
appeal to the Court of 'ppeals in the <anner proided for in the Rules of Court
for appeals fro< the Regional Trial Court to the Court of 'ppeals!
6For the purpose of any proceeding under this section, the Co<<issioner, or any
officer thereof designated by hi< is e<powered to ad<inister oaths and
affir<ation, subpoena witnesses, co<pel their attendance, ta?e eidence, and
reCuire the production of any boo?s, papers, docu<ents, or contracts or other
records which are releant or <aterial to the inCuiry!
6' full and co<plete record shall be ?ept of all proceedings had before the
Co<<issioner, or the officers thereof designated by hi<, and all testi<ony shall
be ta?en down and transcribed by a stenographer appointed by the
Co<<issioner!
6&n order to pro<ote party autono<y in the resolution of cases, the Co<<issioner
shall establish a syste< for resoling cases through the use of alternatie dispute
resolution!
6T&T%# 3
6F##S '(1 )T0#R S)$RC#S )F F$(1S
6S#C! 88+! DaE For the issuance or renewal of certificates of authority, licenses
and certificates of registration, pursuant to pertinent proisions of this Code, the
Co<<issioner shall collect and receie fees which shall be not less than the
following=
6For each certificate of authority issued to an insurance co<pany doing business
in the Philippines, Two hundred pesos DP3++!++E!
6For each special certificate of authority issued to a sericing insurance co<pany,
)ne hundred pesos DP*++!++E!
6For each license issued to a general agent of an insurance co<pany, Fifty pesos
DP:+!++E!
6For each license issued to an insurance agent, Twenty-fie pesos DP3:!++E!
6For each license issued to an agent of ariable contract policy, Twenty-fie
pesos DP3:!++E!
6For each license issued to an insurance bro?er, )ne hundred pesos DP*++!++E!
6For each license issued to a reinsurance bro?er, )ne hundred pesos DP*++!++E!
6For each license issued to an insurance adIuster, )ne hundred pesos
DP*++!++E!
6For each certificate of registration issued to an actuary, Fifty pesos DP:+!++E!
6For each certificate of registration issued to a resident agent, Fifty pesos
DP:+!++E!
6For each license issued to a rating organiHation, )ne hundred pesos DP*++!++E!
6For each certificate of registration issued to a non-life co<pany underwriter, Fifty
pesos DP:+!++E!
6For each license issued to a <utual benefit association, Ten pesos DP*+!++E!
6For each certificate of registration issued to a trust for charitable uses, Ten
pesos DP*+!++E!
6'll certificates of authority and all other licenses, as well as all certificates of
registration, issued to any person, partnership, association or corporation under
the pertinent proisions of this Code for which no eBpiration date has been
prescribed, shall eBpire on the last day of 1ece<ber of the third year fro< its
issuance and shall be renewed upon application therefor and pay<ent of the
corresponding fee, if the licensee or holder of such license or certificate is
continuing to co<ply with all the applicable proisions of eBisting laws, and of
rules, instructions, orders and decisions of the Co<<issioner!
6DbE For the filing of the annual state<ent referred to in Section 33;, the
Co<<issioner shall collect and receie fro< the insurance co<pany so filing a
fee of not less than Fie hundred pesos DP:++!++E= Proided, That a fine of not
less than )ne hundred pesos DP*++!++E shall be i<posed and collected by the
Co<<issioner for each wee? of delay, or any fraction thereof, in the filing of the
annual state<ent!
6For the filing of annual state<ent referred to in Section 8*G, the Co<<issioner
shall collect and receie fro< the <utual benefit association so filing a fee of not
less than Ten pesos DP*+!++E= Proided, That a fine of not less than Ten pesos
DP*+!++E shall be i<posed and collected by the Co<<issioner for each wee? of
delay, or any fraction thereof, in the filing of the annual state<ent!
6DcE For the eBa<ination prescribed in Section 3:G, the Co<<issioner shall
collect and receie fees according to the a<ount of its total assets, in the case of
a do<estic co<pany, or of its assets in the Philippines, in the case of a foreign
co<pany, not less than the a<ount as follows=
6D*E Two <illion pesos or <ore but less than Four <illion pesos, Four hundred
pesos DP8++!++EF
6D3E Four <illion pesos or <ore but less than SiB <illion pesos, #ight hundred
pesos DP9++!++EF
6DGE SiB <illion pesos or <ore but less than #ight <illion pesos, )ne thousand
two hundred pesos DP*,3++!++EF
6D8E #ight <illion pesos or <ore but less than Ten <illion pesos, )ne thousand
siB hundred pesos DP*,,++!++EF
6D:E Ten <illion pesos or <ore, Two thousand pesos DP3,+++!++EF
6Proided, That if the said eBa<ination is <ade in places outside the
Metropolitan Manila area, besides these fees, the Co<<issioner shall reCuire of
the co<pany eBa<ined the pay<ent of the actual and necessary traelling and
subsistence eBpenses of the eBa<iner or eBa<iners concerned!
6For the eBa<ination prescribed in Section 8*3, the Co<<issioner shall collect
and receie a <ini<u< fee of not less than )ne hundred pesos DP*++!++E fro<
the <utual benefit association eBa<ined= Proided, That if such association has
total assets of <ore than )ne hundred thousand pesos DP*++,+++!++E, an
additional fee of not less than Ten pesos DP*+!++E for eery Fifty thousand pesos
DP:+,+++!++E in eBcess thereof shall be i<posed=
6DdE For the filing of an application to withdraw fro< the Philippines under Title *9,
the Co<<issioner shall collect and receie fro< the foreign co<pany so
withdrawing a fee of not less than )ne thousand pesos DP*,+++!++E!
6DeE The Co<<issioner <ay fiB and collect fees or charges for docu<ents,
transcripts, or other <aterials which <ay be furnished by hi< not in eBcess of
reasonable cost!
6S#C! 88*! The Co<<issioner, in accordance with the rules and regulations of
the 1epart<ent of Budget and Manage<ent and other releant regulatory
agencies, shall source the salary, allowances and other eBpenses fro< the
retained a<ount of the fees, charges, penalties and other inco<e fro< the
regulation of insurance co<panies and other coered persons and entities, and
fro< the &nsurance Fund, which is created out of the proceeds of taBes on
insurance pre<iu<s <entioned in Section 3:: of the (ational &nternal Reenue
Code, as a<ended!
6M&SC#%%'(#)$S PR)>&S&)(S
6S#C! 883! 'ny person, co<pany or corporation subIect to the superision and
control of the Co<<issioner who iolates any proision of this Code, for which no
penalty is proided, shall be dee<ed guilty of a penal offense, and upon
coniction be punished by a fine not eBceeding Two hundred thousand pesos
DP3++,+++!++E or i<prison<ent of siB D,E <onths, or both, at the discretion of the
court!
6&f the offense is co<<itted by a co<pany or corporation, the officers, directors,
or other persons responsible for its operation, <anage<ent, or ad<inistration,
unless it can be proed that they hae ta?en no part in the co<<ission of the
offense, shall li?ewise be guilty of a penal offense, and upon coniction be
punished by a fine not eBceeding Two hundred thousand pesos DP3++,+++!++E or
i<prison<ent of siB D,E <onths, or both, at the discretion of the court!
6S#C! 88G! 'll cri<inal actions for the iolation of any of the proisions of this
Code shall prescribe after three DGE years fro< the discoery of such iolation=
Proided, That such actions shall in any eent prescribe after ten D*+E years fro<
the co<<ission of such iolation!
6S#C! 888! 'ny person, partnership, association or corporation heretofore
authoriHed, licensed or registered by the Co<<issioner shall be dee<ed to hae
been authoriHed, licensed or registered under the proisions of this Code and
shall be goerned by the proisions thereof= Proided, howeer, That where any
such person, partnership, association or corporation is affected by the new
reCuire<ents of this Code, said person, partnership, association or corporation
shall, unless otherwise herein proided, be gien a period of one D*E year fro<
the effectiity of this Code within which to co<ply with the sa<e!
6S#C! 88:! Transitory Proision! T Renewal of eBisting licenses, certificates of
authority or accreditation which will eBpire on June G+, 3+*G shall be alid until
1ece<ber G*, 3+*:! Thereafter, renewal shall be filed on the last day of
1ece<ber eery third year following the date of eBpiry of the license, certificate
of authority or accreditation!
6S#C! 88,! Repealing Clause! T #Bcept as eBpressly proided by this Code, all
laws, decrees, orders, rules and regulations or parts thereof, inconsistent with
any proision of this Code shall be dee<ed repealed, a<ended or <odified
accordingly!
6S#C! 88-! Separability Clause! T &f any proision of this Code or any part hereof
be declared inalid or unconstitutional, the re<ainder of the law or other
proisions not otherwise affected shall re<ain alid and subsisting!
6S#C! 889! This Code shall ta?e effect fifteen D*:E days following its publication in
a newspaper of general circuation!7
'pproed,