REPUBLIC ACT NO.
10607 "In the application of the provisions of this Code, the fact that no profit is derived
AN ACT STRENGTHENING THE INSURANCE INDUSTRY, FURTHER AMENDING
PRESIDENTIAL DECREE NO. 612, OTHERWISE KNOWN AS "THE INSURANCE CODE", AS
AMENDED BY PRESIDENTIAL DECREE NOS. 1141, 1280, 1455, 1460, 1814 AND 1981,
AND BATAS PAMBANSA BLG. 874, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:
Section 1. Presidential Decree No. 612, as amended, is hereby further amended to
read as follows:
"GENERAL PROVISIONS
"Section 1. This Decree shall be known as The Insurance Code.
"Section 2. Whenever used in this Code, the following terms shall have the respective
meanings hereinafter set forth or indicated, unless the context otherwise requires:
"(a) A contract of insurance is an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or liability arising from an
unknown or contingent event.
"A contract of suretyship shall be deemed to be an insurance contract, within the
meaning of this Code, only if made by a surety who or which, as such, is doing an
insurance business as hereinafter provided.
"(b) The term doing an insurance business or transacting an insurance business, within
the meaning of this Code, shall include:
"(1) Making or proposing to make, as insurer, any insurance contract;
"(2) Making or proposing to make, as surety, any contract of suretyship as a vocation
and not as merely incidental to any other legitimate business or activity of the surety;
"(3) Doing any kind of business, including a reinsurance business, specifically
recognized as constituting the doing of an insurance business within the meaning of
this Code;
"(4) Doing or proposing to do any business in substance equivalent to any of the
foregoing in a manner designed to evade the provisions of this Code.
from the making of insurance contracts, agreements or transactions or that no
separate or direct consideration is received therefor, shall not be deemed conclusive
to show that the making thereof does not constitute the doing or transacting of an
insurance business.
"(c) As used in this Code, the term Commissioner means the Insurance Commissioner.
"CHAPTER I
"THE CONTRACT OF INSURANCE
"TITLE 1
"WHAT MAY BE INSURED
"Section 3. Any contingent or unknown event, whether past or future, which may
damnify a person having an insurable interest, or create a liability against him, may be
insured against, subject to the provisions of this chapter.
"The consent of the spouse is not necessary for the validity of an insurance policy
taken out by a married person on his or her life or that of his or her children.
"All rights, title and interest in the policy of insurance taken out by an original owner
on the life or health of the person insured shall automatically vest in the latter upon
the death of the original owner, unless otherwise provided for in the policy.
"Section 4. The preceding section does not authorize an insurance for or against the
drawing of any lottery, or for or against any chance or ticket in a lottery drawing a
prize.
"Section 5. All kinds of insurance are subject to the provisions of this chapter so far as
the provisions can apply.
"TITLE 2
"PARTIES TO THE CONTRACT
"Section 6. Every corporation, partnership, or association, duly authorized to transact
insurance business as elsewhere provided in this Code, may be an insurer.
"Section 7. Anyone except a public enemy may be insured.
"Section 8. Unless the policy otherwise provides, where a mortgagor of property
effects insurance in his own name providing that the loss shall be payable to the
mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed
to be upon the interest of the mortgagor, who does not cease to be a party to the
original contract, and any act of his, prior to the loss, which would otherwise avoid the
insurance, will have the same effect, although the property is in the hands of the
mortgagee, but any act which, under the contract of insurance, is to be performed by
the mortgagor, may be performed by the mortgagee therein named, with the same
effect as if it had been performed by the mortgagor.
"Section 9. If an insurer assents to the transfer of an insurance from a mortgagor to a
mortgagee, and, at the time of his assent, imposes further obligations on the
assignee, making a new contract with him, the acts of the mortgagor cannot affect the
rights of said assignee.
"TITLE 3
"INSURABLE INTEREST
"Section 10. Every person has an insurable interest in the life and health:
"(a) Of himself, of his spouse and of his children;
"(b) Of any person on whom he depends wholly or in part for education or support, or
in whom he has a pecuniary interest;
"(c) Of any person under a legal obligation to him for the payment of money, or
respecting property or services, of which death or illness might delay or prevent the
performance; and
"(d) Of any person upon whose life any estate or interest vested in him depends.
"Section 11. The insured shall have the right to change the beneficiary he designated
in the policy, unless he has expressly waived this right in said policy. Notwithstanding
the foregoing, in the event the insured does not change the beneficiary during his
lifetime, the designation shall be deemed irrevocable.
"Section 12. The interest of a beneficiary in a life insurance policy shall be forfeited
when the beneficiary is the principal, accomplice, or accessory in willfully bringing
about the death of the insured. In such a case, the share forfeited shall pass on to the
other beneficiaries, unless otherwise disqualified. In the absence of other
beneficiaries, the proceeds shall be paid in accordance with the policy contract. If the
policy contract is silent, the proceeds shall be paid to the estate of the insured.
"Section 13. Every interest in property, whether real or personal, or any relation
thereto, or liability in respect thereof, of such nature that a contemplated peril might
directly damnify the insured, is an insurable interest.
"Section 14. An insurable interest in property may consist in:
"(a) An existing interest;
"(b) An inchoate interest founded on an existing interest; or
"(c) An expectancy, coupled with an existing interest in that out of which the
expectancy arises.
"Section 15. A carrier or depository of any kind has an insurable interest in a thing
held by him as such, to the extent of his liability but not to exceed the value thereof.
"Section 16. A mere contingent or expectant interest in any thing, not founded on an
actual right to the thing, nor upon any valid contract for it, is not insurable.
"Section 17. The measure of an insurable interest in property is the extent to which
the insured might be damnified by loss or injury thereof.
"Section 18. No contract or policy of insurance on property shall be enforceable
except for the benefit of some person having an insurable interest in the property
insured.
"Section 19. An interest in property insured must exist when the insurance takes
effect, and when the loss occurs, but need not exist in the meantime; and interest in
the life or health of a person insured must exist when the insurance takes effect, but
need not exist thereafter or when the loss occurs.
"Section 20. Except in the cases specified in the next four sections, and in the cases of
life, accident, and health insurance, a change of interest in any part of a thing insured
unaccompanied by a corresponding change of interest in the insurance, suspends the
insurance to an equivalent extent, until the interest in the thing and the interest in the
insurance are vested in the same person.
"Section 21. A change of interest in a thing insured, after the occurrence of an injury
which results in a loss, does not affect the right of the insured to indemnity for the
loss.
"Section 22. A change of interest in one or more of several distinct things, separately
insured by one policy, does not avoid the insurance as to the others.
"Section 23. A change of interest, by will or succession, on the death of the insured,
does not avoid an insurance; and his interest in the insurance passes to the person
taking his interest in the thing insured.
"Section 24. A transfer of interest by one of several partners, joint owners, or owners
in common, who are jointly insured, to the others, does not avoid an insurance even
though it has been agreed that the insurance shall cease upon an alienation of the
thing insured.
"Section 25. Every stipulation in a policy of insurance for the payment of loss whether
the person insured has or has not any interest in the property insured, or that the
policy shall be received as proof of such interest, and every policy executed by way of
gaming or wagering, is void.
"TITLE 4
"CONCEALMENT
"Section 26. A neglect to communicate that which a party knows and ought to
communicate, is called a concealment.
"Section 27. A concealment whether intentional or unintentional entitles the injured
party to rescind a contract of insurance.
"Section 28. Each party to a contract of insurance must communicate to the other, in
good faith, all facts within his knowledge which are material to the contract and as to
which he makes no warranty, and which the other has not the means of ascertaining.
"Section 29. An intentional and fraudulent omission, on the part of one insured, to
communicate information of matters proving or tending to prove the falsity of a
warranty, entitles the insurer to rescind.
"Section 30. Neither party to a contract of insurance is bound to communicate
information of the matters following, except in answer to the inquiries of the other:
"(a) Those which the other knows;
"(b) Those which, in the exercise of ordinary care, the other ought to know, and of
which the former has no reason to suppose him ignorant;
"(c) Those of which the other waives communication;
"(d) Those which prove or tend to prove the existence of a risk excluded by a
warranty, and which are not otherwise material; and
"(e) Those which relate to a risk excepted from the policy and which are not otherwise
material.
"Section 31. Materiality is to be determined not by the event, but solely by the
probable and reasonable influence of the facts upon the party to whom the
communication is due, in forming his estimate of the disadvantages of the proposed
contract, or in making his inquiries.
"Section 32. Each party to a contract of insurance is bound to know all the general
causes which are open to his inquiry, equally with that of the other, and which may
affect the political or material perils contemplated; and all general usages of trade.
"Section 33. The right to information of material facts may be waived, either by the
terms of insurance or by neglect to make inquiry as to such facts, where they are
distinctly implied in other facts of which information is communicated.
"Section 34. Information of the nature or amount of the interest of one insured need
not be communicated unless in answer to an inquiry, except as prescribed by Section
51.
"Section 35. Neither party to a contract of insurance is bound to communicate, even
upon inquiry, information of his own judgment upon the matters in question.
"TITLE 5
"REPRESENTATION
"Section 36. A representation may be oral or written.
"Section 37. A representation may be made at the time of, or before, issuance of the
policy.
"Section 38. The language of a representation is to be interpreted by the same rules
as the language of contracts in general.
"Section 39. A representation as to the future is to be deemed a promise, unless it
appears that it was merely a statement of belief or expectation.
"Section 40. A representation cannot qualify an express provision in a contract of
insurance, but it may qualify an implied warranty.
"Section 41. A representation may be altered or withdrawn before the insurance is
effected, but not afterwards.
"Section 42. A representation must be presumed to refer to the date on which the
contract goes into effect.
"Section 43. When a person insured has no personal knowledge of a fact, he may
nevertheless repeat information which he has upon the subject, and which he
believes to be true, with the explanation that he does so on the information of others;
or he may submit the information, in its whole extent, to the insurer; and in neither
case is he responsible for its truth, unless it proceeds from an agent of the insured,
whose duty it is to give the information.
"Section 44. A representation is to be deemed false when the facts fail to correspond
with its assertions or stipulations.
"Section 45. If a representation is false in a material point, whether affirmative or
promissory, the injured party is entitled to rescind the contract from the time when
the representation becomes false.
"Section 46. The materiality of a representation is determined by the same rules as
the materiality of a concealment.
"Section 47. The provisions of this chapter apply as well to a modification of a contract
of insurance as to its original formation.
"Section 48. Whenever a right to rescind a contract of insurance is given to the insurer
by any provision of this chapter, such right must be exercised previous to the
commencement of an action on the contract.
"After a policy of life insurance made payable on the death of the insured shall have
been in force during the lifetime of the insured for a period of two (2) years from the
date of its issue or of its last reinstatement, the insurer cannot prove that the policy is
void ab initio or is rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.
"TITLE 6
"THE POLICY
"Section 49. The written instrument in which a contract of insurance is set forth, is
called a policy of insurance.
"Section 50. The policy shall be in printed form which may contain blank spaces; and
any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary
to complete the contract of insurance shall be written on the blank spaces provided
therein.
"Any rider, clause, warranty or endorsement 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 descriptive title or name of the rider, clause, warranty or endorsement is
also mentioned and written on the blank spaces provided in the policy.
"Unless applied for by the insured or owner, any rider, clause, warranty or
endorsement issued after the original policy shall be countersigned by the insured or
owner, which countersignature shall be taken as his agreement to the contents of
such rider, clause, warranty or endorsement.
"Notwithstanding the foregoing, the policy may be in electronic form subject to the
pertinent provisions of Republic Act No. 8792, otherwise known as the Electronic
Commerce Act and to such rules and regulations as may be prescribed by the
Commissioner.
"Section 51. A policy of insurance must specify:
"(a) The parties between whom the contract is made;
"(b) The amount to be insured except in the cases of open or running policies;
"(c) The premium, or if the insurance is of a character where the exact premium is
only determinable upon the termination of the contract, a statement of the basis and
rates upon which the final premium is to be determined;
"(d) The property or life insured;
"(e) The interest of the insured in property insured, if he is not the absolute owner
thereof;
"(f) The risks insured against; and
"(g) The period during which the insurance is to continue.
"Section 52. Cover notes may be issued to bind insurance temporarily pending the
issuance of the policy. Within sixty (60) days after issue of a cover note, a policy shall
be issued in lieu thereof, including within its terms the identical insurance bound
under the cover note and the premium therefor.
"Cover notes may be extended or renewed beyond such sixty (60) days with the
written approval of the Commissioner if he determines that such extension is not
contrary to and is not for the purpose of violating any provisions of this Code. The
Commissioner may promulgate rules and regulations governing such extensions for
the purpose of preventing such violations and may by such rules and regulations
dispense with the requirement of written approval by him in the case of extension in
compliance with such rules and regulations.
"Section 53. The insurance proceeds shall be applied exclusively to the proper interest
of the person in whose name or for whose benefit it is made unless otherwise
specified in the policy.
"Section 54. When an insurance contract is executed with an agent or trustee as the
insured, the fact that his principal or beneficiary is the real party in interest may be
indicated by describing the insured as agent or trustee, or by other general words in
the policy.
"Section 55. 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 terms
of the policy should be such as are applicable to the joint or common interest.
"Section 56. When the description of the insured in a policy is so general that it may
comprehend any person or any class of persons, only he who can show that it was
intended to include him, can claim the benefit of the policy.
"Section 57. A policy may be so framed that it will inure to the benefit of
whomsoever, during the continuance of the risk, may become the owner of the
interest insured.
"Section 58. The mere transfer of a thing insured does not transfer the policy, but
suspends it until the same person becomes the owner of both the policy and the thing
insured.
"Section 59. A policy is either open, valued or running.
"Section 60. An open policy is one in which the value of the thing insured is not
agreed upon, and the amount of the insurance merely represents the insurers
maximum liability. The value of such thing insured shall be ascertained at the time of
the loss.
"Section 61. A valued policy is one which expresses on its face an agreement that the
thing insured shall be valued at a specific sum.
"Section 62. A running policy is one which contemplates successive insurances, and
which provides that the object of the policy may be from time to time defined,
especially as to the subjects of insurance, by additional statements or
indorsements.1wphi1
"Section 63. A condition, stipulation, or agreement in any policy of insurance, limiting
the time for commencing an action thereunder to a period of less than one (1) year
from the time when the cause of action accrues, is void.
"Section 64. No policy of insurance other than life shall be cancelled by the insurer
except upon prior notice thereof to the insured, and no notice of cancellation shall be
effective unless it is based on the occurrence, after the effective date of the policy, of
one or more of the following:
"(a) Nonpayment of premium;
"(b) Conviction of a crime arising out of acts increasing the hazard insured against;
"(c) Discovery of fraud or material misrepresentation;
"(d) Discovery of willful or reckless acts or omissions increasing the hazard insured
against;
"(e) Physical changes in the property insured which result in the property becoming
uninsurable;
"(f) Discovery of other insurance coverage that makes the total insurance in excess of
the value of the property insured; or
"(g) A determination by the Commissioner that the continuation of the policy would
violate or would place the insurer in violation of this Code.
"Section 65. All notices of cancellation mentioned in the preceding section shall be in
writing, mailed or delivered to the named insured at the address shown in the policy,
or to his broker provided the broker is authorized in writing by the policy owner to
receive the notice of cancellation on his behalf, and shall state:
"(a) Which of the grounds set forth in Section 64 is relied upon; and
"(b) That, upon written request of the named insured, the insurer will furnish the facts
on which the cancellation is based.
"Section 66. In case of insurance other than life, unless the insurer at least forty-five
(45) days in advance of the end of the policy period mails or delivers to the named
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 limits or elimination of coverages,
the named insured shall be entitled to renew the policy upon payment of the
premium due on the effective date of the renewal. Any policy written for a term of
less than one (1) year shall be considered as if written for a term of one (1) year. Any
policy written for a term longer than one (1) year or any policy with no fixed
expiration date shall be considered as if written for successive policy periods or terms
of one (1) year.

"TITLE 7
"WARRANTIES
"Section 67. A warranty is either expressed or implied.
"Section 68. A warranty may relate to the past, the present, the future, or to any or all
of these.
"Section 69. No particular form of words is necessary to create a warranty.
"Section 70. Without prejudice to Section 51, every express warranty, made at or
before the execution of a policy, must be contained in the policy itself, or in another
instrument signed by the insured and referred to in the policy as making a part of it.
"Section 71. A statement in a policy, of a matter relating to the person or thing
insured, or to the risk, as fact, is an express warranty thereof.
"Section 72. A statement in a policy, which imparts that it is intended to do or not to
do a thing which materially affects the risk, is a warranty that such act or omission
shall take place.
"Section 73. When, before the time arrives for the performance of a warranty relating
to the future, a loss insured against happens, or performance becomes unlawful at
the place of the contract, or impossible, the omission to fulfill the warranty does not
avoid the policy.
"Section 74. The violation of a material warranty, or other material provision of a
policy, on the part of either party thereto, entitles the other to rescind.
"Section 75. A policy may declare that a violation of specified provisions thereof shall
avoid it, otherwise the breach of an immaterial provision does not avoid the policy.
"Section 76. A breach of warranty without fraud merely exonerates an insurer from
the time that it occurs, or where it is broken in its inception, prevents the policy from
attaching to the risk.
"TITLE 8
"PREMIUM
"Section 77. An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid, except in the case of
a life or an industrial life policy whenever the grace period provision applies, or
whenever under the broker and agency agreements with duly licensed intermediaries,
a ninety (90)-day credit extension is given. No credit extension to a duly licensed
intermediary should exceed ninety (90) days from date of issuance of the policy.
"Section 78. Employees of the Republic of the Philippines, including its political
subdivisions and instrumentalities, and government-owned or -controlled
corporations, may pay their insurance premiums and loan obligations through salary
deduction: Provided, That the treasurer, cashier, paymaster or official of the entity
employing the government employee is authorized, notwithstanding the provisions of
any existing law, rules and regulations to the contrary, to make deductions from the
salary, wage or income of the latter pursuant to the agreement between the insurer
and the government employee and to remit such deductions to the insurer
concerned, and collect such reasonable fee for its services.
"Section 79. An acknowledgment in a policy or contract of insurance or the receipt of
premium is conclusive evidence of its payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be binding until the premium
is actually paid.
"Section 80. A person insured is entitled to a return of premium, as follows:
"(a) To the whole premium if no part of his interest in the thing insured be exposed to
any of the perils insured against;
"(b) Where the insurance is made for a definite period of time and the insured
surrenders his policy, to such portion of the premium as corresponds with the
unexpired time, at a pro rata rate, unless a short period rate has been agreed upon
and appears on the face of the policy, after deducting from the whole premium any
claim for loss or damage under the policy which has previously accrued: Provided,
That no holder of a life insurance policy may avail himself of the privileges of this
paragraph without sufficient cause as otherwise provided by law.
"Section 81. If a peril insured against has existed, and the insurer has been liable for
any period, however short, the insured is not entitled to return of premiums, so far as
that particular risk is concerned.
"Section 82. A person insured is entitled to a return of the premium when the
contract is voidable, and subsequently annulled under the provisions of the Civil Code;
or on account of the fraud or misrepresentation of the insurer, or of his agent, or on
account of facts, or the existence of which the insured was ignorant of without his
fault; or when by any default of the insured other than actual fraud, the insurer never
incurred any liability under the policy.
"A person insured is not entitled to a return of premium if the policy is annulled,
rescinded or if a claim is denied by reason of fraud.
"Section 83. In case of an over insurance by several insurers other than life, the
insured is entitled to a ratable return of the premium, proportioned to the amount by
which the aggregate sum insured in all the policies exceeds the insurable value of the
thing at risk.
"Section 84. An insurer may contract and accept payments, in addition to regular
premium, for the purpose of paying future premiums on the policy or to increase the
benefits thereof.
"TITLE 9
"LOSS
"Section 85. An agreement not to transfer the claim of the insured against the insurer
after the loss has happened, is void if made before the loss except as otherwise
provided in the case of life insurance.
"Section 86. Unless otherwise provided by the policy, an insurer is liable for a loss of
which a peril insured against was the proximate cause, although a peril not
contemplated by the contract may have been a remote cause of the loss; but he is not
liable for a loss of which the peril insured against was only a remote cause.
"Section 87. An insurer is liable where the thing insured is rescued from a peril insured
against that would otherwise have caused a loss, if, in the course of such rescue, the
thing is exposed to a peril not insured against, which permanently deprives the
insured of its possession, in whole or in part; or where a loss is caused by efforts to
rescue the thing insured from a peril insured against.
"Section 88. Where a peril is especially excepted in a contract of insurance, a loss,
which would not have occurred but for such peril, is thereby excepted although the
immediate cause of the loss was a peril which was not excepted.
"Section 89. An insurer is not liable for a loss caused by the willful act or through the
connivance of the insured; but he is not exonerated by the negligence of the insured,
or of the insurance agents or others.
"TITLE 10
"NOTICE OF LOSS
"Section 90. In case of loss upon an insurance against fire, an insurer is exonerated, if
written notice thereof be not given to him by an insured, or some person entitled to
the benefit of the insurance, without unnecessary delay. For other non-life insurance,
the Commissioner may specify the period for the submission of the notice of loss.
"Section 91. When a preliminary proof of loss is required by a policy, the insured is not
bound to give such proof as would be necessary in a court of justice; but it is sufficient
for him to give the best evidence which he has in his power at the time.
"Section 92. All defects in a notice of loss, or in preliminary proof thereof, which the
insured might remedy, and which the insurer omits to specify to him, without
unnecessary delay, as grounds of objection, are waived.
"Section 93. Delay in the presentation to an insurer of notice or proof of loss is waived
if caused by any act of him, or if he omits to take objection promptly and specifically
upon that ground.
"Section 94. If the policy requires, by way of preliminary proof of loss, the certificate
or testimony 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 give it,
then to furnish reasonable evidence to the insurer that such refusal was not induced
by any just grounds of disbelief in the facts necessary to be certified or testified.
"TITLE 11
"DOUBLE INSURANCE
"Section 95. A double insurance exists where the same person is insured by several
insurers separately in respect to the same subject and interest.
"Section 96. Where the insured in a policy other than life is over insured by double
insurance:
"(a) The insured, unless the policy otherwise provides, may claim payment from the
insurers in such order as he may select, up to the amount for which the insurers are
severally liable under their respective contracts;
"(b) Where the policy under which the insured claims is a valued policy, any sum
received by him under any other policy shall be deducted from the value of the policy
without regard to the actual value of the subject matter insured;
"(c) Where the policy under which the insured claims is an unvalued policy, any sum
received by him under any policy shall be deducted against the full insurable value, for
any sum received by him under any policy;
"(d) Where the insured receives any sum in excess of the valuation in the case of
valued policies, or of the insurable value in the case of unvalued policies, he must hold
such sum in trust for the insurers, according to their right of contribution among
themselves;
"(e) Each insurer is bound, as between himself and the other insurers, to contribute
ratably to the loss in proportion to the amount for which he is liable under his
contract.
"TITLE 12
"REINSURANCE
"Section 97. A contract of reinsurance is one by which an insurer procures a third
person to insure him against loss or liability by reason of such original insurance.
"Section 98. Where an insurer obtains reinsurance, except under automatic
reinsurance treaties, he must communicate all the representations of the original
insured, and also all the knowledge and information he possesses, whether previously
or subsequently acquired, which are material to the risk.
"Section 99. A reinsurance is presumed to be a contract of indemnity against liability,
and not merely against damage.
"Section 100. The original insured has no interest in a contract of reinsurance.
"CHAPTER II
"CLASSES OF INSURANCE
"TITLE I
"MARINE INSURANCE
"SUB-TITLE 1-A
"DEFINITION
"Section 101. Marine Insurance includes:
"(a) Insurance against loss of or damage to:
"(1) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects,
disbursements, profits, moneys, securities, choses in action, instruments of debts,
valuable papers, bottomry, and respondentia interests and all other kinds of property
and interests therein, in respect to, appertaining to or in connection with any and all
risks or perils of navigation, transit or transportation, or while being assembled,
packed, crated, baled, compressed or similarly prepared for shipment or while
awaiting shipment, or during any delays, storage, transhipment, or reshipment
incident thereto, including war risks, marine builders risks, and all personal property
floater risks;
"(2) Person or property in connection with or appertaining to a marine, inland marine,
transit or transportation insurance, including liability for loss of or damage arising out
of or in connection with the construction, repair, operation, maintenance or use of
the subject matter of such insurance (but not including life insurance or surety bonds
nor insurance against loss by reason of bodily injury to any person arising out of
ownership, maintenance, or use of automobiles);
"(3) Precious stones, jewels, jewelry, precious metals, whether in course of
transportation or otherwise; and
"(4) Bridges, tunnels and other instrumentalities of transportation and
communication (excluding buildings, their furniture and furnishings, fixed contents
and supplies held in storage); piers, wharves, docks and slips, and other aids to
navigation and transportation, including dry docks and marine railways, dams and
appurtenant facilities for the control of waterways.
"(b) Marine protection and indemnity insurance, meaning insurance against, or
against legal liability of the insured for loss, damage, or expense incident to
ownership, operation, chartering, maintenance, use, repair, or construction of any
vessel, craft or instrumentality in use of ocean or inland waterways, including liability
of the insured for personal injury, illness or death or for loss of or damage to the
property of another person.
"SUB-TITLE 1-B
"INSURABLE INTEREST
"Section 102. The owner of a ship has in all cases an insurable interest in it, even
when it has been chartered by one who covenants to pay him its value in case of loss:
Provided, That in this case the insurer shall be liable for only that part of the loss
which the insured cannot recover from the charterer.
"Section 103. The insurable interest of the owner of the ship hypothecated by
bottomry is only the excess of its value over the amount secured by bottomry.
"Section 104. Freightage, in the sense of a policy of marine insurance, signifies all the
benefits derived by the owner, either from the chartering of the ship or its
employment for the carriage of his own goods or those of others.
"Section 105. The owner of a ship has an insurable interest in expected freightage
which according to the ordinary and probable course of things he would have earned
but for the intervention of a peril insured against or other peril incident to the voyage.

"Section 106. The interest mentioned in the last section exists, in case of a charter
party, when the ship has broken ground on the chartered voyage. If a price is to be
paid for the carriage of goods it exists when they are actually on board, or there is
some contract for putting them on board, and both ship and goods are ready for the
specified voyage.
"Section 107. One who has an interest in the thing from which profits are expected to
proceed has an insurable interest in the profits.
"Section 108. The charterer of a ship has an insurable interest in it, to the extent that
he is liable to be damnified by its loss.
"SUB-TITLE 1-C
"CONCEALMENT
"Section 109. In marine insurance, each party is bound to communicate, in addition to
what is required by Section 28, all the information which he possesses, material to the
risk, except such as is mentioned in Section 30, and to state the exact and whole truth
in relation to all matters that he represents, or upon inquiry discloses or assumes to
disclose.
"Section 110. In marine insurance, information of the belief or expectation of a third
person, in reference to a material fact, is material.
"Section 111. A person insured by a contract of marine insurance is presumed to have
knowledge, at the time of insuring, of a prior loss, if the information might possibly
have reached him in the usual mode of transmission and at the usual rate of
communication.
"Section 112. A concealment in a marine insurance, in respect to any of the following
matters, does not vitiate the entire contract, but merely exonerates the insurer from
a loss resulting from the risk concealed:
"(a) The national character of the insured;
"(b) The liability of the thing insured to capture and detention;
"(c) The liability to seizure from breach of foreign laws of trade;
"(d) The want of necessary documents; and
"(e) The use of false and simulated papers.
"SUB-TITLE 1-D
"REPRESENTATION
"Section 113. If a representation by a person insured by a contract of marine
insurance, is intentionally false in any material respect, or in respect of any fact on
which the character and nature of the risk depends, the insurer may rescind the entire
contract.
"Section 114. The eventual falsity of a representation as to expectation does not, in
the absence of fraud, avoid a contract of marine insurance.
"SUB-TITLE 1-E
"IMPLIED WARRANTIES
"Section 115. In every marine insurance upon a ship or freight, or freightage, or upon
any thing which is the subject of marine insurance, a warranty is implied that the ship
is seaworthy.
"Section 116. A ship is seaworthy when reasonably fit to perform the service and to
encounter the ordinary perils of the voyage contemplated by the parties to the policy.
"Section 117. An implied warranty of seaworthiness is complied with if the ship be
seaworthy at the time of the commencement of the risk, except in the following
cases:
"(a) When the insurance is made for a specified length of time, the implied warranty is
not complied with unless the ship be seaworthy at the commencement of every
voyage it undertakes during that time;
"(b) When the insurance is upon the cargo which, by the terms of the policy,
description of the voyage, or established custom of the trade, is to be transhipped at
an intermediate port, the implied warranty is not complied with unless each vessel
upon which the cargo is shipped, or transhipped, be seaworthy at the commencement
of each particular voyage.
"Section 118. A warranty of seaworthiness extends not only to the condition of the
structure of the ship itself, but requires that it be properly laden, and provided with a
competent master, a sufficient number of competent officers and seamen, and the
requisite appurtenances and equipment, such as ballasts, cables and anchors, cordage
and sails, food, water, fuel and lights, and other necessary or proper stores and
implements for the voyage.
"Section 119. Where different portions of the voyage contemplated by a policy differ
in respect to the things requisite to make the ship seaworthy therefor, a warranty of
seaworthiness is complied with if, at the commencement of each portion, the ship is
seaworthy with reference to that portion.
"Section 120. When the ship becomes unseaworthy during the voyage to which an
insurance relates, an unreasonable delay in repairing the defect exonerates the
insurer on ship or shipowners interest from liability from any loss arising therefrom.
"Section 121. A ship which is seaworthy for the purpose of an insurance upon the ship
may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy
for the purpose of insurance upon the cargo.
"Section 122. Where the nationality or neutrality of a ship or cargo is expressly
warranted, it is implied that the ship will carry the requisite documents to show such
nationality or neutrality and that it will not carry any documents which cast
reasonable suspicion thereon.
"SUB-TITLE 1-F
"THE VOYAGE AND DEVIATION
"Section 123. When the voyage contemplated by a marine insurance policy is
described by the places of beginning and ending, the voyage insured is one which
conforms to the course of sailing fixed by mercantile usage between those places.
"Section 124. If the course of sailing is not fixed by mercantile usage, the voyage
insured by a marine insurance policy is that way between the places specified, which
to a master of ordinary skill and discretion, would mean the most natural, direct and
advantageous.
"Section 125. Deviation is a departure from the course of the voyage insured,
mentioned in the last two (2) sections, or an unreasonable delay in pursuing the
voyage or the commencement of an entirely different voyage.
"Section 126. A deviation is proper:
"(a) When caused by circumstances over which neither the master nor the owner of
the ship has any control;
"(b) When necessary to comply with a warranty, or to avoid a peril, whether or not
the peril is insured against;
"(c) When made in good faith, and upon reasonable grounds of belief in its necessity
to avoid a peril; or
"(d) When made in good faith, for the purpose of saving human life or relieving
another vessel in distress.
"Section 127. Every deviation not specified in the last section is improper.
"Section 128. An insurer is not liable for any loss happening to the thing insured
subsequent to an improper deviation.
"SUB-TITLE 1-G
"LOSS
"Section 129. A loss may be either total or partial.
"Section 130. Every loss which is not total is partial.
"Section 131. A total loss may be either actual or constructive.
"Section 132. An actual total loss is caused by:
"(a) A total destruction of the thing insured;
"(b) The irretrievable loss of the thing by sinking, or by being broken up;
"(c) Any damage to the thing which renders it valueless to the owner for the purpose
for which he held it; or
"(d) Any other event which effectively deprives the owner of the possession, at the
port of destination, of the thing insured.
"Section 133. A constructive total loss is one which gives to a person insured a right to
abandon, under Section 141.
"Section 134. An actual loss may be presumed from the continued absence of a ship
without being heard of. The length of time which is sufficient to raise this
presumption depends on the circumstances of the case.
"Section 135. When a ship is prevented, at an intermediate port, from completing the
voyage, by the perils insured against, the liability of a marine insurer on the cargo
continues after they are thus reshipped.
"Nothing in this section shall prevent an insurer from requiring an additional premium
if the hazard be increased by this extension of liability.
"Section 136. In addition to the liability mentioned in the last section, a marine insurer
is bound for damages, expenses of discharging, storage, reshipment, extra freightage,
and all other expenses incurred in saving cargo reshipped pursuant to the last section,
up to the amount insured.
"Nothing in this or in the preceding section shall render a marine insurer liable for any
amount in excess of the insured value or, if there be none, of the insurable value.
"Section 137. Upon an actual total loss, a person insured is entitled to payment
without notice of abandonment.
"Section 138. Where it has been agreed that an insurance upon a particular thing, or
class of things, shall be free from particular average, a marine insurer is not liable for
any particular average loss not depriving the insured of the possession, at the port of
destination, of the whole of such thing, or class of things, even though it becomes
entirely worthless; but such insurer is liable for his proportion of all general average
loss assessed upon the thing insured.
"Section 139. An insurance confined in terms to an actual loss does not cover a
constructive total loss, but covers any loss, which necessarily results in depriving the
insured of the possession, at the port of destination, of the entire thing insured.
"SUB-TITLE 1-H
"ABANDONMENT
"Section 140. Abandonment, in marine insurance, is the act of the insured by which,
after a constructive total loss, he declares the relinquishment to the insurer of his
interest in the thing insured.
"Section 141. A person insured by a contract of marine insurance may abandon the
thing insured, or any particular portion thereof separately valued by the policy, or
otherwise separately insured, and recover for a total loss thereof, when the cause of
the loss is a peril insured against:
"(a) If more than three-fourths () thereof in value is actually lost, or would have to
be expended to recover it from the peril;
"(b) If it is injured to such an extent as to reduce its value more than three-fourths
();
"(c) If the thing insured is a ship, and the contemplated voyage cannot be lawfully
performed without incurring either an expense to the insured of more than three-
fourths () the value of the thing abandoned or a risk which a prudent man would not
take under the circumstances; or
"(d) If the thing insured, being cargo or freightage, and the voyage cannot be
performed, nor another ship procured by the master, within a reasonable time and
with reasonable diligence, to forward the cargo, without incurring the like expense or
risk mentioned in the preceding subparagraph. But freightage cannot in any case be
abandoned unless the ship is also abandoned.
"Section 142. An abandonment must be neither partial nor conditional.
"Section 143. An abandonment must be made within a reasonable time after receipt
of reliable information of the loss, but where the information is of a doubtful
character, the insured is entitled to a reasonable time to make inquiry.
"Section 144. Where the information upon which an abandonment has been made
proves incorrect, or the thing insured was so far restored when the abandonment was
made that there was then in fact no total loss, the abandonment becomes ineffectual.
"Section 145. Abandonment is made by giving notice thereof to the insurer, which
may be done orally, or in writing: Provided, That if the notice be done orally, a written
notice of such abandonment shall be submitted within seven (7) days from such oral
notice.
"Section 146. A notice of abandonment must be explicit, and must specify the
particular cause of the abandonment, but need state only enough to show that there
is probable cause therefor, and need not be accompanied with proof of interest or of
loss.
"Section 147. An abandonment can be sustained only upon the cause specified in the
notice thereof.
"Section 148. An abandonment is equivalent to a transfer by the insured of his
interest to the insurer, with all the chances of recovery and indemnity.
"Section 149. If a marine insurer pays for a loss as if it were an actual total loss, he is
entitled to whatever may remain of the thing insured, or its proceeds or salvage, as if
there had been a formal abandonment.
"Section 150. Upon an abandonment, acts done in good faith by those who were
agents of the insured in respect to the thing insured, subsequent to the loss, are at
the risk of the insurer, and for his benefit.
"Section 151. Where notice of abandonment is properly given, the rights of the
insured are not prejudiced by the fact that the insurer refuses to accept the
abandonment.

"Section 152. The acceptance of an abandonment may be either express or implied
from the conduct of the insurer. The mere silence of the insurer for an unreasonable
length of time after notice shall be construed as an acceptance.
"Section 153. The acceptance of an abandonment, whether express or implied, is
conclusive upon the parties, and admits the loss and the sufficiency of the
abandonment.
"Section 154. An abandonment once made and accepted is irrevocable, unless the
ground upon which it was made proves to be unfounded.
"Section 155. On an accepted abandonment of a ship, freightage earned previous to
the loss belongs to the insurer of said freightage; but freightage subsequently earned
belongs to the insurer of the ship.
"Section 156. If an insurer refuses to accept a valid abandonment, he is liable as upon
an actual total loss, deducting from the amount any proceeds of the thing insured
which may have come to the hands of the insured.
"Section 157. If a person insured omits to abandon, he may nevertheless recover his
actual loss.
"SUB-TITLE 1-I
"MEASURE OF INDEMNITY
"Section 158. A valuation in a policy of marine insurance is conclusive between the
parties thereto in the adjustment of either a partial or total loss, if the insured has
some interest at risk, and there is no fraud on his part; except that when a thing has
been hypothecated by bottomry or respondentia, before its insurance, and without
the knowledge of the person actually procuring the insurance, he may show the real
value. But a valuation fraudulent in fact, entitles the insurer to rescind the contract.
"Section 159. A marine insurer is liable upon a partial loss, only for such proportion of
the amount insured by him as the loss bears to the value of the whole interest of the
insured in the property insured.
"Section 160. Where profits are separately insured in a contract of marine insurance,
the insured is entitled to recover, in case of loss, a proportion of such profits
equivalent to the proportion which the value of the property lost bears to the value of
the whole.
"Section 161. In case of a valued policy of marine insurance on freightage or cargo, if a
part only of the subject is exposed to risk, the valuation applies only in proportion to
such part.
"Section 162. When profits are valued and insured by a contract of marine insurance,
a loss of them is conclusively presumed from a loss of the property out of which they
are expected to arise, and the valuation fixes their amount.
"Section 163. In estimating a loss under an open policy of marine insurance the
following rules are to be observed:
"(a) The value of a ship is its value at the beginning of the risk, including all articles or
charges which add to its permanent value or which are necessary to prepare it for the
voyage insured;
"(b) The value of the cargo is its actual cost to the insured, when laden on board, or
where the cost cannot be ascertained, its market value at the time and place of
lading, adding the charges incurred in purchasing and placing it on board, but without
reference to any loss incurred in raising money for its purchase, or to any drawback
on its exportation, or to the fluctuation of the market at the port of destination, or to
expenses incurred on the way or on arrival;
"(c) The value of freightage is the gross freightage, exclusive of primage, without
reference to the cost of earning it; and
"(d) The cost of insurance is in each case to be added to the value thus estimated.
"Section 164. If cargo insured against partial loss arrives at the port of destination in a
damaged condition, the loss of the insured is deemed to be the same proportion of
the value which the market price at that port, of the thing so damaged, bears to the
market price it would have brought if sound.
"Section 165. A marine insurer is liable for all the expenses attendant upon a loss
which forces the ship into port to be repaired; and where it is stipulated in the policy
that the insured shall labor for the recovery of the property, the insurer is liable for
the expense incurred thereby, such expense, in either case, being in addition to a total
loss, if that afterwards occurs.
"Section 166. A marine insurer is liable for a loss falling upon the insured, through a
contribution in respect to the thing insured, required to be made by him towards a
general average loss called for by a peril insured against: Provided, That the liability of
the insurer shall be limited to the proportion of contribution attaching to his policy
value where this is less than the contributing value of the thing insured.
"Section 167. When a person insured by a contract of marine insurance has a demand
against others for contribution, he may claim the whole loss from the insurer,
subrogating him to his own right to contribution. But no such claim can be made upon
the insurer after the separation of the interests liable to contribution, nor when the
insured, having the right and opportunity to enforce contribution from others, has
neglected or waived the exercise of that right.
"Section 168. In the case of a partial loss of ship or its equipment, the old materials
are to be applied towards payment for the new. Unless otherwise stipulated in the
policy, a marine insurer is liable for only two-thirds (2/3) of the remaining cost of
repairs after such deduction, except that anchors must be paid in full.
"TITLE 2
"FIRE INSURANCE
"Section 169. As used in this Code, the term fire insurance shall include insurance
against loss by fire, lightning, windstorm, tornado or earthquake and other allied risks,
when such risks are covered by extension to fire insurance policies or under separate
policies.
"Section 170. An alteration in the use or condition of a thing insured from that to
which it is limited by the policy made without the consent of the insurer, by means
within the control of the insured, and increasing the risks, entitles an insurer to
rescind a contract of fire insurance.
"Section 171. An alteration in the use or condition of a thing insured from that to
which it is limited by the policy, which does not increase the risk, does not affect a
contract of fire insurance.
"Section 172. A contract of fire insurance is not affected by any act of the insured
subsequent to the execution of the policy, which does not violate its provisions, even
though it increases the risk and is the cause of the loss.
"Section 173. If there is no valuation in the policy, the measure of indemnity in an
insurance against fire is the expense it would be to the insured at the time of the
commencement of the fire to replace the thing lost or injured in the condition in
which it was at the time of the injury; but if there is a valuation in a policy of fire
insurance, the effect shall be the same as in a policy of marine insurance.
"Section 174. Whenever the insured desires to have a valuation named in his policy,
insuring any building or structure against fire, he may require such building or
structure to be examined by an independent appraiser and the value of the insureds
interest therein may then be fixed as between the insurer and the insured. The cost of
such examination shall be paid for by the insured. A clause shall be inserted in such
policy stating substantially that the value of the insureds interest in such building or
structure has been thus fixed. In the absence of any change increasing the risk
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 amount so insured upon the insureds
interest in such building or structure, as stated in the policy upon which the insurers
have received a premium, shall be paid, and in case of a partial loss the full amount of
the partial loss shall be so paid, and in case there are two (2) or more policies covering
the insureds interest therein, each policy shall contribute pro rata to the payment of
such whole or partial loss. But in no case shall the insurer be required to pay more
than the amount thus stated in such policy. This section shall not prevent the parties
from stipulating in such policies concerning the repairing, rebuilding or replacing of
buildings or structures wholly or partially damaged or destroyed.
"Section 175. No policy of fire insurance shall be pledged, hypothecated, or
transferred to any person, firm or company who acts as agent for or otherwise
represents the issuing company, and any such pledge, hypothecation, or transfer
hereafter made shall be void and of no effect insofar as it may affect other creditors
of the insured.
"TITLE 3
"CASUALTY INSURANCE
"Section 176. Casualty insurance is insurance covering loss or liability arising from
accident or mishap, excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of other types of insurance such as
fire or marine. It includes, but is not limited to, employers liability insurance, motor
vehicle liability insurance, plate glass insurance, burglary and theft insurance, personal
accident and health insurance as written by non-life insurance companies, and other
substantially similar kinds of insurance.
"TITLE 4
"SURETYSHIP
"Section 177. A contract of suretyship is an agreement whereby a party called the
surety guarantees the performance by another party called the principal or obligor of
an obligation or undertaking in favor of a third party called the obligee. It includes
official recognizances, stipulations, bonds or undertakings issued by any company by
virtue of and under the provisions of Act No. 536, as amended by Act No. 2206.
"Section 178. The liability of the surety or sureties shall be joint and several with the
obligor and shall be limited to the amount of the bond. It is determined strictly by the
terms of the contract of suretyship in relation to the principal contract between the
obligor and the obligee.
"Section 179. The surety is entitled to payment of the premium as soon as the
contract of suretyship or bond is perfected and delivered to the obligor. No contract
of suretyship or bonding shall be valid and binding unless and until the premium
therefor has been paid, except where the obligee has accepted the bond, in which
case the bond becomes valid and enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety: Provided, That if the contract of
suretyship or bond is not accepted by, or filed with the obligee, the surety shall collect
only a reasonable amount, not exceeding fifty percent (50%) of the premium due
thereon as service fee plus the cost of stamps or other taxes imposed for the issuance
of the contract or bond: Provided, however, That if the nonacceptance of the bond be
due to the fault or negligence of the surety, no such service fee, stamps or taxes shall
be collected.
"In the case of a continuing bond, the obligor shall pay the subsequent annual
premium as it falls due until the contract of suretyship is cancelled by the obligee or
by the Commissioner or by a court of competent jurisdiction, as the case may be.
"Section 180. Pertinent provisions of the Civil Code of the Philippines shall be applied
in a suppletory character whenever necessary in interpreting the provisions of a
contract of suretyship.
"TITLE 5
"LIFE INSURANCE
"Section 181. Life insurance is insurance on human lives and insurance appertaining
thereto or connected therewith.
"Every contract or undertaking for the payment of annuities including contracts for
the payment of lump sums under a retirement program where a life insurance
company manages or acts as a trustee for such retirement program shall be
considered a life insurance contract for purposes of this Code.
"Section 182. An insurance upon life may be made payable on the death of the
person, or on his surviving a specified period, or otherwise contingently on the
continuance or cessation of life.
"Every contract or pledge for the payment of endowments or annuities shall be
considered a life insurance contract for purposes of this Code.
"In the absence of a judicial guardian, the father, or in the latters absence or
incapacity, the mother, of any minor, who is an insured or a beneficiary under a
contract of life, health, or accident insurance, may exercise, in behalf of said minor,
any right under the policy, without necessity of court authority or the giving of a
bond, where the interest of the minor in the particular act involved does not exceed
Five hundred thousand pesos (P500,000.00) or in such reasonable amount as may be
determined by the Commissioner. Such right may include, but shall not be limited to,
obtaining a policy loan, surrendering the policy, receiving the proceeds of the Policy,
and giving the minors consent to any transaction on the policy.
"In the absence or in case of the incapacity of the father or mother, the grandparent,
the eldest brother or sister at least eighteen (18) years of age, or any relative who has
actual custody of the minor insured or beneficiary, shall act as a guardian without
need of a court order or judicial appointment as such guardian, as long as such person
is not otherwise disqualified or incapacitated. Payment made by the insurer pursuant
to this section shall relieve such insurer of any liability under the contract.
"Section 183. The insurer in a life insurance contract shall be liable in case of suicide
only when it is committed after the policy has been in force for a period of two (2)
years from the date of its issue or of its last reinstatement, unless the policy provides
a shorter period: Provided, however, That suicide committed in the state of insanity
shall be compensable regardless of the date of commission.
"Section 184. A policy of insurance upon life or health may pass by transfer, will or
succession to any person, whether he has an insurable interest or not, and such
person may recover upon it whatever the insured might have recovered.
"Section 185. Notice to an insurer of a transfer or bequest thereof is not necessary to
preserve the validity of a policy of insurance upon life or health, unless thereby
expressly required.
"Section 186. Unless the interest of a person insured is susceptible of exact pecuniary
measurement, the measure of indemnity under a policy of insurance upon life or
health is the sum fixed in the policy.
"TITLE 6
"MICROINSURANCE
"Section 187. Microinsurance is a financial product or service that meets the risk
protection needs of the poor where:
"(a) The amount of contributions, premiums, fees or charges, computed on a daily
basis, does not exceed seven and a half percent (7.5%) of the current daily minimum
wage rate for nonagricultural workers in Metro Manila; and
"(b) The maximum sum of guaranteed benefits is not more than one thousand (1,000)
times of the current daily minimum wage rate for nonagricultural workers in Metro
Manila.
"Section 188. No insurance company or mutual benefit association shall engage in the
business of microinsurance unless it possesses all the requirements as may be
prescribed by the Commissioner. The Commissioner shall issue such rules and
regulations governing microinsurance.
"CHAPTER II-A
"FINANCIAL REPORTING FRAMEWORK
"Section 189. All companies regulated by the Commission, unless otherwise required
by law, should comply with the financial reporting frameworks adopted by the
Commission for purposes of creating the statutory financial reports and the annual
statements to be submitted to the Commission. Financial reporting framework means
a set of accounting and reporting principles, standards, interpretations and
pronouncements that must be adopted in the preparation and submission of the
statutory financial statements and reports required by the Commission. This financial
reporting framework is not the same as the financial reporting framework used to
prepare the financial statements that the Securities and Exchange Commission may
require. The main purpose of the statutory statements is to present important
information about the level of risk and solvency situation of insurers. In prescribing
the applicable statutory financial reporting framework, the Commissioner shall take
into account international standards concerning solvency and insurance company
reporting as well as generally accepted actuarial principles concerning financial
reporting promulgated by the Actuarial Society of the Philippines.
"The assets and investments discussed in Sections 204 to 215 shall be accounted for in
accordance with this section.
"The valuation of reserves shall be accounted for in accordance with Title 5 of this
Code.
"CHAPTER III
"THE BUSINESS OF INSURANCE
"TITLE 1
"INSURANCE COMPANIES, ORGANIZATION,
CAPITALIZATION AND AUTHORIZATION
"Section 190. For purposes of this Code, the term insurer or insurance company shall
include all partnerships, associations, cooperatives or corporations, including
government-owned or -controlled corporations or entities, engaged as principals in
the insurance business, excepting mutual benefit associations. Unless the context
otherwise requires, the term shall also include professional reinsurers defined in
Section 288. Domestic company shall include companies formed, organized or existing
under the laws of the Philippines. Foreign company when used without limitation
shall include companies formed, organized, or existing under any laws other than
those of the Philippines.
"Section 191. The provisions of the Corporation Code, as amended, shall apply to all
insurance corporations now or hereafter engaged in business in the Philippines
insofar as they do not conflict with the provisions of this chapter.
"Section 192. No corporation, partnership, or association of persons shall transact any
insurance business in the Philippines except as agent of a corporation, partnership or
association authorized to do the business of insurance in the Philippines, unless
possessed of the capital and assets required of an insurance corporation doing the
same kind of business in the Philippines and invested in the same manner; unless the
Commissioner shall have granted it a certificate to the effect that it has complied with
all the provisions of this Code.
"Every entity receiving any such certificate of authority shall be subject to the
insurance and other applicable laws of the Philippines and to the jurisdiction and
supervision of the Commissioner.
"Section 193. No insurance company shall transact any insurance business in the
Philippines until after it shall have obtained a certificate of authority for that purpose
from the Commissioner upon application therefor and payment by the company
concerned of the fees hereinafter prescribed.
"The Commissioner may refuse to issue a certificate of authority to any insurance
company if, in his judgment, such refusal will best promote the interest of the people
of this country. No such certificate of authority shall be granted to any such company
until the Commissioner shall have satisfied himself by such examination as he may
make and such evidence as he may require that such company is qualified by the laws
of the Philippines to transact business therein, that the grant of such authority
appears to be justified in the light of local economic requirements, and that the
direction and administration, as well as the integrity and responsibility of the
organizers and administrators, the financial organization and the amount of capital,
reasonably assure the safety of the interests of the policyholders and the public.
"In order to maintain the quality of the management of the insurance companies and
afford better protection to policyholders and the public in general, any person of good
moral character, unquestioned integrity and recognized competence may be elected
or appointed director or officer of insurance companies in accordance with the
pertinent provisions contained in the corporate governance circulars prescribed by
the Commissioner. In addition hereto, the Commissioner shall prescribe the
qualifications of directors, executive officers and other key officials of insurance
companies for purposes of this section.
"No person shall concurrently be a Director and/or Officer of an insurance company
and an adjustment company.
"Before issuing such certificate of authority, the Commissioner must be satisfied that
the name of the company is not that of any other known company transacting a
similar business in the Philippines, or a name so similar as to be calculated to mislead
the public. The Commissioner may issue rules and regulations on the use of names of
insurance companies and other supervised persons or entities.
"The certificate of authority issued by the Commissioner shall expire on the last day of
December, three (3) years following its date of issuance, and shall be renewable every
three (3) years thereafter, subject to the companys continuing compliance with the
provisions of this Code, circulars, instructions, rulings or decisions of the Commission.
"Every company receiving any such certificates of authority shall be subject to the
provisions of this Code and other related laws and to the jurisdiction and supervision
of the Commissioner.
"No insurance company may be authorized to transact in the Philippines the business
of life and non-life insurance concurrently, unless specifically authorized to do so by
the Commissioner: Provided, That the terms life and non-life insurance shall be
deemed to include health, accident and disability insurance.
"No insurance company shall have equity in an adjustment company and neither shall
an adjustment company have equity in an insurance company.
"No insurance company issued with a valid certificate of authority to transact
insurance business anywhere in the Philippines by the Insurance Commissioner, shall
be barred, prevented, or disenfranchised from issuing any insurance policy or from
transacting any insurance business within the scope or coverage of its certificate of
authority, anywhere in the Philippines, by any local government unit or authority, for
whatever guise or reason whatsoever, including under any kind of ordinance,
accreditation system, or scheme. Any local ordinance or local government unit
regulatory issuance imposing such restriction or disenfranchisement on any insurance
company shall be deemed null and void ab initio.
"Section 194. Except as provided in Section 289, no new domestic life or non-life
insurance company shall, in a stock corporation, engage in business in the Philippines
unless possessed of a paid-up capital equal to at least One billion pesos
(P1,000,000,000.00): Provided, That a domestic insurance company already doing
business in the Philippines shall have a net worth by June 30, 2013 of Two hundred
fifty million pesos (P250,000,000.00). Furthermore, said company must have by
December 31, 2016, an additional Three hundred million pesos (P300,000,000.00) in
net worth; by December 31, 2019, an additional Three hundred fifty million pesos
(P350,000,000.00) in net worth; and by December 31, 2022, an additional Four
hundred million pesos (P400,000,000.00) in net worth.
"The Commissioner may, as a pre-licensing requirement of a new insurance company,
in addition to the paid-up capital stock, require the stockholders to pay in cash to the
company in proportion to their subscription interests a contributed surplus fund of
not less than One hundred million pesos (P100,000,000.00). He may also require such
company to submit to him a business plan showing the companys estimated receipts
and disbursements, as well as the basis therefor, for the next succeeding three (3)
years.
"If organized as a mutual company, in lieu of such net worth, it must have available
total members equity in an amount to be determined by the Insurance Commission
above all liabilities for losses reported; expenses, taxes, legal reserve, and reinsurance
of all outstanding risks, and the contributed surplus fund equal to the amounts
required of stock corporations. A stock insurance company doing business in the
Philippines may, subject to the pertinent law and regulation which now or hereafter
may be in force, alter its organization and transform itself into a mutual insurance
company.
"The Secretary of Finance may, upon recommendation of the Commissioner, increase
such minimum paid-up capital stock or cash assets requirement under such terms and
conditions as he may impose, to an amount which, in his opinion, would reasonably
assure the safety of the interests of the policyholders and the public. The minimum
paid-up capital and net worth requirement must remain unimpaired for the
continuance of the license. The Commissioner may require the adoption of the risk-
based capital approach and other internationally accepted forms of capital
framework.
"For the purpose of this section, net worth shall consist of:
"(a) Paid-up capital;
"(b) Retained earnings;
"(c) Unimpaired surplus; and
"(d) Revaluation of assets as may be approved by the Commissioner.
"The Commission may adopt for purposes of compliance with capital build up
requirement 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 common
capital stocks.
"The President of the Philippines may order a periodic review every two (2) years the
capital structure set out above to determine the capital adequacy of the local
insurance industry from and after the integration and liberalization of the financial
services, including insurance, in the ASEAN Region. For this purpose, a review
committee consisting of representatives from the Department of Finance (DOF), the
Insurance Commission (IC), the National Economic and Development Authority
(NEDA), the Securities and Exchange Commission (SEC) and other agencies which the
President may designate shall conduct the review and may recommend to the
President to adopt for implementation the necessary capital adjustment.
"Section 195. Every company must, before engaging in the business of insurance in
the Philippines, file with the Commissioner the following:
"(a) A certified copy of the last annual statement or a verified financial statement
exhibiting the condition and affairs of such company;
"(b) If incorporated under the laws of the Philippines, a copy of the articles of
incorporation and bylaws, and any amendments to either, certified by the Securities
and Exchange Commission to be a copy of that which is filed in its Office;
"(c) If incorporated under any laws other than those of the Philippines, a certificate
from the Securities and Exchange Commission showing that it is duly registered in the
mercantile registry of that Commission in accordance with the Corporation Code. A
copy of the articles of incorporation and bylaws, and any amendments to either, if
organized or formed under any law requiring such to be filed, duly certified by the
officer having the custody of same, or if not so organized, a copy of the law, charter or
deed of settlement under which the deed of organization is made, duly certified by
the proper custodian thereof, or proved by affidavit to be a copy; also, a certificate
under the hand and seal of the proper officer of such state or country having
supervision of insurance business therein, if any there be, that such corporation or
company is organized under the laws of such state or country, with the amount of
capital stock or assets and legal reserve required by this Code;
"(d) If not incorporated and of foreign domicile, aside from the certificate mentioned
in paragraph (c) of this section, a certificate setting forth the nature and character of
the business, the location of the principal office, the name of the individual or names
of the persons composing the partnership or association, the amount of actual capital
employed or to be employed therein, and the names of all officers and persons by
whom the business is or may be managed.
"The certificate must be verified by the affidavit of the chief officer, secretary, agent,
or manager of the company; and if there are any written articles of agreement of the
company, a copy thereof must accompany such certificate.
"Section 196. The Commissioner must require as a condition precedent to the
transaction of insurance business in the Philippines by any foreign insurance
company, that such company file in his office a written power of attorney designating
some person who shall be a resident of the Philippines as its general agent, on whom
any notice provided by law or by any insurance policy, proof of loss, summons and
other legal processes may be served in all actions or other legal proceedings against
such company, and consenting that service upon such general agent shall be admitted
and held as valid as if served upon the foreign company at its home office. Any such
foreign company shall, as further condition precedent to the transaction of insurance
business in the Philippines, make and file with the Commissioner an agreement or
stipulation, executed by the proper authorities of said company in form and
substance as follows:
"The (name of company) does hereby stipulate and agree in consideration of the
permission granted by the Insurance Commissioner to transact business in the
Philippines, that if at any time said company shall leave the Philippines, or cease to
transact business therein, or shall be without any agent in the Philippines on whom
any notice, proof of loss, summons, or legal process may be served, then in any action
or proceeding arising out of any business or transaction which occurred in the
Philippines, service of any notice provided by law, or insurance policy, proof of loss,
summons, or other legal process may be made upon the Insurance Commissioner,
and that such service upon the Insurance Commissioner shall have the same force and
effect as if made upon the company.
"Whenever such service of notice, proof of loss, summons, or other legal process shall
be made upon the Commissioner, he must, within ten (10) days thereafter, transmit
by mail, postage paid, a copy of such notice, proof of loss, summons, or other legal
process to the company at its home or principal office. The sending of such copy by
the Commissioner shall be a necessary part of the service of the notice, proof of loss,
or other legal process.
"Section 197. No insurance company organized or existing under the government or
laws other than those of the Philippines shall engage in business in the Philippines
unless possessed of unimpaired capital or assets and reserve of not less than One
billion pesos (P1,000,000,000.00), nor until it shall have deposited with the
Commissioner for the benefit and security of the policyholders and creditors of such
company in the Philippines, securities satisfactory to the Commissioner consisting of
good securities of the Philippines, including new issues of stock of registered
enterprises, as this term is defined in Executive Order No. 226 of 1987, as amended,
to the actual market value of not less than the amount herein required: Provided,
That at least fifty percent (50%) of such securities shall consist of bonds or other
instruments of debt of the Government of the Philippines, its political subdivisions
and instrumentalities, or of government-owned or -controlled corporations and
entities, including the Bangko Sentral ng Pilipinas: Provided, further, That the total
investment of a foreign insurance company in any registered enterprise shall not
exceed twenty percent (20%) of the net worth of said foreign insurance company nor
twenty percent (20%) of the capital of the registered enterprise, unless previously
authorized in writing by the Commissioner.
"The Commissioner may, as a pre-licensing requirement of a new branch office of a
foreign insurance company, in addition to the required asset or net worth, require the
company to have an additional surplus fund in an amount to be determined by the
Insurance Commission.
"For purposes of this Code, the net worth of a foreign insurance company shall refer
only to its net worth in the Philippines.
"Section 198. The Commissioner shall hold the securities, deposited as required in the
immediately preceding section, for the benefit and security of all the policyholders
and creditors of the company depositing the same: Provided, That the Commissioner
may as long as the company is solvent, permit the company to collect the interest or
dividends on the securities so deposited, and, from time to time, with his assent, to
withdraw any of such securities, upon depositing with said Commissioner other like
securities, the market value of which shall be equal to the market value of such as
may be withdrawn. In the event of any company ceasing to do business in the
Philippines, the securities deposited as aforesaid shall be returned to the company
upon the Commissioners written approval and only after the company has duly
proven in its application therefor that it has no further liability whatsoever under any
of its policies nor to any of its creditors in the Philippines.
"Section 199. Every foreign company doing business in the Philippines shall set aside
an amount corresponding to the legal reserves of the policies written in the
Philippines and invest and keep the same therein in accordance with the provisions of
this section. The legal reserve therein required to be set aside shall be invested only in
the classes of Philippine securities described in Section 206: Provided, however, That
no investment in stocks or bonds of any single entity shall, in the aggregate exceed
twenty percent (20%) of the net worth of the investing company or twenty percent
(20%) of the capital of the issuing company, whichever is the lesser, unless otherwise
approved in writing by the Commissioner. The securities purchased and kept in the
Philippines under this section, shall not be sent out of the territorial jurisdiction of the
Philippines without the written consent of the Commissioner.
"TITLE 2
"SOLVENCY
"Section 200. An insurance company doing business in the Philippines shall at all times
maintain the minimum paid-up capital, and net worth requirements as prescribed by
the Commissioner. Such solvency requirements shall be based on internationally
accepted solvency frameworks and adopted only after due consultation with the
insurance industry associations.
"Whenever the aforementioned requirement be found to be less than that herein
required to be maintained, the Commissioner shall forthwith direct the company to
make good any such deficiency by cash, to be contributed by all stockholders of
record in proportion to their respective interests, and paid to the treasurer of the
company, within fifteen (15) days from receipt of the order: Provided, That the
company in the interim shall not be permitted to take any new risk of any kind or
character unless and until it make good any such deficiency: Provided; further, That a
stockholder who aside from paying the contribution due from him, pays the
contribution due from another stockholder by reason of the failure or refusal of the
latter to do so, shall have a lien on the certificates of stock of the insurance company
concerned appearing in its books in the name of the defaulting stockholder on the
date of default, as well as on any interests or dividends that have accrued or will
accrue to the said certificates of stock, until the corresponding payment or
reimbursement is made by the defaulting stockholder.
"Section 201. No domestic insurance corporation shall declare or distribute any
dividend on its outstanding stocks unless it has met the minimum paid-up capital and
net worth requirements under Section 194 and except from profits attested in a
sworn statement to the Commissioner by the president or treasurer of the
corporation to be remaining on hand after retaining unimpaired:
"(a) The entire paid-up capital stock;
"(b) The solvency requirements defined by Section 200;
"(c) In the case of life insurance corporations, the legal reserve fund required by
Section 217;
"(d) In the case of corporations other than life, the legal reserve fund required by
Section 219; and
"(e) A sum sufficient to pay all net losses reported, or in the course of settlement, and
all liabilities for expenses and taxes.
"Any dividend declared or distributed under the preceding paragraph shall be
reported to the Commissioner within thirty (30) days after such declaration or
distribution.
"If the Commissioner finds that any such corporation has declared or distributed any
such dividend in violation of this section, he may order such corporation to cease and
desist from doing business until the amount of such dividend or the portion thereof in
excess of the amount allowed under this section has been restored to said
corporation.
"The Commissioner shall prescribe solvency requirements for branches of foreign
insurance companies operating in the Philippines.
"TITLE 3
"ASSETS
"Section 202. In any determination of the financial condition of any insurance
company doing business in the Philippines, there shall be allowed and admitted as
assets only such assets legally or beneficially owned by the insurance company
concerned as determined by the Commissioner which consist of:
"(a) Cash in the possession of the insurance company or in transit under its control,
and the true and duly verified balance of any deposit of such company in a financially
sound bank or trust company duly authorized by the Bangko Sentral ng Pilipinas.
"(b) Investments in securities, including money market instruments, and in real
property acquired or held in accordance with and subject to the applicable provisions
of this Code and the income realized therefrom or accrued thereon.
"(c) Loans granted by the insurance company concerned to the extent of that portion
thereof adequately secured by non-speculative assets with readily realizable values in
accordance with and subject to the limitations imposed by applicable provisions of
this Code.
"(d) Policy loans and other policy assets and liens on policies, contracts or certificates
of a life insurance company, in an amount not exceeding legal reserves and other
policy liabilities carried on each individual life insurance policy, contract or certificate.
"(e) The net amount of uncollected and deferred premiums and annuity
considerations in the case of a life insurance company which carries the full mean
tabular reserve liability.
"(f) Reinsurance recoverable by the ceding insurer:
"(1) From an insurer authorized to transact business in this country, the full amount
thereof; or
"(2) From an insurer not authorized in this country, in an amount not exceeding the
liabilities carried by the ceding insurer for amounts withheld under a reinsurance
treaty with such unauthorized insurer as security for the payment of obligations
thereunder if such funds are held subject to withdrawal by, and under the control of,
the ceding insurer. The Commissioner may prescribe the conditions under which a
ceding insurer may be allowed credit, as an asset or as a deduction from loss and
unearned premium reserves, for reinsurance recoverable from an insurer not
authorized in this country but which presents satisfactory evidence that it meets the
applicable standards of solvency required in this country.
"(g) Funds withheld by a ceding insurer under a reinsurance treaty, provided reserves
for unpaid losses and unearned premiums are adequately provided.
"(h) Deposits or amounts recoverable from underwriting associations, syndicates and
reinsurance funds, or from any suspended banking institution, to the extent deemed
by the Commissioner to be available for the payment of losses and claims and values
to be determined by him.
"(i) Electronic data processing machines, as may be authorized by the Commissioner
to be acquired by the insurance company concerned, the acquisition cost of which to
be amortized in equal annual amounts within a period of five (5) years from the date
of acquisition thereof.
"(j) Investments in mutual funds, real estate investment trusts, salary loans, unit
investment trust funds and special deposit accounts, subject to the conditions as may
be provided for by the Commissioner.
"(k) Other assets, not inconsistent with the provisions of paragraphs (a) to (j) hereof,
which are deemed by the Commissioner to be readily realizable and available for the
payment of losses and claims at values to be determined by him in a circular, rule or
regulation.
"Section 203. In addition to such assets as the Commissioner may from time to time
determine to be non-admitted assets of insurance companies doing business in the
Philippines, the following assets shall in no case be allowed as admitted assets of an
insurance company doing business in the Philippines, in any determination of its
financial condition:
"(a) Goodwill, trade names, and other like intangible assets.
"(b) Prepaid or deferred charges for expenses and commissions paid by such
insurance company.
"(c) Advances to officers (other than policy loans), which are not adequately secured
and which are not previously authorized by the Commissioner, as well as advances to
employees, agents, and other persons on mere personal security.
"(d) Shares of stock of such insurance company, owned by it, or any equity therein as
well as loans secured thereby, or any proportionate interest in such shares of stock
through the ownership by such insurance company of an interest in another
corporation or business unit.
"(e) Furniture, furnishing, fixtures, safes, equipment, library, stationery, literature, and
supplies.
"(f) Items of bank credits representing checks, drafts or notes returned unpaid after
the date of statement.
"(g) The amount, if any, by which the aggregate value of investments as carried in the
ledger assets of such insurance company exceeds the aggregate value thereof as
determined in accordance with the provisions of this Code and/or the rules of the
Commissioner.
"All non-admitted assets and all other assets of doubtful value or character included
as ledger or non-ledger assets in any statement submitted by an insurance company
to the Commissioner, or in any insurance examiners report to him, shall also be
reported, to the extent of the value disallowed as deductions from the gross assets of
such insurance company, except where the Commissioner permits a reserve to be
carried among the liabilities of such insurance company in lieu of any such deduction.
"TITLE 4
"INVESTMENTS
"Section 204. A life insurance company may lend to any of its policyholders upon the
security of the value of its policy such sum as may be determined pursuant to the
provisions of the policy.
"No insurance company shall loan any of its money or deposits to any person,
corporation or association, except upon the security of any of the following:
"(a) First mortgage or deeds of trust of registered, unencumbered, improved or
unimproved real estate, including condominiums;
"(b) First mortgages or deeds of trust of actually cultivated, improved and
unencumbered agricultural lands in the Philippines;
"(c) Purchase money mortgages, lease purchase agreements or similar securities
executed or received by it on account of the sale or exchange of real property
acquired pursuant to Sections 206 and 208;
"(d) Bonds or other instruments of indebtedness issued or guaranteed by the
Government of the Philippines or its political subdivisions authorized by law to incur
such obligations or issue such guarantees or of government-owned or -controlled
corporations and instrumentalities including the Bangko Sentral ng Pilipinas; or
"(e) Obligations issued or guaranteed by universal banks, commercial banks, offshore
banking units, investment houses or other financial intermediaries duly registered
with the Bangko Sentral ng Pilipinas; or
"(f) Obligations issued or guaranteed by foreign banks or corporations, each of which
shall have total net worth of at least One hundred fifty million US dollars
($US150,000,000.00) or such other higher net worth as may be prescribed by the
Insurance Commission, as shown in their financial statements as of the immediately
preceding fiscal year; or
"(g) Assignments of monetary instruments such as cash deposits, deposit certificates
or other similar instruments of universal banks, commercial banks, investment houses
or other financial intermediaries duly registered with the Bangko Sentral ng Pilipinas;
or
"(h) Pledges of shares of stock, bonds or other instruments of indebtedness specified
in Section 209; or
"(i) Chattel mortgages over equipment not more than three (3) years old; and
"(j) Such other security as may be approved by the Commissioner.
"The loans provided in the preceding subsection shall be subject to the following
conditions:
"(1) The amount of loan secured by real estate mortgage over a non-agricultural land
shall not exceed seventy percent (70%) of its appraised value, and in the case of a loan
secured by a real estate mortgage over an agricultural land, the amount of loan shall
not exceed forty percent (40%) of its market value: Provided, That, in no case shall
such loan have a maturity period in excess of twenty-five (25) years;
"(2) Unless approved by the Commissioner, no loan may be granted upon the security
of a mortgage on improved real estate if the improvements thereon do not belong to
the owner of the land, and the owner of the improvements does not sign the deed of
mortgage. However, if the owner of the land is the Government of the Philippines or
any of its political subdivisions and a long-term lease has been executed in favor of
the owner of the improvements, the owner of the land need not be a party to the
deed of mortgage. The expiration date of the lease shall not, however, precede the
maturity of the loan. The phrase improved real estate as used herein shall mean land
with permanent building or buildings erected thereon;
"(3) Lease-agreements or similar securities received on the sale of real estate property
shall not exceed one hundred percent (100%) of the selling price of said property, or
one hundred percent (100%) of its market value at the time of its disposition,
whichever amount is lower. However, in no case shall such agreement have a
maturity period not exceeding thirty (30) years;
"(4) Loans secured by shares of stock of solvent corporations or institutions shall not
exceed fifty percent (50%) of:
"(i) The weighted average market price for the one hundred eighty (180) days
preceding the approval of the loan for shares listed in the stock exchange; and
"(ii) For unlisted shares, the adjusted book value of such shares.
"(5) Loans secured by the chattel mortgages over equipment shall not exceed seventy
percent (70%) of the market value of said equipment.
"Section 205. No loan by any insurance company on the security of real estate shall be
made unless the title to such real estate shall have first been registered in accordance
with the existing Land Registration Act, or shall have been previously registered under
the provisions of the existing Mortgage Law and the lien or interest of the insurance
company as mortgagee has been registered.
"Section 206. (a) An insurance company may purchase, hold, own and convey such
property, real and personal, as may have been mortgaged, pledged, or conveyed to it
in good faith in trust for its benefit by reason of money loaned by it in pursuance of
the regular business of the company, and such real or personal property as may have
been purchased by it at sales under pledges, mortgages or deeds of trust for its
benefit on account of money loaned by it; and such real and personal property as may
have been conveyed to it by borrowers in satisfaction and discharge of loans made by
the company in payment or by reason of any loan made by the company in payment
or by reason of any loan made by it shall be sold by the company within twenty (20)
years after the title thereto has been vested in it.
"(b) An insurance company may purchase, hold, and own the following:
"(1) Real properties which serve as its main place of business and/or branch offices:
Provided, That such investment shall not in the overall exceed twenty percent (20%)
of its net worth as shown by its latest financial statement approved by the
Commissioner.
"(2) Bonds or other instruments of indebtedness of the Government of the Philippines
or its political subdivisions authorized by law to issue bonds at the reasonable market
value thereof.
"(3) Bonds or other instruments of debt of government-owned or -controlled
corporations and entities, including the Bangko Sentral ng Pilipinas.
"(4) Bonds, debentures or other instruments of indebtedness of any solvent
corporation or institution created or existing under the laws of the Philippines:
Provided, however, That the issuing, assuming or guaranteeing entity or its
predecessors shall not have defaulted in the payment of interest on any of its
securities and that during each of any three (3) including the last two (2) of the five (5)
fiscal years next preceding the date of acquisition by such insurance company of such
bonds, debentures, or other instruments of indebtedness, the net earnings of the
issuing, assuming or guaranteeing institution available for its fixed charges, as
hereinafter defined, shall have been not less than one and one-quarter (1) times the
total of its fixed charges for such year: Provided, further, That no life insurance
company shall invest in or loan upon the obligations of any one institution in the kinds
permitted under this subsection an amount in excess of twenty-five percent (25%) of
the total admitted assets of such insurer as of December thirty-first next preceding
the date of such investment.
"As used in this subsection the term net earnings available for fixed charges shall
mean net income after deducting operating and maintenance expenses, taxes other
than income taxes, depreciation and depletion; but excluding extraordinary
nonrecurring items of income or expense appearing in the regular financial statement
of the issuing, assuming or guaranteeing institution. The term fixed charges shall
include interest on funded and unfunded debt, amortization of debt discount, and
rentals for leased properties.
"(5) Preferred or guaranteed stocks of any solvent corporation or institution created
or existing under the laws of the Philippines: Provided, That if the stocks are
guaranteed, the amount of stocks so guaranteed is not in excess of fifty percent (50%)
of the amount of the preferred or common stocks, as the case may be, of the
guaranteeing corporation: Provided, finally, That no life insurance company shall
invest in or loan upon obligations of any one institution in the kinds permitted under
this subsection an amount in excess of ten percent (10%) of the total admitted assets
of such insurer as of December thirty-first next preceding the date of such
investment.
"(6) Common stocks of any solvent corporation or institution created or existing under
the laws of the Philippines: Provided, however, That no life insurance company shall
invest in or loan upon the obligations of any one corporation or institution in the kinds
permitted under this subsection an amount in excess of ten percent (10%) of the total
admitted assets of such insurer as of December thirty-first next preceding the date of
such investment.
"(7) Securities issued by a registered enterprise, as this term is defined in Executive
Order No. 226, otherwise known as the Omnibus Investments Code of 1987, as
amended: Provided, That the total investment of a domestic non-life insurance
company in any registered enterprise shall not exceed twenty percent (20%) of the
net worth of said insurance company as shown by its aforesaid financial statement
unless previously authorized by the Commissioner.
"(8) Certificates, notes and other obligations issued by the trustees or receivers of any
institution created or existing under the laws of the Philippines which, or the assets of
which, are being administered under the direction of any court having jurisdiction:
Provided, however, That such certificates, notes or other obligations are adequately
secured as to principal and interests.
"(9) Equipment trust obligations or certificates which are adequately secured or other
adequately secured instruments evidencing an interest in equipment wholly or in part
within the Philippines: Provided, however, That there is a right to receive determined
portions of rental, purchase or other fixed obligatory payments for the use or
purchase of such equipment.
"(10) Any obligation of any corporation or institution created or existing under the
laws of the Philippines which is, on the date of acquisition by the insurer, adequately
secured and has qualities and characteristics wherein the speculative elements are
not predominant.
"(11) Such other securities as may be approved by the Commissioner.
"(c) Any domestic insurer which has outstanding insurance, annuity or reinsurance
contracts in currencies other than the national currency of the Philippines may invest
in, or otherwise acquire or loan upon securities and investments in such currency
which are substantially of the same kinds, classes and investment grades as those
eligible for investment under the foregoing subdivisions of this section; but the
aggregate amount of such investments and of such cash in such currency which is at
any time held by such insurer shall not exceed one and one-half (1) times the
amount of its reserves and other obligations under such contracts or the amount
which such insurer is required by the law of any country or possession outside the
Republic of the Philippines to be invested in such country or possession, whichever
shall be greater.
"Section 207. An insurance company may:
"(1) Invest in equities of other financial institutions; and
"(2) Engage in the buying and selling of long-term debt instruments: Provided, That
any or all of such investments shall be with the prior approval of the Commissioner.
Insurance companies may, however, invest in listed equities of other financial
institutions without need of prior approval by the Commissioner.
"Section 208. Any life insurance company may:
"(a) Acquire or construct housing projects and, in connection with any such project,
may acquire land or any interest therein by purchase, lease or otherwise, or use land
acquired pursuant to any other provision of this Code. Such company may thereafter
own, maintain, manage, collect or receive income from, or sell and convey, any land
or interest therein so acquired and any improvements thereon. The aggregate book
value of the investments of any such company in all such projects shall not exceed at
the time of such investments twenty-five percent (25%) of the total admitted assets
of such company on the thirty-first day of December next preceding: Provided, That
the funds of the company for the payment of pending claims and obligations shall not
be used for such investments.
"(b) Acquire real property, other than property to be used primarily for providing
housing and property for accommodation of its own business, as an investment for
the production of income, or may acquire real property to be improved or developed
for such investment purpose pursuant to a program therefor, subject to the condition
that the cost of each parcel of real property so acquired under the authority of this
paragraph (b), including the estimated cost to the company of the improvement or
development thereof, when added to the book value of all other real property held by
it pursuant to this paragraph (b), shall not exceed twenty-five percent (25%) of its
admitted assets as of the thirty-first day of December next preceding.
"Section 209. Every domestic insurance company shall, to the extent of an amount
equal in value to twenty-five percent (25%) of the minimum net worth required under
Section 194, invest its funds only in securities, satisfactory to the Commissioner,
consisting of bonds or other instruments of debt of the Government of the Philippines
or its political subdivisions or instrumentalities, or of government-owned or -
controlled corporations and entities, including the Bangko Sentral ng Pilipinas:
Provided, That such investments shall at all times be maintained free from any lien or
encumbrance: Provided, further, That such securities shall be deposited with and held
by the Commissioner for the faithful performance by the depositing insurer of all its
obligations under its insurance contracts. The provisions of Section 198 shall, so far as
practicable, apply to the securities deposited under this section.
"Except as otherwise provided in this Code, no judgment creditor or other claimant
shall have the right to levy upon any of the securities of the insurer held on deposit
under this section or held on deposit pursuant to the requirement of the
Commissioner.
"Section 210. After satisfying the requirements contained in the preceding section,
any domestic non-life insurance company, shall invest, to an amount prescribed
below, its funds in, or otherwise, acquire or loan upon, only the classes of investments
described in Section 206, including securities issued by any registered enterprise, as
this term is defined in Executive Order No. 226, otherwise known as The Omnibus
Investments Code of 1987 and such other classes of investments as may be
authorized by the Commissioner for purposes of this section: Provided, That:
"(a) No more than twenty percent (20%) of the net worth of such company as shown
by its latest financial statement approved by the Commissioner shall be invested in
the lot and building in which the insurance company conducts its business; and
"(b) The total investment of an insurance company in any registered enterprise shall
not exceed twenty percent (20%) of the net worth of said insurance company as
shown by its aforesaid financial statement nor twenty percent (20%) of the paid-up
capital of the registered enterprise excluding the intended investment, unless
previously authorized by the Commissioner: Provided, further, That such investments,
free from any lien or encumbrance, shall be at least equal in amount to the aggregate
amount of: (1) its legal reserve, as provided in Section 219, and (2) its reserve fund
held for reinsurance as provided for in the pertinent treaty provision in the case of
reinsurance ceded to authorized insurers.
"Section 211. After satisfying the requirements contained in Sections 197, 199, 209
and 210, any non-life insurance company may invest any portion of its funds
representing earned surplus in any of the investments described in Sections 204, 206
and 207, or in any securities issued by a registered enterprise mentioned in the
preceding sections: Provided, That no investment in stocks or bonds of any single
entity shall in the aggregate, exceed twenty percent (20%) of the net worth of the
insurance company as shown in its latest financial statement approved by the
Commissioner or twenty percent (20%) of the paid-up capital of the issuing company,
whichever is lesser, unless otherwise approved by the Commissioner.
"Section 212. After satisfying the minimum capital investment required in Section
209, any life insurance company may invest its legal policy reserve, as provided in
Section 217 or in Section 218, in any of the classes of securities or types of
investments described in Sections 204, 206, 207 and 208, subject to the limitations
therein contained, and in any securities issued by any registered enterprise
mentioned in Section 210, free from any lien or encumbrance, in such amounts as
may be approved by the Commissioner. Such company may likewise invest any
portion of its earned surplus in the aforesaid securities or investments subject to the
aforesaid limitations.
"Section 213. Any investment made in violation of the applicable provisions of this
title shall be considered non-admitted assets.
"Section 214. (a) All bonds or other instruments of indebtedness having a fixed term
and rate of interest and held by any life insurance company authorized to do business
in this country, if amply secured and if not in default as to principal or interest, shall
be valued based on their amortized cost using effective interest method less
impairment and unrecoverable amount based on appropriate measurement methods
which are generally accepted in the industry and accepted by the Commissioner. The
Commissioner shall have the power to determine the eligibility of any such
investments for valuation on the basis of amortization, and may by regulation
prescribe or limit the classes of securities so eligible for amortization. All bonds or
other instruments of indebtedness which in the judgment of the Commissioner are
not amply secured shall not be eligible for amortization and shall be valued in
accordance with paragraph two. The Commissioner may, if he finds that the interest
of policyholders so permit or require, by official regulation permit or require any class
or classes of insurers, other than life insurance companies authorized to do business
in this country, to value their bonds or other instruments of indebtedness in
accordance with the foregoing rule.
"(b) The investments of all insurers authorized to do business in this country, except
securities subject to amortization and except as otherwise provided in this chapter,
shall be valued, in the discretion of the Commissioner, at their amortized cost using
effective interest method less impairment and unrecoverable amount or at valuation
representing their fair market value. If the Commissioner finds that in view of the
character of investments of any insurer authorized to do business in this country it
would be prudent for such insurer to establish a special reserve for possible losses or
fluctuations in the values of its investments, he may require such insurer to establish
such reserve, reasonable in amount, and include a report thereon in any statement or
report of the financial condition of such insurer. The Commissioner may, in
connection with any examination or required financial statement of an authorized
insurer, require such insurer to furnish him complete financial statements and audited
report of the financial condition of any corporation of which the securities are owned
wholly or partly by such insurer and may cause an examination to be made of any
subsidiary or affiliate of such insurer as appropriate to specific investments as
provided in appropriate circulars issued by the Commissioner.
"(c) Investments in equity of an insurance company shall be valued as follows:
"(1) Listed stocks shall be valued at market value and periodically adjusted to reflect
market changes through a special valuation account to reflect their realizable value
when sold;
"(2) Unlisted stocks shall be valued at adjusted book value based on the latest
unqualified audited financial statements of the company which issued such stocks;
and
"(3) Stocks of a corporation under the control of the insurer shall be valued using the
equity method which is the cost plus or minus the share of the controlling company in
the earnings or losses of the controlled company after acquisition of such stocks.
"(d) The stock of an insurance company shall be valued at the lesser of its market
value or its book value as shown by its last approved audited financial statement or
the last report on examination, whichever is more recent. The book value of a share
of common stock of an insurance company shall be ascertained by dividing (1) the
amount of its capital and surplus less the value of all of its preferred stock, if any,
outstanding, by (2) the number of shares of its common stock issued and outstanding.
"Notwithstanding the foregoing provisions, an insurer may, at its option, value its
holdings of stock in a subsidiary insurance company in an amount not less than
acquisition cost if such acquisition cost is less than the value determined as
hereinbefore provided.
"(e) Real estate acquired by foreclosure or by deed in lieu thereof, in the absence of a
recent appraisal deemed by the Commissioner to be reliable, shall not be valued at an
amount greater than the unpaid principal of the defaulted loan at the date of such
foreclosure or deed, together with any taxes and expenses paid or incurred by such
insurer at such time in connection with such acquisition, and the cost of additions or
improvements thereafter paid by such insurer and any amount or amounts thereafter
paid by such insurer or any assessments levied for improvements in connection with
the property.
"(f) Purchase money mortgages received on dispositions of real property held
pursuant to Section 208 shall be valued in an amount equivalent to ninety percent
(90%) of the value of such real property. Purchase money mortgages received on
disposition of real property otherwise held shall be valued in an amount not
exceeding ninety percent (90%) of the value of such real property as determined by
an appraisal made by an appraiser at or about the time of disposition of such real
property.
"(g) The stock of a subsidiary of an insurer shall be valued on the basis of the greater
of:
"(1) The value of only such of the assets of such subsidiary as would constitute lawful
investments for the insurer if acquired or held directly by the insurer; or
"(2) Such other value determined pursuant to standards and cumulative limitations,
contained in a regulation to be promulgated by the Commissioner.
"(h) Notwithstanding any provision contained in this section or elsewhere in this
chapter, if the Commissioner finds that the interests of policyholders so permit or
require, he may permit or require any class or classes of insurers authorized to do
business in this country to value their investments or any class or classes thereof as of
any date heretofore or hereafter in accordance with any applicable valuation or
method.
"Section 215. It shall be the duty of the officers of the insurance company to report
within the first fifteen (15) days of every month all such investments as may be made
by them during the preceding month, and the Commissioner may, if such investments
or any of them seem injudicious to him, require the sale or disposal of the same. The
report shall also include a list of investments sold or disposed of by the company
during the same period.
"TITLE 5
"RESERVES
"Section 216. Every life insurance company, doing business in the Philippines, shall
annually make a valuation of all policies, additions thereto, unpaid dividends, and all
other obligations outstanding on the thirty-first day of December of the preceding
year. All such valuations shall be made according to the standard adopted by the
company, as prescribed by the Commissioner in accordance with internationally
accepted actuarial standards, which standard shall be stated in its annual report.
"Such standard of valuations shall be according to a standard table of mortality with
interest to be determined by the Insurance Commissioner. When the preliminary
term basis is used, the term insurance shall be limited to the first policy year.
"The results of such valuations shall be reported to the Commissioner on or before
the thirtieth day of April of each year accompanied by a sworn statement of a
designated company officer and stating the methods and assumptions used in arriving
at the values reported.
"Section 217. The aggregate net value so ascertained of the policies of such company
shall be deemed its reserve liability, to provide for which it shall hold funds in secure
investments equal to such net value, above all its other liabilities; and it shall be the
duty of the Commissioner, after having verified, to such an extent as he may deem
necessary, the valuation of all policies in force, to satisfy himself that the company has
such amount in safe legal securities after all other debts and claims against it have
been provided for.
"The reserve liability for variable contracts defined in Section 238 shall be established
in accordance with actuarial procedures that recognize the variable nature of the
benefits provided, and shall be approved by the Commissioner.
"Section 218. Every life insurance company, conducted on the mutual plan or a plan in
which policyholders are by the terms 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 fixed or specified time
and contingent upon the policy being in force and the insured living at that time,
annually ascertain the amount 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 amount
of the surplus so ascertained, and carry the amount 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 same was accumulated, and no
company or any of its officers shall be permitted to use any part of such apportioned
surplus fund for any purpose whatsoever other than for the express purpose for
which the same was accumulated.
"Section 219. Every insurance company, other than life, shall maintain a reserve for
unearned premiums on its policies in force, which shall be charged as a liability in any
determination of its financial condition. Such reserve shall be calculated based on the
twenty-fourth (24th) method.
"Section 220. In addition to its liabilities and reserves on contracts of insurance issued
by it, every insurance company shall be charged with the estimated amount of all of
its other liabilities, including taxes, expenses and other obligations due or accrued at
the date of statement, and including any special reserves required by the
Commissioner pursuant to the provisions of this Code.
TITLE 6
"LIMIT OF SINGLE RISK
"Section 221. No insurance company other than life, whether foreign or domestic,
shall retain any risk on any one subject of insurance in an amount exceeding twenty
percent (20%) of its net worth. For purposes of this section, the term subject of
insurance shall include all properties or risks insured by the same insurer that
customarily are considered by non-life company underwriters to be subject to loss or
damage from the same occurrence of any hazard insured against.
"The Commissioner may issue regulations providing for a maximum limit on the
overall retained risks of insurers to serve as a catastrophe cover requirement for the
same.
"Reinsurance ceded as authorized under the succeeding title shall be deducted in
determining the risk retained. As to surety risk, deduction shall also be made of the
amount assumed by any other company authorized to transact surety business and
the value of any security mortgaged, pledged, or held subject to the suretys control
and for the suretys protection.
"TITLE 7
"REINSURANCE TRANSACTIONS
"Section 222. An insurance company doing business in the Philippines may accept
reinsurances only of such risks, and retain risk thereon within such limits, as it is
otherwise authorized to insure.
"Section 223. No insurance company doing business in the Philippines shall cede all or
part of any risks situated in the Philippines by way of reinsurance directly to any
foreign insurer not authorized to do business in the Philippines unless such foreign
insurer or, if the services of a nonresident broker are utilized, such nonresident broker
is represented in the Philippines by a resident agent duly registered with the
Commissioner as required in this Code.
"The resident agent of such unauthorized foreign insurer or nonresident broker shall
immediately upon registration furnish the Commissioner with the annual statement
of such insurer, or of such company or companies where such broker may place
Philippine business as of the year preceding such registration, and annually thereafter
as soon as available.
"Section 224. All insurance companies, both life and non-life, authorized to do
business in the Philippines shall cede their excess risks to other companies similarly
authorized to do business in the Philippines in such amounts and under such
arrangements as would be consistent with sound underwriting practices before they
enter into reinsurance arrangements with unauthorized foreign insurers.
"Section 225. Any insurance company doing business in the Philippines desiring to
cede their excess risks to foreign insurance or reinsurance companies not authorized
to transact business in the Philippines may do so under such terms and conditions
which the Commissioner may prescribe.
"Should any reinsurance agreement be for any reason cancelled or terminated, the
ceding company concerned shall inform the Commissioner in writing of such
cancellation or termination within thirty (30) days from the date of such cancellation
or termination or from the date notice or information of such cancellation or
termination is received by such company as the case may be.
"Section 226. Every insurance company authorized to do business in the Philippines
shall report to the Commissioner on forms prescribed by him the particulars of
reinsurance treaties or any new treaties or changes in existing treaties within three (3)
months from their effectivity.
"Section 227. No credit shall be allowed as an admitted asset or as a deduction from
liability, to any ceding insurer for reinsurance made, ceded, renewed, or otherwise
becoming effective after January 1, 1975, unless the reinsurance shall be payable by
the assuming insurer on the basis of the liability of the ceding insurer under the
contract or contracts reinsured without diminution because of the insolvency of the
ceding insurer nor unless under the contract or contracts of reinsurance the liability
for such reinsurance is assumed by the assuming insurer or insurers as of the same
effective date; nor unless the reinsurance agreement provides that payments by the
assuming insurer shall be made directly to the ceding insurer or to its liquidator,
receiver, or statutory successor except:
"(a) Where the contract specifically provides another payee of such reinsurance in the
event of the insolvency of the ceding insurer; and
"(b) Where the assuming insurer with the consent of the direct insured or insureds
has assumed such policy obligations of the ceding insurer as direct obligations of the
assuming insurer to the payees under such policies and in substitution for the
obligations of the ceding insurer to such payees.
"Section 228. No life insurance company doing business in the Philippines shall
reinsure its whole risk on any individual life or joint lives, or substantially all of its
insurance in force, without having first obtained the written permission of the
Commissioner.
"TITLE
"ANNUAL STATEMENT
"Section 229. Every insurance company doing business in the Philippines shall
terminate its fiscal period on the thirty-first day of December every year, and shall
annually on or before the thirtieth day of April of each year render to the
Commissioner a statement signed and sworn to by the chief officer of such company
showing, in such form and details as may be prescribed by the Commissioner, the
exact condition of its affairs on the preceding thirty-first day of December.
"The annual statement shall be prepared in accordance with the financial reporting
framework as determined by the Commissioner. In addition, the Commissioner may
require other relevant information. The form and details of such other relevant
information shall be prescribed by the Commissioner and shall form part of the
supplementary schedules to the annual statement.
"Any entry in the statement which is found to be false shall constitute a misdemeanor
and the officer signing such statement shall be subject to the penalty provided for
under Section 442.
"Section 230. Every insurance company authorized under Title 10 of this chapter to
issue, deliver or use variable contracts shall annually file with the Commissioner
separate annual statement of its separate variable accounts. Such statement shall be
on a form prescribed or approved by the Commissioner and shall include details as to
all of the income, disbursements, assets and liability items of and associated with the
said separate variable accounts. Said statement shall be under oath of two (2) officers
of the company and shall be filed simultaneously with the annual statement required
by the preceding section.
"Section 231. Within thirty (30) days after receipt of the annual statement approved
by the Commissioner, every insurance company doing business in the Philippines shall
publish in a newspaper of general circulation, a full synopsis of its annual financial
statement showing fully the conditions of its business, and setting forth its resources
and liabilities in accordance with such form prescribed by the Commissioner.
"The Commissioner shall have the authority to make, amend, and rescind such
accounting rules and regulations as may be necessary to carry out the provisions of
this Code, and define accounting, technical and trade terms used in this Code:
Provided, That such shall be in accordance with internationally accepted accounting
standards. Among other things, the Commissioner may prescribe the form or forms in
which required information shall be set forth, the items or details to be shown in the
balance sheet and income statement, and the methods to be followed in the
preparation of accounts, appraisal or valuation of assets and liabilities, determination
of recurring and nonrecurring income, differentiation of investment and operating
income, and in the preparation, where the Commissioner deems it necessary or
desirable, of consolidated balance sheets or income accounts of any person directly or
indirectly controlling or controlled by the insurance company.
"TITLE 9
"POLICY FORMS
"Section 232. No policy, certificate or contract of insurance shall be issued or
delivered within the Philippines unless in the form previously approved by the
Commissioner, and no application form shall be used with, and no rider, clause,
warranty or endorsement shall be attached to, printed or stamped upon such policy,
certificate or contract unless the form of such application, rider, clause, warranty or
endorsement has been approved by the Commissioner.
"Section 233. In the case of individual life or endowment insurance, the policy shall
contain in substance the following conditions:
"(a) A provision that the policyholder is entitled to a grace period either of thirty (30)
days or of one (1) month within which the payment of any premium after the first
may be made, subject at the option of the insurer to an interest charge not in excess
of six percent (6%) per annum for the number of days of grace elapsing before the
payment of the premium, during which period of grace the policy shall continue in full
force, but in case the policy becomes a claim during the said period of grace before
the overdue premium is paid, the amount of such premium with interest may be
deducted from the amount payable under the policy in settlement;
"(b) A provision that the policy shall be incontestable after it shall have been in force
during the lifetime of the insured for a period of two (2) years from its date of issue as
shown in the policy, or date of approval of last reinstatement, except for nonpayment
of premium and except for violation of the conditions of the policy relating to military
or naval service in time of war;
"(c) A provision that the policy shall constitute the entire contract between the
parties, but if the company desires to make the application a part of the contract it
may do so provided 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 provision that the
policy and the application therefor shall constitute the entire contract between the
parties;
"(d) A provision that if the age of the insured is considered in determining the
premium and the benefits accruing under the policy, and the age of the insured has
been misstated, the amount payable under the policy shall be such as the premium
would have purchased at the correct age;
"(e) If the policy is participating, a provision that the company shall periodically
ascertain and apportion any divisible surplus accruing on the policy under conditions
specified therein;
"(f) A provision specifying the options to which the policyholder is entitled to in the
event of default in a premium payment after three (3) full annual premiums shall have
been paid. Such option shall consist of:
"(1) A cash surrender value payable upon surrender of the policy which shall not be
less than the reserve on the policy, the basis of which shall be indicated, for the then
current policy year and any dividend additions thereto, reduced by a surrender charge
which shall not be more than one-fifth (1/5) of the entire reserve or two and one-half
percent (2%) of the amount insured and any dividend additions thereto; and
"(2) One or more paid-up benefits on a plan or plans specified in the policy of such
value as may be purchased by the cash surrender value.
"(g) A provision that at any time after a cash surrender value is available under the
policy and while the policy is in force, the company will advance, on proper
assignment or pledge of the policy and on sole security thereof, a sum equal to, or at
the option of the owner of the policy, less than the cash surrender value on the policy,
at a specified rate of interest, not more than the maximum allowed by law, to be
determined by the company from time to time, but not more often than once a year,
subject to the approval of the Commissioner; and that the company will deduct from
such loan value any existing indebtedness on the policy and any unpaid balance of the
premium for the current policy year, and may collect interest in advance on the loan
to the end of the current policy year, which provision may further provide that such
loan may be deferred for not exceeding six (6) months after the application therefor is
made;
"(h) A table showing in figures cash surrender values and paid-up options available
under the policy each year upon default in premium payments, during at least twenty
(20) years of the policy beginning with the year in which the values and options first
become available, together with a provision that in the event of the failure of the
policyholder to elect one of the said options within the time specified in the policy,
one of said options shall automatically take effect and no policyholder shall ever
forfeit his right to same by reason of his failure to so elect;
"(i) In case the proceeds of a policy are payable in installments or as an annuity, a
table showing the minimum amounts of the installments or annuity payments;
"(j) A provision that the policyholder shall be entitled to have the policy reinstated at
any time within three (3) years from the date of default of premium payment unless
the cash surrender value has been duly paid, or the extension period has expired,
upon production of evidence of insurability satisfactory to the company and upon
payment of all overdue premiums and any indebtedness to the company upon said
policy, with interest rate not exceeding that which would have been applicable to said
premiums and indebtedness in the policy years prior to reinstatement.
"Any of the foregoing provisions or portions thereof not applicable to single premium
or term policies shall to that extent not be incorporated therein; and any such policy
may be issued and delivered in the Philippines which in the opinion of the
Commissioner contains provisions on any one or more of the foregoing requirements
more favorable to the policyholder than hereinbefore required.
"This section shall not apply to policies of group life or industrial life insurance.
"Section 234. No policy of group life insurance shall be issued and delivered in the
Philippines unless it contains in substance the following provisions, or provisions
which in the opinion of the Commissioner are more favorable to the persons insured,
or at least as favorable to the persons insured and more favorable to the
policyholders:
"(a) A provision that the policyholder is entitled to a grace period of either thirty (30)
days or of one (1) month for the payment of any premium due after the first, during
which grace period the death benefit coverage shall continue in force, unless the
policyholder shall have given the insurer written notice of discontinuance in advance
of the date of discontinuance and in accordance with the terms of the policy. The
policy may provide that the policyholder shall be liable for the payment of a pro rata
premium for the time the policy is in force during such grace period;
"(b) A provision that the validity of the policy shall not be contested, except for
nonpayment of premiums after it has been in force for two (2) years from its date of
issue; and that no statement made by any insured under the policy relating to his
insurability shall be used in contesting the validity of the insurance with respect to
which such statement was made after such insurance has been in force prior to the
contest for a period of two (2) years during such persons lifetime nor unless
contained in a written instrument signed by him;
"(c) A provision that a copy of the application, if any, of the policyholder shall be
attached to the policy when issued, that all statements made by the policyholder or
by persons insured shall be deemed representations and not warranties, and that no
statement made by any insured shall be used in any contest unless a copy of the
instrument containing the statement is or has been furnished to such person or to his
beneficiary;
"(d) A provision setting forth the conditions, if any, under which the insurer reserves
the right to require a person eligible for insurance to furnish evidence of individual
insurability satisfactory to the insurer as a condition to part or all of his coverage;
"(e) A provision specifying an equitable adjustment of premiums or of benefits or of
both to be made in the event that the age of a person insured has been misstated,
such provision to contain a clear statement of the method of adjustment to be used;
"(f) A provision that any sum becoming due by reason of death of the person insured
shall be payable to the beneficiary designated by the insured, subject to the
provisions of the policy in the event that there is no designated beneficiary, as to all or
any part of such sum, living at the death of the insured, and subject to any right
reserved by the insurer in the policy and set forth in the certificate to pay at its option
a part of such sum not exceeding Five hundred pesos (P500.00) to any person
appearing to the insurer to be equitably entitled thereto by reason of having incurred
funeral or other expenses incident to the last illness or, death of the person insured;
"(g) A provision that the insurer will issue to the policyholder for delivery to each
person insured a statement as to the insurance protection to which he is entitled, to
whom the insurance benefits are payable, and the rights set forth in paragraphs (h),
(i) and (j) following;
"(h) A provision that if the insurance, or any portion of it, on a person covered under
the policy ceases because of termination of employment or of membership in the
class or classes eligible for coverage under the policy, such person shall be entitled to
have issued to him by the insurer, without evidence of insurability, an individual policy
of life insurance without disability or other supplementary benefits, provided
application for the individual policy and payment of the first premium to the insurer
shall be made within thirty (30) days after such termination, and provided further
that:
"(1) The individual policy shall be on any one of the forms, except term insurance,
then customarily issued by the insurer at the age and for an amount not in excess of
the coverage under the group policy; and
"(2) The premium on the individual policy shall be at the insurers then customary rate
applicable to the form and amount of the individual policy, to the class of risk to
which such person then belongs, and to his age attained on the effective date of the
individual policy.
"(i) A provision that if the group policy terminates or is amended so as to terminate
the insurance of any class of insured persons, every person insured thereunder at the
date of such termination whose insurance terminates and who has been so insured
for five (5) years prior to such termination date shall be entitled to have issued to him
by the insurer an individual policy of life insurance subject to the same limitations as
set forth in paragraph (h), except that the group policy may provide that the amount
of such individual policy shall not exceed the amount of the persons life insurance
protection ceasing;
"(j) A provision that if a person insured under the group policy dies during the thirty
(30)-day period within which he would have been entitled to an individual policy
issued to him in accordance with paragraphs (h) and (i) above and before such
individual policy shall have become effective, the amount of life insurance which he
would have been entitled to have issued to him as an individual policy shall be
payable as a claim under the group policy whether or not application for the
individual policy or the payment of the first premium has been made;
"(k) In the case of a policy issued to a creditor to insure debtors of such creditor, a
provision that the insurer will furnish to the policyholder for delivery to each debtor
insured under the policy a form which will contain a statement 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 extinguish indebtedness.
"The provisions of paragraphs (f) to (j) shall not apply to policies issued to a creditor to
insure his debtors. If a group life policy is on a plan of insurance other than term, it
shall contain a non-forfeiture provision or provisions which in the opinion of the
Commissioner is or are equitable to the insured or the policyholder: Provided, That
nothing herein contained shall be so construed as to require group life policies to
contain the same non-forfeiture provisions as are required of individual life policies.
"Section 235. The term industrial life insurance as used in this Code shall mean that
form of life insurance under which the premiums are payable either monthly or
oftener, if the face amount of insurance provided in any policy is not more than five
hundred times that of the current statutory minimum daily wage in the City of Manila,
and if the words industrial policy are printed upon the policy as part of the descriptive
matter.
"An industrial life policy shall not lapse for nonpayment of premium if such
nonpayment was due to the failure of the company to send its representative or
agent to the insured at the residence of the insured or at some other place indicated
by him for the purpose of collecting such premium: Provided, That the provisions of
this paragraph shall not apply when the premium on the policy remains unpaid for a
period of three (3) months or twelve (12) weeks after the grace period has expired.
"Section 236. In the case of industrial life insurance, the policy shall contain in
substance the following provisions:
"(a) A provision that the insured is entitled to a grace period of four (4) weeks within
which the payment of any premium after the first may be made, except that where
premiums are payable monthly, the period of grace shall be either one (1) month or
thirty (30) days; and that during the period of grace, the policy shall continue in full
force, but if during such grace period the policy becomes a claim, then any overdue
and unpaid premiums may be deducted from any amount payable under the policy in
settlement;
"(b) A provision that the policy shall be incontestable after it has been in force during
the lifetime of the insured for a specified period, not more than two (2) years from its
date of issue, except for nonpayment of premiums and except for violation of the
conditions of the policy relating to naval or military service, or services auxiliary
thereto, and except as to provisions relating to benefits in the event of disability as
defined in the policy, and those granting additional insurance specifically against
death by accident or by accidental means, or to additional insurance against loss of, or
loss of use of, specific members of the body;
"(c) A provision 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 provision that the policy and the application therefor shall constitute
the entire contract between the parties, and in the latter case, a provision that all
statements made by the insured shall, in the absence of fraud, be deemed
representations and not warranties;
"(d) A provision that if the age of the person insured, or the age of any person,
considered in determining the premium, or the benefits accruing under the policy, has
been misstated, any amount payable or benefit accruing under the policy shall be
such as the premium paid would have purchased at the correct age;
"(e) A provision that if the policy is a participating policy, the company shall
periodically ascertain and apportion any divisible surplus accruing on the policy under
the conditions specified therein;
"(f) A provision that in the event of default in premium payments after three (3) full
years premiums have been paid, the policy shall be converted into a stipulated form
of insurance, and that in the event of default in premium payments after five (5) full
years premiums have been paid, a specified cash surrender value shall be available, in
lieu of the stipulated form of insurance, at the option of the policyholder. The net
value of such stipulated form of insurance and the amount of such cash value shall
not be less than the reserve on the policy and dividend additions thereto, if any, at
the end of the last completed policy year for which premiums shall have been paid
(the policy to specify the mortality table, rate of interest and method of valuation
adopted to compute such reserve), exclusive of any reserve on disability benefits and
accidental death benefits, less an amount not to exceed two and one-half percent
(2%) of the maximum amount insured by the policy and dividend additions thereto,
if any, when the issue age is under ten (10) years, and less an amount not to exceed
two and one-half percent (2%) of the current amount insured by the policy and
dividend additions thereto, if any, if the issue age is ten (10) years or older, and less
any existing indebtedness to the company on or secured by the policy;
"(g) A provision that the policy may be surrendered to the company at its home office
within a period of not less than sixty (60) days after the due date of a premium in
default for the specified cash value: Provided, That the insurer may defer payment for
not more than six (6) months after the application therefor is made;
"(h) A table that shows in figures the nonforfeiture benefits available under the policy
every year upon default in payment of premiums during at least the first twenty (20)
years of the policy, such table to begin with the year in which such values become
available, and a provision that the company will furnish upon request an extension of
such table beyond the year shown in the policy;
"(i) A provision that specifies which one of the stipulated forms of insurance provided
for under the provision of paragraph (f) of this section shall take effect in the event of
the insureds failure, within sixty (60) days from the due date of the premium in
default, to notify the insurer in writing as to which one of such forms he has selected;
"(j) A provision that the policy may be reinstated at any time within two (2) years from
the due date of the premium in default unless the cash surrender value has been paid
or the period of extended term insurance expired, upon production of evidence of
insurability satisfactory to the company and payment of arrears of premiums with
interest at a rate not exceeding six percent (6%) per annum payable annually;
"(k) A provision that when a policy shall become a claim by death of the insured,
settlement shall be made upon receipt of due proof of death, or not later than two (2)
months after receipt of such proof;
"(l) A title on the face and on the back of the policy correctly describing its form;
"(m) A space on the front or the back of the policy for the name of the beneficiary
designated by the insured with a reservation of the insureds right to designate or
change the beneficiary after the issuance of the policy. The policy may also provide
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 may refuse to endorse the
name of any proposed beneficiary who does not appear to the insurer to have an
insurable interest in the life of the insured. Such policy may also contain a provision
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 (30) days after the death of the insured, or if the beneficiary is the estate of the
insured, or is a minor, or dies before the insured, or is not legally competent to give
valid release, then the insurer may make any payment thereunder to the executor or
administrator of the insured, or to any of the insureds relatives by blood or legal
adoption or connections by marriage or to any person appearing to the insurer to be
equitably entitled thereto by reason of having incurred expense for the maintenance,
medical attention or burial of the insured; and
"(n) A provision that when an industrial life insurance policy is issued providing for
accidental or health benefits, or both, in addition to life insurance, the foregoing
provisions shall apply only to the life insurance portion of the policy.
"Any of the foregoing provisions or portions thereof not applicable to
nonparticipating or term policies shall to that extent not be incorporated therein. The
foregoing provisions shall not apply to policies issued or granted pursuant to the
nonforfeiture provisions prescribed in provisions of paragraphs (f) and (i) of this
section, nor shall provisions of paragraphs (f), (g), (h), and (i) hereof be required in
term insurance of twenty (20) years or less but such term policies shall specify the
mortality table, rate of interest, and method of computing reserves.
"Section 237. No policy of industrial life insurance shall be issued or delivered in the
Philippines if it contains any of the following provisions:
"(a) A provision that gives the insurer the right to declare the policy void because the
insured has had any disease or ailment, whether specified or not, or because the
insured has received institutional, hospital, medical or surgical treatment or attention,
except a provision which gives the insurer the right to declare the policy void if the
insured has, within two (2) years prior to the issuance of the policy, received
institutional, hospital, medical or surgical treatment or attention and if the insured or
the claimant under the policy fails to show that the condition occasioning such
treatment or attention was not of a serious nature or was not material to the risk;
"(b) A provision that gives the insurer the right to declare the policy void because the
insured has been rejected for insurance, unless such right be conditioned upon a
showing by the insurer that knowledge of such rejection would have led to a refusal
by the insurer to make such contract;
"(c) A provision that allows the company to pay the proceeds of the policy at the
death of the insured to any person other than the named beneficiary, except in
accordance with a standard provision as specified under the provisions of paragraph
(m) of the preceding section;
"(d) A provision that limits the time within which any action at law or in equity may be
commenced to less than six (6) years after the cause of action shall accrue; and
"(e) A provision that specifies any mode of settlement at maturity of less value than
the amount insured by the policy plus dividend additions, if any, less any
indebtedness to the company on the policy and less any premium that may by the
terms of the policy be deducted, payments to be made in accordance with the terms
of the policy.
"Nothing contained in this section nor in the provision of paragraph (b) of the
preceding section, relating to incontestability, shall be construed as prohibiting the
life insurance company from placing in its industrial life policies provisions limiting its
liability with respect to:
"(1) Death resulting from aviation other than as a fare-paying passenger on a regularly
scheduled route between definitely established airports; and
"(2) Military or naval service: Provided, That if the liability of the company is limited as
herein provided, such liability shall in no event be fixed at an amount less than the
reserve on the policy (excluding the reserve for any additional benefits in the event of
death by accident or accidental means or for benefits in the event of any type of
disability), less any indebtedness on or secured by such policy; nor shall any provision
of this section apply to any provision in an industrial life insurance policy for
additional benefits in the event of death by accident or accidental means.
"TITLE 10
"VARIABLE CONTRACTS
"Section 238. (a) No insurance company authorized to transact business in the
Philippines shall issue, deliver, sell or use any variable contract in the Philippines,
unless and until such company shall have satisfied the Commissioner that its financial
and general condition and its methods of operations, including the issue and sale of
variable contracts, are not and will not be hazardous to the public or to its policy and
contract owners. No foreign insurance company shall be authorized to issue, deliver
or sell any variable contract in the Philippines, unless it is likewise authorized to do so
by the laws of its domicile.
"(b) The term variable contract shall mean any policy or contract on either a group or
on an individual basis issued by an insurance company providing for benefits or other
contractual payments or values thereunder to vary so as to reflect investment results
of any segregated portfolio of investments or of a designated separate account in
which amounts received in connection with such contracts shall have been placed and
accounted for separately and apart from other investments and accounts. This
contract may also provide benefits or values incidental thereto payable in fixed or
variable amounts, or both. It shall not be deemed to be a security or securities as
defined in The Securities Act, as amended, or in the Investment Company Act, as
amended, nor subject to regulations under said Acts.
"(c) In determining the qualifications of a company requesting authority to issue,
deliver, sell or use variable contracts, the Commissioner shall always consider the
following:
"(1) The history, financial and general condition of the company: Provided, That such
company, if a foreign company, must have deposited with the Commissioner for the
benefit and security of its variable contract owners in the Philippines, securities
satisfactory to the Commissioner consisting of bonds of the Government of the
Philippines or its instrumentalities with an actual market value of Two million pesos
(P2,000,000.00);
"(2) The character, responsibility and fitness of the officers and directors of the
company; and
"(3) The law and regulation under which the company is authorized in the state of
domicile to issue such contracts.
"(d) If after notice and hearing, the Commissioner shall find that the company is
qualified to issue, deliver, sell or use variable contracts in accordance with this Code
and the regulations and rules issued thereunder, the corresponding order of
authorization shall be issued. Any decision or order denying authority to issue, deliver,
sell or use variable contracts shall clearly and distinctly state the reasons and grounds
on which it is based.
"Section 239. Any insurance company issuing variable contracts pursuant to this Code
may in its discretion issue contracts providing a combination of fixed amount and
variable amount of benefits and for option lump-sum payment of benefits.
"Section 240. Every variable contract form delivered or issued for delivery in the
Philippines, and every certified form evidencing variable benefits issued pursuant to
any such contract on a group basis, and the application, rider and endorsement forms
applicable thereto and used in connection therewith, shall be subject to the prior
approval of the Commissioner.
"Section 241. Illustration of benefits payable under any variable contract shall not
include or involve projections of past investment experience into the future and shall
conform with the rules and regulations promulgated by the Commissioner.
"Section 242. Variable contracts may be issued on the industrial life basis, provided
that the pertinent provisions of this Code and of the rules and regulations of the
Commissioner governing variable contracts are complied with in connection with such
contracts.
"Section 243. Every life insurance company authorized under the provisions of this
Code to issue, deliver, sell or use variable contracts shall, in connection with the same,
establish one or more separate accounts to be known as separate variable accounts.
All amounts received by the company in connection with any such contracts which are
required by the terms thereof, to be allocated or applied to one or more designated
separate variable accounts shall be placed in such designated account or accounts.
The assets and liabilities of each such separate variable account shall at all times be
clearly identifiable and distinguishable from the assets and liabilities in all other
accounts of the company. Notwithstanding any provision of law to the contrary, the
assets held in any such separate variable account shall not be chargeable with
liabilities arising out of any other business the company may conduct but shall be held
and applied exclusively for the benefit of the owners or beneficiaries of the variable
contracts applicable thereto. In the event of the insolvency of the company, the assets
of each such separate variable account shall be applied to the contractual claims of
the owners or beneficiaries of the variable contracts applicable thereto. Except as
otherwise specifically provided by the contract, no sale, exchange or other transfer of
assets may be made by a company, between any of its separate accounts or between
any other investment account and one or more of its separate accounts, unless in the
case of a transfer into a separate account, such transfer is made solely to establish the
account or to support the operation of the contracts with respect to the separate
account to which the transfer is made, or in case of a transfer from a separate
account, such transfer would not cause the remaining assets of the account to
become less than the reserves and other contract liabilities with respect to such
separate account. Such transfer, whether into or from a separate account, shall be
made by a transfer of cash, or by a transfer of securities having a valuation which
could be readily determined in the market place: Provided, That such transfer of
securities is approved by the Commissioner. The Commissioner may authorize other
transfers among such accounts, if, in his opinion, such transfers would not be
inequitable. All amounts and assets allocated to any such separate variable account
shall be owned by the company and with respect to the same the company shall not
be nor hold itself out to be a trustee.
"Section 244. Any insurance company which has established one or more separate
variable accounts pursuant to the preceding section may invest and reinvest all or any
part of the assets allocated to any such account in the securities and investments
authorized by Sections 204, 206, 207 and 208 for any of the funds of an insurance
company in such amount or amounts as may be approved by the Commissioner. In
addition thereto, such company may also invest in common stocks or other equities
which are listed on or admitted to trading in a securities exchange located in the
Philippines, or which are publicly held and traded in the over-the-counter market as
defined by the Commissioner and as to which market quotations have been available:
Provided, however, That no such company shall invest in excess of ten percent (10%)
of the assets of any such separate variable accounts in any one corporation issuing
such common stock. The assets and investments of such separate variable accounts
shall not be taken into account in applying the quantitative investment limitations
applicable to other investments of the company. In the purchase of common capital
stock or other equities, the insurer shall designate to the broker, or to the seller if the
purchase is not made through a broker, the specific variable account for which the
investment is made.
"Section 245. Assets allocated to any separate variable account shall be valued at
their market value on the date of any valuation, or if there is no readily available
market value then in accordance with the terms of the variable contract applicable to
such assets, or if there are no such contract terms then in such manner as may be
prescribed by the rules and regulations of the Commissioner.
"Section 246. The reserve liability for variable contracts shall be established in
accordance with actuarial procedures that recognize the variable nature of the
benefits provided, and shall be approved by the Commissioner.
"TITLE 11
"CLAIMS SETTLEMENT
"Section 247. (a) No insurance company doing business in the Philippines shall refuse,
without just cause, to pay or settle claims arising under coverages provided by its
policies, nor shall any such company engage in unfair claim settlement practices. Any
of the following acts by an insurance company, if committed without just cause and
performed with such frequency as to indicate a general business practice, shall
constitute unfair claim settlement practices:
"(1) Knowingly misrepresenting to claimants pertinent facts or policy provisions
relating to coverage at issue;
"(2) Failing to acknowledge with reasonable promptness pertinent communications
with respect to claims arising under its policies;
"(3) Failing to adopt and implement reasonable standards for the prompt
investigation of claims arising under its policies;
"(4) Not attempting in good faith to effectuate prompt, fair and equitable settlement
of claims submitted in which liability has become reasonably clear; or
"(5) Compelling policyholders to institute suits to recover amounts due under its
policies by offering without justifiable reason substantially less than the amounts
ultimately recovered in suits brought by them.
"(b) Evidence as to numbers and types of valid and justifiable complaints to the
Commissioner against an insurance company, and the Commissioners complaint
experience with other insurance companies writing similar lines of insurance shall be
admissible in evidence in an administrative or judicial proceeding brought under this
section.
"(c) If it is found, after notice and an opportunity to be heard, that an insurance
company has violated this section, each instance of noncompliance with paragraph (a)
may be treated as a separate violation of this section and shall be considered
sufficient cause for the suspension or revocation of the companys certificate of
authority.
"Section 248. The proceeds of a life insurance policy shall be paid immediately upon
maturity of the policy, unless such proceeds are made payable in installments or as an
annuity, in which case the installments, or annuities shall be paid as they become due:
Provided, however, That in the case of a policy maturing by the death of the insured,
the proceeds thereof shall be paid within sixty (60) days after presentation of the
claim and filing of the proof of death of the insured. Refusal or failure to pay the claim
within the time 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 claim is fraudulent.
"The proceeds of the policy maturing by the death of the insured payable to the
beneficiary shall include the discounted value of all premiums paid in advance of their
due dates, but are not due and payable at maturity.
"Section 249. The amount of any loss or damage for which an insurer may be liable,
under any policy other than life insurance policy, shall be paid within thirty (30) days
after proof of loss is received by the insurer and ascertainment of the loss or damage
is made either by agreement between the insured and the insurer or by arbitration;
but if such ascertainment is not had or made within sixty (60) days after such receipt
by the insurer of the proof of loss, then the loss or damage shall be paid within ninety
(90) days after such receipt. Refusal or failure to pay the loss or damage within the
time 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 claim is fraudulent.
"Section 250. In case of any litigation for the enforcement of any policy or contract of
insurance, it shall be the duty of the Commissioner or the Court, as the case may be,
to make a finding as to whether the payment of the claim of the insured has been
unreasonably denied or withheld; and in the affirmative case, the insurance company
shall be adjudged to pay damages which shall consist of attorneys fees and other
expenses incurred by the insured person by reason of such unreasonable denial or
withholding of payment plus interest of twice the ceiling prescribed by the Monetary
Board of the amount of the claim due the insured, from the date following the time
prescribed in Section 248 or in Section 249, as the case may be, until the claim is fully
satisfied: Provided, That failure to pay any such claim within the time prescribed in
said sections shall be considered prima facie evidence of unreasonable delay in
payment.
"Section 251. It is unlawful to:
"(a) Present or cause to be presented any fraudulent claim for the payment of a loss
under a contract of insurance; and
"(b) Fraudulently prepare, make or subscribe any writing with intent to present or use
the same, or to allow it to be presented in support of any such claim. Any person who
violates this section shall be punished by a fine not exceeding twice the amount
claimed or imprisonment of two (2) years, or both, at the discretion of the court.
"TITLE 12
"EXAMINATION OF COMPANIES
"Section 252. The Commissioner shall require every insurance company doing
business in the Philippines to keep its books, records, accounts and vouchers in such
manner that he or his authorized representatives may readily verify its annual
statements and ascertain whether the company is solvent and has complied with the
provisions of this Code or the circulars, instructions, rulings or decisions of the
Commissioner.
"Section 253. The Commissioner shall at least once a year and whenever he considers
the public interest so demands, cause an examination to be made into the affairs,
financial condition and method of business of every insurance company authorized to
transact business in the Philippines and of any other person, firm or corporation
managing the affairs and/or property of such insurance company. Such company, as
well as such managing person, firm or corporation, shall submit to the examiner all
such books, papers and securities as he may require and such examiner shall also
have the power to examine the officers of such company under oath touching its
business and financial condition, and the authority to transact business in the
Philippines of any such company shall be suspended by the Commissioner if such
examination is refused and such company shall not thereafter be allowed to transact
further business in the Philippines until it has fully complied with the provisions of this
section.
"Government-owned or -controlled corporations or entities engaged in social or
private insurance shall similarly be subject to such examination by the Commissioner
unless their respective charters otherwise provide.
"TITLE 13
"SUSPENSION OR REVOCATION OF AUTHORITY
"Section 254. If the Commissioner is of the opinion upon examination of other
evidence that any domestic or foreign insurance company is in an unsound condition,
or that it has failed to comply with the provisions of law or regulations obligatory
upon it, or that its condition or method of business is such as to render its
proceedings hazardous to the public or to its policyholders, or that its net worth
requirement, in the case of a domestic stock company, or its available cash assets, in
the case of a domestic mutual company, or its security deposits, in the case of a
foreign company, is impaired or deficient, or that the margin of solvency required of
such company is deficient, the Commissioner is authorized to suspend or revoke all
certificates of authority granted to such insurance company, its officers and agents,
and no new business shall thereafter be done by such company or for such company
by its agent in the Philippines while such suspension, revocation or disability
continues or until its authority to do business is restored by the Commissioner. Before
restoring such authority, the Commissioner shall require the company concerned to
submit to him a business plan showing the companys estimated receipts and
disbursements, as well as the basis therefor, for the next succeeding three (3) years.
"TITLE 14
"APPOINTMENT OF CONSERVATOR
"Section 255. If at any time before, or after, the suspension or revocation of the
certificate of authority of an insurance company as provided in the preceding title, the
Commissioner finds that such company is in a state of continuing inability or
unwillingness to maintain a condition of solvency or liquidity deemed adequate to
protect the interest of policyholders and creditors, he may appoint a conservator to
take charge of the assets, liabilities, and the management of such company, collect all
moneys and debts due to said company and exercise all powers necessary to preserve
the assets of said company, reorganize the management thereof, and restore its
viability. The said conservator shall have the power to overrule or revoke the actions
of the previous management and board of directors of the said company, any
provision of law, or of the articles of incorporation or bylaws of the company, to the
contrary notwithstanding, and such other powers as the Commissioner shall deem
necessary.
"The conservator may be another insurance company doing business in the
Philippines, any officer or officers of such company, or any other competent and
qualified person, firm or corporation. The remuneration of the conservator and other
expenses attendant to the conservation shall be borne by the insurance company
concerned.
"The conservator shall not be subject to any action, claim or demand by, or liability to,
any person in respect of anything done or omitted to be done in good faith in the
exercise, or in connection with the exercise, of the powers conferred on the
conservator.
"The conservator appointed shall report and be responsible to the Commissioner until
such time as the Commissioner is satisfied that the insurance company can continue
to operate on its own and the conservatorship shall likewise be terminated should the
Commissioner, on the basis of the report of the conservator or of his own findings,
determine that the continuance in business of the insurance company would be
hazardous to policyholders and creditors, in which case the provisions of Title 15 shall
apply.
"No insurance company, life or non-life, or any professional reinsurer, ordered to be
liquidated by the Commissioner under the provisions hereunder may be rehabilitated
or authorized to transact anew, insurance or reinsurance business, as the case may
be.
"TITLE 15
"PROCEEDINGS UPON INSOLVENCY
"Section 256. Whenever, upon examination or other evidence, it shall be disclosed
that the condition of any insurance company doing business in the Philippines is one
of insolvency, or that its continuance in business would be hazardous to its
policyholders and creditors, the Commissioner shall forthwith order the company to
cease and desist from transacting business in the Philippines and shall designate a
receiver to immediately take charge of its assets and liabilities, as expeditiously as
possible collect and gather all the assets and administer the same for the benefit of its
policyholders and creditors, and exercise all the powers necessary for these purposes
including, but not limited to, bringing suits and foreclosing mortgages in the name of
the insurance company.
"The Commissioner shall thereupon determine within ninety (90) days whether the
insurance company may be reorganized or otherwise placed in such condition so that
it may be permitted to resume business with safety to its policyholders and creditors
and shall prescribe the conditions under which such resumption of business shall take
place as well as the time for fulfillment of such conditions. In such case, the expenses
and fees in the collection and administration of the insurance company shall be
determined by the Commissioner and shall be paid out of the assets of such company.
"If the Commissioner shall determine and confirm within the said period that the
insurance company is insolvent, as defined hereunder, or cannot resume business
with safety to its policyholders and creditors, he shall, if the public interest requires,
order its liquidation, indicate the manner of its liquidation and approve a liquidation
plan and implement it immediately. The Commissioner shall designate a competent
and qualified person as liquidator who shall take over the functions of the receiver
previously designated and, with all convenient speed, reinsure all its outstanding
policies, convert the assets of the insurance company to cash, or sell, assign or
otherwise dispose of the same to the policyholders, creditors and other parties for the
purpose of settling the liabilities or paying the debts of such company and he may, in
the name of the company, institute such actions as may be necessary in the
appropriate court to collect and recover accounts and assets of the insurance
company, and to do such other acts as may be necessary to complete the liquidation
as ordered by the Commissioner.
"The provisions of any law to the contrary notwithstanding, the actions of the
Commissioner under this section shall be final and executory, and can be set aside by
the court upon petition by the company and only if there is convincing proof that the
action is plainly arbitrary and made in bad faith. The Commissioner, through the
Solicitor General, shall then file the corresponding answer reciting the proceeding
taken and praying the assistance of the court in the liquidation of the company. No
restraining order or injunction shall be issued by the court enjoining the
Commissioner from implementing his actions under this section, unless there is
convincing proof that the action of the Commissioner is plainly arbitrary and made in
bad faith and the petitioner or plaintiff files with the Clerk or Judge of the Court in
which the action is pending a bond executed in favor of the Commissioner in an
amount to be fixed by the court. The restraining order or injunction shall be refused
or, if granted, shall be dissolved upon filing by the Commissioner, if he so desires, of a
bond in an amount twice the amount of the bond of the petitioner or plaintiff
conditioned that it will pay the damages which the petition or plaintiff may suffer by
the refusal or the dissolution of the injunction. The provisions of Rule 58 of the New
Rules of Court insofar as they are applicable shall govern the issuance and dissolution
of the restraining order or injunction contemplated in this section.
"All proceedings under this title shall be given preference in the courts. The
Commissioner shall not be required to pay any fee to any public officer for filing,
recording, or in any manner authenticating any paper or instrument relating to the
proceedings.
"As used in this title, the term Insolvency shall mean the inability of an insurance
company to pay its lawful obligations as they fall due in the usual and ordinary course
of business as may be shown by its failure to maintain the solvency requirements
under Section 200 of this Code.
"Section 257. The receiver or the liquidator, as the case may be, designated under the
provisions of this title, shall not be subject to any action, claim or demand by, or
liability to, any person in respect of anything done or omitted to be done in good faith
in the exercise, or in connection with the exercise, of the powers conferred on such
receiver or liquidator.
"TITLE 16
"CONSOLIDATION AND MERGER OF
INSURANCE COMPANIES
"Section 258. Upon prior notice to the Commissioner, two (2) or more domestic
insurance companies, acting through their respective boards of directors, may
negotiate to merge 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 formed by the consolidation. A common agreement of the
proposed merger or consolidation shall be drawn up for submission to the
stockholders or members of the constituent companies for adoption and approval in
accordance with the provisions of the respective bylaws of the constituent companies
and all existing laws that may be pertinent.
"Section 259. Such agreement shall include, aside from the proposed merger or
consolidation, provisions relative to the manner of transfer of assets to and
assumption of liabilities by the absorbing or acquiring company from the absorbed or
dissolved company or companies; the proposed articles of merger or consolidation
and bylaws of the surviving or acquiring company; the corporate name to be adopted
which should not be that of any other existing company transacting similar business
or one so similar as to be calculated to mislead the public; the rights of the
stockholders or members of the absorbed or dissolved companies; date of effectivity
of the merger or consolidation; and such particulars as may be necessary to explain
and make manifest the objects and purposes of the absorbing or acquiring company.
"Section 260. Upon execution of such agreement to merge or consolidate by and
between or among the boards of directors of the constituent companies, notice
thereof shall be mailed immediately to their policyholders and creditors. The
company or companies to be absorbed or dissolved shall discharge all its accrued
liabilities; otherwise, such liabilities shall, with the consent of its creditors, be
transferred to and assumed by the absorbing or acquiring company, or such liabilities
be reinsured by the latter. In the case of such policies as are subject to cancellation by
the company or companies to be absorbed or dissolved, same may be cancelled
pursuant to the terms thereof in lieu of such transfer, assumption, or reinsurance.
"Section 261. Upon approval or adoption in the meetings of the stockholders or
members called for the purpose in each of the constituent companies of the
agreement to merge or consolidate, all stockholders or members dissenting or
objecting to the merger or consolidation shall be paid the value of their shares by the
company concerned in accordance with the bylaws thereof.
"Section 262. Upon approval or adoption of the agreement to merge or consolidate
by the stockholders or members of the constituent companies, the corresponding
articles of merger or of consolidation shall be duly executed by the presidents and
attested by the corporate secretaries and shall bear the corporate seals of the
merging or consolidating companies setting forth:
"(a) The plan of merger or the plan of consolidation;
"(b) As to each corporation, the number of shares outstanding, or in case of mutual
corporations, the number of members; and
"(c) As to each corporation, the number of shares or members voted for and against
such plan, respectively. Thereafter, a certified copy of such articles of merger or
consolidation, together with a certificate of approval or adoption by the stockholders
or members of such articles of merger or consolidation, verified by affidavits of such
officers and under the seal of the constituent companies, shall be submitted to the
Commissioner, together with such other papers or documents which the
Commissioner may require, for his consideration.
"Section 263. The articles of merger or of consolidation, signed and verified as
hereinabove required, shall be filed with the Securities and Exchange Commission for
its examination and approval.
"Section 264. Upon receipt from the Securities and Exchange Commission of the
certificate of merger or of consolidation, the constituent companies shall surrender to
the Commissioner their respective certificates of authority to transact insurance
business. The absorbing or surviving company in case of merger, or the newly formed
company in case of consolidation, shall immediately file with the Commissioner the
corresponding application for issuance of a new certificate of authority to transact
insurance business, together with a certified copy of the certificate of merger or of
consolidation, and of the certificate of increase of stocks, if there is any, issued by the
Securities and Exchange Commission.
"Section 265. Nothing in this title shall be construed to enlarge the powers of the
absorbing or surviving company in case of merger, or the newly formed company in
case of consolidation, except those conferred by the certificate of merger or of
consolidation and the articles of merger or of consolidation, or the amended articles
of incorporation, as registered with the Securities and Exchange Commission.
"Section 266. No director, officer, or stockholder of any such constituent companies
shall receive any fee, commission, compensation, or other valuable consideration
whatsoever, directly or indirectly, or in any manner aiding, promoting or assisting in
such merger or consolidation.
"Section 267. The merger or consolidation of companies under this Code shall be
subject to the provisions of the Corporation Code, and, in those cases specified in
Republic Act No. 5455, as amended, be further subject to the provisions of said law.
"TITLE 17
"MUTUALIZATION OF STOCK LIFE
INSURANCE COMPANIES
"Section 268. Any domestic stock life insurance company doing business in the
Philippines may convert itself into an incorporated mutual life insurer. To that end it
may provide and carry out a plan for the acquisition of the outstanding shares of its
capital stock for the benefit of its policyholders, or any class or classes of its
policyholders, by complying with the requirements of this chapter.
"Section 269. Such plan shall include appropriate proceedings for amending the
insurers articles of incorporation to give effect to the acquisition, by said insurer, for
the benefit of its policyholders or any class or classes thereof, of the outstanding
shares of its capital stock and the conversion of the insurer from a stock corporation
into a nonstock corporation for the benefit of its members. The members of such
nonstock corporation shall be the policyholders from time to time of the class or
classes for whose benefit the stock of the insurer was acquired, and the policyholders
of such other class or classes as may be specified in such corporations articles of
incorporation as they may be amended from time to time. Such plan shall be:
"(a) Adopted by a vote of a majority of the directors;
"(b) Approved by the vote of the holders of at least a majority of the outstanding
shares at a special meeting of shareholders called for that purpose, or by the written
consent of such shareholders;
"(c) Submitted to the Commissioner and approved by him in writing;
"(d) Approved by a majority vote of all the policyholders of the class or classes for
whose benefit the stock is to be acquired voting at an election by the policyholders
called for that purpose, subject to the provisions of Section 271. The terms
policyholder or policyholders as used in this chapter shall be deemed to mean the
person or persons insured under an individual policy of life insurance, or of health and
accident insurance, or of any combination of life, health and accident insurance. They
shall also include the person or persons to whom any annuity or pure endowment is
presently or prospectively payable by the terms of an individual annuity or pure
endowment contract, except where the policy or contract declares some other person
to be the owner or holder thereof, in which case such other person shall be deemed
policyholder. In any case where a policy or contract names two or more persons as
joint insured, payees, owners or holders thereof, the persons so named shall be
deemed collectively to be one (1) policyholder for the purpose of this chapter. In any
case where a policy or contract shall have been assigned by assignment absolute on
its face to an assignee other than the insurer, and such assignment shall have been
filed at the principal office of the insurer at least thirty (30) days prior to the date of
any election or meeting referred to in this chapter, then such assignee shall be
deemed at such election or meeting to be the policyholder. For the purpose of this
chapter the terms policyholder and policyholders include the employer to whom, or a
president, secretary or other executive officer of any corporation or association to
which a master group policy has been issued, but exclude the holders of certificates or
policies issued under or in connection with a master group policy. Beneficiaries under
unmatured contracts shall not as such be deemed to be policyholders; and

"(e) Filed with the Commissioner after having been approved as provided in this
section.
"Section 270. The Commissioner shall examine the plan submitted to him under the
provisions of subparagraph (c) of Section 269. He shall not approve 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 equitable in its
operation.
"Section 271. The election prescribed by subparagraph (d) of Section 269 shall be
called by the board of directors or the president, and every policyholder of the class
or classes for whose benefit the stock is to be acquired, whose insurance shall have
been in force for at least one (1) year prior to such election shall have one vote,
regardless of the number of policies or amount 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. Notice of such election shall be given to policyholders
entitled to vote by mail from the principal office of such insurer at least thirty (30)
days prior to the date set for such election, in a sealed envelope, postage prepaid,
addressed to each such policyholder at his last known address.
"Voting shall be by one of the following methods:
"(a) At a meeting of such policyholders, held pursuant to such notice, by ballot in
person or by proxy.
"(b) If not by the method described in the preceding subparagraph, then by mail
pursuant to a procedure and on forms to be prescribed by such plan.
"Such election shall be conducted under the direction and supervision of three (3)
impartial and disinterested inspectors appointed by the insurer and approved by the
Commissioner. In case any person appointed as inspector fails to appear at such
meeting or fails or refuses to act at such election, the vacancy, if occurring in advance
of the convening of the meeting or in advance of the opening of the mail vote, may be
filled in the manner prescribed for the appointment of inspectors and, if occurring at
the meeting or during the canvass of the mail vote, may be filled by the person acting
as chairman of said meeting or designated for that purpose in such plan. The decision,
act or certificate of a majority of the inspectors shall be effective in all respects as the
decision, act or certificate of all. The inspectors of election shall determine the
number of policyholders, the voting power of each, the policyholders represented at
the meeting or voting by mail, the existence of a quorum and the authenticity, validity
and effect of proxies. They shall receive votes, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and tabulate
all votes, determine the result, and do such other acts as are proper to conduct the
vote with fairness to all policyholders. The inspectors of election shall, before
commencing performance of their duties, subscribe to and file with the insurer and
with the Commissioner an oath that they, and each of them, will perform their duties
impartially, in good faith, to the best of their ability and as expeditiously as is
practicable. On the request of the insurer, the Commissioner, a policyholder or his
proxy, the inspectors shall make a report in writing of any challenge or question or
matter determined by them and execute a certificate of any fact found by them. They
shall also certify the result of such vote to the insurer and to the Commissioner. Any
report or certificate made by them shall be prima facie evidence of facts stated
therein. All necessary expenses incurred in connection with such election shall be paid
by the insurer. For the purpose of this section, a quorum shall consist of five percent
(5%) of the policyholders of such insurer entitled to vote at such election.
"Section 272. In carrying out any such plan, the insurer may acquire any shares of its
own stock by gift, bequest or purchase. Any shares so acquired shall, unless as a result
of such acquisition all of the shares of the insurer shall have been acquired, be
acquired in trust for the policyholders of the class or classes for whose benefit the
plan provides that the stock of the insurer shall be acquired as hereinafter provided.
Such shares shall be assigned and transferred on the books of such insurer and
approved by the Commissioner. Such trustees shall hold such stock in trust until all of
the outstanding shares of capital stock of such insurer have been acquired, but for not
longer than thirty (30) years with such extensions of not more than five (5) years each
as may be granted by the Commissioner. Such extensions may be granted by the
Commissioner if the plan so provides and if in his opinion the plan of acquisition of all
of such stock can be completed within a reasonable period. Such trustees shall vote
such stock at all corporate meetings at which stockholders have the right to vote.
When all the outstanding shares of capital stock of such insurer have been acquired,
all said shares shall be cancelled, the certificate of amendment of the insurers articles
of incorporation giving effect thereto shall be filed in accordance with the provisions
of the Corporation Code, and the insurer shall become a nonstock corporation for the
profit of its members and such trust shall thereupon terminate. Thereafter such
corporation shall be conducted for the mutual benefit, ratably, of its policyholders of
the class or classes for whose benefit the stock was acquired and shall have power to
issue non-assessable policies on a reserve basis subject to all provisions of law
applicable to incorporated life insurers issuing non-assessable policies on a reserve
basis. Policies so issued may be upon the basis of full or partial participation therein as
agreed between the insurer and the insured.
"Upon the termination of any such voting trust, either in accordance with its terms or
as hereinabove provided, such plan of mutualization shall terminate, unless
theretofore completed. Upon such termination, unless the plan of mutualization
provides for the disposition of the shares acquired 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 competent jurisdiction in the
judicial district in which is located the principal office of such insurer, made upon a
verified petition of the Commissioner.
"Section 273. Any such plan of mutualization may provide for the creation of a voting
trust under a trust agreement for the holding and voting by three (3) or more trustees
of any portion or all of the shares of the insurer not required upon the adoption of
such plan. The voting trustees shall be named in accordance with such plan or, if no
provision is made therein for the naming of such trustees, then by the insurer. The
voting trust agreement and voting trustees shall be subject to the approval of the
Commissioner. Any or all of the trustees under such voting trust agreement may be
the same person or persons as any or all of the trustees referred to in Section 272.
Such voting trust agreement shall provide that in the event of acquisition by the
insurer of any of the shares of stock held thereunder in accordance with the
provisions of the plan, such shares so acquired together with the voting rights thereof
shall be transferred by the trustees named under the provisions of this section to the
trustees named under the provisions of Section 272. Any voting trust agreement
created pursuant to the provisions of this section may be made irrevocable for not
longer than thirty (30) years and thereafter until the termination of the trust provided
for in Section 272. The trust created pursuant to the provisions of this section shall
terminate in any event upon termination of the trust provided for in Section 272.
Upon the termination of the trust created pursuant to the provisions of this section,
any shares held in such trust shall revert to the persons entitled thereto by law.
"Section 274. Every payment for the acquisition of any shares of the capital stock of
such insurer, the purchase price of which is not fixed by such plan, shall be subject to
the prior approval of the Commissioner. Neither such plan, nor any such payment,
may be approved by the Commissioner unless he finds that the rights and interests of
the insurer, its policyholders, and shareholders are protected.
"Section 275. The trustees referred to in Section 272 shall file with such insurer and
with the Commissioner a verified acceptance of their appointments and verified
declarations that they will faithfully discharge their duties as such trustees. All
dividends and other sums received by said trustees on the shares held by them, after
paying the necessary expenses of executing their trust, shall be immediately repaid to
such insurer for the benefit of all who are, or may become, policyholders of such
insurance of the class or classes for whose benefit the stock of such insurer was
acquired and entitled to participate in the profits thereof and shall be added to and
become part of the assets of such insurer.
"Section 276. If, at any time within the period provided in the plan for the acquisition
of the outstanding shares of stock of the insurer, ninety percent (90%) thereof has
already been acquired and transferred to the trustees under the plan, the insurer by a
vote of a majority of the directors may determine to make an offer, with the
permission of the Commissioner and subject to such requirement as he may specify,
to acquire by purchase all of the shares not theretofore acquired under the plan, at a
specified price which the insurer considers to be their fair value as of the date of
making such offer.
"If the offer to acquire is permitted by the Commissioner, the insurer shall make a
written offer by registered mail to each shareholder whose shares have not
theretofore been acquired under the plan or otherwise, offering to acquire all his
shares at such price if accepted in writing within thirty (30) days after the mailing of
such offer. Any shareholder accepting such offer within the time therefor shall, within
sixty (60) days after his acceptance, transfer to the insurer the certificates
representing such shares and, upon doing so, shall be paid by the insurer the amount
of such offer for his shares. Any share so acquired shall be assigned and transferred to
the trustees under the plan and held by them as shares acquired pursuant to the plan.
"Each shareholder who does not accept such offer to acquire his shares within the
time stated in such offer for acceptance thereof shall within fifteen (15) days after the
expiration of such offer apply to the Secretary of Finance for a determination of the
fair value of his shares as of the date of making such offer. The Secretary of Finance
may himself, after due notice and hearing, determine upon the evidence received the
fair value of the shares as of the date of making such offer, or appoint three (3)
impartial and disinterested persons to appraise the fair value of such shares with such
direction as he shall deem proper and necessary to expedite the proceedings. Upon
completion of the appraisal proceedings, the appraisers shall file with the Secretary of
Finance their report in writing stating the fair value of such shares as of the date of
the making of such offer and setting forth their findings in support of such statement.
The appraisers shall furnish each party to the proceedings a copy of their appraisal
report, and within ten (10) days after receipt thereof, any such party may signify his
objection, if any, to the report or move for the approval thereof. Upon the expiration
of the period of ten (10) days referred to above, the report shall be set for hearing,
after which the Secretary of Finance shall issue an order adopting, modifying or
rejecting the report, in whole or in part, or he may receive further evidence or may
recommit it with instructions. Whenever the Secretary of Finance shall determine in
any manner, as aforesaid, the fair value of such shares, he may also determine the
terms of payment thereof by the insurer. The expenses incidental to the proceedings
including charges of the appraisers, if any, shall be paid equally by the insurer and the
shareholder.
"The findings of the Secretary of Finance on all questions of fact raised at the hearing
of the application for determination of the fair value of such shares shall be conclusive
upon all parties to the proceedings. The order of the Secretary of Finance determining
the fair value of the shares and the terms of payment thereof shall have the force and
effect of a judgment which shall be appealable on any question of law. Such order
shall become final and executory fifteen (15) days after receipt thereof by the parties
to the proceedings.

"Upon any such order becoming final and from which no appeal is pending, or when
the time to appeal therefrom has expired, 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 make payment therefor as
provided in such order. Any shares so acquired by the insurer shall be assigned and
transferred to the trustees and held by them as shares acquired pursuant to the plan.
"Any shareholder who does not apply to the Secretary of Finance in the manner and
within the time hereinbefore prescribed shall be deemed to have accepted the offer
referred to above, effective, however, upon the expiration of the time hereinabove
prescribed for making such application, and such shareholders time for accepting
such offer shall, for that purpose only, be deemed to have been extended accordingly.
"Any offer to acquire shares made pursuant to this section shall, except as otherwise
provided herein, be irrevocable until all proceedings upon such offer have been
completed or all shares have otherwise been earlier acquired by the insurer.
"Any shareholder who has expressly or impliedly accepted the plan or the offer to
acquire his shares not theretofore acquired under the plan, and any shareholder who
has rejected such plan or such offer and has applied, as aforesaid, to the Secretary of
Finance for a determination of the fair value of his shares subsequent to which an
agreement has been reached or a final order issued fixing such fair value but who fails
to surrender his certificates for cancellation upon payment of the amount to which he
is entitled, may be compelled to do so by an order of the Secretary of Finance for that
purpose and such order may provide that upon failure of such shareholder to
surrender such certificates for cancellation, such order shall stand in lieu of such
surrender and cancellation.
"Section 277. Such insurer, after mutualization, shall be a continuation of the original
insurer, and such mutualization shall not affect such insurers certificate of authority
nor existing suits, rights or contracts except as provided in said plan for the acquisition
of the outstanding shares of the capital stock of such insurer, approved as provided in
this chapter. Such insurer, after mutualization, shall exercise all the rights and powers
and shall perform all the duties conferred or imposed by law upon insurers writing the
classes of insurance written by it, and to protect rights and contracts existing prior to
mutualization, subject to the effect of said plan. The board of directors of such
insurer, prior to mutualization, may adopt amendments to its bylaws to take effect
upon mutualization.
"Section 278. (a) An annual meeting of members shall be held at ten oclock in the
morning of the fourth Tuesday of March of each year at the principal office of the
insurer, unless a different time or place is provided in the bylaws.
"(b) Special meetings of the members, for any purpose or purposes whatsoever, may
be called at any time by the president, or by the board of directors, or by one or more
members holding not less than one-fifth (1/5) of the voting power of such insurer, or
by such other officers or persons as the bylaws authorize.
(c) Notice of all meetings of members whether annual or special shall be given in
writing to the members entitled to vote 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 member. At the option of the insurer such notice
may be imprinted on premium notices or receipts or on both.
"A notice may be given by such insurer to any member either personally, or by mail,
or other means of written communication, charges prepaid, addressed to such
member at his address appearing on the books of the insurer, or given by him to the
insurer for the purpose of notice. If a member gives no address, notice shall be
deemed to have been given him if sent by mail or other means of written
communication addressed to the place where the principal office of the insurer is
situated, or if published at least once in some newspaper of general circulation in the
place in which said office is located.
"Notice of any meeting of members shall be sent to each member entitled thereto not
less than seven (7) days before such meeting, unless the bylaws provide otherwise.
"Notice of any meeting of members shall specify the place, the day and the hour of
the meeting and the general nature of the business to be transacted.
"Notice of an annual meeting to be held at the time and place specified in
subparagraph (a) of this section shall be sufficiently given if published at least once in
each of four (4) successive weeks 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 meeting shall be required.
"(d) The presence in person or by proxy of five percent (5%) of the members entitled
to vote at any meeting shall constitute a quorum for the transaction of business,
including the amendment of the articles of incorporation and/or the bylaws unless
otherwise provided by the bylaws.
"(e) Each such member shall have one (1) vote at any meeting of members regardless
of the number of policies or the amount of insurance that such member holds and
regardless of whether such policies are policies of life insurance, or of health and
accident insurance, or both. Any member entitled to vote shall have the right to do so
either in person or by an agent or agents authorized by a written proxy executed by
such person or his duly authorized agent and filed with the secretary of such insurer.
"(f) The directors of the insurer in office at the time the insurer is mutualized as
provided in this chapter shall continue in office until the first annual meeting of
members. At the first annual meeting of members and at each annual meeting
thereafter, directors shall be elected by the members for the term or terms
authorized by this chapter.
"(g) The articles of incorporation or the bylaws may provide that the directors may be
divided into two (2) or more classes whose terms of office shall expire at different
times, but no terms shall continue longer than six (6) years. In the absence of such
provisions, each director, except members of the board of directors at the time the
insurer is mutualized, shall be elected for a term of one (1) year. All directors shall
hold office for a term for which they are elected and until their successors are elected
and qualified. A director may, but need not be a member or policyholder of the
insurer of which he is acting as director. Vacancies in the board of directors may be
filled by a majority of the remaining directors, though less than a quorum, and each
director so elected shall hold office until the next annual meeting.
"(h) All insurers mutualized under the provisions of this chapter shall be subject to all
other applicable provisions of this Code. The provisions of the Corporation Code shall
apply in a suppletory manner.
"Section 279. The provisions of Commonwealth Act No. 83, otherwise known as the
Securities Act, as amended, shall not apply to any of the following:
"(a) Shares of the capital stock of such insurer acquired as provided in Section 272 and
assigned and transferred to the trustees as is provided in said section, and the
assignment and transfer of said shares as so provided;
"(b) Any certificate or other instrument issued to a policyholder of such mutualized
insurer conferring or evidencing membership in such mutualized insurer or conferring
or evidencing such members right to participate in the profits or share in the assets
of such mutualized insurer by virtue of his membership therein, and the issuance of
such certificate or other instrument;
"(c) The plan for the acquisition of the outstanding shares of the capital stock of such
insurer authorized by the provisions of this chapter, the submission of said plan to the
Commissioner and to the policyholders of such insurer as provided in this chapter,
and the approval and carrying out of said plan or any part thereof in accordance with
the provisions of this chapter.
"Section 280. A domestic mutual life insurance company doing business in the
Philippines may convert itself into an incorporated stock life insurance company by
demutualization. To that end, it may provide and carry out a plan for the conversion
by complying with the requirements of this title.
"The conversion of a domestic mutual life insurance company to an incorporated
stock life insurance company shall be carried out pursuant to a conversion plan duly
approved by the Commissioner.
"The Commissioner shall promulgate such rules and regulations as he or she may
deem necessary to carry out the provisions of this title, after due consultation with
representatives of the insurance industry.
"All converted insurers under the provisions of this title shall be subject to all other
applicable provisions of this Code. The provisions of the Corporation Code shall apply
in a suppletory manner.
"TITLE 18
"WITHDRAWAL OF FOREIGN
INSURANCE COMPANIES
"Section 281. A foreign insurance company doing business in the Philippines, upon
payment of the fee hereinafter prescribed and surrender to the Commissioner of its
certificate of authority, may apply to withdraw from the Philippines. Such application
shall be duly executed in writing, accompanied by evidence of due authority for such
execution, properly acknowledged.
"Section 282. The Commissioner shall publish the application for withdrawal once a
week for three (3) consecutive weeks in a newspaper of general circulation in the
Philippines. The expenses of such publication shall be paid by the insurance company
filing such application.
"Section 283. Every foreign insurance company desiring to withdraw from the
Philippines shall, prior to such withdrawal, discharge its liabilities to policyholders and
creditors in this country. In case of its policies insuring residents of the Philippines, it
shall cause the primary liabilities under such policies to be reinsured and assumed by
another insurance company authorized to transact business in the Philippines. In the
case of such policies as are subject to cancellation by the withdrawing company, it
may cancel such policies pursuant to the terms thereof in lieu of such reinsurance and
assumption of liabilities.
"Section 284. The Commissioner shall cause an examination of the books and records
of the withdrawing company, and if, upon such examination, the Commissioner finds
that the insurer has no outstanding liabilities to policyholders and creditors in the
Philippines, and no policies uncancelled; or its primary liabilities have been reinsured
or assumed by another insurance company authorized to transact business in the
Philippines, as required in the preceding section, it shall cancel the withdrawing
companys certificate of authority, if unexpired, and shall permit the insurer to
withdraw. The cost and expenses of all such examination shall be paid as prescribed in
Section 440.
"Section 285. Upon the failure of such withdrawing insurance company or its agents in
the Philippines to pay the expenses of such publication within thirty (30) days after
the presentation of the bill therefor, the Commissioner shall collect such fee from the
deposit furnished in accordance with the provisions of Section 197.
"Section 286. A foreign life insurance company that withdraws from the Philippines
shall be considered a servicing insurance company if its business transactions are
confined to accepting periodic premium payments from, or granting policy loans and
paying cash surrender values of outstanding policies to, or reviving lapsed policies of,
Philippine policyholders, and such other related services.
"Section 287. No company shall act as a servicing insurance company until after it
shall have obtained a special certificate of authority to act as such from the
Commissioner upon application therefor and payment by the company of the fees
hereinafter prescribed. Such certificate shall expire on the last day of December of the
third year and shall be renewed, while the company continues to service its
policyholders, and to comply with all the applicable provisions of law and regulations.
"TITLE 19
"PROFESSIONAL REINSURERS
"Section 288. Except as otherwise provided in this Code, no partnership, association
or corporation shall transact any business in the Philippines as a professional reinsurer
until it shall have obtained a certificate of authority for that purpose from the
Commissioner upon application therefor and payment by such entity of the fees
hereinafter prescribed. As used in this Code, the term professional reinsurer shall
mean any entity that transacts solely and exclusively reinsurance business in the
Philippines.
"The Commissioner may refuse to issue a certificate of authority to any such entity
when such refusal will best promote public interest. No such certificate of authority
shall be granted to any such entity unless and until the Commissioner is satisfied by
such examination and such evidence as may be required that such entity is qualified
by the laws of the Philippines to transact business therein as a professional reinsurer.
"Before issuing such certificate of authority, the Commissioner must be satisfied that
the name of the applicant is not that of any other known company transacting
insurance or reinsurance business in the Philippines, or a name so similar as to be
calculated to mislead the public.
"Such certificate of authority shall expire on the last day of December the third year
following its issuance unless it is renewed.
"Every such partnership, association, or corporation receiving such certificate of
authority shall be subject to the provisions of this Code and other related laws, and to
the jurisdiction and supervision of the Commissioner.
"Section 289. Any partnership, association, or corporation authorized to transact
solely reinsurance business must have a capitalization of at least Three billion pesos
(P3,000,000,000.00) paid in cash of which at least fifty percent (50%) is paid-up and
the remaining portion thereof is contributed surplus, which in no case shall be less
than Four hundred million pesos (P400,000,000.00) or such capitalization as may be
determined by the Secretary of Finance, upon the recommendation of the
Commissioner: Provided, That twenty-five percent (25%) of the paid-up capital must
be invested in securities satisfactory to the Commissioner consisting of bonds or other
instruments of debt of the Government of the Philippines or its political subdivisions
or instrumentalities, or of government-owned or -controlled corporations and
entities, including the Bangko Sentral ng Pilipinas, and deposited with the
Commissioner, and the remaining seventy-five percent (75%) in such other securities
as may be allowed and permitted by the Commissioner, which securities shall at all
times be maintained free from any lien or encumbrance: Provided, further, That the
aforesaid capital requirement is without prejudice to other requirements to be
imposed under any risk-based capital method that may be adopted by the
Commissioner: Provided, finally, That the provisions of this chapter applicable to
insurance companies shall as far as practicable be likewise applicable to professional
reinsurers.
"TITLE 20
"HOLDING COMPANIES
"Section 290. As used in this title, the following terms shall have the respective
meanings hereinafter set forth unless the context shall otherwise require:
"(a) Person means an individual, partnership, firm, association, corporation, trust, any
similar entity or any combination of the foregoing acting in concert.
"(b) Control, including the terms controlling, controlled by and under common control
with, means the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities by a contract other than a commercial contract for
goods or non-management services or otherwise. Subject to Section 292, control shall
be presumed to exist if any person directly or indirectly owns, controls or holds with
the power to vote forty percent (40%) or more of the voting securities of any other
person: Provided, That no person shall be deemed to control another person solely by
reason of his being an officer or director of such other person.
"(c) Holding company means any person who directly or indirectly controls any
authorized insurer.
"(d) Controlled insurer means an authorized insurer controlled directly or indirectly by
a holding company.
"(e) Controlled person means any person, other than a controlled insurer, who is
controlled directly or indirectly by a holding company.
"(f) Holding company system means a holding company together with its controlled
insurers and controlled persons.
"Section 291. Notwithstanding paragraph (b) of Section 290, the Commissioner may
determine after notice and opportunity to be heard, that a person exercises directly
or indirectly either alone or pursuant to an agreement with one or more other
persons such a controlling influence over the management or policies of an
authorized insurer as to make it necessary or appropriate in the public interest or for
the protection of policyholders or stockholders of the insurer that the person be
deemed to control the insurer.
"Section 292. The Commissioner may determine upon application that any person,
either alone or pursuant to agreement with one or more other persons, does not or
will not upon the taking of some proposed action control another person. The filing of
an application hereunder in good faith by any person shall relieve the applicant from
any obligation or liability imposed by this title with respect to the subject of the
application, except as contained in Section 302, until the Commissioner has acted
upon the application. Within thirty (30) days or such further period as he may
prescribe, the Commissioner may prospectively revoke or modify his determination,
after notice and opportunity to be heard, whenever in his judgment, revocation or
modification is consistent with this title.
"Section 293. Notwithstanding any other provisions of this title, the following shall not
be deemed holding companies:
"(a) Authorized insurers or reinsurers or their subsidiaries; and
"(b) The Government of the Philippines, or any political subdivision, agency or
instrumentality thereof, or any corporation which is wholly owned directly or
indirectly by one or more of the foregoing.
"The Commissioner may conditionally or unconditionally exempt any specified person
or class of persons from any of the obligations or liabilities imposed under this title, if
and to the extent he finds the exemption necessary or appropriate in the public
interest or not adverse to the interests of policyholders or stockholders and
consistent with the purposes of this title.
"Section 294. (a) Every person who on the date this Code takes effect is a controlled
insurer and every person who thereafter becomes a controlled insurer, shall, within
sixty (60) days thereafter, or within thirty (30) days after becoming a controlled
insurer, whichever is later, register with the Commissioner. Such registration shall be
amended within thirty (30) days following any change in the identity of its holding
company. The Commissioner may grant one or more reasonable extensions of the
time to register.
"(b) Every registrant shall furnish the Commissioner with the following information
concerning its holding company:
"(1) A copy of its charter or articles of incorporation and its bylaws;
"(2) The identities of its principal shareholders, officers, directors and controlled
persons; and
"(3) Information as to its capital structure and financial condition, and a description of
its principal business activities.
"Section 295. Every controlled insurer shall file with the Commissioner such reports or
material as he may direct for the purpose of disclosing information concerning the
operations of persons within the holding company system which may materially affect
the operations, management or financial condition of the insurer.
"Section 296. Every holding company and every controlled person within a holding
company system shall be subject to examination by order of the Commissioner if he
has cause to believe that the operations of such persons may materially affect the
operations, management or financial condition of any controlled insurer with the
system and that he is unable to obtain relevant information from such controlled
insurer. The grounds relied upon by the Commissioner for such examination shall be
stated in his order, which order shall be subject to judicial review only at the instance
of the person sought to be examined. Such examination shall be confined to matters
specified in the order. The cost of such examination shall be assessed against the
person examined and no portion thereof shall thereafter be reimbursed to it directly
or indirectly by the controlled insurer.
"Section 297. The Commissioner shall keep the contents of each report made
pursuant to this title and any information obtained by him in connection therewith
confidential and shall not make the same public without the prior written consent of
the controlled insurer to which it pertains unless the Commissioner after notice and
an opportunity to be heard shall determine that the interests of policyholders,
stockholders or the public will be served by the publication thereof. In any action or
proceeding by the Commissioner against the person examined or any other person
within the same holding company system a report of such examination published by
him shall be admissible as evidence of the facts stated therein.
"Section 298. Transactions within a holding company system to which a controlled
insurer is a party shall be subject to the following:
"(a) The terms shall be fair and equitable;
"(b) Charges or fees for services performed shall be reasonable;
"(c) Expenses incurred and payments received shall be allocated to the insurer on an
equitable basis in conformity with customary insurance accounting practices
consistently applied.
"The books, accounts and records of each party to all such transactions shall be
maintained as to clearly and accurately disclose the nature and details of the
transactions including such accounting information as is necessary to support the
reasonableness of the charges or fees to the respective parties.
"Section 299. The prior written approval of the Commissioner shall be required for the
following transactions between a controlled insurer and any person in its holding
company system: sales, purchases, exchanges, loans or extensions of credit, or
investments, involving five percent (5%) or more of the insurers admitted assets as of
the thirty-first day of December next preceding.
"Section 300. The following transactions between a controlled insurer and any person
in its holding company system may not be entered into unless the insurer has notified
the Commissioner in writing of its intention to enter into any such transaction at least
thirty (30) days prior thereto, or such shorter period as he may permit, and he has not
disapproved it within such period:
"(a) Sales, purchases, exchanges, loans or extensions of credit, or investments,
involving more than one-half of one percent (%) but less than five percent (5%) of
the insurers admitted assets as of the thirty-first day of December next preceding;
"(b) Reinsurance treaties or agreements;
"(c) Rendering of services on a regular or systematic basis; or
"(d) Any material transaction, specified by regulation, which the Commissioner
determines may adversely affect the interest of the insurers policyholders or
stockholders or of the public.
"Nothing herein contained shall be deemed to authorize or permit any transaction
which, in the case of a non-controlled insurer, would be otherwise contrary to law.
"Section 301. The Commissioner, in reviewing transactions pursuant to Sections 299
and 300, shall consider whether the transactions comply with the standard set forth
in Section 298 and whether they may adversely affect the interests of policyholders.
This section shall not apply to transactions subject to other sections of this Code
which impose notice or approval requirements greater than those prescribed by this
title.
"Section 302. (a) No person, other than an authorized insurer, shall acquire control of
any domestic insurer, whether by purchase of its securities or otherwise, except:
"(1) After twenty (20) days written notice to its insurer or such shorter period as the
Commissioner may permit, of its intention to acquire control; and
"(2) With the prior written approval of the Commissioner.
"(b) The Commissioner shall disapprove the acquisition of control of a domestic
insurer if he determines, 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 him in reaching the foregoing
determination:
"(1) The financial condition of the acquiring person and the insurer;
"(2) The trustworthiness of the acquiring person or any of its officers or directors;
"(3) A plan for the proper and effective conduct of the insurers operations;
"(4) The source of the funds or assets for the acquisition;
"(5) The fairness of any exchange of stock, assets, cash or other consideration for the
stock or assets to be received;
"(6) Whether the effect of the acquisition may be substantially to lessen competition
in any line of commerce in insurance or to tend to create a monopoly therein; and
"(7) Whether the acquisition is likely to be hazardous or prejudicial to the insurers
policyholders or stockholders.

"(c) The following conditions affecting any controlled insurer, regardless of when such
control has been acquired, are violations of this title:
"(1) The controlling person or any of its officers or directors have demonstrated
untrustworthiness; and
"(2) The effect of retention of control may be substantially to lessen competition in
any line of commerce in insurance in this country or to tend to create a monopoly
therein. If, after notice and an opportunity to be heard, the Commissioner determines
that any of the foregoing violations exists, he shall reduce his findings to writing and
shall issue an order based thereon and cause the same to be served upon the insurer
and upon all persons affected thereby directing any person found to be in violation
thereof to take appropriate action to cure such violation. Upon the failure of any such
person to comply with such order, Section 306 shall become applicable.
"(d) The Commissioner may require the submission of such information as he deems
necessary to determine whether any acquisition or retention of control complies with
this title and may require, as a condition of approval of such acquisition or retention
of control, that all or any portion of such information be disclosed to the insurers
stockholders.
"(e) Unless subject to registration under Section 294 or unless acquisition of its
control is subject to paragraphs (a) and (b) hereof, every authorized insurer shall
notify the Commissioner in writing of the identity of any person whom the insurer
then knows or has reason to believe controls or has taken any action, other than
preliminary negotiations or discussion, to acquire control of the insurer.
"Section 303. (a) Notwithstanding the control of an authorized insurer by any person,
the officers and directors of the insurer shall not thereby be relieved of any obligation
or liability to which they would otherwise be subject by law, and the insurer shall be
managed so as to assure its separate operating identity consistent with this title.
"(b) Nothing herein shall preclude an authorized insurer from having or sharing a
common management or cooperative or joint use of personnel, property or services
with one or more other persons under arrangements meeting the standards of
Section 298.
"Section 304. To the extent that any information or material is set forth in forms or
other matter on file with any government agency or in a registration form filed with
the Commissioner by another person within the same holding company system, the
controlled insurer may comply with the registration or reporting requirements of this
title by referring in its registration form or report to such other filed matter and
attaching a copy thereof certified by the insurer as a true and complete copy, to such
registration form or report or, if such other filed matter is on file with the
Commissioner, incorporating such matter by reference.
"Section 305. No holding company 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 violate any provision of this Code.
"Section 306. In addition to any other penalty provided by law, the Commissioner
may, upon the willful failure of any person within a holding company system to
comply with this title or any regulation or order promulgated hereunder:
"(a) Proceed under Title 14 or Title 15, Chapter III of this Code with respect to insurer
within the holding company system; or
"(b) Revoke or refuse to renew the authority to do business in this country of an
insurer within the holding company system or refuse to issue such authority to any
other insurer in the system; or
"(c) Direct that, in addition to any other penalty provided by law, such person forfeit
to the people of this country a sum not less than Five thousand pesos (P5,000.00) for
a first violation and Twenty-five thousand pesos (P25,000.00) for any subsequent
violation. An additional sum not less than Twenty-five thousand pesos (P25,000.00)
shall be imposed for each month during which any such violation shall continue.
"CHAPTER IV
"SALES AGENCIES AND TECHNICAL SERVICES
"TITLE 1
"INSURANCE AGENTS AND INSURANCE BROKERS
"Section 307. No insurance company doing business in the Philippines, nor any agent
thereof, shall pay any commission or other compensation to any person for services in
obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided.
"No person shall act as an insurance agent or as an insurance broker in the solicitation
or procurement of applications for insurance, or receive for services in obtaining
insurance, any commission or other compensation from any insurance company doing
business in the Philippines, or any agent thereof, without first procuring a license so
to act from the Commissioner, which must be renewed every three (3) years
thereafter. Such license shall be issued by the Commissioner only upon the written
application of the person desiring it, such application if for a license to act as
insurance agent, being approved or endorsed by the company such person desires to
represent, and shall be upon a form prescribed by the Commissioner giving such
information as he may require, and upon payment of the corresponding fee
hereinafter prescribed. The Commissioner shall satisfy himself as to the competence
and trustworthiness of the applicant and shall have the right to refuse to issue or
renew and to suspend or revoke any such license in his discretion. The license shall
expire after the thirty-first day of December of the third year following the date of
issuance unless it is renewed.
"Licenses may be renewed in the case of the company represented by such agents,
and in the case of insurance brokers, upon the application of the said brokers,
themselves.
"Section 308. The provisions of Sections 307 and 309 shall apply to an employee who
shall be engaged to sell insurance products by an insurance company.
"Section 309. Any person who for compensation solicits or obtains insurance on
behalf of any insurance company or transmits for a person other than himself an
application for a policy or contract of insurance to or from such company or offers or
assumes to act in the negotiating of such insurance shall be an insurance agent within
the intent of this section and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance agent is subject.
"An insurance agent is an independent contractor and not an employee of the
company represented. Insurance agent includes an agency leader, agency manager,
or their equivalent.
"Since the insurance industry is imbued with public interest, the insurance companies
upon approval of the Commissioner may exercise wide latitude in supervising the
activities of their insurance agents to ensure the protection of the insuring public.
"Section 310. Any person who for any compensation, commission or other thing of
value acts or aids in any manner in soliciting, negotiating or procuring the making of
any insurance contract or in placing risk or taking out insurance, on behalf of an
insured other than himself, shall be an insurance broker within the intent of this Code,
and shall thereby become liable to all the duties, requirements, liabilities and
penalties to which an insurance broker is subject.
"Section 311. Every applicant for an insurance brokers license shall file with the
application and shall thereafter maintain in force while so licensed, a bond in favor of
the people of the Republic of the Philippines executed by a company authorized to
become surety upon official recognizances, stipulations, bonds and undertakings. The
bond shall be in such amount as may be fixed by the Commissioner, but in no case
less than Five hundred thousand pesos (P500,000.00), and shall be conditioned upon
full accounting and due payment to the person entitled thereto of funds coming into
the brokers possession through insurance transactions under license. The bond shall
remain in force until released by the Commissioner, or until cancelled by the surety.
Without prejudice to any liability previously incurred thereunder, the surety may
cancel the bond on thirty (30) days advance written notice to both the broker and the
Commissioner.
"Upon approval of the application, the applicant must also file two (2) errors and
omissions (professional liability or professional indemnity) policies issued separately
by two (2) insurance companies authorized to do business in the Philippines,
satisfactory to the Commissioner to indemnify the applicant against any claim or
claims for breach of duty as insurance broker which may be made against him by
reason of any negligent act, error or omission, whenever or wherever committed or
alleged to have been committed, on the part of the applicant or any person who has
been, is now, or may hereafter during the subsistence of the policies be employed by
the said applicant in his capacity as insurance broker: Provided, That the filing of any
claim or claims under one of such policies shall preclude the filing of the said claim or
claims under the other policy. The said policies shall be in such amounts as may be
prescribed by the Commissioner, depending upon the size or amount of the broking
business of the applicant, but in no case shall the amount of each of such policies be
less than Five hundred thousand pesos (P500,000.00).
"Section 312. The Commissioner shall, in order to determine the competence of every
applicant to have the kind of license applied for, require such applicant to submit to a
written examination and to pass the same to the satisfaction of the Commissioner.
The Commissioner may delegate or authorize the administration of the examination
to an independent organization, subject to such conditions that the Commissioner
may provide.
"Section 313. An applicant for the written examination mentioned in the preceding
section must be of good moral character and must not have been convicted of any
crime involving moral turpitude. He must satisfactorily show to the Commissioner that
he has been trained in the kind of insurance contemplated in the license applied for.
Such examination may be waived if it is shown to the satisfaction of the Commissioner
that the applicant has undergone extensive education and/or training in insurance.
"Section 314. An application for the issuance or renewal of a license to act as an
insurance agent or insurance broker may be refused, or such license, if already issued
or renewed, shall be suspended or revoked if the Commissioner finds that the
applicant for, or holder of, such license:
"(a) Has willfully violated any provision of this Code; or
"(b) Has intentionally made a material misstatement in the application to qualify for
such license; or
"(c) Has obtained or attempted to obtain a license by fraud or misrepresentation; or
"(d) Has been guilty of fraudulent or dishonest practices; or
"(e) Has misappropriated or converted to his own use or illegally withheld moneys
required to be held in a fiduciary capacity; or
"(f) Has not demonstrated trustworthiness and competence to transact business as an
insurance agent or insurance broker in such manner as to safeguard the public; or
"(g) Has materially misrepresented the terms and conditions of policies or contracts of
insurance which he seeks to sell or has sold; or
"(h) Has failed to pass the written examination prescribed, if not otherwise exempt
from taking the same.
"In addition to the foregoing causes, no license to act as insurance agent or insurance
broker shall be renewed if the holder thereof has not been actively engaged as such
agent or broker in accordance with such rules as the Commissioner may prescribe.
"Section 315. The premium, or any portion thereof, which an insurance agent or
insurance broker collects from an insured and which is to be paid to an insurance
company because of the assumption of liability through the issuance of policies or
contracts of insurance, shall be held by the agent or broker in a fiduciary capacity and
shall not be misappropriated or converted to his own use or illegally withheld by the
agent or broker.
"Any insurance company which delivers to an insurance agent or insurance broker a
policy or contract of insurance shall be deemed to have authorized such agent or
broker to receive on its behalf payment of any premium which is due on such policy or
contract of insurance at the time of its issuance or delivery or which becomes due
thereon.
"In order to ensure faithful performance by the insurance agent or insurance broker
of these fiduciary responsibilities, the Insurance Commissioner shall prescribe the
minimum terms and conditions on such matters in the standard agency or brokers
agreement between the agents and/or the broker with the insurance companies.
"Section 316. Any provision of existing laws to the contrary notwithstanding, no
person shall, within the Philippines, sell or offer for sale a variable contract or do or
perform any act or thing in the sale, negotiation, making or consummating of any
variable contract other than for himself unless such person shall have a valid and
current license from the Commissioner authorizing such person to act as a variable
contract agent. No such license shall be issued unless and until the Commissioner is
satisfied, after examination that such person is by training, knowledge, ability and
character qualified to act as such agent. Any such license may be withdrawn and
cancelled by the Commissioner after notice and hearing, if he shall find that the
holder thereof does not then have the qualifications required for the issuance of such
license.
"Section 317. It shall be unlawful for any person, company or corporation in the
Philippines to act as general agent of any insurance company unless he is empowered
by a written power of attorney duly executed by such insurance company, and
registered with the Commissioner to receive notices, summons and legal processes
for and in behalf of the insurance company concerned in connection with actions or
other legal proceedings against said insurance company. It shall be the duty of said
general agent to notify the Commissioner of his post office address in the Philippines,
or any change thereof. Notices, summons, or processes of any kind sent by registered
mail to the last registered address of such general agent of the company concerned or
to the Commissioner shall be sufficient service and deemed as if served on the
insurance company itself.
"Section 318. Except as otherwise provided by law or treaty, it shall be unlawful for
any person, partnership, association or corporation in the Philippines, for himself or
itself, or for some other person, partnership, association or corporation, either to
procure, receive or forward applications of insurance in, or to issue or to deliver or
accept policies or contracts of insurance of or for, any insurance company or
companies not authorized to transact business in the Philippines, covering risks, life or
non-life, situated in the Philippines; and any such person, partnership, association or
corporation violating the provisions of this section shall be deemed guilty of a penal
offense, and upon conviction thereof, shall for each such offense be punished by a
fine of Two hundred fifty thousand pesos (P250,000.00), or imprisonment of six (6)
months, or both, at the discretion of the court: Provided, That the provisions of this
section shall not apply to reinsurance.
"TITLE 2
"REINSURANCE BROKERS
"Section 319. Except as provided in the next succeeding title, no person shall act as
reinsurance broker in the Philippines unless he is authorized as such by the
Commissioner.
"A reinsurance broker is one who, for compensation, not being a duly authorized
agent, employee or officer of an insurer in which any reinsurance is effected, acts or
aids in any manner in negotiating contracts of reinsurance, or placing risks of effecting
reinsurance, for any insurance company authorized to do business in the Philippines.
"Section 320. Upon application and payment of the corresponding fee hereinafter
prescribed, and the filing of two (2) errors and omissions (professional liability or
professional indemnity) policies hereinafter described, a person may, if found
qualified, be issued a license to act as reinsurance broker by the Commissioner. No
such license shall be valid after December 31 of the third year following its issuance
unless it is renewed.
"The errors and omissions (professional liability or professional indemnity) policies
mentioned above shall indemnify the applicant against any claim or claims for breach
of duty as reinsurance broker which may be made against him by reason of any
negligent act, error or omission, whenever or wherever committed or alleged to have
been committed, on the part of the applicant or any person who has been, is now, or
may hereafter during the subsistence of the policies be employed by the said
applicant in his capacity as reinsurance broker: Provided, That the filing of any claim
or claims under one of such policies shall preclude the filing of the said claim or claims
under the other policy. The said policies shall be issued separately by two (2)
insurance companies authorized to do business in the Philippines and shall be in such
amounts as may be prescribed by the Insurance Commissioner, depending upon the
size or amount of the broking business of the applicant, but in no case shall the
amount of each of such policies be less than Five hundred thousand pesos
(P500,000.00).
"Section 321. The Commissioner may recall, suspend or revoke the license granted to
a reinsurance broker for violation of any existing law, rule and regulation, or any
provision of this Code after due notice and hearing.
"TITLE 3
"RESIDENT AGENTS
"Section 322. No person shall act as resident agent, as hereinafter defined, unless he
is registered as such with the Commissioner.
"Section 323. The term resident agent, as used in this title, is one duly appointed by a
foreign insurer or broker not authorized to do business in the Philippines to receive in
its behalf notices, summons and legal processes in connection with actions or other
legal proceedings against such foreign insurer or broker.
"Section 324. The application for a certificate of registration as resident agent filed
with the Commissioner must be accompanied with a copy of the power of attorney,
duly notarized and authenticated by the Philippine Consul in the place where such
foreign insurer or broker is domiciled, empowering the applicant to act as resident
agent and to receive notices, summons and legal processes for and in behalf of such
foreign insurer or broker in connection with any action or legal proceeding against
such foreign insurer or broker.
"Section 325. It shall be the duty of such resident agent to notify immediately the
Commissioner of any change of his office address.
"Section 326. A certificate of registration issued to a resident agent shall expire on the
thirty-first day of December of the third year following its issuance unless it is
renewed.
"The Commissioner may, after due notice and hearing, recall or cancel the certificate
of registration issued to a resident agent for violation of any existing law, rule or
regulation, or any provision of this Code.
"TITLE 4
"NON-LIFE COMPANY UNDERWRITER
"Section 327. No person shall act, and no company shall employ any person, as non-
life company underwriter, whose duty and responsibility it shall be to select, evaluate
and accept risks for, and to determine the terms and conditions, including those
pertaining to amounts of retentions, under which such risks are to be accepted by the
company, unless such underwriter is registered as such with the Commissioner.
"Section 328. Every non-life insurance company doing business in the Philippines must
maintain at all times a register of risks accepted and a claims register for each line of
risks engaged in by such non-life insurance company with such entries therein as are
now or as may hereafter be required by the Commissioner, and it shall be the
responsibility of the underwriter on the particular line of risk involved to see to it that
the said registers are well maintained and kept, and that all entries therein are
properly and correctly recorded. Such registers shall be open to inspection and
examination of duly authorized representatives of the Commissioner at all times
during business hours.
"Section 329. No person shall be registered with the Commissioner, unless such
person shall be at least twenty-one (21) years of age on the date of such registration;
a resident of the Philippines; of good moral character and with no conviction of any
crime involving moral turpitude; has had at the time such registration is made at least
two (2) years of underwriting work in the particular line of risk involved; and has
passed such qualifying written examination that the Commissioner shall conduct at
such time and in such place as he may decide to hold for applicants desiring to act as
underwriters.
"Such examination shall not be required of any person who has served as non-life
company underwriter for a period of at least five (5) years, if the Commissioner is
satisfied of the applicants competence as shown by the results of his underwriting
work in the non-life insurance company or companies that employed him in that
capacity. The minimum underwriting experience herein required may be reduced or
waived if it is shown to the satisfaction of the Commissioner that the non-life
company underwriter has undergone extensive education and/or training in
insurance.
"Section 330. Any applicant who misrepresents or omits any material fact in his
application for registration as a non-life company underwriter, or commits any
dishonest act in taking or in connection with the qualifying written examination for
underwriters, shall be barred from being registered as such non-life company
underwriter and, if already registered, his registration shall be cancelled and the
certificate of registration issued in his favor shall be recalled immediately by the
Commissioner.
"In the event that the certificate of authority of a non-life insurance company to
transact business is suspended or revoked due to business failure arising largely from
the imprudent and injudicious acceptance of risks by the underwriter concerned, the
registration of such underwriter shall likewise be cancelled and his certificate of
registration shall be recalled by the Commissioner, and no similar certificate shall
thereafter be issued in his favor.
"Section 331. No certificate of registration issued to an underwriter shall be valid after
December 31 of the third year following its issuance unless it is renewed.
"The Commissioner may, after due notice and hearing, also suspend or cancel such
certificate for violation of existing laws, rules and regulations or of any provisions of
this Code.
"TITLE 5
"ADJUSTERS
"Section 332. No person, partnership, association, or corporation shall act as an
adjuster, as hereinafter defined, unless authorized so to act by virtue of a license
issued or renewed by the Commissioner pursuant to the provisions of this Code:
Provided, That in the case of a natural person, he must be a Filipino citizen and in the
case of a partnership, association or corporation, at least sixty percent (60%) of its
capital must be owned by citizens of the Philippines.
"Section 333. An adjuster may be an independent adjuster or a public adjuster.
"The term independent adjuster means any person, partnership, association or
corporation which, for money, commission or any other thing of value, acts for or on
behalf of an insurer in the adjusting of claims arising under insurance contracts or
policies issued by such insurer.
"The term public adjuster means any person, partnership, association or corporation
which, for money, commission or any other thing of value, acts on behalf of an
insured in negotiating for, or effecting, the settlement of a claim or claims of the said
insured arising under insurance contracts or policies, or which advertises for or solicits
employment as an adjuster of such claims.
"Section 334. For every line of insurance claim adjustment, adjusters shall be licensed
either as independent adjusters or as public adjusters. No adjuster shall act on behalf
of an insurer unless said adjuster is licensed as an independent adjuster; and no
adjuster shall act on behalf of an insured unless said adjuster is licensed as a public
adjuster: Provided, however, That when a firm or person has been licensed as a public
adjuster, he shall not be granted another license as independent adjuster and vice
versa.
"No license, however, shall be required of any company adjuster who is a salaried
employee of an insurance company for the adjustment of claims filed under policies
issued by such insurance company.
"Section 335. Such license or any renewal thereof may be issued by the Commissioner
upon written application filed by the person interested on the form or forms
prescribed by the Commissioner, which shall contain such information as he may
require, and upon payment of the corresponding fee hereinafter prescribed.
"Section 336. The Commissioner shall conduct, at such times, and in such places as he
may decide to hold, written examinations to determine the competence and ability of
applicants desiring to act as adjuster of insurance claims.
"Section 337. No adjusters license issued hereunder shall be valid after December 31
of the third year following the issuance of such license unless it is renewed.
"Section 338. Nothing contained in this title shall apply to any duly licensed attorney-
at-law who acts or aids in adjusting insurance claims as an incident to the practice of
his profession and who does not advertise himself as an adjuster.
"Section 339. The Commissioner may suspend or revoke any adjusters license if, after
giving notice and hearing to the adjuster concerned, the Commissioner finds that the
said adjuster:
"(a) Has violated any provision of this Code and of the circulars, rulings and
instructions of the Commissioner or has violated any law in the course of his dealings
as an adjuster; or
"(b) Has made a material misstatement in the application for such license; or
"(c) Has been guilty of fraudulent or dishonest practices; or
"(d) Has demonstrated his incompetence or untrustworthiness to act as adjuster; or
"(e) Has made patently unjust valuation of loss; or
"(f) Has failed to make a report of the adjustment he proposed within sixty (60) days
from the date of the filing of the claim by the insured with the insurer, unless
prevented so to do by reasons beyond his control; or
"(g) Has refused to allow an examination into his affairs or method of doing business
as hereinafter provided.
"Section 340. Every adjuster shall submit to the Commissioner a quarterly report of all
losses which are the subject of adjustment effected by him during each month in the
form prescribed by the Commissioner. The report shall be filed within one (1) month
after the end of each quarter.
"Section 341. Every adjuster shall keep his or its books, records, reports, accounts,
and vouchers in such manner that the Commissioner or his duly authorized
representatives may readily verify the quarterly reports of the said adjuster and
ascertain whether the said adjuster has complied with the provisions of law or
regulations obligatory upon him or whether the method of doing business of the said
adjuster has been fair, just and honest.
"Section 342. The Commissioner shall, at least once a year and whenever he considers
the public interest so demands, cause an examination to be made into the affairs and
method of doing business of every adjuster.
"Section 343. Any violation of any provision of this title shall be punished by a fine of
not less than Ten thousand pesos (P10,000.00), or by imprisonment at the discretion
of the court: Provided, That, in case of a partnership, association or corporation, the
said penalty shall be imposed upon the partner, president, manager, managing
director, director or person in charge of its business or responsible for the violation.
"TITLE 6
"ACTUARIES
"Section 344. No life insurance company shall be licensed to do business in the
Philippines nor shall any life insurance company doing business in the Philippines be
allowed to continue doing such business unless they shall engage the services of an
actuary duly accredited with the Commissioner who shall, during his tenure of office,
be directly responsible for the direction and supervision of all actuarial work
connected with or that may be involved in the business of the insurance company.
The Commissioner may also require non-life insurance companies to engage the
services of an accredited actuary, in accordance with the rules and regulations that
the Commissioner will formulate.
"Section 345. Any person may be officially accredited by the Commissioner to act as
an actuary in any life insurance company or in any mutual benefit association
authorized to do business in the Philippines upon application therefor and the
payment of the corresponding fee hereinafter prescribed: Provided, That:
"(a) He is a fellow of good standing of the Actuarial Society of the Philippines at the
time of his appointment and remains in such good standing during the tenure of his
engagement; or
"(b) In the case of one who is not a fellow of the Actuarial Society of the Philippines,
he meets all the requirements of the said Society for accreditation as a fellow of the
Society, and has been given permission by the pertinent government authorities in
the Philippines to render services in the Philippines, in the event that he is not a
citizen of the Philippines.
"The registration of the actuary shall be suspended or revoked by the Commissioner
on the following grounds:
"(1) Failure to adequately perform required functions and duties under this Code;
"(2) Failure to disclose conflict of interest;
"(3) Failure to comply with the Code of Conduct of the Actuarial Society of the
Philippines; or
"(4) Such other grounds that may be determined by the Commissioner.
"No actuary engaged by a life insurance company shall be at the same time a
stockholder or a director of the board, chief executive officer or chief financial officer
of the company or hold any position that the Commissioner may determine to have
an inherent conflict of interest to the position of an actuary.
"No certificate of registration issued under this title shall be valid after December 31
of the third year following its issuance unless it is renewed.

"Section 346. The following documents, which are from time to time submitted to the
Commissioner by a life insurance company authorized to do business in the
Philippines, shall be duly certified by an accredited actuary employed by such
company:
"(a) Policy reserves, claims or loss reserves and net due and deferred premiums.
"(b) Statements of bases and net premiums, loading for gross premiums, and on non-
forfeiture values and reserves, when applying for approval of gross premiums,
reserves and non-forfeiture values.
"(c) Policies of insurance under any plan submitted to the Commissioner as required
by law.
"(d) Annual statements and valuation reports submitted to the Commissioner as
required by law.
"(e) Financial projection showing the probable income and outgo and reserve
requirements, enumerating the actuarial assumptions and bases of projections.
"(f) Valuation of annuity funds or retirement plans.
"The Commissioner may also require non-life insurance companies to submit, from
time to time, similar documents which shall be duly certified by an accredited actuary
employed by such company.
"Any life insurance company authorized to do business in the Philippines may employ
any person who is not officially accredited under either of the qualifications for any
kind of actuarial work: Provided, That he shall not, at any time, have the authority to
certify to the correctness of the foregoing documents.
"Section 347. No accredited actuary shall serve more than one client or employer at
the same time. However, one already in the employ of an insurance company may be
allowed by the Commissioner to serve a mutual benefit association or any other
insurance company, provided the following conditions are first complied with:
"(a) That the request to engage his services by the other employer is in writing;
"(b) That his present employer acquiesced to it in writing; and
"(c) That he furnishes the Commissioner with copies of said request and acquiescence.
"No external auditor shall be engaged by supervised persons or entities unless it has
been issued an accreditation certificate by the Commissioner. The accreditation
certificate shall be valid until December 31 of the third year from issuance unless it is
revoked or suspended. The Commissioner shall issue rules and regulations to govern
the accreditation of the external auditor and the revocation or suspension of the
accreditation.
"TITLE 7
"RATING ORGANIZATION AND RATE MAKING
"Section 348. Every organization which now exists or which may hereafter be formed
for the purpose of making rates to be used by more than one insurance company
authorized to do business in the Philippines shall be known as a rating organization.
The term rate as used in this title shall generally mean the ratio of the premium to the
amount insured and shall include, as the context may require, either the
consideration to be paid or charged for insurance contracts, including surety bonds, or
the elements and factors forming the basis for the determination or application of the
same, or both.
"Section 349. Every rating organization which now exists or which may hereafter be
formed shall be subject to the provisions of this title.
"Section 350. No rating organization hereafter formed shall commence rate-making
operations until it shall have obtained a license from the Commissioner. Before
obtaining such license, such rating organization shall file with the Commissioner a
notice of its intention to commence rate-making operations, a copy of its constitution,
articles of agreement or association, or of incorporation, and its bylaws, a list of
insurance companies that have agreed to become members or subscribers, and such
other information concerning such rating organization and its operations as may be
required by the Commissioner. If the Commissioner finds that the organization has
complied with the provisions of law and that it has a sufficient number of members or
subscribers and is otherwise qualified to function as a rating organization, the
Commissioner may issue a license to such rating organization authorizing it to make
rates for the kinds of insurance or subdivisions thereof as may be specified in such
license. No license issued to a rating organization shall be valid after December 31 of
the third year following its issuance unless it is renewed. No rating organization which
now exists and is not licensed pursuant to this section shall continue rate-making
operations until it shall have obtained from the Commissioner a license which he may
issue if satisfied that such organization is complying with the provisions of this title.
Every rating organization shall notify the Commissioner promptly of every change in:
"(a) Its constitution, its articles of agreement or association or its certificate of
incorporation, and its bylaws, rules and regulations governing the conduct of its
business; and

"(b) Its list of members and subscribers.
"A member means an insurer who participates in or is entitled to participate in the
management of a rating organization.
"A subscriber means an insurer which is furnished at its request with rates and rating
manuals by a rating organization of which it is not a member.
"Section 351. Each rating organization shall furnish its rating service without
discrimination to all of its members and subscribers, and shall, subject to reasonable
rules and regulations, permit any insurance company doing business in the
Philippines, not admitted to membership, to become a subscriber to its rating services
for any kind of insurance or subdivisions thereof. Notice of proposed changes in such
rules and regulations shall be given to subscribers. The reasonableness of any rule or
regulation in its application to subscribers, or the refusal of any rating organization to
admit an insurance company as a subscriber, shall, at the request of any subscriber or
any such insurance company, be reviewed by the Commissioner at a hearing held
upon at least ten (10) days written notice to such rating organization and to such
subscriber or insurance company. The Commissioner may, after such hearing, issue an
appropriate order.
"Section 352. No rating organization or any other association shall refuse to do
business with, or prohibit or prevent the payment of commissions to, any person
licensed as an insurance broker pursuant to the provisions of Title 1 of this chapter.
"Section 353. Rating organizations shall be subject to examination by the
Commissioner, as often as he may deem such examination expedient, pursuant to the
provisions of this Code applicable to the examination of insurance companies. He shall
cause such an examination of each rating organization to be made at least once in
every five (5) years.
"Section 354. The Commissioner may suspend or revoke the license of any rating
organization which fails to comply with his order within the time limited by such
order, or any extension thereof which he may grant. The Commissioner may
determine when a suspension of license shall become effective and it shall remain in
effect for the period fixed by him, unless he modifies or rescinds such suspension.
"Section 355. Any rating organization may subscribe for or purchase actuarial,
technical or other services, and such services shall be available to all members and
subscribers without discrimination.
"Section 356. Any rating organization may provide for the examination of policies,
daily reports, binders, renewal certificates, endorsements or other instruments of
insurance, or the cancellation thereof, and may make reasonable rules governing their
submission. Such rules shall contain a provision that in the event an insurance
company does not within sixty (60) days furnish satisfactory evidence to the rating
organization of the correction of any error or omission previously called to its
attention by the rating organization, it shall be the duty of the rating organization to
notify the Commissioner thereof. All information so submitted for examination shall
be confidential.
"Section 357. Cooperation among rating organizations or among rating organizations
and insurers in rate making or in other matters within the scope of this title is hereby
authorized, provided the filings resulting from such cooperation are subject to all
provisions of this title which are applicable to filings generally. The Commissioner may
review such cooperative activities and practices and if he finds that any such activity
or practice is unfair or unreasonable or otherwise inconsistent with the provisions of
this title, he may issue a written order specifying in what respects such activity or
practice is unfair or unreasonable or otherwise inconsistent with the provisions of this
title, and requiring the discontinuance of such activity or practice.
"Section 358. Every rating organization and every insurance company which makes
and files its own rates, shall make rates for all risks rated by such organization or
insurance company in accordance with the following provisions:
"(a) Basic classification, manual, minimum, class, or schedule rates or rating plans,
shall be made and adopted for all such risks. Any departure from such rates shall be in
accordance with schedules, rating plans and rules filed with the Commissioner;
"(b) Rates shall be reasonable and adequate for the class of risks to which they apply;
"(c) No rate shall discriminate unfairly between risks involving essentially the same
hazards and expense elements or between risks in the application of like charges and
credits;
"(d) Consideration shall be given to the past and prospective loss experience,
including the conflagration and catastrophe hazards, if any, to all factors reasonably
attributable to the class of risks, to a reasonable profit, to commissions paid during
the most recent annual period and to past and prospective other expenses. In case of
fire insurance rates, consideration shall be given to the experience of the fire
insurance business during a period of not less than five (5) years next preceding the
year in which the review is made;
"(e) Risk may be grouped by classifications for the establishment of rates and
minimum premiums. Classification rates may be modified to produce rates for
individual risks in accordance with rating plans which establish standards for
measuring variations in hazards or expense provisions, or both. Such standards may
measure any difference among risks that can be demonstrated to have a probable
effect upon losses or expenses.
"Section 359. No rating organization and no insurance company which makes and files
its own rates shall make or promulgate any rate or schedule of rates which is to be
applied to any fire risk on the condition that the whole amount of insurance on any
risk or any specified part thereof shall be placed with the members of or subscribers
to such rating organization or with such insurer.
"Section 360. Every insurance company doing business in the Philippines shall
annually file with the rating organization of which it is a member or subscriber, or
with such other agency as the Commissioner may designate, a statistical report
showing a classification schedule of its premiums and losses on all kinds or types of
insurance business to which Section 358 is applicable, and such other information as
the Commissioner may deem necessary or expedient for the administration of the
provisions of this title.
"Section 361. Every non-life rating organization and every non-life insurance company
doing business in the Philippines shall file with the Commissioner, except as to risks
which by general custom of the business are not written according to manual rates or
rating plans, every rate manual, schedule of rates, classification of risks, rating plan,
and every other rating rule and every modification of any of the foregoing which it
proposes to use. An insurance company may satisfy its obligation to make such filings
for any kind or type of insurance by becoming a member of or subscriber to a rating
organization which makes such filings for such kind or type of insurance, and by
authorizing the Commissioner to accept such filings of the rating organization on
behalf of such insurance company.
"Section 362. Every manual or schedule of rates and every rating plan filed as
provided in the preceding section shall state or clearly indicate the character and
extent of the coverage to which any such rate or any modification thereof will be
applied.
"Section 363. The Commissioner shall review filings as soon as reasonably possible
after they have been made in order to determine whether they meet the
requirements of this title. When a filing is not accompanied by the information upon
which the insurance company supports such filing, and the Commissioner does not
have sufficient information to determine whether such filing meets the requirements
of this title, he shall require such insurance company to furnish the information upon
which it supports such filing. The information furnished in support of a filing may
include:
"(a) The experience or judgment of the insurance company or rating organization
making the filing;
"(b) Its interpretation of any statistical data it relies upon;
"(c) The experience of other insurance companies or rating organization; or
"(d) Any other relevant factors.
"Section 364. If the Commissioner finds that any rate filings theretofore filed with him
do not comply with the provisions of this title or that they provide rates or rules which
are inadequate, excessive, unfairly discriminatory or otherwise unreasonable, he may
order the same withdrawn and at the expiration of sixty (60) days thereafter the same
shall be deemed no longer on file. Before making any such finding and order, the
Commissioner shall give notice, not less than ten (10) days in advance, and a hearing,
to the rating organization, or to the insurer, which filed the same. Such order shall not
affect any contract or policy made or issued prior to the expiration of such sixty (60)-
day period.
"Section 365. No member or subscriber of a rating organization, and no insurance
company doing business in the Philippines, or agent, employee or other
representative of such company, and no insurance broker shall charge or demand a
rate or receive a premium which deviates from the rates, rating plans, classifications,
schedules, rules and standards, made and last filed by a rating organization or by or
on behalf of the insurance company, or shall issue or make any policy or contract
involving a violation of such rate filings.
"Section 366. Notwithstanding any other provisions of this title, upon the written
application of the insurer, stating his reasons therefor, filed with and approved by the
Commissioner, a rate in excess of that provided by a filing otherwise applicable may
be used on any specific risk.
"Section 367. Whenever the Commissioner shall determine, after notice and a
hearing, that the rates charged or filed on any class of risks are excessive,
discriminatory, inadequate or unreasonable, he shall order that such rates be
appropriately adjusted. For the purpose of applying the provisions of this section, the
Commissioner may from time to time approve reasonable classifications of risks for
any or all such classes, having due regard to the past and prospective loss experience,
including conflagration or catastrophe hazards, if any, to all other relevant factors and
to a reasonable profit.
"Section 368. Nothing contained in this title shall be construed as requiring any
insurer to become a member of or subscriber to any rating organization.
"Section 369. Agreements may be made among insurance companies with respect to
the equitable apportionment among them of insurance which may be afforded
applicants who are in good faith entitled to but are unable to procure such insurance
through ordinary methods and such insurance companies may agree among
themselves on the use of reasonable rates and modifications for such insurance, such
agreements and rate modifications to be subject to the approval of the
Commissioner: Provided, however, That the provisions of this section shall not be
deemed to apply to workmens compensation insurance.
"Section 370. No insurance company doing business in the Philippines or any agent
thereof, no insurance broker, and no employee or other representative of any such
insurance company, agent, or broker, shall make, procure or negotiate any contract of
insurance or agreement as to policy contract, other than is plainly expressed in the
policy or other written contract issued or to be issued as evidence thereof, or shall
directly or indirectly, by giving or sharing a commission or in any manner whatsoever,
pay or allow or offer to pay or allow to the insured or to any employee of such
insured, either as an inducement to the making of such insurance or after such
insurance has been effected, any rebate from the premium which is specified in the
policy, or any special favor or advantage in the dividends or other benefits to accrue
thereon, or shall give or offer to give any valuable consideration or inducement of any
kind, directly or indirectly, which is not specified in such policy or contract of
insurance; nor shall any such company, or any agent thereof, as to any policy or
contract of insurance issued, make any discrimination against any Filipino in the sense
that he is given less advantageous rates, dividends or other policy conditions or
privileges than are accorded to other nationals because of his race.
"Section 371. No insurance company doing business in the Philippines, and no officer,
director, or agent thereof, and no insurance broker or any other person, partnership
or corporation shall issue or circulate or cause or permit to be issued or circulated any
literature, illustration, circular or statement of any sort misrepresenting the terms of
any policy issued by any insurance company of the benefits or advantages promised
thereby, or any misleading estimate of the dividends or share of surplus to be
received thereon, or shall use any name or title of any policy or class of policies
misrepresenting the true nature thereof; nor shall any such company or agent
thereof, or any other person, partnership or corporation make any misleading
representation or incomplete comparison of policies to any person insured in such
company for the purpose of inducing or tending to induce such person to lapse,
forfeit, or surrender his said insurance.
"Section 372. If the Commissioner, after notice and hearing, finds that any insurance
company, rating organization, agent, broker or other person has violated any of the
provisions of this title, it shall order the payment of a fine not to exceed Twenty-five
thousand pesos (P25,000.00) for each such offense, and shall immediately suspend or
revoke the license issued to such insurance company, rating organization, agent, or
broker. The issuance, procurement or negotiation of a single policy or contract of
insurance shall be deemed a separate offense.
"TITLE 8
"PROVISION COMMON TO AGENTS,
BROKERS AND ADJUSTERS
"Section 373. A license issued to a partnership, association or corporation to act as an
insurance agent, general agent, insurance broker, reinsurance broker, or adjuster shall
authorize only the individual named in the license who shall qualify therefor as
though an individual licensee. The Commissioner shall charge, and the licensee shall
pay, a full additional license fee as to each respective individual so named in such
license in excess of one.
"Licenses and certificates of registration issued under the provisions of this chapter
may be renewed by the filing of notices of intention on forms to be prescribed by the
Commissioner and payment of the fees therefor.
"Section 374. The Commissioner, in consultation with the duly accredited associations
representing the insurance industry, shall adopt and promulgate a code of conduct to
promote integrity, honesty and ethical business practices among insurance agents,
distributors and other intermediaries.
"TITLE 9
"BANCASSURANCE
"Section 375. The term bancassurance shall mean the presentation and sale to bank
customers by an insurance company of its insurance products within the premises of
the head office of such bank duly licensed by the Bangko Sentral ng Pilipinas or any of
its branches under such rules and regulations which the Commissioner and the
Bangko Sentral ng Pilipinas may promulgate. To engage in bancassurance
arrangement, a bank is not required to have equity ownership of the insurance
company. No insurance company shall enter into a bancassurance arrangement
unless it possesses all the requirements as may be prescribed by the Commissioner
and the Bangko Sentral ng Pilipinas.
"No insurance product under this section, whether life or non-life, shall be issued or
delivered unless in the form previously approved by the Commissioner.
"Section 376. Personnel tasked to present and sell insurance products within the bank
premises shall be duly licensed by the Commissioner and shall be subject to the rules
and regulations of this Act.
"Section 377. The Commissioner and the Bangko Sentral ng Pilipinas shall promulgate
rules and regulations to effectively supervise the business of bancassurance.
"CHAPTER V
"SECURITY FUND
"Section 378. There is hereby created a fund to be known as the Security Fund which
shall be used in the payment of allowed claims against an insurance company
authorized to transact business in the Philippines remaining unpaid by reason of the
insolvency of such company. The said Fund may also be used to reinsure the policy of
the insolvent insurer in any solvent insurer authorized to do business in the
Philippines as provided in Section 256. The Fund may likewise be used to pay insured
claims which otherwise would not be compensable under the provisions of the policy.
No payment from the Security Fund shall, however, be made to any person who owns
or controls ten percent (10%) or more of the voting shares of stock of the insolvent
insurer and no payment on any one claim shall exceed Twenty thousand pesos
(P20,000.00).
"Section 379. Such Fund shall consist of all payments made to the Fund by insurance
companies authorized to do business in the Philippines. Payments made by life
insurance companies shall be treated separately from those made by non-life
insurance companies and the corresponding fund shall be called Life Account and
Non-Life Account, respectively, and shall be held and administered as such by the
Commissioner in accordance with the provisions of this title. The Life Account shall be
utilized exclusively for disbursements that refer to life insurance companies, while the
Non-Life Account shall be utilized exclusively for disbursements that refer to non-life
insurance companies.
"Section 380. All insurance companies doing business in the Philippines shall
contribute to the Security Fund, Life or Non-Life Account, as the case may be, the
aggregate amount of Five million pesos (P5,000,000.00) for each Account. The
contributions of the life insurance companies and of the non-life insurance companies
shall be in direct proportion to the ratio between a particular life insurance company
or a particular non-life insurance companys net worth and the aggregate net worth of
all life insurance companies or all non-life insurance companies, as the case may be,
as shown in their latest financial statements approved by the Commissioner. This
proportion applied to the Five million pesos (P5,000,000.00) shall be the contribution
of a particular company to the corresponding Account of the Security Fund.
"The amount of Five million pesos (P5,000,000.00) in each Account shall be in the
form of a revolving trust fund. The respective contributions of the companies shall
remain as admitted assets in their books and any disbursement therefrom shall be
deducted proportionately from the contributions of each company which will be
allowed as deductions for income tax purposes. Any earnings of the Fund shall be
turned over to the contributing companies in proportion to their contributions.
"In the case of disbursements of funds from the Fund as provided in the foregoing
paragraph, the life and non-life companies, as the case may be, shall replenish the
amount disbursed in direct proportion to the individual companys net worth and the
aggregate net worth of the life or non-life companies, as the case may be. However, in
no case shall the Fund exceed the aggregate amount of Ten million pesos
(P10,000,000.00), or Five million pesos (P5,000,000.00) for each Account.
"Should the Fund, Life or Non-Life Account, as the case may be, be inadequate for a
disbursement as provided for, then the Life or Non-Life companies, as the case may
be, shall contribute to the Fund their respective shares in the proportion previously
mentioned.
"Section 381. The Commissioner may adopt, amend, and enforce all reasonable rules
and regulations necessary for the proper administration of the Fund and of the
Accounts. In the event any insurer shall fail to make any payment required by this
title, or that any payment made is incorrect, he shall have full authority to examine all
the books and records of the insurer for the purpose of ascertaining the facts and
shall determine the correct amount to be paid and may proceed in any court of
competent jurisdiction to recover for the benefit of the Fund or of the Account
concerned any sum shown to be due upon such examination and determination. Any
insurer which fails to make any payment to the Fund or to the Account concerned
when due, shall thereby forfeit to said Fund or Account concerned a penalty of five
percent (5%) of the amount determined to be due as provided by this title, plus one
percent (1%) of such amount for each month of delay or fraction thereof, after the
expiration of the first month of such delay, but the Commissioner, if satisfied that the
delay was excusable, may remit all or any part of such penalty. The Commissioner, in
his discretion, may suspend or revoke the certificate of authority to do business in the
Philippines of any insurance company which shall fail to comply with this title or to
pay any penalty imposed in accordance therewith.
"Section 382. The Accounts created by this title shall be separate and apart from each
other and from any other fund. The Treasurer of the Philippines shall be the custodian
of the Life Account and Non-Life Account of the Security Fund; and all disbursements
from any Account shall be made by the Treasurer of the Philippines upon vouchers
signed by the Commissioner or his deputy, as hereinafter provided. The moneys of
said Account may be invested by the Commissioner only in bonds or other
instruments of debt of the Government of the Philippines or its political subdivisions
or instrumentalities. The Commissioner may sell any of the securities in which an
Account is invested, if advisable, for its proper administration or in the best interest of
such Account.
"Section 383. Payments from either the Life Insurance Account or Non-Life Account,
as the case may be, shall be made by the Treasurer of the Philippines to the
Commissioner, upon the authority of appropriate certificate filed with him by the
Commissioner acting in such capacity.
"Section 384. The Commissioner may, in his discretion, designate or appoint a duly
authorized representative or representatives to appear and defend before any court
or other body or official having jurisdiction any or all actions or proceedings against
principals or assureds on insurance policies or contracts issued to them where the
insurer has become insolvent or unable to meet its insurance obligations. The
Commissioner shall have, as of the date of insolvency of such insurer or as of the date
of its inability to meet its insurance obligations, only the rights which such insurer
would have had if it had not become insolvent or unable to meet its insurance
obligations. For the purpose of this title, the Commissioner shall have power to
employ such counsel, clerks and assistants as he may deem necessary.
"Section 385. The expense of administering an Account shall be paid out of the
Account concerned. The Commissioner shall serve as administrator of the Fund and of
the Accounts without additional compensation, but may be allowed and paid from the
Account concerned expenses incurred in the performance of his duties in connection
with said Account. The compensation of those persons employed by the
Commissioner shall be deemed administration expense payable from the Account
concerned. The Commissioner shall include in his annual report to the Secretary of
Finance a statement of the expenses of administration of the Fund and of the Life
Account and Non-Life Account for the preceding year.
"CHAPTER VI
"COMPULSORY MOTOR VEHICLE
LIABILITY INSURANCE
"Section 386. For purposes of this chapter:
"(a) Motor Vehicle is any vehicle as defined in Section 3, paragraph (a) of Republic Act
No. 4136, otherwise known as the Land Transportation and Traffic Code.
"(b) Passenger is any fare paying person being transported and conveyed in and by a
motor vehicle for transportation of passengers for compensation, including persons
expressly authorized by law or by the vehicles operator or his agents to ride without
fare.
"(c) Third party is any person other than a passenger as defined in this section and
shall also exclude a member of the household, or a member of the family within the
second degree of consanguinity or affinity, of a motor vehicle owner or land
transportation operator, as likewise defined herein, or his employee in respect of
death, bodily injury, or damage to property arising out of and in the course of
employment.
"(d) Owner or motor vehicle owner means the actual legal owner of a motor vehicle,
in whose name such vehicle is duly registered with the Land Transportation Office;
"(e) Land transportation operator means the owner or owners of motor vehicles for
transportation of passengers for compensation, including school buses.
"(f) Insurance policy or Policy refers to a contract of insurance against passenger and
third-party liability for death or bodily injuries and damage to property arising from
motor vehicle accidents.
"Section 387. It shall be unlawful for any land transportation operator or owner of a
motor vehicle to operate the same 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 provisions of this chapter to indemnify the death, bodily injury,
and/or damage to property of a third-party or passenger, as the case may be, arising
from the use thereof.
"Section 388. The Commissioner shall furnish the Land Transportation Office with a
list of insurance companies authorized to issue the policy of insurance or surety bond
required by this chapter.
"Section 389. The Land Transportation Office shall not allow the registration or
renewal of registration of any motor vehicle without first requiring from the land
transportation operator or motor vehicle owner concerned the presentation and filing
of a substantiating documentation in a form approved by the Commissioner
evidencing that the policy of insurance or guaranty in cash or surety bond required by
this chapter is in effect.
"Section 390. Every land transportation operator and every owner of a motor vehicle
shall, before applying for the registration or renewal of registration of any motor
vehicle, at his option, either secure an insurance policy or surety bond issued by any
insurance company authorized by the Commissioner or make a cash deposit in such
amount as herein required as limit of liability for purposes specified in Section 387.
"(a) In the case of a land transportation operator, the insurance guaranty in cash or
surety bond shall cover liability for death or bodily injuries of third-parties and/or
passengers arising out of the use of such vehicle in the amount not less than Twelve
thousand pesos (P12,000.00) per passenger or third-party and an amount, for each of
such categories, in any one accident of not less than that set forth in the following
scale:
"(1) Motor vehicles with an authorized capacity of twenty-six (26) or more
passengers: Fifty thousand pesos (P50,000.00);
"(2) Motor vehicles with an authorized capacity of from twelve (12) to twenty-five
(25) passengers: Forty thousand pesos (P40,000.00);
"(3) Motor vehicles with an authorized capacity of from six (6) to eleven (11)
passengers: Thirty thousand pesos (P30,000.00);
"(4) Motor vehicles with an authorized capacity of five (5) or less passengers: Five
thousand pesos (P5,000.00) multiplied by the authorized capacity.
"Provided, however, That such cash deposit made to, or surety bond posted with, the
Commissioner shall be resorted to by him in cases of accidents the indemnities for
which to third-parties and/or passengers are not settled accordingly by the land
transportation operator and, in that event, the said cash deposit shall be replenished
or such surety bond shall be restored within sixty (60) days after impairment or
expiry, as the case may be, by such land transportation operator, otherwise, he shall
secure the insurance policy required by this chapter. The aforesaid cash deposit may
be invested by the Commissioner in readily marketable government bonds, and/or
securities.
"(b) In the case of an owner of a motor vehicle, the insurance or guaranty in cash or
surety bond shall cover liability for death or injury to third-parties in an amount not
less than that set forth in the following scale in any one accident:
"(1) Private Cars
"(i) Bantam: Twenty thousand pesos (P20,000.00);
"(ii) Light: Twenty thousand pesos (P20,000.00); and
"(iii) Heavy: Thirty thousand pesos (P30,000.00).
"(2) Other Private Vehicles
"(i) Tricycles, motorcycles and scooters: Twelve thousand pesos (P12,000.00);
"(ii) Vehicles with an unladen weight of 2,600 kilos or less: Twenty thousand pesos
(P20,000.00);
"(iii) Vehicles with an unladen weight of between 2,601 kilos and 3,930 kilos: Thirty
thousand pesos (P30,000.00); and
"(iv) Vehicles with an unladen weight over 3,930 kilos: Fifty thousand pesos
(P50,000.00).
"The Commissioner may, if warranted, set forth schedule of indemnities for the
payment of claims for death or bodily injuries with the coverages set forth herein.
"Section 391. Any claim for death or injury to any passenger or third-party pursuant to
the provisions of this chapter shall be paid without the necessity of proving fault or
negligence of any kind: Provided, That for purposes of this section:
"(a) The total indemnity in respect of any person shall not be less than Fifteen
thousand pesos (P15,000.00);
"(b) The following proofs of loss, when submitted under oath, shall be sufficient
evidence to substantiate the claim:
"(1) Police report of accident; and
"(2) Death certificate and evidence sufficient to establish the proper payee; or
"(3) Medical report and evidence of medical or hospital disbursement in respect of
which refund is claimed;
"(c) Claim may be made against one motor vehicle only. In the case of an occupant of
a vehicle, claim, shall lie against the insurer of the vehicle in which the occupant is
riding, mounting or dismounting from. In any other case, claim shall lie against the
insurer of the directly offending vehicle. In all cases, the right of the party paying the
claim to recover against the owner of the vehicle responsible for the accident shall be
maintained.
"Section 392. No land transportation operator or owner of motor vehicle shall be
unreasonably denied the policy of insurance or surety bond required by this chapter
by the insurance companies authorized to issue the same, otherwise, the Land
Transportation Office shall require from said land transportation operator or owner of
the vehicle, in lieu of a policy of insurance or surety bond, a certificate that a cash
deposit has been made with the Commissioner in such amount required as limits of
indemnity in Section 390 to answer for the passenger and/or third-party liability of
such land transportation operator or owner of the vehicle.
"No insurance company may issue the policy of insurance or surety bond required
under this chapter unless so authorized under existing laws.
"The authority to engage in the casualty and/or surety lines of business of an
insurance company that refuses to issue or renew, without just cause, the insurance
policy or surety bond therein required shall be withdrawn immediately.
"Section 393. No cancellation of the policy shall be valid unless written notice thereof
is given to the land transportation operator or owner of the vehicle and to the Land
Transportation Office at least fifteen (15) days prior to the intended effective date
thereof. Upon receipt of such notice, the Land Transportation Office, unless it receives
evidence of a new valid insurance or guaranty in cash or surety bond as prescribed in
this chapter, or an endorsement of revival of the cancelled one, shall order the
immediate confiscation of the plates of the motor vehicle covered by such cancelled
policy. The same may be reissued only upon presentation of a new insurance policy or
that a guaranty in cash or surety bond has been made or posted with the
Commissioner and which meets the requirements of this chapter, or an endorsement
or revival of the cancelled one.
"Section 394. If the cancellation of the policy or surety bond is contemplated by the
land transportation operator or owner of the vehicle, he shall, before the policy or
surety bond ceases to be effective, secure a similar policy of insurance or surety bond
to replace the policy or surety bond to be cancelled or make a cash deposit in
sufficient amount with the Commissioner, and without any gap, file the required
documentation with the Land Transportation Office, and notify the insurance
company concerned of the cancellation of its policy or surety bond.
"Section 395. In case of change of owner ship of a motor vehicle, or change of the
engine of an insured vehicle, there shall be no need of issuing a new policy until the
next date of registration or renewal of registration of such vehicle, and: Provided,
That the insurance company shall agree to continue the policy, such change of
ownership or such change of the engine shall be indicated in a corresponding
endorsement by the insurance company concerned, and a signed duplicate of such
endorsement shall, within a reasonable time, be filed with the Land Transportation
Office.
"Section 396. In the settlement and payment of claims, the indemnity shall not be
availed of by any accident victim or claimant as an instrument of enrichment by
reason of an accident, but as an assistance or restitution insofar as can fairly be
ascertained.
"Section 397. Any person having any claim upon the policy issued pursuant to this
chapter shall, without any unnecessary delay, present to the insurance company
concerned a written notice of claim setting forth the nature, extent and duration of
the injuries sustained as certified by a duly licensed physician. Notice of claim must be
filed within six (6) months from the date of accident, otherwise, the claim shall be
deemed waived. Action or suit for recovery of damage due to loss or injury must be
brought, in proper cases, with the Commissioner or the courts within one (1) year
from denial of the claim, otherwise, the claimants right of action shall prescribe.
"Section 398. The insurance company concerned shall forthwith ascertain the truth
and extent of the claim and make payment within five (5) working days after reaching
an agreement. If no agreement is reached, the insurance company shall pay only the
no-fault indemnity provided in Section 391 without prejudice to the claimant from
pursuing his claim further, in which case, he shall not be required or compelled by the
insurance company to execute any quit claim or document releasing it from liability
under the policy of insurance or surety bond issued.
"In case of any dispute in the enforcement of the provisions of any policy issued
pursuant to this chapter, the adjudication of such dispute shall be within the original
and exclusive jurisdiction of the Commissioner, subject to the limitations provided in
Section 439.
"Section 399. It shall be unlawful for a land transportation operator or owner of
motor vehicle to require his or its drivers or other employees to contribute in the
payment of premiums.
"Section 400. No government office or agency having the duty of implementing the
provisions of this chapter nor any official or employee thereof shall act as agent in
procuring the insurance policy or surety bond provided for herein. The commission of
an agent procuring the said policy or bond shall in no case exceed ten percent (10%)
of the amount of the premiums therefor.
"Section 401. Any land transportation operator or owner of motor vehicle or any
other person violating any of the provisions of the preceding sections shall be
punished by a fine of not less than Five hundred pesos (P500.00) and/or
imprisonment for not more than six (6) months. The violation of Section 390 by a land
transportation operator shall be a sufficient cause for the revocation of the certificate
of public convenience issued by the Land Transportation Franchising and Regulatory
Board covering the vehicle concerned.
"Section 402. Whenever any violation of the provisions of this chapter is committed
by a corporation or association, or by a government office or entity, the executive
officer or officers of said corporation, association or government office or entity who
shall have knowingly permitted, or failed to prevent, said violation shall be held liable
as principals.
"CHAPTER VII
"MUTUAL BENEFIT ASSOCIATIONS AND
TRUSTS FOR CHARITABLE USES
"TITLE 1
"MUTUAL BENEFIT ASSOCIATIONS
"Section 403. Any society, association or corporation, without capital stock, formed or
organized not for profit but mainly for the purpose of paying sick benefits to
members, or of furnishing financial support to members while out of employment, or
of paying to relatives of deceased members of fixed or any sum of money, irrespective
of whether such aim or purpose is carried out by means of fixed dues or assessments
collected regularly from the members, or of providing, by the issuance of certificates
of insurance, payment of its members of accident or life insurance benefits out of
such fixed and regular dues or assessments, but in no case shall include any society,
association, or corporation with such mutual benefit features and which shall be
carried out purely from voluntary contributions collected not regularly and/or no fixed
amount from whomsoever may contribute, shall be known as a mutual benefit
association within the intent of this Code.
"Any society, association, or corporation principally organized as a labor union shall
be governed by the Labor Code notwithstanding any mutual benefit feature
provisions in its charter as incident to its organization.
"In no case shall a mutual benefit association be organized and authorized to transact
business as a charitable or benevolent organization, and whenever it has this feature
as incident to its existence, the corresponding charter provision shall be revised to
conform with the provision of this section. Mutual benefit association, already
licensed to transact business as such on the date this Code becomes effective, having
charitable or benevolent feature shall abandon such incidental purpose upon
effectivity of this Code if they desire to continue operating as such mutual benefit
associations.
"Section 404. A mutual benefit association, before it may transact as such, must first
secure a license from the Commissioner. The application for such license shall be filed
with the Commissioner together with certified true copies of the articles of
incorporation or the constitution and bylaws of the association, and all amendments
thereto, and such other documents or testimonies as the Commissioner may require.
"No license shall be granted to a mutual benefit association until the Commissioner
shall have been satisfied by such examination as he may make and such evidence as
he may require that the association is qualified under existing laws to operate and
transact business as such. The Commissioner may refuse to issue a license to any
mutual benefit association if, in his judgment, such refusal will best promote the
interest of the members of such association and of the people of this country. Any
license issued shall expire on the last day of December of the third year following its
issuance and, upon proper application, may be renewed if the association is
continuing to comply with existing laws, rules and regulations, orders, instructions,
rulings and decisions of the Commissioner. Every association receiving any such
license shall be subject to the supervision of the Commissioner: Provided, That no
such license shall be granted to any such association if such association has no
actuary.
"Section 405. No mutual benefit association shall be issued a license to operate as
such unless it has constituted and established a Guaranty Fund by depositing with the
Commissioner an initial minimum amount of Five million pesos (P5,000,000.00) in
cash, or in government securities with a total value equal to such amount, to answer
for any valid benefit claim of any of its members.
"All moneys received by the Commissioner for this purpose must be deposited by him
in interest-bearing deposits with any bank or banks authorized to transact business in
the Philippines for the account of the particular association constituting the Guaranty
Fund.
"Any accrual to such fund, be it interest earned or dividend additions on moneys or
securities so deposited, may, with the prior approval of the Commissioner, be
withdrawn by the association if there is no pending benefit claim against it, including
interest thereon or dividend additions thereto.
"The Commissioner, prior to or after licensing a mutual benefit association, may
require such association to increase its Guaranty Fund from the initial minimum
amount required to an amount equal to the capital investment required of an existing
domestic insurance company under Section 209 of this Code.
"Section 406. Every mutual benefit association licensed to do business as such shall
issue membership certificates to its members specifying the benefits to which such
members are entitled.
"Such certificates, together with the articles of incorporation of the association or its
constitution and bylaws, and all existing laws as may be pertinent shall constitute the
agreement, as of the date of its issuance, between the association and the member.
The membership certificate shall be in a form previously approved by the
Commissioner.
"Section 407. A mutual benefit association may, by reinsurance agreement, cede in
whole or in part any individual risk or risks under certificates of insurance issued by it,
only to a life insurance company authorized to transact business or to a professional
reinsurer authorized to accept life risks in the Philippines: Provided, That a copy of the
draft of such reinsurance agreement shall be submitted to the Commissioner for his
approval. The association may take credit for the reserves on such ceded risks to the
extent reinsured.
"Section 408. The constitution or bylaws of a mutual benefit association must
distinctly state the purpose for which dues and/or assessments are made and
collected and the portion thereof which may be used for expenses.
"Death benefit and other relief funds shall be created and used exclusively for paying
benefits due the members under their respective membership certificates. A general
fund shall likewise be created and used for expenses of administration of the
association.
"A mutual benefit association shall only maintain free and unassigned surplus of not
more than twenty percent (20%) of its total liabilities as verified by the Commissioner.
Any amount in excess shall be returned to the members by way of dividends,
enhancing the equity value or providing benefits in kind and other relevant services.
In addition, subject to the approval of the Commissioner, a mutual benefit association
may allocate a portion for capacity building and research and development such as
developing new products and services, upgrading and improving operating systems
and equipment and continuing member education.
"Section 409. Every outstanding membership certificate must have an equity value
equivalent to at least fifty percent (50%) of the total contributions collected thereon.
The equity value only applies to basic life insurance product and excludes optional
products.
"Section 410. Every mutual benefit association must accumulate and maintain, out of
the periodic dues collected from its members, sufficient reserves for the payment of
claims or obligations for which it shall hold funds in securities satisfactory to the
Commissioner consisting of bonds of the Government of the Philippines, or any of its
political subdivisions and instrumentalities, or in such other good securities as may be
approved by the Commissioner.
"The reserve liability shall be established in accordance with actuarial procedures and
shall be approved by the Commissioner.
"The articles of incorporation or the constitution and bylaws of a mutual benefit
association must provide that if its reserve as to all or any class of certificates
becomes impaired, its board of directors or trustees may require that there shall be
paid by the members to the association the amount of the members equitable
proportion of such deficiency as ascertained by said board and that if the payment be
not made it shall stand as an indebtedness against the membership certificates of the
defaulting members and draw interest not to exceed five percent (5%) per annum
compounded annually.
"Section 411. A mutual benefit association may invest such portion of its funds as shall
not be required to meet pending claims and other obligations in any of the classes of
investments or types of securities in which life insurance companies doing business in
the Philippines may invest.
"It may also grant loans to members on the security of a pledge or chattel mortgage
of personal properties of the borrowers, or in the absence thereof, on the security of
the membership certificate of the borrowing members, in which event such loan shall
become a first lien on the proceeds thereof.
"Section 412. The Commissioner or any of his duly designated representatives, shall
have the power of visitation, audit and examination into the affairs, financial
condition, and methods of doing business of all mutual benefit associations, and he
shall cause such examination to be made at least once every two (2) years or
whenever it may be deemed proper and necessary. Free access to the books, records
and documents of the association shall be accorded to the Commissioner, or to his
representatives, in such manner that the Commissioner or his representatives may
readily verify or determine the true affairs, financial condition, and method of doing
business of such association. In the course of such examination, the Commissioner or
his duly designated representatives shall have authority to administer oaths and take
testimony or other evidence on any matter relating to the affairs of the association.
"All minutes of the proceedings of the board of directors or trustees of the
association, and those of the regular or special meetings of the members, shall be
taken, and a copy thereof, in English or in Pilipino, shall be submitted to the
Commissioners representatives or examiners in the course of such examination.
"A copy of the findings of such examination, together with the recommendations of
the Commissioner, shall be furnished the association for its information and
compliance, and the same shall be taken up immediately in the meetings of the board
of directors or trustees and of the members of the association.
"Section 413. Every mutual benefit association shall, annually on or before the
thirtieth day of April of each year, render to the Commissioner an annual statement in
such form and detail as may be prescribed by the Commissioner, signed and sworn to
by the president, secretary, treasurer, and actuary of the association, showing the
exact condition of its affairs on the preceding thirty-first day of December.
"Section 414. No money, aid or benefit to be paid, provided or tendered by any
mutual benefit association, shall be liable to attachment, garnishment, or other
process, or be seized, taken, appropriated, or applied by any legal or equitable
process to pay any debt or liability of a member or beneficiary, or any other person
who may have a right thereunder, either before or after payment.1wphi1
"Section 415. Any member of a mutual benefit association shall have the right at all
times 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 expressly waived this right in the membership certificate. Every association may,
under such rules as it may adopt, limit the scope of beneficiaries and provide that no
beneficiary shall have or obtain any vested interest in the proceeds of any certificate
until the certificate has become due and payable under the terms of the membership
certificate.
"Section 416. Any chapter affiliate independently licensed as a mutual benefit
association may consolidate or merge with any other similar chapter affiliate or with
the mother association.
"Section 417. Any mutual benefit association may be converted into and licensed as a
mutual life insurance company by complying with the requirements of the pertinent
provisions of this Code and submitting the specific plan for such conversion to the
Commissioner for his approval. Such plan, as approved, shall then be submitted to the
members either in the regular meeting or in a special meeting called for the purpose
for their adoption. The affirmative vote of at least two-thirds (2/3) of all the members
shall be necessary in order to consider such plan as adopted.
"No such conversion shall take effect unless and until approved by the Commissioner.
"Section 418. No mutual benefit association shall be dissolved without first notifying
the Commissioner and furnishing him with a certified copy of the resolution
authorizing the dissolution, duly adopted by the affirmative vote of two-thirds (2/3) of
the members at a meeting called for that purpose, the financial statements as of the
date of the resolution, and such other papers or documents as may be required by the
Commissioner.
"No dissolution shall proceed until and unless approved by the Commissioner and all
proceedings in connection therewith shall be witnessed and attested by his duly
designated representative.
"No mutual benefit association shall be officially declared as dissolved until after the
Commissioner so certifies that all outstanding claims against the association have
been duly settled and liquidated.
"Section 419. The Commissioner shall, after notice and hearing, have the power either
to suspend or revoke the license issued to a mutual benefit association if he finds that
the association has:
"(a) Failed to comply with any provision of this Code;
"(b) Failed to comply with any other law or regulation obligatory upon it;
"(c) Failed to comply with any order, ruling, instruction, requirement or
recommendation of the Commissioner;
"(d) Exceeded its power to the prejudice of its members;
"(e) Conducted its business fraudulently or hazardously;
"(f) Rendered its affairs and condition to one of insolvency; or
"(g) Failed to carry out its aims and purposes for which it was organized due to any
cause.
"After receipt of the order from the Commissioner suspending or revoking the license,
the association must immediately exert efforts to remove such cause or causes which
brought about the order and, upon proper showing, may apply with the
Commissioner for the lifting of the order and restoration or revival of the license so
revoked or suspended.
"Section 420. For failure to remove such cause or causes which brought about the
suspension or revocation of the license of a mutual benefit association, the
Commissioner shall apply under this Code for an order from the proper court to
liquidate such association.
"The provisions of Titles 14 and 15, Chapter III, pertaining to the appointment of a
conservator and proceedings upon insolvency of an insurance company shall, insofar
as practicable, apply to mutual benefit associations.
"Section 421. To secure the enforcement of any provision under this title, the
Commissioner may issue such rules, rulings, instructions, orders and circulars.
"Section 422. The violation of any provision of this title shall subject the person
violating or the officer of the association responsible therefor to a fine of not less than
Ten thousand pesos (P10,000.00), or imprisonment of not exceeding three (3) years,
or both such fine and imprisonment, at the discretion of the court.
"Section 423. All provisions of this Code governing life insurance companies and such
other provisions whenever practicable and necessary, shall be applicable to mutual
benefit associations.
"TITLE 2
"TRUSTS FOR CHARITABLE USES
"Section 424. The term trust for charitable uses, within the intent of this Code, shall
include, all the real or personal properties or funds, as well as those acquired with the
fruits or income therefrom or in exchange or substitution thereof, given to or received
by any person, corporation, association, foundation, or entity, except the National
Government, its instrumentalities or political subdivisions, for charitable, benevolent,
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 number of persons.
"Section 425. The term trustee shall include any individual, corporation, association,
foundation, or entity, except the National Government, its instrumentalities or
political subdivisions, in charge of, or acting for, or concerned with the administration
of, the trust referred to in the section immediately preceding and with the proper
application of trust property.
"Section 426. The term trust property shall include all real or personal properties or
funds pertaining to the trust as well as those acquired with the fruits or income
therefrom or in exchange or substitution thereof.
"Section 427. All trustees shall, before entering in the performance of the duties of
their trust, obtain a certificate of registration from the Commissioner. The registration
shall expire on December 31 of the third year following its issuance unless it is
renewed.
"All provisions of this Code governing mutual benefit associations and such other
provisions herein, whenever practicable and necessary, shall be applicable to trusts
for charitable uses.
"Section 428. The treasurer of a charitable trust shall file a fidelity bond in the amount
commensurate with the value of the trust property in his custody, as may be
determined by the Commissioner.
"CHAPTER VIII
"TRUST BUSINESS IN GENERAL
"Section 429. An insurance company may engage in limited trust business, consisting
of managing funds pertaining only to retirement and pre-need plans, provided it has
secured a license to do so from the Bangko Sentral ng Pilipinas. This trust business
shall be separate and distinct from the general business of the insurance company
and shall be subject to rules and regulations as may be promulgated by the Bangko
Sentral ng Pilipinas in consultation with the Commissioner.
"CHAPTER IX
"REGISTRATION, RESPONSIBILITIES AND
OVERSIGHT OF SELF-REGULATORY
ORGANIZATIONS
"Section 430. The Commissioner shall have the power to register as a self-regulatory
organization, or otherwise grant licenses, and to regulate, supervise, examine,
suspend or otherwise discontinue, as a condition for the operation of organizations
whose operations are related to or connected with the insurance market such as, but
not limited to, associations of insurance companies, whether life or non-life,
reinsurers, actuaries, agents, brokers, dealers, mutual benefit associations, trusts,
rating agencies, and other persons regulated by the Commissioner, which are
engaged in the business regulated by this Code.
"The Commissioner may prescribe rules and regulations which are necessary or
appropriate in the public interest or for the protection of investors to govern self-
regulatory organizations and other organizations licensed or regulated pursuant to
the authority granted hereunder including, but not limited to, the requirement of
cooperation within and among all participants in the insurance market to ensure
transparency and facilitate exchange of information.
"Section 431. An association cannot be registered as a self-regulatory organization
unless the Commissioner determines that:
"(a) The association is so organized and has the capacity to be able to carry out the
purposes of this Code and to comply with, and to enforce compliance by its members
and persons associated with its members, with the provisions of this Code, the rules
and regulations thereunder, and the rules of the association.
"(b) The rules of the association, notwithstanding anything in the Corporation Code to
the contrary, provide the following:
"(1) Qualifications and the disqualifications on membership of the association;
"(2) A fair representation of its members to serve on the board of directors of the
association and the administration of its affairs, and that any natural person
associated with a juridical entity that is a member shall also be deemed to be a
member for this purpose;
"(3) The president of the association and at least two (2) independent directors as
members of the board of directors of the association;
"(4) Equitable allocation of reasonable dues, fees, and other charges among members
and other persons using any facility or system which the association operates or
controls;
"(5) The prevention of fraudulent and manipulative acts and practices to protect the
insuring public and the promotion of just and equitable principles of business;
"(6) Members and persons associated with its members subject to discipline for
violation of any provision of this Code, the rules or regulations thereunder, or the
rules of the association;
"(7) Fair procedure for the disciplining of members and persons associated with
members; and
"(8) The prohibition or limitation of access to services offered by the association or a
member thereof.
"Section 432. A self-regulatory organization may examine and verify the qualifications
of an applicant to become a member in accordance with procedures established by
the rules of the association.
"A self-regulatory organization shall deny membership or condition the membership
of an entity, if it does not meet the standards of financial responsibility, operational
capability, training, experience, or competence that are prescribed by the rules of the
association; or has engaged, and there is a reasonable likelihood it will again engage,
in acts or practices inconsistent with just and equitable principles of fair trade.
"A self-regulatory organization may deny membership to an entity not engaged in a
type of business in which the rules of the association require members to be engaged.
"Section 433. Upon the filing of an application for registration as a self-regulatory
organization under this title, the Commissioner shall have ninety (90) days within
which to either grant registration or institute a proceeding to determine whether
registration should be denied. In the event proceedings are instituted, the
Commissioner shall have two hundred seventy (270) days within which to conclude
such proceedings at which time he shall, by order, grant or deny such registration.
"Section 434. Every self-regulatory organization shall comply with the provisions of
this Code, the rules and regulations thereunder, and its own rules, and enforce
compliance therewith by its members, persons associated with its members or its
participants, notwithstanding any provision of the Corporation Code to the contrary.
"Section 435. Each self-regulatory organization shall submit to the Commissioner for
prior approval any proposed rule or amendment thereto, together with a concise
statement of the reason and effect of the proposed amendment.
"Within sixty (60) days after submission of a proposed amendment, the Commissioner
shall, by order, approve the proposed amendment. Otherwise, the same may be
made effective by the self-regulatory organization.
"In the event of an emergency requiring action for the protection of the insuring
public, a self-regulatory organization may put a proposed amendment into effect
summarily: Provided, however, That a copy of the same shall be immediately
submitted to the Commissioner.
"The Commissioner is further authorized, if after making appropriate request in
writing to a self-regulatory organization that such organization effect on its own
behalf specified changes in its rules and practices and, after due notice and hearing, it
determines that such changes have not been effected, and that such changes are
necessary, by rule or regulation or by order, may alter, abrogate or supplement the
rules of such self-regulatory organization insofar as necessary or appropriate to effect
such changes in respect of such matters as:
"(a) Safeguards in respect of the financial responsibility of members and adequate
provision against the evasion of financial responsibility through the use of corporate
forms or special partnerships;
"(b) The supervision of market practices;
"(c) The manner, method and place of soliciting business;
"(d) The fixing of reasonable rates of fees, interest, listing and other charges, but not
rates of commission; and self-regulatory organization; and
"(e) The supervision, auditing and disciplining of members.
"In addition to the general powers of the Commissioner over the entities under
supervision, the Commissioner, after due notice and hearing, is authorized, in the
public interest and to protect the insuring public:
"(1) To suspend for a period not exceeding twelve (12) months or to revoke the
registration of a self-regulatory organization, or to censure or impose limitations on
the activities, functions and operations of such self-regulatory organization, if the
Commission finds that such a self-regulatory organization has willfully violated or is
unable to comply with any provision of this Code or of the rules and regulations
thereunder, or its own rules, or has failed to enforce compliance therewith by a
member of, person associated with a member, or a participant in such self-regulatory
organization;
"(2) To expel from a self-regulatory organization any member thereof or any
participant therein who is found to have willfully violated any provision of this Code or
suspend for a period not exceeding twelve (12) months for violation of any provision
of this Code or any other law administered by the Commission, or the rules and
regulations thereunder, or effected, directly or indirectly, any transaction for any
person who, such member or participant had reason to believe, was violating in
respect of such transaction any of such provisions; and
"(3) To remove from office or censure any officer or director of a self-regulatory
organization if it finds that such officer or director has violated any provision of this
Code, any other law administered by the Commissioner, the rules or regulations
thereunder and the rules of such self-regulatory organization, or has abused his
authority, or without reasonable justification or excuse has failed to enforce
compliance with any of such provisions.
"Section 436. (a) A self-regulatory organization is authorized to discipline a member of
or participant in such self-regulatory organization, or any person associated with a
member, including suspending or expelling such member or participant, or
suspending or barring such person from being associated with a member, if engaged
in acts or practices inconsistent with just and equitable principles of fairness or in
willful violation of any provision of this Code, any other law administered by the
Commission, the rules or regulations thereunder, or the rules of the self-regulatory
organization. In any disciplinary proceeding by a self-regulatory organization (other
than a summary proceeding pursuant to paragraph (b) of this section) the self-
regulatory organization shall bring specific charges, provide notice to the person
charged, afford the person charged with an opportunity to defend against the
charges, and keep a record of the proceedings. A determination to impose a
disciplinary sanction shall be supported by a written statement of the offense, a
summary of the evidence presented and a statement of the sanction imposed.
"(b) A self-regulatory organization may summarily:
"(1) Suspend a member, participant or person associated with a member who has
been or is expelled or suspended from any other self-regulatory organization; or
"(2) Suspend a member who the self-regulatory organization finds to be in such
financial or operating difficulty that the member or participant cannot be permitted
to continue to do business as a member with safety to investors, creditors, other
members, participants or the self-regulatory organization: Provided, That the self-
regulatory organization immediately notifies the Commission of the action taken. Any
person aggrieved by a summary action pursuant to this paragraph shall be promptly
afforded an opportunity for a hearing by the association in accordance with the
preceding paragraph. The Commissioner, by order, may stay a summary action on his
own or upon application by any person aggrieved thereby, if the Commissioner
determines summarily or after due notice and hearing (which hearing may consist
solely of the submission of affidavits or presentation of oral arguments), that a stay is
consistent with the public interest and the protection of the insuring public.
"(c) A self-regulatory organization shall promptly notify the Commission of any
disciplinary sanction on any member thereof or participant therein, any denial of
membership or participation in such organization, or the imposition of any disciplinary
sanction on a person associated with a member or a bar of such person from
becoming so associated. Within thirty (30) days after such notice, any aggrieved
person may appeal to the Commissioner from, or the Commissioner on its own
motion within such period, may institute review of, the decision of the self-regulatory
organization, at the conclusion of which, after due notice and hearing (which may
consist solely of review of the record before the self-regulatory organization), the
Commissioner shall affirm, modify or set aside the sanction. In such proceeding, the
Commissioner shall determine whether the aggrieved person has engaged or omitted
to engage in the acts and practices as found by the self-regulatory organization,
whether such acts and practices constitute willful violations of this Code, any other
law administered by the Commission, the rules or regulations thereunder, or the rules
of the self-regulatory organization as specified by such organization, whether such
provisions were applied in a manner consistent with the purposes of this Code, and
whether, with due regard for the public interest and the protection of investors, the
sanction is excessive or oppressive.
"CHAPTER X
"THE INSURANCE COMMISSIONER
"TITLE 1
"ADMINISTRATIVE AND ADJUDICATORY POWERS
"Section 437. The Insurance Commissioner shall be appointed by the President of the
Republic of the Philippines for a term of six (6) years without reappointment and who
shall serve as such until the successor shall have been appointed and qualified. If the
Insurance Commissioner is removed before the expiration of his term of office, the
reason for the removal must be published.
"The Insurance Commissioner shall have the duty to see that all laws relating to
insurance, insurance companies and other insurance matters, mutual benefit
associations, and trusts for charitable uses are faithfully executed and to perform the
duties imposed upon him by this Code, and shall, notwithstanding any existing laws to
the contrary, have sole and exclusive authority to regulate the issuance and sale of
variable contracts as defined in Section 238 hereof and to provide for the licensing of
persons selling such contracts, and to issue such reasonable rules and regulations
governing the same.
"The Commissioner may issue such rulings, instructions, circulars, orders and
decisions as may be deemed necessary to secure the enforcement of the provisions of
this Code, to ensure the efficient regulation of the insurance industry in accordance
with global best practices and to protect the insuring public. Except as otherwise
specified, decisions made by the Commissioner shall be appealable to the Secretary of
Finance.
"In addition to the foregoing, the Commissioner shall have the following powers and
functions:
"(a) Formulate policies and recommendations on issues concerning the insurance
industry, advise Congress and other government agencies on all aspects of the
insurance industry and propose legislation and amendments thereto;
"(b) Approve, reject, suspend or revoke licenses or certificates of registration provided
for by this Code;
"(c) Impose sanctions for the violation of laws and the rules, regulations and orders
issued pursuant thereto;
"(d) Prepare, approve, amend or repeal rules, regulations and orders, and issue
opinions and provide guidance on and supervise compliance with such rules,
regulations and orders;
"(e) Enlist the aid and support of, and/or deputize any and all enforcement agencies
of the government in the implementation of its powers and functions under this
Code;
"(f) Issue cease and desist orders to prevent fraud or injury to the insuring public;
"(g) Punish for contempt of the Commissioner, both direct and indirect, in accordance
with the pertinent provisions of and penalties prescribed by the Rules of Court;
"(h) Compel the officers of any registered insurance corporation or association to call
meetings of stockholders or members thereof under its supervision;
"(i) Issue subpoena duces tecum and summon witnesses to appear in any proceeding
of the Commission and, in appropriate cases, order the examination, search and
seizure of all documents, papers, files and records, tax returns, and books of accounts
of any entity or person under investigation as may be necessary for the proper
disposition of the cases before it, subject to the provisions of existing laws;
"(j) Suspend or revoke, after proper notice and hearing, the license or certificate of
authority of any entity or person under its regulation, upon any of the grounds
provided by law;
"(k) Conduct an examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by appropriate rules and regulations;
"(l) Investigate not oftener than once a year from the last date of examination to
determine whether an institution is conducting its business on a safe and sound basis:
Provided, That, the deficiencies/irregularities found by or discovered by an audit shall
be immediately addressed;
"(m) Inquire into the solvency and liquidity of the institutions under its supervision
and enforce prompt corrective action;
"(n) To retain and utilize, in addition to its annual budget, all fees, charges and other
income derived from the regulation of insurance companies and other supervised
persons or entities;
"(o) To fix and assess fees, charges and penalties as the Commissioner may find
reasonable in the exercise of regulation; and
"(p) Exercise such other powers as may be provided by law as well as those which may
be implied from, or which are necessary or incidental to the express powers granted
the Commission to achieve the objectives and purposes of this Code.
"The Commission shall indemnify the Commissioner, Deputy Commissioner, and other
officials of the Commission, including personnel performing supervision and
examination functions, for all costs and expenses reasonably incurred by such persons
in connection with any civil or criminal actions, suits or proceedings to which they
may be made a party to by the reason of the performance of their duties and
functions, unless they are finally adjudged in such actions, suits or proceedings to be
liable for negligence or misconduct.
"In the event of settlement or compromise, indemnification shall be provided only in
connection with such matters covered by the settlement as to which the Commission
is advised by external counsel that the persons to be indemnified did not commit any
negligence or misconduct:
"The costs and expenses incurred in defending the aforementioned action, suit or
proceeding may be paid by the Commission in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
Commissioner, Deputy Commissioner, officer or employee to repay the amount
advanced should it ultimately be determined by the Commission that the person is
not entitled to be indemnified.
"Section 438. In addition to the administrative sanctions provided elsewhere in this
Code, the Insurance Commissioner is hereby authorized, at his discretion, to impose
upon insurance companies, their directors and/or officers and/or agents, for any
willful failure or refusal to comply with, or violation of any provision of this Code, or
any order, instruction, regulation, or ruling of the Insurance Commissioner, or any
commission or irregularities, and/or conducting business in an unsafe or unsound
manner as may be determined by the Insurance Commissioner, the following:
"(a) Fines not less than Five thousand pesos (P5,000.00) and not more than Two
hundred thousand pesos (P200,000.00); and
"(b) Suspension, or after due hearing, removal of directors and/or officers and/or
agents.
"Section 439. The Commissioner shall have the power to adjudicate claims and
complaints involving any loss, damage or liability for which an insurer may be
answerable under any kind of policy or contract of insurance, or for which such
insurer may be liable under a contract of suretyship, or for which a reinsurer may be
sued under any contract of reinsurance it may have entered into; or for which a
mutual benefit association may be held liable under the membership certificates it
has issued to its members, where the amount of any such loss, damage or liability,
excluding interest, cost and attorneys fees, being claimed or sued upon any kind of
insurance, bond, reinsurance contract, or membership certificate does not exceed in
any single claim Five million pesos (P5,000,000.00).
"The power of the Commissioner does not cover the relationship between the
insurance company and its agents/brokers but is limited to adjudicating claims and
complaints filed by the insured against the insurance company.
"The Commissioner may authorize any officer or group of officers under him to
conduct investigation, inquiry and/or hearing and decide claims and he may issue
rules governing the conduct of adjudication and resolution of cases. The Rules of
Court shall have suppletory application.
"The party filing an action pursuant to the provisions of this section thereby submits
his person to the jurisdiction of the Commissioner. The Commissioner shall acquire
jurisdiction over the person of the impleaded party or parties in accordance with and
pursuant to the provisions of the Rules of Court.
"The authority to adjudicate granted to the Commissioner under this section shall be
concurrent with that of the civil courts, but the filing of a complaint with the
Commissioner shall preclude the civil courts from taking cognizance of a suit involving
the same subject matter.
"Any decision, order or ruling rendered by the Commissioner after a hearing shall
have the force and effect of a judgment. Any party may appeal from a final order,
ruling or decision of the Commissioner by filing with the Commissioner within thirty
(30) days from receipt of copy of such order, ruling or decision a notice of appeal to
the Court of Appeals in the manner provided for in the Rules of Court for appeals from
the Regional Trial Court to the Court of Appeals.
"For the purpose of any proceeding under this section, the Commissioner, or any
officer thereof designated by him is empowered to administer oaths and affirmation,
subpoena witnesses, compel their attendance, take evidence, and require the
production of any books, papers, documents, or contracts or other records which are
relevant or material to the inquiry.
"A full and complete record shall be kept of all proceedings had before the
Commissioner, or the officers thereof designated by him, and all testimony shall be
taken down and transcribed by a stenographer appointed by the Commissioner.
"In order to promote party autonomy in the resolution of cases, the Commissioner
shall establish a system for resolving cases through the use of alternative dispute
resolution.
"TITLE 2
"FEES AND OTHER SOURCES OF FUNDS
"Section 440. (a) For the issuance or renewal of certificates of authority, licenses and
certificates of registration, pursuant to pertinent provisions of this Code, the
Commissioner shall collect and receive fees which shall be not less than the following:
"For each certificate of authority issued to an insurance company doing business in
the Philippines, Two hundred pesos (P200.00).
"For each special certificate of authority issued to a servicing insurance company, One
hundred pesos (P100.00).
"For each license issued to a general agent of an insurance company, Fifty pesos
(P50.00).
"For each license issued to an insurance agent, Twenty-five pesos (P25.00).
"For each license issued to an agent of variable contract policy, Twenty-five pesos
(P25.00).
"For each license issued to an insurance broker, One hundred pesos (P100.00).
"For each license issued to a reinsurance broker, One hundred pesos (P100.00).
"For each license issued to an insurance adjuster, One hundred pesos (P100.00).
"For each certificate of registration issued to an actuary, Fifty pesos (P50.00).
"For each certificate of registration issued to a resident agent, Fifty pesos (P50.00).
"For each license issued to a rating organization, One hundred pesos (P100.00).
"For each certificate of registration issued to a non-life company underwriter, Fifty
pesos (P50.00).
"For each license issued to a mutual benefit association, Ten pesos (P10.00).
"For each certificate of registration issued to a trust for charitable uses, Ten pesos
(P10.00).
"All 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 provisions of this Code for which no expiration date has been prescribed,
shall expire on the last day of December of the third year from its issuance and shall
be renewed upon application therefor and payment of the corresponding fee, if the
licensee or holder of such license or certificate is continuing to comply with all the
applicable provisions of existing laws, and of rules, instructions, orders and decisions
of the Commissioner.
"(b) For the filing of the annual statement referred to in Section 229, the
Commissioner shall collect and receive from the insurance company so filing a fee of
not less than Five hundred pesos (P500.00): Provided, That a fine of not less than One
hundred pesos (P100.00) shall be imposed and collected by the Commissioner for
each week of delay, or any fraction thereof, in the filing of the annual statement.
"For the filing of annual statement referred to in Section 413, the Commissioner shall
collect and receive from the mutual benefit association so filing a fee of not less than
Ten pesos (P10.00): Provided, That a fine of not less than Ten pesos (P10.00) shall be
imposed and collected by the Commissioner for each week of delay, or any fraction
thereof, in the filing of the annual statement.
"(c) For the examination prescribed in Section 253, the Commissioner shall collect and
receive fees according to the amount of its total assets, in the case of a domestic
company, or of its assets in the Philippines, in the case of a foreign company, not less
than the amount as follows:
"(1) Two million pesos or more but less than Four million pesos, Four hundred pesos
(P400.00);
"(2) Four million pesos or more but less than Six million pesos, Eight hundred pesos
(P800.00);
"(3) Six million pesos or more but less than Eight million pesos, One thousand two
hundred pesos (P1,200.00);
"(4) Eight million pesos or more but less than Ten million pesos, One thousand six
hundred pesos (P1,600.00);
"(5) Ten million pesos or more, Two thousand pesos (P2,000.00);
"Provided, That if the said examination is made in places outside the Metropolitan
Manila area, besides these fees, the Commissioner shall require of the company
examined the payment of the actual and necessary travelling and subsistence
expenses of the examiner or examiners concerned.
"For the examination prescribed in Section 412, the Commissioner shall collect and
receive a minimum fee of not less than One hundred pesos (P100.00) from the mutual
benefit association examined: Provided, That if such association has total assets of
more than One hundred thousand pesos (P100,000.00), an additional fee of not less
than Ten pesos (P10.00) for every Fifty thousand pesos (P50,000.00) in excess thereof
shall be imposed:
"(d) For the filing of an application to withdraw from the Philippines under Title 18,
the Commissioner shall collect and receive from the foreign company so withdrawing
a fee of not less than One thousand pesos (P1,000.00).
"(e) The Commissioner may fix and collect fees or charges for documents, transcripts,
or other materials which may be furnished by him not in excess of reasonable cost.
"Section 441. The Commissioner, in accordance with the rules and regulations of the
Department of Budget and Management and other relevant regulatory agencies, shall
source the salary, allowances and other expenses from the retained amount of the
fees, charges, penalties and other income from the regulation of insurance companies
and other covered persons and entities, and from the Insurance Fund, which is
created out of the proceeds of taxes on insurance premiums mentioned in Section
255 of the National Internal Revenue Code, as amended.
"MISCELLANEOUS PROVISIONS
"Section 442. Any person, company or corporation subject to the supervision and
control of the Commissioner who violates any provision of this Code, for which no
penalty is provided, shall be deemed guilty of a penal offense, and upon conviction be
punished by a fine not exceeding Two hundred thousand pesos (P200,000.00) or
imprisonment of six (6) months, or both, at the discretion of the court.

"If the offense is committed by a company or corporation, the officers, directors, or

other persons responsible for its operation, management, or administration, unless it
can be proved that they have taken no part in the commission of the offense, shall
likewise be guilty of a penal offense, and upon conviction be punished by a fine not
exceeding Two hundred thousand pesos (P200,000.00) or imprisonment of six (6)
months, or both, at the discretion of the court.

"Section 443. All criminal actions for the violation of any of the provisions of this Code
shall prescribe after three (3) years from the discovery of such violation: Provided,
That such actions shall in any event prescribe after ten (10) years from the
commission of such violation.

"Section 444. Any person, partnership, association or corporation heretofore

authorized, licensed or registered by the Commissioner shall be deemed to have been
authorized, licensed or registered under the provisions of this Code and shall be
governed by the provisions thereof: Provided, however, That where any such person,
partnership, association or corporation is affected by the new requirements of this
Code, said person, partnership, association or corporation shall, unless otherwise
herein provided, be given a period of one (1) year from the effectivity of this Code
within which to comply with the same.

"Section 445. Transitory Provision. Renewal of existing licenses, certificates of

authority or accreditation which will expire on June 30, 2013 shall be valid until
December 31, 2015. Thereafter, renewal shall be filed on the last day of December
every third year following the date of expiry of the license, certificate of authority or
accreditation.

"Section 446. Repealing Clause. Except as expressly provided by this Code, all laws,
decrees, orders, rules and regulations or parts thereof, inconsistent with any provision
of this Code shall be deemed repealed, amended or modified accordingly.

"Section 447. Separability Clause. If any provision of this Code or any part hereof be
declared invalid or unconstitutional, the remainder of the law or other provisions not
otherwise affected shall remain valid and subsisting.

"Section 448. This Code shall take effect fifteen (15) days following its publication in a
newspaper of general circulation."

Approved.
May 30, 1997
REPUBLIC ACT NO. 8291
AN ACT AMENDING PRESIDENTIAL DECREE NO. 1146, AS AMENDED, EXPANDING AND
INCREASING THE COVERAGE AND BENEFITS OF THE GOVERNMENT SERVICE
INSURANCE SYSTEM, INSTITUTING REFORMS THEREIN AND FOR OTHER PURPOSES
SECTION 1. Presidential Decree No. 1146, as amended, otherwise known as the
Revised Government Service Insurance Act of 1977, is hereby further amended to
read as follows:
SECTION 1. Title. The short title of this Act shall be: The Government Service
Insurance System Act of 1997.
A. DEFINITIONS
SECTION 2. Definition of Terms. Unless the context otherwise indicates, the
following terms shall mean:
(a) GSIS The Government Service Insurance System created by Commonwealth Act
No. 186;
(b) Board The Board of Trustees of the Government Service Insurance System;
(c) Employer The national government, its political subdivisions, branches,
agencies or instrumentalities, including government-owned or controlled
corporations, and financial institutions with original charters, the constitutional
commissions and the judiciary;
(d) Employee or Member Any person, receiving compensation while in the service
of an employer as defined herein, whether by election or appointment, irrespective of
status of appointment, including barangay and sanggunian officials;
(e) Active Member A member who is not separated from the service;
(f) Dependents Dependents shall be the following: (a) the legitimate spouse
dependent for support upon the member or pensioner; (b) the legitimate,
legitimated, legally adopted child, including the illegitimate child, who is unmarried,
not gainfully employed, not over the age of majority, or is over the age of majority but
incapacitated and incapable of self-support due to a mental or physical defect
acquired prior to age of majority; and (c) the parents dependent upon the member
for support;
(g) Primary beneficiaries The legal dependent spouse until he/she
remarries and the dependent children;
(h) Secondary beneficiaries The dependent parents and, subject to the restrictions
on dependent children, the legitimate descendants;
(i) Compensation The basic pay or salary received by an employee, pursuant to his
election/appointment, excluding per diems, bonuses, overtime pay, honoraria,
allowances and any other emoluments received in addition to the basic pay which are
not integrated into the basic pay under existing laws;
(j) Contribution The amount payable to the GSIS by the member and the employer
in accordance with Section 5 of this Act;
(k) Current Daily Compensation The actual daily compensation or the actual
monthly compensation divided by the number of working days in the month of
contingency but not to exceed twenty-two (22) days;
(l) Average Monthly Compensation (AMC) The quotient arrived at after dividing
the aggregate compensation received by the member during his last thirty-six (36)
months of service preceding his separation/retirement/disability/death by thirty-six
(36), or by the number of months he received such compensation if he has less than
thirty-six (36) months of service: Provided, That the average monthly compensation
shall in no case exceed the amount and rate as may be respectively set by the Board
under the rules and regulations implementing this Act as determined by the actuary
of the GSIS: Provided, further, That initially the average monthly compensation shall
not exceed Ten thousand pesos (P10,000.00), and premium shall be nine percent (9%)
and twelve percent (12%) for employee and employer covering the AMC limit and
below; and two percent (2%) and twelve percent (12%) for employee and employer
covering the compensation above the AMC limit;
(m) Revalued average monthly compensation An amount equal to one hundred
seventy percent (170%) of the first One thousand pesos (P1,000) of the average
monthly compensation plus one hundred percent (100%) of the average monthly
compensation in excess of One thousand pesos (P1,000);
(n) Lump sum The basic monthly pension multiplied by sixty (60);
(o) Pensioner Any person receiving old-age or permanent total disability pension
or any person who has received the lump sum excluding one receiving survivorship
pension benefits as defined in Section 20 of this Act;
(p) Gainful Occupation Any productive activity that provided the member with
income at least equal to the minimum compensation of government employees;
(q) Disability Any loss or impairment of the normal functions of the physical
and/or mental faculty of a member which reduces or eliminates his/her capacity to
continue with his/her current gainful occupation or engage in any other gainful
occupation;
(r) Total Disability Complete incapacity to continue with his present employment
or engage in any gainful occupation due to the loss or impairment of the normal
functions of the physical and/or mental faculties of the member;
(s) Permanent Total Disability Accrues or arises when recovery from the
impairment mentioned in Section 2(Q) is medically remote;
(t) Temporary Total Disability Accrues or arises when the impaired physical and/or
mental faculties can be rehabilitated and/or restored to their normal functions;
(u) Permanent Partial Disability Accrues or arises upon the irrevocable loss or
impairment of certain portion/s of the physical faculties, despite which the member is
able to pursue a gainful occupation.
B. MEMBERSHIP IN THE GSIS
SECTION 3. Compulsory Membership. Membership in the GSIS shall be
compulsory for all employees receiving compensation who have not reached the
compulsory retirement age, irrespective of employment status, except members of
the Armed Forces of the Philippines and the Philippine National Police, subject to the
condition that they must settle first their financial obligation with the GSIS, and
contractuals who have no employer and employee relationship with the agencies they
serve.
Except for the members of the judiciary and constitutional commissions who shall
have life insurance only, all members of the GSIS shall have life insurance, retirement,
and all other social security protection such as disability, survivorship, separation, and
unemployment benefits.
SECTION 4. Effect of Separation from the Service. A member separated from the
service shall continue to be a member, and shall be entitled to whatever benefits he
has qualified to in the event of any contingency compensable under this Act.
C. SOURCES OF FUNDS
SECTION 5. Contributions. (a) It shall be mandatory for the member and the
employer to pay the monthly contributions specified in the following schedule:
Monthly Compensation Percentage of Monthly
Compensation Payable by
Member Employer
I. Maximum Average
Monthly Compensation
(AMC) Limit and Below 9.0% 12.0%
II. Over the Maximum AMC Limit
III.
Up to the Maximum AMC Limit 9.0% 12.0%
In Excess of the AMC Limit 2.0% 12.0%
Members of the judiciary and constitutional commissioners shall pay three percent
(3%) of their monthly compensation as personal share, and their employers a
corresponding three percent (3%) share for their life insurance coverage.
(b) The employer shall include in its annual appropriation the necessary amounts for
its share of the contributions indicated above, plus any additional premiums that may
be required on account of the hazards or risks of its employees occupation.
(c) It shall be mandatory and compulsory for all employers to include the payment of
contributions in their annual appropriations. Penal sanctions shall be imposed upon
employers who fail to include the payment of contributions in their annual
appropriations or otherwise fail to remit the accurate/exact amount of contributions
on time, or delay the remittance of premium contributions to the GSIS. The heads of
offices and agencies shall be administratively liable for non-remittance or delayed
remittance of premium contributions to the GSIS.
SECTION 6. Collection and Remittance of Contributions. (a) The employer shall
report to the GSIS the names of all its employees, their corresponding employment
status, positions, salaries and such other pertinent information, including subsequent
changes therein, if any, as may be required by the GSIS; the employer shall deduct
each month from the monthly salary or compensation of each employee the
contribution payable by him in accordance with the schedule prescribed in the rules
and regulations implementing this Act.
(b) Each employer shall remit directly to the GSIS the employees and employers (b) All service credited for retirement, resignation or separation for which
contributions within the first ten (10) days of the calendar month following the month
to which the contributions apply. The remittance by the employer of the contributions
to the GSIS shall take priority over and above the payment of any and all obligations,
except salaries and wages of its employees.
SECTION 7. Interests on Delayed Remittances. Agencies which delay the
remittance of any and all monies due the GSIS shall be charged interests as may be
prescribed by the Board but not less than two percent (2%) simple interest per
month. Such interest shall be paid by the employers concerned.
SECTION 8. Government Guarantee. The government of the Republic of the
Philippines hereby guarantees the fulfillment of the obligations of the GSIS to its
members as and when they fall due.
D. BENEFITS
SECTION 9. Computation of the Basic Monthly Pension. (a) the basic monthly
pension is equal to:
1) thirty-seven and one-half percent (37.5%) of the revalued average monthly
compensation; plus
2) two and one-half percent (2.5%) of said revalued average monthly compensation
for each year of service in excess of fifteen (15) years: Provided, That the basic
monthly pension shall not exceed ninety percent (90%) of the average monthly
compensation.
(b) The basic monthly pension may be adjusted upon the recommendation of the
President and General Manager of the GSIS and approved by the President of the
Philippines in accordance with the rules and regulations prescribed by the GSIS:
Provided, however, That the basic monthly pension shall not be less than One
thousand and three hundred pesos (P1,300.00): Provided, further, That the basic
monthly pension for those who have rendered at least twenty (20) years of service
after the effectivity of this Act shall not be less than Two thousand four hundred
pesos (P2,400.00) a month.
SECTION 10. Computation of Service. (a) The computation of service for the
purpose of determining the amount of benefits payable under this Act shall be from
the date of original appointment/election, including periods of service at different
times under one or more employers, those performed overseas under the authority
of the Republic of the Philippines, and those that may be prescribed by the GSIS in
coordination with the Civil Service Commission.
corresponding benefits have been awarded under this Act or other laws shall be
excluded in the computation of service in case of reinstatement in the service of an
employer and subsequent retirement or separation which is compensable under this
Act.
For the purpose of this section the term service shall include full time service with
compensation: Provided, That part time and other services with compensation may
be included under such rules and regulations as may be prescribed by the GSIS.
SEPARATION BENEFITS
SECTION 11. Separation Benefits. The separation benefit shall consist of: (a) a cash
payment equivalent to one hundred percent (100%) of his average monthly
compensation for each year of service he paid contributions, but not less than Twelve
thousand pesos (P12,000) payable upon reaching sixty (60) years of age or upon
separation, whichever comes later: Provided, That the member resigns or separates
from the service after he has rendered at least three (3) years of service but less than
fifteen (15) years; or
(b) A cash payment equivalent to eighteen (18) times his basic monthly pension
payable at the time of resignation or separation, plus an old-age pension benefit
equal to the basic monthly pension payable monthly for life upon reaching the age of
sixty (60): Provided, That the member resigns or separates from the service after he
has rendered at least fifteen (15) years of service and is below sixty (60) years of age
at the time of resignation or separation.
SECTION 12. Unemployment or Involuntary Separation Benefits. Unemployment
benefits in the form of monthly cash payments equivalent to fifty percent (50%) of the
average monthly compensation shall be paid to a permanent employee who is
involuntarily separated from the service due to the abolition of his office or position
usually resulting from reorganization: Provided, That he has been paying integrated
contributions for at least one (1) year prior to separation. Unemployment benefits
shall be paid in accordance with the following schedule:
Contributions Made Benefit Duration
1 year but less than 3 years 2 months
3 or more years but less than 6 years 3 months
6 or more years but less than 9 years 4 months
9 or more years but less than 11 years 5 months
11 or more years but less than 15 years 6 months
The first payment shall be equivalent to two (2) monthly benefits. A seven-day (7)
waiting period shall be imposed on succeeding monthly payments.
All accumulated unemployment benefits paid to the employee during his entire
membership with the GSIS shall be deducted from voluntary separation benefits.
The GSIS shall prescribe the detailed guidelines in the operationalization of this
section in the rules and regulations implementing this Act.
RETIREMENT BENEFITS
SECTION 13. Retirement Benefits. (a) Retirement benefit shall be:
(1) the lump sum payment as defined in this Act payable at the time of retirement
plus an old-age pension benefit equal to the basic monthly pension payable monthly
for life, starting upon expiration of the five-year (5) guaranteed period covered by the
lump sum; or
(2) cash payment equivalent to eighteen (18) months of his basic monthly pension
plus monthly pension for life payable immediately with no five-year (5) guarantee.
(b) Unless the service is extended by appropriate authorities, retirement shall be
compulsory for an employee at sixty-five (65) years of age with at least fifteen (15)
years of service: Provided, That if he has less than fifteen (15) years of service, he may
be allowed to continue in the service in accordance with existing civil service rules and
regulations.
SECTION 13-A. Conditions for Entitlement. A member who retires from the service
shall be entitled to the retirement benefits in paragraph (a) of Section 13 hereof:
Provided, That:
(1) he has rendered at least fifteen (15) years of service;
(2) he is at least sixty (60) years of age at the time of retirement; and
(3) he is not receiving a monthly pension benefit from permanent total disability.
SECTION 14. Periodic Pension Adjustment. The monthly pension of all pensioners
including all those receiving survivorship pension benefits shall be periodically
adjusted as may be recommended by the GSIS actuary and approved by the Board in
accordance with the rules and regulations prescribed by the GSIS.
PERMANENT DISABILITY BENEFITS
SECTION 15. General Conditions for Entitlement. A member who suffers
permanent disability for reasons not due to his grave misconduct, notorious
negligence, habitual intoxication, or willful intention to kill himself or another, shall be
entitled to the benefits provided for under Sections 16 and 17 immediately following,
subject to the corresponding conditions therefor.
SECTION 16. Permanent Total Disability Benefits. (a) If the permanent disability is
total, he shall receive a monthly income benefit for life equal to the basic monthly
pension effective from the date of disability: Provided, That:
(1) he is in the service at the time of disability; or
(2) if separated from the service, he has paid at least thirty-six (36) monthly
contributions within the five (5) year period immediately preceding his disability, or
has paid a total of at least one hundred eighty (180) monthly contributions, prior to
his disability: Provided, further, That if at the time of disability, he was in the service
and has paid a total of at least one hundred eighty (180) monthly contributions, in
addition to the monthly income benefit, he shall receive a cash payment equivalent to
eighteen (18) times his basic monthly pension: Provided, finally, That a member
cannot enjoy the monthly income benefit for permanent disability and the old-age
retirement simultaneously.
(b) If a member who suffers permanent total disability does not satisfy conditions (1)
and (2) in paragraph (a) of this section but has rendered at least three (3) years
service at the time of his disability, he shall be advanced the cash payment equivalent
to one hundred percent (100%) of his average monthly compensation for each year of
service he paid contributions, but not less than Twelve Thousand pesos (P12,000)
which should have been his separation benefit.
(c) Unless the member has reached the minimum retirement age, disability benefit
shall be suspended when:
(1) he is reemployed or
(2) he recovers from disability as determined by the GSIS, whose decision shall be
final and binding; or
(3) he fails to present himself for medical examination when required by the GSIS.
(d) The following disabilities shall be deemed total and permanent:
(1) complete loss of sight of both eyes;
(2) loss of two (2) limbs at or above the ankle or wrist;
(3) permanent complete paralysis of two(2) limbs;
(4) brain injury resulting in incurable imbecility or insanity; and
(5) such other cases as may be determined by the GSIS.
SECTION 17. Permanent Partial Disability Benefits. (a) If the disability is partial, he
shall receive a cash payment in accordance with a schedule of disabilities to be
prescribed by the GSIS: Provided, That he satisfies either conditions (1) or (2) of
Section 16(a);
(b) The following disabilities shall be deemed permanent and partial:
(1) complete and permanent loss of the use of:
(i) any finger
(ii) any toe
(iii) one arm
(iv) one hand
(v) one foot
(vi) one leg
(vii) one or both ear
(viii) hearing of one or both ears
(ix) sight of one eye
(2) such other cases as may be determined by the GSIS.
TEMPORARY DISABILITY BENEFITS
SECTION 18. Temporary Total Disability Benefit. (a) A member who suffers
temporary total disability for reasons not due to any of the conditions enumerated in
Section 15 hereof shall be entitled to seventy-five percent (75%) of his current daily
compensation for each day or fraction thereof of temporary disability benefit not
exceeding one hundred twenty (120) days in one calendar year after exhausting all his
sick leave credits and collective bargaining agreement sick leave benefits, if any, but
not earlier than the fourth day of his temporary total disability: Provided, That:
(1) he is in the service at the time of his disability; or
(2) if separated, he has rendered at least three (3) years of service and has paid at
least six (6) monthly contributions in the twelve-month period immediately preceding
his disability.
Provided, however, That a member cannot enjoy the temporary total disability
benefit and sick leave pay simultaneously: Provided, further, That if the disability
requires more extensive treatment that lasts beyond one hundred twenty (120) days,
the payment of the temporary total disability benefit may be extended by the GSIS
but not to exceed a total of two hundred forty (240) days.
(b) The temporary total disability benefit shall in no case be less than Seventy pesos
(P70.00) a day.
(c) The notices required of the member and the employer, the mode of payment,
and the other requirements for entitlement to temporary total disability benefits shall
be provided in the rules and regulations to be prescribed by the GSIS.
SECTION 19. Non-scheduled Disability. For injuries or illnesses resulting in a
disability not listed in the schedule of partial/total disability, as provided herein, the
GSIS shall determine the nature of the disability and the corresponding benefits
therefor.
SURVIVORSHIP BENEFITS
SECTION 20. Survivorship Benefits. When a member or pensioner dies, the
beneficiaries shall be entitled to survivorship benefits provided in Sections 21 and 22
hereunder subject to the conditions therein provided for. The survivorship pension
shall consist of:
(1) the basic survivorship pension which is fifty percent (50%) of the basic monthly
pension; and
(2) the dependent childrens pension not exceeding fifty percent (50%) of the basic
monthly pension.
(3)
SECTION 21. Death of a Member. (a) Upon the death of a member, the primary
beneficiaries shall be entitled to:
(1) survivorship pension: Provided, That the deceased:

(i) was in the service at the time of his death; or
(ii) if separated from the service, has at least three (3) years of service at the time of
his death and has paid thirty-six (36) monthly contributions within the five-year period
immediately preceding his death; or has paid a total of at least one hundred eighty
(180) monthly contributions prior to his death; or
(2) the survivorship pension plus a cash payment equivalent to one hundred percent
(100%) of his average monthly compensation for every year of service: Provided, That
the deceased was in the service at the time of his death with at least three (3) years of
service; or
(3) a cash payment equivalent to one hundred percent (100%) of his average monthly
compensation for each year of service he paid contributions, but not less than Twelve
thousand pesos (P12,000.00): Provided, That the deceased has rendered at least three
(3) years of service prior to his death but does not qualify for the benefits under the
item (1) or (2) of this paragraph.
(b) The survivorship pension shall be paid as follows:
(1) when the dependent spouse is the only survivor, he/she shall receive the basic
survivorship pension for life or until he/she remarries;
(2) when only dependent children are the survivors, they shall be entitled to the basic
survivorship pension for as long as they are qualified, plus the dependent childrens
pension equivalent to ten percent (10%) of the basic monthly pension for every
dependent child not exceeding five (5), counted from the youngest and without
substitution;
(3) when the survivors are the dependent spouse and the dependent children, the
dependent spouse shall receive the basic survivorship pension for life or until he/she
remarries, and the dependent children shall receive the dependent childrens pension
mentioned in the immediately preceding paragraph (2) hereof.
(c) In the absence of primary beneficiaries, the secondary beneficiaries shall be
entitled to:
(1) the cash payment equivalent to one hundred percent (100%) of his average
monthly compensation for each year of service he paid contributions, but not less
than Twelve thousand pesos (P12,000): Provided, That the member is in the service at
the time of his death and has at least three (3) years of service; or
(2) in the absence of secondary beneficiaries, the benefits under this paragraph shall
be paid to his legal heirs.
(d) For purposes of the survivorship benefits, legitimate children shall include legally
adopted and legitimate children.
SECTION 22. Death of a Pensioner. Upon the death of an old-age pensioner or a
member receiving the monthly income benefit for permanent disability, the qualified
beneficiaries shall be entitled to the survivorship pension defined in Section 20 of this
Act, subject to the provisions of paragraph (b) of Section 21 hereof. When the
pensioner dies within the period covered by the lump sum, the survivorship pension
shall be paid only after the expiration of the said period.
FUNERAL BENEFITS
SECTION 23. Funeral Benefit. The amount of funeral benefit shall be determined
and specified by the GSIS in the rules and regulations but shall not be less than Twelve
thousand pesos (P12,000.00): Provided, That it shall be increased to at least Eighteen
thousand pesos (P18,000.00) after five (5) years and shall be paid upon the death of:
(a) an active member as defined under Section 2(e) of this Act; or
(b) a member who has been separated from the service, but who may be entitled to
future benefit pursuant to Section 4 of this Act; or
(c) a pensioner, as defined in Section 2(o) of this Act; or
(d) a retiree who at the time of his retirement was of pensionable age under this Act
but who opted to retire under Republic Act No. 1616.
LIFE INSURANCE BENEFITS
SECTION 24. Compulsory Life Insurance. All employees except for Members of the
Armed Forces of the Philippines (AFP) and the Philippine National Police (PNP) shall,
under such terms and conditions as may be promulgated by the GSIS, be compulsorily
covered with life insurance, which shall automatically take effect as follows:
(1) for those employed after the effectivity of this Act, their insurance shall take effect
on the date of their employment;
(2) for those whose insurance will mature after the effectivity of this Act, their
insurance shall be deemed renewed on the day following the maturity or expiry date
of their insurance;
(3) for those without any life insurance as of the effectivity of this Act, their insurance
shall take effect following said effectivity.
SECTION 25. Dividends. An annual dividend may be granted to all members of the
GSIS whose life insurance is in force for at least one (1) year in accordance with a
dividend allocation formula to be determined by the GSIS.
SECTION 26. Optional Insurance. Subject to the rules and regulations prescribed
by the GSIS, a member may apply for insurance and/or pre-need coverage embracing
life, health, hospitalization, education, memorial plans, and such other plans as may
be designed by the GSIS, for himself and/or his dependents. Any employer may
likewise apply for group insurance coverage for its employees. The payment of the
premiums/installments for optional insurance and pre-need products may be made
by the insured or his employer and/or any person acceptable to the GSIS.
SECTION 27. Reinsurance. The GSIS may reinsure any of its interests or part
thereof with any private company or reinsurer whether domestic or foreign: Provided,
That the GSIS shall submit an annual report on its reinsurance operations to the
Insurance Commission.
E. ADJUDICATION OF CLAIMS AND DISPUTES
SECTION 28. Prescription. Claims for benefits under this Act except for life and
retirement shall prescribe after four (4) years from the date of contingency.
SECTION 29. Facility of Payment. The GSIS shall prescribe rules and regulations to
facilitate payment of benefit, proceeds, and claims under this Act and any other laws
administered by the GSIS. Payments made by the GSIS prior to its receipt of an
adverse claim, to a beneficiary or claimant subsequently found not entitled thereto,
shall not bar the legal and eligible recipient to his right to demand the payment of
benefits, proceeds, and claims from the GSIS, who shall, however, have a right to
institute the appropriate action in a court of law against the ineligible recipient.
SECTION 30. Settlement of Disputes. The GSIS shall have original and exclusive
jurisdiction to settle any dispute arising under this Act and any other laws
administered by the GSIS.
The Board may designate any member of the Board, or official of the GSIS who is a
lawyer, to act as hearing officer to receive evidence, make findings of fact and submit
recommendations thereon. The hearing officer shall submit his findings and
recommendations, together with all the documentary and testimonial evidence to the
Board within thirty (30) working days from the time the parties have closed their
respective evidence and filed their last pleading. The Board shall decide the case
within thirty (30) days from the receipt of the hearing officers findings and
recommendations. The cases heard directly by the Board shall be decided within
thirty (30) working days from the time they are submitted by the parties for decision.
SECTION 31. Appeals. Appeals from any decision or award of the Board shall be
governed by Rules 43 and 45 of the 1997 Rules of Civil Procedure adopted by the
Supreme Court on April 8, 1997 which will take effect on July 1, 1997: Provided, That
pending cases and those filed prior to July 1, 1997 shall be governed by the applicable
rules of procedure: Provided, further, That the appeal shall take precedence over all
other cases except criminal cases when the penalty of life imprisonment or death or
reclusion perpetua is imposable.
The appeal shall not stay the execution of the order or award unless ordered by the
Board, by the Court of Appeals or by the Supreme Court and the appeal shall be
without prejudice to the special civil action of certiorari when proper.
SECTION 32. Execution of Decision. When no appeal is perfected and there is no
order to stay by the Board, by the Court of Appeals or by the Supreme Court, any
decision or award of the Board shall be enforced and executed in the same manner as
decisions of the Regional Trial Court. For this purpose, the Board shall have the power
to issue to the city or provincial sheriff or its appointed sheriff such writs of execution
as may be necessary for the enforcement of such decision or award, and any person
who shall fail or refuse to comply with such decision, award, writ or process after
being required to do so, shall, upon application by the GSIS, be punished for
contempt.
SECTION 33. Oaths, Witnesses, and Production of Records. When authorized by
the Board, an official or employee of the GSIS shall have the power to administer oath
and affirmation, take depositions, certify to official acts, and issue subpoena ad
testificandum and subpoena duces tecum to compel the attendance of witnesses and
the production of books, papers, correspondences, and other records deemed
necessary as evidence in connection with any question arising under this Act. Any case
of contumacy shall be dealt with in accordance with the provisions of Section 580 of
the Revised Administrative Code.
F. FUNDS OF THE GSIS
SECTION 34. Funds. All contributions payable under Section 5 of this Act together
with the earnings and accruals thereon shall constitute the GSIS Social Insurance
Fund. The said Fund shall be used to finance the benefits administered by the GSIS
under this Act. In addition, the GSIS shall administer the optional insurance fund for
the insurance coverage described in Section 26 hereof, the employees Compensation
Insurance Fund created under P.D. 626, as amended, the General Insurance Fund
created under Act No. 656, as amended, and such other special funds existing or that
may be created for special groups or persons rendering services to the government.
The GSIS shall maintain the required reserves to guarantee the fulfillment of its
obligations under this Act.
The funds of the GSIS shall not be used for purposes other than what are provided
for under this Act. Moreover, no portion of the funds of the GSIS or income thereof
shall accrue to the General Fund of the national government and its political
subdivisions, instrumentalities and other agencies including government-owned and
controlled corporations except as may be allowed under this Act.
SECTION 35. Deposits and Disbursements. All revenues collected and all accruals
thereto shall be deposited, administered and disbursed in accordance with the law. A
maximum expense loading of twelve percent (12%) of the yearly revenues from all
sources may be disbursed for administrative and operational expenses except as may
be otherwise approved by the President of the Philippines on the basis of actuarial
and management studies.
SECTION 36. Investment of Funds. The funds of the GSIS which are not needed to
meet the current obligations may be invested under such terms and conditions and
rules and regulations as may be prescribed by the Board: Provided, That investments
shall satisfy the requirements of liquidity, safety/security and yield in order to ensure
the actuarial solvency of the funds of the GSIS: Provided, further, That the GSIS shall
submit an annual report on all investments made to both Houses of Congress of the
Philippines, to wit:
(a) in interest-bearing bonds or securities or other evidence of indebtedness of the
Government of the Philippines;
(b) In interest-bearing deposits or securities in any domestic bank doing business in
the Philippines: Provided, That in the case of such deposits, these shall not exceed at
any time the unimpaired capital and surplus or total private deposits of the depository
bank, whichever is smaller: Provided, further, That said bank has prior designation as
a depository for the purpose by the Monetary Board of the Central Monetary
Authority;
(c) in direct housing loans to members and group housing projects secured by first
mortgage, giving priority to the low income groups and in short-and-medium-term
loans to members such as salary, policy, educational, emergency, stock purchase plan
and other similar loans: Provided, That no less than forty percent (40%) of the
investable fund of the GSIS Social Insurance Fund shall be invested for these purposes;
(d) in bonds, securities, promissory notes or other evidence of indebtedness of
educational or medical institutions to finance the construction, improvement and
maintenance of schools and hospitals;
(e) in real estate property including shares of stocks involving real estate property and
investments secured by first mortgages on real estate or other collaterals acceptable
to the GSIS: Provided, That such investments shall, in the determination of the Board,
redound to the benefit of the GSIS, its members, as well as the general public;
(f) In debt instruments and other securities traded in the secondary markets;
(g) In loans to, or in bonds, debentures, promissory notes or other evidence of
indebtedness of any solvent corporation created or existing under the laws of the
Philippines;
(h) In common and preferred stocks of any solvent corporation or financial institution
created or existing under the laws of the Philippines listed in the stock exchange with
proven track record or profitability over the last three (3) years and payment of
dividends at least once over the same period;
(i) In domestic mutual funds including investments related to the operations of
mutual funds; and
(j) In foreign mutual funds and in foreign currency deposits or foreign currency-
denominated debts, non-speculative equities and other financial instruments or other
assets issued in accordance with existing laws of the countries where such financial
instruments are issued: Provided, That these instruments or assets are listed in
bourses of the respective countries where these instruments or assets are issued:
Provided, further, That the issuing company has proven track record of profitability
over the last three (3) years and payment of dividends at least once over the same
period.
SECTION 37. Records and Reports. The GSIS shall keep and cause to keep such
records as may be necessary for the purpose of making actuarial studies, calculations
and valuations of the funds of the GSIS including such data needed in the
computation of rates of disability, mortality, morbidity, separation and retirement
among the members and any other information useful for the adjustment of the
benefits of the members. The GSIS shall maintain appropriate books of accounts to
record its assets, liabilities, income, expenses, receipts and disbursements of funds
and other financial transactions and operations.
SECTION 38. Examination and Valuation of the Funds. The GSIS shall make a
periodic actuarial examination and valuation of its funds in accordance with accepted
actuarial principles.
SECTION 39. Exemption from Tax, Legal Process and Lien. It is hereby declared to
be the policy of the State that the actuarial solvency of the funds of the GSIS shall be
preserved and maintained at all times and that contribution rates necessary to sustain
the benefits under this Act shall be kept as low as possible in order not to burden the
members of the GSIS and their employers. Taxes imposed on the GSIS tend to impair
the actuarial solvency of its funds and increase the contribution rate necessary to
sustain the benefits of this Act. Accordingly, notwithstanding any laws to the contrary,
the GSIS, its assets, revenues including all accruals thereto, and benefits paid, shall be
exempt from all taxes, assessments, fees, charges or duties of all kinds. These
exemptions shall continue unless expressly and specifically revoked and any
assessment against the GSIS as of the approval of this Act are hereby considered paid.
Consequently, all laws, ordinances, regulations, issuances, opinions or jurisprudence
contrary to or in derogation of this provision are hereby deemed repealed,
superseded and rendered ineffective and without legal force and effect.
Moreover, these exemptions shall not be affected by subsequent laws to the
contrary unless this section is expressly, specifically and categorically revoked or
repealed by law and a provision is enacted to substitute or replace the exemption
referred to herein as an essential factor to maintain or protect the solvency of the
fund, notwithstanding and independently of the guaranty of the national government
to secure such solvency or liability.
The funds and/or the properties referred to herein as well as the benefits, sums or
monies corresponding to the benefits under this Act shall be exempt from
attachment, garnishment, execution, levy or other processes issued by the courts,
quasi-judicial agencies or administrative bodies including Commission on Audit (COA)
disallowances and from all financial obligations of the members, including his
pecuniary accountability arising from or caused or occasioned by his exercise or
performance of his official functions or duties, or incurred relative to or in connection
with his position or work except when his monetary liability, contractual or otherwise,
is in favor of the GSIS.
G. ADMINISTRATION
SECTION 40. Implementing Body. The Government Service Insurance System as
created under Commonwealth Act No. 186 shall implement the provisions of this Act.
SECTION 41. Powers and Functions of the GSIS. The GSIS shall exercise the
following powers and functions:
(a) to formulate, adopt, amend and/or rescind such rules and regulations as may be
necessary to carry out the provisions and purposes of this Act, as well as the effective
exercise of the powers and functions, and the discharge of duties and responsibilities
of the GSIS, its officers and employees;
(b) to adopt or approve the annual and supplemental budget of receipts and
expenditures including salaries and allowances of the GSIS personnel; to authorize
such capital and operating expenditures and disbursements of the GSIS as may be
necessary and proper for the effective management and operation of the GSIS;
(c) to invest the funds of the GSIS, directly or indirectly, in accordance with the
provisions of this Act;
(d) to acquire, utilize or dispose of, in any manner recognized by law, real or personal
property in the Philippines or elsewhere necessary to carry out the purposes of this
Act;
(e) to conduct continuing actuarial and statistical studies and valuations to determine
the financial condition of the GSIS and taking into consideration such studies and
valuations and the limitations herein provided, re-adjust the benefits, contributions,
premium rates, interest rates or the allocation or re-allocation of the funds to the
contingencies covered;
(f) to have the power of succession;
(g) to sue and be sued;
(h) to enter into, make, perform and carry out contracts of every kind and description
with any person, firm or association or corporation, domestic or foreign;
(i) to carry on any other lawful business whatsoever in pursuance of, or in connection
with the provisions of this Act;
(j) to have one or more offices in and outside of the Philippines, and to conduct its
business and exercise its powers throughout and in any part of the Republic of the
Philippines and/or in any or all foreign countries, states and territories: Provided, That
the GSIS shall maintain a branch office in every province where there exists a
minimum of fifteen thousand (15,000) membership;
(k) to borrow funds from any source, private or government, foreign or domestic, only
as an incident in the securitization of housing mortgages of the GSIS and on account
of its receivables from any government or private entity;
(l) to invest, own or otherwise participate in equity in any establishment, firm or
entity;
(m) to approve appointments in the GSIS except appointments to positions which are
policy determining, primarily confidential or highly technical in nature according to
the Civil Service rules and regulations: Provided, That all positions in the GSIS shall be
governed by a compensation and position classification system and qualifications
standards approved by the GSIS Board of Trustees based on a comprehensive job
analysis and audit of actual duties and responsibilities: Provided, further, That the
compensation plan shall be comparable with the prevailing compensation plans in the
private sector and shall be subject to the periodic review by the Board no more than
once every four (4) years without prejudice to yearly merit reviews or increases based
on productivity and profitability;
(n) to design and adopt an Early Retirement Incentive Plan (ERIP) and/or financial
assistance for the purpose of retirement for its own personnel;
(o) to fix and periodically review and adjust the rates of interest and other terms and
conditions for loans and credits extended to members or other persons, whether
natural or juridical;
(p) to enter into agreement with the Social Security System or any other entity,
enterprise, corporation or partnership for the benefit of members transferring from
one system to another subject to the provision of Republic Act No. 7699, otherwise
known as the Portability Law;
(q) to be able to float proper instrument to liquefy long-term maturity by pooling
funds for short-term secondary market;
(r) to submit annually, not later than June 30, a public report to the President of the
Philippines and the Congress of the Philippines regarding its activities in the
administration and enforcement of this Act during the preceding year including
information and recommendations on broad policies for the development and
perfection of the programs of the GSIS;
(s) to maintain a provident fund, which consists of contributions made by both the
GSIS and its officials and employees and their earnings, for the payment of benefits to
such officials and employees or their heirs under such terms and conditions as it may
prescribe;
(t) to approve and adopt guidelines affecting investments, insurance coverage of
government properties, settlement of claims, disposition of acquired assets,
privatization or expansion of subsidiaries, development of housing projects, increased
benefit and loan packages to members, and the enforcement of the provisions of this
Act;
(u) any provision of law to the contrary notwithstanding, to authorize the payment of
extra remuneration to the officials and employees directly involved in the collection
and/or remittance of contributions, loan repayments, and other monies due to the
GSIS at such rates and under such conditions as it may adopt. Provided, That the best
interest of the GSIS shall be observed thereby;
(v) to determine, fix and impose interest upon unpaid premiums due from employers
and employees;
(w) to ensure the collection or recovery of all indebtedness, liabilities and/or
accountabilities, including unpaid premiums or contributions in favor of the GSIS
arising from any cause or source whatsoever, due from all obligors, whether public or
private. The Board shall demand payment or settlement of the obligations referred to
herein within thirty (30) days from the date the obligation becomes due, and in the
event of failure or refusal of the obligor or debtor to comply with the demand, to
initiate or institute the necessary or proper actions or suits, criminal, civil or
administrative or otherwise, before the courts, tribunals, commissions, boards, or
bodies of proper jurisdiction within thirty (30) days reckoned from the expiry date of
the period fixed in the demand within which to pay or settle the account;
(x) to design and implement programs that will promote and mobilize savings and
provide additional resources for social security expansion and at the same time afford
individual members appropriate returns on their savings/investments. The programs
shall be so designed as to spur socio-economic take-off and maintain continued
growth; and
(y) to exercise such powers and perform such other acts as may be necessary, useful,
incidental or auxiliary to carry out the provisions of this Act, or to attain the purposes
and objectives of this Act.
SECTION 42. The Board of Trustees; Its Composition; Tenure and Compensation.
The corporate powers and functions of the GSIS shall be vested in and exercised by
the Board of Trustees composed of the President and General Manager of the GSIS
and eight (8) other members to be appointed by the President of the Philippines, one
(1) of whom shall be either the President of the Philippine Public School Teachers
Association (PPSTA) or the President of the Philippine Association of School
Superintendents (PASS), another two (2) shall represent the leading organizations or
associations of government employees/retirees, another four (4) from the banking,
finance, investment, and insurance sectors, and one (1) recognized member of the
legal profession who at the time of appointment is also a member of the GSIS. The
Trustees shall elect from among themselves a Chairman while the President and
General Manager of the GSIS shall automatically be the vice-chairman.
The Trustees, except the President and General Manager who shall cease as trustee
upon his separation, shall hold office for six (6) years without reappointment, or until
their successors are duly appointed and qualified. Vacancy, other than through the
expiration of the term, shall be filled for the unexpired term only. The members of the
Board shall be entitled to a per diem of Two thousand five hundred pesos (P2,500) for
each board meeting actually attended by them, but not to exceed Ten thousand pesos
(P10,000) a month and reasonable transportation and representation allowances as
may be fixed by the Board.
SECTION 43. Powers and Functions of the Board of Trustees. The Board of
Trustees shall have the following powers and functions:
(a) to formulate the policies, guidelines and programs to effectively carry out the
purposes of this Act;
(b) to promulgate such rules and regulations as may be necessary or proper for the
effective exercise of the powers and functions as well as the discharge of the duties
and responsibilities of the GSIS, its officers and employees;
(c) upon the recommendation of the President and General Manager, to approve the
annual and supplemental budget of receipts and expenditures of the GSIS, and to
authorize such operating and capital expenditures and disbursements of the GSIS as
may be necessary or proper for the effective management, operation and
administration of the GSIS;
(d) upon the recommendation of the President and General Manager, to approve the
GSIS organizational and administrative structures and staffing pattern, and to
establish, fix, review, revise and adjust the appropriate compensation package for the
officers and employees of the GSIS with reasonable allowances, incentives, bonuses,
privileges and other benefits as may be necessary or proper for the effective
management, operation and administration of the GSIS, which shall be exempt from
Republic Act No. 6758, otherwise known as the Salary Standardization Law and
Republic Act No. 7430, otherwise known as the Attrition Law;
(e) to fix and periodically review and adjust the rates of interest and other terms and
conditions for loans and credits extended to its members or other persons, whether
natural or juridical;
(f) the provision of any law to the contrary notwithstanding, to compromise or
release, in whole or in part, any claim or settle liability to the GSIS, regardless of the
amount involved, under such terms and conditions as it may impose for the best
interest of the GSIS;
(g) to approve and adopt guidelines affecting investments, insurance coverage of
government properties, settlement of claims, disposition of acquired assets,
development of housing projects, increased benefit and loan packages to members,
and the enforcement of the provisions of this Act;
(h) to determine, fix and impose interest upon unpaid or unremitted premiums
and/or contributions; and
(i) to do and perform any and all acts necessary, proper or incidental to the
attainment of the purposes and objectives of this Act.
SECTION 44. Appointment, Qualifications, and Compensation of the President and
General Manager and of Other Personnel. The President and General Manager of
the GSIS shall be its Chief Executive Officer and shall be appointed by the President of
the Philippines. He shall be a person with management and investments expertise
necessary for the effective performance of his duties and functions under this Act.
The GSIS President and General Manager shall be assisted by one or more executive
vice-presidents, senior vice-presidents, vice-presidents and managers in addition to
the usual supervisory and rank and file positions who shall be appointed and removed
by the President and General Manager with the approval of the Board, in accordance
with the existing Civil Service rules and regulations.
SECTION 45. Powers and Duties of the President and General Manager. The
President and General Manager of the GSIS shall among others, execute and
administer the policies and resolutions approved by the board and direct and
supervise the administration and operations of the GSIS. The President and General
Manager, subject to the approval of the Board, shall appoint the personnel of the
GSIS, remove, suspend or otherwise discipline them for cause, in accordance with
existing Civil Service rules and regulations, and prescribe their duties and
qualifications to the end that only competent persons may be employed.
SECTION 46. Auditor. (a) The Chairman of the Commission on Audit shall be the ex
officio auditor of the GSIS. For this purpose, he may appoint a representative who
shall be the Auditor of the GSIS, and the necessary personnel to assist said
representative in the performance of his duties.
(b) The Chairman of the Commission on Audit or his authorized representative, shall
submit to the Board soon after the close of each calendar year, an audited statement
showing the financial condition and progress of the GSIS for the calendar year just
ended.
SECTION 47. Legal Counsel. The Government Corporate Counsel shall be the legal
adviser and consultant of the GSIS, but the GSIS may assign to the Office of the
Government Corporate Counsel (OGCC) cases for legal action or trial, issues for legal
opinions, preparation and review of contracts/agreements and others, as the GSIS
may decide or determine from time to time: Provided, however, That the present
legal services group in the GSIS shall serve as its in-house legal counsel.
The GSIS may, subject to approval by the proper court, deputize any personnel of the
legal service group to act as special sheriff in the enforcement of writs and processes
issued by the court, quasi-judicial agencies or administrative bodies in cases involving
the GSIS.
SECTION 48. Powers of the Insurance Commission. The Insurance Commissioner
or his authorized representatives shall make an examination of the financial condition
and methods of transacting business of the GSIS at least once every three (3) years
and the report of said examination shall be submitted to the Board of Trustees and
copies thereof be furnished the Office of the President of the Philippines and the two
Houses of the Congress of the Philippines within five (5) days after the close of
examination: Provided, however, That for each examination the GSIS shall pay the
office of the Insurance Commissioner an amount equal to the actual expenses
incurred by the said office in the conduct of the examination, including the salaries of
the examiners and of the actuary of such examination for the actual time spent.
H. GENERAL PROVISIONS
SECTION 49. Dispensation of Social Insurance Benefits. (a) The GSIS shall pay the
retirement benefits to the employee on his last day of service in the government:
Provided, That all requirements are submitted to the GSIS within a reasonable period
prior to the effective date of the retirement;
(b) The GSIS shall discontinue the processing and adjudication of retirement claims
under R.A. No. 1616 except refund of retirement premium and R.A. No. 910. Instead,
all agencies concerned shall process and pay the gratuities of their employees. The
Board shall adopt the proper rules and procedures for the implementation of this
provision.
SECTION 50. Development and disposition of Acquired Assets. The GSIS shall have
the right to develop and dispose of its acquired assets obtained in the ordinary course
of its business. To add value to, improve profitability on, and/or enhance the
marketability of an acquired asset, the GSIS may further develop/renovate the same
either with its own capital or through a joint venture arrangement with private
companies or individuals.
The GSIS may sell its acquired assets in accordance with existing Commission on
Audit (COA) rules and regulations for an amount not lower than the current market
value of the property. For this purpose, the GSIS shall conduct an annual appraisal of
its property or acquired assets to determine its current market value. All notices of
sale shall be published in newspapers of general circulation.
No injunction or restraining order issued by any court, commission, tribunal or office
shall bar, impede or delay the sale and disposition by the GSIS of its acquired assets
except on questions of ownership and national or public interest.
SECTION 51. Government Assistance to the GSIS. The GSIS may call upon any
employer for such assistance as may be necessary in the discharge of its duties and
functions.
L. PENAL PROVISIONS
SECTION 52. Penalty. (a) Any person found to have participated directly or
indirectly in the commission of fraud, collusion, falsification, or misrepresentation in
any transaction with the GSIS whether for him or for some other persons, shall suffer
the penalties provided for in Article 172 of the Revised Penal Code.
(b) Whoever shall obtain or receive any money or check invoking any provision of
this Act or any agreement thereunder, without being entitled thereto with the intent
to defraud any member, any employer, the GSIS, or any third party, shall be punished
by a fine of not less than Five thousand pesos (P5,000.00) nor more than Twenty
thousand pesos (P20,000.00) or by imprisonment of not less than six (6) years and
one (1) day to twelve (12) years, or both, at the discretion of the court.
(c) Whoever fails or refuses to comply with the provisions of this Act or with the rules
and regulations adopted by the GSIS shall be punished by a fine of not less than Five
thousand pesos (P5,000.00) nor more than Twenty thousand pesos (P20,000.00), or
by imprisonment of not less than six (6) years and one (1) day to twelve (12) years, or
both, at the discretion of the court.
(d) The treasurer, finance officer, cashier, disbursing officer, budget officer or other
official or employee who fails to include in the annual budget the amount
corresponding to the employer and employee contributions, or who fails or refuses or
delays by more than thirty (30) days from the time such amount becomes due and
demandable, or to deduct the monthly contributions of the employee shall, upon
conviction by final judgment, suffer the penalties of imprisonment from six (6) months
and one (1) day to six (6) years, and a fine of not less than Three thousand pesos
(P3,000.00) but not more than Six thousand pesos (P6,000.00), and in addition shall
suffer absolute perpetual disqualification from holding public office and from
practicing any profession or calling licensed by the government.
(e) Any employee or member who receives or keeps fund or property belonging,
payable or deliverable to the GSIS and appropriates the same, or takes or
misappropriates or uses the same to any purpose other than that authorized by this
Act, or permits another person to take, misappropriate or use said fund or property
by expressly consenting thereto, or through abandonment or negligence, or is
otherwise guilty of the misappropriation of said fund or property, in whole or in part,
shall suffer the penalties provided in Article 217 of the Revised Penal Code, and in
addition shall suffer absolute perpetual disqualification from holding public office and
from practicing any profession or calling licensed by the government.

(f) Any employee, who after deducting the monthly contribution or loan amortization
from a members compensation, fails to remit the same to the GSIS within thirty (30)
days from the date they should have been remitted under Section 6(a) shall be
presumed to have misappropriated such contribution or loan amortization and shall
suffer the penalties provided in Article 315 of the Revised Penal Code, and in addition
shall suffer absolute perpetual disqualification from holding public office and from
practicing any profession or calling licensed by the government.
(g) The heads of the offices of the national government, its political subdivisions,
branches, agencies and instrumentalities, including government-owned or controlled
corporations and government financial institutions, and the personnel of such offices
who are involved in the collection of premium contributions, loan amortization and
other accounts due the GSIS who shall fail, refuse or delay the payment, turnover,
remittance or delivery of such accounts to the GSIS within thirty (30) days from the
time that the same shall have been due and demandable shall, upon conviction by
final judgment, suffer the penalties of imprisonment of not less than one (1) year nor
more than five (5) years and a fine of not less than Ten thousand pesos (P10,000.00)
nor more than Twenty thousand pesos (P20,000.00), and in addition shall suffer
absolute perpetual disqualification from holding public office and from practicing any
profession or calling licensed by the government.
(h) The officers and/or personnel referred to in paragraph (g) of this section shall be
liable not only criminally but also civilly to the GSIS or to the employee or member
concerned in the form of damages, including surcharges and interests.
(i) For the charges or complaints referred to in paragraph (g) of this Section, the
liabilities therein set forth shall be construed as waiver of the State of its immunity
from suit, hence, the above-mentioned officials and/or personnel may not invoke the
defense of non-suability of the State.
(j) Failure of the Members of the GSIS Board, including the chairman and the vice-
chairman, to comply with the provisions of paragraph (w) of Section 41 hereof, shall
subject them to imprisonment of not less than six (6) months nor more than one (1)
year or a fine of not less than Five thousand pesos (P5,000.00) nor more than Ten
thousand pesos (P10,000.00) without prejudice to any civil or administrative liability
which may also arise therefrom.
Criminal actions arising from violations of the provisions of this Act may be
commenced by the GSIS or by the aggrieved member, either under this Act or, in
appropriate cases, under the Revised Penal Code.
SECTION 53. Implementing Rules and Regulations. The implementing rules and
regulations to carry out the provisions of this Act shall be adopted and promulgated
by the GSIS not later than ninety (90) days after the approval of this Act.
SECTION 54. Non-impairment of Benefits, Powers, Jurisdiction, Rights, Privileges,
Functions and Activities. Nothing in this Act shall be construed to repeal, amend or
limit any provision of existing laws. Presidential Decrees and Letters of Instructions,
not otherwise specifically inconsistent with the provisions of this Act.
SECTION 55. Exclusiveness of Benefits. Whenever other laws provide similar
benefits for the same contingencies covered by this Act, the member who qualifies to
the benefits shall have the option to choose which benefits will be paid to him.
However, if the benefits provided by the law chosen are less than the benefits
provided under this Act, the GSIS shall pay only the difference.
SECTION 56. Appropriations. The amount necessary to carry out the provisions of
this Act shall be included in the respective budgets of the agencies in the national
government obligation program of the year following its enactment into law and
thereafter.
SECTION 2. Separability Clause. Should any provision of this Act or any part thereof
be declared invalid, the other provisions, so far as they are separable from the invalid
ones, shall remain in force and effect.
SECTION 3. Repealing Clause. All laws and any other law or parts of law specifically
inconsistent herewith are hereby repealed or modified accordingly: Provided, That
the rights under existing laws, rules and regulations vested upon or acquired by an
employee who is already in the service as of the effectivity of this Act shall remain in
force and effect: Provided, further, That subsequent to the effectivity of this Act, a
new employee or an employee who has previously retired or separated and is
reemployed in the service shall be covered by the provisions of this Act.
SECTION 4. Effectivity. This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in at least two (2) newspapers of general
circulation.
Approved: May 30, 1997
Published in Malaya, The Philippine Star, Philippine Daily Inquirer, and the Manila
Bulletin on June 9, 1997. July 28, 1997.
Published in the Official Gazette, Vol. 93 No. 29 page 4360 on July 21, 1997.
EXECUTIVE ORDER NO. 250 July 25, 1987
INCREASING, INTEGRATING, AND RATIONALIZING THE INSURANCE BENEFITS OF
BARANGAY OFFICIALS UNDER R.A. 4898, AS AMENDED, AND MEMBERS OF
SANGGUNIANG PANLALAWIGAN, SANGGUNIANG PANLUNGSOD, AND SANGGUNIANG
BAYAN UNDER P.D. 1147 AND FOR OTHER PURPOSES
WHEREAS, the Panlalawigan, Sangguniang Panlungsod, Sangguniang Bayan and
Sangguniang Barangay provide grassroots participation of the citizenry in the affairs of
the Government;
WHEREAS, under B.P. 337 otherwise known as the "Local Government Code", these
officials are responsible for providing local support to national development by the
enforcement of laws and directives and the maintenance of peace and order;
WHEREAS, pursuant to the policy of promoting autonomy in the local government
unit as provided under B.P. 337, the State must find and effectuate ways of enhancing
their capabilities in discharging their responsibilities as effective patterns in national
development;
WHEREAS, the State, in its declared policy of affording protection to labor has already
granted under R.A. 4898, as amended, insurance benefits of Barangay Officials and
has extended the beneficial mantle of said law to some local officials without any
fixed salary or compensation, particularly the Kabataang Barangay Chairman thru P.D.
684 and the members of Sangguniang Panlalawigan, Sangguniang Panlungsod, and
Sangguniang Bayan thru P.D. 1147;
WHEREAS, the benefits provided for in R.A. 4898, as amended, have been found
grossly insufficient for the needs of the covered officials and their families when
contingencies occur in view of the increasing cost of living;
WHEREAS, actuarial studies indicate that the premiums provided for in R.A. 4898, as
amended, are very inadequate;
WHEREAS, there is a need to increase the benefits and adjust the premiums as well as
integrate and rationalize existing laws granting insurance benefits to these local
government officials for effective administration;
NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, do hereby
order:
Sec. 1. Every Punong Barangay, Sangguniang Barangay Member, Chairman of the
Kabataang Barangay, Barangay Secretary and Barangay Treasurer, and every member
of the Sangguniang Panlalawigan, Sangguniang Panlungsod and Sangguniang Bayan,
duly elected or appointed, and duly qualified, who does not receive fixed salary or
compensation, is, during his incumbency, automatically covered under this Order:
Provided, That the moment said official receives a fixed salary or compensation
whether in the same capacity or by virtue of a permanent appointment in any
government office, or by election to another public office, his coverage under this
Order shall automatically cease and he shall then be covered under the appropriate
law.
Sec. 2. In the event of loss of life during a covered official's incumbency whether the
cause of death is work-connected or not, the beneficiaries of a Punong Barangay or
member of the Sangguniang Panlalawigan, Sangguniang Panlungsod, Sangguniang
Bayan shall be entitled to SEVEN THOUSAND PESOS (P7,000.00) while the
beneficiaries or a member of the Sangguniang Barangay, Barangay Secretary,
Barangay Treasurer or Chairman of the Kabataang Barangay shall be entitled to FIVE
THOUSAND PESOS (P5,000.00). In addition to the death benefits herein provided, a
burial benefit of ONE THOUSAND PESOS (P1,000.00) shall be paid to the beneficiaries.
Sec. 3. In the event of total and permanent incapacity or disability as determined by
the System, a Punong Barangay or a member of the Sangguniang Panlalawigan.
Sangguniang Panlungsod or Sangguniang Bayan shall be entitled to FIVE THOUSAND
PESOS (P5,000.00) while a member of the Sangguniang Barangay, Barangay Secretary,
Barangay Treasurer, or Chairman of the Kabataang Barangay shall be entitled to
THREE THOUSAND PESOS (P3,000.00) provided that the disability occurred during his
incumbency whether work-connected or not. In addition to the disability benefits
herein provided, a burial benefit of ONE THOUSAND PESOS (P1,000.00) shall be paid
to his beneficiaries provided that death occurs within one year from the onset of total
and permanent incapacity or disability.
Anyone availing of the benefits under this section cannot benefit from Sections, Two,
Four and Five hereof.
Sec. 4. For injuries resulting from an accident occurring during his incumbency
whether work-connected or not, a Punong Barangay or a member of the Sangguniang
Panlalawigan, Sangguniang Panlungsod, or Sangguniang Bayan shall be entitled to the
following benefits which in no case shall exceed the maximum benefit of P5,000.00
per covered year:
a) For an injury to the brain resulting in the loss of sanity, FIVE THOUSAND
PESOS (P5,000.00);
b) For permanent loss of sight in both eyes, FIVE THOUSAND PESOS (P5,000.00);
c) For permanent loss of sense of hearing in both ears, FOUR THOUSAND PESOS
(P4,000.00);
d) For permanent loss of sight in one eye, TWO THOUSAND FIVE HUNDRED Sec. 5. For injuries resulting from an accident occurring during his incumbency
PESOS (P2,500.00); whether work-connected or not, a member of the Sangguniang Barangay, Barangay
Secretary, Barangay Treasurer, or Chairman of the Kabataang Barangay, shall be
e) For permanent loss of sense of hearing in one ear, TWO THOUSAND PESOS entitled to the following benefits which in no case shall exceed the maximum benefit
(P2,000.00); of P3,000.00 per covered year:

f) For the loss or destruction of two or more limbs, FIVE THOUSAND PESOS a) For any injury to the brain resulting in the loss of sanity, THREE THOUSAND
(P5,000.00); PESOS (P3,000.00);

g) For the loss of one limb, TWO THOUSAND FIVE HUNDRED PESOS (P2,500.00); b) For permanent loss of sight in both eyes, THREE THOUSAND PESOS
(P3,000.00);
h) For the loss or destruction of both of his hands at or above the wrist, FOUR
THOUSAND PESOS (P4,000.00); c) For permanent loss of sense of hearing in both ears, TWO THOUSAND FIVE
HUNDRED PESOS (P2,500.00);
i) For the loss or destruction of both of his feet at or above the ankle, FOUR
THOUSAND PESOS(P4,000.00); d) For permanent loss of sight in one eye, ONE THOUSAND FIVE HUNDRED
PESOS (P1,500.00);
j) For the loss or destruction of one hand at or above the wrist, TWO
THOUSAND PESOS (P2,000.00); e) For permanent loss of sense of hearing in one ear, ONE THOUSAND TWO
HUNDRED FIFTY PESOS (P1,250.00);
k) For the loss or destruction of one foot at or above the ankle, TWO
THOUSAND PESOS (P2,000.00); f) For the loss of or destruction of two or more limbs, THREE THOUSAND PESOS
(P3,000.00);
l) For the loss or destruction of every thumb or great toe, SEVEN HUNDRED
FIFTY PESOS (P750.00); g) For the loss of one limb, one thousand five hundred pesos (P1,500.00);

m) For the loss or destruction of every finger or toe, TWO HUNDRED FIFTY h) For the loss or destruction of both his hands at or above the wrist, TWO
PESOS (P250.00); THOUSAND FIVE HUNDRED PESOS (P2,500.00);

n) For any other injury requiring hospitalization of at least forty days ONE i) For the loss or destruction of both his feet at or above the ankle, TWO
THOUSAND FIVE HUNDRED PESOS (P1,500.00) and in cases where the hospitalization THOUSAND FIVE HUNDRED PESOS (P2,500.00);
is less than forty days, at such amount not exceeding ONE THOUSAND PESOS
(P1,000.00) as determined by the Government Service Insurance System and j) For the loss or destruction of one hand at or above the wrist, ONE
prescribed in its Rules and Regulations issued pursuant to the provisions of this order; THOUSAND TWO HUNDRED FIFTY PESOS (P1,250.00);
and
k) For the loss or destruction of one foot at or above the ankle, ONE THOUSAND
o) For any other injury or requiring hospitalization but requiring medical TWO HUNDRED FIFTY PESOS (P1,250.00);
attention for at least fifteen days, FIVE HUNDRED PESOS (P500.00), and in cases
where the medical attention extended is less than fifteen days, at such amount not l) For the loss or destruction of every thumb or great toe, FOUR HUNDRED
exceeding THREE HUNDRED PESOS (P300.00) as determined by the Government FIFTY PESOS (P450.00);
Service Insurance System and prescribed in its Rules and Regulations issued pursuant
to the provisions of this Order. m) For the loss or destruction of every finger or toe, ONE HUNDRED FIFTY PESOS
(P150.00);
n) For any injury requiring hospitalization of at least forty days, ONE THOUSAND Sec. 9. A maximum expense loading of twelve (12) percent of the annual premiums
PESOS (P1,000.00), and in cases where the hospitalization is less than forty days, at may be disbursed by the Government Service Insurance System for administrative and
such amount not exceeding EIGHT HUNDRED PESOS (P800.00) as determined by the operational expenses.
Government Service Insurance System and prescribed in its Rules and Regulations
issued pursuant to the provisions of this Order; and Sec. 10. Within one month after the effectivity of this Order, the Government Service
Insurance System shall prescribe and promulgate such rules and regulations as may be
o) For any other injury not requiring hospitalization but requiring medical necessary for the proper implementation of the provisions of this Order.
attention for at least fifteen days, THREE HUNDRED PESOS (P300.00) and in cases
where medical attention extended is less than fifteen days, at such amount not Sec. 11. Only to such extent as would affect the enforcement of this Order, executive
exceeding TWO HUNDRED PESOS (P200.00) as determined by the Government Service orders, rules and regulations, or part thereof, inconsistent with this Order, are hereby
Insurance System and prescribed in its Rules and Regulations issued pursuant to the amended or modified accordingly.
provisions of this Order.
Sec. 12. This Order shall take effect immediately.
Sec. 6. For all the insurance benefits provided under this Order, the national
government of the Republic of the Philippines shall appropriate annually and include Done in the City of Manila, this 25th day of July, in the year of Our Lord, nineteen
in the General Appropriations Act the total annual premiums based on the actual hundred and eighty-seven.
number of local officials covered under Sec. 1 hereof and as certified by the
Department of Local Government. The annual premiums, unless later on adjusted in
accordance with the provisions of this section, shall be ONE HUNDRED TEN PESOS
(P110.00) for every Punong Barangay and member of the Sangguniang Panlalawigan,
Sangguniang Panlungsod or Sangguniang Bayan and FORTY EIGHT PESOS (P48.00) for
every member of the Sangguniang Barangay, Barangay Secretary, Barangay Treasurer,
and Chairman of the Kabataang Barangay. The Government Service Insurance System
shall conduct periodic actuarial studies to determine the adequacy of the
contributions as provided herein. Based on such duties, the premium may be adjusted
and the total annual premium based on the adjusted premium rates as certified by
the System shall likewise be provided for in the General Appropriations Act for every
applicable year thereafter; Provided, That any failure or delay in the payment of
premiums shall not in any way prejudice the efficacy and enforceability of the
insurance benefits herein set forth.

Sec. 7. No benefit shall be allowed to a covered official or his beneficiaries when the
injury, sickness, disability or death was occasioned by any of the following:

1) his intoxication,

2) his willful intention to injure or kill himself or another, or

3) his notorious negligence.

Sec. 8. Whenever other laws provided similar benefits for the same contingencies
covered by this Order, the official or his beneficiaries who qualify for such benefits
shall have the option to choose which benefit will be paid to them.
REPUBLIC ACT NO. 5756 - AN ACT TO EXTEND THE PROVISIONS OF REPUBLIC ACT
NUMBERED FOUR THOUSAND EIGHT HUNDRED AND NINETY-EIGHT TO BARRIO
TREASURERS AND BARRIO SECRETARIES, BY AMENDING SECTIONS ONE, TWO, THREE,
FIVE, SIX AND SEVEN AND THE TITLE THEREOF
Section 1. Section one of the Republic Act numbered Four thousand eight hundred
ninety-eight is hereby amended to read as follows:
"Section 1. Every barrio captain and councilman duly elected, and every barrio
treasurer and barrio secretary duly appointed and qualified, under existing laws, but
only while assuming their respective offices, are automatically while assuming their
respective offices, are automatically covered by life, disability and accident insurance
benefit herein provided which the Government Service Insurance System shall extent,
as it is hereby directed to extend."
Sec. 2. Section two of the said Act is hereby amended to read as follows:
"Sec. 2. The life of a barrio captain is insured for five thousand pesos while that of a
councilman, barrio treasurer or barrio secretary is insured for three thousand pesos
each."
Sec. 3. Section three of the said Act is hereby amended to read as follows:
"Sec. 3. When a barrio captain, councilman, barrio treasurer or barrio secretary
becomes fully and permanently incapacitated or disabled arising out of the and in the
course of the performance of his duties, the barrio captain shall be paid disability
insurance proceeds of three thousand pesos, and the councilman, barrio treasurer or
barrio secretary, in the amount of two thousand pesos each. Anyone availing the
benefits under Section cannot benefit from Section four and five hereof."
Sec. 4. Section five of the said Act is hereby amended to read as follows:
"Sec. 5. Should a councilman, barrio treasurer or barrio secretary suffer injuries as a
result of an accident, he shall be paid accident insurance proceeds as follows:
(a) For an injury to the brain resulting in the loss of sanity, three thousand pesos;
(b) For permanent loss of sight in both eyes, three thousand pesos;
(c) For permanent loss of sense of hearing in both ears, two thousand pesos;
(d) For permanent loss of sight in one eye, on thousand five hundred pesos;
(e) For permanent loss of sense of hearing in one ear, five hundred pesos;
( f ) For the loss or destruction of two or more ear, five hundred pesos;
(g) For the loss of one limb, one thousand five hundred pesos;
(h) For the loss or destruction of both his hands at or above the wrist, two thousand
pesos;
(i) For the loss or destruction of both his feet at or above the ankle, two thousand
pesos;
( j) For the loss or destruction of one hand at or above the wrist, one thousand
pesos;
(k) For the loss or destruction of one foot at or above the ankle, one thousand
pesos;
(l) For the loss or destruction of every thumb or great toe, one hundred pesos;
(m) For the loss or destruction of every thumb or great toe, eighty pesos;
(n) For any other injury requiring hospitalization of at least forty days, seven
hundred pesos, and in cases where the hospitalization is less than forty days, at such
amount not exceeding six hundred fifty pesos as determined by the Government
Service Insurance System and prescribed in its Rules and Regulations issued pursuant
to the provisions of this Act; and
(o) For any other injury requiring medical attention for at least fifteen days, one
hundred pesos, and in cases where the medical attention extended is less than fifteen
days, at such amount not exceeding ninety pesos as determined by the government
Service Insurance System and prescribed in its Rules and Regulations issued pursuant
to the provisions of this Act."
Sec. 5. Section six of the same Act is hereby amended to read as follows:
"Sec. 6. For all the insurance benefits provided under this Act, the national
government of the Republic of the Philippines shall pay an annual premium to the
Government Service Insurance System the sum of fifteen pesos for every barrio
captain and the sum of ten pesos for every councilman, barrio treasurer or barrio
secretary: Provided, That any failure or delay in the payment of such premium shall
not in any way prejudice the efficiency and enforceability of the insurance benefits
herein set forth."
Sec. 6. Section seven of the same Act is hereby amended to read as follows:
"Sec. 7. To carry out the purposes of this Act, there is hereby authorized to be
appropriated out of any funds in the national treasury not otherwise appropriated,
the amount of two million eight hundred fifty thousand pesos to pay the annual
premiums starting upon the approval of this Act. Thereafter, there shall be authorized
to be appropriated annually and included in the General Appropriations Act for every
subsequent year, out of any funds in the National Treasury not otherwise
appropriated, the amount of two million eight hundred fifty thousand pesos or such
amount as may be necessary to pay the annual premiums payable by the national
government by virtue of this Act certified to by the Presidential Assistant on
Community Development: Provided, That any of such amount not used to pay said
premiums shall automatically revert to the general funds."
Sec. 7. The title of the same Act is hereby amended to read as follows:
"An Act providing Instance Coverage To Barrio Captains, Councilmen, Barrio
Treasurers and Barrio Secretaries and Authorizing the appropriation of funds for the
purposes."
Sec. 8. This Act shall take effect upon its approval.
June 21, 1969
Republic Act No. 9829
AN ACT ESTABLISHING THE PRE-NEED CODE OF THE PHILlPPlNES
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:
CHAPTER I
GENERAL PROVISIONS
Section 1. Title. - This Act shall be known as the "Pre-need Code of the Philippines".
Section 2. Declaration of Policy. - It is the policy of the State to regulate the
establishment of pre-need companies and to place their operation on sound, efficient
and stable basis to derive the optimum advantage from them in the mobilization of
savings and to prevent and mitigate, as far as practicable, practices prejudicial to
public interest and the protection of planholders.
The State shall hereby regulate, through an empowered agency, pre-need companies
based on prudential principles to promote soundness, stability and sustainable
growth of the pre-need industry.
Section 3. Construction. - Any doubt in the interpretation and implementation of any
provision in this Code shall be interpreted in favor of the rights and interests of the
planholder.
Section 4. Definition of Terms. - Whenever used in this Code, the following terms shall
have their respective. meanings;
(a) "Commission" "refers to the Insurance Commission.
(b) "Pre-need plans" are contracts, agreements, deeds or plans for the benefit of the
planholders which provide for the performance of future service/s, payment of
monetary considerations or delivery of other benefits at the time of actual need or
agreed maturity date, as specified therein, in exchange for cash or installment
amounts with or without interest or insurance coverage and includes life, pension,
education, interment and other plans, instruments contracts or deeds as may in the
future he determined by the Commission.
(c) "Pre-need company" refers to any corporation registered with the Commission and
authorized/licensed to sell or offer to sell pre-need plans. The term "pre-need
company" also refers to schools, memorial chapels, banks, nonbank financial
institutions and other entities which have also been authorized/licensed to sell or
offer to sell pre-need plans insofar as their pre-need activities or business are
concerned.
(d) "Planholder" refers to any natural or juridical person who purchases pre-need
plans from a pre-need company for whom or for whose beneficiaries' benefits are to
be delivered, as stipulated and guaranteed by the pre-need company. The term
includes the assignee, transferee and any successor - in - interest of the planholder.
(e) "Beneficiary" refers to the person designated by the planholder as the recipient of
the benefits in the pre-need plan.
(f) "Contract price" refers to the stipulated price in the pre-need plan.
(g) "Benefits" refers to the payment of monetary considerations and/or performance
of future services which the pre-need company undertakes to deliver either to the
planholder or his beneficiary at the time of actual need or agreed maturity date, as
specified in the_ pre-need plan.
(h) "Sales counselors" refers to natural persons who are engaged in the sale of, or
offer to sell, or counsel of prospective planholders for the purpose of selling, whether
or not on commission basis, pre-need plans upon the authority of the pre-need
company.
(i) "Affiliate of, or affiliated with, a specified person" refers to a person that directly or
indirectly, through one (1) or more intermediaries, controls, or is controlled by, or is
under common control with, the person specified. Exercising control over a legal
entity shall mean any one of the following; (1) owning either solely or together with
affiliated persons more than twenty - five percent (25%) of the outstanding capital
stock of a legal entity; and (2) being an officer or director of such legal entity.
(j) "Trust fund" refers to a fund set up from the planholders' payments to pay for the
cost of benefits and services, termination values payable to planholders and other
costs necessary to ensure the delivery of benefits or services to planholders as
provided for in the contracts.
(k) "Pre-need reserve liabilities" refers to the measure of the liabilities of the pre-need
company for its in - force plans or lapsed plans as of valuation date.
(l) "Liquidity reserve" refers to a portion of the trust fund set aside by the trustee to
cover benefits due to planholders for the ensuing year.
(m) "Fixed value plans" refers to pre-need plans whose 'benefits and costs are fixed
and predetermined at the inception or purchase of the plan.
(n) "In - force plan" refers to a plan for which the pre-need company has an
outstanding obligation for the delivery of benefits or services or payment of
termination value.
(o) "Lapsed plan" refers to a plan that is delinquent in payment of installments
provided for in the contract, the delinquency, of which extends beyond the grace
period provided for in the plan or contract.
(p) "Cancelled plan" refers to a plan that can no longer be reinstated by reason of
delinquency in the payment of installments for more than two (2) years or a longer
period as provided in the contract, counted from the expiry of the grace period
provided for in the plan or contract.1avvphi1
(q) "Scheduled benefit plans" refers to plans the date of availment of the benefits of
which is set at the inception or purchase of the plan.
(r) "Contingent benefit plans" refers to plans the timing of the provision of the
benefits of which is conditional on the occurrence of the contingency.
(s) "Risk - based capital" refers to a method to measure the minimum amount of
capital that a pre-need company needs to support its overall business operation. It is
used to set capital requirements, considering the size and degree of risk taken by the
pre-need company.
(t) "BSP" refers to "Bangko Sentral ng Pllipinas".
The terms not otherwise defined under this Code shall be construed in their usual and
commonly understood trade, business, commercial or investment meaning.
CHAPTER II
AUTHORITY OF THE COMMISSION
Section 5. Supervision. - All pre-need companies, as defined under this Act, shall be
under the primary and exclusive supervision and regulation of the Insurance
Commission. The Commission is hereby authorized to provide for its reorganization,
to streamline its structure and operations, upgrade its human resource component to
enable it to effectively and efficiently perform its functions and exercise its powers
under this Code.
All - positions of the - Commission shall be governed by compensation and position
classification systems and qualification standards approved by the Commission based
on a comprehensive job analysis and audit of actual duties and responsibilities. The
compensation plan shall be comparable with the prevailing compensation plan in the
Bangko Sentral ng Pilipinas (BSP) and other government financial institutions and shall
be subject to periodic review by the Commission no more than once every two (2)
years without prejudice to yearly merit reviews or increases based on productivity
and efficiency. The Commission shall, therefore, be exempt from laws, rules and
regulations on compensation, position classification and qualification standards. The
Commission shall, however, endeavor to make its system conform as closely as
possible with the principles under the Compensation and Position Classification Act of
1989 (Republic Act No. 6758, as amended).
The salary and allowances or personal services expense of the employees of the
Insurance Commission shall be sourced from the retained amount of the fees, charges
and other income derived from the regulation of pre-need companies and from the
Insurance Fund under Section 418 of the Insurance Code of the Philippines
(Presidential Decree No. 612, as amended) and Section 286 of the National Internal
Revenue Code. If the personal services expense cannot be covered by the retained
amount and the Insurance Fund, it shall be appropriated in the General
Appropriations Fund.
Section 6. Powers and Functions of the Commission. - The Commission shall, at all
times, act with transparency and dispatch and shall have, among others, the following
powers and functions;
(a) Approve, amend, renew or deny any license, registration or certificate issued
under this Code;
(b) Fix and assess fees and/or charges as it may find reasonable in the exercise of
regulation;
(c) Regulate, supervise and monitor the operations and management of pre-need
companies to ensure compliance with the provisions of this Code, existing laws, rules
and regulations including, but not limited to:
(1) Revoking or nullifying investments made and/or entered into by a - pre-need
company or a trustee which are contrary to existing laws, rules and regulations;
(2) Demanding for the conversion of the investments made by the trustee to cash or
other liquid assets to protect the interest of the planholders; and
(3) Regulating, investigating or supervising activities of pre-need companies, their
officers, employees, sales counselors, consultants or agents;
(d) Issue cease and desist orders to prevent fraud and injury to the investing public;
(e) Issue subpoena duces tecum and ad testificandum, order the examination, search
and seizure of documents, papers, files, tax returns, books of accounts and other
records, in whatever form, of any entity or person under investigation;
(f) Punish for contempt of the Commission, both direct and indirect, in accordance
with the pertinent provisions of and penalties prescribed by the Rules of Court;
(g) Impose sanctions, institute cases and/or prosecute offenders for violation of this
Code, related laws, rules, regulations and orders issued pursuant thereto;
(h) Suspend or revoke licenseslawph!l
(i) Enlist the aid and support of and/or deputize any and all enforcement agencies of
the government in the implementation of its powers and in the exercise of its
functions under this Code;
(j) Take over pre-need companies which fail to comply with this Code, related laws,
rules, regulations and orders issued pursuant thereto, either through the
appointment of a conservator, receiver or liquidator;
(k) Prepare, approve, amend or repeal rules, regulations and orders, and issue
opinions and provide guidance on and supervise compliance with such rules,
regulations and orders;
(l) Formulate policies and recommendations on issues concerning the pre-need
industry, including proposed legislations;
(m) Retain and utilize, in addition to its annual budget, an amount up to One hundred
million pesos (Pl00, 000,000.00) of the fees, charges and other income derived from
the regulation of the pre-need companies; and
(n) Exercise such other powers as may be provided by law as well as those which may
be implied from, or which are necessary or incidental to carry out the express powers
granted the Commission to achieve the objectives and purposes of the law.
CHAPTER III
ORGANIZATION, LICENSING AND MANAGEMENT OF PRE-NEED COMPANIES
Section 7. Prerequisites to Incorporation. - Except upon favorable recommendation of
the Commission, the Securities and Exchange Commission (SEC) shall not accept or
approve the articles of incorporation and bylaws of any pre-need company.
A foreign corporation may be allowed to engage in a pre-need business in the
Philippines: Provided, That it shall comply with the pertinent laws, rules and
regulations.
Section 8. Amendment of the Articles of Incorporation and Bylaws. - Amendments to
the articles of incorporation and bylaws of a pre-need company, including merger,
consolidation and dissolution, shall not be approved by the SEC without the favorable
recommendation from the Commission.
Section 9. Paid-up Capital. - A pre-need company incorporated after the effectivity of
this Code shall have a minimum paid - up capital of One hundred million pesos (P100,
000,000.00). Existing pre-need companies shall comply with the following minimum
unimpaired paid - up capital:
(a) One Hundred million pesos (P100, 000,000.00) for companies selling at least
three(3) types of plan;
(b) Seventy - five million pesos (P75, 000,000.00) for companies selling two (2) types
of plan; and
(c) Fifty million pesos (P50, 000,000.00) for companies selling a single type of
plan.1avvphi1
Existing pre-need companies with traditional education plans shall have a minimum
unimpaired paid-up capital of One hundred million pesos (P100, 000,000.00)
The Commission may adopt risk - based principles on capital adequacy based on
internationally accepted standards. In the exercise of its authority under this
paragraph, the Commission may prescribe a higher minimum unimpaired paid - up
capital for pre-need companies.
Section 10. Licensing of Pre-need Companies. No person shall operate as a pre-need
company or engage in the business of a pre-need company unless licensed by the
Commission in accordance with this Code.
The license under this section shall expire one (1) year from the time of the
registration. It may be renewed upon compliance with the prescribed requirements of
the Commission. Such renewal shall be deemed approved if not acted upon within
thirty (30) days from the time of filing of the application for renewal.
Section 11. Qualification and Disqualification of Directors and Officers. - To maintain
the quality of management of pre-need companies and afford better protection to
planholders and beneficiaries, the Commission shall prescribe, pass upon and review
the qualifications and disqualifications of individuals elected or appointed directors or
officers of pre-need companies, including its actuaries, and disqualify those found
unfit. The Commission may disqualify, suspend or remove any director or officer who
commits or omits an act which renders him unfit for the position.
In determining whether an individual is fit and proper to hold the position of a
director or officer of a pre-need company, regard shall be given to his integrity,
experience, education, training and competence. The following persons, and those
determined by the Commission to be unfit, shall in no case be allowed to serve or act
in the capacity of an officer, employee, director, consultant or sales counselor of any
pre-need company:
(a) Any person convicted of any crime involving any pre-need plan, security or
financial product;
(b) Any person convicted of an offense involving moral turpitude or involving fraud or
embezzlement, theft, estafa or other fraudulent acts or transactions;
(c) Any person who, by reason of any misconduct, is enjoined by order, judgment or
decree by any court, quasi - judicial body or administrative agency of competent
jurisdiction from acting as a director, officer, employee, consultant, agent or
occupying any fiduciary position;
(d) Any person found by the Commission to have willfully violated or willfully aided,
abetted, counseled, commanded, induced or procured the violation of this Code, the
Insurance Code, the Securities Regulation Code or any related laws and any rules or
orders thereunder;
(e) Any person judicially declared to be insolvent or incapacitated to contract; and
(f) Any person found guilty by a foreign court, regulatory authority or government
agency of the acts or violations similar to any of the acts or misconduct enumerated in
the foregoing paragraphs: Provided, That conviction in the first instance shall be
considered as sufficient ground for disqualification.
Section 12. Independent Directors. Pre-need companies shall have at least two (2)
independent directors or twenty percent (20%) of the members of the board,
whichever is higher. For this purpose an "independent director" shall refer to a person
other than an officer, employee or any person having a fiduciary relation to the pre-
need company, its parent or subsidiaries, or any other individual having a relationship
therewith, which may interfere with the exercise of independent judgment in carrying
out the responsibilities of a director.
Section 13. Investment Restrictions of Directors and Officers. No director or officer
of any pre-need company shall, after his election or appointment as such, directly or
indirectly, for himself or as the representatives or agent of others, have an investment
in excess of Five million pesos (P5, 000,000.00) in any corporation or business
undertaking in which the pre-need companys trust fund has an investment in or has a
financial interest with. No relatives of directors or officers of the pre-need company
within the fourth degree of consanguinity or affinity shall, directly or indirectly, have
an investment of more than Five million pesos (P5, 000,000.00) in any corporation or
business undertaking in which the pre-need companys trust fund has an investment
in or has a financial interest with during the incumbency or term of the director or
officer involved.
CHAPTER IV
REGISTRATION OF PRE-NEED PLANS
Section 14. Registration of Pre-need Contracts/Plans. Within a period of forty - five
(45) days after the grant of a license to do business as a pre-need company, and for
every pre-need plan which the pre-need company intends to offer for sale to the
public, the pre-need company shall file with the Commission a registration statement
for the sale of pre-need plans pursuant to this Code. The Commission shall
promulgate rules governing the registration of pre-need plans and the required
documents which include, among others, the viability study with certification, under
oath, of a pre-need brochure, a copy of the pre-need plan, and information and
documents necessary to ensure the protection of planholders and the general public.
Said rules shall further set forth the conditions under which such registration may be
denied revoked, suspended or withdrawn, and the remedies of pre-need companies
in such instances.
Section 15. Registration Requirements. The Commission shall set forth the
requirements for registration of pre-need plans and shall require the following
documents, among others;
(a) Duly accomplished Registration Statements;
(b) Board resolution authorizing the registration of applicants pre-need plans;
(c) Opinion of independent counsel on the legality of the issue;
(d) Audited financial statements;
(e) Viability study with certification, under oath, of pre-need actuary accredited by the
Commission;
(f) Copy of the proposed pre-need plan; and
(g) Sample of sales materials.

Such registration statements and sales materials required under this section shall
contain the appropriate risk factors as may be determined by the Commission.
Section 16. Accreditation of Actuary. - The Commission shall have the power to set
standards for the accreditation of actuaries directly responsible for the preparation
and certification of the viability study of the pre-need plan submitted by the pre-need
company for registration or amendment with the Commission. It shall further have
the power to define the obligations and liabilities of actuaries accredited by it. No
actuary engaged by a pre-need company shall at the same time be a stockholder or
serve as a director of the board, chief executive officer or chief financial officer of the
company or any such position that the Commission may determine to have an
inherent conflict of interest to the position of an actuary.
Section 17. Approval of Contract Forms. All forms, including amendments thereto,
relating to the pre-need plans shall be approved by the Commission. No pre-need
contracts or certificates shall be issued or delivered within the Philippines unless in
the form previously approved by the Commission.
Section 18. Pre-need Advertising Rules. - Pre-need plans shall be advertised and sold
in an appropriate non - misleading manner in accordance with the rules to be
prescribed by the Commission.
It shall be unlawful for any pre-need company to advertise itself or its pre-need plans
unless the Commission has approved such advertising material. The Commission shall
have a period of ten (10) working days to approve or deny the advertising material
and failure to act within the said period shall cause the advertising material to be
approved. For purposes hereof, the Commission shall have the power to define the
scope of its advertising rules to appropriately cover advertising or other
communications to the public.
Any person who sells or offers to sell any pre-need plan or contract by any means or
instruments of communication in violation of this section shall be liable to the person
purchasing such pre-need contract who may sue to recover the consideration paid for
such pre-need contract with interest thereon. In addition hereto, the Commission
shall have the power to pursue the erring pre-need company in an administrative or
criminal proceeding.
A fine of One hundred thousand pesos (P100, 000,000.00) shall be imposed on any
pre-need company found to have violated this section: Provided, That a second
violation of this section shall, in addition to the fine imposed, result in the suspension
of the license of the pre-need company.
Section 19. Disclosures to Prospective Planholders. - No registered pre-need plan shall
be sold to prospective planholders unless an information brochure, which has been
filed with the Commission, has been provided to the purchaser. The information
brochure shall contain an explanation of the principal features of the pre-need plan, a
statement that the planholder may avail of a default or reinstatement period within
which to reinstate his lapsed plan, and the conditions of the same and the rates of
return for scheduled benefit plans and illustrative yields for contingent benefit plans;
and such other information that the Commission shall require by rule.
CHAPTER V
LICENSING OF SALES COUNSELORS AND GENERAL AGENTS
Section 20. Licensing of Sales Counselors. - No sales counselor shall be allowed to
solicit, sell or offer to sell pre-need plans under this Code without being licensed as
such by the Commission. No license shall be issued unless the following qualifications
have been complied with:
(a) The applicant must be of good moral character and must not have been convicted
of any crime involving moral turpitude;
(b) The applicant has undergone a training program approved by the Commission and
such fact has been certified under oath by a duly authorized representative of a pre-
need company; and
(c) The applicant has passed a written examination administered by the. Commission:
Provided, That the administration of the examination may be delegated to an
independent organization under the supervision of the Commission.
Such license shall automatically expire every thirtieth (30th) day of June or such date
of every year as may be fixed by the Commission and may be accordingly renewed.
Section 21. Denial, Suspension, Revocation of License. - An application for the
issuance or renewal of a license to act as sales counselor may be denied, or such
license, if already issued, shall be suspended or revoked based on the following
grounds:
(a) Materially misrepresented statements in the application requirements;
(b) Obtained or attempted to obtain a license by fraud or misrepresentation;
(c) Materially misrepresented the terms and conditions of pre-need plan which he
sold or offered to sell;
(d) Solicited, sold or attempted to solicit or sell a pre-need plan by means of false or
misleading representation and other fraudulent means;
(e) Terminated for cause from another pre-need company;
(f) Similar grounds found in Section II of this Code;
(g) Willfully allowing the use of one's license by a non - licensed or barred individual;
and
(h) Analogous circumstances.
Section 22. Licensing of General Agents. - If the issuer should contract the services of a
general agent to undertake the sales of its plans, such general agent shall be required
to be licensed as such with the Commission, in accordance with the requirements
imposed by the Commission.
CHAPTER VI
DEFAULT AND TERMINATION BY PLANHOLDERS
Section 23. Default; Reinstatement Period. - The pre-need company must provide in
all contracts issued to planholders a grace period of at least sixty (60) days within
which to pay accrued installments, counted from the due date of the first unpaid
installment. Nonpayment of a plan within the grace period shall render the plan a
lapsed plan. Any payment by the planholder after the grace period shall be
reimbursed forthwith, unless the planholder duly reinstates the plan. The planholder
shall be allowed a period of not less than two (2) years from the lapse of the grace
period or a longer period as provided in the contract within which to reinstate his
plan. No cancellation of plans shall be made by the issuer during such period when
reinstatement may be effected.
Within thirty (30) days from the expiration of the grace period and within thirty (30)
days from the expiration of the reinstatement period, which is two (2) years from the
lapse of the grace period, the pre-need company shall give written notice to the
planholder that his plan will be cancelled if not reinstated within two (2) years. Failure
to give either of the required notices shall preclude the pre-need company from
treating the plans as cancelled.
Section 24. Termination of Pre-need Plans. - A planholder may terminate his pre-need
plan at any time by giving written notice to the issuer.
A pre-need plan shall contain a schedule of termination values to which the
planholder is entitled to upon termination. Such schedule of termination value shall
be required for all in - force pre-need plans and shall be fair, equitable and in
compliance with the Commission issuances. The termination value of the pre-need
plan shall be predetermined by the actuary of the pre-need company upon
application for registration of the pre-need plans with the Commission and shall be
disclosed in the contract.
CHAPTER VII
CLAIMS SETTLEMENT
Section 25. Unfair Claims Settlement Practices. - (a) No pre-need company shall
refuse, without just cause, to pay or settle claims arising under coverages provided by
its plans nor shall any such company engage in unfair claim settlement practices. Any
of the following acts by a pre-need company, if committed without just cause, shall
constitute unfair claims settlement practices:
(1) Knowingly misrepresenting to claimants pertinent facts or plan provisions relating
to coverages at issue;
(2) Failing to acknowledge with reasonable promptness pertinent communications
with respect to claims arising under its plan;
(3) Failing to adopt and implement reasonable standards for the prompt investigation
of claims arising under its plan;
(4) Failing to provide prompt, fair and equitable settlement of claims submitted in
which liability has become reasonably clear; or
(5) Compelling planholders to institute suits or recover amounts due under its plan by
offering, without justifiable reason, substantially less than the amounts ultimately
recovered in suits brought by them.
(b) Evidence as to the number and types of valid and justifiable complaints to the
Commission against a pre-need company shall be deemed admissible in an
administrative or judicial proceeding brought under this section.
(c) Any violation of this section shall be considered sufficient cause for the suspension
or revocation of the company's certificate of authority.
Section 26. Payment of Plan Proceeds. - In the case of scheduled benefit plans, the
proceeds of the plan shall be paid immediately upon maturity of the contract, unless
such proceeds are made payable in installments or as an annuity, in which case the
installments or annuities shall be paid as they become due. Refusal or failure to pay
the claim within fifteen (15) days from maturity or due date will entitle the beneficiary
to collect interest on the proceeds of the plan for the duration of the delay at the rate
twice the legal interest unless such failure or refusal to pay is based on the ground
that the claim is fraudulent: Provided, That the planholder has duly complied with the
documentary requirements of the pre-need company.
In the case of contingent benefit plans, the benefits shall be paid by the pre-need
company thirty (30) days upon submission of all necessary documents.
Section 27. Recovery of Investment. The planholder may institute the necessary
legal action in court to recover his/her investment in the pre-need company thirty
(30) days upon submission of all necessary documents.
However, in case the insolvency or bankruptcy is a mere cover - up for fraud or
illegality, the planholder may institute the legal action directly against the officers
and/or controlling owners of the said pre-need company.
Section 28. Consequences of Delay or Default. In case of any litigation for the
enforcement of any pre-need plan, it shall be the duty of the Commission to
determine whether the payment of the claim of the planholder has been
unreasonably denied or withheld. If found to have unreasonably denied or withheld
the claim, the pre-need company shall be liable to pay damages, consisting of actual
damages, attorneys fees and legal interest, to be computed from the date the claim is
made until it is fully satisfied: Provided, That the failure to pay any such claim within
the time prescribed in Section 26 hereof shall be considered prima facie evidence of
unreasonable delay in payment.
Section 29. Distribution of Profits. A pre-need company may declare divided:
Provided, That the following shall remain unimpaired, as certified under oath by the
president and the treasurer with respect to items (a) and (b); and in the case of item
(c), by the trust officer:
(a) One hundred percent (100%) of the capital stock;
(b) An amount sufficient to pay all net losses reported, or in the course of settlement,
and all liabilities for expenses and taxes; and
(c) Trust fund.
Any dividend declared under the preceding paragraph shall be reported to the
Commission within thirty (30) days after such declaration.
CHAPTER VIII
TRUST FUND
Section 30. Trust Fund. - To ensure the delivery of the guaranteed benefits and
services provided under a pre-need plan contract, a trust fund per pre-need plan
category shall be established. A portion of the installment payment collected shall be
deposited by the pre-need company in the trust fund, the amount of which will be as
determined by the actuary based on the viability study of the pre-need plan approved
by the Commission. Assets in the trust fund shall at all times remain for the sole
benefit of the planholders. At no time shall any part of the trust fund be used for or
diverted to any purpose other than for the exclusive benefit of the planholders. In no
case shall the trust fund assets be used to satisfy claims of other creditors of the pre-
need company. The provision of any law to the contrary notwithstanding, in case of
insolvency of the pre-need company, the general creditors shall not be entitled to the
trust fund.
Except for the payment of the cost of benefits or services, the termination values
payable to the planholders, the insurance premium payments for insurance - funded
benefits of memorial life plans and other costs necessary to ensure the delivery of
benefits or services to planholders, no withdrawal shall be made from the trust fund
unless approved by the Commission. The benefits received by the planholders shall be
exempt from all taxes and the trust fund shall not be held liable for attachment,
garnishment, levy or seizure by or under any legal or equitable processes except to
pay for the debt of the planholder to the benefit plan or that arising from criminal
liability imposed in a criminal action.
The trust fund shall at all times be sufficient to cover the required pre-need reserve.
Section 31. Deposits to the Trust Fund. (a) The pre-need company shall make monthly
deposits to the trust fund in an amount determined by the accredited actuary,
sufficient to pay the benefits promised under the contract. For plans paid for in full,
the pre-need company shall deposit into the trust fund at least forty - five percent
(45%) for life plans and fifty - one percent (51%) for education and pension plans of
said full payment or such higher amount as determine by the actuary.
In case of installment payments, the minimum limits of the deposit contributions to
the trust fund, unless the viability study done by the actuary requires otherwise, shall
be in accordance with the following schedule:
Life Plans Other Plans
Collection of the 1st 20% of Contract Price 5% 5%
Collection of the 2nd 20% of Contract Price 10% 10%
Collection of the 3rd 20% of Contract Price 70% 80%
Collection of the 4th 20% of Contract Price 70% 80%
Collection of the 5th 20% of Contract Price 70% 80%
Contributions to the trust fund shall not form part of the income or gross receipts of
the pre-need company and, therefore, shall not be available for dividend declaration
or payment to creditors.
(b) The deposits to the trust fund shall be made within twenty (20) days from the end
of each reference month for payments received from plans whether paid for in full or
in installments. Failure to make the trust fund deposit shall subject the pre-need
company to administrative liability as provided for under this Code.
(c) Should the Commission discover a deficiency in the trust fund, it shall give notice
of the same to the pre-need company and require the said company to make
additional deposits. The pre-need company shall have thirty (30) days from receipt of
notice to make the said deposits and correct the deficiency. Failure to pay the
deficiency inspite of notice by the Commission shall subject the pre-need company to
the payment of a penalty, in addition to other sanctions imposable under this Code.
(d) For plans sold prior to the effectivity of this law, the minimum contributions to the
trust fund shall be governed by rules and regulations in force at the time of sale.
Section 32. Terms and Conditions of a Trust Fund. - A trust fund must be established
separately for each type of pre-need plan with the trust department of a trust
company, bank or investment house doing business in the Philippines. No trust fund
shall be established by a pre-need company with an affiliate trust entity subject to
Section 38 hereof.
The trust agreement shall be submitted to the Commission for approval before
execution and shall contain the following salient provisions, among others:
(a) The manner in which the trust fund is to be operated;
(b) Investment powers of the trustee with respect to trust deposits, including the
character and kind of investment;
(c) Auditing and settlement of accounts of the trustee with respect to the trust fund;
(d) Basis upon which the trust fund may be terminated;
(e) Provisions for withdrawals from the trust fund;
(f) That the trustee shall submit to the power of the Commission to examine and
verify the trust fund;
(g) An undertaking by the trustee that it shall abide by the rules and regulations of the
Commission with respect to the trust fund; and
(h) An undertaking by the trustee that it shall submit such other data or information
as may be prescribed by the Commission.
Section 33. Responsibilities of the Trustee. - The trustee shall:
(a) Administer and manage the trust fund with utmost good faith, care and prudence
required by a fiduciary relationship;
(b) The trustee shall have the exclusive management and control over the funds and
the right at any time to sell, convert, invest, change, transfer or otherwise change or
dispose of the assets comprising the funds within the parameters prescribed, by the
pre-need company and provided these parameters are compliant with the
Commission's regulations; and
(c) Not use the trust fund to invest in or extend any loan or credit accommodation to
the pre-need company, its directors, officers, stockholders, and related interests as
well as to persons or enterprises controlling, owned or controlled by, or under
common control with said company, its directors, officers, stockholders and related
interests except for entities which are direct providers of pre-need companies.
Section 34. Investment of the Trust Fund. - To ensure the liquidity of the trust fund to
guarantee the delivery of the benefits provided for under the plan contract and
likewise obtain sufficient capital growth to meet the growing actuarial reserve
liabilities, all investments of the trust fund/s of a pre-need company shall be limited to
the following and subject to limitations, to wit:
(a) Fixed income instruments. - These may be classified into short - term and long -
term instruments. The instrument is short - term if the maturity period is three
hundred sixty - five (365) days or less. This category includes:
(1) Government securities which shall not be less than ten percent (10%) of the trust
fund amount;
(2) Savings/time deposits and unit investment trust funds maintained with and
managed by a duly authorized bank with satisfactory examination rating as of the last
examination by the BSP;
(3) Commercial papers duly registered with the SEC with a credit rating of "1" for
short - term and "A.AA" for long - term based on the rating scale of an accredited
Philippine Rating Agency or its equivalent at the time of investment.
The maximum exposure to long - term commercial papers shall not exceed fifteen
percent (15%) of the total trust fund amount while the exposure to each commercial
paper issuer shall not exceed ten percent (10%) of the allocated amount; and
(4) Direct loans to corporations which are financially stable, profitable for the last
three (3) years and have a good track record of paying their previous loans.

These loans shall be fully secured by a real estate mortgage up to the extent of sixty
percent (60%) of the zonal valuation of the property at the time the loan was granted.
The property shall be covered by a transfer certificate of title registered in the name
of the mortgagor and free from liens and encumbrances.
The maximum amount to be allocated for direct loans shall not exceed five percent
(5%) of the total trust fund amount while the amount to be granted to each corporate
borrower shall not exceed ten percent (10%) of the amount allocated.
The maximum term of the loan should be no longer than four (4) years.
Direct loans to planholders are exempt from the limitations set forth under this
section: Provided, That such loans to planholders shall not exceed ten percent (10%)
of the total trust fund amount.
(b) Equities. - Investments in equities shall be limited to stocks listed on the main
board of a local stock exchange.
Investments in duly registered collective investment instruments such as mutual
funds are allowed hereunder: Provided, That such funds are invested only in fixed
income instruments and blue chips securities, subject to the limitations prescribed by
laws, rules and regulations.
These investments shall include stocks issued by companies that are financially stable,
actively traded, possess good track record of growth and have declared dividends for
the past three (3) years. Notwithstanding the prohibition against transactions with
directors, officers, stockholders and related interests, the trustee may invest in
equities of companies related to the trustee provided these companies comply with
the foregoing criteria provided in this paragraph for equity investments.
The amount to be allocated for this purpose shall not exceed thirty percent (30%) of
the total trust fund while the investment in any particular issue shall not exceed ten
percent (10%) of the allocated amount. The investment shall be recorded at the
aggregate of the lower of cost or market.
Existing investments which are not in accordance herewith shall be disposed of within
three (3) years from the effectivity of this Act.
(c) Real Estate. - These shall include real estate properties located in strategic areas of
cities and first class municipalities. The transfer certificate of title (TCT) shall be in the
name of the seller, free from liens and encumbrances and shall be transferred in the
name of the trustee in trust for the planholders unless the seller/transferor is the pre-
need company wherein an annotation to the TCT relative to the sale/transfer may be
allowed. It shall be recorded at acquisition cost.
However, the real estate shall be appraised every three (3) years by a licensed real
estate appraiser, accredited by the Philippine Association of Real Estate Appraisers, to
reflect the increase or decrease in the value of the property. In case the appraisal
would result in an increase in the value, only sixty percent (60%) of the appraisal
increase is allowed to be recorded in the books of the trust fund but in case of decline
in value, the entire decline shall be recorded. Appraisal increment should not be used
to cover up the required monthly contribution to the trust fund.
The total recorded value of the real estate investment shall not exceed ten percent
(10%) of the total trust fund amount of the pre-need company. In the event that the
existing real estate investment exceeds the aforesaid limit, the same shall be leveled
off to the prescribed limit within three (3) years from the effectivity of this Code. I
Investment of the trust fund, which is not in accordance with the preceding
paragraphs, shall not be allowed unless the prior written approval of the Commission
had been secured: Provided, further, That no deposit or investment in any single
entity shall exceed fifteen percent (15%) of the total value of the trust fund: Provided,
finally, That the Commission is authorized to adjust the percentage allocation per
category set forth herein not in excess of two percentage (2%) points upward or
downward and no oftener than once every five (5) years. The first adjustment
hereunder may be made no earlier than five (5) years from the effectivity of this Act.
The pre-need company shall not use the trust fund to extend any loan to or to invest
in its directors, stockholders, officers or its affiliates.
Section 35. Valuation of Reserve Liabilities of the Pre-need Company. - To determine
the sufficiency and adequacy of the fund, an annual pre-need reserve valuation report
establishing the reserve requirement and contractual liabilities of the pre-need
company shall be made and submitted to the Commission, within one hundred
twenty (120) days from end of the calendar year. The valuation report shall contain
the assumptions, methodology, formulas used, a summary of the pre-need plans that
were subject of valuation and the results of such valuation.
The report shall be duly certified to by a professional as may be determined by the
Commission. Upon approval by the Commission of the reserve computation, any
deficiency in the fund shall be covered by the pre-need company, in the manner as
may be prescribed by the Commission. In case of an excess of the fund over the
reserve liability, the excess shall be credited for future deposit requirements.
Section 36. Trust Fund Deficiencies. - Upon approval by the Commission of the pre-
need reserve computation submitted in the preceding section, any deficiency in the
trust fund, when compared to the reserve liabilities as reported in the pre-need
reserve valuation report, shall be funded by the pre-need company within sixty (60)
days from such approval. Failure to cover the deficiency in an appropriate manner
within the time required shall subject the pre-need company to the payment of a
penalty, in addition to other remedies exercisable by the Commission, as provided for
in this Code. Any excess of the trust fund over the actuarial reserve liabilities may be
credited to future deposit requirements.
Section 37. Liquidity Reserve. - The trustee shall at all times maintain a liquidity
reserve which shall be sufficient to cover at least fifteen percent (15%) of the trust
fund but in no case less than one hundred twenty - five percent (125%) of the amount
of the availing plans for the succeeding year. For this purpose, the pre-need company
shall timely submit to the trustee a summary of benefits payable for the succeeding
year.
The following shall qualify as investments for the liquidity reserve:
(a) Loans secured by a hold - out on assignment or pledge deposits maintained either
with the trustee or other banks, or of deposit substitute of the trustee itself or
mortgage and chattel mortgage bonds issued by the trustee;
(b) Treasury notes or bills, other government securities or bonds, and such other
evidences or indebtedness or obligations the servicing and repayment of which are
fully guaranteed by the Republic of the Philippines;
(c) Repurchase agreements with any of those mentioned in Item "b" above, as
underlying instruments thereof; and
(d) Savings or time deposits with government - owned banks or commercial banks.
Section 38. Trustees. - Upon approval of the Commission or when the Commission
requires for the protection of planholders, the pre-need company shall entrust the
management and administration of the trust fund to any reputable bank's trust
department, trust company or any entity - authorized to perform trust functions in
the Philippines: Provided, That no director and/or officer of the affiliate or related
trust entity: Provided, further, That no trust fund shall be established by a pre-need
company with a subsidiary, affiliate or related trust entity. However, such may be
allowed: Provided, That the following conditions are complied with:
(a) A written approval of the Commission has been previously obtained; and
(b) Public disclosure of the affiliation with the trust entity be included in all materials
in whatever form.
The Commission shall have the authority to prescribe appropriate rules that shall
ensure that the yield of the trust fund is maximized, consistent with the requirements
of safety and liquidity.
CHAPTER IX
ACTUARIES FOR PRE-NEED COMPANIES
Section 39. Required Actuarial Reports. - The following documents which are from
time to time submitted to the Commission by a pre-need company shall be duly
certified by an Insurance Commission accredited actuary:
(a) Actuarial valuation of all Iiabilities pertaining to pre-need contracts;
(b) Asset share studies when applying for approval of new products or enhancement
or repricing of existing products;
(c) Accounts in the financial statement of the pre-need company pertaining to
actuarial reserve liabilities and other actuarial reserve items;
(d) Financial projections showing the probable income and reserve requirements,
enumerating the actuarial assumptions and bases of projections; and
(e) Such other reports as may be required by the Commission.
It shall be the duty of an actuary to immediately report to the Commission any matter
contained in arising out of or in relation to the above reports requiring intervention of
the Commission to protect the interests of planholders: Provided, That the actuary
shall not be liable to the pre-need company for any acts done under this paragraph,
unless there is a clear showing of bad faith, malice or gross negligence.
Section 40. Disaccreditation of an Actuary. - An actuary shall be disaccredited by the
Commission on the following grounds:
(a) Failure to adequately perform his required functions and duties under this Code;
(b) Failure to meet the requirements of Section 11 of this Code;
(c) Failure to disclose conflict of interest;
(d) Failure to comply with the Code of Conduct of the Actuarial Society of the
Philippines; or
(e) Such other grounds that may be determined by the Commission.
CHAPTER X
REPORTS AND EXAMINATION
Section 41. Annual Pre-need Reserve Valuation Report. Every pre-need company shall
annually determine its reserve requirement and contractual liabilities, and submit to
the Commission an annual pre-need reserve valuation report within one hundred
twenty (120) days from the end of the fiscal year of the pre-need company. The
valuation report shall contain the assumptions, methodology, formulas used, a
summary of the pre-need plans that were the subject of the valuation and the results
of such valuation. The report should be duly certified by an actuary accredited by the
Commission in the case of contingent plans such as memorial/life plans and by the
pre-need company's external auditors or by a qualified actuary in the case of
scheduled - benefit plans such as pre-need pension and education plans, the liabilities
of which are not actuarial in nature. The reserving formula, bases and limits of the
assumptions to be used in the valuation of reserves shall be prescribed by the
Commission.
The Commission may require any pre-need company to submit an interim pre-need
reserve valuation report if any of the following events occurred:
(a) When there is sufficient evidence that a subsequent event or transaction occurred
after the end of the fiscal year and such event would materially affect the
computation of the pre-need reserve valuation report submitted; and
(b) When the company ceased operation six (6) months after the end of the fiscal
year.
Section 42. Annual Audited Financial Statements. - Every pre-need company shall
terminate its fiscal period on the thirty - first (31") day of December every year.
Within one hundred twenty (120) days after the calendar or fiscal year, the pre-need
company shall render to the Commission annual financial statements signed and
sworn to by its chief executive officer, chief finance officer and external auditors in
accordance with a uniform accounting system that shall be prescribed by the
Commission, showing in such form and details the exact condition of its affairs.
The audited financial statements should be accompanied by the Statement of
Management's Responsibility signed under oath by the companys chairman of the
board, chief executive officer and chief financial officer, containing the following
declaration:
"The management of (name of the pre-need company) is responsible for all
information and representations contained in the financial statements for the year(s)
ended (date). The financial statements have been prepared in conformity with rules
and regulations of the Commission on accounting and reflect amounts that are based
on the best estimates and informed judgment of management with an appropriate
consideration to materiality."
"In this regard, management maintains a system of accounting and reporting which
provides for the necessary internal controls to ensure that transactions are properly
authorized and recorded, assets are safeguarded against unauthorized use or
disposition and liabilities are recognized. The management likewise discloses to the
company's audit committee and to its external auditor: (i) all significant deficiencies in
the design or operation of internal controls that could adversely affect its ability to
record, process, and report financial data; (ii) material weaknesses in the internal
controls; and (iii) any fraud that involves management or other employees who
exercise significant roles in internal controls."
"The board of directors reviews the financial statements before such statements are
approved and submitted to the stockholders of the company.
"The (name of the auditing firm), the independent auditors appointed by the
stockholders, has examined the financial statements of the company in accordance
with generally accepted auditing standards in the Philippines and has expressed its
opinion on the fairness of the presentation upon completion of such examination, in
its report to the board of directors and stockholders."
Any material omission of disclosures, misstatement or misleading information found
in the financial statements, whether interim or annual, shall constitute a violation of
this Code and the officer signing such statement shall be subject to the penalty
provided for under this Code and such other sanctions as may be imposed by the
Commission.
Section 43. Annual Statement of Trust Fund. - Every pre-need company shall file with
the Commission an annual statement of its trust fund for each type of plan. Such
statement shall be in a form prescribed by .the Commission and shall include details
as to all of the income, disbursements, assets and liability items of and associated
with the said trust fund accounts. Said statement shall be made under oath by two (2)
officers of the company and shall be filed simultaneously with the annual statement
required by the preceding section.
Where the trust fund is managed and administered by a trustee as provided under
Section 80 - of this Code, an annual statement of trust fund for each type of plan shall
instead be filed with the Commission. It shall include details such as the income,
disbursements, assets and liability items, and shall be certified under oath by at least
two (2) of the highest ranking officers of the trustee.
Section 44. Publication of Annual Statement. - Within thirty (30) days after receipt of
the annual statement approved by the Commission, every pre-need company shall
publish in two (2) newspapers of general circulation a full synopsis of its annual
financial statements, including the trust fund annual statement showing fully the
conditions of its business, and setting forth its resources and liabilities in a
standardized format to be designed by the Commission.
The Commission may require pre-need companies to create and maintain a website
wherein its planholders may readily access updated information pertaining to the
status of financial condition and results of information of the company. The
sufficiency and truthfulness of the contents of such website shall be the responsibility
of the company.
Section 45. Keeping of Records. - The Commission shall require every pre-need
company to keep its books, records, accounts and vouchers in such manner that the
Commission's authorized representatives may readily verify the company's annual
statements and ascertain whether the company is solvent and has complied with the
provisions of this Code or the circulars, instructions, rulings or decisions of the
Commission.
Section 46. Examination. The Commission shall, at least once a year and whenever it
considers that the public interest so demands, cause an examination to be made into
the affairs, financial condition and method of business of every pre-need company,
and of any other person, firm or corporation managing the fund or affairs and/or
property of such pre-need company. Such examination shall be carried in a manner
prescribed by the Commission by rule.
CHAPTER XI
FINANCIAL ACCOUNTING STANDARDS
Section 47. Accounting Rules and Regulations for Pre-need Plans. - The Commission
shall have the authority to make, amend and rescind such accounting rules and
regulations applicable for pre-need companies. The Commission may prescribe,
among other things, the form or forms in which required information shall be set
forth, the items or details to be shown in the components of the financial statements,
and the recognition and measurement basis to be adopted for each account, after
considering the nature of the operation of the pre-need industry. Pre-need companies
shall strictly comply with such accounting rules and regulations as prescribed by the
Commission.
CHAPTER XII
SUSPENSION OR REVOCATION OF AUTHORITY
Section 48. Suspension; Grounds. - If the Commission is of the opinion, upon
examination or other evidence, that any pre-need company is in an unsound
condition, or that it has failed to comply with the provisions of law or regulations, or
that its condition or method of business is such as to render its proceedings
hazardous to the public or to its planholders, or that its paid - up capital stock is
impaired or deficient, the Commission is authorized to suspend or revoke all
certificates of authority granted to such pre-need company, its officers and agents,
after due notice or hearing. No new business shall thereafter be done by such
company or for such company by its agent in the Philippines.
The Commission may not lift the order of suspension or revocation of the said
authority until the concerned pre-need company shall have submitted a viable
business plan showing the companys estimated receipts and disbursements, as well
as the basis therefor for the next succeeding three (3) years.
CHAPTER XIII
CONSERVATORSHIP AND PROCEEDINGS UPON INSOLVENCY
Section 49. Appointment of Conservator. If at any time before or after the
suspension or revocation of the license of a pre-need company as provided in Section
27 hereof, the Commission finds that such company is in a state of continuing inability
or unwillingness to comply with the requirements of the Code and/or orders of the
Commission, a conservator may be appointed to take charge of the assets, liabilities,
and the management of such company, collect all moneys and debts due the
company and exercise all powers necessary to preserve the assets of the company,
reorganize its management, and restore its viability. The conservator shall have the
power to overrule or revoke the actions of the previous management and board of
directors of the said company, any provision of law, or of the articles of incorporation
or bylaws of the company, to the contrary notwithstanding, and such other powers as
the Commission shall deem necessary. The conservator may be another pre-need
company, by officer or officers of such company, or any other competent and
qualified person, firm or corporation. The remuneration of the conservator and other
expenses attendant to the conservation shall be borne by the pre-need company. The
conservator shall not be subject to any action, claim or demand by, or liability to, any
person in respect of anything done or omitted to be done in good faith in the
exercise, or in connection with the exercise, of the powers conferred on the
conservator.
The conservator appointed shall report and be responsible to the Commission until
such time as the Commission is satisfied that the pre-need company can continue to
operate .on its own and the conservatorship shall likewise be terminated should the
Commission, on the basis of the report of the conservator or of his own findings,
determine that the continuance in business of the pre-need company would be
hazardous to planholders and creditors, in which case the provisions of Chapter XVI
shall apply.
Section 50. Proceedings upon Insolvency. - Whenever, upon examination or other
evidence, it shall be disclosed that the condition of any pre-need company is one of
insolvency, or that its continuance in business would be hazardous to its planholders
and creditors, the Commission shall forthwith order the company to cease and desist
from transacting business and shall designate a receiver to immediately take charge of
its trust fund, assets and liabilities, as expeditiously as possible collect and gather all
the assets and administer the same for the benefit of its planholders and creditors,
and exercise all the powers necessary for these purposes including, but not limited to,
bringing suits and foreclosing mortgages in the name of the pre-need company.
The Commission shall thereupon determine within thirty (30) days whether the pre-
need company may be reorganized or otherwise placed in such condition so that it
may be permitted to resume business with safety to its planholders and creditors and
shall prescribe the conditions under which such resumption of business shall take
place as well as the time for fulfillment of such conditions. In such case, the expenses
and fees in the collection and administration of the pre-need company shall be
determined by the Commission and shall be paid out of the assets of such company. If
the Commission shall determine and confirm within the said period that the pre-need
company is insolvent, as defined hereunder, it shall, if the public interest so requires,
order its liquidation, indicate the manner of its liquidation and approve a liquidation
plan and implement it immediately. The Commission shall designate a competent and
qualified person as liquidator who shall take over the functions of the receiver
previously designated and, with all convenient speed, distribute the trust fund
exclusively to the planholders in proportion to termination values of their respective
pre-need plans, convert the assets of the pre-need company to cash, or sell, assign or
otherwise dispose of the same to the planholders, creditors and other parties for the
purpose of settling the liabilities or paying the debts of such company and he may, in
the name of the company. institute such actions as may be necessary in the
appropriate court to collect and recover accounts and assets of the pre-need
company, and to do such other acts as may be necessary to complete the liquidation
as ordered by the Commission.
The provisions of any law to the contrary notwithstanding the actions of the
Commission under this section shall be final and executory, and can be set aside by
the court upon petition by the company and only if there is convincing proof that the
action is plainly arbitrary and made in bad faith. The Commission shall then file the
corresponding answer reciting the proceeding taken and praying for the assistance of
the court in the liquidation of the company. No restraining order or injunction shall be
issued by the court enjoining the Commission from implementing his actions under
this section, unless there is convincing proof that the action of the Commission is
plainly arbitrary and made in bad faith and the petitioner files a bond in favor of the
Commission with the court in an amount fixed by it. The restraining order or
injunction shall be refused or, if granted, shall be dissolved upon filing by the
Commission, if he so desires, of a bond in an amount twice the amount of the bond of
the petitioner conditioned that it will pay the damages which the petition may suffer
by the refusal or the dissolution of the injunction.
The court shall give preference to all proceedings under this chapter. The Commission
shall not be required to pay any fee to any public officer for filing, recording or in any
manner authenticating any paper or instrument relating to the proceedings.
As used in this title, the term "insolvency" shall refer to the financial condition of a
pre-need company that is generally unable to pay its liabilities as they fall due in the
ordinary course of business or that has liabilities that are greater than its assets.
In case of liquidation of a pre-need company, after payment of the cost of the
proceedings, including reasonable expenses and fees incurred in the liquidation to be
allowed by the court, the Commission shall pay all allowed claims against such
company, under order of the court, in accordance with their legal priority.
The receiver or the liquidator, as the case may be, designated under the provisions of
this title shall not be subject to any action, claim or demand by, or liability to, any
person in respect of anything done or omitted to be done in good faith in the
exercise, or in connection with the exercise, of the powers conferred on such receiver
or liquidator.
Section 51. Commission's Power to Assume Trustee Functions. - In cases where the
Commission has ordered the liquidation of the pre-need company, the Commission
may immediately take custody of the trust fund established by the pre-need
company, and the pre-need company shall forthwith deliver custody and an
accounting of the same. Henceforth, the Commission shall have the full power and
control over the fund to satisfy the pre-need company's obligations to planholders.
Section 52. Liquidation. - (a) In cases where the Commission determines that the pre-
need company shall be liquidated, it shall have the power to commence insolvency
proceedings in the appropriate court which shall have jurisdiction over the assets of
the pre-need company, excluding trust fund assets that have been established
exclusively for the benefit of planholders.
(b) Proceedings in court shall proceed independently of proceedings in the
Commission for the liquidation of claims, and creditors of the pre-need company shall
have no personality whatsoever in the Commission proceedings to litigate their claims
against the trust funds.
(c) In liquidating claims of planholders, the Commission shall ensure that all
planholders receive an equitable distribution of their claims, considering the amounts
each has paid into their plans, the termination values due each planholder, the
present value of their claims and other equitable considerations. The only other
claims which may be satisfied by the Commission out of the trust funds are the claims
for trustees fees which are reasonable and can be shown to have been incurred in
the administration of the trust fund, and taxes incurred under trust.
CHAPTER XIV
ADMINISTRATIVE SANCTIONS AND CRIMINAL PENALTIES
Section 53. Administrative Sanctions. (a) The Commission, after proper notice and
hearing, may impose any or all of the sanctions provided in subparagraph (b) of this
section for the following offenses: (1) the making of any untrue statement of a
material fact in a registration statement, information brochure and its supporting
papers and other reports required to be filed with the Commission; (2) the failure to
disclose any material fact required to be stated therein; (3) the refusal to permit any
lawful examination into its affairs; and (4) any violation of this Code or its
implementing rules and regulations.
(b) The imposition of the foregoing administrative sanctions shall be without
prejudice to the filing of criminal charges against the individual responsible for the
violation:
(1) Cease and Desist Order. - The Commission may, motu proprio or upon verified
complaint by any party, issue a cease and desist order (CDO) against any pre-need
company upon proof, after due notice and hearing, of violation of any provision of
this Code: Provided, That such CDO may be issued ex parte if the violation is clearly
apparent, injurious to a number of planholders and requires immediate intervention
by the Commission. The CDO shall specifically enjoin the pre-need company from
performing certain activities and shall impose fines and state the required remedial
actions. All proceedings before the issuance of the CDO shall be confidential;
(2) Suspension of License. - The Commission shall issue a suspension order against the
pre-need company if it fails to comply with the CDO within thirty (30) days from
issuance thereof;
(3) Revocation of License. - The Commission may issue a revocation order of the
license of the pre-need company under suspension for a period of ninety (90) days;
(4) A fine of not less than Ten thousand pesos (P10, 000.00) nor more than One
million pesos (P1, 000,000.00) plus not more than Two thousand pesos (P2, 000.00)
for each day of continuing violation;
(5) Disqualification from being an officer, a member of the board of directors or
principal stockholders of a pre-need company; or
(6) Other penalties within the power of the Commission under existing laws.
(c) The unauthorized sale of pre-need plans shall subject the issuer to a fine as
follows:
(1) First violation - thirty percent (30%) of the aggregate gross pre-need price of the
plans sold;
(2) Second violation - forty percent (40%) of the aggregate gross pre-need price of the
plans sold; and
(3) Third violation - suspension or revocation of license.
Failure to pay fines within three (3) months from receipt of notice to pay will cause
the Commission to issue a suspension order.
Section 54. Criminal Penalties. - The following acts are criminal in nature:
(a) Selling or offering to sell a pre-need plan by unregistered persons shall be
penalized by imprisonment of one (1) year and a fine equivalent to triple the contract
price;
(b) Selling or offering to sell an unregistered pre-need plan or any product that has
pre-need plan features shall be penalized by imprisonment of one (1) year and a fine
equivalent to triple the indicated price;
(c) Soliciting, selling or offering to sell a pre-need plan by means of false or misleading
representation and other fraudulent means shall be penalized by imprisonment of six
(6) years and one (1) day to twelve (12) years and a fine in the amount of Fifty
thousand pesos (P50,000.00) to Five hundred thousand pesos (P500, 000.00);
(d) Any negligent act or omission that is prejudicial or injurious to the planholder shall
be penalized by imprisonment of one (1) year and one (1) day to six (6) years and a
fine in the amount of Fifty thousand pesos (P50, 000.00) to Five hundred thousand
pesos (P500,000.00);
(e) Any fraudulent act or omission that is prejudicial or injurious to the planholder
shall be penalized by imprisonment of six (6) years and one (1) day to twelve (12)
years and a fine in the amount of One hundred thousand pesos (P100, 000.00) to One
million pesos (P1, 000,000.00); and
(f) Willful violation of the provisions of this Code or orders of the Commission:
Provided, That repeated violations shall constitute prima facie evidence against the
offender and shall be penalized by imprisonment of six (6) years and one (1) day to
twelve (12) years and a fine in the amount of One hundred thousand pesos (P100,
000.00) to One million pesos (P1, 000,000.00).
Any person who violates any other provisions of this Code or rules and regulations
promulgated by the Commission under authority thereof shall, upon conviction, be
punished by a fine of not less than Fifty thousand pesos (P50, 000.00) nor more than
Five million pesos (P5,000,000.00) or imprisonment of not less than one (1) year nor
more than fourteen (14) years, or both, at the discretion of the court. Should the
offense be committed by a juridical person, the penalty may, in the discretion .of the
court, be imposed on such juridical entity and upon the officer or officers of the
juridical entity responsible for the violation. If such officer is an alien, he shall, in
addition to the penalties prescribed, be deported without further proceedings after
service of sentence.
CHAPTER XV
MISCELLANEOUS PROVISIONS
Section 55. Claims. - The Commission shall have the primary and exclusive power to
adjudicate any and all claims involving pre-need plans. If the amount of benefits does
not exceed One hundred thousand pesos (P100, 000.00), the decision of the
Commission shall be final and executory.
Section 56. Review of Commission Orders or Decisions. - Any person aggrieved by an
order or decision of the Commission, whether in relation to its settlement of a claim
of a planholder or in the exercise of its regulatory authority, may appeal the order or
decision to the Court of Appeals by petition for review in accordance with the
pertinent provisions of the Rules of Court.
Section 57. Transitory Provisions. - Any pre-need company who, at the time of the
effectivity of this Code has been registered and licensed to sell pre-need plans and
similar contracts, shall be considered registered and licensed under the provision of
this Code and its implementing rules and regulations and shall be subject to and
governed by the provisions hereof: Provided, however, That compliance for all
sections with the exception of Section 21, may be deferred for such reasonable time
as the Commission may determine but not to exceed one (1) year unless otherwise
specifically provided in this Code. With respect to Chapter IV, compliance will cover all
new plans sold one hundred twenty (120) days after the effectivity of this law.
Violations committed prior to the effectivity of this Code shall be punished in
accordance with the provisions of the laws then in force.
The Commission shall constitute forthwith a special team of experts to handle all
matters related to the pre-need industry and shall secure and transfer all the files and
records of the SEC to the Insurance Commission within ninety (90) days after the
effectivity of this Code.
Notwithstanding any provision to the contrary, all pending claims, complaints and
cases filed with the SEC shall be continued in its full and final conclusion. It shall also
assist the Department of Justice in criminal cases involving matters related to the pre-
need industry.
Section 58. Implementing Rules and Regulations. - The Commission shall adopt such
rules and regulations for the proper and effective implementation of this Code within
sixty (60) days from approval hereof. The Commission shall publish once a week for
two (2) consecutive weeks in two (2) newspapers of general circulation the, rules and
regulations promulgated pursuant to the preceding section.
Section 59. Effect on Existing Law. Any person, natural or juridical, or pre-need plan,
authorized, licensed or registered by the SEC under the Securities Regulation Code
shall be deemed to have been licensed or registered under the provisions of this
Code. Such person or plan shall, unless otherwise herein provided, be given a period
of one (1) year from the effectivity of this Code within which to comply with the same.
The rights and remedies provided by this Code shall be in addition to any and all other
rights and remedies that exist under existing laws.
Section 60. Separability Clause. - Should any provision of this Act or the application
thereof to any person or circumstance be held invalid, the other provisions or sections
of this Act shall not be affected thereby.
Section 61. Repealing Clause. - All acts, laws, executive orders and/or rules and
regulations or any part thereof that are inconsistent with the provisions of this Code
are hereby repealed or modified accordingly.
Section 62. Effectivity. - This Act shall take effect upon its approval.
Approved,
PROSPERO C. NOGRALES
Speaker of the House of Representatives JUAN PONCE ENRILE
President of the Senate
This Act which is a consolidation of Senate Bill No. 2077 and House Bill No. 6407 was
finally passed by the Senate and the House of Representatives on September 30, 2009
and September 29, 2009, respectively.
MARILYN B. BARUA-YAP
Secretary General House of Representatives EMMA LIRIO-REYES
Secretary of the Senate
Approved: DEC. 03, 2009
Republic Act No. 3591
REPUBLIC ACT NO. 3591 AN ACT ESTABLISHING THE PHILIPPINE DEPOSIT
INSURANCE CORPORATION, DEFINING ITS POWERS AND DUTIES AND FOR OTHER
PURPOSES
Section 1. There is hereby created a Philippine Deposit Insurance Corporation
hereinafter referred to as the Corporation which shall insure, as herein provided,
the deposits of all banks which are entitled to the benefits of insurance under this Act,
and which shall have the powers hereinafter granted.
Sec. 2. The powers and functions of the Corporation shall be vested in a board of
directors consisting of three (3) members one of whom shall be the governor of the
Central Bank of the Philippines and two of whom shall be citizens of the Republic of
the Philippines to be appointed by the President of the Philippines with the advice
and consent of the Commission on Appointments. One of the appointive members
shall be the Chairman of the Board of Directors of the Corporation who shall be
appointed on a full time basis for a term of six (6) years at an annual salary of twenty-
four thousand pesos (P24,000.00). The other appointive member, who shall be
appointed for a term of four (4) years and the Governor of the Central Bank shall each
receive a per diem of not exceeding fifty pesos (P50.00) for each day of meeting
actually attended by them but in no case shall each of them receive more than five
hundred pesos (P500.00) a month. In the event of a vacancy in the Office of the
Governor of the Central Bank of the Philippines, and pending the appointment of his
successor or during the absence of the Governor, the Acting Governor of the Central
Bank of the Philippines shall act as member of the Board of Director. In the event of a
vacancy in the Office of the Chairman of the Board of Directors and pending the
appointment of his successor, the Governor of the Central Bank of the Philippines
shall act as Chairman. The members of the Board of Directors shall be ineligible during
the time they are in office and for a period of two years thereafter to hold any office,
position or employment in any insured bank, except that this restriction shall not
apply to any member who has served the full term for which he was appointed. No
member of the Board of Directors shall be an officer or director of any insured bank;
and before entering upon his duties as member of the Board of Directors he shall
certify under oath that he has complied with this requirement and such certification
shall be filed with the Secretary of the Board of Directors. Any vacancy in the Board
created by the death, resignation, or removal of an appointive member shall be filled
by the appointment of new member to complete the unexpired period of the term of
the member concerned.
The Board of Directors shall have the authority:
1. To prepare and issue rules and regulations as it considers necessary for the
effective discharge of its responsibilities;
2. To direct the management, operations and administration of the Corporation;
3. To appoint, fix the remunerations and remove all officers and employees of the
Corporation, subject to the Civil Service Law; and
4. To authorize such expenditures by the Corporation as are in the interest of the
effective administration and operation of the Corporation.
Sec. 3. As used in this Act -
(a) The term Board of Directors means the Board of Directors of the Corporation.
(b) The term Bank and Banking Institution shall be synonymous and
interchangeable and shall include banks, commercial banks, savings banks, mortgage
banks, rural banks, development banks, cooperative banks, trust companies, branches
and agencies in the Philippines of foreign banks and all other companies,
corporations, partnership performing banking functions in the Philippines.
(c) The term receiver includes a receiver, liquidating agent, conservator,
commission, person, or other agency charged by law with the duty of winding up the
affairs of a bank.
(d) The term insured bank means any bank the deposit of which are insured in
accordance with the provision of this Act;
(e) The term non-insured bank means any bank the deposit of which are not
insured.
The term deposit means the unpaid balance of money or its equivalent received by
a bank in the usual course of business and for which it has given or is obliged to give
credit to a commercial, checking, savings, time or thrift account or which is evidenced
by its certificate of deposit, and trust funds held by such bank whether retained or
deposited in any department of such bank or deposited in another bank, together
with such other obligations of a bank as the Board of Directors shall find and shall
prescribe by regulations to be deposit liabilities of the Bank: Provided, That any
obligation of a bank which is payable at the office of the bank located outside of the
Philippines shall not be a deposit for any of the purposes of this Act or included as
part of the total deposits or of the insured deposit: Provided, further, That any
insured bank which is incorporated under the laws of the Philippines which maintains
a branch outside the Philippines may elect to include for insurance its deposit
obligation payable only at such branch.
(g) The term insured deposit means the net amount due to any depositor for
deposits in an insured bank (after deducting offsets) less any part thereof which is in
excess of P10,000. Such net amount shall be determined according to such
regulations as the Board of Directors may prescribe and in determining the amount
due to any depositor there shall be added together all deposits in the bank
maintained in the same capacity and the same right for his benefit or in his own name
or in the names of others.
(h) The term transfer deposit means a deposit in an insured bank made available to
a depositor by the Corporation as payment of insured deposit of such depositor in a
closed bank and assumed by another insured bank.
(i) The term trust funds means funds held by an insured bank in a fiduciary capacity
and includes without being limited to, funds held as trustee, executor, administrator,
guardian, or agent.
Sec. 4. Any bank or banking institution which is engaged in the business of receiving
deposits as herein defined on the effective date of this Act, or which thereafter may
engage in the business of receiving deposits, may insure its deposit liabilities with the
Corporation. Before approving the application of such bank to become an insured
bank, the Board of Directors shall give consideration to the factors enumerated in
Section 5 and shall determine upon the basis of a thorough examination of such bank,
that its assets in excess of its capital requirements are adequate to enable it to meet
all its liabilities to depositors and other creditors as shown by the books of the bank.
Sec. 5. The factors to be considered by the Board of Directors under the preceding
section shall be the following: the financial history and condition of the Bank, the
adequacy of its capital structure, its future earning prospects, the general character of
its management, the convenience and needs of the community to be served by the
Bank and whether or not its corporate powers are consistent with the purposes of this
Act.
Sec. 6. (a) The assessment rate shall be determined by the Board of Directors:
Provided, That the assessment rate shall not exceed one-twelfth of one per centum
per annum. The semiannual assessment for each insured bank shall be in the amount
of the product of one-half (1/2) the assessment rate multiplied by the assessment
base. The assessment base shall be the amount of the liability of the bank for
deposits, according to the definition of the term deposit in and pursuant to
subsection (f) of Section 3 without any deduction for indebtedness of depositors:
Provided, further, That the bank -
(1) may deduct (i) from the deposit balance due to an insured bank the deposit
balance due from such insured bank (other than trust funds deposited by it in such
bank) which is subject to an immediate withdrawal; and (ii) cash items as determined
by either of the following methods, at the option of the bank: (aa) by multiplying by 2
the total of the cash items forwarded for collection on the assessment base days
(being the days on which the average deposits are computed) and cash items held for
clearings at the close of business on said days, which are in the process of collection
and which the bank has paid in the regular course of business or credited to deposit
accounts; or (bb) by deducting the total of cash items forwarded for collection on the
assessment base days and cash items held for clearing at the close of business on said
days, which are in the process of collection and which the bank has paid in the regular
course of business or credited to deposit accounts, plus such uncollected items paid
or credited on preceding days which are in the process of collection: Provided, That
the Board of Directors may define the terms cash items, process of collection, and base of the bank as of the close of business on the preceding June thirty or December
uncollected items and shall fix the maximum period for which any such item may be
deducted; and
(2) may exclude from its assessment base (i) drafts drawn by it on deposit accounts in
other banks which are issued in the regular course of business; and the amount of
devices or authorizations issued by it for cash letters received, directing that its
deposit account in the sending bank be charged with the amount thereof; and (ii) cash
funds which are received and held solely for the purpose of securing a liability to the
bank but not in an amount in excess of such liability, and which are not subject to
withdrawal by the obligor and are carried in a special non-interest bearing account
designated to properly show their purpose.
Each insured bank, as a condition to the right to make any such deduction or exclusion
in determining its assessment base, shall maintain such records as will readily permit
verification of the correctness thereof. The semiannual assessment base for one
semiannual period shall be the average of the assessment base of the bank as of the
close of business on March thirty-one and June thirty, and the semiannual assessment
base for the other semiannual period shall be the average of the assessment base of
the bank as of the close of business on September thirty and December thirty-one:
Provided, That when any of said days is a nonbusiness day or a legal holiday, either
National or Provincial, the preceding business day shall be used. The certified
statements required to be filed with the Corporation under subsections (b) and (c) of
this section shall be in such form and set forth such supporting information as the
Board of Directors shall prescribe. The assessment payments required from insured
banks under subsections (b) and (c) of this section shall be made in such manner and
at such time or times as the Board of Directors shall prescribe, provided the time or
times so prescribed shall not be later than sixty days after filing the certified
statement setting forth the amount of assessment.
(b) On or before the 15th of July of each year, each insured bank shall file with the
Corporation a certified statement showing for the six months ending on the preceding
June thirty the amount of the assessment base and the amount of the semiannual
assessment due to the Corporation for the period ending on the following December
thirty-one, determined in accordance with subsection (a) of this section, which shall
contain or be verified by a written declaration that it is made under the penalties of
perjury. Each insured bank shall pay to the Corporation the amount of the semiannual
assessment it is required to certify. On or before the 15th day of January of each year,
each insured bank shall file with the Corporation a similar certified statement for the
six months ending on the preceding December thirty-one and shall pay to the
Corporation the amount of the semiannual assessment for the period ending on the
following June thirty which it is required to certify.
(c) Each bank which becomes an insured bank shall not be required to file any
certified statement or pay any assessment for the semiannual period in which it
becomes an insured bank. On the expiration of such period, each such bank shall
comply with the provisions of subsection (b) of this section except that the
semiannual assessment base for its first certified statement shall be the assessment
thirty-one, whichever is applicable, determined in accordance with subsection (a) of
this section. If such bank has assumed the liabilities for deposits of another bank or
banks, it shall include such liabilities in its assessment base. The first certified
statement shall show as the amount of the first semiannual assessment due to the
Corporation, an amount equal to the product of one-half of the annual assessment
rate multiplied by such assessment base.
(d) As of December thirty-one nineteen hundred sixty-four, and as of December
thirty-one of each calendar year thereafter, the Corporation shall transfer 40 per
centum of its net assessment income to its capital account and the balance of the net
assessment income shall be credited pro rata to the insured banks based upon the
assessment of each bank becoming due during said calendar year. Each year such
credit shall be applied by the Corporation toward the payment of the total
assessment becoming due for the semiannual assessment period beginning the next
ensuing July 1 and any excess credit shall be applied upon the assessment next
becoming due. The term net assessment income as used therein means the total
assessments which becomes due during the calendar year less (1) the operating costs
and expenses of the Corporation for the calendar year; (2) additions to reserve to
provide for insurance losses during the calendar year, except that any adjustments to
reserve which result in a reduction of such reserve shall be added; and (3) the
insurance losses sustained in said calendar year plus losses from any preceding years
in excess of such reserves. If the above deductions exceed in amount the total
assessments which become due during the calendar year, the amount of such excess
shall be restored by deduction from total assessments becoming due in subsequent
years.
(e) The Corporation (1) may refund to an insured bank any payment of assessment in
excess of the amount due to the Corporation or (2) may credit such excess toward the
payment of the assessment next becoming due from such bank and upon succeeding
assessments until the credit is exhausted.
Any insured bank which fails to file any certified statement required to be filed by it in
connection with determining the amount of any assessment payable by the bank to
the Corporation may be compelled to file such statement by mandatory injunction or
other appropriate remedy in a suit brought for such purpose by the Corporation
against the bank and any officer or officers thereof in any court of the Philippines of
competent jurisdiction in which such bank is located.
(g) The Corporation, in a suit brought in any court of competent jurisdiction, shall be
entitled to recover from any insured bank the amount of any unpaid assessment
lawfully payable by such insured bank to the Corporation, whether or not such bank
shall have filed any such certified statement and whether or not suit shall have been
brought to compel the bank to file any such statement. No action or proceeding shall
be brought for recovery of any assessment due to the Corporation or for the
recovering of any amount paid to the Corporation in excess of the amount due to it,
unless such action or proceeding shall have been brought within five years after the
right accrued for which the claim is made, except where the insured bank has made or
filed with the Corporation a false or fraudulent certified statement with the intent of
evade, in a whole or in part, the payment of assessment, in which case the claim shall
not have been deemed to have accrued until the discovery by the Corporation that
the certified statement is false fraudulent.
(h) Should any insured bank fail or refuse to pay any assessment required to be paid
by such bank under any provision of this Act, and should the bank not correct such
failure or refusal within thirty days after written notice has been given by the
Corporation to an officer of the bank, citing this subsection, and stating that the bank
has failed or refused to pay as required by law the insured status of such bank shall be
terminated by the Board of Directors. The remedies provided in this subsection and in
the two preceding subsections shall not be construed as limiting any other remedies
against an insured bank but shall be in addition thereto.
(i) Trust funds held by an insured bank in a fiduciary capacity whether held in trust or
deposited in any other department or in another bank shall be insured like other
forms of deposits, in an amount not to exceed P10,000 for each trust estate, and
when deposited by the fiduciary bank in another insured bank such trust funds shall
be similarly insured to the fiduciary bank according to the trust estates represented.
Notwithstanding any other provision of this Act, such insurance shall be separate from
the additional to that covering other deposits of the owners of such trust funds or the
beneficiaries of such trust estates: Provided, That where the fiduciary bank deposits
any of such trust funds in other insured banks, the amount so held by other insured
banks on deposit shall not for the purpose of any certified statement required under
subsections (b) and (c) of this section be considered to be a deposit liability of the
fiduciary bank, but shall be considered to be a deposit liability of the bank in which
such funds are so deposited by such fiduciary bank. The Board of Directors shall have
the power by regulation to prescribe the manner of reporting and of depositing such
trust funds.
Sec. 7. (a) Any insured bank may, upon not less than ninety days, written notice to the
Corporation, and to the Development Bank of the Philippines if it owns or holds as
pledges any preferred stock, capital notes, or debentures of such bank, terminate its
status as an insured bank. Whenever the Board of Directors shall find that an insured
bank or its directors or trustees have continued unsafe or unsound practices in
conducting the business of the bank or which have knowingly or negligently permitted
any of its officers or agents to violate any provisions of any law or regulation to which
the insured bank is subject, the Board of Directors shall first give to the Central Bank
of the Philippines a statement with respect to such practices or violations for the
purpose of securing the correction thereof and shall give a copy thereof to the bank.
Unless such correction shall be made within one hundred twenty days or such shorter
period of time as the Central Bank of the Philippines shall require, the Board of
Directors, if it shall determine to proceed further, shall give to the bank not less than
thirty days written notice of intention to determine the status of the bank as an
insured bank, and shall fix a time and place for a hearing before the Board of Directors
or before a person designated by it to conduct such hearing, at which evidence may
be produced, and upon such evidence the Board of Directors shall make written
findings which shall be conclusive. Unless the bank shall appear at the hearing by a
duly authorized representative, it shall be deemed to have consented to the
termination of its status as an insured bank. If the Board of Directors shall find that
any unsafe or unsound practice or violation specified in such notice has been
established and has not been corrected within the time above prescribed in which to
make such correction, the Board of Directors may order that the insured status of the
bank be terminated on a date subsequent to such finding and to the expiration of the
same specified in such notice of intention. The Corporation may publish notice of such
termination and the bank shall give notice of such termination to each of the
depositors at his last address of record on the books of the bank, in such a manner
and at such at time as the Board of Directors may find to be necessary and may order
for the protection of the depositors. After the termination of the insured status of any
bank under the provisions of this subsection, the insured deposits of each depositor in
the bank on the date of such termination, less all subsequent withdrawals from any
deposits of such depositor, shall continue for a period of two years to be insured, and
the bank shall continue to pay to the Corporation assessments as in the case of an
insured bank during such period. No additions to any such deposits and no new
deposits in such bank made after the date of such termination shall be insured by the
Corporation, and the bank shall not advertise or hold itself out as having insured
deposits unless in the same connection it shall also state equal prominence that such
additions to deposits and new deposits made after such date are not so insured. Such
bank shall, in all other respects, be subject to the duties and obligations of an insured
bank for the period of two years from the date of such termination, and in the event
that such bank shall be closed on account of insolvency within such period of two
years, the Corporation shall have the same powers and rights with respect to such
bank as in case of an insured bank.
(b) Notwithstanding any other provision of law, whenever the Board of Directors shall
determine that an insured banking institution is not engaged in the business of
receiving deposits, the Corporation shall notify the banking institution that its insured
status will terminate at the expiration of the first full semiannual assessment period
following such notice. A finding by the Board of Directors that a banking institution is
not engaged in the business of receiving deposits shall be conclusive. The Board of
Directors shall prescribe the notice to be given by the banking institution of such
termination and the Corporation may publish notice thereof. Upon the termination of
the insured status of any such banking institution, its deposits shall thereupon cease
to be insured and the banking institution shall thereafter be relieved of all future
obligations to the Corporation, including the obligation to pay future assessments.
(c) Whenever the liabilities of an insured bank for deposits shall have been assumed
by another insured bank or banks, the insured status of the bank whose liabilities are
so assumed shall terminate on the date of receipt by the Corporation of satisfactory
evidence of such assumption with like effect as if its insured status had been
terminated on said date by the Board of Directors after proceedings under subsection
(a) of this section: Provided, That if the bank whose liabilities are so assumed gives to
its depositors notice of such assumption within thirty days after such assumption
takes effect, by publication or by any reasonable means, in accordance with
regulations to be prescribed by the Board of Directors, the insurance of its deposits
shall terminate at the end of six months from the date such assumption takes effect.
Such bank shall be subject to the duties and obligations of an insured bank for the
period its deposits are insured: Provided, further, That if the deposits are assumed by
a newly insured bank, the bank whose deposits are assumed shall not be required to
pay any assessment upon the deposits which have been so assumed after the
semiannual period in which the assumption takes effect.
Sec. 8. The Corporation as a corporate body shall have the power -
First. - To adopt and use a corporate seal.
Second. - To have succession until dissolved by an Act of Congress.
Third. - To make contracts.
Fourth. - To sue and be sued, complain and defend, in any court of law in the
Philippines. All suits of a civil nature to which the corporation shall be a part shall be
deemed to arise under the laws of the Philippines. No attachment or execution shall
be issued against the Corporation or its property before final judgment in any suit,
action, or proceeding in any court. The Board of Directors shall designate an agent
upon whom service of process may be made in any province or city or jurisdiction in
which any insured bank is located.
Fifth. - To appoint by its Board of Directors such officers and employees as are not
otherwise provided for in this Act to define their duties, fix their compensation,
require bonds of them and fix penalty thereof and to dismiss such officers and
employees for cause.
Sixth. - To prescribe, by its Board of Directors, by-laws not inconsistent with law,
regulating the manner in which its general business may be conducted, and the
privileges granted to it by law may be exercised and enjoyed.
Seventh. - To exercise by its Board of Directors, or duly authorized officers or agents,
all powers specifically granted by the provisions of this Act, and such incidental
powers as shall be necessary to carry on the powers so granted.
Eighth. - To make examination of and to require information and reports from banks,
as provided in this Act.
Ninth. - To act as receiver.
Tenth. - To prescribe by its Board of Directors such rules and regulations as it may
deem necessary to carry out the provisions of this Act.
Sec. 9. (a) The Board of Directors shall administer the affairs of the Corporation fairly
and impartially and without discrimination. the Corporation shall be entitled to the
free use of Philippine mails in the same manner as the other offices of the national
government.
(b) The Board of Directors shall appoint examiners who shall have power, on behalf of
the Corporation to examine any insured bank or any bank making application to
become an insured bank, whenever in the judgment of the Board of Directors an
examination of the bank is necessary. Each such examiner shall have power to make a
thorough examination of all the affairs of the bank and in doing so he shall have
power to administer oaths and to examine and take and preserve the testimony of
any of the officers and agents thereof, and shall make a full and detailed report of the
condition of the bank to the Corporation. The Board of Directors in like manner shall
appoint claim agents who shall have power to investigate and examine all claims for
insured deposits and transferred deposits. Each claim agent shall have power to
administer oaths and to examine under oath and take and preserve the testimony of
any person relating to such claims.
(c) Each insured bank shall make to the Corporation reports of condition in such form
and at such times as the Board of Directors may require such reports to be published
in such manner, not inconsistent with any applicable law, as it may direct. Every such
bank which fails to make or publish any such report within such time, not less than
five days, as the Board of Directors may require, shall be subject to a penalty of not
more than P100 for each day of such failure recoverable by the Corporation of its use.
(d) The Corporation shall have access to reports of examination made by, and reports
of condition made to the Superintendent of Banks or the Governor of the Central
Bank of the Philippines, and the Superintendent of Banks or the Governor of the
Central Bank of the Philippines shall also have access to reports of examination made
on behalf of, and reports of condition made to the Corporation.
(e) The members of the Board of Directors and the officers and employees of the
Corporation are prohibited from revealing any information relating to the condition or
business of any insured bank and any member of the Board of Directors, officer or
employee of the Corporation violating this provision shall be held liable for any loss or
injury suffered by the Corporation.
Sec. 10. (a) A permanent insurance fund in the amount of P5,000,000 to be
appropriated from the General Fund is hereby created to be used by the Corporation
to carry out the purposes of this Act: Provided, That the maximum amount of the
insured deposit of any depositor shall be P10,000.
(b) For the purposes of this Act an insured bank shall be deemed to have been closed
on account of insolvency in any case in which it has been closed for the purpose of
liquidation without adequate provision being made for payment of its depositors.
(c) Whenever an insured bank shall have been closed on account of insolvency,
payment of the insured deposits in such bank shall be made by the Corporation as
soon as possible either (1) by cash or (2) by making available to each depositor a
transferred deposit in another insured bank in an amount equal to the insured deposit
of such depositor: Provided, That the Corporation, in its discretion, may require proof
of claims to be filed before paying the insured deposit, and that in any case where the
Corporation is not satisfied as to the validity of a claim for an insured deposit, it may
require the final determination of a court of competent jurisdiction before paying
such claim.
(d) The Corporation, upon the payment of any depositor as provided for in subsection
(c) of this section shall be subrogated to all rights of the depositor against the closed
bank to the extent of such payment. Such subrogation shall include the right on the
part of the Corporation to receive the same dividends from the proceeds of the assets
of such closed bank and recoveries on account of stockholders liability as would have
been payable to the depositor on a claim for the insured deposit, but such depositor
shall retain his claim for any uninsured portion of his deposit.
Sec. 11. (a) Payment of an insured deposit to any person by the Corporation shall
discharge the Corporation, and payment of a transferred deposit to any person by the
new bank or by an insured bank in which a transferred deposit has been made
available shall discharge the Corporation and such new bank or other insured bank, to
the same extent that payment to such person by the closed bank would have
discharged it from liability for the insured deposit.
(b) Except as otherwise prescribed by the Board of Directors, neither the Corporation
nor such other insured bank shall be required to recognize as the owner of any
portion of a deposit appearing on the records of the closed bank under a name other
than that of the claimant, any person whose name or interest as such owner is not
disclosed on the records of such closed bank as part owner of said deposit, if such
recognition would increase the aggregate amount of the insured deposits in such
closed bank.
(c) The Corporation may withhold payment of such portion of the insured deposit of
any depositor in a closed bank as may be required to provide for the payment of any
liability of such depositor as a stockholder of the closed bank, or of any liability of
such depositor to the closed bank or its receiver, which is not offset against the claim
due from such bank, pending the determination and payment of such liability by such
depositor or any other person liable therefor.
(d) If, after the Corporation shall have given at least three months notice to the
depositor by mailing a copy thereof to his last-known address appearing on the
records of the closed bank, any depositor in the closed bank shall fail to claim his
insured deposit from the Corporation within eighteen months after the Monetary
Board of the Central Bank of the Philippines or the proper court shall have ordered
the conversion of the assets of such closed bank into money, all rights of the
depositor against the Corporation with respect to the insured deposit shall be barred,
and all rights of the depositor against the closed bank and its shareholders or the
receivership estate to which the Corporation may have become subrogated, shall
thereupon revert to the depositor.
Sec. 12. (a) Money of the Corporation not otherwise employed shall be invested in
obligations of the Republic of the Philippines or in obligations guaranteed as to
principal and interest by the Republic of the Philippines: Provided, That the
Corporation shall not sell or purchase any such obligations for its own account and in
its own right and interest, at any one time aggregating in excess of P100,000, without
the approval of the Insurance Commissioner: And Provided, further, That the
Insurance Commissioner may waive the requirement of his approval with respect to
any transaction or classes of transactions subject to the provisions of this subsection
for the period of time and under such conditions as he may determine.
(b) The banking or checking accounts of the Corporation shall be kept with the Central
Bank of the Philippines, with the Philippine National Bank, or with any other bank
designated as depositary or fiscal agent of the Philippine Government.
(c) When the Corporation has determined that an insured bank is in danger of closing,
in order to prevent such closing, the Corporation, in the discretion of its Board of
Directors is authorized to make loans to, or purchase the assets of, or make deposits
in, such insured bank, upon such terms and conditions as the Board of Directors may
prescribe, when in the opinion of the Board of Directors the continued operation of
such bank is essential to provide adequate banking service in the community. Such
loans and deposits may be in subordination to the rights of depositors and other
creditors.
Sec. 13. The corporation is authorized to borrow from the Central Bank of the
Philippines and the Central Bank is authorized and directed to loan the Corporation on
such terms as may be fixed by the Corporation and the Central Bank, such funds as in
the judgment of the Board of Directors of the Corporation are from time to time
required for insurance purposes not exceeding in the aggregate of one hundred
million pesos outstanding at any one time: Provided, That the rate of interest to be
charged in connection with any loan made pursuant to this section shall not be less
than the current average rate on outstanding marketable and nonmarketable
obligations of the Republic of the Philippines as of the last day of the month preceding
the making of such loan. Any such loan shall be used by the Corporation solely in
carrying out its functions with respect to such insurance.
Sec. 14. All notes, debentures, bonds, or such obligations issued by the Corporation
shall be exempt from taxation.
Sec. 15. (a) The Corporation shall annually make a report of its operations to the
Congress as soon as practicable after the 1st day of January in each year.
(b) The financial transactions of the Corporation shall be audited by the General
Auditing Office in accordance with the principles and procedures applicable to
commercial corporate transactions and under such rules and regulations as may be
prescribed by the Auditor General. The audit shall be conducted at the place or places
where accounts of the Corporation are normally kept. The representatives of the
General Auditing Office shall have access to all books, accounts, records, reports, files,
and all other papers, things, or property belonging to or in use by the Corporation
pertaining to its financial transactions and necessary to facilitate the audit, and they
shall be afforded full facilities for verifying transactions with the balances or securities
held by depositaries, fiscal agents, and custodians. All such books, accounts, records,
reports, files, papers, and property of the Corporation shall remain in possession and
custody of the Corporation.
(c) A report of the Audit for each fiscal year ending on June 30 shall be made by the
Auditor General to the Congress not later than January 15 following the close of such
fiscal year. On or before December 15 following such fiscal year the Auditor General
shall furnish the Corporation a short form report showing the financial position of the
Corporation at the close of fiscal year. The report to the Congress shall set forth the
scope of the audit and shall include a statement of assets and liabilities and surplus or
deficit; a statement of surplus or deficit analysis; a statement of income and
expenses; a statement of sources and application of funds and such comments and
information as may be deemed necessary to inform Congress of the financial
operations and condition of the Corporation, together with such recommendations
with respect thereto as the Auditor General may deem advisable. The report shall also
show specifically any program, expenditure, or other financial transactions or
undertaking observed in the course of the audit, which in the opinion of the Auditor
General, has been carried on or made without authority of law. A copy of each report
shall be furnished to the President of the Philippines, to the Governor of the Central
Bank of the Philippines, and to the Corporation at the time submitted to the Congress.
Sec. 16. (a) Every insured bank shall display at each place of business maintained by it
a sign or signs, and shall include a statement to the effect that its deposits are insured
by the Corporation in all of its advertisements: Provided, That the Board of Directors
may exempt from this requirement advertisements which do not relate to deposits or
when it is impractical to include such statement therein. The Board of Directors shall
prescribe by regulation the forms of such signs and the manner of display and the
substance of such statements and the manner of use. For each day an insured bank
continues to violate any provisions of this subsection or any lawful provisions of said
regulations, it shall be subject to a penalty of not more than P100, which the
Corporation may recover for its use.
(b) No insured bank shall pay any dividend on its capital stock or interest on its capital
notes or debentures (if such interest is required to be paid only out of net profits) or
distribute any of its capital assets while it remains in default in the payment of any
assessment due to the Corporation; and any director or officer of any insured bank
who participates in the declaration or payment of any such dividend or interest or in
any such distribution shall, upon conviction, be fined not more than P1,000 or
imprisoned not more than one year, or both: Provided, That if such default is due to a
dispute between the insured bank and the Corporation over the amount of such
assessment, this subsection shall not apply, if such bank shall deposit security
satisfactory to the Corporation of payment upon final determination of the issue.
(c) Without prior written consent by the Corporation, no insured bank shall (1) merge
or consolidate with any noninsured bank or institution or convert into a noninsured
bank or institution or (2) assume liability to pay any deposits made in, or similar
liabilities of, any noninsured bank or institution or (3) transfer assets to any
noninsured bank or institution in consideration of the assumption of liabilities for any
portion of the deposits made in such insured bank.
(d) The Corporation may require any insured bank to provide protection and
indemnity against burglary, defalcation, and other similar insurable losses. Whenever
any insured bank refuses to comply with any such requirement the Corporation may
contract for such protection and indemnity and add the cost thereof to the
assessment otherwise payable by such bank.
(e) Any insured bank which wilfully fails or refuses to file any certified statement or
pay any assessment required under this Act shall be subject to a penalty of not more
than P100 for each day that such violations continue, which penalty the Corporation
may recover for its use: Provided, That this subsection shall not be applicable under
the circumstances stated in the provisions of subsection (b) of this section.

Sec. 17. Except with the written consent of the Corporation, no person shall serve as a
director, officer, or employee of an insured bank who has been convicted, or who is
hereafter convicted, of any criminal offense involving dishonesty or a breach of trust.
For each willful violation of this prohibition, the bank involved shall be subject to a
penalty of not more than P100 for each day this prohibition is violated, which the
Corporation may recover for its use.

Sec. 18. If any provision or section of this Act or the application thereof to any person
or circumstances is held invalid, the other provisions or sections of this Act, in the
application of such provision or section to other persons or circumstances shall not be
affected thereby.

Sec. 19. All Acts or parts of Acts and executive orders, administrative orders, or parts
thereof which are inconsistent with the provisions of this Act are hereby repealed.

Sec. 20. This Act shall take effect upon approval. The Philippine Deposit Insurance
Corporation shall commence business upon organization of the Board of Directors and
certification by the Treasurer of the Philippines that the Permanent Insurance Fund
has been appropriated.

Approved: June 22, 1963