December 18, 1974 is received therefore, shall not be

deemed conclusive to show that the

ORDAINING AND making thereof does not constitute the
doing or transacting of an insurance
INSTITUTING AN business.
INSURANCE CODE OF (3) As used in this code, the
THE PHILIPPINES term "Commissioner" means
the "Insurance Commissioner".
I, Ferdinand E. Marcos, President of
the Philippines , by virtue of the powers Chapter 1
vested in me by the Constitution, do THE CONTRACT OF INSURANCE
hereby decree and order the following: Title 1
GENERAL PROVISIONS WHAT MAY BE INSURED
Sec. 1. This Decree shall be known Sec. 3. Any contingent or unknown
as "The Insurance Code". event, whether past or future, which
may damnify a person having an
Sec. 2. Whenever used in this Code, the insurable interest, or create a liability
following terms shall have the respective against him, may be insured against,
meanings hereinafter set forth or subject to the provisions of this chapter.
indicated, unless the context otherwise
requires: The consent of the husband is not
necessary for the validity of an
(1) A "contract of insurance" is an insurance policy taken out by a married
agreement whereby one undertakes for a woman on her life or that of her
consideration to indemnify another children.
against loss, damage or liability arising
from an unknown or contingent event. Any minor of the age of eighteen years
or more, may, notwithstanding such
A contract of suretyship shall be deemed minority, contract for life, health and
to be an insurance contract, within the accident insurance, with any insurance
meaning of this Code, only if made by a company duly authorized to do business
surety who or which, as such, is doing an in the Philippines, provided the
insurance business as hereinafter insurance is taken on his own life and
provided. the beneficiary appointed is the minor's
(2) The term "doing an insurance estate or the minor's father, mother,
business" or "transacting an insurance husband, wife, child, brother or sister.
business", within the meaning of this The married woman or the minor herein
Code, shall include: allowed to take out an insurance policy
(a) making or proposing to make, may exercise all the rights and privileges
as insurer, any insurance of an owner under a policy.
contract; All rights, title and interest in the policy
(b) making or proposing to make, of insurance taken out by an original
as surety, any contract owner on the life or health of a minor
of suretyship as a vocation and shall automatically vest in the minor
not as merely incidental to any upon the death of the original owner,
other legitimate business or unless otherwise provided for in the
activity of the surety; policy.
(c) doing any kind of business, Sec. 4. The preceding section does not
including a reinsurance business, authorize an insurance for or against the
specifically recognized as drawing of any lottery, or for or against
constituting the doing of an any chance or ticket in a lottery drawing
insurance business within the a prize.
meaning of this Code; Sec. 5. All kinds of insurance are subject
(d) doing or proposing to do any to the provisions of this chapter so far as
business in substance equivalent the provisions can apply.
to any of the foregoing in a Title 2
manner designed to evade the PARTIES TO THE CONTRACT
provisions of this Code.
Sec. 6. Every person, partnership,
In the application of the provisions of association, or corporation duly
this Code the fact that no profit is authorized to transact insurance
derived from the making of insurance business as elsewhere provided in this
contracts, agreements or transactions or code, may be an insurer.
that no separate or direct consideration
Sec. 7. Anyone except a public enemy Sec. 13. Every interest in property,
may be insured. whether real or personal, or any relation
Sec. 8. Unless the policy otherwise thereto, or liability in respect thereof, of
provides, where a mortgagor of property such nature that a contemplated peril
effects insurance in his own name might directly damnify the insured, is an
providing that the loss shall be payable insurable interest.
to the mortgagee, or assigns a policy of Sec. 14. An insurable interest in
insurance to a mortgagee, the insurance property may consist in:
is deemed to be upon the interest of the (a) An existing interest;
mortgagor, who does not cease to be a
party to the original contract, and any (b) An inchoate interest founded
act of his, prior to the loss, which would on an existing interest; or
otherwise avoid the insurance, will have (c) An expectancy, coupled with an
the same effect, although the property is existing interest in that out of
in the hands of the mortgagee, but any which the expectancy arises.
act which, under the contract of
Sec. 15. A carrier or depository of any
insurance, is to be performed by the
kind has an insurable interest in a thing
mortgagor, may be performed by the
held by him as such, to the extent of his
mortgagee therein named, with the same
liability but not to exceed the value
effect as if it had been performed by the
thereof.
mortgagor.
Sec. 16. A mere contingent or expectant
Sec. 9. If an insurer assents to the
interest in anything, not founded on an
transfer of an insurance from a
actual right to the thing, nor upon any
mortgagor to a mortgagee, and, at the
valid contract for it, is not insurable.
time of his assent, imposes further
obligation on the assignee, making a new Sec. 17. The measure of an insurable
contract with him, the act of the interest in property is the extent to
mortgagor cannot affect the rights of which the insured might be damnified by
said assignee. loss or injury thereof.
Title 3 Sec. 18. No contract or policy of
INSURABLE INTEREST insurance on property shall be
enforceable except for the benefit of
Sec. 10. Every person has an insurable
some person having an insurable interest
interest in the life and health:
in the property insured.
(a) Of himself, of his spouse and of
Sec. 19. An interest in property insured
his children;
must exist when the insurance takes
(b) Of any person on whom he effect, and when the loss occurs, but not
depends wholly or in part for exist in the meantime; and interest in
education or support, or in whom the life or health of a person insured
he has a pecuniary interest; must exist when the insurance takes
(c) Of any person under a legal effect, but need not exist thereafter or
obligation to him for the payment when the loss occurs.
of money, or respecting property Sec. 20. Except in the cases specified in
or services, of which death or the next four sections, and in the cases
illness might delay or prevent the of life, accident, and health insurance, a
performance; and change of interest in any part of a thing
(d) Of any person upon whose life insured unaccompanied by a
any estate or interest vested in corresponding change in interest in the
him depends. insurance, suspends the insurance to an
equivalent extent, until the interest in
Sec. 11. The insured shall have the right the thing and the interest in the
to change the beneficiary he designated insurance are vested in the same person.
in the policy, unless he has expressly
waived this right in said policy. Sec. 21. A change in interest in a thing
insured, after the occurrence of an
Sec. 12. The interest of a beneficiary in a injury which results in a loss, does not
life insurance policy shall be forfeited affect the right of the insured to
when the beneficiary is the principal, indemnity for the loss.
accomplice, or accessory in willfully
bringing about the death of the insured; Sec. 22. A change of interest in one or
in which event, the nearest relative of more several distinct things, separately
the insured shall receive the proceeds of insured by one policy, does not avoid the
said insurance if not otherwise insurance as to the others.
disqualified.
Sec. 23. A change on interest, by will or excluded by a warranty, and which
succession, on the death of the insured, are not otherwise material; and
does not avoid an insurance; and his (e) Those which relate to a
interest in the insurance passes to the risk excepted from the policy and
person taking his interest in the thing which are not otherwise material.
insured.
Sec. 31. Materiality is to be determined
Sec. 24. A transfer of interest by one of not by the event, but solely by the
several partners, joint owners, or owners probable and reasonable influence of the
in common, who are jointly insured, to facts upon the party to whom the
the others, does not avoid an insurance communication is due, in forming his
even though it has been agreed that the estimate of the disadvantages of the
insurance shall cease upon an alienation proposed contract, or in making his
of the thing insured. inquiries.
Sec. 25. Every stipulation in a policy of Sec. 32. Each party to a contract of
insurance for the payment of loss insurance is bound to know all the
whether the person insured has or has general causes which are open to his
not any interest in the property insured, inquiry, equally with that of the other,
or that the policy shall be received as and which may affect the political or
proof of such interest, and every policy material perils contemplated; and all
executed by way of gaming or wagering, general usages of trade.
is void.
Sec. 33. The right to information of
Title 4 material facts may be waived, either by
CONCEALMENT the terms of the insurance or by neglect
Sec. 26. A neglect to to make inquiry as to such facts, where
communicate that which a party knows they are distinctly implied in other facts
and ought to communicate, is called a of which information is communicated.
concealment. Sec. 34. Information of the nature or
Sec. 27. A concealment whether amount of the interest of one insured
intentional or unintentional entitles the need not be communicated unless in
injured party to rescind a contract of answer to an inquiry, except as
insurance. (As amended prescribed by section fifty-one.
by Batasang Pambansa Blg. 874)
Sec. 35. Neither party to a contract of
Sec. 28. Each party to a contract of insurance is bound to communicate,
insurance must communicated to the even upon inquiry, information of his
other, in good faith, all facts within his own judgment upon the matters in
knowledge which are material to the question.
contract and as to which he makes no
Title 5
warranty, and which the other has not
REPRESENTATION
the means of ascertaining.
Sec. 36. A representation may be oral or
Sec. 29. An intentional and fraudulent
written.
omission, on the part of one insured, to
communicate information of matters Sec. 37. A representation may be made
proving or tending to prove the falsity of at the time of, or before, issuance of the
a warranty, entitles the insurer to policy.
rescind. Sec. 38. The language of a
Sec. 30. Neither party to a contract of representation is to be interpreted by
insurance is bound to communicate the same rules as the language of
information of the matters following, contracts in general.
except in answer to the inquiries of the Sec. 39. A representation as to the
other: future is to be deemed a promise, unless
(a) Those which the other knows; it appears that it was merely a statement
of belief or expectation.
(b) Those which, in the exercise of
ordinary care, the other ought to Sec. 40. A representation cannot qualify
know, and of which the former has an express provision in a contract of
no reason to suppose him insurance, but it may qualify an implied
ignorant; warranty.
(c) Those of which the other Sec. 41. A representation may be altered
waives communication; or withdrawn before the insurance
is effected, but not afterwards.
(d) Those which prove or tend to
prove the existence of a risk
Sec. 42. A representation must be and any word, phrase, clause, mark,
presumed to refer to the date on which sign, symbol, signature, number, or word
the contract goes into effect. necessary to complete the contract of
Sec. 43. When a person insured has no insurance shall be written on the blank
personal knowledge of a fact, he may spaces provided therein.
nevertheless repeat information which Any rider, clause, warranty or
he has upon the subject, and which he endorsement purporting to be part of the
believes to be true, with the explanation contract of insurance and which is
that he does so on the information of pasted or attached to said policy is not
others; or he may submit the binding on the insured, unless the
information, in its whole extent, to the descriptive title or name of the rider,
insurer; and in neither case is he clause, warranty or endorsement is also
responsible for its truth, unless it mentioned and written on the blank
proceeds from an agent of the insured, spaces provided in the policy.
whose duty it is to give the information. Unless applied for by the insured or
Sec. 44. A representation is to be owner, any rider, clause, warranty or
deemed false when the facts fail to endorsement issued after the original
correspond with its assertions or policy shall be countersigned by the
stipulations. insured or owner, which
Sec. 45. If a representation is false in a countersignature shall be taken as his
material point, whether affirmative or agreement to the contents of such rider,
promissory, the injured party is entitled clause, warranty or endorsement.
to rescind the contract from the time Group insurance and group annuity
when the representation becomes false. policies, however, may be typewritten
The right to rescind granted by this Code and need not be in printed form.
to the insurer is waived by the Sec. 51. A policy of insurance must
acceptance of premium payments specify:
despite knowledge of the ground for
rescission. (As amended by BatasangPambansa Blg. (a) The parties between whom the
874). contract is made;
Sec. 46. The materiality of a (b) The amount to be insured
representation is determined by the except in the cases of open or
same rules as the materiality of a running policies;
concealment. (c) The premium, or if the
Sec. 47. The provisions of this chapter insurance is of a character where
apply as well to a modification of a the exact premium is only
contract of insurance as to its original determinable upon the
formation. termination of the contract, a
statement of the basis and rates
Sec. 48. Whenever a right to rescind a
upon which the final premium is
contract of insurance is given to the
to be determined;
insurer by any provision of this chapter,
such right must be exercised previous to (d) The property or life insured;
the commencement of an action on the (e) The interest of the insured in
contract. property insured, if he is not the
After a policy of life insurance made absolute owner thereof;
payable on the death of the insured shall (f) The risks insured against; and
have been in force during the lifetime of
the insured for a period of two years (g) The period during which the
from the date of its issue or of its last insurance is to continue.
reinstatement, the insurer cannot prove Sec. 52. Cover notes may be issued to
that the policy is void ab initio or bind insurance temporarily pending the
is rescindible by reason of the fraudulent issuance of the policy. Within sixty days
concealment or misrepresentation of the after the issue of the cover note, a policy
insured or his agent. shall be issued in lieu thereof, including
Title 6 within its terms the identical insurance
THE POLICY bound under the cover note and the
premium therefore.
Sec. 49. The written instrument in
which a contract of insurance is set Cover notes may be extended or renewed
forth, is called a policy of insurance. beyond such sixty days with the written
approval of the Commissioner if he
Sec. 50. The policy shall be in printed determines that such extension is not
form which may contain blank spaces; contrary to and is not for the purpose of
violating any provisions of this insurance, by additional statements
Code. The Commissioner may or indorsements.
promulgate rules and regulations Sec. 63. A condition, stipulation, or
governing such extensions for the agreement in any policy of insurance,
purpose of preventing such violations limiting the time for commencing an
and may by such rules and regulations action thereunder to a period of less
dispense with the requirement of written than one year from the time when the
approval by him in the case of extension cause of action accrues, is void.
in compliance with such rules and
regulations. Sec. 64. No policy of insurance other
than life shall be cancelled by the
Sec. 53. The insurance proceeds shall be insurer except upon prior notice thereof
applied exclusively to the proper interest to the insured, and no notice of
of the person in whose name or for cancellation shall be effective unless it is
whose benefit it is made unless based on the occurrence, after the
otherwise specified in the policy. effective date of the policy, of one or
Sec. 54. When an insurance contract is more of the following:
executed with an agent or trustee as the (a) non-payment of premium;
insured, the fact that his principal or
beneficiary is the real party in interest (b) conviction of a crime arising
may be indicated by describing the out of acts increasing the hazard
insured as agent or trustee, or by other insured against;
general words in the policy. (c) discovery of fraud or material
Sec. 55. To render an insurance effected misrepresentation;
by one partner or part-owner, applicable (d) discovery of willful or reckless
to the interest of his co-partners or acts or omissions increasing the
other part-owners, it is necessary that hazard insured against;
the terms of the policy should be such as
(e) physical changes in the
are applicable to the joint or common
property insured which result in
interest.
the property becoming
Sec. 56. When the description of the uninsurable; or
insured in a policy is so general that it
(f) a determination by the
may comprehend any person or any class
Commissioner that the
of persons, only he who can show that it
continuation of the policy would
was intended to include him can claim
violate or would place the insurer
the benefit of the policy.
in violation of this Code.
Sec. 57. A policy may be so framed that
Sec. 65. All notices of cancellation
it will inure to the benefit
mentioned in the preceding section shall
of whomsoever, during the continuance
be in writing, mailed or delivered to the
of the risk, may become the owner of the
named insured at the address shown in
interest insured.
the policy, and shall state (a) which of
Sec. 58. The mere transfer of a thing the grounds set forth in section sixty-
insured does not transfer the policy, but four is relied upon and (b) that, upon
suspends it until the same person written request of the named insured,
becomes the owner of both the policy the insurer will furnish the facts on
and the thing insured. which the cancellation is based.
Sec. 59. A policy is either open, valued Sec. 66. In case of insurance other than
or running. life, unless the insurer at least forty-five
Sec. 60. An open policy is one in which days in advance of the end of the policy
the value of the thing insured is not period mails or delivers to the named
agreed upon, but is left to be ascertained insured at the address shown in the
in case of loss. policy notice of its intention not to
renew the policy or to condition its
Sec. 61. A valued policy is one which renewal upon reduction of limits or
expresses on its face an agreement that elimination of coverages, the named
the thing insured shall be valued at a insured shall be entitled to renew the
specific sum. policy upon payment of the premium
Sec. 62. A running policy is one which due on the effective date of the
contemplates successive insurances, and renewal. Any policy written for a term
which provides that the object of the of less than one year shall be considered
policy may be from time to time defined, as if written for a term of one year. Any
especially as to the subjects of policy written for a term longer than one
year or any policy with no fixed
expiration date shall be considered as if insurance company is valid and binding
written for successive policy periods or unless and until the premium thereof
terms of one year. has been paid, except in the case of a life
Title 7 or an industrial life policy whenever the
WARRANTIES grace period provision applies.

Sec. 67. A warranty is either expressed Sec. 78. An acknowledgment in a policy

or implied. or contract of insurance or the receipt of
premium is conclusive evidence of its
Sec. 68. A warranty may relate to the payment, so far as to make the policy
past, the present, the future, or to any binding, notwithstanding any stipulation
or all of these. therein that it shall not be binding until
Sec. 69. No particular form of words is the premium is actually paid.
necessary to create a warranty. Sec. 79. A person insured is entitled to a
Sec. 70. Without prejudice to section return of premium, as follows:
fifty-one, every express warranty, made (a) To the whole premium if no
at or before the execution of a policy, part of his interest in the thing
must be contained in the policy itself, or insured be exposed to any of the
in another instrument signed by the perils insured against;
insured and referred to in the policy as
(b) Where the insurance is made
making a part of it.
for a definite period of time and
Sec. 71. A statement in a policy of the insured surrenders his policy,
matter relating to the person or thing to such portion of the premium as
insured, or to the risk, as a fact, is an corresponds with the unexpired
express warranty thereof. time, at a pro rata rate, unless a
Sec. 72. A statement in a policy which short period rate has been agreed
imparts that it is intended to do or not upon and appears on the face of
to do a thing which materially affects the policy, after deducting from
the risk, is a warranty that such act or the whole premium any claim for
omission shall take place. loss or damage under the policy
which has previously accrued;
Sec. 73. When, before the time arrives
Provided, That no holder of a life
for the performance of a warranty
insurance policy may avail himself
relating to the future, a loss insured
of the privileges of this paragraph
against happens, or performance
without sufficient cause as
becomes unlawful at the place of the
otherwise provided by law.
contract, or impossible, the omission to
fulfill the warranty does not avoid the
policy. Sec. 80. If a peril insured against has
existed, and the insurer has been liable
Sec. 74. The violation of a
for any period, however short, the
material warranty, or other material
insured is not entitled to return of
provision of a policy, on the part of
premiums, so far as that particular risk
either party thereto, entitles the other
is concerned.
to rescind.
Sec. 81. A person insured is entitled to
Sec. 75. A policy may declare that a
return of the premium when the
violation of specified provisions thereof
contract is voidable, on account of fraud
shall avoid it, otherwise the breach of an
or misrepresentation of the insurer, or of
immaterial provision does not avoid the
his agent, or on account of facts, the
policy.
existence of which the insured was
Sec. 76. A breach of warranty without ignorant without his fault; or when by
fraud merely exonerates an insurer from any default of the insured other than
the time that it occurs, or where it is actual fraud, the insurer never incurred
broken in its inception, prevents the any liability under the policy.
policy from attaching to the risk.
Sec. 82. In case of an over-insurance by
Title 8 several insurers, the insured is entitled
PREMIUM to a ratable return of the premium,
Sec. 77. An insurer is entitled to proportioned to the amount by which
payment of the premium as soon as the the aggregate sum insured in all the
thing insured is exposed to the peril policies exceeds the insurable value of
insured against. Notwithstanding any the thing at risk.
agreement to the contrary, no policy or Title 9
contract of insurance issued by an LOSS
Sec. 83. An agreement not to transfer waived if caused by any act of him, or if
the claim of the insured against the he omits to take objection promptly and
insurer after the loss has happened, is specifically upon that ground.
void if made before the loss except as Sec. 92. If the policy requires, by way of
otherwise provided in the case of life preliminary proof of loss, the certificate
insurance. or testimony of a person other than the
Sec. 84. Unless otherwise provided by insured, it is sufficient for the insured to
the policy, an insurer is liable for a loss use reasonable diligence to procure it,
of which a peril insured against was the and in case of the refusal of such person
proximate cause, although a peril not to give it, then to furnish reasonable
contemplated by the contract may have evidence to the insurer that such refusal
been a remote cause of the loss; but he was not induced by any just grounds of
is not liable for a loss which the peril disbelief in the facts necessary to be
insured against was only a remote cause. certified or testified.
Sec. 85. An insurer is liable where the Title 11
thing insured is rescued from a peril DOUBLE INSURANCE
insured against that would otherwise Sec. 93. A double insurance exists where
have caused a loss, if, in the course of the same person is insured by several
such rescue, the thing is exposed to a insurers separately in respect to the
peril not insured against, which
same subject and interest.
permanently deprives the insured of its
possession, in whole or in part; or where Sec. 94. Where the insured
a loss is caused by efforts to rescue the is overinsured by double insurance:
thing insured from a peril insured (a) The insured, unless the policy
against. otherwise provides, may claim
Sec. 86. Where a peril is payment from the insurers in such
especially excepted in a contract of order as he may select, up to the
insurance, a loss, which would not have amount for which the insurers are
occurred but for such peril, is thereby severally liable under their
excepted although the immediate cause respective contracts;
of the loss was a peril which was not (b) Where the policy under which
excepted. the insured claims is a valued
Sec. 87. An insurer is not liable for a loss policy, the insured must give
caused by the willful act or through the credit as against the valuation for
connivance of the insured; but he is not any sum received by him under
exonerated by the negligence of the any other policy without regard to
insured, or of the insurance agents or the actual value of the subject
others. matter insured;
Title 10 (c) Where the policy under which
NOTICE OF LOSS the insured claims is an unvalued
policy he must give credit, as
Sec. 88. In case of loss upon an against the full insurable value,
insurance against fire, an insurer is for any sum received by him under
exonerated, if notice thereof be not any policy;
given to him by an insured, or some
person entitled to the benefit of the (d) Where the insured receives any
insurance, without unnecessary delay. sum in excess of the valuation in
the case of valued policies, or of
Sec. 89. When a preliminary proof of loss the insurable value in the case of
is required by a policy, the insured is not unvalued policies, he must hold
bound to give such proof as would be such sum in trust for the insurers,
necessary in a court of justice; but it is according to their right of
sufficient for him to give the best contribution among themselves;
evidence which he has in his power at
the time. (e) Each insurer is bound, as
between himself and the other
Sec. 90. All defects in a notice of loss, or insurers, to contribute ratably to
in preliminary proof thereof, which the the loss in proportion to the
insured might remedy, and which the amount for which he is liable
insurer omits to specify to him, without under his contract.
unnecessary delay, as grounds of
objection, are waived. Title 12
REINSURANCE
Sec. 91. Delay in the presentation to an
insurer of notice or proof of loss is
Sec. 95. A contract of reinsurance is one inland marine, transit or
by which an insurer procures a third transportation insurance,
person to insure him against loss or including liability for loss
liability by reason of such original of or damage arising out
insurance. of or in connection with
Sec. 96. Where an insurer obtains the construction, repair,
reinsurance, except under automatic operation, maintenance or
reinsurance treaties, he must use of the subject matter
communicate all the representations of of such insurance (but not
the original insured, and also all the including life insurance or
knowledge and information he possesses, surety bonds nor
whether previously or subsequently insurance against loss by
acquired, which are material to the risk. reason of bodily injury to
any person arising out of
Sec. 97. A reinsurance is presumed to be ownership, maintenance,
a contract of indemnity against liability, or use of automobiles);
and not merely against damage.
(c) Precious stones, jewels,
Sec. 98. The original insured has no jewelry, precious metals,
interest in a contract of reinsurance. whether in course of
Chapter II transportation or
CLASSES OF INSURANCE otherwise;
Title I (d) Bridges, tunnels and
MARINE INSURANCE other instrumentalities of
transportation and
Sub-Title 1- A communication (excluding
DEFINITION buildings, their furniture
Sec. 99. Marine Insurance includes: and furnishings, fixed
(1) Insurance against loss of or contents and supplies
held in storage); piers,
damage to:
wharves, docks and slips,
and other aids to
(a) Vessels, craft, aircraft, navigation and
vehicles, goods, freights, transportation, including
cargoes, merchandise, dry docks and marine
effects, disbursements, railways, dams and
profits, moneys, appurtenant facilities for
securities, choses in the control of waterways.
action, evidences of debts,
(2) "Marine protection and
valuable papers, bottomry,
indemnity insurance," meaning
and respondentia interest
insurance against, or against legal
s and all other kinds of
liability of the insured for loss,
property and interests
damage, or expense incident to
therein, in respect to,
ownership, operation, chartering,
appertaining to or in
maintenance, use, repair, or
connection with any and
construction of any vessel, craft
all risks or perils of
or instrumentality in use of ocean
navigation, transit or
or inland waterways, including
transportation, or while
liability of the insured for personal
being assembled, packed,
injury, illness or death or for loss
crated, baled, compressed
of or damage to the property of
or similarly prepared for
another person.
shipment or while
awaiting shipment, or Sub-Title 1-B
during any delays, INSURABLE INTEREST
storage, transhipment, or Sec. 100. The owner of a ship has in all
reshipment incident cases an insurable interest in it, even
thereto, including war when it has been chartered by one who
risks, marine builder's covenants to pay him its value in case of
risks, and all personal loss: Provided, That in this case the
property floater risks; insurer shall be liable for only that part
(b) Person or property in of the loss which the insured cannot
connection with or recover from the charterer.
appertaining to a marine,
Sec. 101. The insurable interest of the the insurer from a loss resulting from
owner of the ship hypothecated the risk concealed:
by bottomry is only the excess of its (a) The national character of the
value over the amount secured insured;
by bottomry.
(b) The liability of the thing
Sec. 102. Freightage, in the sense of a insured to capture and detention;
policy of marine insurance, signifies all
the benefits derived by the owner, either (c) The liability to seizure from
from the chartering of the ship or its breach of foreign laws of trade;
employment for the carriage of his own (d) The want of necessary
goods or those of others. documents;
Sec. 103. The owner of a ship has an (e) The use of false and simulated
insurable interest in expected freightage papers.
which according to the ordinary and
Sub-Title 1-D
probable course of things he would have
REPRESENTATION
earned but for the intervention of a peril
insured against or other peril incident to Sec. 111. If a representation by a person
the voyage. insured by a contract of marine
insurance, is intentionally false in any
Sec. 104. The interest mentioned in the
material respect, or in respect of any
last section exists, in case of a charter
fact on which the character and nature
party, when the ship has broken ground
of the risk depends, the insurer may
on the chartered voyage. If a price is to
rescind the entire contract.
be paid for the carriage of goods it exists
when they are actually on board, or Sec. 112. The eventual falsity of a
there is some contract for putting them representation as to expectation does
on board, and both ship and goods are not, in the absence of fraud, avoid a
ready for the specified voyage. contract of marine insurance.
Sec. 105. One who has an interest in the Sub-Title 1-E
thing from which profits are expected to IMPLIED WARRANTIES
proceed has an insurable interest in the Sec. 113. In every marine insurance
profits. upon a ship or freight, or freightage, or
Sec. 106. The charterer of a ship has an upon any thing which is the subject of
insurable interest in it, to the extent marine insurance, a warranty is implied
that he is liable to be damnified by its that the ship is seaworthy.
loss. Sec. 114. A ship is seaworthy when
Sub-Title 1-C reasonably fit to perform the service and
CONCEALMENT to encounter the ordinary perils of the
voyage contemplated by the parties to
Sec. 107. In marine insurance each party
the policy.
is bound to communicate, in addition to
what is required by section twenty-eight, Sec. 115. An implied warranty of
all the information which he possesses, seaworthiness is complied with if the
material to the risk, except such as is ship be seaworthy at the time of the
mentioned in Section thirty, and to state of commencement of the risk, except in
the exact and whole truth in relation to the following cases:
all matters that he represents, or upon (a) When the insurance is made for
inquiry discloses or assumes to disclose. a specified length of time, the
Sec. 108. In marine insurance, implied warranty is not complied
information of the belief or expectation with unless the ship be seaworthy
of a third person, in reference to a at the commencement of every
material fact, is material. voyage it undertakes during that
time;
Sec. 109. A person insured by a contract
of marine insurance is presumed to have (b) When the insurance is upon the
knowledge, at the time of insuring, of a cargo which, by the terms of the
prior loss, if the information might policy, description of the voyage,
possibly have reached him in the usual or established custom of the
mode of transmission and at the usual trade, is to be transhipped at an
rate of communication. intermediate port, the implied
warranty is not complied with
Sec. 110. A concealment in a marine
unless each vessel upon which the
insurance, in respect to any of the
cargo is shipped, or transhipped,
following matters, does not vitiate the
be seaworthy at the
entire contract, but merely exonerates
 commencement of each particular unreasonable delay in pursuing the
voyage. voyage or the commencement of an
Sec. 116. A warranty of seaworthiness entirely different voyage.
extends not only to the condition of the Sec. 124. A deviation is proper:
structure of the ship itself, but requires (a) When caused by circumstances
that it be properly laden, and provided over which neither the master nor
with a competent master, a sufficient the owner of the ship has any
number of competent officers and control;
seamen, and the requisite appurtenances
and equipment, such as ballasts, cables (b) When necessary to comply with
and anchors, cordage and sails, food, a warranty, or to avoid a peril,
water, fuel and lights, and other whether or not the peril is insured
necessary or proper stores and against;
implements for the voyage. (c) When made in good faith, and
Sec. 117. Where different portions of the upon reasonable grounds of belief
voyage contemplated by a policy differ in in its necessity to avoid a peril; or
respect to the things requisite to make (d) When made in good faith, for
the ship seaworthy therefor, a warranty the purpose of saving human life
of seaworthiness is complied with if, at or relieving another vessel in
the commencement of each portion, the distress.
ship is seaworthy with reference to that
Sec. 125. Every deviation not specified
portion.
in the last section is improper.
Sec. 118. When the ship
Sec. 126. An insurer is not liable for any
becomes unseaworthy during the voyage
loss happening to the thing insured
to which an insurance relates, an
subsequent to an improper deviation.
unreasonable delay in repairing the
defect exonerates the insurer on ship Sub-Title 1-G
or shipowner'sinterest from liability from LOSS
any loss arising therefrom. Sec. 127. A loss may be either total or
Sec. 119. A ship which is seaworthy for partial.
the purpose of an insurance upon the Sec. 128. Every loss which is not total is
ship may, nevertheless, by reason of partial.
being unfitted to receive the cargo,
be unseaworthy for the purpose of the Sec. 129. A total loss may be either
insurance upon the cargo. actual or constructive.
Sec. 120. Where the nationality or Sec. 130. An actual total loss is cause
neutrality of a ship or cargo is expressly by:
warranted, it is implied that the ship will (a) A total destruction of the thing
carry the requisite documents to show insured;
such nationality or neutrality and that it
(b) The irretrievable loss of the
will not carry any documents which cast
thing by sinking, or by being
reasonable suspicion thereon.
broken up;
Sub-Title 1-F (c) Any damage to the thing which
THE VOYAGE AND DEVIATION renders it valueless to the owner
Sec. 121. When the voyage contemplated for the purpose for which he held
by a marine insurance policy is it; or
described by the places of beginning and (d) Any other event which
ending, the voyage insured in one which effectively deprives the owner of
conforms to the course of sailing fixed the possession, at the port of
by mercantile usage between those destination, of the thing insured.
places.
Sec. 131. A constructive total loss is one
Sec. 122. If the course of sailing is not which gives to a person insured a right
fixed by mercantile usage, the voyage to abandon, under Section one hundred
insured by a marine insurance policy is thirty-nine.
that way between the places specified,
which to a master of ordinary skill and Sec. 132. An actual loss may be
discretion, would mean the most presumed from the continued absence of
natural, direct and advantageous. a ship without being heard of. The length
of time which is sufficient to raise this
Sec. 123. Deviation is a departure from presumption depends on the
the course of the voyage insured, circumstances of the case.
mentioned in the last two sections, or an
Sec. 133. When a ship is prevented, at (a) If more than three-fourths
an intermediate port, from completing thereof in value is actually lost, or
the voyage, by the perils insured against, would have to be expended to
the liability of a marine insurer on the recover it from the peril;
cargo continues after they are thus (b) If it is injured to such an
reshipped. extent as to reduce its value more
Nothing in this section shall prevent an than three-fourths;
insurer from requiring an additional
premium if the hazard be increased by (c) If the thing insured is a ship,
this extension of liability. and the contemplated voyage
cannot be lawfully performed
Sec. 134. In addition to the liability without incurring either an
mentioned in the last section, a marine expense to the insured of more
insurer is bound for damages, expenses than three-fourths the value of the
of discharging, storage, reshipment, thing abandoned or a risk which a
extra freightage, and all other expenses prudent man would not take under
incurred in saving cargo reshipped the circumstances; or
pursuant to the last section, up to the
amount insured. (d) If the thing insured, being
Nothing in this or in the preceding cargo or freightage, and the
section shall render a marine insurer voyage cannot be performed, nor
liable for any amount in excess of the another ship procured by the
insured value or, if there be none, of the master, within a reasonable time
insurable value. and with reasonable diligence, to
forward the cargo, without
Sec. 135. Upon an actual total loss, a incurring the like expense or risk
person insured is entitled to payment mentioned in the preceding sub-
without notice of abandonment. paragraph. But freightage cannot
Sec. 136. Where it has been agreed that in any case be abandoned unless
an insurance upon a particular thing, or the ship is also abandoned.
class of things, shall be free from Sec. 140. An abandonment must be
particular average, a marine insurer is neither partial nor conditional.
not liable for any particular average loss
not depriving the insured of the Sec. 141. An abandonment must be
possession, at the port of destination, of made within a reasonable time after
the whole of such thing, or class of receipt of reliable information of the
things, even though it becomes entirely loss, but where the information is of a
worthless; but such insurer is liable for doubtful character, the insured is
his proportion of all general average loss entitled to a reasonable time to make
assessed upon the thing insured. inquiry.

Sec. 137. An insurance confined in Sec. 142. Where the information upon
terms to an actual loss does not cover a which an abandonment has been made
constructive total loss, but covers any proves incorrect, or the thing insured
loss, which necessarily results in was so far restored when the
depriving the insured of the possession, abandonment was made that there was
at the port of destination, of the entire then in fact no total loss, the
thing insured. abandonment becomes ineffectual.

Sub-Title 1-H Sec. 143. Abandonment is made by

ABANDONMENT giving notice thereof to the insurer,
which may be done orally, or in writing;
Sec. 138. Abandonment, in marine Provided, That if the notice be done
insurance, is the act of the insured by orally, a written notice of such
which, after a constructive total loss, he abandonment shall be submitted within
declares the relinquishment to the seven days from such oral notice.
insurer of his interest in the thing
insured. Sec. 144. A notice of abandonment must
be explicit, and must specify the
Sec. 139. A person insured by a contract particular cause of the abandonment,
of marine insurance may abandon the but need state only enough to show that
thing insured, or any particular portion there is probable cause therefor, and
thereof separately valued by the policy, need not be accompanied with proof of
or otherwise separately insured, and interest or of loss.
recover for a total loss thereof, when the
cause of the loss is a peril insured Sec. 145. An abandonment can be
against: sustained only upon the cause specified
in the notice thereof.
Sec. 146. An abandonment is equivalent by bottomry or respondentia, before its
to a transfer by the insured of his insurance, and without the knowledge of
interest to the insurer, with all the the person actually procuring the
chances of recovery and indemnity. insurance, he may show the real value.
Sec. 147. If a marine insurer pays for a But a valuation fraudulent in fact,
loss as if it were an actual total loss, he entitles the insurer to rescind the
is entitled to whatever may remain of contract.
the thing insured, or its proceeds or Sec. 157. A marine insurer is liable upon
salvage, as if there had been a formal a partial loss, only for such proportion of
abandonment. the amount insured by him as the loss
Sec. 148. Upon an abandonment, acts bears to the value of the whole interest
done in good faith by those who were of the insured in the property insured.
agents of the insured in respect to the Sec. 158. Where profits are separately
thing insured, subsequent to the loss, insured in a contract of marine
are at the risk of the insurer and for his insurance, the insured is entitled to
benefit. recover, in case of loss, a proportion of
Sec. 149. Where notice of abandonment such profits equivalent to the proportion
is properly given, the rights of the which the value of the property lost
insured are not prejudiced by the fact bears to the value of the whole.
that the insurer refuses to accept the Sec. 159. In case of a valued policy of
abandonment. marine insurance on freightage or cargo,
Sec. 150. The acceptance of an if a part only of the subject is exposed to
abandonment may be either express or the risk, the evaluation applies only in
implied from the conduct of the insurer. proportion to such part.
The mere silence of the insurer for an Sec. 160. When profits are valued and
unreasonable length of time after notice insured by a contract of marine
shall be construed as an acceptance. insurance, a loss of them is conclusively
Sec. 151. The acceptance of an presumed from a loss of the property out
abandonment, whether express or of which they are expected to arise, and
implied, is conclusive upon the parties, the valuation fixes their amount.
and admits the loss and the sufficiency Sec. 161. In estimating a loss under an
of the abandonment. open policy of marine insurance the
Sec. 152. An abandonment once made following rules are to be observed:
and accepted is irrevocable, unless the (a) The value of a ship is its value
ground upon which it was made proves at the beginning of the risk,
to be unfounded. including all articles or charges
Sec. 153. On an accepted abandonment which add to its permanent value
of a ship, freightage earned previous to or which are necessary to prepare
the loss belongs to the insurer of said it for the voyage insured;
freightage; but freightage subsequently (b) The value of the cargo is its
earned belongs to the insurer of the actual cost to the insured, when
ship. laden on board, or where the cost
Sec. 154. If an insurer refuses to accept cannot be ascertained, its market
a valid abandonment, he is liable as upon value at the time and place of
actual total loss, deducting from the lading, adding the charges
amount any proceeds of the thing incurred in purchasing and placing
insured which may have come to the it on board, but without reference
hands of the insured. to any loss incurred in raising
money for its purchase, or to any
Sec. 155. If a person insured omits to drawback on its exportation, or to
abandon, he may nevertheless recover the fluctuation of the market at
his actual loss. the port of destination, or to
Sub-Title 1-I expenses incurred on the way or
MEASURE OF INDEMNITY on arrival;
Sec. 156. A valuation in a policy of (c) The value of freightage is the
marine insurance in conclusive between gross freightage, exclusive
the parties thereto in the adjustment of of primage, without reference to
either a partial or total loss, if the the cost of earning it; and
insured has some interest at risk, and (d) The cost of insurance is in
there is no fraud on his part; except that each case to be added to the value
when a thing has been hypothecated thus estimated.
Sec. 162. If cargo insured against partial without the consent of the insurer, by
loss arrives at the port of destination in means within the control of the insured,
a damaged condition, the loss of the and increasing the risks, entitles an
insured is deemed to be the same insurer to rescind a contract of fire
proportion of the value which the insurance.
market price at that port, of the thing so Sec. 169. An alteration in the use or
damaged, bears to the market price it condition of a thing insured from that to
would have brought if sound. which it is limited by the policy, which
Sec. 163. A marine insurer is liable for does not increase the risk, does not
all the expenses attendant upon a loss affect a contract of fire insurance.
which forces the ship into port to be Sec. 170. A contract of fire insurance is
repaired; and where it is stipulated in not affected by any act of the insured
the policy that the insured shall labor for subsequent to the execution of the
the recovery of the property, the insurer policy, which does not violate its
is liable for the expense incurred provisions, even though it increases the
thereby, such expense, in either case, risk and is the cause of the loss.
being in addition to a total loss, if that
afterwards occurs. Sec. 171. If there is no valuation in the
policy, the measure of indemnity in an
Sec. 164. A marine insurer is liable for a insurance against fire is the expense it
loss falling upon the insured, through a would be to the insured at the time of
contribution in respect to the thing the commencement of the fire to replace
insured, required to be made by him the thing lost or injured in the condition
towards a general average loss called for in which at the time of the injury; but if
by a peril insured against; provided, that there is a valuation in a policy of fire
the liability of the insurer shall be insurance, the effect shall be the same
limited to the proportion of contribution as in a policy of marine insurance.
attaching to his policy value where this
is less than the contributing value of the Sec. 172. Whenever the insured desires
thing insured. to have a valuation named in his policy,
insuring any building or structure
Sec. 165. When a person insured by a against fire, he may require such
contract of marine insurance has a building or structure to be examined by
demand against others for contribution, an independent appraiser and the value
he may claim the whole loss from the of the insured's interest therein may
insurer, subrogating him to his own right then be fixed as between the insurer and
to contribution. But no such claim can the insured. The cost of such
be made upon the insurer after the examination shall be paid for by the
separation of the interests liable to the insured. A clause shall be inserted in
contribution, nor when the insured, such policy stating substantially that the
having the right and opportunity to value of the insured's interest in such
enforce the contribution from others, building or structure has been thus
has neglected or waived the exercise of fixed. In the absence of any change
that right. increasing the risk without the consent
Sec. 166. In the case of a partial loss of of the insurer or of fraud on the part of
ship or its equipment, the old materials the insured, then in case of a total loss
are to be applied towards payment for under such policy, the whole amount so
the new. Unless otherwise stipulated in insured upon the insured's interest in
the policy, a marine insurer is liable for such building or structure, as stated in
only two-thirds of the remaining cost of the policy upon which the insurers have
repairs after such deduction, except that received a premium, shall be paid, and in
anchors must be paid in full. case of a partial loss the full amount of
Title 2 the partial loss shall be so paid, and in
case there are two or more policies
FIRE INSURANCE
covering the insured's interest therein,
Sec. 167. As used in this Code, the each policy shall contribute pro rata to
term "fire insurance" shall include the payment of such whole or partial
insurance against loss by fire, lightning, loss. But in no case shall the insurer be
windstorm, tornado or earthquake and required to pay more than the amount
other allied risks, when such risks are thus stated in such policy. This section
covered by extension to fire insurance shall not prevent the parties from
policies or under separate policies. stipulating in such policies concerning
Sec. 168. An alteration in the use or the repairing, rebuilding or replacing of
condition of a thing insured from that to buildings or structures wholly or
which it is limited by the policy made partially damaged or destroyed.
Sec. 173. No policy of fire insurance contract of suretyship or bond is not
shall be pledged, hypothecated, or accepted by, or filed with the obligee,
transferred to any person, firm or the surety shall collect only reasonable
company who acts as agent for or amount, not exceeding fifty per centum
otherwise represents the issuing of the premium due thereon as service
company, and any such pledge, fee plus the cost of stamps or other
hypothecation, or transfer hereafter taxes imposed for the issuance of the
made shall be void and of no effect contract or bond: Provided,
insofar as it may affect other creditors of however, That if the non-acceptance of
the insured. the bond be due to the fault or
Title 3 negligence of the surety, no such service
CASUALTY INSURANCE fee, stamps or taxes shall be collected.

Sec. 174. Casualty insurance is In the case of a continuing bond, the

insurance covering loss or liability obligor shall pay the subsequent annual
premium as it falls due until the
arising from accident or mishap,
contract of suretyship is cancelled by
excluding certain types of loss which by
law or custom are considered as falling the obligee or by the Commissioner or by
exclusively within the scope of other a court of competent jurisdiction, as the
types of insurance such as fire or case may be.
marine. It includes, but is not limited to, Sec. 178. Pertinent provisions of the
employer's liability insurance, motor Civil Code of the Philippines shall be
vehicle liability insurance, applied in a suppletory character
plateglassinsurance, burglary and theft whenever necessary in interpreting the
insurance, personal accident and health provisions of a contract of suretyship.
insurance as written by non-life Title 5
insurance companies, and other LIFE INSURANCE
substantially similar kinds of insurance.
Sec. 179. Life insurance is insurance on
Title 4 human lives and insurance appertaining
SURETYSHIP thereto or connected therewith.
Sec. 175. A contract of suretyship is an Sec. 180. An insurance upon life may be
agreement whereby a party called the made payable on the death of the
surety guarantees the performance by person, or on his surviving a specified
another party called the principal or period, or otherwise contingently on the
obligor of an obligation or undertaking in continuance or cessation of life.
favor of a third party called the obligee.
It includes official recognizances, Every contract or pledge for the
stipulations, bonds or undertakings payment of endowments or annuities
issued by any company by virtue of and shall be considered a life insurance
under the provisions of Act No. 536, as contract for purpose of this Code.
amended by Act No. 2206. In the absence of a judicial guardian, the
Sec. 176. The liability of the surety or father, or in the latter's absence or
sureties shall be joint and several with incapacity, the mother, or any minor,
the obligor and shall be limited to the who is an insured or a beneficiary under
amount of the bond. It is determined a contract of life, health or accident
strictly by the terms of the contract insurance, may exercise, in behalf of said
of suretyship in relation to the principal minor, any right under the policy,
contract between the obligor and without necessity of court authority or
the obligee. (As amended by Presidential Decree No. the giving of a bond, where the interest
1455). of the minor in the particular act
involved does not exceed twenty
Sec. 177. The surety is entitled to
thousand pesos. Such right may include,
payment of the premium as soon as the
but shall not be limited to, obtaining a
contract of suretyship or bond is
policy loan, surrendering the policy,
perfected and delivered to the obligor.
receiving the proceeds of the policy, and
No contract of suretyship or bonding
giving the minor's consent to any
shall be valid and binding unless and
transaction on the policy.
until the premium therefor has been
paid, except where the obligee has Sec. 180-A. The insurer in a life
accepted the bond, in which case the insurance contract shall be liable in case
bond becomes valid and enforceable of suicides only when it is committed
irrespective of whether or not the after the policy has been in force for a
premium has been paid by the obligor to period of two years from the date of its
the surety: Provided, That if the issue or of its last reinstatement, unless
the policy provides a shorter The provisions of the Corporation Law
period: Provided, however, That suicide shall apply to all insurance corporations
committed in the state of insanity shall now or hereafter engaged in business in
be compensable regardless of the date of the Philippines insofar as they do not
commission. (As conflict with the provisions of this
amended by Batasang Pambansa Blg. 874). chapter.
Sec. 181. A policy of insurance upon life Sec. 186. No person, partnership, or
or health may pass by transfer, will or association of persons shall transact any
succession to any person, whether he insurance business in the Philippines
has an insurable interest or not, and except as agent of a person or
such person may recover upon it corporation authorized to do the
whatever the insured might have business of insurance in the Philippines,
recovered. unless possessed of the capital and
Sec. 182. Notice to an insurer of a assets required of an insurance
transfer or bequest thereof is not corporation doing the same kind of
necessary to preserve the validity of a business in the Philippines and invested
policy of insurance upon life or health, in the same manner; nor unless the
unless thereby expressly required. Commissioner shall have granted to him
or them a certificate to the effect that
Sec. 183. Unless the interest of a person he or they have complied with all the
insured is susceptible of exact pecuniary provisions of law which an insurance
measurement, the measure of indemnity corporation doing business in the
under a policy of insurance upon life or Philippines is required to observe.
health is the sum fixed in the policy.
Every person, partnership, or association
Chapter III receiving any such certificate of
THE BUSINESS OF INSURANCE authority shall be subject to the
Title 1 insurance laws of the Philippines and to
INSURANCE COMPANIES, the jurisdiction and supervision of the
ORGANIZATION, Commissioner in the same manner as if
CAPITALIZATION AND AUTHORIZATION an insurance corporation authorized by
the laws of the Philippines to engage in
Sec. 184. For purposes of this Code, the
the business of insurance specified in
term "insurer" or "insurance
the certificate.
company" shall include all individuals,
partnerships, associations, or Sec. 187. No insurance company shall
corporations, including government- transact any insurance business in
owned or controlled corporations or the Philippines until after it shall have
entities, engaged as principals in the obtained a certificate of authority for
insurance business, excepting mutual that purpose from the Commissioner
benefit associations. Unless the context upon application therefore and payment
otherwise requires, the terms shall also by the company concerned of the fees
include professional reinsurers defined hereinafter prescribed.
in section two hundred eighty. "Domestic The Commissioner may refuse to issue a
company" shall include companies certificate of authority to any insurance
formed, organized or existing under the company if, in his judgment, such
laws of the Philippines."Foreign refusal will best promote the interest of
company" when used without limitation the people of this country. No such
shall include companies formed, certificate of authority shall be granted
organized, or existing under any laws to any such company until the
other than those of the Philippines. Commissioner shall have satisfied
Sec. 185. Corporations formed or himself by such examination as he may
organized to save any person or persons make and such evidence as he may
or other corporations harmless from require that such company is qualified
loss, damage, or liability arising from by the laws of the Philippines to transact
any unknown or future or contingent business therein, that the grant of such
event, or to indemnify or to compensate authority appears to be justified in the
any person or persons or other light of economic requirements, and that
corporations for any such loss, damage, the direction and administration, as well
or liability, or to guarantee the as the integrity and responsibility of the
performance of or compliance with organizers and administrators, the
contractual obligations or the payment financial organization and the amount of
of debt of others shall be known capital, notwithstanding the provisions
as "insurance corporations". of section one hundred eighty-eight,
reasonably assure the safety of the
interests of the policyholders and the stockholdings. (As amended by Presidential Decree
public. No. 1455).
In order to maintain the quality of the Sec. 188. Except as provided in section
management of the insurance companies two hundred eighty-one, no domestic
and afford better protection to insurance company shall, in a stock
policyholders and the public in general, corporation, engage in business in the
any person of good moral character, Philippines unless possessed of a paid-up
unquestioned integrity and recognized capital stock equal to at least five
competence may be elected or appointed million pesos: Provided, That a domestic
director or officer of insurance insurance company already doing
companies. The Commissioner shall business in the Philippines with a paid-
prescribe the qualifications of the up capital stock which is less than five
executive officers and other key officials million pesos shall have a paid-up capital
of insurance companies for purposes of stock of at least three million pesos by
this section. December thirty-one, nineteen hundred
seventy-eight, four million pesos by
No person shall concurrently be a
December thirty-one, nineteen hundred
director and/or officer of an insurance
seventy-nine and five million pesos by
company and an adjustment company.
December thirty-one, nineteen hundred
Incumbent directors and/or officers eighty: Provided, further, that the
affected by the above provisions are Secretary of Finance may, upon
hereby allowed to hold on to their recommendation of the Insurance
positions until the end of their terms or Commissioner, increase such minimum
two years from the effectivity of this paid-up capital stock requirement, under
decree, whichever is shorter. such terms and conditions as he may
Before issuing such certificate of impose, to an amount which, in his
authority, the Commissioner must be opinion, would reasonably assure the
satisfied that the name of the company safety of the interests of the
is not that of any other known company policyholders and the public.
transacting a similar business in the The Commissioner may, as a pre-
Philippines, or a name so similar as to be licensing requirement of a new insurance
calculated to mislead the public. company, in addition to the paid-up
Such certificate of authority shall expire capital stock, require the stockholders
on the last day of June of each year and to pay in cash to the company in
shall be renewed annually if the proportion to their subscription
company is continuing to comply with interests a contributed surplus fund of
the provisions of this Code or the not less than one million pesos, in the
circulars, instructions, rulings or case of a life insurance company, or not
decisions of the Commissioner. Every less than five hundred thousand pesos,
company receiving any such certificates in the case of an insurance company
of authority shall be subject to the other than life. He may also require such
provisions of this Code and other related company to submit to him a business
laws and to the jurisdiction and plan showing the company's estimated
supervision of the Commissioner. receipts and disbursements, as well as
the basis therefore, for the next
No insurance company may be succeeding three years.
authorized to transact in
the Philippines the business of life and If organized as a mutual company, in
non-life insurance concurrently unless lieu of such capital stock, it must have
specifically authorized to do available cash assets of at least five
so: Provided, That the million pesos above all liabilities for
terms "life" and "non-life" insurance shall losses reported, expenses, taxes, legal
be deemed to include health, accident reserve, and reinsurance of all
and disability insurance. outstanding risks, and the contributed
surplus fund equal to the amounts
No insurance company shall have equity required of stock corporations. A stock
in an adjustment company and neither insurance company doing business in
shall an adjustment company have an the Philippines may, subject to the
equity in an insurance company. pertinent law and regulations which now
Insurance companies and adjustment are of hereafter may be in force, alter its
companies presently affected by the organization and transform itself into a
above provision shall have two years mutual insurance company. (As amended by
from the effectivity of this Decree within Presidential Decree No. 1455).
which to divest of their
Sec. 189. Every company must, before by whom the business is or may be
engaging in the business of insurance in managed.
the Philippines, file with the The certificate must be verified by the
Commissioner the following: affidavit of the chief officer, secretary,
(a) A certified copy of the last agent, or manager of the company; and if
annual statement or a verified there are any written articles of
financial statement exhibiting the agreement of the company, a copy
condition and affairs of such thereof must be accompany such
company; certificate.
(b) If incorporated under the laws Sec. 190. The Commissioner must
of the Philippines, a copy of the require as a condition precedent to the
articles of incorporation and by- transaction of insurance business in the
laws, and any amendments to Philippines by any foreign insurance
either, certified by the Securities company, that such company file in his
and Exchange Commission to be office a written power of attorney
a copy of that which is filed in its designating some person who shall be a
Office; resident of the Philippines as its general
(c) If incorporated under any laws agent, on whom any notice provided by
other than those of the law or by any insurance policy, proof of
Philippines, a certificate from the loss, summons and other legal processes
Securities and Exchange may be served in all actions or other
Commission showing that it is legal proceedings against such company,
duly registered in the mercantile and consenting that service upon such
registry of that Commission in general agent shall be admitted and held
accordance with the Corporation as valid as if served upon the foreign
Law. A copy of the articles of company at its home office. Any such
incorporation and by-laws, and foreign company shall, as further
any amendments to either, if condition precedent to the transaction
organized or formed under any law of insurance business in the Philippines,
requiring such to be filed, duly make and file with the Commissioner an
certified by the officer having the agreement or stipulation, executed by
custody of same, or if not so the proper authorities of said company
organized, a copy of the law, in form and substance as follows:
charter or deed of settlement "The (name of company) does
under which the deed of hereby stipulate and agree in
organization is made, duly consideration of the permission
certified by the proper custodian granted by the Insurance
thereof, or proved by affidavit to Commissioner to transact
be a copy; also, a certificate under business in the Philippines, that
the hand and seal of the proper if at any time said company shall
officer of such state or country leave the Philippines, or cease to
having supervision of insurance transact business therein, or
business therein, if any there be, shall be without any agent in the
that such corporation or company Philippines on whom any notice,
is organized under the laws of proof of loss, summons, or legal
such state or country, with the process may be served, then in
amount of capital stock or assets any action or proceeding arising
and legal reserve required by this out any business or transaction
Code; which occurred in the
(d) If not incorporated and of Philippines, service of any notice
foreign domicile, aside from the provided by law, or insurance
certificate mentioned in policy, proof of loss, summons, or
paragraph (c) of this section, a other legal process may be made
certificate setting forth the nature upon the Insurance Commissioner
and character of the business, the shall have the same force and
location of the principal office, effect as if made upon the
the name of the individual or company."
names of the persons composing Whenever such service of notice, proof
the partnership or association, the of loss, summons, or other legal process
amount of actual capital employed shall be made upon the Commission, he
or to be employed therein and the must, within ten days thereafter,
names of all officers and persons transmit by mail, postage paid, a copy of
such notice, proof of loss, summons, or
other legal process to the company at its business in the Philippines the securities
home or principal office. The sending of deposited as aforesaid shall be returned
such copy by the Commissioner shall be upon the company's making application
a necessary part of the service of the therefore and proving to the satisfaction
notice, proof of loss, or other legal of the Commissioner that it has no
process. further liability under any of its policies
Sec. 191. No insurance company in the Philippines.
organized or existing under the Sec. 193. Every foreign company doing
government or laws other than those of business in the Philippines shall set
the Philippines shall engage in business aside an amount corresponding to the
in the Philippines unless possessed of legal reserves of the policies written in
paid-up unimpaired capital or assets and the Philippines and invest and keep the
reserve not less than that herein same therein in accordance with the
required of domestic insurance provisions of this section. The legal
companies, nor until it shall have reserve therein required to be set aside
deposited with the Commissioner for the shall be invested only in the classes of
benefit and security of the policyholders the Philippine securities described in
and creditors of such company in the section two hundred: Provided, however,
Philippines, securities satisfactory to the That no investment in stocks or bonds of
Commissioner consisting of good any single entity shall, in the aggregate
securities of the Philippines, including exceed twenty per centum of the net
new issues of stock of "registered worth of the investing company or
enterprises", as this term is defined in twenty per centum of the capital of the
Republic Act No. 5186, otherwise known issuing company, whichever is the lesser
as the Investment Incentives Act, as unless otherwise approved in writing by
amended, to the actual market value of the Commissioner. The securities
not less than the minimum paid-up purchased and kept in
capital required of domestic insurance the Philippines under this section, shall
companies: Provided, That at least not be sent out of the territorial
fifty per centum of such securities shall jurisdiction of the Philippines without
consist of bonds or other evidences of the written consent of the
debt of the Government of the Commissioner.
Philippines, its political subdivisions and Title 2
instrumentalities, or of government- MARGIN OF INSOLVENCY
owned or controlled corporations and
entities, including the Central Bank. The Sec. 194. An insurance company doing
total investment of a foreign insurance business in the Philippines shall at all
company in any registered enterprise times maintain a margin of solvency
shall not exceed twenty per centum of which shall be an excess of the value of
the net worth of said foreign insurance its admitted assets exclusive of its paid-
company nortwenty per centum of the up capital, in the case of a domestic
capital of the registered enterprise, company, or an excess of the value of its
unless previously authorized in writing admitted assets in the Philippines,
by the Commissioner. exclusive of its security deposits, in the
case of a foreign company, over the
For purposes of this Code, the net worth amount of its liabilities, unearned
of a foreign insurance company shall premium and reinsurance reserves in the
refer only to its net worth in
Philippines of at least two per mille of
the Philippines.
the total amount of its insurance in
Sec. 192. The Commissioner shall hold force as of the preceding calendar year
the securities, deposited as aforesaid, for on all policies, except term insurance, in
the benefit and security of all the the case of a life insurance company, or
policyholders of the company depositing of at least ten per centum of the total
the same, but shall as long as the amount of its net premium written
company is solvent, permit the company during the preceding calendar year, in
to collect the interest or dividends on the case of a company other than a life
the securities so deposited, and, from insurance company: Provided, That in
time to time, with his assent, to either case, such margin shall in no
withdraw any of such securities, upon event be less than five hundred thousand
depositing with said Commissioner other pesos: and Provided, further, That the
like securities, the market value of term "paid-up capital" shall not include
which shall be equal to the market value contributed surplus and capital paid in
of such as may be withdrawn. In the excess of par value. Such assets,
event of any company ceasing to do liabilities and reserves shall exclude
assets, liabilities and reserves included reported to the Commissioner within
in separate accounts established in thirty days after such declaration or
accordance with section two hundred distribution.
thirty-seven. Whenever the If the Commissioner finds that any such
aforementioned margin be found to be corporation has declared or distributed
less than that herein required to be any such dividend in violation of this
maintained, the Commissioner shall section, he may order such corporation
forthwith direct the company to make to cease and desist from doing business
good any such deficiency by cash, to be until the amount of such dividend or the
contributed by all stockholders of record portion thereof in excess of the amount
in proportion to their respective allowed under this section has been
interest, and paid to the treasurer of the restored to said corporation.
company, within fifteen days from
receipt of the order: Provided, That the Title 3
company in the interim shall not be ASSETS
permitted to take any new risk of any Sec. 196. In any determination of the
kind or character unless and until it financial condition of any insurance
make good any such company doing business in
deficiency: Provided, further, that a the Philippines, there shall be allowed
stockholder who aside from paying the and admitted as assets only such assets
contribution due from him, pays the owned by the insurance company
contribution due from the another concerned and which consist of:
stockholder by reason of the failure or
1. Cash in the possession of the
refusal of the latter to do so, shall have a
insurance company or in transit
lien on the certificates of stock of the
under its control, and the true and
insurance company concerned appearing
duly verified balance of any
in its books in the name of the
deposit of such company in a
defaulting stockholder on the date of
financially sound commercial
default, as well as on any interests or
bank or trust company.
dividends that have accrued or will
accrue to the said certificates of stock, 2. Investments in securities,
until the corresponding payment or including money market
reimbursement is made by the defaulting instruments, and in real property
stockholder. (As amended by Presidential Decree No. acquired or held in accordance
1455). with and subject to the applicable
Sec. 195. No domestic insurance provisions of this Code and the
corporation shall declare or distribute income realized therefrom or
any dividend on its outstanding stocks accrued thereon.
except from profits attested in a sworn 3. Loans granted by the insurance
statement to the Commissioner by the company concerned to the extent
president or treasurer of the corporation of that portion thereof adequately
to be remaining on hand after retaining secured by non-speculative assets
unimpaired: with readily realizable values in
(a) The entire paid-up capital accordance with and subject to
stock; the limitations imposed by
applicable provisions of this Code.
(b) The margin of solvency
required by section one hundred 4. Policy loans and other policy
ninety-four; assets and liens on policies,
contracts or certificates of a life
(c) In the case of life insurance insurance company, in an amount
corporation, the legal reserve fund not exceeding legal reserves and
required by section two hundred other policy liabilities carried on
eleven; each individual life insurance
(d) In the case of corporations policy, contract or certificate.
other than life, the legal reserve 5. The net amount of uncollected
fund required by section two and deferred premiums and
hundred thirteen; annuity considerations in the case
(e) A sum sufficient to pay all net of a life insurance company which
losses reported, or in the course of carries the full mean tabular
settlement, and all liabilities for reserve liability.
expenses and taxes. 6. Reinsurance recoverable by the
Any dividend declared or distributed ceding insurer:
under the preceding paragraph shall be
 (a) from an insurer 10. Other assets, not inconsistent
authorized to transact with the provisions of paragraphs
business in this country, 1 to 9 hereof, which are deemed
the full amount thereof; or by the Commissioner to be readily
(b) from an insurer not realizable and available for the
authorized in this payment of losses and claims at
country, in an amount not values to be determined by him.
exceeding the liabilities Sec. 197. In addition to such assets as
carried by the ceding the Commissioner may from time to
insurer for amounts time determine to be non-admitted
withheld under a assets of insurance companies doing
reinsurance treaty with business in the Philippines, the following
such unauthorized insurer assets shall in no case be allowed as
as security for the admitted assets of an insurance
payment of company doing business in the
obligations thereunder if Philippines, in any determination of its
such funds are held financial condition:
subject to withdrawal by, 1. Goodwill, trade names, and
and under the control of, other like intangible assets.
the ceding insurer. The
Commissioner may 2. Prepaid or deferred charges for
prescribe the conditions expenses and commissions paid by
under which a ceding such insurance company.
insurer may be allowed 3. Advances to officers (other than
credit, as an asset or as a policy loans), which are not
deduction from loss and adequately secured and which are
unearned premium not previously authorized by the
reserves, for reinsurance Commissioner, as well as advances
recoverable from an to employees, agents, and other
insurer not authorized in persons on mere personal
this country but which security.
presents satisfactory
4. Shares of stock of such
evidence that it meets the
insurance company, owned by it,
applicable standards of
or any equity therein as well as
solvency required in this
loans secured thereby, or any
country.
proportionate interest in such
shares of stock through the
7. Funds withheld by a ceding ownership by such insurance
insurer under a reinsurance company of an interest in another
treaty, provided reserves for corporation or business unit.
unpaid losses and unearned
5. Furniture, furnishing, fixtures,
premiums are adequately
safes, equipment, library,
provided.
stationery, literature, and
8. Deposits or amounts supplies.
recoverable from underwriting
6. Items of bank credits
associations, syndicates and
representing checks, drafts or
reinsurance funds, or from any
notes returned unpaid after the
suspended banking institution, to
date of statement.
the extent deemed by the
Commissioner to be available for 7. The amount, if any, by which
the payment of losses and claims the aggregate value of
and values to be determined by investments as carried in the
him. ledger assets of such insurance
company exceeds the aggregate
9. Electronic data processing
value thereof as determined in
machines, as may be authorized
accordance with the provisions of
by the Commissioner to be
this Code and/or the rules of the
acquired by the insurance
Commissioner.
company concerned, the
acquisition cost of which to be All non-admitted assets and all other
amortized in equal annual assets of doubtful value or character
amounts within a period of five included as ledger or non-ledger assets
years from the date of acquisition in any statement submitted by an
thereof. insurance company to the
Commissioner, or in any insurance Commissioner, in case the building or
examiner's report to him, shall also be buildings on land do not belong to the
reported, to the extent of the value owner of the latter, no loan shall be
disallowed as deductions from the gross granted on the security of the real estate
assets of such insurance company, in question unless both the owner of the
except where the Commissioner permits building or buildings and the owner of
a reserve to be carried among the the land sign the deed of mortgage, and
liabilities of such insurance company in unless the owner of the land is the
lieu of any such deduction. Government of the Philippines or one of
Title 4 its political subdivisions, in which event
the owner is not required to sign the
INVESTMENTS
deed of mortgage.
Sec. 198. No insurance company shall
loan any of its money or deposits to any Sec. 199. No loan by any insurance
person, corporation or association, company on the security of real estate
shall be made unless the title to such
except upon first mortgage or deeds of
real estate shall have first been
trust of unencumbered, improved or
unimproved real estate, including registered in accordance with the
condominiums, in cities and centers of existing Land Registration Act, or shall
population of municipalities in the be a titulo real duly registered, or have
Philippines when the amount of such been previously registered under the
provisions of the existing Mortgage Law.
loan is not in excess of seventy per
centum of the market value of such real Sec. 200. (1) An insurance company may
estate; or upon the security of first purchase, hold, own and convey such
mortgages or deeds of trust of actually property, real and personal, as may have
cultivated, improved and unencumbered been mortgaged, pledged, or conveyed to
agricultural lands in the Philippines it in good faith in trust for its benefit by
when the amount of such loan is not in reason of money loaned by it in
excess of forty per centum of the market pursuance of the regular business of the
value of such land; or upon the purchase company, and such real or personal
money mortgages or like securities property as may have been purchased by
received by it upon the sale or exchange it at sales under pledges, mortgages or
of real property acquired pursuant to deeds of trust for its benefit on account
sections two hundred and two hundred of money loaned by it; and such real and
two; or upon bonds or other evidences of personal property as may have been
debt of the Government of the conveyed to it by borrowers in
Philippines or its political subdivisions satisfaction and discharge of loans made
authorized by law to issue bonds, or by the company to them: Provided,
upon bonds or other evidences of debt of however, That any real estate purchased
government-owned or controlled by an insurance company in payment or
corporations and instrumentalities by reason of any loan made by it shall be
including the Central Bank or upon sold by the company within twenty years
obligations issued or guaranteed by the after the title thereto has been vested in
International Bank for Reconstruction it.
and Development; or upon stocks, bonds (2) An insurance company may purchase,
or other evidences of debt as are hold, own and convey real and personal
specified in section two hundred. property as follows:
A life insurance company, however, may (a) The lot with building thereon
lend to any of its policyholders upon the in which the company conducts
security of the value of its policy such and carries on its business.
sum as may be determined pursuant to
the provisions of the policy. (b) Bonds or other evidences of
debt of the Government of
Loans granted upon the security of real the Philippines or its political
estate for a period longer than five years subdivisions authorized by law to
shall be amortized in monthly, quarterly, issue bonds at the reasonable
semi-annual or annual market value thereof.
installments; Provided, that no such
loans shall have a maturity in excess of (c) Bonds or other evidences of
twenty years. debt of the government-owned or
controlled corporations and
The phrase "improved real estate" used entities, including the Central
above is hereby defined to mean land Bank.
with permanent building or buildings
erected or being erected thereon. Except (d) Bonds, debentures or other
as otherwise approved by the evidences of indebtedness of any
solvent corporations or institution the stocks are guaranteed, the
created or existing under the laws amount of stocks so guaranteed is
of the Philippines: Provided, not excess of fifty per centum of
however, That the issuing, the amount of the preferred or
assuming or guaranteeing entity common stocks, as the case may
or its predecessors shall not have be, of the guaranteeing
defaulted in the payment of corporation: and Provided, finally,
interest on any of its securities That no life insurance company
and that during each of any three shall invest in or loan upon
including the last two of the five obligations of any one institution
fiscal years next preceding the in the kinds permitted under this
date of acquisition by such sub-section an amount in excess
insurance company of such bonds, of ten per centum of the total
debentures, or other evidences of admitted assets of such insurer as
indebtedness, the net earnings of of December thirty-first next
the issuing, assuming or preceding the date of such
guaranteeing institution available investment.
for its fixed charges, as (f) Common stocks of any solvent
hereinafter defined, shall have corporation or institution created
been not less than one and one- or existing under the laws of the
quarter times the total of its fixed Philippines upon which regular
charges for such year; dividends shall have been paid for
and Provided, further, that no life the three years next preceding the
insurance company shall invest in purchase of such stock: Provided,
or loan upon the obligations of however, That no life insurance
any one institution in the kinds company shall invest in or loan
permitted under this sub-section upon the obligations of any one
an amount in excess of twenty- corporation or institution in the
five per centum of the total kinds permitted under this sub-
admitted assets of such insurer as section an amount in excess of
of December thirty-first next ten per centum of the total
preceding the date of such admitted assets of such insurer as
investment. of December thirty-first next
As used in this sub-section the preceding the date of such
term "net earnings available for investment.
fixed charges" shall mean net (g) Certificates, notes and other
income after deducting operating obligations issued by the trustees
and maintenance expenses, taxes or receivers of any institution
other than income taxes, created or existing under the laws
depreciation and depletion; but of the Philippines which, or the
excluding extraordinary non- assets of which, are being
recurring items of income or administered under the direction
expense appearing in the regular of any court having
financial statement of the issuing, jurisdiction; Provided,
assuming or guaranteeing however, That such certificates,
institution. The term "fixed notes or other obligations are
charges" shall include interest on adequately secured as to principal
funded and unfunded debt, and interests.
amortization of debt discount, and
rentals for leased properties. (h) Equipment trust obligations or
certificates which are adequately
(e) Preferred or guaranteed stocks secured or other adequately
of any solvent corporation or secured instruments evidencing
institution created or existing an interest in equipment wholly or
under the laws of the in part within the
Philippines: Provided, however, Philippines: Provided,
That the issuing, assuming or however, That there is a right to
guaranteeing entity or its receive determined portions of
predecessors has paid regular rental, purchase or other fixed
dividends upon its preferred or obligatory payments for the use or
guaranteed stocks for a period of purchase of such equipment.
at least three years next preceding
the date of investment in such (i) Any obligation of any
preferred or guaranteed corporation or institution created
stock: Provided, further, That if or existing under the laws of the
 Philippines which is, on the date (b) Acquire real property, other
of acquisition by the insurer, than property to be used primarily
adequately secured and has for providing housing and
qualities and characteristics property for accommodation of its
wherein the speculative elements own business, as an investment
are not predominant. for the production of income, or
(j) Such other securities as may be may acquire real property to be
approved by the Commissioner. improved or developed for such
investment purpose pursuant to a
(3) Any domestic insurer which has program therefor, subject to the
outstanding insurance, annuity or condition that the cost of each
reinsurance contracts in currencies parcel of real property so acquired
other than the national currency of the under the authority of this
Philippines may invest in, or otherwise paragraph (b), including the
acquire or loan upon securities and estimated cost to the company of
investments in such currency which are the improvement or development
substantially of the same kinds, classes thereof, when added to the book
and investment grades as those eligible value of all other real property
for investment under the foregoing held by its pursuant to this
subdivisions of this section; but the paragraph (b), shall not exceed
aggregate amount of such investment twenty-five per centum of its
and of such cash in such currency which admitted assets as of the thirty-
is at anytime held by such insurer shall first day of December next
not exceed one and one-half times the preceding.
amount of its reserves and other
obligations under such contracts or the Sec. 203. Every domestic insurance
amount which such insurer is required company shall, to the extent of an
by the law of any country or possession amount equal in value to twenty-five per
outside the Republic of the Philippines centum of the minimum paid-up capital
to be invest in such country or required under section one hundred
possession, whichever shall be greater. eighty-eight, invest its funds only in
securities, satisfactory to the
Sec. 201. An insurance company may (1) Commissioner, consisting of bonds or
invest in equities of other financial other evidences of debt of the
institutions, and (2) engage in the buying Government of the Philippines or its
and selling of short-term debt political subdivisions or
instruments: Provided, that any or all of instrumentalities, or of government-
such investments shall be with the prior owned or controlled corporations and
approval of the Commissioner. entities, including the Central Bank of
Sec. 202. Any life insurance company the Philippines: Provided, That such
may: investments shall at all times be
maintained free from any lien or
(a) Acquire or construct housing
encumbrance; and Provided, further,
projects and, in connection with
That such securities shall be deposited
any such project, may acquire
with and held by the Commissioner for
land or any interest therein by
the faithful performance by the
purchase, lease or otherwise, or
depositing insurer of all its obligations
use land acquired pursuant to any
under its insurance contracts. The
other provision of this Code. Such
provisions of section one hundred
company may thereafter own,
ninety-two shall, so far as practicable,
maintain, manage, collect or
apply to the securities deposited under
receive income from, or sell and
this section.
convey, any land or interest
therein so acquired and any Except as otherwise provided in this
improvements thereon. The Code, no judgment creditor or other
aggregate book value of the claimant shall have the right to levy
investments of any such company upon any of the securities of the insurer
in all such projects shall not held on deposit under this section or
exceed at the time of such held on deposit pursuant to the
investments twenty five per requirement of the Commissioner. (As
centum of the total admitted amended by Presidential Decree No. 1455).
assets of such company on the Sec. 204. After satisfying the
thirty-first day of December next requirements contained in the preceding
preceding; section, any domestic non-life insurance
company, shall invest, to an amount
prescribed below, its funds in, or company may invest its legal policy
otherwise, acquire or loan upon, only the reserve, as provided in section two
classes of investments described in hundred eleven or in section two
section two hundred, including hundred twelve, in any of the classes of
securities issued by any "registered securities or types of investments
enterprise", as this term is defined in described in sections one hundred
Republic Act No. 5186, otherwise known ninety-eight, two hundred, two hundred
as the Investment Incentives Act, and one and two hundred two, subject to the
such other classes of investments as limitations therein contained, and in any
may be authorized by the Commissioner securities issued by any "registered
for purposes of this section:Provided, enterprise" mentioned in section two
That (a) no more than twenty per hundred four, free from any lien or
centum of the net worth of such encumbrance, in such amounts as may
company as shown by its latest financial be approved by the Commissioner. Such
statement approved by the company may likewise invest any
Commissioner shall be invested in the portion of its earned surplus in the
lot and building in which the insurance aforesaid securities or investments
company conducts its business and (b) subject to the aforesaid limitations.
the total investment of an insurance Sec. 207. Any investment made in
company in any registered enterprise violation of the applicable provisions of
shall not exceed twenty per centumof this title shall be considered non-
the net worth of said insurance company admitted assets.
as shown by its aforesaid financial
statement nor twenty per centum of the Sec. 208. (1) All bonds or other
paid-up capital of the registered evidences of indebtedness having a fixed
enterprise excluding the intended term and rate of interest and held by any
investment, unless previously authorized life insurance company authorized to do
by the Commissioner: and, Provided, business in this country, if amply
further, That such investments free secured and if not in default as to
from any lien or encumbrance, shall be principal or interest, shall be valued as
at least equal in amount to the aggregate follows: If purchased at par, at the par
amount of (a) its legal reserve, as value; if purchased above or below par,
provided in section two hundred on the basis of the purchase price
thirteen, and (b) its reserve fund held for adjusted so as to bring the value to par
reinsurance as provided for in the at maturity and so as to yield in the
pertinent treaty provision in the case of meantime the effective rate of interest
reinsurance ceded to authorized at which the purchase was made, or in
insurers. (As amended by Presidential Decree No.1455). the discretion of the Commissioner, on
the basis of the method of calculation
Sec. 205. After satisfying the commonly known as the pro-rata
requirements contained in sections one method. In applying the foregoing rule
hundred ninety-one, one hundred the purchase price shall in no case be
ninety-three, two hundred three and two taken at a higher figure than the actual
hundred four, any non-life insurance market value at the time of acquisition.
company may invest any portion of its The Commissioner shall have the power
funds representing earned surplus in any to determine the eligibility of any such
of the investments described in sections investments for valuation on the basis of
one hundred ninety-eight, two hundred amortization, and may by regulation
and two hundred one, or in any prescribe or limit the classes of
securities issued by a "registered securities so eligible for amortization.
enterprise" mentioned in the preceding All bonds or other evidences of
sections: Provided, That no investment indebtedness which in the judgment of
in stocks or bonds of any single entity the Commissioner are not amply secured
shall in the aggregate, exceed twenty per shall not be eligible for amortization and
centum of the net worth of the shall be valued in accordance with
insurance company as shown in its latest paragraph two. The Commissioner may,
financial statement approved by the if he finds that the interest of policy
Commissioner or twenty per centum of holders so permit or require, by official
the paid-up capital of the issuing regulation permit or require any class or
company, whichever is lesser, unless classes of insurers, other than life
otherwise approved by the insurance companies, authorized to do
Commissioner. business in this country, to value their
Sec. 206. After satisfying the minimum bonds or other evidences of
capital investment required in section indebtedness in accordance with the
two hundred three, any life insurance foregoing rule.
(2) The investments of all insurers improvements thereafter paid by such
authorized to do business in this insurer and any amount or amounts
country, except securities subject to thereafter paid by such insurer on any
amortization and except as otherwise assessments levied for improvements in
provided in this chapter, shall be valued, connection with the property.
in the discretion of the Commissioner, (5) Purchase money mortgages received
at their market value, or at their on dispositions of real property held
appraised value, or at prices determined pursuant to section one hundred ninety-
by him as representing their fair market eight shall be valued in an amount
value. If the Commissioner finds that in equivalent to ninety per centum of the
view of the character of investments of value of such real property. Purchase
any insurer authorized to do business in money mortgages received on
this country it would be prudent for such disposition of real property otherwise
insurer to establish a special reserve for held shall be valued in an amount not
possible losses or fluctuations in the exceeding ninety per centum of the
values of its investments, he may value of such real property as
require such insurer to establish such determined by an appraisal made by an
reserve, reasonable in amount, and may appraiser at or about the time of
require that such reserve be maintained disposition of such real property.
and reported in any statement or report
of the financial condition of such (6) The stock of a subsidiary of an
insurer. The Commissioner may, in insurer shall be valued on the basis of
connection with any examination or the greater of (i) the value of only such
required financial statement of an subsidiary of the assets of such
authorized insurer, require such insurer subsidiary as would constitute lawful
to furnish him complete financial investments for the insurer if acquired
statements and audited report of the or held directly by the insurer or (ii)
financial condition of any corporation of such other value determined pursuant to
which the securities are owned wholly or standards and cumulative limitations,
partly by such insurer and may cause an contained in a regulation to be
examination to be made of any promulgated by the Commissioner.
subsidiary or affiliate of such insurer. (7) Notwithstanding any provision
(3) The stock of an insurance company contained in this section or elsewhere in
shall be valued at the lesser of its this chapter, if the Commissioner find
market value or its book value as shown that the interests of policyholders so
by its last approved annual statement or permit or require, he may permit or
the last report on examination, require any class or classes of insurers
whichever is more recent. The book authorized to do business in this country
value of a share of common stock of an to value their investments or any class
insurance company shall be ascertained or classes thereof as of any date
by dividing (a) the amount of its capital heretofore or hereafter in accordance
and surplus less the value of all of its with any applicable valuation or method.
preferred stock, if any, outstanding, by Sec. 209. It shall be the duty of the
(b) the number of shares of its common officers of the insurance company to
stock issued and outstanding. report within the first fifteen days of
Notwithstanding the foregoing every month all such investments as
provisions, an insurer may, at its option, may be made by them during the
value its holdings of stock in a preceding month, and the Commissioner
subsidiary insurance company in an may, if such investments or any of them
amount not less than acquisition cost if seem injudicious to him, require the sale
such acquisition cost is less than the or disposal of the same. The report shall
value determined as hereinbefore also include a list of investments sold or
provided. disposed of by the company during the
(4) Real estate required by foreclosure or same period.
by deed in lieu thereof, in the absence of Title 5
a recent appraisal deemed by the RESERVES
Commissioner to be reliable, shall not be
Sec. 210. Every life insurance company,
valued at an amount greater than the
doing business in the Philippines, shall
unpaid principal of the defaulted loan at
annually make a valuation of all policies,
the date of such foreclosure or deed,
additions thereto, unpaid dividends, and
together with any taxes and expenses
all other obligations outstanding on the
paid or incurred by such insurer at such
thirty-first day of December of the
time in connection with such
preceding year. All such valuations shall
acquisition, and the cost of additions or
be made upon the net premiums basis, actual interest earnings and accretions
according to the standard adopted by the to such fund, as a distinct and separate
company, which standard shall be stated liability to such class of policies on and
in its annual report. for which the same was accumulated,
Such standard of valuation whether of and no company or any of its officers
the net level premium, full preliminary shall be permitted to use any part of
term, any modified preliminary term, or such apportioned surplus fund for any
select and ultimate reserve basis, shall purpose whatsoever other than for the
be according to a standard table of express purpose for which the same was
mortality with interest at not more than accumulated.
six per centum compound interest. When Sec. 213. Every insurance company,
the preliminary term basis is used, the other than life, shall maintain a reserve
term insurance shall be limited to the for unearned premiums on its policies in
first policy year. force, which shall be charged as a
The results of such valuations shall be liability in any determination of its
reported to the Commissioner on or financial condition. Such reserve shall be
before the thirtieth day of April of each equal to forty per centum of the gross
year accompanied by a sworn statement premiums, less returns and
of the company's actuary certifying to cancellations, received on policies or
the figures and stating upon what risks having not more than a year to run,
mortality table it is based, upon what and pro rata on all gross premiums
rate of interest the valuation is made, received on policies or risks having more
and the methods used in arriving at the than a year to run: Provided, That for
result obtained. marine cargo risks the reserve shall be
equal to forty per centum of the
Sec. 211. The aggregate net value so premiums written in the policies upon
ascertained of the policies of such yearly risks, and the full amount of the
company shall be deemed its reserve premiums written during the last two
liability, to provide for which it shall months of the calendar year upon all
hold funds in secure investments equal other marine risks not terminated.
to such net value, above all its other
liabilities; and it shall be the duty of the Sec. 214. In addition to its liabilities and
Commissioner, after having verified, to reserves on contracts of insurance
such an extent as he may deem issued by it, every insurance company
necessary, the valuation of all policies in shall be charged with the estimated
force, to satisfy himself that the amount of all of its other liabilities,
company has such amount in safe legal including taxes, expenses and other
securities after all other debts and obligations due or accrued at the date of
claims against it have been provided for. statement, and including any special
reserves required by the Commissioner
The reserve liability for variable pursuant to the provisions of this Code.
contracts defined in section two hundred
thirty-two shall be established in Title 6
accordance with actuarial procedures LIMIT OF SINGLE RISK
that recognize the variable nature of the Sec. 215. No insurance company other
benefits provided, and shall be approved than life, whether foreign or domestic,
by the Commissioner. shall retain any risk on any one subject
Sec. 212. Every domestic life insurance of insurance in an amount exceeding
company, conducted on the mutual plan twenty per centum of its net worth. For
or a plan in which policyholders are by purposes of this section, the
the terms of their policies entitled to term "subject of insurance" shall include
share in the profits or surplus shall, on all properties or risks insured by the
all policies of life insurance heretofore or same insurer that customarily are
hereafter issued, under the conditions of considered by non-life company
which the distribution of surplus is underwriters to be subject to loss or
deferred to a fixed or specified time and damage from the same occurrence of any
contingent upon the policy being in hazard insured against.
force and the insured living at that time, Reinsurance ceded as authorized under
annually ascertain the amount of the the succeeding title shall be deducted in
surplus to which all such policies as determining the risk retained. As to
separate class are entitled, and shall surety risk, deduction shall also be made
annually apportion to such policies as a of the amount assumed by any other
class the amount of the surplus so company authorized to transact surety
ascertained, and carry the amount of business and the value of any security
such apportioned surplus, plus the mortgage, pledged, or held subject to the
surety's control and for the surety's provide the facilities sought
protection. abroad.
Title 7 (2) The reserve fund withheld shall
REINSURANCE TRANSACTIONS be invested in bonds or other
Sec. 216. An insurance company doing evidences of debt of the
business in the Philippines may accept Government of the Philippines or
reinsurances only of such risks, and its political subdivisions or
instrumentalities, or of
retain risk thereon within such limits, as
government-owned or controlled
it is otherwise authorized to insure.
corporations and entities,
Sec. 217. No insurance company doing including the Central Bank,
business in the Philippines shall cede all and/or other securities acceptable
or part of any risks situated in the under section two hundred.
Philippines by way of reinsurance
Should any reinsurance agreement be for
directly to any foreign insurer not
authorized to do business in the any reason cancelled or terminated, the
Philippines unless such foreign insurer ceding company concerned shall inform
or, if the services of a non-resident the Commissioner in writing of such
broker are utilized, such non-resident cancellation or termination within thirty
broker is represented in the Philippines days from the date of such cancellation
or termination or from the date notice or
by a resident agent duly registered with
information of such cancellation or
the Commissioner as required in this
Code. termination is received by such company
as the case may be.
The resident agent of such unauthorized
foreign insurer or non- resident broker Sec. 220. Every insurance company
authorized to do business in the
shall immediately upon registration
Philippines shall report to the
furnish the Commissioner with the
annual statement of such insurer, or of Commissioner on forms prescribed by
such company or companies where such him the particulars of reinsurance
broker may place Philippine business as treaties as of the first day of January of
of the year preceding such registration, the year following the approval of this
and annually thereafter as soon as Code and shall thereafter similarly
report to the Commissioner particulars
available.
of any new treaties or changes in
Sec. 218. All insurance companies, both existing treaties.
life and non-life, authorized to do
business in the Philippines shall cede Sec. 221. No credit shall be allowed as an
their excess risks to other companies admitted asset or as a deduction from
liability, to any ceding insurer for
similarly authorized to do business in
reinsurance made, ceded, renewed, or
the Philippines in such amounts and
under such arrangements as would be otherwise becoming effective after
consistent with sound underwriting January first, nineteen hundred seventy-
practices before they enter into five, unless the reinsurance shall be
reinsurance arrangements with payable by the assuming insurer on the
unauthorized foreign insurers. basis of the liability of the ceding insurer
under the contract or contracts
Sec. 219. Any insurance company doing reinsured without diminution because of
business in the Philippines desiring to the insolvency of the ceding insurer nor
cede their excess risks to foreign unless under the contract or contracts of
insurance or reinsurance companies not reinsurance the liability for such
authorized to transact business in reinsurance is assumed by the assuming
the Philippines may do so under the insurer or insurers as of the same
following conditions: effective date; nor unless the
(1) Except in facultative reinsurance agreement provides that
reinsurance and excess of loss payments by the assuming insurer shall
covers, the full amount of the be made directly to the ceding insurer or
reserve fund required by law shall to its liquidator, receiver, or statutory
be set up in the books of and held successor except (a) where the contract
by the ceding company for so long specifically provides another payee of
as the risk concerned is in such reinsurance in the event of the
force: Provided, That in case of insolvency of the ceding insurer and (b)
facultative insurance, the ceding where the assuming insurer with the
company shall show to the consent of the direct insured
satisfaction of the Commissioner or insureds has assumed such policy
that the Philippine market cannot obligations of the ceding insurer as
direct obligations of the assuming Title 9
insurer to the payees under such policies POLICY FORMS
and in substitution for the obligations of Sec. 226. No policy, certificate or
the ceding insurer to such payees.
contract of insurance shall be issued or
Sec. 222. No life insurance company delivered within the Philippines unless
doing business in the Philippines shall in the form previously approved by the
reinsure its whole risk on any individual Commissioner, and no application form
life or joint lives, or substantially all of shall be used with, and no rider, clause,
its insurance in force, without having warranty or endorsement shall be
first obtained the written permission of attached to, printed or stamped upon
the Commissioner. such policy, certificate or contract
Title 8 unless the form of such application,
ANNUAL STATEMENT rider, clause, warranty or endorsement
has been approved by the Commissioner.
Sec. 223. Every insurance company
doing business in the Philippines shall Sec. 227. In the case of individual life or
terminate its fiscal period on the thirty- endowment insurance, the policy shall
first day of December every year, and contain in substance the following
shall annually on or before the thirtieth conditions:
day of April of each year render to the (a) A provision that the
Commissioner a statement signed and policyholder is entitled to a grace
sworn to by the chief officer of such period either of thirty days or of
company showing, in such form and one month within which the
details as may be prescribed by the payment of any premium after the
Commissioner, the exact condition of its first may be made, subject at the
affairs on the preceding thirty-first day option of the insurer to an
of December. interest charge not in excess of
Any entry in the statement which is six per centum per annum for the
found to be false shall constitute a number of days of grace elapsing
misdemeanor and the officer signing before the payment of the
such statement shall be subject to the premium, during which period of
penalty provided for under section four grace the policy shall continue in
hundred nineteen. full force, but in case the policy
becomes a claim during the said
Sec. 224. Every insurance company period of grace before the overdue
authorized under title ten of this chapter premium is paid, the amount of
to issue, deliver or use variable contracts such premium with interest may
shall annually file with the de deducted from the amount
Commissioner separate annual payable under the policy in
statement of its separate variable settlement;
accounts. Such statement shall be on a
form prescribed or approved by the (b) A provision that the policy
Commissioner and shall include details shall be incontestable after it shall
as to all of the income, disbursements, have been in force during the
assets and liability items of and lifetime of the insured for a period
associated with the said separate of two years from its date of issue
variable accounts. Said statement shall as shown in the policy, or date of
be under oath of two officers of the approval of last reinstatement,
company and shall be filed except for non-payment of
simultaneously with the annual premium and except for violation
statement required by the preceding of the conditions of the policy
section. relating to military or naval
service in time of war;
Sec. 225. Within thirty days after receipt
of the annual statement approved by the (c) A provision that the policy
Commissioner, every insurance company shall constitute the entire
doing business in the Philippines shall contract between the parties, but
publish in two newspapers of general if the company desires to make
circulation in the City of Manila, one the application a part of the
published in English and one in Pilipino, contract it may do so provided a
a full synopsis of its annual financial copy of such application shall be
statement showing fully the conditions indorsed upon or attached to the
of its business, and setting forth its policy when issued, and in such
resources and liabilities. case the policy shall contain a
provision that the policy and the
application therefore shall
constitute the entire contract time to time, but not more often
between the parties; than once a year, subject to the
(d) A provision that if the age of approval of the Commissioner;
the insured is considered in and that the company will deduct
determining the premium and the from such loan value any existing
benefits accruing under the indebtedness on the policy and
policy, and the age of the insured any unpaid balance of the
has been misstated, the amount premium for the current policy
payable under the policy shall be year, and may collect interest in
such as the premium would have advance on the loan to the end of
purchased at the correct age; the current policy year, which
provision may further provide that
(e) If the policy is participating, a such loan may be deferred for not
provision that the company shall exceeding six months after the
periodically ascertain and application therefore is made;
apportion any divisible surplus
accruing on the policy under (h) A table showing in figures cash
conditions specified therein; surrender values and paid-up
options available under the policy
(f) A provision specifying the each year upon default in
options to which the policyholder premium payments, during at
is entitled to in the event of least twenty years of the policy
default in a premium payment beginning with the year in which
after three full annual premiums the values and options first
shall have been paid. Such option become available, together with a
shall consist of: provision that in the event of the
failure of the policyholder to elect
(1) A cash surrender value one of the said options within the
payable upon surrender of time specified in the policy, one of
the policy which shall not said options shall automatically
be less than the reserve take effect and no policyholder
on the policy, the basis of shall ever forfeit his right to same
which shall be indicated, by reason of his failure to so elect;
for the then current policy (i) In case the proceeds of a policy
year and any dividend are payable in installments or as
additions thereto, reduced an annuity, a table showing the
by a surrender charge minimum amounts of the
which shall not be more installments or annuity payments;
than one-fifth of the
(j) A provision that the
entire reserve or two and
policyholder shall be entitled to
one-half per centum of the
have the policy reinstated at any
amount insured and any
time within three years from the
dividend additions
date of default of premium
thereto;
payment unless the cash
(2) One or more paid-up surrender value has been duly
benefits on a plan or plans paid, or the extension period has
specified in the policy of expired, upon production of
such value as may be evidence of insurability
purchased by the cash satisfactory to the company and
surrender value; upon payment of all overdue
(g) A provision that at anytime premiums and any indebtedness
after a cash surrender value is to the company upon said policy,
available under the policy and with interest rate not exceeding
while the policy is in force, the that which would have been
company will advance, on proper applicable to said premiums and
assignment or pledge of the policy indebtedness in the policy years
and on sole security thereof, a prior to reinstatement.
sum equal to, or at the option of Any of the foregoing provisions or
the owner of the policy, less than portions thereof not applicable to single
the cash surrender value on the premium or term policies shall to that
policy, at a specified rate of extent not be incorporated therein; and
interest, not more than the any such policy may be issued and
maximum allowed by law, to be delivered in the Philippines which in the
determined by the company from opinion of the Commissioner contains
provisions on any one or more of the been furnished to such person or
foregoing requirements more favorable to his beneficiary;
to the policyholder than hereinbefore (d) A provision setting forth the
required. conditions, if any, under which
This section shall not apply to policies of the insurer reserves the right to
group life or industrial life insurance. require a person eligible for
Sec. 228. No policy of group life insurance to furnish evidence of
insurance shall be issued and delivered individual insurability satisfactory
in the Philippines unless it contains in to the insurer as a condition to
substance the following provisions, or part or all of his coverage;
provisions which in the opinion of the (e) A provision specifying an
Commissioner are more favorable to the equitable adjustment of premiums
persons insured, or at least as favorable or of benefits or of both to be
to the persons insured and more made in the event that the age of
favorable to the policy-holders: a person insured has been
(a) A provision that the misstated, such provision to
policyholder is entitled to a grace contain a clear statement of the
period of either thirty days or of method of adjustment to be used;
one month for the payment of any (f) A provision that any sum
premium due after the first, becoming due by reason of death
during which grace period the of the person insured shall be
death benefit coverage shall payable to the beneficiary
continue in force, unless the designated by the insured, subject
policyholder shall have given the to the provisions of the policy in
insurer written notice of the event that there is no
discontinuance in advance of the designated beneficiary, as to all or
date of discontinuance and in any part of such sum, living at the
accordance with the terms of the death of the insured, and subject
policy. The policy may provide to any right reserved by the
that the policyholder shall be insurer in the policy and set forth
liable for the payment of a pro in the certificate to pay at its
rata premium for the time the option a part of such sum not
policy is in force during such exceeding five hundred pesos to
grace period; any person appearing to the
(b) A provision that the validity of insurer to be equitably entitled
the policy shall not be contested, thereto by reason of having
except for non-payment of incurred funeral or other expenses
premiums after it has been in incident to the last illness or
force for two years from its date of death of the person insured;
issue; and that no statement made (g) A provision that the insurer
by any insured under the policy will issue to the policyholder for
relating to his insurability shall be delivery to each person insured an
used in contesting the validity of individual certificate setting forth
the insurance with respect to a statement as to the insurance
which such statement was made protection to which he is entitled,
after such insurance has been in to whom the insurance benefits
force prior to the contest for a are payable, and the rights set
period of two years during such forth in paragraphs (h), (i) and (j)
person's lifetime nor unless following;
contained in written instrument
signed by him; (h) A provision that if the
insurance, or any portion of it, on
(c) A provision that a copy of the a person covered under the policy
application, if any, of the ceases because of termination of
policyholder shall be attached to employment or of membership in
the policy when issued, that all the class or classes eligible for
statements made by the coverage under the policy, such
policyholder or by persons insured person shall be entitled to have
shall be deemed representations issued to him by the insurer,
and not warranties, and that no without evidence of insurability,
statement made by any insured an individual policy of life
shall be used in any contest unless insurance without disability or
a copy of the instrument other supplementary benefits,
containing the statement is or has provided application for the
individual policy and payment of life insurance which he would
the first premium to the insurer have been entitled to have issued
shall be made within thirty days to him as an individual policy
after such termination and shall be payable as a claim under
provided further that: the group policy whether or not
application for the individual
policy or the payment of the first
(1) the individual policy
premium has been made;
shall be on any one of the
forms, except term (k) In the case of a policy issued to
insurance, then a creditor to insure debtors of
customarily issued by the such creditor, a provision that the
insurer at the age and for insurer will furnish to the
an amount not in excess policyholder for delivery to each
of the coverage under the debtor insured under the policy a
group policy; and form which will contain a
statement that the life of the
(2) the premium on the
debtor is insured under the policy
individual policy shall be
and that any death benefit
at the insurer's then
paid thereunder by reason of his
customary rate applicable
death shall be applied to reduce or
to the form and amount of
extinguish indebtedness.
the individual policy, to
the class of risk to which The provisions of paragraphs (f) to (j)
such person then belongs, shall not apply to policies issued to a
and to his age attained on creditor to insure his debtors. If a group
the effective date of the life policy is on a plan of insurance other
individual policy. than term, it shall contain a non-
forfeiture provision or provisions which
in the opinion of the Commissioner is or
(i) A provision that if the group
are equitable to the insured or the
policy terminates or is amended
policyholder: Provided, That nothing
so as to terminate the insurance
herein contained shall be so construed
of any class of insured persons,
as to require group life policies to
every person
contain the same non-forfeiture
insured thereunder at the date of
provisions as are required of individual
such termination whose insurance
life policies.
terminates and who has been so
insured for five years prior to such Sec. 229. The term "industrial life
termination date shall be entitled insurance" as used in this Code shall
to have issued to him by the mean that form of life insurance under
insurer an individual policy of life which the premiums are payable either
insurance subject to the same monthly or oftener, if the face amount of
limitations as set forth in insurance provided in any policy is not
paragraph (h), except that the more than five hundred times that of the
group policy may provide that the current statutory minimum daily wage
amount of such individual policy in the City of Manila, and if the
shall not exceed the smaller of (a) words "industrial policy"are printed
the amount of the person's life upon the policy as part of the
insurance protection ceasing less descriptive matter.
the amount of any life insurance An industrial life policy shall not lapse
for what he is or becomes eligible for non-payment of premium if such
under any group policy issued or non-payment was due to the failure of
reinstated by the same or the company to send its representative
another reinsurer within thirty or agent to the insured at the residence
days after such termination, and of the insured or at some other place
(b) two thousand pesos; indicated by him for the purpose of
(j) A provision that if a person collecting such premium: Provided, That
insured under the group policy the provisions of this paragraph shall not
dies during the thirty-day period apply when the premium on the policy
within which he would have been remains unpaid for a period of three
entitled to an individual policy months or twelve weeks after the grace
issued to him in accordance with period has expired.
(h) and (i) above and before such Sec. 230. In the case of industrial life
individual policy shall have insurance, the policy shall contain in
become effective, the amount of substance the following provisions:
(a) A provision that the insured is company shall periodically
entitled to a grace period of four ascertain and apportion any
weeks within which the payment divisible surplus accruing on the
of any premium after the first may policy under the conditions
be made, except that where specified therein;
premiums are payable monthly, (f) A provision that in the event of
the period of grace shall be either default in premium payments
one month or thirty days; and after three full years' premiums
that during the period of grace, have been paid, the policy shall be
the policy shall continue in full converted into a stipulated form
force, but if during such grace of insurance, and that in the event
period the policy becomes a claim, of default in premium payments
then any overdue and unpaid after five full years' premiums
premiums may be deducted from have been paid, a specified cash
any amount payable under the surrender value shall be available,
policy in settlement; in lieu of the stipulated form of
(b) A provision that the policy insurance, at the option of the
shall be incontestable after it has policyholder. The net value of
been in force during the lifetime such stipulated form of insurance
of the insured for a specified and the amount of such cash value
period, not more than two years shall not be less than the reserve
from its date of issue, except for on the policy and dividend
non-payment of premiums and additions thereto, if any, at the
except for violation of the end of the last completed policy
conditions of the policy relating to year for which premiums shall
naval or military service, or have been paid (the policy to
services auxiliary thereto, and specify the mortality table, rate of
except as to provisions relating to interest and method of valuation
benefits in the event of disability adopted to compute such reserve),
as defined in the policy, and those exclusive of any reserve on
granting additional insurance disability benefits and accidental
specifically against death by death benefits, less an amount not
accident or by accidental means, to exceed two and one-half per
or to additional insurance against centum of the maximum amount
loss of, or loss of use of, specific insured by the policy and dividend
members of the body; additions thereto, if any, at the
(c) A provision that the policy end of the last completed policy
shall constitute the entire year for which premiums shall
contract between the parties, or if have been paid (the policy to
a copy of the application is specify the mortality table, rate of
endorsed upon and attached to interest and method of valuation
the policy when issued, a adopted to compute such reserve),
provision that the policy and the exclusive of any reserve on
application therefor shall disability benefits and accidental
constitute the entire contract death benefits, less an amount not
between the parties, and in the to exceed two and one-half per
latter case, a provision that all centum of the maximum amount
statements made by the insured insured by the policy and dividend
shall, in the absence of fraud, be additions thereto, if any, when the
deemed representations and not issue age is under ten years, and
warranties; less an amount not to exceed two
and one-half per centum of the
(d) A provision that if the age of current amount insured by the
the person insured, or the age of policy and dividend additions
any person, considered in thereto, if any, if the issue age is
determining the premium, or the ten years or older, and less any
benefits accruing under the existing indebtedness to the
policy, has been misstated, any company on or secured by the
amount payable or benefit policy;
accruing under the policy shall be
such as the premium paid would (g) A provision that the policy may
have purchased at the correct age; be surrendered to the company at
its home office within a period of
(e) A provision that if the policy is not less than sixty days after the
a participating policy, the due date of a premium in default
for the specified cash value, policy by the insurer, and that the
provided that the insurer may insurer may refuse to endorse the
defer payment for not more than name of any proposed beneficiary
six months after the application who does not appear to the
therefore is made; insurer to have an insurable
(h) A table that shows in figures interest in the life of the insured.
the non-forfeiture benefits Such policy may also contain a
available under the policy every provision that if the beneficiary
year upon default in payment of designated in the policy does not
premiums during at least the first surrender the policy with due
twenty years of the policy, such proof of death within the period
table to begin with the year in stated in the policy, which shall
which such values become not be less than thirty days after
available, and a provision that the the death of the insured, or if the
company will furnish upon request beneficiary is the estate of the
an extension of such table beyond insured, or is a minor, or dies
the year shown in the policy; before the insured, or is not
legally competent to give valid
(i) A provision that specifies which release, then the insurer may
one of the stipulated forms of make any payment thereunder to
insurance provided for under the the executor or administrator of
provision of paragraph (f) of this the insured, or to any of the
section shall take effect in the insured's relatives by blood or
event of the insured's failure, legal adoption or connections by
within sixty days from the due marriage or to any person
date of the premium in default, to appearing to the insurer to be
notify the insurer in writing as to equitably entitled thereto by
which one of such forms he has reason of having incurred expense
selected; for the maintenance, medical
(j) A provision that the policy may attention or burial of the insured;
be reinstated at any time within and
two years from the due date of the (n) A provision that when an
premium in default unless the industrial life insurance policy is
cash surrender value has been issued providing for accidental or
paid or the period of extended health benefits, or both, in
term insurance expired, upon addition to life insurance, the
production of evidence of foregoing provisions shall apply
insurability satisfactory to the only to the life insurance portion
company and payment of arrears of the policy.
of premiums with interest at a
rate not exceeding six per centum Any of the foregoing provisions or
per annum payable annually; portions thereof not applicable to non-
participating or term policies shall to
(k) A provision that when a policy that extent not be incorporated therein.
shall become a claim by death of The foregoing provisions shall not apply
the insured, settlement shall be to policies issued or granted pursuant to
made upon receipt of due proof of the non-forfeiture provisions prescribed
death, or not later than two in provisions of paragraphs (f) and (i) of
months after receipt of such this section, nor shall provisions of
proof; paragraphs (f), (g), (h), and (i) hereof be
(l) A title on the face and on the required in term insurance of twenty
back of the policy correctly years or less but such term policies shall
describing its form; specify the mortality table, rate of
interest, and method of computing
(m) A space on the front or the
reserves.
back of the policy for the name of
the beneficiary designated by the Sec. 231. No policy of industrial life
insured with a reservation of the insurance shall be issued or delivered in
insured's right to designate or the Philippines if it contains any of the
change the beneficiary after the following provisions:
issuance of the policy. The policy (a) A provision that gives the
may also provide that no insurer the right to declare the
designation or change of policy void because the insured
beneficiary shall be binding on the has had any disease or ailment,
insurer until endorsed on the whether specified or not, or
 because the insured has received service: Provided, That if the liability of
institutional, hospital, medical or the company is limited as herein
surgical treatment or attention, provided, such liability shall in no event
except a provision which gives the be fixed at an amount less than the
insurer the right to declare the reserve on the policy (excluding the
policy void if the insured has, reserve for any additional benefits in the
within two years prior to the event of death by accident or accidental
issuance of the policy, received means or for benefits in the event of any
institutional hospital, medical or type of disability), less any indebtedness
surgical treatment or attention on or secured by such policy; nor shall
and if the insured or the claimant any provision of this section apply to
under the policy fails to show that any provision in an industrial life
the condition occasioning such insurance policy for additional benefits
treatment or attention was not of in the event of death by accident or
a serious nature or was not accidental means.
material to the risk; Title 10
(b) A provision that gives the VARIABLE CONTRACTS
insurer the right to declare the Sec. 232. (1) No insurance company
policy void because the insured authorized to transact business in the
has been rejected for insurance, Philippines shall issue, deliver, sell or
unless such right be conditioned
use any variable contract in the
upon a showing by the insurer
Philippines, unless and until such
that knowledge of such rejection
company shall have satisfied the
would have led to a refusal by the Commissioner that its financial and
insurer to make such contract; general condition and its methods of
(c) A provision that allows the operations, including the issue and sale
company to pay the proceeds of of variable contracts, are not and will
the policy at the death of the not be hazardous to the public or to its
insured to any person other than policy and contract owners. No foreign
the named beneficiary, except in insurance company shall be authorized
accordance with a standard to issue, deliver or sell any variable
provision as specified under the contract in the Philippines, unless it is
provisions of paragraph (m) of the likewise authorized to do so by the laws
preceding section; of its domicile.
(d) A provision that limits the (2) The term "variable contract" shall
time within which any action at mean any policy or contract on either a
law or in equity may be group or on an individual basis issued by
commenced to less than six years an insurance company providing for
after the cause of action shall benefits or other contractual payments
accrue; and or values thereunder to vary so as to
(e) A provision that specifies any reflect investment results of any
mode of settlement at maturity of segregated portfolio of investments or of
less value than the amount a designated separate account in which
insured by the policy plus amounts received in connection with
dividend additions, if any, less any such contracts shall have been placed
indebtedness to the company on and accounted for separately and apart
the policy and less any premium from other investments and accounts.
that may by the terms of the This contract may also provide benefits
policy be deducted, payments to or values incidental thereto payable in
be made in accordance with the fixed or variable amounts, or both. It
terms of the policy. shall not be deemed to be
a "security" or "securities" as defined in
Nothing contained in this section nor in The Securities Act, as amended, or in
the provision of paragraph (b) of the the TheInvestment Company Act, as
preceding section, relating to amended, nor subject to regulation
incontestability, shall be construed as under said Acts.
prohibiting the life insurance company
from placing in its industrial life policies (3) In determining the qualifications of a
provisions limiting its liability with company requesting authority to issue,
respect to: (1) death resulting from deliver, sell or use variable contracts,
aviation other than as a fare-paying the Commissioner shall always consider
passenger on a regularly scheduled route the following: (a) the history, financial
between definitely established airports; and general condition of the
and (2) military or naval company: Provided, That such company,
if a foreign company, must have variable contracts shall, in connection
deposited with the Commissioner for the with same, establish one or more
benefit and security of its variable separate accounts to be known as
contract owners in the Philippines, separate variable accounts. All amounts
securities satisfactory to the received by the company in connection
Commissioner consisting of bonds of the with any such contracts which are
Government of the Philippines or its required by the terms thereof, to be
instrumentalities with an actual market collected or applied to one or more
value of two million pesos; (b) the designated separate variable accounts
character, responsibility and fitness of shall be placed in such designated
the officers and directors of the account or accounts. The assets and
company; and (c) the law and regulation liabilities of each such separate variable
under which the company is authorized account shall at all times be clearly
in the state of domicile to issue such identifiable and distinguishable from the
contracts. assets and liabilities in all other
(4) If after notice and hearing, the accounts of the company.
Commissioner shall find that the Notwithstanding any provision of law to
company is qualified to issue, deliver, the contrary, the assets held in any such
sell or use variable contracts in separate variable account shall not be
accordance with this Code and the chargeable with liabilities arising out of
regulations and rules issued thereunder, any other business the company conduct
the corresponding order of authorization but shall be held and applied exclusively
shall be issued. Any decision or order for the benefit of the owners or
denying authority to issue, deliver, sell beneficiaries of the variable contracts
or use variable contracts shall clearly applicable thereto. In the event of the
and distinctly state the reasons and insolvency of the company, the assets of
grounds on which it is based. each such separate variable account
shall be applied to the contractual
Sec. 233. Any insurance company claims of the owners or beneficiaries of
issuing variable contracts pursuant to the variable contracts applicable thereto.
this Code may in its discretion issue Except as otherwise specifically provided
contracts providing a combination of by the contract, no sale, exchange or
fixed amount and variable amount of other transfer of assets may be made by
benefits and for option lump-sum a company, between any of its separate
payment of benefits. accounts or between any other
Sec. 234. Every variable contract form investment account and one or more of
delivered or issued for delivery in the its separate accounts, unless in the case
Philippines, and every certified form of a transfer into a separate account,
evidencing variable benefits issued such transfer is made solely to establish
pursuant to any such contract on a the account or to support the operation
group basis, and the application, rider of the contracts with respect to the
and endorsement forms applicable separate account to which the transfer is
thereto and used in connection made, or in case of a transfer from a
therewith, shall be subject to the prior separate account, such transfer would
approval of the Commissioner. not cause the remaining assets of the
account to become less than the
Sec. 235. Illustration of benefits payable
reserves and other contract liabilities
under any variable contract shall not
with respect to such separate account.
include or involve projections of past
Such transfer, whether into or from a
investment experience into the future
separate account, shall be made by a
and shall conform with the rules and
transfer of cash, or by a transfer of
regulations promulgated by the
securities having a valuation which
Commissioner.
could be readily determined in the
Sec. 236. Variable contracts may be market place, provided that such
issued on the industrial life basis, transfer of securities is approved by the
provided that the pertinent provisions of Commissioner. The Commissioner may
this Code and of the rules and authorize other transfers among such
regulations of the Commissioner accounts, if, in his opinion, such
governing variable contracts are transfer would not be inequitable. All
complied with in connection with such amounts and assets allocated to any
contracts. such separate variable account shall be
Sec. 237. Every life insurance company owned by the company and with respect
authorized under the provisions of this to same the company shall not be nor
Code to issue, deliver, sell or use hold itself out to be a trustee.
Sec. 238. Any insurance company which unfair claim settlement practices. Any of
has established one or more separate the following acts by an insurance
variable accounts pursuant to the company, if committed without just
preceding section may invest and re- cause and performed with such
invest all or any part of the assets frequency as to indicate a general
allocated to any such account in the business practice, shall constitute unfair
securities and investments authorized claim settlement practices:
by sections one hundred ninety-eight, (a) knowingly misrepresenting to
two hundred, two hundred one and two claimants pertinent facts or policy
hundred two for any of the funds of an provisions relating to coverage at
insurance company in such amount or issue;
amounts as may be approved by the
Commissioner. In addition thereto, such (b) failing to acknowledge with
company may also invest in common reasonable promptness pertinent
stocks or other equities which are listed communications with respect to
on or admitted to trading in a securities claims arising under its policies;
exchange located in the Philippines, or (c) failing to adopt and implement
which are publicly held and traded in reasonable standards for the
the "over-the-counter market" as defined prompt investigation of claims
by the Commissioner and as to which arising under its policies;
market quotations have been
(d) not attempting in good faith to
available: Provided, however, That no
effectuate prompt, fair and
such company shall invest in excess of
equitable settlement of claims
ten per centum of the assets of any such
submitted in which liability has
separate variable accounts in any one
become reasonably clear; or
corporation issuing such common stock.
The assets and investments of such (e) compelling policyholders to
separate variable accounts shall not be institute suits to recover amounts
taken into account in applying the due under its policies by offering
quantitative investment limitations without justifiable reason
applicable to other investments of the substantially less than the
company. In the purchase of common amounts ultimately recovered in
capital stock or other equities, the suits brought by them.
insurer shall designate to the broker, or (2) Evidence as to numbers and types of
to the seller if the purchase is not made valid and justifiable complaints to the
through a broker, the specific variable Commissioner against an insurance
account for which the investment is company, and the Commissioner's
made. complaint experience with other
Sec. 239. Assets allocated to any insurance companies writing similar
separate variable account shall be valued lines of insurance shall be admissible in
at their market value on the date of any evidence in an administrative or judicial
valuation, or if there is no readily proceeding brought under this section.
available market then in accordance (3) If it is found, after notice and an
with the terms of the variable contract opportunity to be heard, that an
applicable to such assets, or if there are insurance company has violated this
no such contract terms then in such section, each instance of non-
manner as may be prescribed by the compliance with paragraph (1) may be
rules and regulations of the treated as a separate violation of this
Commissioner. section and shall be considered
Sec. 240. The reserve liability for sufficient cause for the suspension or
variable contracts shall be established in revocation of the company's certificate
accordance with actuarial procedures of authority.
that recognize the variable nature of the Sec. 242. The proceeds of a life
benefits provided, and shall be approved insurance policy shall be paid
by the Commissioner. immediately upon maturity of the
Title 11 policy, unless such proceeds are made
CLAIMS SETTLEMENT payable in installments or as an annuity,
in which case the installments, or
Sec. 241. (1) No insurance company
annuities shall be paid as they become
doing business in the Philippines shall
due: Provided, however, That in the case
refuse, without just cause, to pay or
of a policy maturing by the death of the
settle claims arising
insured, the proceeds thereof shall be
under coverages provided by its policies,
paid within sixty days after presentation
nor shall any such company engage in
of the claim and filing of the proof of the said sections shall be considered prima
death of the insured. Refusal or failure facie evidence of unreasonable delay in
to pay the claim within the time payment.
prescribed herein will entitle the Title 12
beneficiary to collect interest on the EXAMINATION OF COMPANIES
proceeds of the policy for the duration of
the delay at the rate of twice the ceiling Sec. 245. The Commissioner shall
prescribed by the Monetary Board, require every insurance company doing
unless such failure or refusal to pay is business in the Philippines to keep its
based on the ground that the claim is books, records, accounts and vouchers in
fraudulent. such manner that he or his authorized
representatives may readily verify its
The proceeds of the policy maturing by annual statements and ascertain
the death of the insured payable to the whether the company is solvent and has
beneficiary shall include the discounted complied with the provisions of this
value of all premiums paid in advance of
Code or the circulars, instructions,
their due dates, but are not due and
rulings or decisions of the
payable at maturity. Commissioner.
Sec. 243. The amount of any loss or Sec. 246. The Commissioner shall at
damage for which an insurer may be least once a year and whenever he
liable, under any policy other than life
considers the public interest so
insurance policy, shall be paid within
demands, cause an examination to be
thirty days after proof loss is received by made into the affairs, financial condition
the insurer and ascertainment of the and method of business of every
loss or damage is made either by insurance company authorized to
agreement between the insured and the transact business in the Philippines and
insurer or by arbitration; but if such of any other person, firm or corporation
ascertainment is not had or made within
managing the affairs and/or property of
sixty days after such receipt by the
such insurance company. Such
insurer of the proof of loss, then the loss company, as well as such managing
or damage shall be paid within ninety person, firm or corporation, shall submit
days after such receipt. Refusal or failure to the examiner all such books, papers
to pay the loss or damage within the and securities as he may require and
time prescribed herein will entitle the
such examiner shall also have the power
assured to collect interest on the
to examine the officers of such company
proceeds of the policy for the duration of
under oath touching its business and
the delay at the rate of twice the ceiling financial condition, and the authority to
prescribed by the Monetary Board, transact business in the Philippines of
unless such failure or refusal to pay is any such company shall be suspended by
based on the ground that the claim is the Commissioner if such examination is
fraudulent.
refused and such company shall not
Sec. 244. In case of any litigation for the thereafter be allowed to transact further
enforcement of any policy or contract of business in the Philippines until it has
insurance, it shall be the duty of the fully complied with the provisions of this
Commissioner or the Court, as the case section.
may be, to make a finding as to whether Government-owned or controlled
the payment of the claim of the insured
corporations or entities engaged in
has been unreasonably denied or
social private insurance shall similarly
withheld; and in the affirmative case, be subject to such examination by the
the insurance company shall be adjudged Commissioner unless their respective
to pay damages which shall consist of charters otherwise provide.
attorney's fees and other expenses
incurred by the insured person by reason Title 13
of such unreasonable denial or SUSPENSION OR REVOCATION OF
withholding of payment plus interest of AUTHORITY
twice the ceiling prescribed by the Sec. 247. If the Commissioner is of the
Monetary Board of the amount of the opinion upon examination of other
claim due the insured, from the date evidence that any domestic or foreign
following the time prescribed in section insurance company is in an unsound
two hundred forty-two or in section two condition, or that it has failed to comply
hundred forty-three, as the case may be, with the provisions of law or regulations
until the claim is fully satisfied; obligatory upon it, or that its condition
Provided, That the failure to pay any or method of business is such as to
such claim within the time prescribed in render its proceedings hazardous to the
public or to its policyholders, or that its attendant to the conservation shall be
paid-up capital stock, in the case of a borne by the insurance company
domestic stock company, or its available concerned.
cash assets, in the case of a domestic The conservator shall not be subject to
mutual company, or its security any action, claim or demand by, or
deposits, in the case of a foreign liability to, any person in respect of
company, is impaired or deficient, or anything done or omitted to be done in
that the margin of solvency required of good faith in the exercise, or in
such company is deficient, the connection with the exercise, of the
Commissioner is authorized to suspend powers conferred on the conservator.
or revoke all certificates of authority
granted to such insurance company, its The conservator appointed shall report
officers and agents, and no new business and be responsible to the Commissioner
shall thereafter be done by such until such time as the Commissioner is
company or for such company by its satisfied that the insurance company
agent in the Philippines while such can continue to operate on its own and
suspension, revocation or disability the conservatorship shall likewise be
continues or until its authority to do terminated should be Commissioner, on
business is restored by the the basis of the report of the conservator
Commissioner. Before restoring such or of his own findings, determine that
authority, the Commissioner shall the continuance in business of the
require the company concerned to insurance company would be hazardous
submit to him a business plan showing to policy holders and creditors, in which
the company's estimated receipts and case the provisions of Title 15 shall
disbursements, as well as the apply.
basis therefor, for the next succeeding Title 15
three years. (As amended by Presidential Decree No. PROCEEDINGS UPON INSOLVENCY
1455).
Sec. 249. Whenever, upon examination
Title 14 or other evidence, it shall be disclosed
APPOINTMENT OF CONSERVATOR that the condition of any insurance
Sec. 248. If at any time before, or after, company doing business in the
the suspension or revocation of the Philippines is one of insolvency, or that
certificate of authority of an insurance its continuance in business would be
company as provided in the preceding hazardous to its policyholders and
title, the Commissioner finds that such creditors, the Commissioner shall
company is in a state of continuing forthwith order the company to cease
inability or unwillingness to maintain a and desist from transacting business in
condition of solvency or liquidity the Philippines and shall designate a
deemed adequate to protect the interest receiver to immediately take charge of
of policy holders and creditors, he may its assets and liabilities, as expeditiously
appoint a conservator to take charge the as possible collect and gather all the
assets, liabilities, and the management assets and administer the same for the
of such company, collect all moneys and benefit of its policyholders and
debts due said company and exercise all creditors, and exercise all the powers
powers necessary to preserve the assets necessary for these purposes including,
of said company, reorganize the but not limited to, bringing suits and
management thereof, and restore its foreclosing mortgages in the name of the
viability. The said conservator shall have insurance company.
the power to overrule or revoke the The Commissioner shall thereupon
actions of the previous management and determine within thirty days whether
board of directors of the said company, the insurance company may be
any provision of law, or of the articles of reorganized or otherwise placed in such
incorporation or by-laws of the company, condition so that it may be permitted to
to the contrary notwithstanding, and resume business with safety to its
such other powers as the Commissioner policyholders and creditors and shall
shall deem necessary. prescribe the conditions under which
The conservator may be another such resumption of business shall take
insurance company doing business in place as well as the time for fulfillment
the Philippines, by officer or officers of of such conditions. In such case, the
such company, or any other competent expenses and fees in the collection and
and qualified person, firm or administration of the insurance
corporation. The remuneration of the company shall be determined by the
conservator and other expenses Commissioner and shall be paid out of
the assets of such company.
If the Commissioner shall determine and the New Rules of Court insofar as they
confirm within the said period that the are applicable shall govern the issuance
insurance company is solvent, as defined and dissolution of the restraining order
hereunder, or cannot resume business or injunction contemplated in this
with safety to its policyholders and Section.
creditors, he shall, if the public interest All proceedings under this Title shall be
requires, order its liquidation, indicate given preference in the Courts. The
the manner of its liquidation and Commissioner shall not be required to
approve a liquidation plan and pay any fee to any public officer for
implement it immediately. The filing, recording, or in any manner
Commissioner shall designate a authenticating any paper or instrument
competent and qualified person as relating to the proceedings.
liquidator who shall take over the
functions of the receiver previously As used in this Title, the
designated and, with all convenient term "Insolvency" shall mean the
speed, reinsure all its outstanding inability of an insurance company to pay
policies, convert the assets of the its lawful obligations as they fall due in
insurance company to cash, or sell, the usual and ordinary course of
assign or otherwise dispose of the same business as may be shown by its failure
to the policyholders, creditors and other to maintain the margin of solvency
parties for the purpose of settling the required under Section 194 of this
liabilities or paying the debts of such Code. (As amended by Presidential Decree No. 1141 and
company and he may, in the name of the further amended by Presidential Decree No. 1455).
company, institute such actions as may Sec. 250. In case of liquidation of an
be necessary in the appropriate Court to insurance company, after payment of
collect and recover accounts and assets the cost of the proceedings, including
of the insurance company, and to do reasonable expenses and fees incurred in
such other acts as may be necessary to the liquidation to be allowed by the
complete the liquidation as ordered by Court, the Commissioner shall pay all
the Commissioner. allowed claims against such company,
The provisions of any law to the contrary under order of the Court, in accordance
notwithstanding, the actions of the with their legal priority.
Commissioner under this Section shall Sec. 251. The receiver or the liquidator,
be final and executory, and can be set as the case may be, designated under the
aside by the Court upon petition by the provisions of this title shall not be
company and only if there is convincing subject to any action, claim or demand
proof that the action is plainly arbitrary by, or liability to, any person in respect
and made in bad faith. The of anything done or omitted to be done
Commissioner, through the Solicitor in good faith in the exercise, or in
General, shall then file the connection with the exercise, of the
corresponding answer reciting the powers conferred on such receiver or
proceeding taken and praying the liquidator.
assistance of the Court in the liquidation Title 16
of the company. No restraining order or CONSOLIDATION AND MERGER OF
injunction shall be issued by the Court INSURANCE COMPANIES
enjoining the Commissioner from
implementing his actions under this Sec. 252. Upon prior notice to the
Section, unless there is convincing proof Commissioner, two or more domestic
that the action of the Commissioner is insurance companies, acting through
plainly arbitrary and made in bad faith their respective boards of directors, may
and the petitioner or plaintiff files with negotiate to merge into a single
the Clerk or Judge of the Court in which corporation which shall be one of the
the action is pending a bond executed in constituent corporations, or consolidate
favor of the Commissioner in an amount into a single corporation which shall be a
to be fixed by the Court. The restraining new corporation to be formed by the
order or injunction shall be refused or, if consolidation. A common agreement of
granted, shall be dissolved upon filing by the proposed merger or consolidation
the Commissioner, if he so desires, of a shall be drawn up for submission to the
bond in an amount twice the amount of stockholders or members of the
the bond of the petitioner or plaintiff constituent companies for adoption and
conditioned that it will pay the damages approved in accordance with the
which the petition or plaintiff may suffer provisions of the respective by-laws of
by the refusal or the dissolution of the the constituent companies and all
injunction. The provisions of Rule 58 of existing laws that may be pertinent.
Sec. 253. Such agreement shall include, (1) The plan of merger or the plan
aside from the proposed merger or of consolidation;
consolidation, provisions relative to the (2) As to each corporation, the
manner of transfer of assets to and number of shares outstanding, or
assumption of liabilities by the absorbing in case of mutual corporations,
or acquiring company from the absorbed the number of members; and
or dissolved company or companies; the
proposed articles of merger or (3) As to each corporation, the
consolidation and by-laws of the number of shares or members
surviving or acquiring company; the voted for and against such plan
corporate name to be adopted which respectively. Thereafter, a
should not be that of any other existing certified copy of such articles of
company transacting similar business or merger or consolidation, together
one so similar as to be calculated to with a certificate of approval or
mislead the public; the rights of the adoption by the stockholders or
stockholders or members of the absorbed members of such articles of
or dissolved companies; date merger or consolidation, verified
of effectivity of the merger or by affidavits of such officers and
consolidation; and such particulars as under the seal of the constituent
may be necessary to explain and make companies, shall be submitted to
manifest the objects and purposes of the the Commissioner, together with
absorbing or acquiring company. such other papers or documents
which the Commissioner may
Sec. 254. Upon execution of such require, for his consideration.
agreement to merge or consolidate by
and between or among the boards of Sec. 257. The articles of merger or
directors of the constituent companies, of consolidation, signed and verified as
notice thereof shall be mailed hereinabove required, shall be filed with
immediately to their policyholders and the Securities and Exchange
creditors. The company or companies to Commission for its examination and
be absorbed or dissolved shall discharge approval.
all its accrued liabilities; otherwise, such Sec. 258. Upon receipt from the
liabilities shall, with the consent of its Securities and Exchange Commission of
creditors, be transferred to and assumed the certificate of merger or of
by the absorbing or acquiring company, consolidation, the constituent
or such liabilities be reinsured by the companies shall surrender to the
latter. In the case of such policies as are Commissioner their respective
subject to cancellation by the company certificates of authority to transact
or companies to be absorbed or insurance business. The absorbing or
dissolved, same may be cancelled surviving company in case of merger, or
pursuant to the terms thereof in lieu of the newly formed company in case of
such transfer, assumption, or consolidation, shall immediately file
reinsurance. with the commissioner the
Sec. 255. Upon approval or adoption in corresponding application for issuance of
the meetings of the stockholders or a new certificate of authority to transact
members called for the purpose in each insurance business, together with a
of the constituent companies of the certified copy of the certificate of
agreement to merge or consolidate, all merger or of consolidation, and of the
stockholders or members dissenting or certificate of increase of stocks, if there
objecting to merger or consolidation is any, issued by the Securities and
shall be paid the value of their shares by Exchange Commission.
the company concerned in accordance Sec. 259. Nothing in this title shall be
with the by-laws thereof. construed to enlarge the powers of the
Sec. 256. Upon the approval or adoption absorbing or surviving company in case
of the agreement to merge or of merger, or the newly formed company
consolidate by the stockholders or in case of consolidation, except those
members of the constituent companies, conferred by the certificate of merger or
the corresponding articles of merger or of consolidation and the articles of
of consolidation shall be duly executed merger of consolidation, or the amended
by the presidents and attested by the articles of incorporation, as registered
corporate secretaries and shall bear the with the Securities and Exchange
corporate seals of the merging or Commission.
consolidating companies setting forth: Sec. 260. No director, officer, or
stockholder of any such constituent
companies shall receive any fee, stock is to be acquired voting at
commission, compensation, or other an election by the policyholders
valuable consideration whatsoever, called for that purpose, subject to
directly or indirectly, or in any manner the provisions of section two
aiding, promoting or assisting in such hundred sixty-five. The
merger or consolidation. terms "policyholder" or "policyhol
Sec. 261. The merger of consolidation of ders" as used in this chapter shall
companies under, this Code shall be be deemed to mean the person or
subject to the provisions of the persons insured under an
Corporation Law, and, in those cases individual policy of life insurance,
specified in Republic Act No. 5455, as or of health and accident
amended, be further subject to the insurance, or of any combination
provisions of said law. of life, health and accident
insurance. They shall also include
Title 17 the person or persons to whom
MUTUALIZATION OF STOCK LIFE any annuity or pure endowment is
INSURANCE COMPANIES presently or prospectively payable
Sec. 262. Any domestic stock life by the terms of an individual
insurance company doing business in annuity or pure endowment
the Philippines may convert itself into contract, except where the policy
an incorporated mutual life insurer. To or contract declares some other
that end it may provide and carry out a person to be the owner or holder
plan for the acquisition of the thereof, in which case such other
outstanding shares of its capital stock person shall be deemed
for the benefit of its policyholders, or policyholder. In any case where a
any class or classes of its policyholders, policy or contract names two or
by complying with the requirements of more persons as joint insured,
this chapter. payees, owners or holders thereof,
the persons so named shall be
Sec. 263. Such plan shall include
deemed collectively to be one
appropriate proceedings for amending
policyholder for the purpose of
the insurer's articles of incorporation to
this chapter. In any case where a
give effect to the acquisition, by said
policy or contract shall have been
insurer, for the benefit of its
assigned by assignment absolute
policyholders or any class or classes
on its face to an assignee other
thereof, of the outstanding shares of its
than the insurer, and such
capital stock and the conversion of the
assignment shall have been filed
insurer from a stock corporation into a
at the principal office of the
non-stock corporation for the benefit of
insurer at least thirty days prior
its members. The members of such non-
to the date of any election or
stock corporation shall be the
meeting referred to in this
policyholders from time to time of the
chapter, then such assignee shall
class or classes for whose benefit the
be deemed at such election or
stock of the insurer was acquired, and
meeting to be the policyholder.
the policyholders of such other class or
For the purpose of this chapter
classes as may be specified in such
the
corporation's articles of incorporation as
terms "policyholder" and "policyho
they may be amended from time to time.
lders" include the employer to
Such plan shall be:
whom, or a president, secretary or
(1) Adopted by a vote of a majority other executive officer of any
of the directors; corporation or association to
(2) Approved by the vote of the which a master group policy has
holders of at least a majority of been issued, but exclude the
the outstanding shares at a special holders of certificates or policies
meeting of shareholders called for issued under or in connection
that purpose, or by the written with a master group policy.
consent of such shareholders; Beneficiaries
under unmatured contracts shall
(3) Submitted to the not as such be deemed to be
Commissioner and approved by policyholders;
him in writing;
(5) Filed with the Commissioner
(4) Approved by a majority vote of after having been approved as
all the policyholders of the class provided in this section.
or classes for whose benefit the
Sec. 264. The Commissioner shall act or certificate of all. The inspectors of
examine the plan submitted to him election shall determine the number of
under the provisions of sub-paragraph policyholders, the voting power of each,
three of section two hundred sixty-three. the policyholders represented at the
He shall not approve such plan unless in meeting or voting by mail, the existence
his opinion the rights and interest of the of a quorum and the authenticity,
insurer, its policyholders and validity and effect of proxies. They shall
shareholders are protected nor unless he receives votes, hear and determine all
is satisfied that the plan will be fair and challenges and questions in any way
equitable in its operation. arising in connection with the right to
Sec. 265. The election prescribed by sub- vote, count and tabulate all votes,
paragraph four of section two hundred determine the result, and do such other
sixty-three shall be called by the board acts as are proper to conduct the vote
of directors or the president, and every with fairness to all policyholders. The
policyholder of the class or classes for inspectors of election shall, before
whose benefit the stock is to be commencing performance of their
acquired, whose insurance shall have duties, subscribe to and file with the
been in force for at least one year prior insurer and with the Commissioner on
to such election shall have one vote, oath that they, and each of them, will
regardless of the number of policies or perform their duties impartially, in good
amount of insurance he holds, and faith, to the best of their ability and as
regardless of whether such policies are expeditiously as in practicable. On the
policies of life insurance or policies of request of the insurer, the
health and accident insurance or Commissioner, a policyholder or his
annuity contracts. Notice of such proxy, the inspectors shall make a report
election shall be given to policyholders in writing of any challenge or question
entitled to vote by mail from the or matter determined by them and
principal office of such insurer at least execute a certificate of any fact found by
thirty days prior to the date set for such them. They shall also certify the result
election, in a sealed envelope, postage of such vote to the insurer and to the
prepaid, addressed to each such Commissioner. Any report or certificate
policyholder at his last known address. made by them shall be prima
facie evidence of facts stated therein. All
Voting shall be by one of the following necessary expenses incurred in
methods: connection with such election shall be
(1) At a meeting of such paid by the insurer. For the purpose of
policyholders, held pursuant to this section, a quorum shall consist of
such notice, by ballot in person or five per centum of the policyholders of
by proxy. such insurer entitled to vote at such
election.
(2) If not by the method described
in the preceding sub-paragraph, Sec. 266. In carrying out any such plan,
then by mail pursuant to a the insurer may acquire any shares of its
procedure and on forms to be own stock by gift, bequest or purchase.
prescribed by such plan. Any shares so acquired shall, unless as a
result of such acquisition all of the
Such election shall be conducted under
shares of the insurer shall have been
the direction and supervision of three
acquired, be acquired in trust for the
impartial and disinterested inspectors
policyholders of the class or classes for
appointed by the insurer and approved
whose benefit the plan provides that the
by the Commissioner. In case any person
stock of the insurer shall be acquired as
appointed as inspector fails to appear at
hereinafter provided. Such shares shall
such meeting or fails or refuses to act at
be assigned and transferred on the books
such election, the vacancy, if occurring
of such insurer and approved by the
in advance of the convening of the
Commissioner. Such trustees shall hold
meeting or in advance of the opening of
such stock in trust until all of the
the mail vote, may be filled in the
outstanding shares of capital stock of
manner prescribed for the appointment
such insurer have been acquired, but for
of inspectors and, if occurring at the
not longer than thirty years with such
meeting or during the canvass of the
extensions of not more than five years
mail vote, may be filled by the person
each as may be granted by the
acting as chairman of said meeting or
Commissioner. Such extensions may be
designated for that purpose in such plan.
granted by the Commissioner if the plan
The decision, act or certificate of a
so provides and if in his opinion the plan
majority of the inspectors shall be
of acquisition of all of such stock can be
effective in all respects as the decision,
completed within a reasonable period. provide that in the event of acquisition
Such trustees shall vote such stock at all by the insurer of any of the shares of
corporate meetings at which stock held thereunder in accordance
stockholders have the right to vote. with the provisions of the plan, such
When all the outstanding shares of shares so acquired together with the
capital stock of such insurer have been voting rights thereof shall be transferred
acquired, all said shares shall be by the trustees named under the
cancelled, the certificate of amendment provisions of this section to the trustees
of the insurer's articles of incorporation named under the provisions of section
giving effect thereto shall be filed in two hundred sixty-six. Any voting trust
accordance with the provisions of the agreement created pursuant to the
Corporation Law, and the insurer shall provisions of this section may be made
become a non-stock corporation for the irrevocable for not longer than thirty
profit of its members and such trust years and thereafter until the
shall thereupon terminate. Thereafter termination of the trust provided for in
such corporation shall be conducted for section two hundred sixty-six. The trust
the mutual benefit, ratably, of its created pursuant to the provisions of
policyholders of the class or classes for this section shall terminate in any event
whose benefit the stock was acquired upon termination of the trust provided
and shall have power to issue non- for in section two hundred sixty-six.
assessable policies on a reserve basis Upon the termination of the trust
subject to all provisions of law applicable created pursuant to the provisions of
to incorporated life insurers issuing non- this section, any shares held in such
assessable policies on a reserve basis. trust shall revert to the persons entitled
Policies so issued may be upon the basis thereto by law.
of full or partial participation therein as Sec. 268. Every payment for the
agreed between the insurer and the acquisition of any shares of the capital
insured. stock of such insurer, the purchase price
Upon the termination of any such voting of which is not fixed by such plan, shall
trust, either in accordance with its be subject to the prior approval of the
terms or as hereinabove provided, such Commissioner. Neither such plan, nor
plan of mutualization shall terminate, any such payment, may be approved by
unless theretofore completed. Upon such the Commissioner unless he finds that
termination, unless the plan the rights and interests of the insurer,
of mutualization provides for the its policyholders, and shareholders are
disposition of the shares acquired by the protected.
insurer under such plan or for the Sec. 269. The trustees referred to in
disposition of the proceeds thereof, the section two hundred sixty-six shall file
shares held by such trustees shall be with such insurer and with the
disposed of in accordance with an order Commissioner a verified acceptance of
of the court of competent jurisdiction in their appointments and verified
the judicial district in which is located declarations that they will faithfully
the principal office of such insurer, discharge their duties as such trustees.
made upon a verified petition of the All dividends and other sums received by
Commissioner. said trustees on the shares held by
Sec. 267. Any such plan them, after paying the necessary
of mutualization may provide for the expenses of executing their trust, shall
creation of a voting trust under a trust be immediately repaid to such insurer
agreement for the holding and voting by for the benefit of all who are, or may
three or more trustees of any portion or become, policyholders of such insurance
all of the shares of the insurer not of the class or classes for whose benefit
required upon the adoption of such plan. the stock of such insurer was acquired
The voting trustees shall be named in and entitled to participate in the profits
accordance with such plan or, if no thereof and shall be added to and
provision is made therein for the naming become part of the assets of such
of such trustees, then by the insurer. insurer.
The voting trust agreement and voting Sec. 269-A. If, at any time within the
trustees shall be subject to the approval period provided in the plan for the
of the Commissioner. Any or all of the acquisition of the outstanding shares of
trustees under such voting trust stock of the insurer, ninety percent
agreement may be the same person or thereof has already been acquired and
persons as any or all of the trustees transferred to the trustees under the
referred to in section two hundred sixty- plan, the insurer by a vote of a majority
six. Such voting trust agreement shall
of the directors may determine to make receive further evidence or may
an offer, with the permission of the recommit it with instructions. Whenever
Commissioner and subject to such the Secretary of Finance shall determine
requirement as he may specify, to in any manner, as aforesaid, the fair
acquire by purchase all of the shares not value of such shares, he may also
theretofore acquired under the plan, at a determine the terms of payment thereof
specified price which the insurer by the insurer. The expenses incidental
considers to be their fair value as of the to the proceedings including charges of
date of making such offer. the appraisers, if any, shall be paid
If the offer to acquire is permitted by the equally by the insurer and the
Commissioner, the insurer shall make a shareholder.
written offer by registered mail to each The findings of the Secretary of Finance
shareholder whose shares have not on all questions of fact raised at the
theretofore been acquired under the plan hearing of the application for
or otherwise, offering to acquire all his determination of the fair value of such
shares at such price if accepted in shares shall be conclusive upon all
writing within thirty days after the parties to the proceedings. The order of
mailing of such offer. Any shareholder the Secretary of Finance determining
accepting such offer, within the time the fair value of the shares and the
therefore shall, within sixty days after terms of payment thereof shall have the
his acceptance, transfer to the insurer force and effect of a judgment which
the certificates representing such shares shall be appealable on any question of
and, upon doing so, shall be paid by the law. Such order shall become final
insurer the amount of such offer for his and executory fifteen days after receipt
shares. Any share so acquired shall be thereof by the parties to the
assigned and transferred to the trustees proceedings.
under the plan and held by them as Upon any such order becoming final and
shares acquired pursuant to the plan. from which no appeal is pending, or
Each shareholder who does not accept when the time to appeal therefrom has
such offer to acquire his shares within expired, each shareholder party to the
the time stated in such offer for proceedings shall transfer his shares to
acceptance thereof shall within fifteen the insurer and surrender to the said
days after the expiration of such offer insurer the certificates representing
apply to the Secretary of Finance for such shares and the insurer shall make
determination of the fair value of his payment therefore as provided in such
shares as of the date of making such order. Any shares so acquired by the
offer. The Secretary of Finance may insurer shall be assigned and transferred
himself, after due notice and hearing, to the trustees and held by them as
determine upon the evidence received shares acquired pursuant to the plan.
the fair value of the shares as of the date Any shareholder who does not apply to
of making such offer, or appoint three the Secretary of Finance in the manner
impartial and disinterested persons to and within the time hereinbefore
appraise the fair value of such shares prescribed shall be deemed to have
with such direction as he shall deem accepted the offer referred to above,
proper and necessary to expedite the effective, however, upon the expiration
proceedings. Upon completion of the of the time hereinabove prescribed for
appraisal proceedings, the appraisers making such application, and such
shall file with the Secretary of Finance shareholder's time for accepting such
their report in writing stating the fair offer shall, for that purpose only, be
value of such shares as of the date of the deemed to have been extended
making of such offer and setting forth accordingly.
their findings in support of such
statement. The appraisers shall furnish Any offer to acquire shares made
each party to the proceedings a copy of pursuant to this section shall, except as
their appraisal report, and within ten otherwise provided herein, be irrevocable
days after receipt thereof any such party until all proceedings upon such offer
may signify his objection, if any, to the have been completed or all shares have
report or move for the approval thereof. otherwise been earlier acquired by the
Upon the expiration of the period of ten insurer.
days referred to above, the report shall Any shareholder who has expressly or
be set for hearing, after which the impliedly accepted the plan or the offer
Secretary of Finance shall issue an order to acquire his shares not theretofore
adopting, modifying or rejecting the acquired under the plan, and any
report in whole or in part or he may shareholder who has rejected such plan
or such offer and has applied, as imprinted on premium notices of
aforesaid, to the Secretary of Finance for receipts or on both.
a determination of the fair value of his A notice may be given by such insurer to
shares subsequent to which an any member either personally, or by
agreement has been reached or a final mail, or other means of written
order issued fixing such fair value but communication, charges prepaid,
who fails to surrender his certificates for addressed to such member at his address
cancellation upon payment of the appearing on the books of the insurer, or
amount to which he is entitled, may be given by him to the insurer for the
compelled to do so by an order of the purpose of notice. If a member gives no
Secretary of Finance for that purpose address, notice shall be deemed to have
and such order may provide that upon been given him if sent by mail or other
failure of such shareholder to surrender means of written communication
such certificates for cancellation such addressed to the place where the
order shall stand in lieu of such principal office of the insurer is situated,
surrender and cancellation. (As amended by or if published at least once in some
Presidential Decree No. 1280).
newspaper of general circulation in the
Sec. 270. Such insurer, place in which said office is located.
after mutualization, shall be a
Notice of any meeting of members shall
continuation of the original insurer, and
be sent to each member entitled thereto
such mutualization shall not affect such
not less than seven days before such
insurer's certificate of authority nor
meeting, unless the by-laws provide
existing suits, rights or contracts except
otherwise.
as provided in said plan for the
acquisition of the outstanding shares of Notice of any meeting of members shall
the capital stock of such insurer, specify the place, the day and the hour
approved as provided in this chapter. of the meeting and the general nature of
Such insurer, after mutualization, shall the business to be transacted.
exercise all the rights and powers and Notice of an annual meeting to be held
shall perform all the duties conferred or at the time and place specified in sub-
imposed by law upon insurers writing paragraph one of this section shall be
the classes of insurance written by it, sufficiently given if published at least
and to protect rights and contracts once in each of four successive weeks in
existing prior to mutualization, subject a newspaper of general circulation in the
to the effect of said plan. The board of place in which the principal office of
directors of such insurer, prior such insurer is located, and if so
to mutualization, may adopt published no other notice of such
amendments to its by-laws to take effect meeting shall be required.
upon mutualization.
(4) The presence in person or by proxy of
Sec. 271. (1) An annual meeting of five per centum of the members entitled
members shall be held at ten o'clock in to vote at any meeting shall constitute a
the morning of the fourth Tuesday of quorum for the transaction of business,
March of each year at the principal office unless otherwise provided by the by-
of the insurer, unless a different time or laws.
place be provided in the by-laws.
(5) Each such member shall have one
(2) Special meetings of the members, for vote at any meeting of members
any purpose or purposes whatsoever, regardless of the number of policies or
may be called at any time by the the amount of insurance that such
president, or by the board of directors, member holds and regardless of whether
or by one or more members holding not such policies are policies of life
less than one-fifth of the voting power of insurance, or of health and accident
such insurer, or by such other officers or insurance, or both. Any member entitled
persons as the by-laws authorize. to vote shall have the right to do so
(3) Notice of all meetings of members either in person or by an agent or agents
whether annual or special shall be given authorized by a written proxy executed
in writing to the members entitled to by such person or his duly authorized
vote by the secretary, or an assistant agent and filed with the secretary of
secretary, or other person charged with such insurer.
that duty, or if there be no such officer, (6) The directors of the insurer in office
or in case of his neglect or refusal, by at the time the insurer is mutualized as
any director or member. At the option of provided in this chapter shall continue
the insurer such notice may be in office until the first annual meeting of
members. At the first annual meeting of
members and at each annual meeting to the policyholders of such
thereafter directors shall be elected by insurer as provided in this
the members for the term or terms chapter, and the approval and
authorized by this chapter. carrying out of said plan or any
(7) The articles of incorporation or the part thereof in accordance with
bay-laws may provide that the directors the provisions of this chapter.
may be divided into two or more classes Title 18
whose terms of office shall expire at WITHDRAWAL OF FOREIGN INSURANCE
different times, but no terms shall COMPANIES
continue longer than six years. In the Sec. 273. A foreign insurance company
absence of such provisions, each doing business in the Philippines, upon
director, except members of the board of payment of the fee hereinafter
directors at the time the insurer prescribed and surrender to the
is mutualized, shall be elected for a term Commissioner of its certificate of
of one year. All directors shall hold office
authority, may apply to withdraw from
for a term for which they are elected and
the Philippines. Such application shall
until their successors are elected and be duly executed in writing,
qualified. A director may, but need not accompanied by evidence of due
be a member or policyholder of the authority for such execution, properly
insurer of which he is acting as director. acknowledged.
Vacancies in the board of directors may
be filled by a majority of the remaining Sec. 274. The Commissioner shall
directors, though less than a quorum, publish the application for withdrawal
and each director so elected shall hold daily for a period of one week in two
office until the next annual meeting. newspapers of general circulation in the
City of Manila, one in English and the
(8) All insurers mutualized under the other in Pilipino. The expenses of such
provisions of this chapter shall be
publication shall be paid by the
subject to all other applicable provisions
insurance company filing such
of this Code and of the Corporation Law. application.
Sec. 272. The provisions of Sec. 275. Every foreign insurance
Commonwealth Act No. 83, otherwise company desiring to withdraw from
known as the Securities Act, as the Philippines shall, prior to such
amended, shall not apply to any of the withdrawal, discharge its liabilities to
following: policyholders and creditors in this
(a) Shares of the capital stock of country. In case of its policies insuring
such insurer acquired as provided residents of the Philippines, it shall
in section two hundred sixty-six cause the primary liabilities under such
and assigned and transferred to policies to be reinsured and assumed by
the trustees as is provided in said another insurance company authorized
section, and the assignment and to transact business in the Philippines.
transfer of said shares as so In the case of such policies as are
provided; subject to cancellation by the
(b) Any certificate or other withdrawing company, it may cancel
instrument issued to a such policies pursuant to the terms
policyholder of thereof in lieu of such reinsurance and
such mutualized insurer assumption of liabilities.
conferring or evidencing Sec. 276. The Commissioner shall make
membership in an examination of the books and records
such mutualized insurer or of the withdrawing company, and if,
conferring or evidencing such upon such examination, the
member's right to participate in Commissioner finds that the insurer has
the profits or share in the assets no outstanding liabilities to residents of
of such mutualized insurer by the the Philippines, it shall cancel the
virtue of his membership therein, withdrawing company's certificate of
and the issuance of such authority, if unexpired, and shall permit
certificate or other instrument; the insurer to withdraw. The cost and
(c) The plan for the acquisition of expenses of all such examination shall be
the outstanding shares of the paid as prescribed in section four
capital stock of such insurer hundred seventeen.
authorized by the provisions of Sec. 277. Upon the failure of such
this chapter, the submission of withdrawing insurance company or its
said plan to the Commissioner and agents in the Philippines to pay the
expenses of such publication within is qualified by the laws of the Philippines
thirty days after the presentation of the to transact business therein as a
bill therefore, the Commissioner shall professional reinsurer.
collect such fee from the deposit Before issuing such certificate of
furnished in accordance with the authority of the Commissioner must be
provisions of section one hundred satisfied that the name of the applicant
ninety-one. is not that of any other known company
Sec. 278. A foreign life insurance transacting insurance or reinsurance
company that withdraws from the business in the Philippines, or a name so
Philippines shall be considered similar as to be calculated to mislead the
a "servicing insurance company" if its public.
business transactions are confined to Such certificate of authority shall expire
accepting periodic premium payments on the last day of June of each year and
from, or granting policy loans and paying shall be renewed annually if such person,
cash surrender values of outstanding partnership, association, or corporation
policies to, or reviving lapsed policies of, is continuing to comply with provisions
Philippine policyholders, and such other of this Code, or the circulars,
related services. instructions, rulings, or decisions of the
Sec. 279. No company shall act as a Commissioner and such other pertinent
servicing insurance company until after law, rules and regulations.
it shall have obtained a special Every such person, partnership,
certification of authority to act as such association, or corporation receiving
from the Commissioner upon application such certificate of authority shall be
therefore and payment by the company subject to the provisions of this Code
of the fees hereinafter prescribed. Such and other related laws, and to the
certificate shall expire on the last day of jurisdiction and supervision of the
June of each year and shall be renewed Commissioner.
annually, while the company continues
to service its policyholders, and to Sec. 281. Any person, partnership,
comply with all the applicable provisions association, or corporation authorized to
of law and regulations. transact solely reinsurance business
must have a paid-up capital stock of at
Title 19 least ten million pesos, twenty-five per
PROFESSIONAL REINSURERS centum of which must be invested in
Sec. 280. Except as otherwise provided securities satisfactory to the
in this Code, no person, partnership, Commissioner, consisting of bonds or
association or corporation shall transact other evidences of debt of the
any business in the Philippines as a Government of the Philippines or its
professional reinsurer until it shall have political subdivisions or
obtained a certificate of authority for instrumentalities, or of government-
that purpose from the Commissioner owned or controlled corporations and
upon the application therefore and entities, including the Central Bank of
payment by such person, partnership, the Philippines, and deposited with the
association or corporation of the fees Commissioner, and the remaining
hereinafter prescribed. As used in this seventy-five per centum in such other
Code, the securities as may be allowed and
term "professional reinsurer" shall mean permitted by the Commissioner, which
any person, partnership, association or securities shall at all times be
corporation that transacts solely and maintained free from any lien or
exclusively reinsurance business in encumbrance: Provided,
the Philippines. That reinsurers already doing business
The Commissioner may refuse to issue a as such in the Philippines shall comply
with the requirement of this section by
certificate of authority to any such
person, partnership, association or increasing their respective capital as
corporation if, in his judgment, such herein provided not later than December
refusal will best promote public interest. thirty-one, nineteen hundred
No such certificate of authority shall be eighty: Provided, Further, That the
provisions of this chapter applicable to
granted to any such person, partnership,
insurance companies shall so far as
association or corporation unless and
practicable be likewise applicable to
until the Commissioner shall have
satisfied himself by such examination as professional reinsurers. (As amended by
Presidential Decree No. 1455).
he may make and such evidence as he
may require that such person, Title 20
partnership, association or corporation HOLDING COMPANIES
Sec. 282. As used in this title, the stockholders of the insurer that the
following terms shall have the respective person be deemed to control the insurer.
meanings hereinafter set forth unless Sec. 284. The Commissioner may
the context shall otherwise require: determine upon application that any
(a) "Person" means an individual, person, either alone or pursuant to
partnership, firm, association, agreement with one or more other
corporation, trust, any similar persons, does not or will not upon the
entity or any combination of the taking of some proposed action control
foregoing acting in concert; another person. The filing of an
(b) "Control", including the application hereunder in good faith by
terms "controlling", "controlled any person shall relieve the applicant
by" and "under common control from any obligation or liability imposed
with", means the possession by this title with respect to the subject
directly or indirectly of the power of the application, except as contained
to direct or cause the direction of in section two hundred ninety-four, until
the management and policies of a the Commissioner has acted upon the
person, whether through the application. Within thirty days or such
ownership of voting securities by a further period as he may prescribe, the
contract other than a commercial Commissioner may prospectively revoke
contract for goods or non- or modify his determination, after notice
management services or and opportunity to be heard, whenever
otherwise. Subject to section two in his judgment revocation or
hundred eight-four, control shall modification is consistent with his title.
be presumed to exist if any person Sec. 285. Notwithstanding any other
directly or indirectly owns, provisions of this title, the following
controls or holds with the power shall not be deemed holding companies:
to vote forty per centum or more (a) authorized insurers
of the voting securities of any or reinsurers or their subsidiaries;
other person: Provided, That no
person shall be deemed to control (b) the Government of
another person solely by reason of the Philippines, or any political
his being an officer or director of subdivision, agency or
such other person; instrumentality thereof, or any
corporation which is wholly owned
(c) "Holding company" means any directly or indirectly by one or
person who directly or indirectly more of the foregoing.
controls any authorized insurer;
The Commissioner may conditionally or
(d) "Controlled insurer" means an unconditionally exempt any specified
authorized insurer controlled person or class of persons from any of
directly or indirectly by a holding the obligations or liabilities imposed
company; under this title, if and to the extent he
(e) "Controlled person" means any finds the exemption necessary to
person, other than a controlled appropriate in the public interest or not
insurer, who is controlled directly adverse to the interests of policyholders
or indirectly by a holding or stockholders and consistent with the
company; purposes of this title.
(f) "Holding company Sec. 286. (1) Every person who on the
system" means a holding company date this Code takes effect is a
together with its controlled controlled insurer and every person who
insurers and controlled persons. thereafter becomes a controlled insurer,
Sec. 283. Notwithstanding paragraph (b) shall, within sixty days thereafter, or
of section two hundred eighty-two, the within thirty days after becoming a
Commissioner may determine after controlled insurer, whichever is later,
notice and opportunity to be heard, that register with the Commissioner. Such
a person exercises directly or indirectly registration shall be amended within
either alone or pursuant to an agreement thirty days following any change in the
with one or more other persons such a identity of its holding company. The
controlling influence over the Commissioner may grant one or more
management or policies of an authorized reasonable extensions of the time to
insurer as to make it necessary or register.
appropriate in the public interest or for (2) Every registrant shall furnish the
the protection of policyholders or Commissioner with the following
information concerning its holding
company: (a) a copy of its charter or insurer is a party shall be subject to the
articles of incorporation and its by-laws, following:
(b) the identities of its principal (a) The terms shall be fair and
shareholders, officers, directors and equitable;
controlled persons, and (c) information
as to its capital structure and financial (b) charges or fees for services
condition, and a description of its performed shall be reasonable;
principal business activities. (c) expenses incurred and
Sec. 287. Every controlled insurer shall payments received shall be
file with the Commissioner such reports allocated to the insurer on an
or material as he may direct for the equitable basis in conformity with
purpose of disclosing information customary insurance accounting
concerning the operations of persons practices consistently applied.
within the holding company system The books, accounts and records of each
which may materially affect the party to all such transactions shall be
operations, management or financial maintained as to clearly and accurately
condition of the insurer. disclose the nature and details of the
Sec. 288. Every holding company and transactions including such accounting
every controlled person within a holding information as is necessary to support
company system shall be subject to the reasonableness of the charges or fees
examination by order of the to the respective parties.
Commissioner if he has cause to believe Sec. 291. The prior written approval of
that the operations of such persons may the Commissioner shall be required for
materially affect the operations, the following transactions between a
management or financial condition of controlled insurer and any person in its
any controlled insurer with the system holding company system: sales,
and that he is unable to obtain relevant purchases, exchanges, loans or
information from such controlled extensions of credit, or investments,
insurer. The grounds relied upon by the involving five per centum or more of the
Commissioner for such examination insurer's admitted assets as of the
shall be stated in his order, which order thirty-first day of December next
shall be subject to judicial review only at preceding.
the instance of the person sought to be
Sec. 292. The following transactions
examined. Such examination shall be
between a controlled insurer and any
confined to matters specified in the
person in its holding company system
order. The cost of such examination
may not be entered into unless the
shall be assessed against the person
insurer has notified the Commissioner in
examined and no portion thereof shall
writing of its intention to enter into any
thereafter be reimbursed to it directly or
such transaction at least thirty days
indirectly by the controlled insurer.
prior thereto, or such shorter period as
Sec. 289. The Commissioner shall keep he may permit, and he has not
the contents of each report made disapproved it within such period:
pursuant to this title and any
(a) sales, purchases, exchanges,
information obtained by him in
loans or extensions of credit, or
connection therewith confidential and
investments, involving more than
shall not make the same public without
one-half of one per centum but
the prior written consent of the
less than five per centum of the
controlled insurer to which it pertains
insurer's admitted assets as of the
unless the Commissioner after notice
thirty-first day of December next
and an opportunity to be heard shall
preceding;
determine that the interests of
policyholders, stockholders or the public (b) reinsurance treaties or
will be served by the publication thereof. agreements;
In any action or proceeding by the (c) rendering of services on a
Commissioner against the person regular or systematic basis; or
examined or any other person within the
same holding company system a report (d) any material transaction,
of such examination published by him specified by regulation, which the
shall be admissible as evidence of the Commissioner determines may
facts stated therein. adversely affect the interest of the
insurer's policyholders or
Sec. 290. Transactions within a holding stockholders or of the public.
company system to which a controlled
Nothing herein contained shall be prejudicial to the insurer's
deemed to authorize or permit any policyholders or stockholders.
transaction which, in the case of a non- (3) The following conditions affecting
controlled insurer, would be otherwise any controlled insurer, regardless of
contrary to law. when such control has been acquired,
Sec. 293. The Commissioner, in are violations of this title: (a) the
reviewing transactions pursuant to controlling person or any of its officers
sections two hundred ninety-one and or directors have demonstrated
two hundred ninety-two, shall consider untrustworthiness; and (b) the effect of
whether the transactions comply with retention of control may be substantially
the standard set forth in section two to lessen competition in any line of
hundred ninety and whether they may commerce in insurance in this country
adversely affect the interests of or to tend to create a monopoly therein.
policyholders. This section shall not If, after notice and an opportunity to be
apply to transactions subject to other heard, the Commissioner determines
sections of this Code which impose that any of the foregoing violations
notice or approval requirements greater exists, he shall reduce his findings to
than those prescribed by this title. writing and shall issue an order based
Sec. 294. (1) No person, other than an thereon and cause the same to be served
authorized insurer, shall acquire control upon the insurer and upon all persons
of any domestic insurer, whether by affected thereby directing any person
purchase of its securities or otherwise, found to be in violation thereof to take
except (a) after twenty days written appropriate action to cure such
notice to its insurer or such shorter violation. Upon the failure of any such
period as the Commissioner may permit, person to comply with such order,
of its intention to acquire control, and section two hundred ninety-eight shall
(b) with the prior written approval of the become applicable.
Commissioner. (4) The Commissioner may require the
(2) The Commissioner shall disapprove submission of such information as he
the acquisition of control of a domestic deems necessary to determine whether
insurer if he determines, after notice any acquisition or retention of control
and an opportunity to be heard, that complies with this title and may require,
such action is reasonably necessary to as a condition of approval of such
protect the interest of the people of this acquisition or retention of control, that
country. The following shall be the only all or any portion of such information be
factors to be considered by him in disclosed to the insurer's stockholders.
reaching the foregoing determination: (5) Unless subject to registration under
(a) the financial condition of the section two hundred eighty-six or unless
acquiring person or and the acquisition of its control is subject to
insurer; paragraphs one and two hereof, every
authorized insurer shall, on or before the
(b) the trustworthiness of the first day of July, nineteen hundred
acquiring person or any of its seventy-five, or within thirty days after
officers or directors; any event requiring notice hereunder,
(c) a plan for the proper and whichever is later, notify the
effective conduct of the insurer's Commissioner in writing of the identity
operations; of any person whom the insurer then
knows or has reason to believe controls
(d) the source of the funds or
or has taken any action, other than
assets for the acquisition;
preliminary negotiations or discussion,
(e) the fairness of any exchange of to acquire control of the insurer.
stock, assets, cash or other
Sec. 295. (1) Notwithstanding the control
consideration for the stock or
of an authorized insurer by any person,
assets to be received;
the officers and directors of the insurer
(f) whether the effect of the shall not thereby be relieved of any
acquisition may be substantially obligation or liability to which they
to lessen competition in any line would otherwise be subject by law, and
of commerce in insurance or to the insurer shall be managed so as to
tend to create a monopoly assure its separate operating identity
therein; and consistent with this title.
(g) whether the acquisition is (2) Nothing herein shall preclude an
likely to be hazardous or authorized insurer from having or
sharing a common management or
cooperative or joint use of personnel, Chapter IV
property or services with one or more SALES AGENCIES AND TECHNICAL
other persons under arrangements SERVICES
meeting the standards of section two
Title 1
hundred ninety.
INSURANCE AGENTS AND INSURANCE
Sec. 296. To the extent that any BROKERS
information or material is set forth in
Sec. 299. No insurance company doing
forms or other matter on file with any
business in the Philippines, nor any
government agency or in a registration
agent thereof, shall pay any commission
form filed with the Commissioner by
or other compensation to any person for
another person within the same holding
services in obtaining insurance, unless
company system, the controlled insurer
such person shall have first procured
may comply with the registration or
from the Commissioner a license to act
reporting requirements of this title by
as an insurance agent of such company
referring in its registration form or
or as an insurance broker as hereinafter
report to such other filed matter and
provided.
attaching a copy thereof certified by the
insurer as a true and complete copy, to No person shall act as an insurance
such registration form or report or, if agent or as an insurance broker in the
such other filed matter is on file with solicitation or procurement of
the Commissioner, incorporating such applications for insurance, or receive for
matter by reference. services in obtaining insurance, any
commission or other compensation from
Sec. 297. No holding company or
any insurance company doing business
controlled person shall directly or
in the Philippines, or any agent thereof,
indirectly or through another person do
without first procuring a license to act
or cause to be done for or in behalf of
from the Commissioner, which must be
the controlled insurer any act intended
renewed annually on the first day of
to affect the insurance operations of the
January, or within six months
insurer which, if done by the insurer,
thereafter. Such license shall be issued
would violate any provision of this Code.
by the Commissioner only upon the
Sec. 298. In addition to any other written application of the person
penalty provided by law, the desiring it, such application if for a
Commissioner may, upon the willful license to act as insurance agent, being
failure of any person within a holding approved and countersigned by the
company system to comply with this company such person desires to
title or any regulation or order represent, and shall be upon a form
promulgated hereunder: prescribed by the Commissioner giving
(a) proceed under title fourteen or such information as he may require, and
title fifteen, Chapter III, of this upon payment of the corresponding fee
Code with respect to insurer hereinafter prescribed. The
within the holding company Commissioner shall satisfy himself as to
system; or competence and trustworthiness of the
applicant and shall have the right to
(b) revoke or refuse to renew the refuse to issue or renew and to suspend
authority to do business in this or revoke any such license in his
country of an insurer within the discretion. No such license shall be valid
holding company system or refuse after the thirtieth day of June of the
to issue such authority to any year following its issuance unless it is
other insurer in the system; or renewed. (As amended by Presidential Decree No. 1455).
(c) direct that, in addition to any Sec. 300. Any person who for
other penalty provided by law, compensation solicits or obtains
such person forfeit to the people insurance on behalf of any insurance
of this country a sum not company or transmits for a person other
exceeding five hundred pesos for a than himself an application for a policy
first violation and two thousand or contract of insurance to or from such
five hundred pesos for any company or offers or assumes to act in
subsequent violation. An the negotiating of such insurance shall
additional sum not exceeding two be an insurance agent within the intent
thousand five hundred pesos shall of this section and shall thereby become
be imposed for each month during liable to all the duties, requirements,
which any such violation shall liabilities and penalties to which an
continue. insurance agent is subject.
Sec. 301. Any person who for any applicant, but in no case shall the
compensation, commission or other amount of each of such policies be less
thing of value acts or aids in any manner than five hundred thousand pesos. (As
in soliciting, negotiating or procuring amended by Presidential Decree No. 1455).
the making of any insurance contract or Sec. 303. The Commissioner shall, in
in placing risk or taking out insurance, order to determine the competence of
on behalf of an insured other than every applicant to have the kind of
himself, shall be an insurance broker license applied for, require such
within the intent of this Code, and shall applicant to submit to a written
thereby become liable to all the duties, examination and to pass the same to the
requirements, liabilities and penalties to satisfaction of the Commissioner. Such
which an insurance broker is subject. examination shall be held at such times
Sec. 302. Every applicant for an and places as the Commissioner shall
insurance broker's license shall file with from time to time determine.
the application and shall thereafter Sec. 304. An applicant for the written
maintain in force while so licensed, a examination mentioned in the preceding
bond in favor of the people of the section must be of good moral character
Republic of the Philippines executed by and must not have been convicted of any
a company authorized to become surety crime involving moral turpitude. He
upon official recognizances, stipulations, must satisfactorily show to the
bonds and undertakings. The bond shall Commissioner that he has been trained
be in such amount as may be fixed by in the kind of insurance contemplated in
the Commissioner, but in no case less the license applied for.
than one hundred thousand pesos, and Such examination may be waived if it is
shall be conditioned upon full shown to the satisfaction of the
accounting and due payment to the Commissioner that the applicant has
person entitled thereto of funds coming undergone extensive education and/or
into the broker's possession through training in insurance.
insurance transactions under license.
The bond shall remain in force until Sec. 305. An application for the issuance
released by the Commissioner, or until or renewal of a license to act as an
cancelled by the surety. Without insurance agent or insurance broker may
prejudice to any liability previously be refused, or such license, if already
incurred thereunder, the surety may issued or renewed, shall be suspended or
cancel the bond on thirty days advance revoked if the Commissioner finds that
written notice to both the broker and the applicant for, or holder of, such
the Commissioner. license:

Upon approval of the application, the (a) has willfully violated any
applicant must also file two errors and provision of this Code; or
omissions (professional liability or (b) has intentionally made a
professional indemnity) policies issued material misstatement in the
separately by two insurance companies application to qualify for such
authorized to do business in the license; or
Philippines, satisfactory to the (c) has obtained or attempted to
Commissioner to indemnify the obtain a license by fraud or
applicant against any claim or claims for misrepresentation; or
breach of duty as insurance broker which
may be made against him by reason of (d) has been guilty of fraudulent or
any negligent act, error or omission, dishonest practices; or
whenever or wherever committed or (e) has misappropriated or
alleged to have been committed, on the converted to his own use or
part of the applicant or any person who illegally withheld moneys required
has been, is now, or may hereafter to be held in a fiduciary capacity;
during the subsistence of the policies be
(f) has not demonstrated
employed by the said applicant in his
trustworthiness and competence
capacity as insurance broker, provided
to transact business as an
that the filing of any claim or claims
insurance agent or insurance
under one of such policies shall preclude
broker in such manner as to
the filing of the said claim or claims
safeguard the public; or
under the other policy. The said policies
shall be in such amounts as may be (g) has materially misrepresented
prescribed by the Insurance the terms and conditions of
Commissioner, depending upon the size policies or contracts of insurance
or amount of the broking business of the
 which he seeks to sell or has sold; attorney duly executed by such
or insurance company, and registered with
(h) has failed to pass the written the Commissioner to receive notices,
examination prescribed, if not summons and legal processes for and in
otherwise exempt from taking the behalf of the insurance company
same. concerned in connection with actions or
other legal proceedings against said
In addition to the foregoing causes, no insurance company. It shall be the duty
license to act as insurance agent or of said general agent to notify the
insurance broker shall be renewed if the Commissioner of his post office address
holder thereof has not been actively in the Philippines, or any change
engaged as such agent or broker in thereof. Notices, summons, or processes
accordance with such rules as the of any kind sent by registered mail to
Commissioner may prescribe. (As amended by the last registered address of such
Presidential Decree No. 1814). general agent of the company concerned
Sec. 306. The premium, or any portion or to the Commissioner shall be
thereof, which an insurance agent or sufficient service and deemed as if
insurance broker collects from an served on the insurance company itself.
insured and which is to be paid to an Sec. 309. Except as otherwise provided
insurance company because of the by law or treaty, it shall be unlawful for
assumption of liability through the any person, partnership, association or
issuance of policies or contracts of corporation in the Philippines, for
insurance, shall be held by the agent or himself or itself, or for some other
broker in a fiduciary capacity and shall person, partnership, association or
not be misappropriated or converted to corporation, either to procure, receive or
his own use or illegally withheld by the forward applications of insurance in, or
agent or broker. to issue or to deliver or accept policies
Any insurance company which delivers or contracts of insurance of or for, any
to an insurance agent or insurance insurance company or companies not
broker a policy or contract of insurance authorized to transact business in the
shall be deemed to have authorized such Philippines, covering risks, life or non-
agent or broker to receive on its behalf life, situated in the Philippines; and any
payment of any premium which is due such person, partnership, association or
on such policy or contract of insurance corporation violating the provisions of
at the time of its issuance or delivery or this section shall be deemed guilty of a
which becomes due thereon. penal offense, and upon conviction
Sec. 307. Any provision of existing laws thereof, shall for each such offense be
to the contrary notwithstanding, no punished by a fine of ten thousand
person shall, within the Philippines, sell pesos, or imprisonment of six months, or
or offer for sale a variable contract or do both at the discretion of the
or perform any act or thing in the sale, court: Provided, That the provisions of
negotiation, making or consummating of this section shall not apply to
any variable contract other than for reinsurance.
himself unless such person shall have a Title 2
valid and current license from the REINSURANCE BROKERS
Commissioner authorizing such person
Sec. 310. Except as provided in the next
to act as a variable contract agent. No
succeeding title, no person shall act as
such license shall be issued unless and
reinsurance broker in
until the Commissioner is satisfied, after
the Philippines unless he is authorized
examination that such person is by
as such by the Commissioner.
training, knowledge, ability and
character qualified to act as such agent. A reinsurance broker is one who, for
Any such license may be withdrawn and compensation, not being a duly
cancelled by the Commissioner after authorized agent, employee or officer of
notice and hearing, if he shall find that an insurer in which any reinsurance is
the holder thereof does not then have effected, act or aids in any manner in
the qualifications required for the negotiating contracts of reinsurance, or
issuance of such license. placing risks of effecting reinsurance, for
any insurance company authorized to do
Sec. 308. It shall be unlawful for any
business in the Philippines.
person, company or corporation in the
Philippines to act as general agent of any Sec. 311. Upon application and payment
insurance company unless he is of the corresponding fee hereinafter
empowered by a written power of prescribed, and the filing of two errors
and omissions (professional liability or
professional indemnity) policies agent filed with the Commissioner must
hereinafter described, a person may, if be accompanied with:
found qualified, be issued a license to (a) a copy of the power of
act as reinsurance broker by the attorney, duly notarized and
Commissioner. No such license shall be authenticated by the Philippine
valid after the thirtieth day of June of Consul in the place where such
the year following its issuance unless it foreign insurer or broker is
is renewed. (As amended by Presidential Decree No. domiciled, empowering the
1455).
applicant to act as resident agent
The errors and omissions (professional and to receive notices, summons
liability or professional indemnity) and legal processes for and in
policies mentioned above shall behalf of such foreign insurer or
indemnify the applicant against any broker in connection with any
claim or claims for breach of duty as action or legal proceeding against
reinsurance broker which may be made such foreign insurer or broker; and
against him by reason of any negligent
(b) a copy of the corresponding
act, error or omission, whenever or
certificate issued by the Board of
wherever committed or alleged to have
Investments as required under
been committed, on the part of the
Section 4 of Republic Act No.
applicant or any person who has been, is
5455, if such foreign insurer or
now, or may hereafter during the
broker is not otherwise exempt
subsistence of the policies be employed
from such requirement.
by the said applicant in his capacity as
reinsurance broker; Provided, That the Sec. 316. It shall be the duty of such
filing of any claim or claims under one of resident agent to notify immediately the
such policies shall preclude the filing of Commissioner of any change of his office
the said claim or claims under the other address.
policy. The said policies shall be issued Sec. 317. A certificate of registration
separately by two insurance companies issued to a resident agent shall expire on
authorized to do business in the the thirtieth day of June of the year
Philippines and shall be in such amounts following its issuance unless it is
as may be prescribed by the Insurance renewed.
Commissioner, depending upon the size
or amount of the broking business of the The Commissioner may, after due notice
applicant, but in no case shall the and hearing, recall or cancel the
amount of each of such policies be less certificate of registration issued to a
than five hundred thousand pesos. (As resident agent for violation of any
amended by Presidential Decree No. 1455). existing law, rule or regulation, or any
provision of this Code. (As amended by
Sec. 312. The Commissioner may recall, Presidential Decree No. 1455).
suspend or revoke the license granted to
a reinsurance broker for violation of any Title 4
existing law, rule and regulation, or any NON-LIFE COMPANY UNDERWRITER
provision of this Code after due notice Sec. 318. No person shall act, and no
and hearing. company shall employ any person, as
Title 3 non-life company underwriter, whose
RESIDENT AGENTS duty and responsibility it shall be to
select, evaluate and accept risks for, and
Sec. 313. No person shall act as resident to determine the terms and conditions,
agent, as hereinafter defined, unless he including those pertaining to amounts of
is registered as such with the retentions, under which such risks are to
Commissioner. be accepted by the company, unless
Sec. 314. The term "resident agent", as such underwriter is registered as such
used in this title, is one duly appointed with the Commissioner.
by a foreign insurer or broker not Sec. 319. Every non-life insurance
authorized to do business in the company doing business in the
Philippines to receive in its behalf Philippines must maintain at all times a
notices, summons and legal processes in register of risks accepted and a claims
connection with actions or other legal register for each line of risks engaged in
proceedings against such foreign insurer by such non-life insurance company with
or broker. such entries therein as are now or as
Sec. 315. The application for a may hereafter be required by the
certificate of registration as resident Commissioner, and it shall be the
responsibility of the underwriter on the
particular line or risk involved to see to
it that the said registers are well of registration shall be recalled by the
maintained and kept, and that all entries Commissioner, and no similar certificate
therein are properly and correctly shall thereafter be issued in his favor.
recorded. Such registers shall be open to Sec. 322. No certificate of registration
inspection and examination of duly issued to an underwriter shall be valid
authorized representative of the after the thirtieth day of June of the
Commissioner at all times during year following its issuance unless it is
business hours. renewed.
Sec. 320. No person shall be registered The Commissioner may, after due notice
with the Commissioner, unless such and hearing, also suspend or cancel such
person shall be at least twenty-one years certificate for violation of existing laws,
of age on the date of such registration; a rules and regulations or of any
resident of the Philippines; of good provisions of this Code. (As amended by
moral character and with no conviction Presidential Decree No. 1455).
of any crime involving moral turpitude; Title 5
has had at the time such registration is ADJUSTERS
made at least two years of underwriting
work in the particular line or risk Sec. 323. No person, partnership,
involved; and has passed such qualifying association, or corporation shall act as
written examination that the an adjuster, as hereinafter defined,
Commissioner shall conduct at such unless authorized so to act by virtue of a
time and in such place as he may decide license issued or renewed by the
to hold for applicants desiring to act as Commissioner pursuant to the
underwriters. provisions of this Code: Provided, That
Such examination shall not be required in the case of a natural person, he must
of any person who has served as non-life be a Filipino citizen and in the case of a
company underwriter for a period of at partnership, association or corporation,
least five years, if the Commissioner is at least sixty per centum of its capital
satisfied of the applicant's competence must be owned by citizens of the
as shown by the results of his Philippines.
underwriting work in the non-life Sec. 324. An adjuster may be an
insurance company or companies that independent adjuster or a public
employed him in that capacity. The adjuster.
minimum underwriting experience The term "independent adjuster" means
herein required may be reduced or any person, partnership, association or
waived if it is shown to the satisfaction corporation which, for money,
of the Commissioner that the non-life commission or any other thing of value,
company underwriter has undergone acts for or on behalf of an insurer in the
extensive education and/or training in adjusting of claims arising under
insurance. insurance contracts or policies issued by
Sec. 321. Any applicant who such insurer.
misrepresents or omits any material fact The term "public adjuster" means any
in his application for registration as a person, partnership, association or
non-life company underwriter, or corporation which, for money,
commits any dishonest act in taking or commission or any other thing of value,
in connection with the qualifying written acts on behalf of an insured in
examination for underwriters, shall be negotiating for, or effecting, the
barred from being registered as such settlement of a claim or claims of the
non-life company underwriter and, if said insured arising under insurance
already registered, his registration shall contracts or policies, or which advertises
be cancelled and the certificate of for or solicits employment as an adjuster
registration issued in his favor shall be of such claims.
recalled immediately by the
Commissioner. Sec. 325. For every line of insurance
claim adjustment, adjusters shall be
In the event that the certificate of licensed either as independent adjusters
authority of a non-life insurance or as public adjusters. No adjuster shall
company to transact business is act on behalf of an insurer unless said
suspended or revoked due to business adjuster is licensed as an independent
failure arising largely from the adjuster; and no adjuster shall act on
imprudent and injudicious acceptance of behalf of an insured unless said adjuster
risks by the underwriter concerned, the is licensed as a public adjuster: Provided,
registration of such underwriter shall however, That when a firm or person has
likewise be cancelled and his certificate been licensed as public adjuster, he shall
not be granted another license as (6) has failed to make a report of
independent adjuster and vice versa. the adjustment he proposed
No license, however, shall be required of within sixty days from the date of
any company adjuster who is a salaried the filing of the claim by the
employee of an insurance company for insured with the insurer, unless
the adjustment of claims filed under prevented so to do by reasons
policies issued by such insurance beyond his control; or
company. (7) has refused to allow an
Sec. 326. Such license or any renewal examination into his affairs or
thereof may be issued by the method of doing business as
Commissioner upon written application hereinafter provided.
filed by the person interested on the Sec. 331. Every adjuster shall submit to
form or forms prescribed by the the Commissioner a quarterly report of
Commissioner, which shall contain such all losses which are the subject of
information as he may require, and upon adjustment effected by him during each
payment of the corresponding fee month in the form prescribed by the
hereinafter prescribed. Commissioner. The report shall be filed
Sec. 327. The Commissioner shall within one month after the end of each
conduct, at such times, and in such quarter.
places as he may decide to hold, written Sec. 332. Every adjuster shall keep his
examinations to determine the or its books, records, reports, accounts,
competence and ability of applicants and vouchers in such manner that the
desiring to act as adjuster of insurance Commissioner or his duly authorized
claims. representatives may readily verify the
Sec. 328. Every adjuster's license issued quarterly reports of the said adjuster and
hereunder shall be valid until after the ascertain whether the said adjuster has
thirtieth day of June of the year complied with the provisions of law or
following the issuance of such license regulations obligatory upon him or
unless it is renewed. (As amended by Presidential whether the method of doing business of
Decree No. 1455). the said adjuster has been fair, just and
honest.
Sec. 329. Nothing contained in this title
shall apply to any duly licensed Sec. 333. The Commissioner shall, at
attorney-at-law who acts or aids in least once a year and whenever he
adjusting insurance claims as an considers the public interest so
incident to the practice of his profession demands, cause an examination to be
and who does not advertise himself as an made into the affairs and method of
adjuster. doing business of every adjuster.
Sec. 330. The Commissioner may Sec. 334. Any violation of any provision
suspend or revoke any adjuster's license of this title shall be punished by a fine of
if, after giving notice and hearing to the not more than ten thousand pesos, or by
adjuster concerned, the Commissioner imprisonment in the discretion of the
finds that the said adjuster: court; Provided, That, in case of a
partnership, association or corporation,
(1) has violated any provision of the said penalty shall be imposed upon
this Code and of the circulars, the partner, president, manager,
rulings and instructions of the managing director, director or person in
Commissioner or has violated any charge of its business or responsible for
law in the course of his dealings as the violation.
an adjuster; or
Title 6
(2) has made a material
ACTUARIES
misstatement in the application
for such license; or Sec. 335. No life insurance company
shall be licensed to do business in the
(3) has been guilty of fraudulent or
Philippines nor shall any life insurance
dishonest practices; or
company doing business in the
(4) has demonstrated his Philippines be allowed to continue doing
incompetence or such business unless they shall engage
untrustworthiness to act as the services of an actuary duly
adjuster; or accredited with the Commissioner who
(5) has made patently unjust shall, during his tenure of office, be
valuation of loss; or directly responsible for the direction and
supervision of all actuarial work
connected with or that may be involved
in the business of the insurance authorized to do business in the
company. Philippines may employ any
Sec. 336. Any person may be officially person who is not officially
accredited by the Commissioner to act accredited under either of the
as any actuary in any life insurance qualifications for any kind of
company or in any mutual benefit actuarial work, provided that he
association authorized to do business in shall not, at any time, have the
the Philippines upon application authority to certify to the
therefor3 and the payment of the correctness of the foregoing
corresponding fee hereinafter documents.
prescribed: Provided, That: (1) he is a Sec. 338. No accredited actuary shall
fellow of good standing of the Actuarial serve more than one client or employer
Society of the Philippines at the time of at the same time. However, one already
his appointment and remains in such in the employ of an insurance company
good standing during the tenure of his may be allowed by the Commissioner to
engagement; or (2) in the case of one serve a mutual benefit association or any
who is not a fellow of the Actuarial other insurance company, provided the
Society of the Philippines, he meets all following conditions are first complied
the requirements of the said Society for with: (a) that the request to engage his
accreditation as a fellow of the Society, services by the other employer is in
and has been given permission by the writing; (b) that his present employer
pertinent government authorities in the acquiesced to it in writing; and (c) that
Philippines to render services in the he furnishes the Commissioner with
Philippines, in the event that he is not a copies of said request and acquiescence.
citizen of the Philippines. Title 7
No certificate of registration issued RATING ORGANIZATION AND RATE
under this title shall be valid after the MAKING
thirtieth day of June of the year
Sec. 339. Every organization which now
following its issuance unless it is exists or which may hereafter be formed
renewed. (As amended by Presidential Decree No. 1455). for the purpose of making rates to be
Sec. 337. The following documents, used by more than one insurance
which are from time to time submitted company authorized to do business in
to the Commissioner by a life insurance the Philippines shall be known as
company authorized to do business in a "rating organization." The
the Philippines, shall be duly certified by term "rate" as used in this title shall
an accredited actuary employed by such generally mean the ratio of the premium
company: to the amount insured and shall include,
1. Policy reserves and net due and as the context may require, either the
deferred premiums. consideration to be paid or charged for
insurance contracts, including surety
2. Statements of bases and net bonds, or the elements and factors
premiums, loading for gross forming the basis for the determination
premiums, and on non-forfeiture or application of the same, or both.
values and reserves, when
applying for approval of gross Sec. 340. Every rating organization
premiums, reserves and non- which now exists or which may hereafter
forfeiture values. be formed shall be subject to the
provisions of this title.
3. Policies of insurance under any
plan submitted to the Sec. 341. No rating organization
Commissioner as required by law. hereafter formed shall commence rate-
making operations until it shall have
4. Annual statements and obtained a license from the
valuation reports submitted to the Commissioner. Before obtaining such
Commissioner as required by law. license, such rating organization shall
5. Financial projection showing file with the Commissioner a notice of
the probable income and outgo its intention to commence rate-making
and reserve requirements, operations, a copy of its constitution,
enumerating the actuarial articles of agreement or association, or
assumptions and bases of of incorporation, and its by-laws, a list of
projections. insurance companies that have agreed to
become members or subscribers, and
6. Valuation of annuity funds or
such other information concerning such
retirement plans.
rating organization and its operations as
Any life insurance company
may be required by the Commissioner. If
the Commissioner finds that the Commissioner may, after such hearing,
organization has complied with the issue an appropriate order.
provisions of law and that it has a Sec. 343. No rating organization or any
sufficient number of members or other association shall refuse to do
subscribers and is otherwise qualified to business with, or prohibit or prevent the
function as a rating organization, the payment of commissions to, any person
Commissioner may issue a license to licensed as an insurance broker pursuant
such rating organization authorizing it to the provisions of title one of this
to make rates for the kinds of insurance chapter.
or subdivisions thereof as may be
specified in such license. No license Sec. 344. Rating organization shall be
issued to a rating organization shall be subject to examination by the
valid after the thirtieth day of June of Commissioner, as often as he may deem
the year following its issuance unless it such examination expedient, pursuant to
is renewed. No rating organization which the provisions of this Code applicable to
now exists and is not licensed pursuant the examination of insurance companies.
to this section shall continue rate- He shall cause such an examination of
making operations until it shall have each rating organization to be made at
obtained from the Commissioner a least once in every five years.
license which he may issue if satisfied Sec. 345. The Commissioner may
that such organization is complying with suspend or revoke the license of any
the provisions of this title. Every rating rating organization which fails to comply
organization shall notify the with his order within the time limited by
Commissioner promptly of every change such order, or any extension thereof
in (1) its constitution, its articles of which he may grant. The Commissioner
agreement or association or its may determine when a suspension of
certificate of incorporation, and its by- license shall become effective and it
laws rules and regulations governing the shall remain in effect for the period fixed
conduct of its business, and (2) its list of by him, unless he modifies or rescinds
members and subscribers. such suspension.
A "member" means an insurer who Sec. 346. Any rating organization may
participates in or is entitled to subscribe for or purchase actuarial,
participate in the management of a technical or other services, and such
rating organization. services shall be available to all members
A "subscriber" means an insurer which is and subscribers without discrimination.
furnished at its request with rates and Sec. 347. Any rating organization may
rating manuals by a rating organization provide for the examination of policies,
of which it is not a member. (As amended by daily reports, binders, renewal
Presidential Decree No. 1455). certificates, endorsements or other
Sec. 342. Each rating organization shall evidences of insurance, or the
furnish its rating service without cancellation thereof, and may make
discrimination to all of its members and reasonable rules governing their
subscribers, and shall, subject to submission. Such rules shall contain a
reasonable rules and regulations, permit provision that in the event an insurance
any insurance company doing business company does not within sixty days
in the Philippines, not admitted to furnish satisfactory evidence to the
membership, to become a subscriber to rating organization of the correction of
its rating services for any kind of any error or omission previously called
insurance or subdivisions thereof. Notice to its attention by the rating
of proposed changes in such rules and organization, it shall be the duty of the
regulations shall be given to subscribers. rating organization to notify the
The reasonableness of any rule or Commissioner thereof. All information
regulation in its application to so submitted for examination shall be
subscribers, or the refusal of any rating confidential.
organization to admit an insurance Sec. 348. Cooperation among rating
company as a subscriber, shall, at the organizations or among rating
request of any subscriber or any such organizations and insurers in rate
insurance company, be reviewed by the making or in other matters within the
Commissioner at a hearing held upon at scope of this title is hereby authorized,
least ten days' written notice to such provided the filings resulting from such
rating organization and to such cooperation are subject to all provisions
subscriber or insurance company. The of this title which are applicable to
filings generally. The Commissioner may
review such cooperative activities and measure any difference among
practices and if he finds that any such risks that can be demonstrated to
activity or practice is unfair or have a probable effect upon losses
unreasonable or otherwise inconsistent or expenses.
with the provisions of this title, he may Sec. 350. No rating organization and no
issue a written order specifying in what insurance company which makes and
respects such activity or practice is files its own rates shall make or
unfair or unreasonable or otherwise promulgate any rate or schedule of rates
inconsistent with the provisions of this which is to be applied to any fire risk on
title, and requiring the discontinuance the condition that the whole amount of
of such activity or practice. insurance on any risk or any specified
Sec. 349. Every rating organization and part thereof shall be placed with the
every insurance company which makes members of or subscribers to such rating
and files its own rates, shall make rates organization or with such insurer.
for all risks rated by such organization Sec. 351. Every insurance company
or insurance company in accordance doing business in the Philippines shall
with the following provisions: annually file with the rating organization
(a) Basic classification, manual, of which it is a member or subscriber, or
minimum, class, or schedule rates with such other agency as the
or rating plans, shall be made and Commissioner may designate, a
adopted for all such risks. Any statistical report showing a classification
departure from such rates shall be schedule of its premiums and losses on
in accordance with schedules, all kinds or types of insurance business
rating plans and rules filed with to which section three hundred forty-
the Commissioner; nine is applicable, and such other
(b) Rates shall be reasonable and information as the Commissioner may
adequate for the class of risks to deem necessary or expedient for the
which they apply; administration of the provisions of this
title.
(c) No rate shall discriminate
unfairly between risks involving Sec. 352. Every non-life rating
essentially the same hazards and organization and every non-life
expense elements or between risks insurance company doing business in
in the application of like charges the Philippines shall file with the
and credits; Commissioner, except as to risks which
by general custom of the business are
(d) Consideration shall be given to not written according to manual rates or
the past and prospective loss rating plans, every rate manual,
experience, including the schedule of rates, classification of risks,
conflagration and catastrophe rating plan, and every other rating rule
hazards, if any, to all factors and every modification of any of the
reasonably attributable to the foregoing which it proposes to use. An
class of risks, to a reasonable insurance company may satisfy its
profit, to commissions paid during obligation to make such filings for any
the most recent annual period and kind or type of insurance by becoming a
to past and prospective other member of or subscriber to a rating
expenses. In case of fire insurance organization which makes such filings
rates, consideration shall be given for such kind or type of insurance, and
to the experience of the fire by authorizing the Commissioner to
insurance business during a period accept such filings of the rating
of not less than five years next organization on behalf of such insurance
preceding the year in which the company.
review is made;
Sec. 353. Every manual or schedule of
(e) Risk may be grouped by rates and every rating plan filed as
classifications for the provided in the preceding section shall
establishment of rates and state or clearly indicate the character
minimum premiums. and extent of the coverage to which any
Classification rates may be such rate or any modification thereof
modified to produce rates for will be applied.
individual risks in accordance
with rating plans which establish Sec. 354. The Commissioner shall review
standards for measuring variations filings as soon as reasonably possible
in hazards or expense provisions, after they have been made in order to
or both. Such standards may determine whether they meet the
requirements of this title. When a filing
is not accompanied by the information unreasonable, he shall order that such
upon which the insurance company rates be appropriately adjusted. For the
supports such filing, and the purpose of applying the provisions of
Commissioner does not have sufficient this section, the Commissioner may
information to determine whether such from time to time approve reasonable
filing meets the requirements of this classifications of risks for any or all such
title, he shall require such insurance classes, having due regard to the past
company to furnish the information and prospective loss experience,
upon which it supports such filing. The including conflagration or catastrophe
information furnished in support of a hazards, if any, to all other relevant
filing may include: (1) the experience or factors and to a reasonable profit.
judgment of the insurance company or Sec. 359. Nothing contained in this title
rating organization making the filing; (2) shall be construed as requiring any
its interpretation of any statistical data insurer to become a member of or
it relies upon; (3) the experience of other subscriber to any rating organization.
insurance companies or rating
organization; or (4) any other relevant Sec. 360. Agreements may be made
factors. among insurance companies with
respect to the equitable apportionment
Sec. 355. If the Commissioner finds that among them of insurance which may be
any rate filings theretofore filed with afforded applicants who are in good faith
him do not comply with the provisions entitled to but are unable to procure
of this title or that they provide rates or such insurance through ordinary
rules which are inadequate, excessive, methods and such insurance companies
unfairly discriminatory or otherwise may agree among themselves on the use
unreasonable, he may order the same of reasonable rates and modifications for
withdrawn and at the expiration of sixty such insurance, such agreements and
days thereafter the same shall be rate modifications to be subject to the
deemed no longer on file. Before making approval of the Commissioner; Provided,
any such finding and order, the however, That the provisions of this
Commissioner shall give notice, not less section shall not be deemed to apply to
than ten days in advance, and a hearing, workmen's compensation insurance.
to the rating organization, or to the
insurer, which filed the same. Such order Sec. 361. No insurance company doing
shall not affect any contract or policy business in the Philippines or any agent
made or issued prior to the expiration of thereof, no insurance broker, and no
such sixty day period. employee or other representative of any
such insurance company, agent, or
Sec. 356. No member or subscriber of a broker, shall make, procure or negotiate
rating organization, and no insurance any contract of insurance or agreement
company doing business in the as to policy contract, other than is
Philippines, or agent, employee or other plainly expressed in the policy or other
representative of such company, and no written contract issued or to be issued
insurance broker shall charge or demand as evidence thereof, or shall directly or
a rate or receive a premium which indirectly, by giving or sharing a
deviates from the rates, rating plans, commission or in any manner
classifications, schedules, rules and whatsoever, pay or allow or offer to pay
standards, made and last filed by a or allow to the insured or to any
rating organization or by or on behalf of employee of such insured, either as an
the insurance company, or shall issue or inducement to the making of such
make any policy or contract involving insurance or after such insurance has
violation of such rate filings. been effected, any rebate from the
Sec. 357. Notwithstanding any other premium which is specified in the
provisions of this title, upon the written policy, or any special favor or advantage
application of the insurer, stating his in the dividends or other benefits to
reasons therefore, filed with and accrue thereon, or shall give or offer to
approved by the Commissioner, a rate in give any valuable consideration or
excess of that provided by a filing inducement of any kind, directly or
otherwise applicable may be used on any indirectly, which is not specified in such
specific risk. policy or contract of insurance; nor shall
Sec. 358. Whenever the Commissioner any such company, or any agent thereof,
shall determine, after notice and a as to any policy or contract of insurance
hearing, that the rates charged or filed issued, make any discrimination against
on any class of risks are excessive, any Filipino in the sense that he is given
discriminatory, inadequate or less advantageous rates, dividends or
other policy conditions or privileges payment of the fees therefore. (As amended
than are accorded to other nationals by Presidential Decree No. 1455).
because of his race. Chapter V
Sec. 362. No insurance company doing SECURITY FUND
business in the Philippines, and no Sec. 365. There is hereby created a fund
officer, director, or agent thereof, and no to be known as the "Security
insurance broker or any other person, Fund" which shall be used in the
partnership or corporation shall issue or payment of allowed claims against an
circulate or cause or permit to be issued insurance company authorized to
or circulated any literature, illustration, transact business in
circular or statement of any sort the Philippines remaining unpaid by
misrepresenting the terms of any policy reason of the solvency of such company.
issued by any insurance company of the The said Fund may also be used to
benefits or advantages promised thereby, reinsure the policy of the insolvent
or any misleading estimate of the insurer in any solvent insurer authorized
dividends or share of surplus to be to do business in the Philippines as
received thereon, or shall use any name provided in section two hundred forty-
or title of any policy or class of policies nine. In the event of national emergency
misrepresenting the true nature thereof; or calamity, the Fund may likewise be
nor shall any such company or agent used to pay insured claims which
thereof, or any other person, partnership otherwise would not be compensable
or corporation make any misleading under the provisions of the policy. No
representation or incomplete payment from the Security Fund shall,
comparison of policies to any person however, be made to any person who
insured in such company for the purpose owns or controls ten per centum or more
of inducing or tending to induce such of the voting shares of stock of the
person to lapse, forfeit, or surrender his insolvent insurer and no payment on any
said insurance. one claim shall exceed twenty thousand
Sec. 363. If the Commissioner, after pesos.
notice and hearing, finds that any Sec. 366. Such Fund shall consist of all
insurance company, rating organization, payments made to the Fund by
agent, broker or other person has insurance companies authorized to do
violated any of the provisions of this business in the Philippines. Payments
title, it shall order the payment of a fine made by life insurance companies shall
not to exceed five hundred pesos for be treated separately from those made
each such offense, and shall immediately by non-life insurance companies and the
revoke the license issued to such corresponding fund shall be called "Life
insurance company, rating organization, Account" and "Non-Life Account",
agent, or broker. The issuance, respectively, and shall be held and
procurement or negotiation of a single administered as such by the
policy or contract of insurance shall be Commissioner in accordance with the
deemed a separate offense. provisions of this title. The "Life
Title 8 Account" shall be utilized exclusively for
PROVISION COMMON TO AGENTS, disbursements that refer to life
BROKERS, insurance companies, while the "Non-Life
AND ADJUSTERS Account" shall be utilized exclusively for
disbursements that refer to non-life
Sec. 364. A license issued to a
insurance companies.
partnership, association or corporation
to act as an insurance agent, general Sec. 367. All insurance companies doing
agent, insurance broker, reinsurance business in the Philippines shall
broker, or adjuster shall authorize only contribute to the Security Fund, Life or
the individual named in the license who Non-Life Account, as the case may be, on
shall qualify therefor as though an or before the fifteenth day of June,
individual licensee. The Commissioner nineteen hundred and seventy-five, the
shall charge, and the licensee shall pay, aggregate amount of five million pesos
a full additional license fee as to each for each Account. The contributions of
respective individual so named in such the life insurance companies and of the
license in excess of one. non-life insurance companies shall be in
Licenses and certificates of registration direct proportion to the ratio between a
issued under the provisions of this particular life insurance company or a
chapter may be renewed by the filing of particular non-life insurance company's
notices of intention on forms to be net worth and the aggregate net worth of
prescribed by the Commissioner and all life insurance companies or all non-
life insurance companies, as the case provided by this title, plus one per
may be, as shown in their latest financial centum of such amount for each month
statements approved by the of delay or fraction thereof, after the
Commissioner. This proportion applied expiration of the first month of such
to the five million pesos shall be the delay, but the Commissioner, if satisfied
contribution of a particular company to that the delay was excusable, may remit
the corresponding Account of the all or any part of such penalty. The
Security Fund. Commissioner, in his discretion, may
The amount of five million pesos in each suspend or revoke the certificate of
Account shall be in the form of a authority to do business in
revolving trust fund. The respective the Philippines of any insurance
contributions of the companies shall company which shall fail to comply with
remain as admitted assets in their books this title or to pay any penalty imposed
and any disbursement therefrom shall be in accordance therewith.
deducted proportionately from the Sec. 369. The Accounts created by this
contributions of each company which title shall be separate and apart from
will be allowed as deductions for income each other and from any other fund. The
tax purposes. Any earnings of the Fund Treasurer of the Philippines shall be the
shall be turned over to the contributing custodian of the Life Account and Non-
companies in proportion to their Life Account of the Security Fund; and
contributions. all disbursements from any Account
In the case of disbursements of funds shall be made by the Treasurer of the
from the Fund as provided in the Philippines upon vouchers signed by the
foregoing paragraph, the life and non-life Commissioner or his deputy, as
companies, as the case may be, shall hereinafter provided. The moneys of said
replenish the amount disbursed in direct Account may be invested by the
proportion to the individual company's Commissioner only in bonds or other
net worth and the aggregate net worth of evidences of debt of the government of
the life or non-life companies, as the the Philippines or its political
case may be. However, in no case shall subdivisions or instrumentalities. The
the Fund exceed the aggregate amount Commissioner may sell any of the
of ten million pesos, or five million securities in which an Account is in
pesos for each Account. vested, if advisable, for its proper
Should the Fund, Life of Non-Life administration or in the best interest of
such Account.
Account, as the case may be, be
inadequate for a disbursement as Sec. 370. Payments from either the Life
provided for, then the Life or Non-Life Insurance Account or Non-Life Account,
companies, as the case may be, shall as the case may be, shall be made by the
contribute to the Fund their respective Treasurer of the Philippines to the
shares in the proportion previously Commissioner, upon the authority of
mentioned. appropriate certificate filed with him by
the Commissioner acting in such
Sec. 368. The Commissioner may adopt,
amend, and enforce all reasonable rules capacity.
and regulations necessary for the proper Sec. 371. The Commissioner may, in his
administration of the Fund and of the discretion, designate or appoint a duly
Accounts. In the event any insurer shall authorized representative or
fail to make any payment required by representatives to appear and defend
this title, or that any payment made is before any court or other body or official
incorrect, he shall have full authority to having jurisdiction any or all actions or
examine all the books and records of the proceedings against principals or
insurer for the purpose of ascertaining assureds on insurance policies or
the facts and shall determine the correct contracts issued to them where the
amount to be paid and may proceed in insurer has become insolvent or unable
any court of competent jurisdiction to to meet its insurance obligations. The
recover for the benefit of the Fund or of Commissioner shall have, as of the date
the Account concerned any sum shown of insolvency of such insurer or as of the
to be due upon such examination and date of its inability meet its insurance
determination. Any insurer which fails obligations, only the rights which such
to make any payment to the Fund or to insurer would have had if it had not
the Account concerned when due, shall become insolvent or unable to meet its
thereby forfeit to said Fund or Account insurance obligations. For the purpose of
concerned a penalty of five per centum this title the Commissioner shall have
of the amount determined to be due as power to employ such counsel, clerks
and assistants as he may deem death or bodily injuries and damaged to
necessary. property arising from motor vehicle
Sec. 372. The expense of administering accidents. (As amended by Presidential Decree No. 1455
and 1814).
an Account shall be paid out of the
Account concerned. The Commissioner Sec. 374. It shall be unlawful for any
shall serve as administrator of the Fund land transportation operator or owner of
and of the Accounts without additional a motor vehicle to operate the same in
compensation, but may be allowed and the public highways unless there is in
paid from the Account concerned force in relation thereto a policy of
expenses incurred in the performance of insurance or guaranty in cash or surety
his duties in connection with said bond issued in accordance with the
Account. The compensation of those provisions of this chapter to indemnify
persons employed payable from the the death, bodily injury, and/or damage
Account concerned. The Commissioner to property of a third-party or passenger,
shall include in his annual report to the as the case may be, arising from the use
Secretary of Finance a statement of the thereof. (As amended by Presidential Decree No. 1455
expenses of administration of the Fund and 1814).
and of the Life Account and Non-Life Sec. 375. The Commissioner shall
Account for the preceding year. furnish the Land Transportation
Chapter VI Commissioner with a list of insurance
COMPULSORY MOTOR VEHICLE companies authorized to issue the policy
LIABILITYINSURANCE of insurance or surety bond required by
this chapter. (As amended by Presidential Decree No.
Sec. 373. For purposes of this chapter: 1814).
(a) "Motor Vehicle" is any vehicle as
Sec. 376. The Land Transportation
defined in section three, paragraph (a) of
Commission shall not allow the
Republic Act Numbered Four Thousand
registration or renewal of registration of
One Hundred Thirty-Six, Otherwise
any motor vehicle without first requiring
known as the "Land Transportation and
from the land transportation operator or
Traffic Code."
motor vehicle owner concerned the
(b) "Passenger" is any fare paying person presentation and filing of a
being transported and conveyed in and substantiating documentation in a form
by a motor vehicle for transportation of approved by the Commissioner
passengers for compensation, including evidencing that the policy of insurance
persons expressly authorized by law or or guaranty in cash or surety bond
by the vehicle's operator or his agents to required by this chapter is in effect. (As
ride without fare. amended by Presidential Decree No. 1455).
(c) "Third-Party" is any person other than Sec. 377. Every land transportation
a passenger as defined in this section operator and every owner of a motor
and shall also exclude a member of the vehicle shall, before applying for the
household, or a member of the family registration or renewal of registration of
within the second degree of any motor vehicle, at his option, either
consanguinity or affinity, of a motor secure an insurance policy or surety
vehicle owner or land transportation bond issued by any insurance company
operator, as likewise defined herein, or authorized by the Commissioner or
his employee in respect of death, bodily make a cash deposit in such amount as
injury, or damage to property arising out herein required as limit of liability for
of and in the course of employment. (As purposes specified in section three
amended by Presidential Decree No. 1814 and 1981). hundred seventy-four.
(d) "Owner" or "motor vehicle (1) In the case of a land transportation
owner" means the actual legal owner of a operator, the insurance guaranty in cash
motor vehicle, in whose name such or surety bond shall cover liability for
vehicle is duly registered with the Land death or bodily injuries of third-parties
Transportation Commission; and/or passengers arising out of the use
(e) "Land transportation of such vehicle in the amount not less
operator" means the owner or owners of than twelve thousand pesos per
motor vehicles for transportation of passenger or third party and an amount,
passengers for compensation, including for each of such categories, in any one
school buses; accident of not less than that set forth
in the following scale:
(f) "Insurance policy" or "Policy" refers to
a contract of insurance against (a) Motor vehicles with an
passenger and thirty-party liability for authorized capacity of twenty-six
 or more passengers: Fifty thousand pesos;
thousand pesos; (d) Vehicles with
(b) Motor vehicles with an an unladen weight over
authorized capacity of from twelve 3,930 kilos : Fifty
to twenty-five passengers: Forty thousand pesos.
thousand pesos; The Commissioner may, if warranted,
(c) Motor vehicles with an set forth schedule of indemnities for the
authorized capacity of from six to payment of claims for death or bodily
eleven passengers: Thirty injuries with the coverages set forth
thousand pesos; herein. (As amended by Presidential Decree No. 1455 and
1814).
(d) Motor vehicles with an
Sec. 378. Any claim for death or injury
authorized capacity of five or less
to any passenger or third party pursuant
passengers: Five thousand pesos
to the provisions of this chapter shall be
multiplied by the authorized
paid without the necessity of proving
capacity.
fault or negligence of any kind; Provided,
Provided, however, That such cash That for purposes of this section:
deposit made to, or surety bond posted
(i) The total indemnity in respect
with, the Commissioner shall be resorted
of any person shall not exceed five
to by him in cases of accidents the
thousand pesos;
indemnities for which to third-parties
and/or passengers are not settled (ii) The following proofs of loss,
accordingly by the land transportation when submitted under oath, shall
operator and, in that event, the said be sufficient evidence to
cash deposit shall be replenished or such substantiate the claim:
surety bond shall be restored with sixty
days after impairment or expiry, as the (a) Police report of
case may be, by such land transportation accident; and
operator, otherwise, he shall secure the
insurance policy required by this (b) Death certificate and
chapter. The aforesaid cash deposit may evidence sufficient to
be invested by the Commissioner in establish the proper
readily marketable government bonds payee; or
and/or securities. (c) Medical report and
(2) In the case of an owner of a motor evidence of medical or
vehicle, the insurance or guaranty in hospital disbursement in
cash or surety bond shall cover liability respect of which refund is
for death or injury to third parties in an claimed;
amount not less than that set forth in
the following scale in any one accident: (iii) Claim may be made against
I. Private Cars one motor vehicle only. In the
case of an occupant of a vehicle,
claim shall lie against the insurer
(a) Bantam : Twenty of the vehicle in which the
thousand pesos; occupant is riding, mounting or
(b) Light : Twenty dismounting from. In any other
thousand pesos; case, claim shall lie against the
(c) Heavy : Thirty insurer of the directly offending
thousand pesos; vehicle. In all cases, the right of
the party paying the claim to
II. Other Private Vehicles recover against the owner of the
vehicle responsible for the
accident shall be maintained.
(a) Tricycles, motorcycles,
and scooters : Twelve Sec. 379. No land transportation
thousand pesos; operator or owner of motor vehicle shall
(b) Vehicles with be unreasonably denied the policy of
an unladen weight of insurance or surety bond required by
2,600 kilos or less : this chapter by the insurance companies
Twenty thousand pesos; authorized to issue the same, otherwise,
(c) Vehicles with the Land Transportation Commission
an unladen weight of shall require from said land
between 2,601 kilos and transportation operator or owner of the
3,930 kilos : Thirty vehicle, in lieu of a policy of insurance
or surety bond, a certificate that a cash be no need of issuing a new policy until
deposit has been made with the the next date of registration or renewal
Commissioner in such amount required of registration of such vehicle, and
as limits of indemnity in section three provided that the insurance company
hundred seventy-seven to answer for the shall agree to continue the policy, such
passenger and/or third-party liability of change of ownership or such change of
such land transportation operator or the engine shall be indicated in a
owner of the vehicle. corresponding endorsement by the
No insurance company may issue the insurance company concerned, and a
policy of insurance or surety bond signed duplicate of such endorsement
required under this chapter unless so shall, within a reasonable time, be filed
authorized under existing laws. with the Land Transportation
Commission.
The authority to engage in the casualty
and/or surety lines of business of an Sec. 383. In the settlement and payment
insurance company that refuses to issue of claims, the indemnity shall not be
or renew, without just cause, the availed of by any accident victim or
insurance policy or surety bond therein claimant as an instrument of enrichment
required shall be withdrawn by reason of an accident, but as an
immediately. (As amended by Presidential Decree No. assistance or restitution insofar as can
1455 and 1814). fairly be ascertained.
Sec. 380. No cancellation of the policy Sec. 384. Any person having any claim
shall be valid unless written notice upon the policy issued pursuant to this
thereof is given to the land Chapter shall, without any unnecessary
transportation operator or owner of the delay, present to the insurance company
vehicle and to the Land Transportation concerned a written notice of claim
Commission at least fifteen days prior to setting forth the nature, extent and
the intended effective date thereof. duration of the injuries sustained as
Upon receipt of such notice, the Land certified by a duly licensed physician.
Transportation Commission, unless it Notice of claim must be filed within six
receives evidence of a new valid months from date of accident, otherwise,
insurance or guaranty in cash or surety the claim shall be deemed waived.
bond as prescribed in this chapter, or an Action or suit for recovery of damage
endorsement of revival of the cancelled due to loss or injury must be brought, in
one, shall order the immediate proper cases, with the Commissioner or
confiscation of the plates of the motor the Courts within one year from denial
vehicle covered by such cancelled policy. of the claim, otherwise, the claimant's
The same may be re-issued only upon right of action shall prescribe. (As amended
by Presidential Decree 1814 and Batas Pambansa Blg. 874).
presentation of a new insurance policy
or that a guaranty in cash or surety band Sec. 385. The insurance company
has been made or posted with the concerned shall forthwith ascertain the
Commissioner and which meets the truth and extent of the claim and make
requirements of this chapter, or an payment within five working days after
endorsement or revival of the cancelled reaching an agreement. If no agreement
one. (As amended by Presidential Decree No. 1455). is reached, the insurance company shall
Sec. 381. If the cancellation of the pay only the "no-fault" indemnity
policy or surety bond is contemplated by provided in section three hundred
the land transportation operator or seventy-eight without prejudice to the
claimant from pursuing his claim
owner of the vehicle, he shall, before the
further, in which case, he shall not be
policy or surety bond ceases to be
required or compelled by the insurance
effective, secure a similar policy of
insurance or surety bond to replace the company to execute any quit claim or
policy or surety bond to be cancelled or document releasing it from liability
make a cash deposit in sufficient under the policy of insurance or surety
amount with the Commissioner and bond issued. (As amended by Presidential Decree No.
1455).
without any gap, file the required
documentation with the Land In case of any dispute in the
Transportation Commission, and notify enforcement of the provisions of any
the insurance company concerned of the policy issued pursuant to this chapter,
cancellation of its policy or surety the adjudication of such dispute shall be
bond.(As amended by Presidential Decree No. 1455). within the original and exclusive
jurisdiction of the Commissioner,
Sec. 382. In case of change of ownership
subject to the limitations provided in
of a motor vehicle, or change of the
section four hundred sixteen.
engine of an insured vehicle, there shall
Sec. 386. It shall be unlawful for a land any society, association, or corporation
transportation operator or owner of with such mutual benefit features and
motor vehicle to require his or its which shall be carried out purely from
drivers or other employees to contribute voluntary contributions collected not
in the payment of premiums. regularly and or no fixed amount from
Sec. 387. No government office or whomsoever may contribute, shall be
agency having the duty of implementing known as a mutual benefit association
the provisions of this chapter nor any within the intent of this Code.
official or employee thereof shall act as Any society, association, or corporation
agent in procuring the insurance policy principally organized as labor union shall
or surety bond provided for herein. The be governed by the Labor Code
commission of an agent procuring the notwithstanding any mutual benefit
said policy or bond shall in no case feature provisions in its charter as
exceed ten per centum of the amount of incident to its organization.
the premiums therefore. In no case shall a mutual benefit
Sec. 388. Any land transportation association be organized and authorized
operator or owner of motor vehicle or to transact business as a charitable or
any other person violating any of the benevolent organization, and whenever
provisions of the preceding sections it has this feature as incident to its
shall be punished by a fine of not less existence, the corresponding charter
than five hundred pesos but not more provision shall be revised to conform
than one thousand pesos and/or with the provision of this section.
imprisonment for not more than six Mutual benefit association, already
months. The violation of section three licensed to transact business as such on
hundred seventy-seven by a land the date this Code becomes effective,
transportation operator shall be a having charitable or benevolent feature
sufficient cause for the revocation of the shall abandon such incidental purpose
certificate of public convenience issued upon effectivity of this Code if they
by the Board of Transportation covering desire to continue operating as such
the vehicle concerned. mutual benefit associations. (As amended by
Presidential Decree No. 1455).
Sec. 389. Whenever any violation of the
Sec. 391. A mutual benefit association,
provisions of this chapter is committed
before it may transact as such, must
by a corporation or association, or by a
first secure a license from the
government office or entity, the
Commissioner. The application for such
executive officer or officers of said
license shall be filed with the
corporation, association or government
Commissioner together with certified
office or entity who shall have knowingly
true copies of the articles of
permitted, or failed to prevent, said
incorporation or the constitution and by-
violation shall be held liable as
laws of the association, and all
principals.
amendments thereto, and such other
Chapter VII documents or testimonies as the
MUTUAL BENEFIT ASSOCIATIONS AND Commissioner may require.
TRUSTS FOR CHARITABLE USES
No license shall be granted to a mutual
Title 1 benefit association until the
MUTUAL BENEFIT ASSOCIATIONS Commissioner shall have been satisfied
Sec. 390. Any society, association or by such examination as may make and
corporation, without capital stock, such evidence as he may require that
formed or organized not for profit but the association is qualified under
mainly for the purpose of paying sick existing laws to operate and transact
benefits to members, or of furnishing business as such. The Commissioner
financial support to members while out may refuse to issue a license to any
of employment, or of paying to relatives mutual benefit association if, in his
of deceased members of fixed or any sum judgment, such refusal will best promote
of money, irrespective of whether such the interest of the members of such
aim or purpose is carried out by means association and of the people of this
of fixed dues or assessments collected country. Any license issued shall expire
regularly from the members, or of on the last day of June of the year
providing, by the issuance of certificates following its issuance and, upon proper
of insurance, payment of its members of application, may be renewed if the
accident or life insurance benefits out of association is continuing to comply with
such fixed and regular dues or existing laws, rules and regulations,
assessments, but in no case shall include orders, instructions, rulings and
decisions of the Commissioner. Every Such certificates, together with the
association receiving any such license articles of incorporation of the
shall be subject to the supervision of the association or its constitution and by-
Commissioner: Provided, That no such laws, and all existing laws as may be
license shall be granted to any such pertinent shall constitute the
association if such association has no agreement, as of the date of its issuance,
actuary. between the association and the
All mutual benefit association existing member. The membership certificate
and licensed as such under the shall be in a form previously approved by
provisions of Article Eight, Chapter the Commissioner.
Forty-One of the Revised Administrative Sec. 394. A mutual benefit association
Code, as amended by Act No. 3612, shall, may, by reinsurance agreement, cede in
upon effectivity of this Code, surrender whole or in part any individual risk or
their respective licenses to the risks under certificates of insurance
Commissioner and apply for new licenses issued by it, only to a life insurance
under the provisions of this code if they company authorized to transact business
still desire to continue operating as such or to a professional reinsurer authorized
mutual benefit associations. to accept life risks in the
Sec. 392. No mutual benefit association Philippines: Provided, That copy of the
shall be issued a license to operate as draft of such reinsurance agreement
such unless it has constituted and shall be submitted to the Commissioner
established a Guaranty Fund by for his approval. The association may
depositing with the Commissioner an take credit for the reserves on such
initial minimum amount of ten thousand ceded risks to the extent reinsured.
pesos in cash, or in government Sec. 395. The constitution or by-laws of
securities with a total value equal to a mutual benefit association must
such amount, to answer for any valid distinctly state the purpose for which
benefit claim of any of its members. dues and/or assessments are made and
All moneys received by the collected and the portion thereof which
Commissioner for this purpose must be may be used for expenses.
deposited by him in interest-bearing Death benefit and other relief funds shall
deposits with any bank or banks be created and used exclusively for
authorized to transact business in paying benefits due the members under
the Philippinesfor the account of the their respective membership certificates.
particular association constituting the A general fund shall likewise be created
Guaranty Fund. and used for expenses of administration
Any accrual to such fund, be it interest of the association.
earned or dividend additions on moneys Sec. 396. Every outstanding membership
or securities so deposited, may, with the certificate must have, after three full
prior approval of the Commissioner, be years of being continuously in force, an
withdrawn by the association if there is equity value equivalent to at least
no pending benefit claim against it, fifty per centum of the total membership
including interest thereon or dividend dues collected thereon.
additions thereto. Sec. 397. Every mutual benefit
The Commissioner, prior to or after association must accumulate and
licensing a mutual benefit association, maintain, out of the periodic dues
may require such association to increase collected from its members, sufficient
its Guaranty Fund from the initial reserves for the payment of claims or
minimum amount required to an amount obligations for which it shall hold funds
equal to at least ten per centum of its in securities satisfactory to the
assets, if such assets exceed one Commissioner consisting of bonds of the
hundred thousand pesos, but in no case Government of the Philippines, or any of
shall such increase exceed the maximum its political subdivisions and
amount of capital investment required of instrumentalities, or in such other good
a domestic insurance company under securities as may be approved by the
section two hundred and three of this Commissioner.
Code. (As amended by Presidential Decree No. 1455). The reserve liability shall be established
Sec. 393. Every mutual benefit in accordance with actuarial procedures
association licensed to do business as and shall be approved by the
such shall issue membership certificates Commissioner.
to its members specifying the benefits to The articles of incorporation or the
which such members are entitled. constitution and by-laws of a mutual
benefit association must provide that if A copy of the findings of such
its reserve as to all or any class of examination, together with the
certificates becomes impaired, its board recommendations of the Commissioner,
of directors or trustees may require that shall be furnished the association for its
there shall be paid by the members to information and compliance, and the
the association the amount of the same shall be taken up immediately in
members' equitable proportion of such the meetings of the board of directors or
deficiency as ascertained by said board trustees and of the members of the
and that if the payment be not made it association.
shall stand as an indebtedness against Sec. 400. Every mutual benefit
the membership certificates of the association shall, annually on or before
defaulting members and draw interest the thirtieth day of April of each year,
not to exceed five per centum per render to the Commissioner an annual
annum compounded annually. statement in such form and details as
Sec. 398. A mutual benefit association may be prescribed by the Commissioner,
may invest such portion of its funds as signed and sworn to by the president,
shall not be required to meet pending secretary, treasurer, and actuary of the
claims and other obligations in any of association, showing the exact condition
the classes of investments or types of of its affairs on the preceding thirty-first
securities in which life insurance day of December.
companies doing business in the Sec. 401. No money, aid or benefit to be
Philippines may invest. paid, provided or tendered by any
It may also grant loans to members on mutual benefit association, shall be
the security of a pledge or chattel liable to attachment, garnishment, or
mortgage of personal properties of the other process, or be seized, taken,
borrowers, or in the absence thereof, on appropriated, or applied by any legal or
the security of the membership equitable process to pay any debt of
certificate of the borrowing members, in liability of a member or beneficiary, or
which event such loan shall become a any other person who may have a
first lien on the proceed thereof. right thereunder, either before or after
Sec. 399. The Commissioner or any of payment.
his duly designated representatives, Sec. 402. Any member of a mutual
shall have the power of visitation, audit benefit association shall have the right
and examination into the affairs, at all times to change the beneficiary or
financial condition, and methods of beneficiaries or add another beneficiary
doing business of all mutual benefit or other beneficiaries in accordance with
associations, and he shall cause such the rules and regulations of the
examination to be made at least once association unless he has expressly
every two years or whenever it may be waived this right in the membership
deemed proper and necessary. Free certificate. Every association may, under
access to the books, records and such rules as it may adopt, limit the
documents of the association shall be scope of beneficiaries and provide that
accorded to the Commissioner, to his no beneficiary shall have or obtain any
representatives, in such manner that the vested interest in the proceeds of any
Commissioner or his representatives certificate until the certificate has
may readily verify or determine the true become due and payable under the terms
affairs, financial condition, and method of the membership certificate.
of doing business of such association. In Sec. 403. Any chapter affiliate
the course of such examination, the independently licensed as a mutual
Commissioner or his duly designated benefit association may consolidate or
representatives shall have authority to merge with any other similar chapter
administer oaths and take testimony or affiliate or with the mother association.
other evidence on any matter relating to
the affairs of the association. Sec. 404. Any mutual benefit association
may be converted into and licensed as a
All minutes of the proceedings of the mutual life insurance company by
board of directors or trustees of the complying with the requirements of the
association, and those of the regular or pertinent provisions of this Code and
special meetings of the members, shall submitting the specific plan for such
be take, and a copy thereof, in English or conversion to the Commissioner for his
in Pilipino, shall be submitted to the approval. Such plan, as approved, shall
Commissioner's representatives or then be submitted to the members either
examiners in the course of such in the regular meeting or in a special
examination. meeting called for the purpose for their
adoption. The affirmative vote of at least showing, may apply with the
two-thirds of all the members shall be Commissioner for the lifting of the order
necessary in order to consider such plan and restoration or revival of the license
as adopted. so revoked or suspended.
No such conversion shall take effect Sec. 407. For failure to remove such
unless and until approved by the cause or causes which brought about the
Commissioner. suspension or revocation of the license
Sec. 405. No mutual benefit association of a mutual benefit association, the
shall be dissolved without first notifying Commissioner shall apply under this
the Commissioner and furnishing him Code for an order from the proper court
with a certified copy of the resolution to liquidate such association.
authorizing the dissolution, duly The provisions of titles fourteen and
adopted by the affirmative vote of two- fifteen, chapter three, pertaining to the
thirds of the members at a meeting appointment of a conservator and
called for that purpose, the financial proceedings upon insolvency of an
statements as of the date of the insurance company, shall, insofar as
resolution, and such other papers or practicable, apply to mutual benefit
documents as may be required by the associations.
Commissioner. Sec. 408. To secure the enforcement of
No dissolution shall proceed until and any provision under this title, the
unless approved by the Commissioner Commissioner may issue such rules,
and all proceedings in connection rulings, instructions, orders and
therewith shall be witnessed and circulars, subject to the approval of the
attested by his duly designated Secretary of Finance.
representative. Sec. 409. The violation of any provision
No mutual benefit association shall be of this title shall subject the person
officially declared as dissolved until after violating or the officer of the association
the Commissioner so certifies that all responsible therefor to a fine of not
outstanding claims against the exceeding one thousand pesos, or
association have been duly settled and imprisonment of not exceeding three
liquidated. years, or both such fine and
Sec. 406. The Commissioner shall after imprisonment, at the discretion of the
notice and hearing, have the power court.
either to suspend or revoke the licensed Title 2
issued to a mutual benefit association if TRUSTS FOR CHARITABLE USES
he finds that the association has: Sec. 410. The term "trust for charitable
(a) failed to comply with any uses", within the intent of this Code,
provision of this Code; shall include, all the real or personal
(b) failed to comply with any other properties or funds, as well as those
law or regulation obligatory upon acquired with the fruits or
it; incometherefrom or in exchange or
substitution thereof, given to or received
(c) failed to comply with any by any person, corporation, association,
order, ruling, instruction, foundation, or entity, except the
requirement, or recommendation National Government, its
of the Commissioner; instrumentalities or political
(d) exceeded its power to the subdivisions, for charitable, benevolent,
prejudice of its members; educational, pious, religious, or other
uses for the benefit of the public at large
(e) conducted its business
or a particular portion thereof or for the
fraudulently or hazardously;
benefit of an indefinite number of
(f) rendered its affairs and persons.
condition to one of insolvency; or
Sec. 411. The term "trustee" shall
(g) failed to carry out its aims and include any individual, corporation,
purposes for which it was association, foundation, or entity,
organized due to any cause. except the National Government, its
After receipt of the order from the instrumentalities or political
Commissioner suspending or revoking subdivisions, in charge of, or acting for,
the license, the association must or concerned with the administration of,
immediately exert efforts to remove the trust referred to in the section
such cause or causes which brought immediately preceding and with the
about the order, and, upon proper proper application of trust property.
Sec. 412. The term "trust property" shall regulation, or ruling of the Insurance
include all real or personal properties or Commissioner, or any commission or
funds pertaining to the trust as well as irregularities, and/or conducting
those acquired with the fruits or business in an unsafe or unsound
income therefrom or in exchange or manner as may be determined by the
substitution thereof. Insurance Commissioner, the following:
Sec. 413. All trustees shall, before (a) fines not in excess of five
entering in the performance of the hundred pesos a day; and
duties of their trust, obtain a certificate (b) suspension, or after due
of registration from the Commissioner. hearing, removal of directors
Trustees who are already discharging the and/or officers and/or agents.
duties of their trust on the date this
Code becomes effective may continue as Sec. 416. The Commissioner shall have
such, subject to the provisions of this the power to adjudicate claims and
Code. complaints involving any loss, damage or
All provisions of this Code governing liability for which in insurer may be
mutual benefit associations and such answerable under any kind of policy or
other provisions herein, whenever contract of insurance, or for which such
practicable and necessary, shall be insurer may be liable under a contract
applicable to trusts for charitable uses. of suretyship, or for which
a reinsurer may be sued under any
Chapter VIII contract of reinsurance it may have
THE INSURANCE COMMISSIONER entered into; or for which a mutual
Title 1 benefit association may be held liable
ADMINISTRATIVE AND ADJUDICATORY under the membership certificates it has
POWERS issued to its members, where the
amount of any such loss, damage or
Sec. 414. The Insurance Commissioner
liability, excluding interest, cost and
shall have the duty to see that all laws
attorney's fees, being claimed or sued
relating to insurance, insurance
upon any kind of insurance, bond,
companies and other insurance matters,
reinsurance contract, or membership
mutual benefit associations, and trusts certificate does not exceed in any single
for charitable uses are faithfully claim one hundred thousand pesos.
executed and to perform the duties
imposed upon him by this Code, and The insurer or surety may, in the same
shall, notwithstanding any existing laws action file a counterclaim against the
to the contrary, have sole and exclusive insured or the obligee.
authority to regulate the issuance and The insurer or surety may also file a
sale of variable contracts as defined in cross-claim against a party for any claim
section two hundred thirty-two and to arising out of the transaction or
provide for the licensing of persons occurrence that is the subject matter of
selling such contracts, and to issue such the original action or of a counterclaim
reasonable rules and regulations therein.
governing the same. With leave of the Commissioner, an
The Commissioner may issue such insurer or surety may file a third-party
rulings, instructions, circulars, orders complaint against its reinsurers for
and decision as he may deem necessary indemnification, contribution,
to secure the enforcement of the subrogation or any other relief, in
provisions of this Code, subject to the respect of the transaction that is the
approval of the Secretary of Finance. subject matter of the original action
Except as otherwise specified, decisions filed with the Commissioner.
made by the Commissioner shall The party filing an action pursuant to
be appealable to the Secretary of the provisions of this section thereby
Finance. submits his person to the jurisdiction of
Sec. 415. In addition to the the Commissioner. The Commissioner
administrative sanctions provided shall acquire jurisdiction over the person
elsewhere in this Code, the Insurance of the impleaded party or parties in
Commissioner is hereby authorized, at accordance with and pursuant to the
his discretion, to impose upon the provisions of the Rules of Court.
insurance companies, their directors The authority to adjudicate granted to
and/or officers and/or agents, for any the Commissioner under this section
willful failure or refusal to comply with, shall be concurrent with that of the civil
or violation of any provision of this courts, but the filing of a complaint with
Code, or any order, instruction, the Commissioner shall preclude the
civil courts from taking cognizance of a of any hearing taken by a stenographer
suit involving the same subject matter. appointed by the Commissioner, being
Any decision, order or ruling rendered by certified by such stenographer to be a
the Commissioner after a hearing shall true and correct transcript of the
have the force and effect of a judgment. testimony on this hearing of a particular
Any party may appeal from a final order, witness, or of a specific proof thereof,
ruling or decision of the Commissioner carefully compared by him from his
by filing with the Commissioner within original notes, and to be a correct
thirty days from receipt of copy of such statement of evidence and proceeding
order, ruling or decision a notice of had in such hearing so purporting to be
appeal to the Intermediate Appellate taken and subscribed, may be received
Court in the manner provided for in the as evidence by the Commissioner and by
Rules of Court for appeals from the any court with the same effect as if such
Regional Trial Court to the Intermediate stenographer were present and testified
Appellate Court. (As amended by to the facts so certified. (As amended by
Batas Pambansa Blg. 874). Presidential Decree No. 1455).
As soon as a decision, order or ruling has Title 2
become final and executory, the FEES AND OTHER SOURCES OF FUNDS
Commissioner shall motu proprio or on Sec. 417. (1) For the issuance or renewal
motion of the interested party, issue a of certificates of authority, licenses and
writ of execution requiring the sheriff or certificates of registration, pursuant to
the proper officer to whom it is directed pertinent provisions of this Code, the
to execute said decision, order or award, Commissioner shall collect and receive
pursuant to Rule thirty-nine of the Rules fees which shall be not less than the
of Court. following:
For the purpose of any proceeding under
this section, the Commissioner, or any For each certificate of authority
officer thereof designated by him, issued to an insurance company
empowered to administer oaths and doing business in the Philippines,
affirmation, subpoena witnesses, compel two hundred pesos.
their attendance, take evidence, and For each special certificate of
require the production of any books, authority issued to a servicing
papers, documents, or contracts or other insurance company, one hundred
records which are relevant or material to pesos.
the inquiry. In case of contumacy by, or
For each license issued to a
refusal to obey a subpoena issued to any
general agent of an insurance
person, the Commissioner may invoke
company, fifty pesos.
the aid of any court of first instance
within the jurisdiction of which such For each license issued to an
proceeding is carried on, where such insurance agent, twenty-five
person resides or carries on his own pesos.
business, in requiring the attendance For each license issued to an
and testimony of witnesses and the agent of variable contract policy,
production of books, papers, documents, twenty-five pesos.
contracts or other records. And such
court may issue an order requiring such For each license issued to an
person to appear before the insurance broker, one hundred
Commissioner, or officer designated by pesos.
the Commissioner, there to produce For each license issued
records, if so ordered or to give to an reinsurance broker, one
testimony touching the matter in hundred pesos.
question. Any failure to obey such order For each license issued to an
of the court may be published by such insurance adjuster, one hundred
court as a contempt thereof. pesos.
A full and complete record shall be kept For each certificate of registration
of all proceedings had before the issued to an actuary, fifty pesos.
commissioner, or the officers thereof
designated by him, and all testimony For each certificate of registration
shall be taken down and transcribed by a issued to a resident agent, fifty
stenographer appointed by the pesos.
Commissioner. For each license issued to a rating
A transcribed copy of the evidence and organization, one hundred pesos.
proceeding, or any specific part thereof,
 For each certificate of registration (d) Eight million pesos or more but
issued to a non-life company less than ten million pesos, One
underwriter, fifty pesos. thousand six hundred pesos;
For each license issued to a (e) Ten million pesos or more, Two
mutual benefit association, ten thousand pesos;
pesos. Provided, That if the said
For each certificate of registration examination is made in places
issued to a trust for charitable outside the Metropolitan Manila
uses, ten pesos. area, besides these fees, the
Commissioner shall require of the
All certificates of authority and all other company examined the payment
licenses, as well as all certificates of of the actual and necessary
registration, issued to any person, traveling and subsistence
partnership, association or corporation expenses of the examiner or
under the pertinent provisions of this examiners concerned.
Code for which no expiration date has
been prescribed, shall expire on the last For the examination prescribed in
day of June of each year and shall be section three hundred ninety-nine, the
renewed annually upon application Commissioner shall collect and receive a
therefore and payment of the minimum fee of one hundred pesos from
corresponding fee, if the licensee or the mutual benefit association
holder of such license or certificate is examined: Provided, That if such
continuing to comply with all the association has total assets of more than
applicable provisions of existing laws, one hundred thousand pesos, an
and of rules, instructions, orders and additional fee of ten pesos for every fifty
decisions of the Commissioner. thousand pesos in excess thereof shall be
imposed: Provided, further, That such
(2) For the filing of the annual statement fee shall not exceed two thousand pesos.
referred to in section two hundred
twenty-three, the Commissioner shall (4) For the filing of an application to
collect and receive from the insurance withdraw from the Philippines under
company so filing a fee of five hundred title eighteen, the Commissioner shall
pesos: Provided, That a fine of one collect and receive from the foreign
hundred pesos shall be imposed and company so withdrawing a fee of one
collected by the Commissioner for each thousand pesos.
week of delay, or any fraction thereof, in (5) The Commissioner may fix and
the filing of the annual statement. collect fees or charges for documents,
For the filing of annual statement transcripts, or other materials which
referred to in section four hundred, the may be furnished by him not in excess of
Commissioner shall collect and receive reasonable cost. (As amended by Presidential Decree
No. 1455).
from the mutual benefit association so
filing a fee of ten pesos: Provided, That a Sec. 418. If the total expenses of the
fine of ten pesos shall be imposed and Insurance Commissioner for every fiscal
collected by the Commissioner for each year exceed the aggregate amount of the
week of delay, or any fraction thereof, in fees collected under the pertinent
the filing of the annual statement. provisions of this Code, the excess shall
be charged against the Insurance Fund,
(3) For the examination prescribed in
which shall hereafter be created out of
section two hundred forty-six, the
the proceeds of taxes on insurance
Commissioner shall collect and receive
premiums mentioned in section two
fees according to the amount of its total
hundred fifty-five of the National
assets, in the case of a domestic
Internal Revenue Code, as
company, or of its assets in the
amended: Provided, however, That
Philippines, in the case of a foreign
pending the creation of said Insurance
company, as follows:
Fund, the provisions of section two,
(a) Two million pesos or more but three and four of Republic Act Numbered
less than four million pesos, Four Two Hundred Seventy-Five, shall
hundred pesos; continue to remain in force and effect.
(b) Four million pesos or more but MISCELLANEOUS PROVISIONS
less than six million pesos, Eight
Sec. 419. Any person, company or
hundred pesos;
corporation subject to the supervision
(c) Six million pesos or more but and control of the Commissioner who
less than eight million pesos, One violates any provision of this Code, for
thousand two hundred pesos; which no penalty is provided, shall be
deemed guilty of a penal offense, and
upon conviction be punished by a fine
not exceeding ten thousand pesos or
imprisonment of six 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 ten thousand pesos or
imprisonment of six months, or both, at
the discretion of the court.
Sec. 420. All criminal actions for the
violation of any of the provisions of this
Code shall prescribed after three years
from the discovery of such
violation: Provided, That such actions
shall in any event prescribe after ten
years from the commission of such
violation.
Sec. 421. Any person, partnership,
association or corporation heretofore
authorized, licensed or registered by the
Insurance 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
year from the effectivity of this Code
within which to comply with the same.
Sec. 422. Except as expressly provided
by this Code, all laws or parts thereof
inconsistent with any provision of this
Code shall be deemed repealed.
Sec. 423. Should any provisions of this
Code or any part thereof be declared
invalid, the other provisions, so far as
they are separable from the invalid ones,
shall remain in force.
Sec. 424. This Code shall take effect
immediately.
DONE in the City of Manila, this 18th
day of December, in the year of Our
Lord, nineteen hundred and seventy-
four.