PRESIDENTIAL DECREE NO.

612
December 18, 1974
ORDAINING AND INSTITUTING AN INSURANCE CODE OF THE PHILIPPINES

I, Ferdinand E. Marcos, President of the Philippines, by virtue of the powers in

me vested by the Constitution, do hereby decree and order the
following:chanroblesvirtuallawlibrary
GENERAL PROVISIONS
Sec. 1. This Decree shall be known as "The Insurance Code".
Sec. 2. Whenever used in this Code, the following terms shall have the
respective meanings hereinafter set forth or indicated, unless the context
otherwise requires:chanroblesvirtuallawlibrary
(1) A "contract of insurance" is an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or liability arising from
an unknown or contingent event.
A contract of suretyship shall be deemed to be an insurance contract, within the
meaning of this Code, only if made by a surety who or which, as such, is doing
an insurance business as hereinafter provided.
(2) The term "doing an insurance business" or "transacting an insurance
business",
within
the
meaning
of
this
Code,
shall
include:chanroblesvirtuallawlibrary
(a) making or proposing to make, as insurer, any insurance contract;
(b) making or proposing to make, as surety, any contract of suretyship as a
vocation and not as merely incidental to any other legitimate business or activity
of the surety;
(c) doing any kind of business, including a reinsurance business, specifically
recognized as constituting the doing of an insurance business within the
meaning of this Code;
(d) doing or proposing to do any business in substance equivalent to any of the
foregoing in a manner designed to evade the provisions of this Code.
In the application of the provisions of this Code the fact that no profit is derived
from the making of insurance contracts, agreements or transactions or that no
separate or direct consideration is received therefor, shall not be deemed
conclusive to show that the making thereof does not constitute the doing or
transacting of an insurance business.
(3) As used in this code, the term "Commissioner" means the "Insurance
Commissioner". chanrobles virtual law library
Chapter 1
THE CONTRACT OF INSURANCE
Title 1
WHAT MAY BE INSURED
Sec. 3. Any contingent or unknown event, whether past or future, which may

damnify a person having an insurable interest, or create a liability against him,

may be insured against, subject to the provisions of this chapter.
The consent of the husband is not necessary for the validity of an insurance
policy taken out by a married woman on her life or that of her children.
Any minor of the age of eighteen years or more, may, notwithstanding such
minority, contract for life, health and accident insurance, with any insurance
company duly authorized to do business in the Philippines, provided the
insurance is taken on his own life and the beneficiary appointed is the minor's
estate or the minor's father, mother, husband, wife, child, brother or sister.
The married woman or the minor herein allowed to take out an insurance policy
may exercise all the rights and privileges of an owner under a policy.
All rights, title and interest in the policy of insurance taken out by an original
owner on the life or health of a minor shall automatically vest in the minor upon
the death of the original owner, unless otherwise provided for in the policy.
Sec. 4. The preceding section does not authorize an insurance for or against the
drawing of any lottery, or for or against any chance or ticket in a lottery drawing
a prize.
Sec. 5. All kinds of insurance are subject to the provisions of this chapter so far
as the provisions can apply.
Title 2
PARTIES TO THE CONTRACT
Sec. 6. Every person, partnership, association, or corporation duly authorized to
transact insurance business as elsewhere provided in this code, may be an
insurer.
Sec. 7. Anyone except a public enemy may be insured.
Sec. 8. Unless the policy otherwise provides, where a mortgagor of property
effects insurance in his own name providing that the loss shall be payable to the
mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is
deemed to be upon the interest of the mortgagor, who does not cease to be a
party to the original contract, and any act of his, prior to the loss, which would
otherwise avoid the insurance, will have the same effect, although the property
is in the hands of the mortgagee, but any act which, under the contract of
insurance, is to be performed by the mortgagor, may be performed by the
mortgagee therein named, with the same effect as if it had been performed by
the mortgagor.
Sec. 9. If an insurer assents to the transfer of an insurance from a mortgagor to
a mortgagee, and, at the time of his assent, imposes further obligation on the
assignee, making a new contract with him, the act of the mortgagor cannot
affect the rights of said assignee.
Title 3
INSURABLE INTEREST
Sec. 10. Every person has an insurable interest in the life and
health:chanroblesvirtuallawlibrary

(a) Of himself, of his spouse and of his children;

(b) Of any person on whom he depends wholly or in part for education or
support, or in whom he has a pecuniary interest;
(c) Of any person under a legal obligation to him for the payment of money, or
respecting property or services, of which death or illness might delay or prevent
the performance; and
(d) Of any person upon whose life any estate or interest vested in him depends.
Sec. 11. The insured shall have the right to change the beneficiary he designated
in the policy, unless he has expressly waived this right in said policy.
Sec. 12. The interest of a beneficiary in a life insurance policy shall be forfeited
when the beneficiary is the principal, accomplice, or accessory in willfully
bringing about the death of the insured; in which event, the nearest relative of
the insured shall receive the proceeds of said insurance if not otherwise
disqualified.
Sec. 13. Every interest in property, whether real or personal, or any relation
thereto, or liability in respect thereof, of such nature that a contemplated peril
might directly damnify the insured, is an insurable interest.
Sec.
14.
An
insurable
interest
in
property
may
consist
in:chanroblesvirtuallawlibrary
(a) An existing interest;
(b) An inchoate interest founded on an existing interest; or
(c) An expectancy, coupled with an existing interest in that out of which the
expectancy arises.
Sec. 15. A carrier or depository of any kind has an insurable interest in a thing
held by him as such, to the extent of his liability but not to exceed the value
thereof.
Sec. 16. A mere contingent or expectant interest in anything, not founded on an
actual right to the thing, nor upon any valid contract for it, is not insurable.
Sec. 17. The measure of an insurable interest in property is the extent to which
the insured might be damnified by loss or injury thereof.
Sec. 18. No contract or policy of insurance on property shall be enforceable
except for the benefit of some person having an insurable interest in the
property insured.
Sec. 19. An interest in property insured must exist when the insurance takes
effect, and when the loss occurs, but not exist in the meantime; and interest in
the life or health of a person insured must exist when the insurance takes effect,
but need not exist thereafter or when the loss occurs.
Sec. 20. Except in the cases specified in the next four sections, and in the cases
of life, accident, and health insurance, a change of interest in any part of a thing
insured unaccompanied by a corresponding change in interest in the insurance,
suspends the insurance to an equivalent extent, until the interest in the thing
and the interest in the insurance are vested in the same person.
Sec. 21. A change in interest in a thing insured, after the occurrence of an injury

which results in a loss, does not affect the right of the insured to indemnity for
the loss.
Sec. 22. A change of interest in one or more several distinct things, separately
insured by one policy, does not avoid the insurance as to the others.
Sec. 23. A change on interest, by will or succession, on the death of the insured,
does not avoid an insurance; and his interest in the insurance passes to the
person taking his interest in the thing insured.
Sec. 24. A transfer of interest by one of several partners, joint owners, or
owners in common, who are jointly insured, to the others, does not avoid an
insurance even though it has been agreed that the insurance shall cease upon an
alienation of the thing insured.
Sec. 25. Every stipulation in a policy of insurance for the payment of loss
whether the person insured has or has not any interest in the property insured,
or that the policy shall be received as proof of such interest, and every policy
executed by way of gaming or wagering, is void.
Title 4
CONCEALMENT
Sec. 26. A neglect to communicate that which a party knows and ought to
communicate, is called a concealment.
Sec. 27. A concealment whether intentional or unintentional entitles the injured
party to rescind a contract of insurance. (As amended by Batasang Pambansa
Blg. 874)
Sec. 28. Each party to a contract of insurance must communicated to the other,
in good faith, all facts within his knowledge which are material to the contract
and as to which he makes no warranty, and which the other has not the means
of ascertaining.
Sec. 29. An intentional and fraudulent omission, on the part of one insured, to
communicate information of matters proving or tending to prove the falsity of a
warranty, entitles the insurer to rescind.
Sec. 30. Neither party to a contract of insurance is bound to communicate
information of the matters following, except in answer to the inquiries of the
other:chanroblesvirtuallawlibrary
(a) Those which the other knows;
(b) Those which, in the exercise of ordinary care, the other ought to know, and
of which the former has no reason to suppose him ignorant;
(c) Those of which the other waives communication;
(d) Those which prove or tend to prove the existence of a risk excluded by a
warranty, and which are not otherwise material; and
(e) Those which relate to a risk excepted from the policy and which are not
otherwise material.
Sec. 31. Materiality is to be determined not by the event, but solely by the
probable and reasonable influence of the facts upon the party to whom the
communication is due, in forming his estimate of the disadvantages of the

proposed contract, or in making his inquiries.

Sec. 32. Each party to a contract of insurance is bound to know all the general
causes which are open to his inquiry, equally with that of the other, and which
may affect the political or material perils contemplated; and all general usages
of trade.
Sec. 33. The right to information of material facts may be waived, either by the
terms of the insurance or by neglect to make inquiry as to such facts, where they
are distinctly implied in other facts of which information is communicated.
Sec. 34. Information of the nature or amount of the interest of one insured need
not be communicated unless in answer to an inquiry, except as prescribed by
section fifty-one.
Sec. 35. Neither party to a contract of insurance is bound to communicate, even
upon inquiry, information of his own judgment upon the matters in question.
Title 5
REPRESENTATION
Sec. 36. A representation may be oral or written.
Sec. 37. A representation may be made at the time of, or before, issuance of the
policy.
Sec. 38. The language of a representation is to be interpreted by the same rules
as the language of contracts in general.
Sec. 39. A representation as to the future is to be deemed a promise, unless it
appears that it was merely a statement of belief or expectation.
Sec. 40. A representation cannot qualify an express provision in a contract of
insurance, but it may qualify an implied warranty.
Sec. 41. A representation may be altered or withdrawn before the insurance is
effected, but not afterwards.
Sec. 42. A representation must be presumed to refer to the date on which the
contract goes into effect.
Sec. 43. When a person insured has no personal knowledge of a fact, he may
nevertheless repeat information which he has upon the subject, and which he
believes to be true, with the explanation that he does so on the information of
others; or he may submit the information, in its whole extent, to the insurer; and
in neither case is he responsible for its truth, unless it proceeds from an agent of
the insured, whose duty it is to give the information.
Sec. 44. A representation is to be deemed false when the facts fail to correspond
with its assertions or stipulations.
Sec. 45. If a representation is false in a material point, whether affirmative or
promissory, the injured party is entitled to rescind the contract from the time
when the representation becomes false. The right to rescind granted by this
Code to the insurer is waived by the acceptance of premium payments despite
knowledge of the ground for rescission. (As amended by Batasang Pambansa
Blg. 874).
Sec. 46. The materiality of a representation is determined by the same rules as

the materiality of a concealment.

Sec. 47. The provisions of this chapter apply as well to a modification of a
contract of insurance as to its original formation.
Sec. 48. Whenever a right to rescind a contract of insurance is given to the
insurer by any provision of this chapter, such right must be exercised previous
to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall
have been in force during the lifetime of the insured for a period of two years
from the date of its issue or of its last reinstatement, the insurer cannot prove
that the policy is void ab initio or is rescindible by reason of the fraudulent
concealment or misrepresentation of the insured or his agent.
Title 6
THE POLICY
Sec. 49. The written instrument in which a contract of insurance is set forth, is
called a policy of insurance.
Sec. 50. The policy shall be in printed form which may contain blank spaces; and
any word, phrase, clause, mark, sign, symbol, signature, number, or word
necessary to complete the contract of insurance shall be written on the blank
spaces provided therein.
Any rider, clause, warranty or endorsement purporting to be part of the contract
of insurance and which is pasted or attached to said policy is not binding on the
insured, unless the descriptive title or name of the rider, clause, warranty or
endorsement is also mentioned and written on the blank spaces provided in the
policy.
Unless applied for by the insured or owner, any rider, clause, warranty or
endorsement issued after the original policy shall be countersigned by the
insured or owner, which countersignature shall be taken as his agreement to the
contents of such rider, clause, warranty or endorsement.
Group insurance and group annuity policies, however, may be typewritten and
need not be in printed form.
Sec. 51. A policy of insurance must specify:chanroblesvirtuallawlibrary
(a) The parties between whom the contract is made;
(b) The amount to be insured except in the cases of open or running policies;
(c) The premium, or if the insurance is of a character where the exact premium
is only determinable upon the termination of the contract, a statement of the
basis and rates upon which the final premium is to be determined;
(d) The property or life insured;
(e) The interest of the insured in property insured, if he is not the absolute
owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to continue.
Sec. 52. Cover notes may be issued to bind insurance temporarily pending the
issuance of the policy. Within sixty days after the issue of the cover note, a

policy shall be issued in lieu thereof, including within its terms the identical
insurance bound under the cover note and the premium therefor.chanrobles
virtual law library
Cover notes may be extended or renewed beyond such sixty days with the
written approval of the Commissioner if he determines that such extension is not
contrary to and is not for the purpose of violating any provisions of this Code.
The Commissioner may promulgate rules and regulations governing such
extensions for the purpose of preventing such violations and may by such rules
and regulations dispense with the requirement of written approval by him in the
case of extension in compliance with such rules and regulations.
Sec. 53. The insurance proceeds shall be applied exclusively to the proper
interest of the person in whose name or for whose benefit it is made unless
otherwise specified in the policy.
Sec. 54. When an insurance contract is executed with an agent or trustee as the
insured, the fact that his principal or beneficiary is the real party in interest may
be indicated by describing the insured as agent or trustee, or by other general
words in the policy.
Sec. 55. To render an insurance effected by one partner or part-owner,
applicable to the interest of his co-partners or other part-owners, it is necessary
that the terms of the policy should be such as are applicable to the joint or
common interest.
Sec. 56. When the description of the insured in a policy is so general that it may
comprehend any person or any class of persons, only he who can show that it
was intended to include him can claim the benefit of the policy.
Sec. 57. A policy may be so framed that it will inure to the benefit of
whomsoever, during the continuance of the risk, may become the owner of the
interest insured.
Sec. 58. The mere transfer of a thing insured does not transfer the policy, but
suspends it until the same person becomes the owner of both the policy and the
thing insured.
Sec. 59. A policy is either open, valued or running.
Sec. 60. An open policy is one in which the value of the thing insured is not
agreed upon, but is left to be ascertained in case of loss.
Sec. 61. A valued policy is one which expresses on its face an agreement that the
thing insured shall be valued at a specific sum.
Sec. 62. A running policy is one which contemplates successive insurances, and
which provides that the object of the policy may be from time to time defined,
especially as to the subjects of insurance, by additional statements or
indorsements.
Sec. 63. A condition, stipulation, or agreement in any policy of insurance,
limiting the time for commencing an action thereunder to a period of less than
one year from the time when the cause of action accrues, is void.
Sec. 64. No policy of insurance other than life shall be cancelled by the insurer

except upon prior notice thereof to the insured, and no notice of cancellation
shall be effective unless it is based on the occurrence, after the effective date of
the policy, of one or more of the following:chanroblesvirtuallawlibrary
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured
against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful or reckless acts or omissions increasing the hazard
insured against;
(e) physical changes in the property insured which result in the property
becoming uninsurable; or
(f) a determination by the Commissioner that the continuation of the policy
would violate or would place the insurer in violation of this Code.
Sec. 65. All notices of cancellation mentioned in the preceding section shall be in
writing, mailed or delivered to the named insured at the address shown in the
policy, and shall state (a) which of the grounds set forth in section sixty-four is
relied upon and (b) that, upon written request of the named insured, the insurer
will furnish the facts on which the cancellation is based.
Sec. 66. In case of insurance other than life, unless the insurer at least forty-five
days in advance of the end of the policy period mails or delivers to the named
insured at the address shown in the policy notice of its intention not to renew
the policy or to condition its renewal upon reduction of limits or elimination of
coverages, the named insured shall be entitled to renew the policy upon
payment of the premium due on the effective date of the renewal. Any policy
written for a term of less than one year shall be considered as if written for a
term of one year. Any policy written for a term longer than one year or any
policy with no fixed expiration date shall be considered as if written for
successive policy periods or terms of one year.
Title 7
WARRANTIES
Sec. 67. A warranty is either expressed or implied.
Sec. 68. A warranty may relate to the past, the present, the future, or to any or
all of these.
Sec. 69. No particular form of words is necessary to create a warranty.
Sec. 70. Without prejudice to section fifty-one, every express warranty, made at
or before the execution of a policy, must be contained in the policy itself, or in
another instrument signed by the insured and referred to in the policy as making
a part of it.
Sec. 71. A statement in a policy of matter relating to the person or thing insured,
or to the risk, as a fact, is an express warranty thereof.
Sec. 72. A statement in a policy which imparts that it is intended to do or not to
do a thing which materially affects the risk, is a warranty that such act or
omission shall take place.

Sec. 73. When, before the time arrives for the performance of a warranty
relating to the future, a loss insured against happens, or performance becomes
unlawful at the place of the contract, or impossible, the omission to fulfill the
warranty does not avoid the policy.
Sec. 74. The violation of a material warranty, or other material provision of a
policy, on the part of either party thereto, entitles the other to rescind.
Sec. 75. A policy may declare that a violation of specified provisions thereof shall
avoid it, otherwise the breach of an immaterial provision does not avoid the
policy.
Sec. 76. A breach of warranty without fraud merely exonerates an insurer from
the time that it occurs, or where it is broken in its inception, prevents the policy
from attaching to the risk.
Title 8
PREMIUM
Sec. 77. An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any agreement
to the contrary, no policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium thereof has been
paid, except in the case of a life or an industrial life policy whenever the grace
period provision applies.
Sec. 78. An acknowledgment in a policy or contract of insurance or the receipt of
premium is conclusive evidence of its payment, so far as to make the policy
binding, notwithstanding any stipulation therein that it shall not be binding until
the premium is actually paid.
Sec. 79. A person insured is entitled to a return of premium, as
follows:chanroblesvirtuallawlibrary
(a) To the whole premium if no part of his interest in the thing insured be
exposed to any of the perils insured against;
(b) Where the insurance is made for a definite period of time and the insured
surrenders his policy, to such portion of the premium as corresponds with the
unexpired time, at a pro rata rate, unless a short period rate has been agreed
upon and appears on the face of the policy, after deducting from the whole
premium any claim for loss or damage under the policy which has previously
accrued; Provided, That no holder of a life insurance policy may avail himself of
the privileges of this paragraph without sufficient cause as otherwise provided
by law.
Sec. 80. If a peril insured against has existed, and the insurer has been liable for
any period, however short, the insured is not entitled to return of premiums, so
far as that particular risk is concerned.
Sec. 81. A person insured is entitled to return of the premium when the contract
is voidable, on account of fraud or misrepresentation of the insurer, or of his
agent, or on account of facts, the existence of which the insured was ignorant

without his fault; or when by any default of the insured other than actual fraud,
the insurer never incurred any liability under the policy.
Sec. 82. In case of an over-insurance by several insurers, the insured is entitled
to a ratable return of the premium, proportioned to the amount by which the
aggregate sum insured in all the policies exceeds the insurable value of the thing
at risk.
Title 9
LOSS
Sec. 83. An agreement not to transfer the claim of the insured against the
insurer after the loss has happened, is void if made before the loss except as
otherwise provided in the case of life insurance.
Sec. 84. Unless otherwise provided by the policy, an insurer is liable for a loss of
which a peril insured against was the proximate cause, although a peril not
contemplated by the contract may have been a remote cause of the loss; but he
is not liable for a loss which the peril insured against was only a remote cause.
Sec. 85. An insurer is liable where the thing insured is rescued from a peril
insured against that would otherwise have caused a loss, if, in the course of
such rescue, the thing is exposed to a peril not insured against, which
permanently deprives the insured of its possession, in whole or in part; or where
a loss is caused by efforts to rescue the thing insured from a peril insured
against.
Sec. 86. Where a peril is especially excepted in a contract of insurance, a loss,
which would not have occurred but for such peril, is thereby excepted although
the immediate cause of the loss was a peril which was not excepted.
Sec. 87. An insurer is not liable for a loss caused by the willful act or through the
connivance of the insured; but he is not exonerated by the negligence of the
insured, or of the insurance agents or others.
Title 10
NOTICE OF LOSS
Sec. 88. In case of loss upon an insurance against fire, an insurer is exonerated,
if notice thereof be not given to him by an insured, or some person entitled to
the benefit of the insurance, without unnecessary delay.
Sec. 89. When a preliminary proof of loss is required by a policy, the insured is
not bound to give such proof as would be necessary in a court of justice; but it is
sufficient for him to give the best evidence which he has in his power at the
time.
Sec. 90. All defects in a notice of loss, or in preliminary proof thereof, which the
insured might remedy, and which the insurer omits to specify to him, without
unnecessary delay, as grounds of objection, are waived.
Sec. 91. Delay in the presentation to an insurer of notice or proof of loss is
waived if caused by any act of him, or if he omits to take objection promptly and
specifically upon that ground.
Sec. 92. If the policy requires, by way of preliminary proof of loss, the certificate

or testimony of a person other than the insured, it is sufficient for the insured to
use reasonable diligence to procure it, and in case of the refusal of such person
to give it, then to furnish reasonable evidence to the insurer that such refusal
was not induced by any just grounds of disbelief in the facts necessary to be
certified or testified.
Title 11
DOUBLE INSURANCE
Sec. 93. A double insurance exists where the same person is insured by several
insurers separately in respect to the same subject and interest.
Sec.
94.
Where
the
insured
is
overinsured
by
double
insurance:chanroblesvirtuallawlibrary
(a) The insured, unless the policy otherwise provides, may claim payment from
the insurers in such order as he may select, up to the amount for which the
insurers are severally liable under their respective contracts;
(b) Where the policy under which the insured claims is a valued policy, the
insured must give credit as against the valuation for any sum received by him
under any other policy without regard to the actual value of the subject matter
insured;
(c) Where the policy under which the insured claims is an unvalued policy he
must give credit, as against the full insurable value, for any sum received by him
under any policy;
(d) Where the insured receives any sum in excess of the valuation in the case of
valued policies, or of the insurable value in the case of unvalued policies, he
must hold such sum in trust for the insurers, according to their right of
contribution among themselves;
(e) Each insurer is bound, as between himself and the other insurers, to
contribute ratably to the loss in proportion to the amount for which he is liable
under his contract.
Title 12
REINSURANCE
Sec. 95. A contract of reinsurance is one by which an insurer procures a third
person to insure him against loss or liability by reason of such original
insurance.
Sec. 96. Where an insurer obtains reinsurance, except under automatic
reinsurance treaties, he must communicate all the representations of the
original insured, and also all the knowledge and information he possesses,
whether previously or subsequently acquired, which are material to the risk.
Sec. 97. A reinsurance is presumed to be a contract of indemnity against
liability, and not merely against damage.
Sec. 98. The original insured has no interest in a contract of reinsurance.
Chapter II
CLASSES OF INSURANCE
Title I

MARINE INSURANCE
Sub-Title 1- A
DEFINITION
Sec. 99. Marine Insurance includes:chanroblesvirtuallawlibrary
(1) Insurance against loss of or damage to:chanroblesvirtuallawlibrary
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise,
effects, disbursements, profits, moneys, securities, choses in action, evidences
of debts, valuable papers, bottomry, and respondentia interests and all other
kinds of property and interests therein, in respect to, appertaining to or in
connection with any and all risks or perils of navigation, transit or
transportation, or while being assembled, packed, crated, baled, compressed or
similarly prepared for shipment or while awaiting shipment, or during any
delays, storage, transhipment, or reshipment incident thereto, including war
risks, marine builder's risks, and all personal property floater risks;
(b) Person or property in connection with or appertaining to a marine, inland
marine, transit or transportation insurance, including liability for loss of or
damage arising out of or in connection with the construction, repair, operation,
maintenance or use of the subject matter of such insurance (but not including
life insurance or surety bonds nor insurance against loss by reason of bodily
injury to any person arising out of ownership, maintenance, or use of
automobiles);
(c) Precious stones, jewels, jewelry, precious metals, whether in course of
transportation or otherwise;
(d) Bridges, tunnels and other instrumentalities of transportation and
communication (excluding buildings, their furniture and furnishings, fixed
contents and supplies held in storage); piers, wharves, docks and slips, and
other aids to navigation and transportation, including dry docks and marine
railways, dams and appurtenant facilities for the control of waterways.
(2) "Marine protection and indemnity insurance," meaning insurance against, or
against legal liability of the insured for loss, damage, or expense incident to
ownership, operation, chartering, maintenance, use, repair, or construction of
any vessel, craft or instrumentality in use of ocean or inland waterways,
including liability of the insured for personal injury, illness or death or for loss of
or damage to the property of another person.
Sub-Title 1-B
INSURABLE INTEREST
Sec. 100. The owner of a ship has in all cases an insurable interest in it, even
when it has been chartered by one who covenants to pay him its value in case of
loss: Provided, That in this case the insurer shall be liable for only that part of
the loss which the insured cannot recover from the charterer.
Sec. 101. The insurable interest of the owner of the ship hypothecated by
bottomry is only the excess of its value over the amount secured by bottomry.

Sec. 102. Freightage, in the sense of a policy of marine insurance, signifies all
the benefits derived by the owner, either from the chartering of the ship or its
employment for the carriage of his own goods or those of others.
Sec. 103. The owner of a ship has an insurable interest in expected freightage
which according to the ordinary and probable course of things he would have
earned but for the intervention of a peril insured against or other peril incident
to the voyage.
Sec. 104. The interest mentioned in the last section exists, in case of a charter
party, when the ship has broken ground on the chartered voyage. If a price is to
be paid for the carriage of goods it exists when they are actually on board, or
there is some contract for putting them on board, and both ship and goods are
ready for the specified voyage.
Sec. 105. One who has an interest in the thing from which profits are expected
to proceed has an insurable interest in the profits.
Sec. 106. The charterer of a ship has an insurable interest in it, to the extent
that he is liable to be damnified by its loss.
Sub-Title 1-C
CONCEALMENT
Sec. 107. In marine insurance each party is bound to communicate, in addition
to what is required by section twenty-eight, all the information which he
possesses, material to the risk, except such as is mentioned in Section thirty,
and to state the exact and whole truth in relation to all matters that he
represents, or upon inquiry discloses or assumes to disclose.
Sec. 108. In marine insurance, information of the belief or expectation of a third
person, in reference to a material fact, is material.
Sec. 109. A person insured by a contract of marine insurance is presumed to
have knowledge, at the time of insuring, of a prior loss, if the information might
possibly have reached him in the usual mode of transmission and at the usual
rate of communication.
Sec. 110. A concealment in a marine insurance, in respect to any of the following
matters, does not vitiate the entire contract, but merely exonerates the insurer
from a loss resulting from the risk concealed:chanroblesvirtuallawlibrary
(a) The national character of the insured;
(b) The liability of the thing insured to capture and detention;
(c) The liability to seizure from breach of foreign laws of trade;
(d) The want of necessary documents;
(e) The use of false and simulated papers.
Sub-Title 1-D
REPRESENTATION
Sec. 111. If a representation by a person insured by a contract of marine
insurance, is intentionally false in any material respect, or in respect of any fact
on which the character and nature of the risk depends, the insurer may rescind
the entire contract.

Sec. 112. The eventual falsity of a representation as to expectation does not, in

the absence of fraud, avoid a contract of marine insurance.
Sub-Title 1-E
IMPLIED WARRANTIES
Sec. 113. In every marine insurance upon a ship or freight, or freightage, or
upon any thing which is the subject of marine insurance, a warranty is implied
that the ship is seaworthy.
Sec. 114. A ship is seaworthy when reasonably fit to perform the service and to
encounter the ordinary perils of the voyage contemplated by the parties to the
policy.
Sec. 115. An implied warranty of seaworthiness is complied with if the ship be
seaworthy at the time of the of commencement of the risk, except in the
following cases:chanroblesvirtuallawlibrary
(a) When the insurance is made for a specified length of time, the implied
warranty is not complied with unless the ship be seaworthy at the
commencement of every voyage it undertakes during that time;
(b) When the insurance is upon the cargo which, by the terms of the policy,
description of the voyage, or established custom of the trade, is to be
transhipped at an intermediate port, the implied warranty is not complied with
unless each vessel upon which the cargo is shipped, or transhipped, be
seaworthy at the commencement of each particular voyage.
Sec. 116. A warranty of seaworthiness extends not only to the condition of the
structure of the ship itself, but requires that it be properly laden, and provided
with a competent master, a sufficient number of competent officers and seamen,
and the requisite appurtenances and equipment, such as ballasts, cables and
anchors, cordage and sails, food, water, fuel and lights, and other necessary or
proper stores and implements for the voyage.
Sec. 117. Where different portions of the voyage contemplated by a policy differ
in respect to the things requisite to make the ship seaworthy therefor, a
warranty of seaworthiness is complied with if, at the commencement of each
portion, the ship is seaworthy with reference to that portion.
Sec. 118. When the ship becomes unseaworthy during the voyage to which an
insurance relates, an unreasonable delay in repairing the defect exonerates the
insurer on ship or shipowner's interest from liability from any loss arising
therefrom.
Sec. 119. A ship which is seaworthy for the purpose of an insurance upon the
ship may, nevertheless, by reason of being unfitted to receive the cargo, be
unseaworthy for the purpose of the insurance upon the cargo.
Sec. 120. Where the nationality or neutrality of a ship or cargo is expressly
warranted, it is implied that the ship will carry the requisite documents to show
such nationality or neutrality and that it will not carry any documents which cast
reasonable suspicion thereon.
Sub-Title 1-F

THE VOYAGE AND DEVIATION

Sec. 121. When the voyage contemplated by a marine insurance policy is
described by the places of beginning and ending, the voyage insured in one
which conforms to the course of sailing fixed by mercantile usage between those
places.
Sec. 122. If the course of sailing is not fixed by mercantile usage, the voyage
insured by a marine insurance policy is that way between the places specified,
which to a master of ordinary skill and discretion, would mean the most natural,
direct and advantageous.
Sec. 123. Deviation is a departure from the course of the voyage insured,
mentioned in the last two sections, or an unreasonable delay in pursuing the
voyage or the commencement of an entirely different voyage.
Sec. 124. A deviation is proper:chanroblesvirtuallawlibrary
(a) When caused by circumstances over which neither the master nor the owner
of the ship has any control;
(b) When necessary to comply with a warranty, or to avoid a peril, whether or
not the peril is insured against;
(c) When made in good faith, and upon reasonable grounds of belief in its
necessity to avoid a peril; or
(d) When made in good faith, for the purpose of saving human life or relieving
another vessel in distress.
Sec. 125. Every deviation not specified in the last section is improper.
Sec. 126. An insurer is not liable for any loss happening to the thing insured
subsequent to an improper deviation.
Sub-Title 1-G
LOSS
Sec. 127. A loss may be either total or partial.
Sec. 128. Every loss which is not total is partial.
Sec. 129. A total loss may be either actual or constructive.
Sec. 130. An actual total loss is cause by:chanroblesvirtuallawlibrary
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by being broken up;
(c) Any damage to the thing which renders it valueless to the owner for the
purpose for which he held it; or
(d) Any other event which effectively deprives the owner of the possession, at
the port of destination, of the thing insured.
Sec. 131. A constructive total loss is one which gives to a person insured a right
to abandon, under Section one hundred thirty-nine.
Sec. 132. An actual loss may be presumed from the continued absence of a ship
without being heard of. The length of time which is sufficient to raise this
presumption depends on the circumstances of the case.
Sec. 133. When a ship is prevented, at an intermediate port, from completing the
voyage, by the perils insured against, the liability of a marine insurer on the

cargo
continues
after
they
are
thus
reshipped.
Nothing in this section shall prevent an insurer from requiring an additional
premium if the hazard be increased by this extension of liability.
Sec. 134. In addition to the liability mentioned in the last section, a marine
insurer is bound for damages, expenses of discharging, storage, reshipment,
extra freightage, and all other expenses incurred in saving cargo reshipped
pursuant
to
the
last
section,
up
to
the
amount
insured.
Nothing in this or in the preceding section shall render a marine insurer liable
for any amount in excess of the insured value or, if there be none, of the
insurable value.
Sec. 135. Upon an actual total loss, a person insured is entitled to payment
without notice of abandonment.
Sec. 136. Where it has been agreed that an insurance upon a particular thing, or
class of things, shall be free from particular average, a marine insurer is not
liable for any particular average loss not depriving the insured of the possession,
at the port of destination, of the whole of such thing, or class of things, even
though it becomes entirely worthless; but such insurer is liable for his
proportion of all general average loss assessed upon the thing insured.
Sec. 137. An insurance confined in terms to an actual loss does not cover a
constructive total loss, but covers any loss, which necessarily results in
depriving the insured of the possession, at the port of destination, of the entire
thing insured.
Sub-Title 1-H
ABANDONMENT
Sec. 138. Abandonment, in marine insurance, is the act of the insured by which,
after a constructive total loss, he declares the relinquishment to the insurer of
his interest in the thing insured.
Sec. 139. A person insured by a contract of marine insurance may abandon the
thing insured, or any particular portion thereof separately valued by the policy,
or otherwise separately insured, and recover for a total loss thereof, when the
cause of the loss is a peril insured against:chanroblesvirtuallawlibrary
(a) If more than three-fourths thereof in value is actually lost, or would have to
be expended to recover it from the peril;
(b) If it is injured to such an extent as to reduce its value more than threefourths;
(c) If the thing insured is a ship, and the contemplated voyage cannot be
lawfully performed without incurring either an expense to the insured of more
than three-fourths the value of the thing abandoned or a risk which a prudent
man would not take under the circumstances; or
(d) If the thing insured, being cargo or freightage, and the voyage cannot be
performed, nor another ship procured by the master, within a reasonable time
and with reasonable diligence, to forward the cargo, without incurring the like
expense or risk mentioned in the preceding sub-paragraph. But freightage

cannot in any case be abandoned unless the ship is also abandoned.

Sec. 140. An abandonment must be neither partial nor conditional.
Sec. 141. An abandonment must be made within a reasonable time after receipt
of reliable information of the loss, but where the information is of a doubtful
character, the insured is entitled to a reasonable time to make inquiry.
Sec. 142. Where the information upon which an abandonment has been made
proves incorrect, or the thing insured was so far restored when the
abandonment was made that there was then in fact no total loss, the
abandonment becomes ineffectual.
Sec. 143. Abandonment is made by giving notice thereof to the insurer, which
may be done orally, or in writing; Provided, That if the notice be done orally, a
written notice of such abandonment shall be submitted within seven days from
such oral notice.
Sec. 144. A notice of abandonment must be explicit, and must specify the
particular cause of the abandonment, but need state only enough to show that
there is probable cause therefor, and need not be accompanied with proof of
interest or of loss.
Sec. 145. An abandonment can be sustained only upon the cause specified in the
notice thereof.
Sec. 146. An abandonment is equivalent to a transfer by the insured of his
interest to the insurer, with all the chances of recovery and indemnity.
Sec. 147. If a marine insurer pays for a loss as if it were an actual total loss, he
is entitled to whatever may remain of the thing insured, or its proceeds or
salvage, as if there had been a formal abandonment.
Sec. 148. Upon an abandonment, acts done in good faith by those who were
agents of the insured in respect to the thing insured, subsequent to the loss, are
at the risk of the insurer and for his benefit.
Sec. 149. Where notice of abandonment is properly given, the rights of the
insured are not prejudiced by the fact that the insurer refuses to accept the
abandonment.
Sec. 150. The acceptance of an abandonment may be either express or implied
from the conduct of the insurer. The mere silence of the insurer for an
unreasonable length of time after notice shall be construed as an acceptance.
Sec. 151. The acceptance of an abandonment, whether express or implied, is
conclusive upon the parties, and admits the loss and the sufficiency of the
abandonment.
Sec. 152. An abandonment once made and accepted is irrevocable, unless the
ground upon which it was made proves to be unfounded.
Sec. 153. On an accepted abandonment of a ship, freightage earned previous to
the loss belongs to the insurer of said freightage; but freightage subsequently
earned belongs to the insurer of the ship.
Sec. 154. If an insurer refuses to accept a valid abandonment, he is liable as
upon actual total loss, deducting from the amount any proceeds of the thing

insured which may have come to the hands of the insured.

Sec. 155. If a person insured omits to abandon, he may nevertheless recover his
actual loss.
Sub-Title 1-I
MEASURE OF INDEMNITY
Sec. 156. A valuation in a policy of marine insurance in conclusive between the
parties thereto in the adjustment of either a partial or total loss, if the insured
has some interest at risk, and there is no fraud on his part; except that when a
thing has been hypothecated by bottomry or respondentia, before its insurance,
and without the knowledge of the person actually procuring the insurance, he
may show the real value. But a valuation fraudulent in fact, entitles the insurer
to rescind the contract.
Sec. 157. A marine insurer is liable upon a partial loss, only for such proportion
of the amount insured by him as the loss bears to the value of the whole interest
of the insured in the property insured.
Sec. 158. Where profits are separately insured in a contract of marine insurance,
the insured is entitled to recover, in case of loss, a proportion of such profits
equivalent to the proportion which the value of the property lost bears to the
value of the whole.
Sec. 159. In case of a valued policy of marine insurance on freightage or cargo, if
a part only of the subject is exposed to the risk, the evaluation applies only in
proportion to such part.
Sec. 160. When profits are valued and insured by a contract of marine insurance,
a loss of them is conclusively presumed from a loss of the property out of which
they are expected to arise, and the valuation fixes their amount.
Sec. 161. In estimating a loss under an open policy of marine insurance the
following rules are to be observed:chanroblesvirtuallawlibrary
(a) The value of a ship is its value at the beginning of the risk, including all
articles or charges which add to its permanent value or which are necessary to
prepare it for the voyage insured;
(b) The value of the cargo is its actual cost to the insured, when laden on board,
or where the cost cannot be ascertained, its market value at the time and place
of lading, adding the charges incurred in purchasing and placing it on board, but
without reference to any loss incurred in raising money for its purchase, or to
any drawback on its exportation, or to the fluctuation of the market at the port
of destination, or to expenses incurred on the way or on arrival;
(c) The value of freightage is the gross freightage, exclusive of primage, without
reference to the cost of earning it; and
(d) The cost of insurance is in each case to be added to the value thus estimated.
Sec. 162. If cargo insured against partial loss arrives at the port of destination in
a damaged condition, the loss of the insured is deemed to be the same
proportion of the value which the market price at that port, of the thing so
damaged, bears to the market price it would have brought if sound.

Sec. 163. A marine insurer is liable for all the expenses attendant upon a loss
which forces the ship into port to be repaired; and where it is stipulated in the
policy that the insured shall labor for the recovery of the property, the insurer is
liable for the expense incurred thereby, such expense, in either case, being in
addition to a total loss, if that afterwards occurs.
Sec. 164. A marine insurer is liable for a loss falling upon the insured, through a
contribution in respect to the thing insured, required to be made by him towards
a general average loss called for by a peril insured against;provided, that the
liability of the insurer shall be limited to the proportion of contribution attaching
to his policy value where this is less than the contributing value of the thing
insured.
Sec. 165. When a person insured by a contract of marine insurance has a
demand against others for contribution, he may claim the whole loss from the
insurer, subrogating him to his own right to contribution. But no such claim can
be made upon the insurer after the separation of the interests liable to the
contribution, nor when the insured, having the right and opportunity to enforce
the contribution from others, has neglected or waived the exercise of that right.
Sec. 166. In the case of a partial loss of ship or its equipment, the old materials
are to be applied towards payment for the new. Unless otherwise stipulated in
the policy, a marine insurer is liable for only two-thirds of the remaining cost of
repairs after such deduction, except that anchors must be paid in full.
Title 2
FIRE INSURANCE
Sec. 167. As used in this Code, the term "fire insurance" shall include insurance
against loss by fire, lightning, windstorm, tornado or earthquake and other allied
risks, when such risks are covered by extension to fire insurance policies or
under separate policies.
Sec. 168. An alteration in the use or condition of a thing insured from that to
which it is limited by the policy made without the consent of the insurer, by
means within the control of the insured, and increasing the risks, entitles an
insurer to rescind a contract of fire insurance.
Sec. 169. An alteration in the use or condition of a thing insured from that to
which it is limited by the policy, which does not increase the risk, does not affect
a contract of fire insurance. chanrobles virtual law library
Sec. 170. A contract of fire insurance is not affected by any act of the insured
subsequent to the execution of the policy, which does not violate its provisions,
even though it increases the risk and is the cause of the loss.
Sec. 171. If there is no valuation in the policy, the measure of indemnity in an
insurance against fire is the expense it would be to the insured at the time of the
commencement of the fire to replace the thing lost or injured in the condition in
which at the time of the injury; but if there is a valuation in a policy of fire
insurance, the effect shall be the same as in a policy of marine insurance.
Sec. 172. Whenever the insured desires to have a valuation named in his policy,

insuring any building or structure against fire, he may require such building or
structure to be examined by an independent appraiser and the value of the
insured's interest therein may then be fixed as between the insurer and the
insured. The cost of such examination shall be paid for by the insured. A clause
shall be inserted in such policy stating substantially that the value of the
insured's interest in such building or structure has been thus fixed. In the
absence of any change increasing the risk without the consent of the insurer or
of fraud on the part of the insured, then in case of a total loss under such policy,
the whole amount so insured upon the insured's interest in such building or
structure, as stated in the policy upon which the insurers have received a
premium, shall be paid, and in case of a partial loss the full amount of the partial
loss shall be so paid, and in case there are two or more policies covering the
insured's interest therein, each policy shall contribute pro rata to the payment of
such whole or partial loss. But in no case shall the insurer be required to pay
more than the amount thus stated in such policy. This section shall not prevent
the parties from stipulating in such policies concerning the repairing, rebuilding
or replacing of buildings or structures wholly or partially damaged or destroyed.
Sec. 173. No policy of fire insurance shall be pledged, hypothecated, or
transferred to any person, firm or company who acts as agent for or otherwise
represents the issuing company, and any such pledge, hypothecation, or transfer
hereafter made shall be void and of no effect insofar as it may affect other
creditors of the insured.
Title 3
CASUALTY INSURANCE
Sec. 174. Casualty insurance is insurance covering loss or liability arising from
accident or mishap, excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of other types of insurance
such as fire or marine. It includes, but is not limited to, employer's liability
insurance, motor vehicle liability insurance, plate glassinsurance, burglary and
theft insurance, personal accident and health insurance as written by non-life
insurance companies, and other substantially similar kinds of insurance.
Title 4
SURETYSHIP
Sec. 175. A contract of suretyship is an agreement whereby a party called the
surety guarantees the performance by another party called the principal or
obligor of an obligation or undertaking in favor of a third party called the
obligee. It includes official recognizances, stipulations, bonds or undertakings
issued by any company by virtue of and under the provisions of Act No. 536, as
amended by Act No. 2206.
Sec. 176. The liability of the surety or sureties shall be joint and several with the
obligor and shall be limited to the amount of the bond. It is determined strictly
by the terms of the contract of suretyship in relation to the principal contract
between the obligor and the obligee. (As amended by Presidential Decree No.

1455).
Sec. 177. The surety is entitled to payment of the premium as soon as the
contract of suretyship or bond is perfected and delivered to the obligor. No
contract of suretyship or bonding shall be valid and binding unless and until the
premium therefor has been paid, except where the obligee has accepted the
bond, in which case the bond becomes valid and enforceable irrespective of
whether or not the premium has been paid by the obligor to the
surety: Provided, That if the contract of suretyship or bond is not accepted by, or
filed with the obligee, the surety shall collect only reasonable amount, not
exceeding fifty per centum of the premium due thereon as service fee plus the
cost of stamps or other taxes imposed for the issuance of the contract or
bond: Provided, however, That if the non-acceptance of the bond be due to the
fault or negligence of the surety, no such service fee, stamps or taxes shall be
collected.
In the case of a continuing bond, the obligor shall pay the subsequent annual
premium as it falls due until the contract of suretyship is cancelled by the
obligee or by the Commissioner or by a court of competent jurisdiction, as the
case may be. chanrobles virtual law library
Sec. 178. Pertinent provisions of the Civil Code of the Philippines shall be applied
in a suppletory character whenever necessary in interpreting the provisions of a
contract of suretyship.
Title 5
LIFE INSURANCE
Sec. 179. Life insurance is insurance on human lives and insurance appertaining
thereto or connected therewith.
Sec. 180. An insurance upon life may be made payable on the death of the
person, or on his surviving a specified period, or otherwise contingently on the
continuance or cessation of life.
Every contract or pledge for the payment of endowments or annuities shall be
considered a life insurance contract for purpose of this Code.
In the absence of a judicial guardian, the father, or in the latter's absence or
incapacity, the mother, or any minor, who is an insured or a beneficiary under a
contract of life, health or accident insurance, may exercise, in behalf of said
minor, any right under the policy, without necessity of court authority or the
giving of a bond, where the interest of the minor in the particular act involved
does not exceed twenty thousand pesos. Such right may include, but shall not be
limited to, obtaining a policy loan, surrendering the policy, receiving the
proceeds of the policy, and giving the minor's consent to any transaction on the
policy.
Sec. 180-A. The insurer in a life insurance contract shall be liable in case of
suicides only when it is committed after the policy has been in force for a period
of two years from the date of its issue or of its last reinstatement, unless the
policy provides a shorter period: Provided, however, That suicide committed in

the state of insanity shall be compensable regardless of the date of

commission. (As amended by Batasang Pambansa Blg. 874).
Sec. 181. A policy of insurance upon life or health may pass by transfer, will or
succession to any person, whether he has an insurable interest or not, and such
person may recover upon it whatever the insured might have recovered.
Sec. 182. Notice to an insurer of a transfer or bequest thereof is not necessary to
preserve the validity of a policy of insurance upon life or health, unless thereby
expressly required.
Sec. 183. Unless the interest of a person insured is susceptible of exact
pecuniary measurement, the measure of indemnity under a policy of insurance
upon life or health is the sum fixed in the policy.
Chapter III
THE BUSINESS OF INSURANCE
Title 1
INSURANCE COMPANIES, ORGANIZATION,
CAPITALIZATION AND AUTHORIZATION
Sec. 184. For purposes of this Code, the term "insurer" or "insurance
company" shall
include
all
individuals,
partnerships,
associations,
or
corporations, including government-owned or controlled corporations or
entities, engaged as principals in the insurance business, excepting mutual
benefit associations. Unless the context otherwise requires, the terms shall also
include professional reinsurers defined in section two hundred eighty."Domestic
company" shall include companies formed, organized or existing under the laws
of the Philippines. "Foreign company" when used without limitation shall include
companies formed, organized, or existing under any laws other than those of the
Philippines.
Sec. 185. Corporations formed or organized to save any person or persons or
other corporations harmless from loss, damage, or liability arising from any
unknown or future or contingent event, or to indemnify or to compensate any
person or persons or other corporations for any such loss, damage, or liability,
or to guarantee the performance of or compliance with contractual obligations or
the payment of debt of others shall be known as"insurance corporations".
The provisions of the Corporation Law shall apply to all insurance corporations
now or hereafter engaged in business in the Philippines insofar as they do not
conflict with the provisions of this chapter.
Sec. 186. No person, partnership, or association of persons shall transact any
insurance business in the Philippines except as agent of a person or corporation
authorized to do the business of insurance in the Philippines, unless possessed
of the capital and assets required of an insurance corporation doing the same
kind of business in the Philippines and invested in the same manner; nor unless
the Commissioner shall have granted to him or them a certificate to the effect
that he or they have complied with all the provisions of law which an insurance
corporation doing business in the Philippines is required to observe.

Every person, partnership, or association receiving any such certificate of

authority shall be subject to the insurance laws of the Philippines and to the
jurisdiction and supervision of the Commissioner in the same manner as if an
insurance corporation authorized by the laws of the Philippines to engage in the
business of insurance specified in the certificate.
Sec. 187. No insurance company shall transact any insurance business in the
Philippines until after it shall have obtained a certificate of authority for that
purpose from the Commissioner upon application therefor and payment by the
company concerned of the fees hereinafter prescribed.
The Commissioner may refuse to issue a certificate of authority to any insurance
company if, in his judgment, such refusal will best promote the interest of the
people of this country. No such certificate of authority shall be granted to any
such company until the Commissioner shall have satisfied himself by such
examination as he may make and such evidence as he may require that such
company is qualified by the laws of the Philippines to transact business therein,
that the grant of such authority appears to be justified in the light of economic
requirements, and that the direction and administration, as well as the integrity
and responsibility of the organizers and administrators, the financial
organization and the amount of capital, notwithstanding the provisions of
section one hundred eighty-eight, reasonably assure the safety of the interests
of the policyholders and the public.
In order to maintain the quality of the management of the insurance companies
and afford better protection to policyholders and the public in general, any
person of good moral character, unquestioned integrity and recognized
competence may be elected or appointed director or officer of insurance
companies. The Commissioner shall prescribe the qualifications of the executive
officers and other key officials of insurance companies for purposes of this
section.
No person shall concurrently be a director and/or officer of an insurance
company and an adjustment company.
Incumbent directors and/or officers affected by the above provisions are hereby
allowed to hold on to their positions until the end of their terms or two years
from the effectivity of this decree, whichever is shorter.
Before issuing such certificate of authority, the Commissioner must be satisfied
that the name of the company is not that of any other known company
transacting a similar business in the Philippines, or a name so similar as to be
calculated to mislead the public.
Such certificate of authority shall expire on the last day of June of each year and
shall be renewed annually if the company is continuing to comply with the
provisions of this Code or the circulars, instructions, rulings or decisions of the
Commissioner. Every company receiving any such certificates of authority shall
be subject to the provisions of this Code and other related laws and to the
jurisdiction and supervision of the Commissioner.

No insurance company may be authorized to transact in the Philippines the

business of life and non-life insurance concurrently unless specifically
authorized to do so: Provided, That the terms "life" and "non-life" insurance
shall be deemed to include health, accident and disability insurance.
No insurance company shall have equity in an adjustment company and neither
shall an adjustment company have an equity in an insurance company.
Insurance companies and adjustment companies presently affected by the above
provision shall have two years from the effectivity of this Decree within which to
divest of their stockholdings. (As amended by Presidential Decree No. 1455).
Sec. 188. Except as provided in section two hundred eighty-one, no domestic
insurance company shall, in a stock corporation, engage in business in the
Philippines unless possessed of a paid-up capital stock equal to at least five
million pesos: Provided, That a domestic insurance company already doing
business in the Philippines with a paid-up capital stock which is less than five
million pesos shall have a paid-up capital stock of at least three million pesos by
December thirty-one, nineteen hundred seventy-eight, four million pesos by
December thirty-one, nineteen hundred seventy-nine and five million pesos by
December thirty-one, nineteen hundred eighty:Provided, further, that the
Secretary of Finance may, upon recommendation of the Insurance
Commissioner, increase such minimum paid-up capital stock requirement, under
such terms and conditions as he may impose, to an amount which, in his opinion,
would reasonably assure the safety of the interests of the policyholders and the
public. chanrobles virtual law library
The Commissioner may, as a pre-licensing requirement of a new insurance
company, in addition to the paid-up capital stock, require the stockholders to
pay in cash to the company in proportion to their subscription interests a
contributed surplus fund of not less than one million pesos, in the case of a life
insurance company, or not less than five hundred thousand pesos, in the case of
an insurance company other than life. He may also require such company to
submit to him a business plan showing the company's estimated receipts and
disbursements, as well as the basis therefor, for the next succeeding three
years.
If organized as a mutual company, in lieu of such capital stock, it must have
available cash assets of at least five million pesos above all liabilities for losses
reported, expenses, taxes, legal reserve, and reinsurance of all outstanding
risks, and the contributed surplus fund equal to the amounts required of stock
corporations. A stock insurance company doing business in the Philippines may,
subject to the pertinent law and regulations which now are of hereafter may be
in force, alter its organization and transform itself into a mutual insurance
company. (As amended by Presidential Decree No. 1455).
Sec. 189. Every company must, before engaging in the business of insurance in
the
Philippines,
file
with
the
Commissioner
the
following:chanroblesvirtuallawlibrary

(a) A certified copy of the last annual statement or a verified financial statement
exhibiting the condition and affairs of such company;
(b) If incorporated under the laws of the Philippines, a copy of the articles of
incorporation and by-laws, and any amendments to either, certified by the
Securities and Exchange Commission to be a copy of that which is filed in its
Office;
(c) If incorporated under any laws other than those of the Philippines, a
certificate from the Securities and Exchange Commission showing that it is duly
registered in the mercantile registry of that Commission in accordance with
the Corporation Law. A copy of the articles of incorporation and by-laws, and any
amendments to either, if organized or formed under any law requiring such to be
filed, duly certified by the officer having the custody of same, or if not so
organized, a copy of the law, charter or deed of settlement under which the deed
of organization is made, duly certified by the proper custodian thereof, or proved
by affidavit to be a copy; also, a certificate under the hand and seal of the proper
officer of such state or country having supervision of insurance business therein,
if any there be, that such corporation or company is organized under the laws of
such state or country, with the amount of capital stock or assets and legal
reserve required by this Code;
(d) If not incorporated and of foreign domicile, aside from the certificate
mentioned in paragraph (c) of this section, a certificate setting forth the nature
and character of the business, the location of the principal office, the name of
the individual or names of the persons composing the partnership or association,
the amount of actual capital employed or to be employed therein and the names
of all officers and persons by whom the business is or may be managed.
The certificate must be verified by the affidavit of the chief officer, secretary,
agent, or manager of the company; and if there are any written articles of
agreement of the company, a copy thereof must be accompany such certificate.
Sec. 190. The Commissioner must require as a condition precedent to the
transaction of insurance business in the Philippines by any foreign insurance
company, that such company file in his office a written power of attorney
designating some person who shall be a resident of the Philippines as its general
agent, on whom any notice provided by law or by any insurance policy, proof of
loss, summons and other legal processes may be served in all actions or other
legal proceedings against such company, and consenting that service upon such
general agent shall be admitted and held as valid as if served upon the foreign
company at its home office. Any such foreign company shall, as further condition
precedent to the transaction of insurance business in the Philippines, make and
file with the Commissioner an agreement or stipulation, executed by the proper
authorities
of
said
company
in
form
and
substance
as
follows:chanroblesvirtuallawlibrary
"The (name of company) does hereby stipulate and agree in consideration of the
permission granted by the Insurance Commissioner to transact business in the

Philippines, that if at any time said company shall leave the Philippines, or cease
to transact business therein, or shall be without any agent in the Philippines on
whom any notice, proof of loss, summons, or legal process may be served, then
in any action or proceeding arising out any business or transaction which
occurred in the Philippines, service of any notice provided by law, or insurance
policy, proof of loss, summons, or other legal process may be made upon the
Insurance Commissioner shall have the same force and effect as if made upon
the company."
Whenever such service of notice, proof of loss, summons, or other legal process
shall be made upon the Commission, he must, within ten days thereafter,
transmit by mail, postage paid, a copy of such notice, proof of loss, summons, or
other legal process to the company at its home or principal office. The sending of
such copy by the Commissioner shall be a necessary part of the service of the
notice, proof of loss, or other legal process.
Sec. 191. No insurance company organized or existing under the government or
laws other than those of the Philippines shall engage in business in the
Philippines unless possessed of paid-up unimpaired capital or assets and reserve
not less than that herein required of domestic insurance companies, nor until it
shall have deposited with the Commissioner for the benefit and security of the
policyholders and creditors of such company in the Philippines, securities
satisfactory to the Commissioner consisting of good securities of the Philippines,
including new issues of stock of"registered enterprises", as this term is defined
in Republic Act No. 5186, otherwise known as the Investment Incentives Act, as
amended, to the actual market value of not less than the minimum paid-up
capital required of domestic insurance companies: Provided, That at least
fifty per centum of such securities shall consist of bonds or other evidences of
debt of the Government of the Philippines, its political subdivisions and
instrumentalities, or of government-owned or controlled corporations and
entities, including the Central Bank. The total investment of a foreign insurance
company in any registered enterprise shall not exceed twenty per centum of the
net worth of said foreign insurance company nor twenty per centum of the
capital of the registered enterprise, unless previously authorized in writing by
the Commissioner.
For purposes of this Code, the net worth of a foreign insurance company shall
refer only to its net worth in the Philippines.
Sec. 192. The Commissioner shall hold the securities, deposited as aforesaid, for
the benefit and security of all the policyholders of the company depositing the
same, but shall as long as the company is solvent, permit the company to collect
the interest or dividends on the securities so deposited, and, from time to time,
with his assent, to withdraw any of such securities, upon depositing with said
Commissioner other like securities, the market value of which shall be equal to
the market value of such as may be withdrawn. In the event of any company
ceasing to do business in the Philippines the securities deposited as aforesaid

shall be returned upon the company's making application therefor and proving
to the satisfaction of the Commissioner that it has no further liability under any
of its policies in the Philippines.
Sec. 193. Every foreign company doing business in the Philippines shall set aside
an amount corresponding to the legal reserves of the policies written in the
Philippines and invest and keep the same therein in accordance with the
provisions of this section. The legal reserve therein required to be set aside shall
be invested only in the classes of the Philippine securities described in section
two hundred: Provided, however, That no investment in stocks or bonds of any
single entity shall, in the aggregate exceed twentyper centum of the net worth
of the investing company or twenty per centum of the capital of the issuing
company, whichever is the lesser unless otherwise approved in writing by the
Commissioner. The securities purchased and kept in the Philippines under this
section, shall not be sent out of the territorial jurisdiction of the Philippines
without the written consent of the Commissioner.
Title 2
MARGIN OF INSOLVENCY
Sec. 194. An insurance company doing business in the Philippines shall at all
times maintain a margin of solvency which shall be an excess of the value of its
admitted assets exclusive of its paid-up capital, in the case of a domestic
company, or an excess of the value of its admitted assets in the Philippines,
exclusive of its security deposits, in the case of a foreign company, over the
amount of its liabilities, unearned premium and reinsurance reserves in the
Philippines of at least two per mille of the total amount of its insurance in force
as of the preceding calendar year on all policies, except term insurance, in the
case of a life insurance company, or of at least ten per centum of the total
amount of its net premium written during the preceding calendar year, in the
case of a company other than a life insurance company: Provided, That in either
case, such margin shall in no event be less than five hundred thousand pesos:
and Provided, further, That the term"paid-up capital" shall not include
contributed surplus and capital paid in excess of par value. Such assets,
liabilities and reserves shall exclude assets, liabilities and reserves included in
separate accounts established in accordance with section two hundred thirtyseven. Whenever the aforementioned margin be found to be less than that
herein required to be maintained, the Commissioner shall forthwith direct the
company to make good any such deficiency by cash, to be contributed by all
stockholders of record in proportion to their respective interest, and paid to the
treasurer of the company, within fifteen days from receipt of the
order: Provided, That the company in the interim shall not be permitted to take
any new risk of any kind or character unless and until it make good any such
deficiency:Provided, further, that a stockholder who aside from paying the
contribution due from him, pays the contribution due from the another
stockholder by reason of the failure or refusal of the latter to do so, shall have a

lien on the certificates of stock of the insurance company concerned appearing

in its books in the name of the defaulting stockholder on the date of default, as
well as on any interests or dividends that have accrued or will accrue to the said
certificates of stock, until the corresponding payment or reimbursement is made
by the defaulting stockholder. (As amended by Presidential Decree No. 1455).
Sec. 195. No domestic insurance corporation shall declare or distribute any
dividend on its outstanding stocks except from profits attested in a sworn
statement to the Commissioner by the president or treasurer of the corporation
to be remaining on hand after retaining unimpaired:chanroblesvirtuallawlibrary
(a) The entire paid-up capital stock;
(b) The margin of solvency required by section one hundred ninety-four;
(c) In the case of life insurance corporation, the legal reserve fund required by
section two hundred eleven;
(d) In the case of corporations other than life, the legal reserve fund required by
section two hundred thirteen;
(e) A sum sufficient to pay all net losses reported, or in the course of settlement,
and all liabilities for expenses and taxes.
Any dividend declared or distributed under the preceding paragraph shall be
reported to the Commissioner within thirty days after such declaration or
distribution.
If the Commissioner finds that any such corporation has declared or distributed
any such dividend in violation of this section, he may order such corporation to
cease and desist from doing business until the amount of such dividend or the
portion thereof in excess of the amount allowed under this section has been
restored to said corporation.
Title 3
ASSETS
Sec. 196. In any determination of the financial condition of any insurance
company doing business in the Philippines, there shall be allowed and admitted
as assets only such assets owned by the insurance company concerned and
which consist of:chanroblesvirtuallawlibrary
1. Cash in the possession of the insurance company or in transit under its
control, and the true and duly verified balance of any deposit of such company in
a financially sound commercial bank or trust company.
2. Investments in securities, including money market instruments, and in real
property acquired or held in accordance with and subject to the applicable
provisions of this Code and the income realized therefrom or accrued thereon.
3. Loans granted by the insurance company concerned to the extent of that
portion thereof adequately secured by non-speculative assets with readily
realizable values in accordance with and subject to the limitations imposed by
applicable provisions of this Code.
4. Policy loans and other policy assets and liens on policies, contracts or
certificates of a life insurance company, in an amount not exceeding legal

reserves and other policy liabilities carried on each individual life insurance
policy, contract or certificate.
5. The net amount of uncollected and deferred premiums and annuity
considerations in the case of a life insurance company which carries the full
mean tabular reserve liability.
6. Reinsurance recoverable by the ceding insurer:chanroblesvirtuallawlibrary
(a) from an insurer authorized to transact business in this country, the full
amount thereof; or
(b) from an insurer not authorized in this country, in an amount not exceeding
the liabilities carried by the ceding insurer for amounts withheld under a
reinsurance treaty with such unauthorized insurer as security for the payment of
obligations thereunder if such funds are held subject to withdrawal by, and
under the control of, the ceding insurer. The Commissioner may prescribe the
conditions under which a ceding insurer may be allowed credit, as an asset or as
a deduction from loss and unearned premium reserves, for reinsurance
recoverable from an insurer not authorized in this country but which presents
satisfactory evidence that it meets the applicable standards of solvency required
in this country.
7. Funds withheld by a ceding insurer under a reinsurance treaty, provided
reserves for unpaid losses and unearned premiums are adequately provided.
8. Deposits or amounts recoverable from underwriting associations, syndicates
and reinsurance funds, or from any suspended banking institution, to the extent
deemed by the Commissioner to be available for the payment of losses and
claims and values to be determined by him.
9. Electronic data processing machines, as may be authorized by the
Commissioner to be acquired by the insurance company concerned, the
acquisition cost of which to be amortized in equal annual amounts within a
period of five years from the date of acquisition thereof.
10. Other assets, not inconsistent with the provisions of paragraphs 1 to 9
hereof, which are deemed by the Commissioner to be readily realizable and
available for the payment of losses and claims at values to be determined by
him.
Sec. 197. In addition to such assets as the Commissioner may from time to time
determine to be non-admitted assets of insurance companies doing business in
the Philippines, the following assets shall in no case be allowed as admitted
assets of an insurance company doing business in the Philippines, in any
determination of its financial condition:chanroblesvirtuallawlibrary
1. Goodwill, trade names, and other like intangible assets.
2. Prepaid or deferred charges for expenses and commissions paid by such
insurance company.
3. Advances to officers (other than policy loans), which are not adequately

secured and which are not previously authorized by the Commissioner, as well
as advances to employees, agents, and other persons on mere personal security.
4. Shares of stock of such insurance company, owned by it, or any equity therein
as well as loans secured thereby, or any proportionate interest in such shares of
stock through the ownership by such insurance company of an interest in
another corporation or business unit.
5. Furniture, furnishing, fixtures, safes, equipment, library, stationery, literature,
and supplies.
6. Items of bank credits representing checks, drafts or notes returned unpaid
after the date of statement.
7. The amount, if any, by which the aggregate value of investments as carried in
the ledger assets of such insurance company exceeds the aggregate value
thereof as determined in accordance with the provisions of this Code and/or the
rules of the Commissioner.
All non-admitted assets and all other assets of doubtful value or character
included as ledger or non-ledger assets in any statement submitted by an
insurance company to the Commissioner, or in any insurance examiner's report
to him, shall also be reported, to the extent of the value disallowed as
deductions from the gross assets of such insurance company, except where the
Commissioner permits a reserve to be carried among the liabilities of such
insurance company in lieu of any such deduction.
Title 4
INVESTMENTS
Sec. 198. No insurance company shall loan any of its money or deposits to any
person, corporation or association, except upon first mortgage or deeds of trust
of unencumbered, improved or unimproved real estate, including condominiums,
in cities and centers of population of municipalities in the Philippines when the
amount of such loan is not in excess of seventy per centum of the market value
of such real estate; or upon the security of first mortgages or deeds of trust of
actually cultivated, improved and unencumbered agricultural lands in the
Philippines when the amount of such loan is not in excess of forty per centum of
the market value of such land; or upon the purchase money mortgages or like
securities received by it upon the sale or exchange of real property acquired
pursuant to sections two hundred and two hundred two; or upon bonds or other
evidences of debt of the Government of the Philippines or its political
subdivisions authorized by law to issue bonds, or upon bonds or other evidences
of debt of government-owned or controlled corporations and instrumentalities
including the Central Bank or upon obligations issued or guaranteed by the
International Bank for Reconstruction and Development; or upon stocks, bonds
or other evidences of debt as are specified in section two hundred.
A life insurance company, however, may lend to any of its policyholders upon the
security of the value of its policy such sum as may be determined pursuant to
the provisions of the policy.

Loans granted upon the security of real estate for a period longer than five years
shall be amortized in monthly, quarterly, semi-annual or annual installments;
Provided, That no such loans shall have a maturity in excess of twenty years.
The phrase "improved real estate" used above is hereby defined to mean land
with permanent building or buildings erected or being erected thereon. Except
as otherwise approved by the Commissioner, in case the building or buildings on
land do not belong to the owner of the latter, no loan shall be granted on the
security of the real estate in question unless both the owner of the building or
buildings and the owner of the land sign the deed of mortgage, and unless the
owner of the land is the Government of the Philippines or one of its political
subdivisions, in which event the owner is not required to sign the deed of
mortgage.
Sec. 199. No loan by any insurance company on the security of real estate shall
be made unless the title to such real estate shall have first been registered in
accordance with the existing Land Registration Act, or shall be a titulo real duly
registered, or have been previously registered under the provisions of the
existing Mortgage Law.
Sec. 200. (1) An insurance company may purchase, hold, own and convey such
property, real and personal, as may have been mortgaged, pledged, or conveyed
to it in good faith in trust for its benefit by reason of money loaned by it in
pursuance of the regular business of the company, and such real or personal
property as may have been purchased by it at sales under pledges, mortgages or
deeds of trust for its benefit on account of money loaned by it; and such real and
personal property as may have been conveyed to it by borrowers in satisfaction
and discharge of loans made by the company to them: Provided, however, That
any real estate purchased by an insurance company in payment or by reason of
any loan made by it shall be sold by the company within twenty years after the
title thereto has been vested in it.
(2) An insurance company may purchase, hold, own and convey real and
personal property as follows:chanroblesvirtuallawlibrary
(a) The lot with building thereon in which the company conducts and carries on
its business.
(b) Bonds or other evidences of debt of the Government of the Philippines or its
political subdivisions authorized by law to issue bonds at the reasonable market
value thereof.
(c) Bonds or other evidences of debt of the government-owned or controlled
corporations and entities, including the Central Bank.
(d) Bonds, debentures or other evidences of indebtedness of any solvent
corporations or institution created or existing under the laws of the
Philippines: Provided, however, That the issuing, assuming or guaranteeing
entity or its predecessors shall not have defaulted in the payment of interest on
any of its securities and that during each of any three including the last two of
the five fiscal years next preceding the date of acquisition by such insurance

company of such bonds, debentures, or other evidences of indebtedness, the net

earnings of the issuing, assuming or guaranteeing institution available for its
fixed charges, as hereinafter defined, shall have been not less than one and onequarter times the total of its fixed charges for such year; and Provided, further,
that no life insurance company shall invest in or loan upon the obligations of any
one institution in the kinds permitted under this sub-section an amount in
excess of twenty-five per centum of the total admitted assets of such insurer as
of December thirty-first next preceding the date of such investment.
As used in this sub-section the term "net earnings available for fixed
charges" shall mean net income after deducting operating and maintenance
expenses, taxes other than income taxes, depreciation and depletion; but
excluding extraordinary non-recurring items of income or expense appearing in
the regular financial statement of the issuing, assuming or guaranteeing
institution. The term "fixed charges" shall include interest on funded and
unfunded debt, amortization of debt discount, and rentals for leased properties.
(e) Preferred or guaranteed stocks of any solvent corporation or institution
created or existing under the laws of the Philippines: Provided, however, That
the issuing, assuming or guaranteeing entity or its predecessors has paid
regular dividends upon its preferred or guaranteed stocks for a period of at least
three years next preceding the date of investment in such preferred or
guaranteed stock: Provided, further, That if the stocks are guaranteed, the
amount of stocks so guaranteed is not excess of fifty per centum of the amount
of the preferred or common stocks, as the case may be, of the guaranteeing
corporation: and Provided, finally, That no life insurance company shall invest in
or loan upon obligations of any one institution in the kinds permitted under this
sub-section an amount in excess of ten per centum of the total admitted assets
of such insurer as of December thirty-first next preceding the date of such
investment.
(f) Common stocks of any solvent corporation or institution created or existing
under the laws of the Philippines upon which regular dividends shall have been
paid for the three years next preceding the purchase of such stock: Provided,
however, That no life insurance company shall invest in or loan upon the
obligations of any one corporation or institution in the kinds permitted under
this sub-section an amount in excess of ten per centum of the total admitted
assets of such insurer as of December thirty-first next preceding the date of
such investment.
(g) Certificates, notes and other obligations issued by the trustees or receivers
of any institution created or existing under the laws of the Philippines which, or
the assets of which, are being administered under the direction of any court
having jurisdiction; Provided, however, That such certificates, notes or other
obligations are adequately secured as to principal and interests.
(h) Equipment trust obligations or certificates which are adequately secured or
other adequately secured instruments evidencing an interest in equipment

wholly or in part within the Philippines: Provided, however, That there is a right
to receive determined portions of rental, purchase or other fixed obligatory
payments for the use or purchase of such equipment.
(i) Any obligation of any corporation or institution created or existing under the
laws of the Philippines which is, on the date of acquisition by the insurer,
adequately secured and has qualities and characteristics wherein the speculative
elements are not predominant.
(j) Such other securities as may be approved by the Commissioner.
(3) Any domestic insurer which has outstanding insurance, annuity or
reinsurance contracts in currencies other than the national currency of the
Philippines may invest in, or otherwise acquire or loan upon securities and
investments in such currency which are substantially of the same kinds, classes
and investment grades as those eligible for investment under the foregoing
subdivisions of this section; but the aggregate amount of such investment and of
such cash in such currency which is at anytime held by such insurer shall not
exceed one and one-half times the amount of its reserves and other obligations
under such contracts or the amount which such insurer is required by the law of
any country or possession outside the Republic of the Philippines to be invest in
such country or possession, whichever shall be greater.
Sec. 201. An insurance company may (1) invest in equities of other financial
institutions, and (2) engage in the buying and selling of short-term debt
instruments: Provided, That any or all of such investments shall be with the prior
approval of the Commissioner.
Sec. 202. Any life insurance company may:chanroblesvirtuallawlibrary
(a) Acquire or construct housing projects and, in connection with any such
project, may acquire land or any interest therein by purchase, lease or
otherwise, or use land acquired pursuant to any other provision of this Code.
Such company may thereafter own, maintain, manage, collect or receive income
from, or sell and convey, any land or interest therein so acquired and any
improvements thereon. The aggregate book value of the investments of any such
company in all such projects shall not exceed at the time of such investments
twenty five per centum of the total admitted assets of such company on the
thirty-first day of December next preceding;
(b) Acquire real property, other than property to be used primarily for providing
housing and property for accommodation of its own business, as an investment
for the production of income, or may acquire real property to be improved or
developed for such investment purpose pursuant to a program therefor, subject
to the condition that the cost of each parcel of real property so acquired under
the authority of this paragraph (b), including the estimated cost to the company
of the improvement or development thereof, when added to the book value of all
other real property held by its pursuant to this paragraph (b), shall not exceed
twenty-five per centum of its admitted assets as of the thirty-first day of
December next preceding.

Sec. 203. Every domestic insurance company shall, to the extent of an amount
equal in value to twenty-five per centum of the minimum paid-up capital
required under section one hundred eighty-eight, invest its funds only in
securities, satisfactory to the Commissioner, consisting of bonds or other
evidences of debt of the Government of the Philippines or its political
subdivisions or instrumentalities, or of government-owned or controlled
corporations
and
entities,
including
the
Central
Bank
of
the
Philippines:Provided, That such investments shall at all times be maintained free
from any lien or encumbrance; and Provided, further, That such securities shall
be deposited with and held by the Commissioner for the faithful performance by
the depositing insurer of all its obligations under its insurance contracts. The
provisions of section one hundred ninety-two shall, so far as practicable, apply
to the securities deposited under this section.
Except as otherwise provided in this Code, no judgment creditor or other
claimant shall have the right to levy upon any of the securities of the insurer
held on deposit under this section or held on deposit pursuant to the
requirement of the Commissioner. (As amended by Presidential Decree No.
1455).
Sec. 204. After satisfying the requirements contained in the preceding section,
any domestic non-life insurance company, shall invest, to an amount prescribed
below, its funds in, or otherwise, acquire or loan upon, only the classes of
investments described in section two hundred, including securities issued by
any "registered enterprise", as this term is defined in Republic Act No. 5186,
otherwise known as the Investment Incentives Act, and such other classes of
investments as may be authorized by the Commissioner for purposes of this
section: Provided, That (a) no more than twenty per centum of the net worth of
such company as shown by its latest financial statement approved by the
Commissioner shall be invested in the lot and building in which the insurance
company conducts its business and (b) the total investment of an insurance
company in any registered enterprise shall not exceed twenty per centum of the
net worth of said insurance company as shown by its aforesaid financial
statement nor twenty per centum of the paid-up capital of the registered
enterprise excluding the intended investment, unless previously authorized by
the Commissioner: and,Provided, further, That such investments free from any
lien or encumbrance, shall be at least equal in amount to the aggregate amount
of (a) its legal reserve, as provided in section two hundred thirteen, and (b) its
reserve fund held for reinsurance as provided for in the pertinent treaty
provision in the case of reinsurance ceded to authorized insurers. (As amended
by Presidential Decree No.1455).
Sec. 205. After satisfying the requirements contained in sections one hundred
ninety-one, one hundred ninety-three, two hundred three and two hundred four,
any non-life insurance company may invest any portion of its funds representing
earned surplus in any of the investments described in sections one hundred

ninety-eight, two hundred and two hundred one, or in any securities issued by
a "registered enterprise" mentioned in the preceding sections: Provided, That no
investment in stocks or bonds of any single entity shall in the aggregate, exceed
twenty per centum of the net worth of the insurance company as shown in its
latest financial statement approved by the Commissioner or twenty per centum
of the paid-up capital of the issuing company, whichever is lesser, unless
otherwise approved by the Commissioner.
Sec. 206. After satisfying the minimum capital investment required in section
two hundred three, any life insurance company may invest its legal policy
reserve, as provided in section two hundred eleven or in section two hundred
twelve, in any of the classes of securities or types of investments described in
sections one hundred ninety-eight, two hundred, two hundred one and two
hundred two, subject to the limitations therein contained, and in any securities
issued by any "registered enterprise" mentioned in section two hundred four,
free from any lien or encumbrance, in such amounts as may be approved by the
Commissioner. Such company may likewise invest any portion of its earned
surplus in the aforesaid securities or investments subject to the aforesaid
limitations.
Sec. 207. Any investment made in violation of the applicable provisions of this
title shall be considered non-admitted assets.
Sec. 208. (1) All bonds or other evidences of indebtedness having a fixed term
and rate of interest and held by any life insurance company authorized to do
business in this country, if amply secured and if not in default as to principal or
interest, shall be valued as follows: If purchased at par, at the par value; if
purchased above or below par, on the basis of the purchase price adjusted so as
to bring the value to par at maturity and so as to yield in the meantime the
effective rate of interest at which the purchase was made, or in the discretion of
the Commissioner, on the basis of the method of calculation commonly known as
the pro-rata method. In applying the foregoing rule the purchase price shall in
no case be taken at a higher figure than the actual market value at the time of
acquisition. The Commissioner shall have the power to determine the eligibility
of any such investments for valuation on the basis of amortization, and may by
regulation prescribe or limit the classes of securities so eligible for amortization.
All bonds or other evidences of indebtedness which in the judgment of the
Commissioner are not amply secured shall not be eligible for amortization and
shall be valued in accordance with paragraph two. The Commissioner may, if he
finds that the interest of policy holders so permit or require, by official
regulation permit or require any class or classes of insurers, other than life
insurance companies, authorized to do business in this country, to value their
bonds or other evidences of indebtedness in accordance with the foregoing rule.
(2) The investments of all insurers authorized to do business in this country,
except securities subject to amortization and except as otherwise provided in
this chapter, shall be valued, in the discretion of the Commissioner, at their

market value, or at their appraised value, or at prices determined by him as

representing their fair market value. If the Commissioner finds that in view of
the character of investments of any insurer authorized to do business in this
country it would be prudent for such insurer to establish a special reserve for
possible losses or fluctuations in the values of its investments, he may require
such insurer to establish such reserve, reasonable in amount, and may require
that such reserve be maintained and reported in any statement or report of the
financial condition of such insurer. The Commissioner may, in connection with
any examination or required financial statement of an authorized insurer,
require such insurer to furnish him complete financial statements and audited
report of the financial condition of any corporation of which the securities are
owned wholly or partly by such insurer and may cause an examination to be
made of any subsidiary or affiliate of such insurer.
(3) The stock of an insurance company shall be valued at the lesser of its market
value or its book value as shown by its last approved annual statement or the
last report on examination, whichever is more recent. The book value of a share
of common stock of an insurance company shall be ascertained by dividing (a)
the amount of its capital and surplus less the value of all of its preferred stock, if
any, outstanding, by (b) the number of shares of its common stock issued and
outstanding.
Notwithstanding the foregoing provisions, an insurer may, at its option, value its
holdings of stock in a subsidiary insurance company in an amount not less than
acquisition cost if such acquisition cost is less than the value determined as
hereinbefore provided.
(4) Real estate required by foreclosure or by deed in lieu thereof, in the absence
of a recent appraisal deemed by the Commissioner to be reliable, shall not be
valued at an amount greater than the unpaid principal of the defaulted loan at
the date of such foreclosure or deed, together with any taxes and expenses paid
or incurred by such insurer at such time in connection with such acquisition, and
the cost of additions or improvements thereafter paid by such insurer and any
amount or amounts thereafter paid by such insurer on any assessments levied
for improvements in connection with the property. chanrobles virtual law
library
(5) Purchase money mortgages received on dispositions of real property held
pursuant to section one hundred ninety-eight shall be valued in an amount
equivalent to ninety per centum of the value of such real property. Purchase
money mortgages received on disposition of real property otherwise held shall
be valued in an amount not exceeding ninety per centum of the value of such
real property as determined by an appraisal made by an appraiser at or about
the time of disposition of such real property.
(6) The stock of a subsidiary of an insurer shall be valued on the basis of the
greater of (i) the value of only such subsidiary of the assets of such subsidiary
as would constitute lawful investments for the insurer if acquired or held directly

by the insurer or (ii) such other value determined pursuant to standards and
cumulative limitations, contained in a regulation to be promulgated by the
Commissioner.
(7) Notwithstanding any provision contained in this section or elsewhere in this
chapter, if the Commissioner find that the interests of policyholders so permit or
require, he may permit or require any class or classes of insurers authorized to
do business in this country to value their investments or any class or classes
thereof as of any date heretofore or hereafter in accordance with any applicable
valuation or method.
Sec. 209. It shall be the duty of the officers of the insurance company to report
within the first fifteen days of every month all such investments as may be made
by them during the preceding month, and the Commissioner may, if such
investments or any of them seem injudicious to him, require the sale or disposal
of the same. The report shall also include a list of investments sold or disposed
of by the company during the same period.
Title 5
RESERVES
Sec. 210. Every life insurance company, doing business in the Philippines, shall
annually make a valuation of all policies, additions thereto, unpaid dividends,
and all other obligations outstanding on the thirty-first day of December of the
preceding year. All such valuations shall be made upon the net premiums basis,
according to the standard adopted by the company, which standard shall be
stated in its annual report.
Such standard of valuation whether of the net level premium, full preliminary
term, any modified preliminary term, or select and ultimate reserve basis, shall
be according to a standard table of mortality with interest at not more than six
per centum compound interest. When the preliminary term basis is used, the
term insurance shall be limited to the first policy year.
The results of such valuations shall be reported to the Commissioner on or
before the thirtieth day of April of each year accompanied by a sworn statement
of the company's actuary certifying to the figures and stating upon what
mortality table it is based, upon what rate of interest the valuation is made, and
the methods used in arriving at the result obtained.
Sec. 211. The aggregate net value so ascertained of the policies of such company
shall be deemed its reserve liability, to provide for which it shall hold funds in
secure investments equal to such net value, above all its other liabilities; and it
shall be the duty of the Commissioner, after having verified, to such an extent as
he may deem necessary, the valuation of all policies in force, to satisfy himself
that the company has such amount in safe legal securities after all other debts
and claims against it have been provided for.
The reserve liability for variable contracts defined in section two hundred thirtytwo shall be established in accordance with actuarial procedures that recognize
the variable nature of the benefits provided, and shall be approved by the

Commissioner.
Sec. 212. Every domestic life insurance company, conducted on the mutual plan
or a plan in which policyholders are by the terms of their policies entitled to
share in the profits or surplus shall, on all policies of life insurance heretofore or
hereafter issued, under the conditions of which the distribution of surplus is
deferred to a fixed or specified time and contingent upon the policy being in
force and the insured living at that time, annually ascertain the amount of the
surplus to which all such policies as separate class are entitled, and shall
annually apportion to such policies as a class the amount of the surplus so
ascertained, and carry the amount of such apportioned surplus, plus the actual
interest earnings and accretions to such fund, as a distinct and separate liability
to such class of policies on and for which the same was accumulated, and no
company or any of its officers shall be permitted to use any part of such
apportioned surplus fund for any purpose whatsoever other than for the express
purpose for which the same was accumulated.
Sec. 213. Every insurance company, other than life, shall maintain a reserve for
unearned premiums on its policies in force, which shall be charged as a liability
in any determination of its financial condition. Such reserve shall be equal to
forty per centum of the gross premiums, less returns and cancellations, received
on policies or risks having not more than a year to run, and pro rata on all gross
premiums received on policies or risks having more than a year to run: Provided,
That for marine cargo risks the reserve shall be equal to forty per centum of the
premiums written in the policies upon yearly risks, and the full amount of the
premiums written during the last two months of the calendar year upon all other
marine risks not terminated.
Sec. 214. In addition to its liabilities and reserves on contracts of insurance
issued by it, every insurance company shall be charged with the estimated
amount of all of its other liabilities, including taxes, expenses and other
obligations due or accrued at the date of statement, and including any special
reserves required by the Commissioner pursuant to the provisions of this Code.
Title 6
LIMIT OF SINGLE RISK
Sec. 215. No insurance company other than life, whether foreign or domestic,
shall retain any risk on any one subject of insurance in an amount exceeding
twenty per centum of its net worth. For purposes of this section, the
term "subject of insurance" shall include all properties or risks insured by the
same insurer that customarily are considered by non-life company underwriters
to be subject to loss or damage from the same occurrence of any hazard insured
against.
Reinsurance ceded as authorized under the succeeding title shall be deducted in
determining the risk retained. As to surety risk, deduction shall also be made of
the amount assumed by any other company authorized to transact surety
business and the value of any security mortgage, pledged, or held subject to the

surety's control and for the surety's protection.

Title 7
REINSURANCE TRANSACTIONS
Sec. 216. An insurance company doing business in the Philippines may accept
reinsurances only of such risks, and retain risk thereon within such limits, as it is
otherwise authorized to insure.
Sec. 217. No insurance company doing business in the Philippines shall cede all
or part of any risks situated in the Philippines by way of reinsurance directly to
any foreign insurer not authorized to do business in the Philippines unless such
foreign insurer or, if the services of a non-resident broker are utilized, such nonresident broker is represented in the Philippines by a resident agent duly
registered with the Commissioner as required in this Code.
The resident agent of such unauthorized foreign insurer or non- resident broker
shall immediately upon registration furnish the Commissioner with the annual
statement of such insurer, or of such company or companies where such broker
may place Philippine business as of the year preceding such registration, and
annually thereafter as soon as available.
Sec. 218. All insurance companies, both life and non-life, authorized to do
business in the Philippines shall cede their excess risks to other companies
similarly authorized to do business in the Philippines in such amounts and under
such arrangements as would be consistent with sound underwriting practices
before they enter into reinsurance arrangements with unauthorized foreign
insurers.
Sec. 219. Any insurance company doing business in the Philippines desiring to
cede their excess risks to foreign insurance or reinsurance companies not
authorized to transact business in the Philippines may do so under the following
conditions:chanroblesvirtuallawlibrary
(1) Except in facultative reinsurance and excess of loss covers, the full amount
of the reserve fund required by law shall be set up in the books of and held by
the ceding company for so long as the risk concerned is in force:Provided, That
in case of facultative insurance, the ceding company shall show to the
satisfaction of the Commissioner that the Philippine market cannot provide the
facilities sought abroad.
(2) The reserve fund withheld shall be invested in bonds or other evidences of
debt of the Government of the Philippines or its political subdivisions or
instrumentalities, or of government-owned or controlled corporations and
entities, including the Central Bank, and/or other securities acceptable under
section two hundred.
Should any reinsurance agreement be for any reason cancelled or terminated,
the ceding company concerned shall inform the Commissioner in writing of such
cancellation or termination within thirty days from the date of such cancellation
or termination or from the date notice or information of such cancellation or
termination is received by such company as the case may be.

Sec. 220. Every insurance company authorized to do business in the Philippines

shall report to the Commissioner on forms prescribed by him the particulars of
reinsurance treaties as of the first day of January of the year following the
approval of this Code and shall thereafter similarly report to the Commissioner
particulars of any new treaties or changes in existing treaties.
Sec. 221. No credit shall be allowed as an admitted asset or as a deduction from
liability, to any ceding insurer for reinsurance made, ceded, renewed, or
otherwise becoming effective after January first, nineteen hundred seventy-five,
unless the reinsurance shall be payable by the assuming insurer on the basis of
the liability of the ceding insurer under the contract or contracts reinsured
without diminution because of the insolvency of the ceding insurer nor unless
under the contract or contracts of reinsurance the liability for such reinsurance
is assumed by the assuming insurer or insurers as of the same effective date;
nor unless the reinsurance agreement provides that payments by the assuming
insurer shall be made directly to the ceding insurer or to its liquidator, receiver,
or statutory successor except (a) where the contract specifically provides
another payee of such reinsurance in the event of the insolvency of the ceding
insurer and (b) where the assuming insurer with the consent of the direct
insured or insureds has assumed such policy obligations of the ceding insurer as
direct obligations of the assuming insurer to the payees under such policies and
in substitution for the obligations of the ceding insurer to such payees.
Sec. 222. No life insurance company doing business in the Philippines shall
reinsure its whole risk on any individual life or joint lives, or substantially all of
its insurance in force, without having first obtained the written permission of the
Commissioner.
Title 8
ANNUAL STATEMENT
Sec. 223. Every insurance company doing business in the Philippines shall
terminate its fiscal period on the thirty-first day of December every year, and
shall annually on or before the thirtieth day of April of each year render to the
Commissioner a statement signed and sworn to by the chief officer of such
company showing, in such form and details as may be prescribed by the
Commissioner, the exact condition of its affairs on the preceding thirty-first day
of December.
Any entry in the statement which is found to be false shall constitute a
misdemeanor and the officer signing such statement shall be subject to the
penalty provided for under section four hundred nineteen.
Sec. 224. Every insurance company authorized under title ten of this chapter to
issue, deliver or use variable contracts shall annually file with the Commissioner
separate annual statement of its separate variable accounts. Such statement
shall be on a form prescribed or approved by the Commissioner and shall include
details as to all of the income, disbursements, assets and liability items of and
associated with the said separate variable accounts. Said statement shall be

under oath of two officers of the company and shall be filed simultaneously with
the annual statement required by the preceding section.
Sec. 225. Within thirty days after receipt of the annual statement approved by
the Commissioner, every insurance company doing business in the Philippines
shall publish in two newspapers of general circulation in the City of Manila, one
published in English and one in Pilipino, a full sypnosis of its annual financial
statement showing fully the conditions of its business, and setting forth its
resources and liabilities.
Title 9
POLICY FORMS
Sec. 226. No policy, certificate or contract of insurance shall be issued or
delivered within the Philippines unless in the form previously approved by the
Commissioner, and no application form shall be used with, and no rider, clause,
warranty or endorsement shall be attached to, printed or stamped upon such
policy, certificate or contract unless the form of such application, rider, clause,
warranty or endorsement has been approved by the Commissioner.
Sec. 227. In the case of individual life or endowment insurance, the policy shall
contain in substance the following conditions:chanroblesvirtuallawlibrary
(a) A provision that the policyholder is entitled to a grace period either of thirty
days or of one month within which the payment of any premium after the first
may be made, subject at the option of the insurer to an interest charge not in
excess of six per centum per annum for the number of days of grace elapsing
before the payment of the premium, during which period of grace the policy
shall continue in full force, but in case the policy becomes a claim during the said
period of grace before the overdue premium is paid, the amount of such
premium with interest may de deducted from the amount payable under the
policy in settlement;
(b) A provision that the policy shall be incontestable after it shall have been in
force during the lifetime of the insured for a period of two years from its date of
issue as shown in the policy, or date of approval of last reinstatement, except for
non-payment of premium and except for violation of the conditions of the policy
relating to military or naval service in time of war;
(c) A provision that the policy shall constitute the entire contract between the
parties, but if the company desires to make the application a part of the contract
it may do so provided a copy of such application shall be indorsed upon or
attached to the policy when issued, and in such case the policy shall contain a
provision that the policy and the application therefor shall constitute the entire
contract between the parties;
(d) A provision that if the age of the insured is considered in determining the
premium and the benefits accruing under the policy, and the age of the insured
has been misstated, the amount payable under the policy shall be such as the
premium would have purchased at the correct age;
(e) If the policy is participating, a provision that the company shall periodically

ascertain and apportion any divisible surplus accruing on the policy under
conditions specified therein;
(f) A provision specifying the options to which the policyholder is entitled to in
the event of default in a premium payment after three full annual premiums
shall have been paid. Such option shall consist of:chanroblesvirtuallawlibrary
(1) A cash surrender value payable upon surrender of the policy which shall not
be less than the reserve on the policy, the basis of which shall be indicated, for
the then current policy year and any dividend additions thereto, reduced by a
surrender charge which shall not be more than one-fifth of the entire reserve or
two and one-half per centum of the amount insured and any dividend additions
thereto;
(2) One or more paid-up benefits on a plan or plans specified in the policy of
such value as may be purchased by the cash surrender value;
(g) A provision that at anytime after a cash surrender value is available under
the policy and while the policy is in force, the company will advance, on proper
assignment or pledge of the policy and on sole security thereof, a sum equal to,
or at the option of the owner of the policy, less than the cash surrender value on
the policy, at a specified rate of interest, not more than the maximum allowed by
law, to be determined by the company from time to time, but not more often
than once a year, subject to the approval of the Commissioner; and that the
company will deduct from such loan value any existing indebtedness on the
policy and any unpaid balance of the premium for the current policy year, and
may collect interest in advance on the loan to the end of the current policy year,
which provision may further provide that such loan may be deferred for not
exceeding six months after the application therefor is made;
(h) A table showing in figures cash surrender values and paid-up options
available under the policy each year upon default in premium payments, during
at least twenty years of the policy beginning with the year in which the values
and options first become available, together with a provision that in the event of
the failure of the policyholder to elect one of the said options within the time
specified in the policy, one of said options shall automatically take effect and no
policyholder shall ever forfeit his right to same by reason of his failure to so
elect;
(i) In case the proceeds of a policy are payable in installments or as an annuity,
a table showing the minimum amounts of the installments or annuity payments;
(j) A provision that the policyholder shall be entitled to have the policy
reinstated at any time within three years from the date of default of premium
payment unless the cash surrender value has been duly paid, or the extension
period has expired, upon production of evidence of insurability satisfactory to
the company and upon payment of all overdue premiums and any indebtedness
to the company upon said policy, with interest rate not exceeding that which
would have been applicable to said premiums and indebtedness in the policy

years prior to reinstatement.

Any of the foregoing provisions or portions thereof not applicable to single
premium or term policies shall to that extent not be incorporated therein; and
any such policy may be issued and delivered in the Philippines which in the
opinion of the Commissioner contains provisions on any one or more of the
foregoing requirements more favorable to the policyholder than hereinbefore
required.
This section shall not apply to policies of group life or industrial life insurance.
Sec. 228. No policy of group life insurance shall be issued and delivered in the
Philippines unless it contains in substance the following provisions, or provisions
which in the opinion of the Commissioner are more favorable to the persons
insured, or at least as favorable to the persons insured and more favorable to
the policy-holders:chanroblesvirtuallawlibrary
(a) A provision that the policyholder is entitled to a grace period of either thirty
days or of one month for the payment of any premium due after the first, during
which grace period the death benefit coverage shall continue in force, unless the
policyholder shall have given the insurer written notice of discontinuance in
advance of the date of discontinuance and in accordance with the terms of the
policy. The policy may provide that the policyholder shall be liable for the
payment of a pro rata premium for the time the policy is in force during such
grace period;
(b) A provision that the validity of the policy shall not be contested, except for
non-payment of premiums after it has been in force for two years from its date
of issue; and that no statement made by any insured under the policy relating to
his insurability shall be used in contesting the validity of the insurance with
respect to which such statement was made after such insurance has been in
force prior to the contest for a period of two years during such person's lifetime
nor unless contained in written instrument signed by him;
(c) A provision that a copy of the application, if any, of the policyholder shall be
attached to the policy when issued, that all statements made by the policyholder
or by persons insured shall be deemed representations and not warranties, and
that no statement made by any insured shall be used in any contest unless a
copy of the instrument containing the statement is or has been furnished to such
person or to his beneficiary;
(d) A provision setting forth the conditions, if any, under which the insurer
reserves the right to require a person eligible for insurance to furnish evidence
of individual insurability satisfactory to the insurer as a condition to part or all of
his coverage;
(e) A provision specifying an equitable adjustment of premiums or of benefits or
of both to be made in the event that the age of a person insured has been
misstated, such provision to contain a clear statement of the method of
adjustment to be used;
(f) A provision that any sum becoming due by reason of death of the person

insured shall be payable to the beneficiary designated by the insured, subject to

the provisions of the policy in the event that there is no designated beneficiary,
as to all or any part of such sum, living at the death of the insured, and subject
to any right reserved by the insurer in the policy and set forth in the certificate
to pay at its option a part of such sum not exceeding five hundred pesos to any
person appearing to the insurer to be equitably entitled thereto by reason of
having incurred funeral or other expenses incident to the last illness or death of
the person insured;
(g) A provision that the insurer will issue to the policyholder for delivery to each
person insured an individual certificate setting forth a statement as to the
insurance protection to which he is entitled, to whom the insurance benefits are
payable, and the rights set forth in paragraphs (h), (i) and (j) following;
(h) A provision that if the insurance, or any portion of it, on a person covered
under the policy ceases because of termination of employment or of membership
in the class or classes eligible for coverage under the policy, such person shall
be entitled to have issued to him by the insurer, without evidence of insurability,
an individual policy of life insurance without disability or other supplementary
benefits, provided application for the individual policy and payment of the first
premium to the insurer shall be made within thirty days after such termination
and
provided
further
that:chanroblesvirtuallawlibrary
(1) the individual policy shall be on any one of the forms, except term insurance,
then customarily issued by the insurer at the age and for an amount not in
excess of the coverage under the group policy; and
(2) the premium on the individual policy shall be at the insurer's then customary
rate applicable to the form and amount of the individual policy, to the class of
risk to which such person then belongs, and to his age attained on the effective
date of the individual policy.
(i) A provision that if the group policy terminates or is amended so as to
terminate the insurance of any class of insured persons, every person insured
thereunder at the date of such termination whose insurance terminates and who
has been so insured for five years prior to such termination date shall be entitled
to have issued to him by the insurer an individual policy of life insurance subject
to the same limitations as set forth in paragraph (h), except that the group
policy may provide that the amount of such individual policy shall not exceed the
smaller of (a) the amount of the person's life insurance protection ceasing less
the amount of any life insurance for what he is or becomes eligible under any
group policy issued or reinstated by the same or another reinsurer within thirty
days after such termination, and (b) two thousand pesos;
(j) A provision that if a person insured under the group policy dies during the
thirty-day period within which he would have been entitled to an individual
policy issued to him in accordance with (h) and (i) above and before such

individual policy shall have become effective, the amount of life insurance which
he would have been entitled to have issued to him as an individual policy shall
be payable as a claim under the group policy whether or not application for the
individual policy or the payment of the first premium has been made;
(k) In the case of a policy issued to a creditor to insure debtors of such creditor,
a provision that the insurer will furnish to the policyholder for delivery to each
debtor insured under the policy a form which will contain a statement that the
life of the debtor is insured under the policy and that any death benefit paid
thereunder by reason of his death shall be applied to reduce or extinguish
indebtedness.
The provisions of paragraphs (f) to (j) shall not apply to policies issued to a
creditor to insure his debtors. If a group life policy is on a plan of insurance
other than term, it shall contain a non-forfeiture provision or provisions which in
the opinion of the Commissioner is or are equitable to the insured or the
policyholder: Provided, That nothing herein contained shall be so construed as to
require group life policies to contain the same non-forfeiture provisions as are
required of individual life policies.
Sec. 229. The term "industrial life insurance" as used in this Code shall mean
that form of life insurance under which the premiums are payable either monthly
or oftener, if the face amount of insurance provided in any policy is not more
than five hundred times that of the current statutory minimum daily wage in the
City of Manila, and if the words "industrial policy" are printed upon the policy as
part of the descriptive matter.
An industrial life policy shall not lapse for non-payment of premium if such nonpayment was due to the failure of the company to send its representative or
agent to the insured at the residence of the insured or at some other place
indicated by him for the purpose of collecting such premium: Provided, That the
provisions of this paragraph shall not apply when the premium on the policy
remains unpaid for a period of three months or twelve weeks after the grace
period has expired.
Sec. 230. In the case of industrial life insurance, the policy shall contain in
substance the following provisions:chanroblesvirtuallawlibrary
(a) A provision that the insured is entitled to a grace period of four weeks within
which the payment of any premium after the first may be made, except that
where premiums are payable monthly, the period of grace shall be either one
month or thirty days; and that during the period of grace, the policy shall
continue in full force, but if during such grace period the policy becomes a claim,
then any overdue and unpaid premiums may be deducted from any amount
payable under the policy in settlement;
(b) A provision that the policy shall be incontestable after it has been in force
during the lifetime of the insured for a specified period, not more than two years
from its date of issue, except for non-payment of premiums and except for
violation of the conditions of the policy relating to naval or military service, or

services auxiliary thereto, and except as to provisions relating to benefits in the

event of disability as defined in the policy, and those granting additional
insurance specifically against death by accident or by accidental means, or to
additional insurance against loss of, or loss of use of, specific members of the
body;
(c) A provision that the policy shall constitute the entire contract between the
parties, or if a copy of the application is endorsed upon and attached to the
policy when issued, a provision that the policy and the application therefor shall
constitute the entire contract between the parties, and in the latter case, a
provision that all statements made by the insured shall, in the absence of fraud,
be deemed representations and not warranties;
(d) A provision that if the age of the person insured, or the age of any person,
considered in determining the premium, or the benefits accruing under the
policy, has been misstated, any amount payable or benefit accruing under the
policy shall be such as the premium paid would have purchased at the correct
age;
(e) A provision that if the policy is a participating policy, the company shall
periodically ascertain and apportion any divisible surplus accruing on the policy
under the conditions specified therein;
(f) A provision that in the event of default in premium payments after three full
years' premiums have been paid, the policy shall be converted into a stipulated
form of insurance, and that in the event of default in premium payments after
five full years' premiums have been paid, a specified cash surrender value shall
be available, in lieu of the stipulated form of insurance, at the option of the
policyholder. The net value of such stipulated form of insurance and the amount
of such cash value shall not be less than the reserve on the policy and dividend
additions thereto, if any, at the end of the last completed policy year for which
premiums shall have been paid (the policy to specify the mortality table, rate of
interest and method of valuation adopted to compute such reserve), exclusive of
any reserve on disability benefits and accidental death benefits, less an amount
not to exceed two and one-half per centum of the maximum amount insured by
the policy and dividend additions thereto, if any, at the end of the last completed
policy year for which premiums shall have been paid (the policy to specify the
mortality table, rate of interest and method of valuation adopted to compute
such reserve), exclusive of any reserve on disability benefits and accidental
death benefits, less an amount not to exceed two and one-half per centum of the
maximum amount insured by the policy and dividend additions thereto, if any,
when the issue age is under ten years, and less an amount not to exceed two
and one-half per centum of the current amount insured by the policy and
dividend additions thereto, if any, if the issue age is ten years or older, and less
any existing indebtedness to the company on or secured by the policy;
(g) A provision that the policy may be surrendered to the company at its home
office within a period of not less than sixty days after the due date of a premium

in default for the specified cash value, provided that the insurer may defer
payment for not more than six months after the application therefor is made;
(h) A table that shows in figures the non-forfeiture benefits available under the
policy every year upon default in payment of premiums during at least the first
twenty years of the policy, such table to begin with the year in which such
values become available, and a provision that the company will furnish upon
request an extension of such table beyond the year shown in the policy;
(i) A provision that specifies which one of the stipulated forms of insurance
provided for under the provision of paragraph (f) of this section shall take effect
in the event of the insured's failure, within sixty days from the due date of the
premium in default, to notify the insurer in writing as to which one of such forms
he has selected;
(j) A provision that the policy may be reinstated at any time within two years
from the due date of the premium in default unless the cash surrender value has
been paid or the period of extended term insurance expired, upon production of
evidence of insurability satisfactory to the company and payment of arrears of
premiums with interest at a rate not exceeding six per centum per annum
payable annually;
(k) A provision that when a policy shall become a claim by death of the insured,
settlement shall be made upon receipt of due proof of death, or not later than
two months after receipt of such proof;
(l) A title on the face and on the back of the policy correctly describing its form;
(m) A space on the front or the back of the policy for the name of the beneficiary
designated by the insured with a reservation of the insured's right to designate
or change the beneficiary after the issuance of the policy. The policy may also
provide that no designation or change of beneficiary shall be binding on the
insurer until endorsed on the policy by the insurer, and that the insurer may
refuse to endorse the name of any proposed beneficiary who does not appear to
the insurer to have an insurable interest in the life of the insured. Such policy
may also contain a provision that if the beneficiary designated in the policy does
not surrender the policy with due proof of death within the period stated in the
policy, which shall not be less than thirty days after the death of the insured, or
if the beneficiary is the estate of the insured, or is a minor, or dies before the
insured, or is not legally competent to give valid release, then the insurer may
make any payment thereunder to the executor or administrator of the insured,
or to any of the insured's relatives by blood or legal adoption or connections by
marriage or to any person appearing to the insurer to be equitably entitled
thereto by reason of having incurred expense for the maintenance, medical
attention or burial of the insured; and
(n) A provision that when an industrial life insurance policy is issued providing
for accidental or health benefits, or both, in addition to life insurance, the
foregoing provisions shall apply only to the life insurance portion of the policy.
Any of the foregoing provisions or portions thereof not applicable to non-

participating or term policies shall to that extent not be incorporated therein.

The foregoing provisions shall not apply to policies issued or granted pursuant to
the non-forfeiture provisions prescribed in provisions of paragraphs (f) and (i)
of this section, nor shall provisions of paragraphs (f), (g), (h), and (i) hereof be
required in term insurance of twenty years or less but such term policies shall
specify the mortality table, rate of interest, and method of computing reserves.
Sec. 231. No policy of industrial life insurance shall be issued or delivered in the
Philippines
if
it
contains
any
of
the
following
provisions:chanroblesvirtuallawlibrary
(a) A provision that gives the insurer the right to declare the policy void because
the insured has had any disease or ailment, whether specified or not, or because
the insured has received institutional, hospital, medical or surgical treatment or
attention, except a provision which gives the insurer the right to declare the
policy void if the insured has, within two years prior to the issuance of the
policy, received institutional hospital, medical or surgical treatment or attention
and if the insured or the claimant under the policy fails to show that the
condition occasioning such treatment or attention was not of a serious nature or
was not material to the risk;
(b) A provision that gives the insurer the right to declare the policy void because
the insured has been rejected for insurance, unless such right be conditioned
upon a showing by the insurer that knowledge of such rejection would have led
to a refusal by the insurer to make such contract;
(c) A provision that allows the company to pay the proceeds of the policy at the
death of the insured to any person other than the named beneficiary, except in
accordance with a standard provision as specified under the provisions of
paragraph (m) of the preceding section;
(d) A provision that limits the time within which any action at law or in equity
may be commenced to less than six years after the cause of action shall accrue;
and
(e) A provision that specifies any mode of settlement at maturity of less value
than the amount insured by the policy plus dividend additions, if any, less any
indebtedness to the company on the policy and less any premium that may by
the terms of the policy be deducted, payments to be made in accordance with
the terms of the policy.
Nothing contained in this section nor in the provision of paragraph (b) of the
preceding section, relating to incontestability, shall be construed as prohibiting
the life insurance company from placing in its industrial life policies provisions
limiting its liability with respect to: (1) death resulting from aviation other than
as a fare-paying passenger on a regularly scheduled route between definitely
established airports; and (2) military or naval service: Provided, That if the
liability of the company is limited as herein provided, such liability shall in no
event be fixed at an amount less than the reserve on the policy (excluding the
reserve for any additional benefits in the event of death by accident or

accidental means or for benefits in the event of any type of disability), less any
indebtedness on or secured by such policy; nor shall any provision of this section
apply to any provision in an industrial life insurance policy for additional benefits
in the event of death by accident or accidental means.
Title 10
VARIABLE CONTRACTS
Sec. 232. (1) No insurance company authorized to transact business in the
Philippines shall issue, deliver, sell or use any variable contract in the
Philippines, unless and until such company shall have satisfied the
Commissioner that its financial and general condition and its methods of
operations, including the issue and sale of variable contracts, are not and will
not be hazardous to the public or to its policy and contract owners. No foreign
insurance company shall be authorized to issue, deliver or sell any variable
contract in the Philippines, unless it is likewise authorized to do so by the laws
of its domicile.
(2) The term "variable contract" shall mean any policy or contract on either a
group or on an individual basis issued by an insurance company providing for
benefits or other contractual payments or values thereunder to vary so as to
reflect investment results of any segregated portfolio of investments or of a
designated separate account in which amounts received in connection with such
contracts shall have been placed and accounted for separately and apart from
other investments and accounts. This contract may also provide benefits or
values incidental thereto payable in fixed or variable amounts, or both. It shall
not be deemed to be a "security" or"securities" as defined in The Securities Act,
as amended, or in the The Investment Company Act, as amended, nor subject to
regulation under said Acts.
(3) In determining the qualifications of a company requesting authority to issue,
deliver, sell or use variable contracts, the Commissioner shall always consider
the following: (a) the history, financial and general condition of the
company: Provided, That such company, if a foreign company, must have
deposited with the Commissioner for the benefit and security of its variable
contract owners in the Philippines, securities satisfactory to the Commissioner
consisting of bonds of the Government of the Philippines or its instrumentalities
with an actual market value of two million pesos; (b) the character,
responsibility and fitness of the officers and directors of the company; and (c)
the law and regulation under which the company is authorized in the state of
domicile to issue such contracts.
(4) If after notice and hearing, the Commissioner shall find that the company is
qualified to issue, deliver, sell or use variable contracts in accordance with this
Code and the regulations and rules issued thereunder, the corresponding order
of authorization shall be issued. Any decision or order denying authority to
issue, deliver, sell or use variable contracts shall clearly and distinctly state the
reasons and grounds on which it is based.

Sec. 233. Any insurance company issuing variable contracts pursuant to this
Code may in its discretion issue contracts providing a combination of fixed
amount and variable amount of benefits and for option lump-sum payment of
benefits.
Sec. 234. Every variable contract form delivered or issued for delivery in the
Philippines, and every certified form evidencing variable benefits issued
pursuant to any such contract on a group basis, and the application, rider and
endorsement forms applicable thereto and used in connection therewith, shall be
subject to the prior approval of the Commissioner.
Sec. 235. Illustration of benefits payable under any variable contract shall not
include or involve projections of past investment experience into the future and
shall conform with the rules and regulations promulgated by the Commissioner.
Sec. 236. Variable contracts may be issued on the industrial life basis, provided
that the pertinent provisions of this Code and of the rules and regulations of the
Commissioner governing variable contracts are complied with in connection with
such contracts.
Sec. 237. Every life insurance company authorized under the provisions of this
Code to issue, deliver, sell or use variable contracts shall, in connection with
same, establish one or more separate accounts to be known as separate variable
accounts. All amounts received by the company in connection with any such
contracts which are required by the terms thereof, to be collected or applied to
one or more designated separate variable accounts shall be placed in such
designated account or accounts. The assets and liabilities of each such separate
variable account shall at all times be clearly identifiable and distinguishable from
the assets and liabilities in all other accounts of the company. Notwithstanding
any provision of law to the contrary, the assets held in any such separate
variable account shall not be chargeable with liabilities arising out of any other
business the company conduct but shall be held and applied exclusively for the
benefit of the owners or beneficiaries of the variable contracts applicable
thereto. In the event of the insolvency of the company, the assets of each such
separate variable account shall be applied to the contractual claims of the
owners or beneficiaries of the variable contracts applicable thereto. Except as
otherwise specifically provided by the contract, no sale, exchange or other
transfer of assets may be made by a company, between any of its separate
accounts or between any other investment account and one or more of its
separate accounts, unless in the case of a transfer into a separate account, such
transfer is made solely to establish the account or to support the operation of
the contracts with respect to the separate account to which the transfer is made,
or in case of a transfer from a separate account, such transfer would not cause
the remaining assets of the account to become less than the reserves and other
contract liabilities with respect to such separate account. Such transfer, whether
into or from a separate account, shall be made by a transfer of cash, or by a
transfer of securities having a valuation which could be readily determined in

the market place, provided that such transfer of securities is approved by the
Commissioner. The Commissioner may authorize other transfers among such
accounts, if, in his opinion, such transfer would not be inequitable. All amounts
and assets allocated to any such separate variable account shall be owned by
the company and with respect to same the company shall not be nor hold itself
out to be a trustee.
Sec. 238. Any insurance company which has established one or more separate
variable accounts pursuant to the preceding section may invest and re-invest all
or any part of the assets allocated to any such account in the securities and
investments authorized by sections one hundred ninety-eight, two hundred, two
hundred one and two hundred two for any of the funds of an insurance company
in such amount or amounts as may be approved by the Commissioner. In
addition thereto, such company may also invest in common stocks or other
equities which are listed on or admitted to trading in a securities exchange
located in the Philippines, or which are publicly held and traded in the "over-thecounter market" as defined by the Commissioner and as to which market
quotations have been available:Provided, however, That no such company shall
invest in excess of ten per centum of the assets of any such separate variable
accounts in any one corporation issuing such common stock. The assets and
investments of such separate variable accounts shall not be taken into account
in applying the quantitative investment limitations applicable to other
investments of the company. In the purchase of common capital stock or other
equities, the insurer shall designate to the broker, or to the seller if the purchase
is not made through a broker, the specific variable account for which the
investment is made.
Sec. 239. Assets allocated to any separate variable account shall be valued at
their market value on the date of any valuation, or if there is no readily available
market then in accordance with the terms of the variable contract applicable to
such assets, or if there are no such contract terms then in such manner as may
be prescribed by the rules and regulations of the Commissioner.
Sec. 240. The reserve liability for variable contracts shall be established in
accordance with actuarial procedures that recognize the variable nature of the
benefits provided, and shall be approved by the Commissioner.
Title 11
CLAIMS SETTLEMENT
Sec. 241. (1) No insurance company doing business in the Philippines shall
refuse, without just cause, to pay or settle claims arising under coverages
provided by its policies, nor shall any such company engage in unfair claim
settlement practices. Any of the following acts by an insurance company, if
committed without just cause and performed with such frequency as to indicate
a general business practice, shall constitute unfair claim settlement
practices:chanroblesvirtuallawlibrary
(a) knowingly misrepresenting to claimants pertinent facts or policy provisions

relating to coverage at issue;

(b)
failing
to
acknowledge
with
reasonable
promptness
pertinent
communications with respect to claims arising under its policies;
(c) failing to adopt and implement reasonable standards for the prompt
investigation of claims arising under its policies;
(d) not attempting in good faith to effectuate prompt, fair and equitable
settlement of claims submitted in which liability has become reasonably clear; or
(e) compelling policyholders to institute suits to recover amounts due under its
policies by offering without justifiable reason substantially less than the
amounts ultimately recovered in suits brought by them.
(2) Evidence as to numbers and types of valid and justifiable complaints to the
Commissioner against an insurance company, and the Commissioner's complaint
experience with other insurance companies writing similar lines of insurance
shall be admissible in evidence in an administrative or judicial proceeding
brought under this section.
(3) If it is found, after notice and an opportunity to be heard, that an insurance
company has violated this section, each instance of non-compliance with
paragraph (1) may be treated as a separate violation of this section and shall be
considered sufficient cause for the suspension or revocation of the company's
certificate of authority.
Sec. 242. The proceeds of a life insurance policy shall be paid immediately upon
maturity of the policy, unless such proceeds are made payable in installments or
as an annuity, in which case the installments, or annuities shall be paid as they
become due: Provided, however, That in the case of a policy maturing by the
death of the insured, the proceeds thereof shall be paid within sixty days after
presentation of the claim and filing of the proof of the death of the insured.
Refusal or failure to pay the claim within the time prescribed herein will entitle
the beneficiary to collect interest on the proceeds of the policy for the duration
of the delay at the rate of twice the ceiling prescribed by the Monetary Board,
unless such failure or refusal to pay is based on the ground that the claim is
fraudulent.
The proceeds of the policy maturing by the death of the insured payable to the
beneficiary shall include the discounted value of all premiums paid in advance of
their due dates, but are not due and payable at maturity.
Sec. 243. The amount of any loss or damage for which an insurer may be liable,
under any policy other than life insurance policy, shall be paid within thirty days
after proof loss is received by the insurer and ascertainment of the loss or
damage is made either by agreement between the insured and the insurer or by
arbitration; but if such ascertainment is not had or made within sixty days after
such receipt by the insurer of the proof of loss, then the loss or damage shall be
paid within ninety days after such receipt. Refusal or failure to pay the loss or
damage within the time prescribed herein will entitle the assured to collect
interest on the proceeds of the policy for the duration of the delay at the rate of

twice the ceiling prescribed by the Monetary Board, unless such failure or refusal
to pay is based on the ground that the claim is fraudulent.
Sec. 244. In case of any litigation for the enforcement of any policy or contract
of insurance, it shall be the duty of the Commissioner or the Court, as the case
may be, to make a finding as to whether the payment of the claim of the insured
has been unreasonably denied or withheld; and in the affirmative case, the
insurance company shall be adjudged to pay damages which shall consist of
attorney's fees and other expenses incurred by the insured person by reason of
such unreasonable denial or withholding of payment plus interest of twice the
ceiling prescribed by the Monetary Board of the amount of the claim due the
insured, from the date following the time prescribed in section two hundred
forty-two or in section two hundred forty-three, as the case may be, until the
claim is fully satisfied; Provided, That the failure to pay any such claim within
the time prescribed in said sections shall be considered prima facie evidence of
unreasonable delay in payment.
Title 12
EXAMINATION OF COMPANIES
Sec. 245. The Commissioner shall require every insurance company doing
business in the Philippines to keep its books, records, accounts and vouchers in
such manner that he or his authorized representatives may readily verify its
annual statements and ascertain whether the company is solvent and has
complied with the provisions of this Code or the circulars, instructions, rulings or
decisions of the Commissioner.
Sec. 246. The Commissioner shall at least once a year and whenever he
considers the public interest so demands, cause an examination to be made into
the affairs, financial condition and method of business of every insurance
company authorized to transact business in the Philippines and of any other
person, firm or corporation managing the affairs and/or property of such
insurance company. Such company, as well as such managing person, firm or
corporation, shall submit to the examiner all such books, papers and securities
as he may require and such examiner shall also have the power to examine the
officers of such company under oath touching its business and financial
condition, and the authority to transact business in the Philippines of any such
company shall be suspended by the Commissioner if such examination is refused
and such company shall not thereafter be allowed to transact further business in
the Philippines until it has fully complied with the provisions of this section.
Government-owned or controlled corporations or entities engaged in social
private insurance shall similarly be subject to such examination by the
Commissioner unless their respective charters otherwise provide.
Title 13
SUSPENSION OR REVOCATION OF AUTHORITY
Sec. 247. If the Commissioner is of the opinion upon examination of other
evidence that any domestic or foreign insurance company is in an unsound

condition, or that it has failed to comply with the provisions of law or regulations
obligatory upon it, or that its condition or method of business is such as to
render its proceedings hazardous to the public or to its policyholders, or that its
paid-up capital stock, in the case of a domestic stock company, or its available
cash assets, in the case of a domestic mutual company, or its security deposits,
in the case of a foreign company, is impaired or deficient, or that the margin of
solvency required of such company is deficient, the Commissioner is authorized
to suspend or revoke all certificates of authority granted to such insurance
company, its officers and agents, and no new business shall thereafter be done
by such company or for such company by its agent in the Philippines while such
suspension, revocation or disability continues or until its authority to do
business is restored by the Commissioner. Before restoring such authority, the
Commissioner shall require the company concerned to submit to him a business
plan showing the company's estimated receipts and disbursements, as well as
the basis therefor, for the next succeeding three years. (As amended by
Presidential Decree No. 1455).
Title 14
APPOINTMENT OF CONSERVATOR
Sec. 248. If at any time before, or after, the suspension or revocation of the
certificate of authority of an insurance company as provided in the preceding
title, the Commissioner finds that such company is in a state of continuing
inability or unwillingness to maintain a condition of solvency or liquidity deemed
adequate to protect the interest of policy holders and creditors, he may appoint
a conservator to take charge the assets, liabilities, and the management of such
company, collect all moneys and debts due said company and exercise all
powers necessary to preserve the assets of said company, reorganize the
management thereof, and restore its viability. The said conservator shall have
the power to overrule or revoke the actions of the previous management and
board of directors of the said company, any provision of law, or of the articles of
incorporation or by-laws of the company, to the contrary notwithstanding, and
such other powers as the Commissioner shall deem necessary.
The conservator may be another insurance company doing business in the
Philippines, by officer or officers of such company, or any other competent and
qualified person, firm or corporation. The remuneration of the conservator and
other expenses attendant to the conservation shall be borne by the insurance
company concerned.
The conservator shall not be subject to any action, claim or demand by, or
liability to, any person in respect of anything done or omitted to be done in good
faith in the exercise, or in connection with the exercise, of the powers conferred
on the conservator.
The conservator appointed shall report and be responsible to the Commissioner
until such time as the Commissioner is satisfied that the insurance company can
continue to operate on its own and the conservatorship shall likewise be

terminated should be Commissioner, on the basis of the report of the

conservator or of his own findings, determine that the continuance in business
of the insurance company would be hazardous to policy holders and creditors, in
which case the provisions of Title 15 shall apply.
Title 15
PROCEEDINGS UPON INSOLVENCY
Sec. 249. Whenever, upon examination or other evidence, it shall be disclosed
that the condition of any insurance company doing business in the Philippines is
one of insolvency, or that its continuance in business would be hazardous to its
policyholders and creditors, the Commissioner shall forthwith order the company
to cease and desist from transacting business in the Philippines and shall
designate a receiver to immediately take charge of its assets and liabilities, as
expeditiously as possible collect and gather all the assets and administer the
same for the benefit of its policyholders and creditors, and exercise all the
powers necessary for these purposes including, but not limited to, bringing suits
and foreclosing mortgages in the name of the insurance company.
The Commissioner shall thereupon determine within thirty days whether the
insurance company may be reorganized or otherwise placed in such condition so
that it may be permitted to resume business with safety to its policyholders and
creditors and shall prescribe the conditions under which such resumption of
business shall take place as well as the time for fulfillment of such conditions. In
such case, the expenses and fees in the collection and administration of the
insurance company shall be determined by the Commissioner and shall be paid
out of the assets of such company.
If the Commissioner shall determine and confirm within the said period that the
insurance company is solvent, as defined hereunder, or cannot resume business
with safety to its policyholders and creditors, he shall, if the public interest
requires, order its liquidation, indicate the manner of its liquidation and approve
a liquidation plan and implement it immediately. The Commissioner shall
designate a competent and qualified person as liquidator who shall take over the
functions of the receiver previously designated and, with all convenient speed,
reinsure all its outstanding policies, convert the assets of the insurance company
to cash, or sell, assign or otherwise dispose of the same to the policyholders,
creditors and other parties for the purpose of settling the liabilities or paying the
debts of such company and he may, in the name of the company, institute such
actions as may be necessary in the appropriate Court to collect and recover
accounts and assets of the insurance company, and to do such other acts as may
be necessary to complete the liquidation as ordered by the Commissioner.
The provisions of any law to the contrary notwithstanding, the actions of the
Commissioner under this Section shall be final and executory, and can be set
aside by the Court upon petition by the company and only if there is convincing
proof that the action is plainly arbitrary and made in bad faith. The
Commissioner, through the Solicitor General, shall then file the corresponding

answer reciting the proceeding taken and praying the assistance of the Court in
the liquidation of the company. No restraining order or injunction shall be issued
by the Court enjoining the Commissioner from implementing his actions under
this Section, unless there is convincing proof that the action of the
Commissioner is plainly arbitrary and made in bad faith and the petitioner or
plaintiff files with the Clerk or Judge of the Court in which the action is pending
a bond executed in favor of the Commissioner in an amount to be fixed by the
Court. The restraining order or injunction shall be refused or, if granted, shall be
dissolved upon filing by the Commissioner, if he so desires, of a bond in an
amount twice the amount of the bond of the petitioner or plaintiff conditioned
that it will pay the damages which the petition or plaintiff may suffer by the
refusal or the dissolution of the injunction. The provisions of Rule 58 of the New
Rules of Court insofar as they are applicable shall govern the issuance and
dissolution of the restraining order or injunction contemplated in this Section.
All proceedings under this Title shall be given preference in the Courts. The
Commissioner shall not be required to pay any fee to any public officer for filing,
recording, or in any manner authenticating any paper or instrument relating to
the proceedings.
As used in this Title, the term "Insolvency" shall mean the inability of an
insurance company to pay its lawful obligations as they fall due in the usual and
ordinary course of business as may be shown by its failure to maintain the
margin of solvency required under Section 194 of this Code. (As amended by
Presidential Decree No. 1141 and further amended by Presidential Decree No.
1455).
Sec. 250. In case of liquidation of an insurance company, after payment of the
cost of the proceedings, including reasonable expenses and fees incurred in the
liquidation to be allowed by the Court, the Commissioner shall pay all allowed
claims against such company, under order of the Court, in accordance with their
legal priority.
Sec. 251. The receiver or the liquidator, as the case may be, designated under
the provisions of this title shall not be subject to any action, claim or demand by,
or liability to, any person in respect of anything done or omitted to be done in
good faith in the exercise, or in connection with the exercise, of the powers
conferred on such receiver or liquidator.
Title 16
CONSOLIDATION AND MERGER OF INSURANCE COMPANIES
Sec. 252. Upon prior notice to the Commissioner, two or more domestic
insurance companies, acting through their respective boards of directors, may
negotiate to merge into a single corporation which shall be one of the
constituent corporations, or consolidate into a single corporation which shall be
a new corporation to be formed by the consolidation. A common agreement of
the proposed merger or consolidation shall be drawn up for submission to the
stockholders or members of the constituent companies for adoption and

approved in accordance with the provisions of the respective by-laws of the

constituent companies and all existing laws that may be pertinent.
Sec. 253. Such agreement shall include, aside from the proposed merger or
consolidation, provisions relative to the manner of transfer of assets to and
assumption of liabilities by the absorbing or acquiring company from the
absorbed or dissolved company or companies; the proposed articles of merger or
consolidation and by-laws of the surviving or acquiring company; the corporate
name to be adopted which should not be that of any other existing company
transacting similar business or one so similar as to be calculated to mislead the
public; the rights of the stockholders or members of the absorbed or dissolved
companies; date of effectivity of the merger or consolidation; and such
particulars as may be necessary to explain and make manifest the objects and
purposes of the absorbing or acquiring company.
Sec. 254. Upon execution of such agreement to merge or consolidate by and
between or among the boards of directors of the constituent companies, notice
thereof shall be mailed immediately to their policyholders and creditors. The
company or companies to be absorbed or dissolved shall discharge all its
accrued liabilities; otherwise, such liabilities shall, with the consent of its
creditors, be transferred to and assumed by the absorbing or acquiring company,
or such liabilities be reinsured by the latter. In the case of such policies as are
subject to cancellation by the company or companies to be absorbed or
dissolved, same may be cancelled pursuant to the terms thereof in lieu of such
transfer, assumption, or reinsurance.
Sec. 255. Upon approval or adoption in the meetings of the stockholders or
members called for the purpose in each of the constituent companies of the
agreement to merge or consolidate, all stockholders or members dissenting or
objecting to merger or consolidation shall be paid the value of their shares by
the company concerned in accordance with the by-laws thereof.
Sec. 256. Upon the approval or adoption of the agreement to merge or
consolidate by the stockholders or members of the constituent companies, the
corresponding articles of merger or of consolidation shall be duly executed by
the presidents and attested by the corporate secretaries and shall bear the
corporate seals of the merging or consolidating companies setting
forth:chanroblesvirtuallawlibrary
(1) The plan of merger or the plan of consolidation;
(2) As to each corporation, the number of shares outstanding, or in case of
mutual corporations, the number of members; and
(3) As to each corporation, the number of shares or members voted for and
against such plan respectively. Thereafter, a certified copy of such articles of
merger or consolidation, together with a certificate of approval or adoption by
the stockholders or members of such articles of merger or consolidation, verified
by affidavits of such officers and under the seal of the constituent companies,
shall be submitted to the Commissioner, together with such other papers or

documents which the Commissioner may require, for his consideration.

Sec. 257. The articles of merger or of consolidation, signed and verified as
hereinabove required, shall be filed with the Securities and Exchange
Commission for its examination and approval.
Sec. 258. Upon receipt from the Securities and Exchange Commission of the
certificate of merger or of consolidation, the constituent companies shall
surrender to the Commissioner their respective certificates of authority to
transact insurance business. The absorbing or surviving company in case of
merger, or the newly formed company in case of consolidation, shall
immediately file with the commissioner the corresponding application for
issuance of a new certificate of authority to transact insurance business,
together with a certified copy of the certificate of merger or of consolidation,
and of the certificate of increase of stocks, if there is any, issued by the
Securities and Exchange Commission.
Sec. 259. Nothing in this title shall be construed to enlarge the powers of the
absorbing or surviving company in case of merger, or the newly formed company
in case of consolidation, except those conferred by the certificate of merger or of
consolidation and the articles of merger of consolidation, or the amended
articles of incorporation, as registered with the Securities and Exchange
Commission.
Sec. 260. No director, officer, or stockholder of any such constituent companies
shall receive any fee, commission, compensation, or other valuable
consideration whatsoever, directly or indirectly, or in any manner aiding,
promoting or assisting in such merger or consolidation.
Sec. 261. The merger of consolidation of companies under, this Code shall be
subject to the provisions of the Corporation Law, and, in those cases specified in
Republic Act No. 5455, as amended, be further subject to the provisions of said
law.
Title 17
MUTUALIZATION OF STOCK LIFE INSURANCE COMPANIES
Sec. 262. Any domestic stock life insurance company doing business in the
Philippines may convert itself into an incorporated mutual life insurer. To that
end it may provide and carry out a plan for the acquisition of the outstanding
shares of its capital stock for the benefit of its policyholders, or any class or
classes of its policyholders, by complying with the requirements of this chapter.
Sec. 263. Such plan shall include appropriate proceedings for amending the
insurer's articles of incorporation to give effect to the acquisition, by said
insurer, for the benefit of its policyholders or any class or classes thereof, of the
outstanding shares of its capital stock and the conversion of the insurer from a
stock corporation into a non-stock corporation for the benefit of its members.
The members of such non-stock corporation shall be the policyholders from time
to time of the class or classes for whose benefit the stock of the insurer was
acquired, and the policyholders of such other class or classes as may be

specified in such corporation's articles of incorporation as they may be amended

from time to time. Such plan shall be:chanroblesvirtuallawlibrary
(1) Adopted by a vote of a majority of the directors;
(2) Approved by the vote of the holders of at least a majority of the outstanding
shares at a special meeting of shareholders called for that purpose, or by the
written consent of such sharesholders;
(3) Submitted to the Commissioner and approved by him in writing;
(4) Approved by a majority vote of all the policyholders of the class or classes
for whose benefit the stock is to be acquired voting at an election by the
policyholders called for that purpose, subject to the provisions of section two
hundred sixty-five. The terms "policyholder" or "policyholders" as used in this
chapter shall be deemed to mean the person or persons insured under an
individual policy of life insurance, or of health and accident insurance, or of any
combination of life, health and accident insurance. They shall also include the
person or persons to whom any annuity or pure endowment is presently or
prospectively payable by the terms of an individual annuity or pure endowment
contract, except where the policy or contract declares some other person to be
the owner or holder thereof, in which case such other person shall be deemed
policyholder. In any case where a policy or contract names two or more persons
as joint insured, payees, owners or holders thereof, the persons so named shall
be deemed collectively to be one policyholder for the purpose of this chapter. In
any case where a policy or contract shall have been assigned by assignment
absolute on its face to an assignee other than the insurer, and such assignment
shall have been filed at the principal office of the insurer at least thirty days
prior to the date of any election or meeting referred to in this chapter, then such
assignee shall be deemed at such election or meeting to be the policyholder. For
the purpose of this chapter the terms "policyholder"and "policyholders" include
the employer to whom, or a president, secretary or other executive officer of any
corporation or association to which a master group policy has been issued, but
exclude the holders of certificates or policies issued under or in connection with
a master group policy. Beneficiaries under unmatured contracts shall not as such
be deemed to be policyholders;
(5) Filed with the Commissioner after having been approved as provided in this
section.
Sec. 264. The Commissioner shall examine the plan submitted to him under the
provisions of sub-paragraph three of section two hundred sixty-three. He shall
not approve such plan unless in his opinion the rights and interest of the insurer,
its policyholders and shareholders are protected nor unless he is satisfied that
the plan will be fair and equitable in its operation. chanrobles virtual law
library
Sec. 265. The election prescribed by sub-paragraph four of section two hundred
sixty-three shall be called by the board of directors or the president, and every
policyholder of the class or classes for whose benefit the stock is to be acquired,

whose insurance shall have been in force for at least one year prior to such
election shall have one vote, regardless of the number of policies or amount of
insurance he holds, and regardless of whether such policies are policies of life
insurance or policies of health and accident insurance or annuity contracts.
Notice of such election shall be given to policyholders entitled to vote by mail
from the principal office of such insurer at least thirty days prior to the date set
for such election, in a sealed envelope, postage prepaid, addressed to each such
policyholder at his last known address.
Voting shall be by one of the following methods:chanroblesvirtuallawlibrary
(1) At a meeting of such policyholders, held pursuant to such notice, by ballot in
person or by proxy.
(2) If not by the method described in the preceding sub-paragraph, then by mail
pursuant to a procedure and on forms to be prescribed by such plan.
Such election shall be conducted under the direction and supervision of three
impartial and disinterested inspectors appointed by the insurer and approved by
the Commissioner. In case any person appointed as inspector fails to appear at
such meeting or fails or refuses to act at such election, the vacancy, if occurring
in advance of the convening of the meeting or in advance of the opening of the
mail vote, may be filled in the manner prescribed for the appointment of
inspectors and, if occurring at the meeting or during the canvass of the mail
vote, may be filled by the person acting as chairman of said meeting or
designated for that purpose in such plan. The decision, act or certificate of a
majority of the inspectors shall be effective in all respects as the decision, act or
certificate of all. The inspectors of election shall determine the number of
policyholders, the voting power of each, the policyholders represented at the
meeting or voting by mail, the existence of a quorum and the authencity, validity
and effect of proxies. They shall receives votes, hear and determine all
challenges and questions in any way arising in connection with the right to vote,
count and tabulate all votes, determine the result, and do such other acts as are
proper to conduct the vote with fairness to all policyholders. The inspectors of
election shall, before commencing performance of their duties, subscribe to and
file with the insurer and with the Commissioner on oath that they, and each of
them, will perform their duties impartially, in good faith, to the best of their
ability and as expeditiously as in practicable. On the request of the insurer, the
Commissioner, a policyholder or his proxy, the inspectors shall make a report in
writing of any challenge or question or matter determined by them and execute
a certificate of any fact found by them. They shall also certify the result of such
vote to the insurer and to the Commissioner. Any report or certificate made by
them shall be prima facieevidence of facts stated therein. All necessary expenses
incurred in connection with such election shall be paid by the insurer. For the
purpose of this section, a quorum shall consist of five per centum of the
policyholders of such insurer entitled to vote at such election.
Sec. 266. In carrying out any such plan, the insurer may acquire any shares of

its own stock by gift, bequest or purchase. Any shares so acquired shall, unless
as a result of such acquisition all of the shares of the insurer shall have been
acquired, be acquired in trust for the policyholders of the class or classes for
whose benefit the plan provides that the stock of the insurer shall be acquired as
hereinafter provided. Such shares shall be assigned and transferred on the
books of such insurer and approved by the Commissioner. Such trustees shall
hold such stock in trust until all of the outstanding shares of capital stock of
such insurer have been acquired, but for not longer than thirty years with such
extensions of not more than five years each as may be granted by the
Commissioner. Such extensions may be granted by the Commissioner if the plan
so provides and if in his opinion the plan of acquisition of all of such stock can be
completed within a reasonable period. Such trustees shall vote such stock at all
corporate meetings at which stockholders have the right to vote. When all the
outstanding shares of capital stock of such insurer have been acquired, all said
shares shall be cancelled, the certificate of amendment of the insurer's articles
of incorporation giving effect thereto shall be filed in accordance with the
provisions of the Corporation Law, and the insurer shall become a non-stock
corporation for the profit of its members and such trust shall thereupon
terminate. Thereafter such corporation shall be conducted for the mutual
benefit, ratably, of its policyholders of the class or classes for whose benefit the
stock was acquired and shall have power to issue non-assessable policies on a
reserve basis subject to all provisions of law applicable to incorporated life
insurers issuing nonassessable policies on a reserve basis. Policies so issued
may be upon the basis of full or partial participation therein as agreed between
the insurer and the insured.
Upon the termination of any such voting trust, either in accordance with its
terms or as hereinabove provided, such plan of mutualization shall terminate,
unless theretofore completed. Upon such termination, unless the plan of
mutualization provides for the disposition of the shares acquired by the insurer
under such plan or for the disposition of the proceeds thereof, the shares held by
such trustees shall be disposed of in accordance with an order of the court of
competent jurisdiction in the judicial district in which is located the principal
office of such insurer, made upon a verified petition of the Commissioner.
Sec. 267. Any such plan of mutualization may provide for the creation of a voting
trust under a trust agreement for the holding and voting by three or more
trustees of any portion or all of the shares of the insurer not required upon the
adoption of such plan. The voting trustees shall be named in accordance with
such plan or, if no provision is made therein for the naming of such trustees,
then by the insurer. The voting trust agreement and voting trustees shall be
subject to the approval of the Commissioner. Any or all of the trustees under
such voting trust agreement may be the same person or persons as any or all of
the trustees referred to in section two hundred sixty-six. Such voting trust
agreement shall provide that in the event of acquisition by the insurer of any of

the shares of stock held thereunder in accordance with the provisions of the
plan, such shares so acquired together with the voting rights thereof shall be
transferred by the trustees named under the provisions of this section to the
trustees named under the provisions of section two hundred sixty-six. Any
voting trust agreement created pursuant to the provisions of this section may be
made irrevocable for not longer than thirty years and thereafter until the
termination of the trust provided for in section two hundred sixty-six. The trust
created pursuant to the provisions of this section shall terminate in any event
upon termination of the trust provided for in section two hundred sixty-six. Upon
the termination of the trust created pursuant to the provisions of this section,
any shares held in such trust shall revert to the persons entitled thereto by law.
Sec. 268. Every payment for the acquisition of any shares of the capital stock of
such insurer, the purchase price of which is not fixed by such plan, shall be
subject to the prior approval of the Commissioner. Neither such plan, nor any
such payment, may be approved by the Commissioner unless he finds that the
rights and interests of the insurer, its policyholders, and shareholders are
protected.
Sec. 269. The trustees referred to in section two hundred sixty-six shall file with
such insurer and with the Commissioner a verified acceptance of their
appointments and verified declarations that they will faithfully discharge their
duties as such trustees. All dividends and other sums received by said trustees
on the shares held by them, after paying the necessary expenses of executing
their trust, shall be immediately repaid to such insurer for the benefit of all who
are, or may become, policyholders of such insurance of the class or classes for
whose benefit the stock of such insurer was acquired and entitled to participate
in the profits thereof and shall be added to and become part of the assets of
such insurer.
Sec. 269-A. If, at any time within the period provided in the plan for the
acquisition of the outstanding shares of stock of the insurer, ninety percent
thereof has already been acquired and transferred to the trustees under the
plan, the insurer by a vote of a majority of the directors may determine to make
an offer, with the permission of the Commissioner and subject to such
requirement as he may specify, to acquire by purchase all of the shares not
theretofore acquired under the plan, at a specified price which the insurer
considers to be their fair value as of the date of making such offer.
If the offer to acquire is permitted by the Commissioner, the insurer shall make
a written offer by registered mail to each shareholder whose shares have not
theretofore been acquired under the plan or otherwise, offering to acquire all his
shares at such price if accepted in writing within thirty days after the mailing of
such offer. Any shareholder accepting such offer, within the time therefor shall,
within sixty days after his acceptance, transfer to the insurer the certificates
representing such shares and, upon doing so, shall be paid by the insurer the
amount of such offer for his shares. Any share so acquired shall be assigned and

transferred to the trustees under the plan and held by them as shares acquired
pursuant to the plan.
Each shareholder who does not accept such offer to acquire his shares within the
time stated in such offer for acceptance thereof shall within fifteen days after
the expiration of such offer apply to the Secretary of Finance for determination
of the fair value of his shares as of the date of making such offer. The Secretary
of Finance may himself, after due notice and hearing, determine upon the
evidence received the fair value of the shares as of the date of making such
offer, or appoint three impartial and disinterested persons to appraise the fair
value of such shares with such direction as he shall deem proper and necessary
to expedite the proceedings. Upon completion of the appraisal proceedings, the
appraisers shall file with the Secretary of Finance their report in writing stating
the fair value of such shares as of the date of the making of such offer and
setting forth their findings in support of such statement. The appraisers shall
furnish each party to the proceedings a copy of their appraisal report, and within
ten days after receipt thereof any such party may signify his objection, if any, to
the report or move for the approval thereof. Upon the expiration of the period of
ten days referred to above, the report shall be set for hearing, after which the
Secretary of Finance shall issue an order adopting, modifying or rejecting the
report in whole or in part or he may receive further evidence or may recommit it
with instructions. Whenever the Secretary of Finance shall determine in any
manner, as aforesaid, the fair value of such shares, he may also determine the
terms of payment thereof by the insurer. The expenses incidental to the
proceedings including charges of the appraisers, if any, shall be paid equally by
the insurer and the shareholder. chanrobles virtual law library
The findings of the Secretary of Finance on all questions of fact raised at the
hearing of the application for determination of the fair value of such shares shall
be conclusive upon all parties to the proceedings. The order of the Secretary of
Finance determining the fair value of the shares and the terms of payment
thereof shall have the force and effect of a judgment which shall be appealable
on any question of law. Such order shall become final and executory fifteen days
after receipt thereof by the parties to the proceedings.
Upon any such order becoming final and from which no appeal is pending, or
when the time to appeal therefrom has expired, each shareholder party to the
proceedings shall transfer his shares to the insurer and surrender to the said
insurer the certificates representing such shares and the insurer shall make
payment therefor as provided in such order. Any shares so acquired by the
insurer shall be assigned and transferred to the trustees and held by them as
shares acquired pursuant to the plan.
Any shareholder who does not apply to the Secretary of Finance in the manner
and within the time hereinbefore prescribed shall be deemed to have accepted
the offer referred to above, effective, however, upon the expiration of the time
hereinabove prescribed for making such application, and such shareholder's

time for accepting such offer shall, for that purpose only, be deemed to have
been extended accordingly.
Any offer to acquire shares made pursuant to this section shall, except as
otherwise provided herein, be irrevocable until all proceedings upon such offer
have been completed or all shares have otherwise been earlier acquired by the
insurer.
Any shareholder who has expressly or impliedly accepted the plan or the offer to
acquire his shares not theretofore acquired under the plan, and any shareholder
who has rejected such plan or such offer and has applied, as aforesaid, to the
Secretary of Finance for a determination of the fair value of his shares
subsequent to which an agreement has been reached or a final order issued
fixing such fair value but who fails to surrender his certificates for cancellation
upon payment of the amount to which he is entitled, may be compelled to do so
by an order of the Secretary of Finance for that purpose and such order may
provide that upon failure of such shareholder to surrender such certificates for
cancellation such order shall stand in lieu of such surrender and
cancellation. (As amended by Presidential Decree No. 1280).
Sec. 270. Such insurer, after mutualization, shall be a continuation of the
original insurer, and such mutualization shall not affect such insurer's certificate
of authority nor existing suits, rights or contracts except as provided in said plan
for the acquisition of the outstanding shares of the capital stock of such insurer,
approved as provided in this chapter. Such insurer, after mutualization, shall
exercise all the rights and powers and shall perform all the duties conferred or
imposed by law upon insurers writing the classes of insurance written by it, and
to protect rights and contracts existing prior to mutualization, subject to the
effect of said plan. The board of directors of such insurer, prior to mutualization,
may adopt amendments to its by-laws to take effect upon mutualization.
Sec. 271. (1) An annual meeting of members shall be held at ten o'clock in the
morning of the fourth Tuesday of March of each year at the principal office of the
insurer, unless a different time or place be provided in the by-laws.
(2) Special meetings of the members, for any purpose or purposes whatsoever,
may be called at any time by the president, or by the board of directors, or by
one or more members holding not less than one-fifth of the voting power of such
insurer, or by such other officers or persons as the by-laws authorize.
(3) Notice of all meetings of members whether annual or special shall be given
in writing to the members entitled to vote by the secretary, or an assistant
secretary, or other person charged with that duty, or if there be no such officer,
or in case of his neglect or refusal, by any director or member. At the option of
the insurer such notice may be imprinted on premium notices of receipts or on
both.
A notice may be given by such insurer to any member either personally, or by
mail, or other means of written communication, charges prepaid, addressed to
such member at his address appearing on the books of the insurer, or given by

him to the insurer for the purpose of notice. If a member gives no address,
notice shall be deemed to have been given him if sent by mail or other means of
written communication addressed to the place where the principal office of the
insurer is situated, or if published at least once in some newspaper of general
circulation in the place in which said office is located.
Notice of any meeting of members shall be sent to each member entitled thereto
not less than seven days before such meeting, unless the by-laws provide
otherwise.
Notice of any meeting of members shall specify the place, the day and the hour
of the meeting and the general nature of the business to be transacted.
Notice of an annual meeting to be held at the time and place specified in subparagraph one of this section shall be sufficiently given if published at least once
in each of four successive weeks in a newspaper of general circulation in the
place in which the principal office of such insurer is located, and if so published
no other notice of such meeting shall be required.
(4) The presence in person or by proxy of five per centum of the members
entitled to vote at any meeting shall constitute a quorum for the transaction of
business, unless otherwise provided by the by-laws.
(5) Each such member shall have one vote at any meeting of members
regardless of the number of policies or the amount of insurance that such
member holds and regardless of whether such policies are policies of life
insurance, or of health and accident insurance, or both. Any member entitled to
vote shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the secretary of such insurer.
(6) The directors of the insurer in office at the time the insurer is mutualized as
provided in this chapter shall continue in office until the first annual meeting of
members. At the first annual meeting of members and at each annual meeting
thereafter directors shall be elected by the members for the term or terms
authorized by this chapter.
(7) The articles of incorporation or the bay-laws may provide that the directors
may be divided into two or more classes whose terms of office shall expire at
different times, but no terms shall continue longer than six years. In the absence
of such provisions, each director, except members of the board of directors at
the time the insurer is mutualized, shall be elected for a term of one year. All
directors shall hold office for a term for which they are elected and until their
successors are elected and qualified. A director may, but need not be a member
or policyholder of the insurer of which he is acting as director. Vacancies in the
board of directors may be filled by a majority of the remaining directors, though
less than a quorum, and each director so elected shall hold office until the next
annual meeting.
(8) All insurers mutualized under the provisions of this chapter shall be subject
to all other applicable provisions of this Code and of the Corporation Law.

Sec. 272. The provisions of Commonwealth Act No. 83, otherwise known as
the Securities
Act,
as
amended,
shall
not
apply
to
any
of
the
following:chanroblesvirtuallawlibrary
(a) Shares of the capital stock of such insurer acquired as provided in section
two hundred sixty-six and assigned and transferred to the trustees as is
provided in said section, and the assignment and transfer of said shares as so
provided;
(b) Any certificate or other instrument issued to a policyholder of such
mutualized insurer conferring or evidencing membership in such mutualized
insurer or conferring or evidencing such member's right to participate in the
profits or share in the assets of such mutualized insurer by the virtue of his
membership therein, and the issuance of such certificate or other instrument;
(c) The plan for the acquisition of the outstanding shares of the capital stock of
such insurer authorized by the provisions of this chapter, the submission of said
plan to the Commissioner and to the policyholders of such insurer as provided in
this chapter, and the approval and carrying out of said plan or any part thereof
in accordance with the provisions of this chapter.
Title 18
WITHDRAWAL OF FOREIGN INSURANCE COMPANIES
Sec. 273. A foreign insurance company doing business in the Philippines, upon
payment of the fee hereinafter prescribed and surrender to the Commissioner of
its certificate of authority, may apply to withdraw from the Philippines. Such
application shall be duly executed in writing, accompanied by evidence of due
authority for such execution, properly acknowledged.
Sec. 274. The Commissioner shall publish the application for withdrawal daily for
a period of one week in two newspapers of general circulation in the City of
Manila, one in English and the other in Pilipino. The expenses of such publication
shall be paid by the insurance company filing such application.
Sec. 275. Every foreign insurance company desiring to withdraw from the
Philippines shall, prior to such withdrawal, discharge its liabilities to
policyholders and creditors in this country. In case of its policies insuring
residents of the Philippines, it shall cause the primary liabilities under such
policies to be reinsured and assumed by another insurance company authorized
to transact business in the Philippines. In the case of such policies as are subject
to cancellation by the withdrawing company, it may cancel such policies
pursuant to the terms thereof in lieu of such reinsurance and assumption of
liabilities.
Sec. 276. The Commissioner shall make an examination of the books and records
of the withdrawing company, and if, upon such examination, the Commissioner
finds that the insurer has no outstanding liabilities to residents of the
Philippines, it shall cancel the withdrawing company's certificate of authority, if
unexpired, and shall permit the insurer to withdraw. The cost and expenses of
all such examination shall be paid as prescribed in section four hundred

seventeen.
Sec. 277. Upon the failure of such withdrawing insurance company or its agents
in the Philippines to pay the expenses of such publication within thirty days after
the presentation of the bill therefor, the Commissioner shall collect such fee
from the deposit furnished in accordance with the provisions of section one
hundred ninety-one.
Sec. 278. A foreign life insurance company that withdraws from the Philippines
shall be considered a "servicing insurance company" if its business transactions
are confined to accepting periodic premium payments from, or granting policy
loans and paying cash surrender values of outstanding policies to, or reviving
lapsed policies of, Philippine policyholders, and such other related services.
Sec. 279. No company shall act as a servicing insurance company until after it
shall have obtained a special certification of authority to act as such from the
Commissioner upon application therefor and payment by the company of the
fees hereinafter prescribed. Such certificate shall expire on the last day of June
of each year and shall be renewed annually, while the company continues to
service its policyholders, and to comply with all the applicable provisions of law
and regulations.
Title 19
PROFESSIONAL REINSURERS
Sec. 280. Except as otherwise provided in this Code, no person, partnership,
association or corporation shall transact any business in the Philippines as a
professional reinsurer until it shall have obtained a certificate of authority for
that purpose from the Commissioner upon the application therefor and payment
by such person, partnership, association or corporation of the fees hereinafter
prescribed. As used in this Code, the term "professional reinsurer" shall mean
any person, partnership, association or corporation that transacts solely and
exclusively reinsurance business in the Philippines.
The Commissioner may refuse to issue a certificate of authority to any such
person, partnership, association or corporation if, in his judgment, such refusal
will best promote public interest. No such certificate of authority shall be
granted to any such person, partnership, association or corporation unless and
until the Commissioner shall have satisfied himself by such examination as he
may make and such evidence as he may require that such person, partnership,
association or corporation is qualified by the laws of the Philippines to transact
business therein as a professional reinsurer.
Before issuing such certificate of authority of the Commissioner must be
satisfied that the name of the applicant is not that of any other known company
transacting insurance or reinsurance business in the Philippines, or a name so
similar as to be calculated to mislead the public.
Such certificate of authority shall expire on the last day of June of each year and
shall be renewed annually if such person, partnership, association, or
corporation is continuing to comply with provisions of this Code, or the circulars,

instructions, rulings, or decisions of the Commissioner and such other pertinent

law, rules and regulations.
Every such person, partnership, association, or corporation receiving such
certificate of authority shall be subject to the provisions of this Code and other
related laws, and to the jurisdiction and supervision of the Commissioner.
Sec. 281. Any person, partnership, association, or corporation authorized to
transact solely reinsurance business must have a paid-up capital stock of at
least ten million pesos, twenty-five per centum of which must be invested in
securities satisfactory to the Commissioner, consisting of bonds or other
evidences of debt of the Government of the Philippines or its political
subdivisions or instrumentalities, or of government-owned or controlled
corporations and entities, including the Central Bank of the Philippines, and
deposited with the Commissioner, and the remaining seventy-five per centum in
such other securities as may be allowed and permitted by the Commissioner,
which securities shall at all times be maintained free from any lien or
encumbrance: Provided, That reinsurers already doing business as such in the
Philippines shall comply with the requirement of this section by increasing their
respective capital as herein provided not later than December thirty-one,
nineteen hundred eighty: Provided, Further, That the provisions of this chapter
applicable to insurance companies shall so far as practicable be likewise
applicable to professional reinsurers. (As amended by Presidential Decree No.
1455).
Title 20
HOLDING COMPANIES
Sec. 282. As used in this title, the following terms shall have the respective
meanings hereinafter set forth unless the context shall otherwise
require:chanroblesvirtuallawlibrary
(a) "Person" means an individual, partnership, firm, association, corporation,
trust, any similar entity or any combination of the foregoing acting in concert;
(b) "Control", including the terms "controlling", "controlled by" and "under
common control with", means the possession directly or indirectly of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities by a contract other than a
commercial contract for goods or non-management services or otherwise.
Subject to section two hundred eight-four, control shall be presumed to exist if
any person directly or indirectly owns, controls or holds with the power to vote
forty per centum or more of the voting securities of any other person: Provided,
That no person shall be deemed to control another person solely by reason of his
being an officer or director of such other person;
(c) "Holding company" means any person who directly or indirectly controls any
authorized insurer;
(d) "Controlled insurer" means an authorized insurer controlled directly or
indirectly by a holding company;

(e) "Controlled person" means any person, other than a controlled insurer, who
is controlled directly or indirectly by a holding company;
(f) "Holding company system" means a holding company together with its
controlled insurers and controlled persons.
Sec. 283. Notwithstanding paragraph (b) of section two hundred eighty-two, the
Commissioner may determine after notice and opportunity to be heard, that a
person exercises directly or indirectly either alone or pursuant to an agreement
with one or more other persons such a controlling influence over the
management or policies of an authorized insurer as to make it necessary or
appropriate in the public interest or for the protection of policyholders or
stockholders of the insurer that the person be deemed to control the insurer.
Sec. 284. The Commissioner may determine upon application that any person,
either alone or pursuant to agreement with one or more other persons, does not
or will not upon the taking of some proposed action control another person. The
filing of an application hereunder in good faith by any person shall relieve the
applicant from any obligation or liability imposed by this title with respect to the
subject of the application, except as contained in section two hundred ninetyfour, until the Commissioner has acted upon the application. Within thirty days
or such further period as he may prescribe, the Commissioner may prospectively
revoke or modify his determination, after notice and opportunity to be heard,
whenever in his judgment revocation or modification is consistent with his title.
Sec. 285. Notwithstanding any other provisions of this title, the following shall
not be deemed holding companies:chanroblesvirtuallawlibrary
(a) authorized insurers or reinsurers or their subsidiaries;
(b) the Government of the Philippines, or any political subdivision, agency or
instrumentality thereof, or any corporation which is wholly owned directly or
indirectly by one or more of the foregoing.
The Commissioner may conditionally or unconditionally exempt any specified
person or class of persons from any of the obligations or liabilities imposed
under this title, if and to the extent he finds the exemption necessary to
appropriate in the public interest or not adverse to the interests of policyholders
or stockholders and consistent with the purposes of this title.
Sec. 286. (1) Every person who on the date this Code takes effect is a controlled
insurer and every person who thereafter becomes a controlled insurer, shall,
within sixty days thereafter, or within thirty days after becoming a controlled
insurer, whichever is later, register with the Commissioner. Such registration
shall be amended within thirty days following any change in the identity of its
holding company. The Commissioner may grant one or more reasonable
extensions of the time to register.
(2) Every registrant shall furnish the Commissioner with the following
information concerning its holding company: (a) a copy of its charter or articles
of incorporation and its by-laws, (b) the identities of its principal shareholders,
officers, directors and controlled persons, and (c) information as to its capital

structure and financial condition, and a description of its principal business

activities.
Sec. 287. Every controlled insurer shall file with the Commissioner such reports
or material as he may direct for the purpose of disclosing information concerning
the operations of persons within the holding company system which may
materially affect the operations, management or financial condition of the
insurer.
Sec. 288. Every holding company and every controlled person within a holding
company system shall be subject to examination by order of the Commissioner if
he has cause to believe that the operations of such persons may materially
affect the operations, management or financial condition of any controlled
insurer with the system and that he is unable to obtain relevant information
from such controlled insurer. The grounds relied upon by the Commissioner for
such examination shall be stated in his order, which order shall be subject to
judicial review only at the instance of the person sought to be examined. Such
examination shall be confined to matters specified in the order. The cost of such
examination shall be assessed against the person examined and no portion
thereof shall thereafter be reimbursed to it directly or indirectly by the
controlled insurer.
Sec. 289. The Commissioner shall keep the contents of each report made
pursuant to this title and any information obtained by him in connection
therewith confidential and shall not make the same public without the prior
written consent of the controlled insurer to which it pertains unless the
Commissioner after notice and an opportunity to be heard shall determine that
the interests of policyholders, stockholders or the public will be served by the
publication thereof. In any action or proceeding by the Commissioner against
the person examined or any other person within the same holding company
system a report of such examination published by him shall be admissible as
evidence of the facts stated therein.
Sec. 290. Transactions within a holding company system to which a controlled
insurer is a party shall be subject to the following:chanroblesvirtuallawlibrary
(a) The terms shall be fair and equitable;
(b) charges or fees for services performed shall be reasonable;
(c) expenses incurred and payments received shall be allocated to the insurer on
an equitable basis in conformity with customary insurance accounting practices
consistently applied.
The books, accounts and records of each party to all such transactions shall be
maintained as to clearly and accurately disclose the nature and details of the
transactions including such accounting information as is necessary to support
the reasonableness of the charges or fees to the respective parties.
Sec. 291. The prior written approval of the Commissioner shall be required for
the following transactions between a controlled insurer and any person in its
holding company system: sales, purchases, exchanges, loans or extensions of

credit, or investments, involving five per centum or more of the insurer's

admitted assets as of the thirty-first day of December next preceding.
Sec. 292. The following transactions between a controlled insurer and any
person in its holding company system may not be entered into unless the insurer
has notified the Commissioner in writing of its intention to enter into any such
transaction at least thirty days prior thereto, or such shorter period as he may
permit,
and
he
has
not
disapproved
it
within
such
period:chanroblesvirtuallawlibrary
(a) sales, purchases, exchanges, loans or extensions of credit, or investments,
involving more than one-half of one per centum but less than five per centum of
the insurer's admitted assets as of the thirty-first day of December next
preceding;
(b) reinsurance treaties or agreements;
(c) rendering of services on a regular or systematic basis; or
(d) any material transaction, specified by regulation, which the Commissioner
determines may adversely affect the interest of the insurer's policyholders or
stockholders or of the public.
Nothing herein contained shall be deemed to authorize or permit any transaction
which, in the case of a non-controlled insurer, would be otherwise contrary to
law.
Sec. 293. The Commissioner, in reviewing transactions pursuant to sections two
hundred ninety-one and two hundred ninety-two, shall consider whether the
transactions comply with the standard set forth in section two hundred ninety
and whether they may adversely affect the interests of policyholders. This
section shall not apply to transactions subject to other sections of this Code
which impose notice or approval requirements greater than those prescribed by
this title.
Sec. 294. (1) No person, other than an authorized insurer, shall acquire control
of any domestic insurer, whether by purchase of its securities or otherwise,
except (a) after twenty days written notice to its insurer or such shorter period
as the Commissioner may permit, of its intention to acquire control, and (b) with
the prior written approval of the Commissioner.
(2) The Commissioner shall disapprove the acquisition of control of a domestic
insurer if he determines, after notice and an opportunity to be heard, that such
action is reasonably necessary to protect the interest of the people of this
country. The following shall be the only factors to be considered by him in
reaching the foregoing determination:chanroblesvirtuallawlibrary
(a) the financial condition of the acquiring person or and the insurer;
(b) the trustworthiness of the acquiring person or any of its officers or directors;
(c) a plan for the proper and effective conduct of the insurer's operations;
(d) the source of the funds or assets for the acquisition;
(e) the fairness of any exchange of stock, assets, cash or other consideration for
the stock or assets to be received;

(f) whether the effect of the acquisition may be substantially to lessen

competition in any line of commerce in insurance or to tend to create a
monopoly therein; and
(g) whether the acquisition is likely to be hazardous or prejudicial to the
insurer's policyholders or stockholders.
(3) The following conditions affecting any controlled insurer, regardless of when
such control has been acquired, are violations of this title: (a) the controlling
person or any of its officers or directors have demonstrated untrustworthiness;
and (b) the effect of retention of control may be substantially to lessen
competition in any line of commerce in insurance in this country or to tend to
create a monopoly therein. If, after notice and an opportunity to be heard, the
Commissioner determines that any of the foregoing violations exists, he shall
reduce his findings to writing and shall issue an order based thereon and cause
the same to be served upon the insurer and upon all persons affected thereby
directing any person found to be in violation thereof to take appropriate action
to cure such violation. Upon the failure of any such person to comply with such
order, section two hundred ninety-eight shall become applicable.
(4) The Commissioner may require the submission of such information as he
deems necessary to determine whether any acquisition or retention of control
complies with this title and may require, as a condition of approval of such
acquisition or retention of control, that all or any portion of such information be
disclosed to the insurer's stockholders.
(5) Unless subject to registration under section two hundred eighty-six or unless
acquisition of its control is subject to paragraphs one and two hereof, every
authorized insurer shall, on or before the first day of July, nineteen hundred
seventy-five, or within thirty days after any event requiring notice hereunder,
whichever is later, notify the Commissioner in writing of the identity of any
person whom the insurer then knows or has reason to believe controls or has
taken any action, other than preliminary negotiations or discussion, to acquire
control of the insurer.
Sec. 295. (1) Notwithstanding the control of an authorized insurer by any
person, the officers and directors of the insurer shall not thereby be relieved of
any obligation or liability to which they would otherwise be subject by law, and
the insurer shall be managed so as to assure its separate operating identity
consistent with this title.
(2) Nothing herein shall preclude an authorized insurer from having or sharing a
common management or cooperative or joint use of personnel, property or
services with one or more other persons under arrangements meeting the
standards of section two hundred ninety.
Sec. 296. To the extent that any information or material is set forth in forms or
other matter on file with any government agency or in a registration form filed
with the Commissioner by another person within the same holding company
system, the controlled insurer may comply with the registration or reporting

requirements of this title by referring in its registration form or report to such

other filed matter and attaching a copy thereof certified by the insurer as a true
and complete copy, to such registration form or report or, if such other filed
matter is on file with the Commissioner, incorporating such matter by reference.
Sec. 297. No holding company or controlled person shall directly or indirectly or
through another person do or cause to be done for or in behalf of the controlled
insurer any act intended to affect the insurance operations of the insurer which,
if done by the insurer, would violate any provision of this Code.
Sec. 298. In addition to any other penalty provided by law, the Commissioner
may, upon the willful failure of any person within a holding company system to
comply
with
this
title
or
any
regulation
or
order
promulgated
hereunder:chanroblesvirtuallawlibrary
(a) proceed under title fourteen or title fifteen, Chapter III, of this Code with
respect to insurer within the holding company system; or
(b) revoke or refuse to renew the authority to do business in this country of an
insurer within the holding company system or refuse to issue such authority to
any other insurer in the system; or
(c) direct that, in addition to any other penalty provided by law, such person
forfeit to the people of this country a sum not exceeding five hundred pesos for a
first violation and two thousand five hundred pesos for any subsequent
violation. An additional sum not exceeding two thousand five hundred pesos
shall be imposed for each month during which any such violation shall continue.
Chapter IV
SALES AGENCIES AND TECHNICAL SERVICES
Title 1
INSURANCE AGENTS AND INSURANCE BROKERS
Sec. 299. No insurance company doing business in the Philippines, nor any
agent thereof, shall pay any commission or other compensation to any person
for services in obtaining insurance, unless such person shall have first procured
from the Commissioner a license to act as an insurance agent of such company
or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the
solicitation or procurement of applications for insurance, or receive for services
in obtaining insurance, any commission or other compensation from any
insurance company doing business in the Philippines, or any agent thereof,
without first procuring a license to act from the Commissioner, which must be
renewed annually on the first day of January, or within six months thereafter.
Such license shall be issued by the Commissioner only upon the written
application of the person desiring it, such application if for a license to act as
insurance agent, being approved and countersigned by the company such person
desires to represent, and shall be upon a form prescribed by the Commissioner
giving such information as he may require, and upon payment of the
corresponding fee hereinafter prescribed. The Commissioner shall satisfy himself

as to competence and trustworthiness of the applicant and shall have the right
to refuse to issue or renew and to suspend or revoke any such license in his
discretion. No such license shall be valid after the thirtieth day of June of the
year following its issuance unless it is renewed. (As amended by Presidential
Decree No. 1455).
Sec. 300. Any person who for compensation solicits or obtains insurance on
behalf of any insurance company or transmits for a person other than himself an
application for a policy or contract of insurance to or from such company or
offers or assumes to act in the negotiating of such insurance shall be an
insurance agent within the intent of this section and shall thereby become liable
to all the duties, requirements, liabilities and penalties to which an insurance
agent is subject.
Sec. 301. Any person who for any compensation, commission or other thing of
value acts or aids in any manner in soliciting, negotiating or procuring the
making of any insurance contract or in placing risk or taking out insurance, on
behalf of an insured other than himself, shall be an insurance broker within the
intent of this Code, and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance broker is subject.
Sec. 302. Every applicant for an insurance broker's license shall file with the
application and shall thereafter maintain in force while so licensed, a bond in
favor of the people of the Republic of the Philippines executed by a company
authorized to become surety upon official recognizances, stipulations, bonds and
undertakings. The bond shall be in such amount as may be fixed by the
Commissioner, but in no case less than one hundred thousand pesos, and shall
be conditioned upon full accounting and due payment to the person entitled
thereto of funds coming into the broker's possession through insurance
transactions under license. The bond shall remain in force until released by the
Commissioner, or until cancelled by the surety. Without prejudice to any liability
previously incurred thereunder, the surety may cancel the bond on thirty days
advance written notice to both the broker and the Commissioner.
Upon approval of the application, the applicant must also file two errors and
omissions (professional liability or professional indemnity) policies issued
separately by two insurance companies authorized to do business in the
Philippines, satisfactory to the Commissioner to indemnify the applicant against
any claim or claims for breach of duty as insurance broker which may be made
against him by reason of any negligent act, error or omission, whenever or
wherever committed or alleged to have been committed, on the part of the
applicant or any person who has been, is now, or may hereafter during the
subsistence of the policies be employed by the said applicant in his capacity as
insurance broker, provided that the filing of any claim or claims under one of
such policies shall preclude the filing of the said claim or claims under the other
policy. The said policies shall be in such amounts as may be prescribed by the
Insurance Commissioner, depending upon the size or amount of the broking

business of the applicant, but in no case shall the amount of each of such
policies be less than five hundred thousand pesos. (As amended by Presidential
Decree No. 1455).
Sec. 303. The Commissioner shall, in order to determine the competence of
every applicant to have the kind of license applied for, require such applicant to
submit to a written examination and to pass the same to the satisfaction of the
Commissioner. Such examination shall be held at such times and places as the
Commissioner shall from time to time determine.
Sec. 304. An applicant for the written examination mentioned in the preceding
section must be of good moral character and must not have been convicted of
any crime involving moral turpitude. He must satisfactorily show to the
Commissioner that he has been trained in the kind of insurance contemplated in
the
license
applied
for.
Such examination may be waived if it is shown to the satisfaction of the
Commissioner that the applicant has undergone extensive education and/or
training in insurance.
Sec. 305. An application for the issuance or renewal of a license to act as an
insurance agent or insurance broker may be refused, or such license, if already
issued or renewed, shall be suspended or revoked if the Commissioner finds that
the applicant for, or holder of, such license:chanroblesvirtuallawlibrary
(a) has willfully violated any provision of this Code; or
(b) has intentionally made a material misstatement in the application to qualify
for such license; or
(c) has obtained or attempted to obtain a license by fraud or misrepresentation;
or
(d) has been guilty of fraudulent or dishonest practices; or
(e) has misappropriated or converted to his own use or illegally withheld
moneys required to be held in a fiduciary capacity;
(f) has not demonstrated trustworthiness and competence to transact business
as an insurance agent or insurance broker in such manner as to safeguard the
public; or
(g) has materially misrepresented the terms and conditions of policies or
contracts of insurance which he seeks to sell or has sold; or
(h) has failed to pass the written examination prescribed, if not otherwise
exempt from taking the same.
In addition to the foregoing causes, no license to act as insurance agent or
insurance broker shall be renewed if the holder thereof has not been actively
engaged as such agent or broker in accordance with such rules as the
Commissioner may prescribe. (As amended by Presidential Decree No. 1814).
Sec. 306. The premium, or any portion thereof, which an insurance agent or
insurance broker collects from an insured and which is to be paid to an
insurance company because of the assumption of liability through the issuance
of policies or contracts of insurance, shall be held by the agent or broker in a

fiduciary capacity and shall not be misappropriated or converted to his own use
or illegally withheld by the agent or broker.
Any insurance company which delivers to an insurance agent or insurance
broker a policy or contract of insurance shall be deemed to have authorized such
agent or broker to receive on its behalf payment of any premium which is due on
such policy or contract of insurance at the time of its issuance or delivery or
which becomes due thereon.
Sec. 307. Any provision of existing laws to the contrary notwithstanding, no
person shall, within the Philippines, sell or offer for sale a variable contract or do
or perform any act or thing in the sale, negotiation, making or consummating of
any variable contract other than for himself unless such person shall have a
valid and current license from the Commissioner authorizing such person to act
as a variable contract agent. No such license shall be issued unless and until the
Commissioner is satisfied, after examination that such person is by training,
knowledge, ability and character qualified to act as such agent. Any such license
may be withdrawn and cancelled by the Commissioner after notice and hearing,
if he shall find that the holder thereof does not then have the qualifications
required for the issuance of such license.
Sec. 308. It shall be unlawful for any person, company or corporation in the
Philippines to act as general agent of any insurance company unless he is
empowered by a written power of attorney duly executed by such insurance
company, and registered with the Commissioner to receive notices, summons
and legal processes for and in behalf of the insurance company concerned in
connection with actions or other legal proceedings against said insurance
company. It shall be the duty of said general agent to notify the Commissioner of
his post office address in the Philippines, or any change thereof. Notices,
summons, or processes of any kind sent by registered mail to the last registered
address of such general agent of the company concerned or to the Commissioner
shall be sufficient service and deemed as if served on the insurance company
itself.
Sec. 309. Except as otherwise provided by law or treaty, it shall be unlawful for
any person, partnership, association or corporation in the Philippines, for
himself or itself, or for some other person, partnership, association or
corporation, either to procure, receive or forward applications of insurance in, or
to issue or to deliver or accept policies or contracts of insurance of or for, any
insurance company or companies not authorized to transact business in the
Philippines, covering risks, life or nonlife, situated in the Philippines; and any
such person, partnership, association or corporation violating the provisions of
this section shall be deemed guilty of a penal offense, and upon conviction
thereof, shall for each such offense be punished by a fine of ten thousand pesos,
or imprisonment of six months, or both at the discretion of the
court: Provided, That the provisions of this section shall not apply to
reinsurance.

Title 2
REINSURANCE BROKERS
Sec. 310. Except as provided in the next succeeding title, no person shall act as
reinsurance broker in the Philippines unless he is authorized as such by the
Commissioner.
A reinsurance broker is one who, for compensation, not being a duly authorized
agent, employee or officer of an insurer in which any reinsurance is effected, act
or aids in any manner in negotiating contracts of reinsurance, or placing risks of
effecting reinsurance, for any insurance company authorized to do business in
the Philippines.
Sec. 311. Upon application and payment of the corresponding fee hereinafter
prescribed, and the filing of two errors and omissions (professional liability or
professional indemnity) policies hereinafter described, a person may, if found
qualified, be issued a license to act as reinsurance broker by the Commissioner.
No such license shall be valid after the thirtieth day of June of the year following
its issuance unless it is renewed. (As amended by Presidential Decree No. 1455).
The errors and omissions (professional liability or professional indemnity)
policies mentioned above shall indemnify the applicant against any claim or
claims for breach of duty as reinsurance broker which may be made against him
by reason of any negligent act, error or omission, whenever or wherever
committed or alleged to have been committed, on the part of the applicant or
any person who has been, is now, or may hereafter during the subsistence of the
policies be employed by the said applicant in his capacity as reinsurance broker;
Provided, That the filing of any claim or claims under one of such policies shall
preclude the filing of the said claim or claims under the other policy. The said
policies shall be issued separately by two insurance companies authorized to do
business in the Philippines and shall be in such amounts as may be prescribed by
the Insurance Commissioner, depending upon the size or amount of the broking
business of the applicant, but in no case shall the amount of each of such
policies be less than five hundred thousand pesos. (As amended by Presidential
Decree No. 1455).
Sec. 312. The Commissioner may recall, suspend or revoke the license granted to
a reinsurance broker for violation of any existing law, rule and regulation, or any
provision of this Code after due notice and hearing.
Title 3
RESIDENT AGENTS
Sec. 313. No person shall act as resident agent, as hereinafter defined, unless he
is registered as such with the Commissioner.
Sec. 314. The term "resident agent", as used in this title, is one duly appointed
by a foreign insurer or broker not authorized to do business in the Philippines to
receive in its behalf notices, summons and legal processes in connection with
actions or other legal proceedings against such foreign insurer or broker.
Sec. 315. The application for a certificate of registration as resident agent filed

with the Commissioner must be accompanied with:chanroblesvirtuallawlibrary

(a) a copy of the power of attorney, duly notarized and authenticated by the
Philippine Consul in the place where such foreign insurer or broker is domiciled,
empowering the applicant to act as resident agent and to receive notices,
summons and legal processes for and in behalf of such foreign insurer or broker
in connection with any action or legal proceeding against such foreign insurer or
broker; and
(b) a copy of the corresponding certificate issued by the Board of Investments
as required under Section 4 of Republic Act No. 5455, if such foreign insurer or
broker is not otherwise exempt from such requirement.
Sec. 316. It shall be the duty of such resident agent to notify immediately the
Commissioner of any change of his office address.
Sec. 317. A certificate of registration issued to a resident agent shall expire on
the thirtieth day of June of the year following its issuance unless it is renewed.
The Commissioner may, after due notice and hearing, recall or cancel the
certificate of registration issued to a resident agent for violation of any existing
law, rule or regulation, or any provision of this Code. (As amended by
Presidential Decree No. 1455).
Title 4
NON-LIFE COMPANY UNDERWRITER
Sec. 318. No person shall act, and no company shall employ any person, as nonlife company underwriter, whose duty and responsibility it shall be to select,
evaluate and accept risks for, and to determine the terms and conditions,
including those pertaining to amounts of retentions, under which such risks are
to be accepted by the company, unless such underwriter is registered as such
with the Commissioner.
Sec. 319. Every non-life insurance company doing business in the Philippines
must maintain at all times a register of risks accepted and a claims register for
each line of risks engaged in by such non-life insurance company with such
entries therein as are now or as may hereafter be required by the Commissioner,
and it shall be the responsibility of the underwriter on the particular line or risk
involved to see to it that the said registers are well maintained and kept, and
that all entries therein are properly and correctly recorded. Such registers shall
be open to inspection and examination of duly authorized representative of the
Commissioner at all times during business hours.
Sec. 320. No person shall be registered with the Commissioner, unless such
person shall be at least twenty-one years of age on the date of such registration;
a resident of the Philippines; of good moral character and with no conviction of
any crime involving moral turpitude; has had at the time such registration is
made at least two years of underwriting work in the particular line or risk
involved; and has passed such qualifying written examination that the
Commissioner shall conduct at such time and in such place as he may decide to
hold
for
applicants
desiring
to
act
as
underwriters.

Such examination shall not be required of any person who has served as non-life
company underwriter for a period of at least five years, if the Commissioner is
satisfied of the applicant's competence as shown by the results of his
underwriting work in the non-life insurance company or companies that
employed him in that capacity. The minimum underwriting experience herein
required may be reduced or waived if it is shown to the satisfaction of the
Commissioner that the non-life company underwriter has undergone extensive
education and/or training in insurance.
Sec. 321. Any applicant who misrepresents or omits any material fact in his
application for registration as a non-life company underwriter, or commits any
dishonest act in taking or in connection with the qualifying written examination
for underwriters, shall be barred from being registered as such non-life company
underwriter and, if already registered, his registration shall be cancelled and the
certificate of registration issued in his favor shall be recalled immediately by the
Commissioner.
In the event that the certificate of authority of a non-life insurance company to
transact business is suspended or revoked due to business failure arising largely
from the imprudent and injudicious acceptance of risks by the underwriter
concerned, the registration of such underwriter shall likewise be cancelled and
his certificate of registration shall be recalled by the Commissioner, and no
similar certificate shall thereafter be issued in his favor.
Sec. 322. No certificate of registration issued to an underwriter shall be valid
after the thirtieth day of June of the year following its issuance unless it is
renewed.
The Commissioner may, after due notice and hearing, also suspend or cancel
such certificate for violation of existing laws, rules and regulations or of any
provisions of this Code. (As amended by Presidential Decree No. 1455).
Title 5
ADJUSTERS
Sec. 323. No person, partnership, association, or corporation shall act as an
adjuster, as hereinafter defined, unless authorized so to act by virtue of a
license issued or renewed by the Commissioner pursuant to the provisions of
this Code: Provided, That in the case of a natural person, he must be a Filipino
citizen and in the case of a partnership, association or corporation, at least sixty
per centum of its capital must be owned by citizens of the Philippines.
Sec. 324. An adjuster may be an independent adjuster or a public adjuster.
The term "independent adjuster" means any person, partnership, association or
corporation which, for money, commission or any other thing of value, acts for
or on behalf of an insurer in the adjusting of claims arising under insurance
contracts or policies issued by such insurer.
The term "public adjuster" means any person, partnership, association or
corporation which, for money, commission or any other thing of value, acts on
behalf of an insured in negotiating for, or effecting, the settlement of a claim or

claims of the said insured arising under insurance contracts or policies, or which
advertises for or solicits employment as an adjuster of such claims.
Sec. 325. For every line of insurance claim adjustment, adjusters shall be
licensed either as independent adjusters or as public adjusters. No adjuster shall
act on behalf of an insurer unless said adjuster is licensed as an independent
adjuster; and no adjuster shall act on behalf of an insured unless said adjuster is
licensed as a public adjuster: Provided, however, That when a firm or person has
been licensed as public adjuster, he shall not be granted another license as
independent adjuster and vice versa.
No license, however, shall be required of any company adjuster who is a salaried
employee of an insurance company for the adjustment of claims filed under
policies issued by such insurance company.
Sec. 326. Such license or any renewal thereof may be issued by the
Commissioner upon written application filed by the person interested on the
form or forms prescribed by the Commissioner, which shall contain such
information as he may require, and upon payment of the corresponding fee
hereinafter prescribed.
Sec. 327. The Commissioner shall conduct, at such times, and in such places as
he may decide to hold, written examinations to determine the competence and
ability of applicants desiring to act as adjuster of insurance claims.
Sec. 328. Every adjuster's license issued hereunder shall be valid until after the
thirtieth day of June of the year following the issuance of such license unless it
is renewed. (As amended by Presidential Decree No. 1455).
Sec. 329. Nothing contained in this title shall apply to any duly licensed
attorney-at-law who acts or aids in adjusting insurance claims as an incident to
the practice of his profession and who does not advertise himself as an adjuster.
Sec. 330. The Commissioner may suspend or revoke any adjuster's license if,
after giving notice and hearing to the adjuster concerned, the Commissioner
finds that the said adjuster:chanroblesvirtuallawlibrary
(1) has violated any provision of this Code and of the circulars, rulings and
instructions of the Commissioner or has violated any law in the course of his
dealings as an adjuster; or
(2) has made a material misstatement in the application for such license; or
(3) has been guilty of fraudulent or dishonest practices; or
(4) has demonstrated his incompetence or untrustworthiness to act as adjuster;
or
(5) has made patently unjust valuation of loss; or
(6) has failed to make a report of the adjustment he proposed within sixty days
from the date of the filing of the claim by the insured with the insurer, unless
prevented so to do by reasons beyond his control; or
(7) has refused to allow an examination into his affairs or method of doing
business as hereinafter provided.
Sec. 331. Every adjuster shall submit to the Commissioner a quarterly report of

all losses which are the subject of adjustment effected by him during each
month in the form prescribed by the Commissioner. The report shall be filed
within one month after the end of each quarter.
Sec. 332. Every adjuster shall keep his or its books, records, reports, accounts,
and vouchers in such manner that the Commissioner or his duly authorized
representatives may readily verify the quarterly reports of the said adjuster and
ascertain whether the said adjuster has complied with the provisions of law or
regulations obligatory upon him or whether the method of doing business of the
said adjuster has been fair, just and honest.
Sec. 333. The Commissioner shall, at least once a year and whenever he
considers the public interest so demands, cause an examination to be made into
the affairs and method of doing business of every adjuster.
Sec. 334. Any violation of any provision of this title shall be punished by a fine of
not more than ten thousand pesos, or by imprisonment in the discretion of the
court; Provided, That, in case of a partnership, association or corporation, the
said penalty shall be imposed upon the partner, president, manager, managing
director, director or person in charge of its business or responsible for the
violation.
Title 6
ACTUARIES
Sec. 335. No life insurance company shall be licensed to do business in the
Philippines nor shall any life insurance company doing business in the
Philippines be allowed to continue doing such business unless they shall engage
the services of an actuary duly accredited with the Commissioner who shall,
during his tenure of office, be directly responsible for the direction and
supervision of all actuarial work connected with or that may be involved in the
business of the insurance company.
Sec. 336. Any person may be officially accredited by the Commissioner to act as
any actuary in any life insurance company or in any mutual benefit association
authorized to do business in the Philippines upon application therefor and the
payment of the corresponding fee hereinafter prescribed:Provided, That: (1) he
is a fellow of good standing of the Acturial Society of the Philippines at the time
of his appointment and remains in such good standing during the tenure of his
engagement; or (2) in the case of one who is not a fellow of the Acturial Society
of the Philippines, he meets all the requirements of the said Society for
accreditation as a fellow of the Society, and has been given permission by the
pertinent government authorities in the Philippines to render services in the
Philippines, in the event that he is not a citizen of the Philippines.
No certificate of registration issued under this title shall be valid after the
thirtieth day of June of the year following its issuance unless it is renewed.(As
amended by Presidential Decree No. 1455).
Sec. 337. The following documents, which are from time to time submitted to the
Commissioner by a life insurance company authorized to do business in the

Philippines, shall be duly certified by an accredited actuary employed by such

company:chanroblesvirtuallawlibrary
1. Policy reserves and net due and deferred premiums.
2. Statements of bases and net premiums, loading for gross premiums, and on
non-forfeiture values and reserves, when applying for approval of gross
premiums, reserves and non-forfeiture values.
3. Policies of insurance under any plan submitted to the Commissioner as
required by law.
4. Annual statements and valuation reports submitted to the Commissioner as
required by law.
5. Financial projection showing the probable income and outgo and reserve
requirements, enumerating the acturial assumptions and bases of projections.
6.
Valuation
of
annuity
funds
or
retirement
plans.
Any life insurance company authorized to do business in the Philippines may
employ any person who is not officially accredited under either of the
qualifications for any kind of acturial work, provided that he shall not, at any
time, have the authority to certify to the correctness of the foregoing
documents.
Sec. 338. No accredited actuary shall serve more than one client or employer at
the same time. However, one already in the employ of an insurance company
may be allowed by the Commissioner to serve a mutual benefit association or
any other insurance company, provided the following conditions are first
complied with: (a) that the request to engage his services by the other employer
is in writing; (b) that his present employer acquiesced to it in writing; and (c)
that he furnishes the Commissioner with copies of said request and
acquiescence.
Title 7
RATING ORGANIZATION AND RATE MAKING
Sec. 339. Every organization which now exists or which may hereafter be formed
for the purpose of making rates to be used by more than one insurance company
authorized to do business in the Philippines shall be known as a "rating
organization." The term "rate" as used in this title shall generally mean the
ratio of the premium to the amount insured and shall include, as the context may
require, either the consideration to be paid or charged for insurance contracts,
including surety bonds, or the elements and factors forming the basis for the
determination or application of the same, or both.
Sec. 340. Every rating organization which now exists or which may hereafter be
formed shall be subject to the provisions of this title.
Sec. 341. No rating organization hereafter formed shall commence rate-making
operations until it shall have obtained a license from the Commissioner. Before
obtaining such license, such rating organization shall file with the Commissioner
a notice of its intention to commence rate-making operations, a copy of its
constitution, articles of agreement or association, or of incorporation, and its by-

laws, a list of insurance companies that have agreed to become members or

subscribers, and such other information concerning such rating organization and
its operations as may be required by the Commissioner. If the Commissioner
finds that the organization has complied with the provisions of law and that it
has a sufficient number of members or subscribers and is otherwise qualified to
function as a rating organization, the Commissioner may issue a license to such
rating organization authorizing it to make rates for the kinds of insurance or
subdivisions thereof as may be specified in such license. No license issued to a
rating organization shall be valid after the thirtieth day of June of the year
following its issuance unless it is renewed. No rating organization which now
exists and is not licensed pursuant to this section shall continue rate-making
operations until it shall have obtained from the Commissioner a license which he
may issue if satisfied that such organization is complying with the provisions of
this title. Every rating organization shall notify the Commissioner promptly of
every change in (1) its constitution, its articles of agreement or association or
its certificate of incorporation, and its by-laws rules and regulations governing
the conduct of its business, and (2) its list of members and subscribers.
A "member" means an insurer who participates in or is entitled to participate in
the management of a rating organization.
A "subscriber" means an insurer which is furnished at its request with rates and
rating manuals by a rating organization of which it is not a member. (As
amended by Presidential Decree No. 1455).
Sec. 342. Each rating organization shall furnish its rating service without
discrimination to all of its members and subscribers, and shall, subject to
reasonable rules and regulations, permit any insurance company doing business
in the Philippines, not admitted to membership, to become a subscriber to its
rating services for any kind of insurance or subdivisions thereof. Notice of
proposed changes in such rules and regulations shall be given to subscribers.
The reasonableness of any rule or regulation in its application to subscribers, or
the refusal of any rating organization to admit an insurance company as a
subscriber, shall, at the request of any subscriber or any such insurance
company, be reviewed by the Commissioner at a hearing held upon at least ten
days' written notice to such rating organization and to such subscriber or
insurance company. The Commissioner may, after such hearing, issue an
appropriate order.
Sec. 343. No rating organization or any other association shall refuse to do
business with, or prohibit or prevent the payment of commissions to, any person
licensed as an insurance broker pursuant to the provisions of title one of this
chapter.
Sec. 344. Rating organization shall be subject to examination by the
Commissioner, as often as he may deem such examination expedient, pursuant
to the provisions of this Code applicable to the examination of insurance
companies. He shall cause such an examination of each rating organization to be

made at least once in every five years.

Sec. 345. The Commissioner may suspend or revoke the license of any rating
organization which fails to comply with his order within the time limited by such
order, or any extension thereof which he may grant. The Commissioner may
determine when a suspension of license shall become effective and it shall
remain in effect for the period fixed by him, unless he modifies or rescinds such
suspension.
Sec. 346. Any rating organization may subscribe for or purchase acturial,
technical or other services, and such services shall be available to all members
and subscribers without discrimination.
Sec. 347. Any rating organization may provide for the examination of policies,
daily reports, binders, renewal certificates, endorsements or other evidences of
insurance, or the cancellation thereof, and may make reasonable rules governing
their submission. Such rules shall contain a provision that in the event an
insurance company does not within sixty days furnish satisfactory evidence to
the rating organization of the correction of any error or omission previously
called to its attention by the rating organization, it shall be the duty of the rating
organization to notify the Commissioner thereof. All information so submitted
for examination shall be confidential.
Sec. 348. Cooperation among rating organizations or among rating organizations
and insurers in rate making or in other matters within the scope of this title is
hereby authorized, provided the filings resulting from such cooperation are
subject to all provisions of this title which are applicable to filings generally. The
Commissioner may review such cooperative activities and practices and if he
finds that any such activity or practice is unfair or unreasonable or otherwise
inconsistent with the provisions of this title, he may issue a written order
specifying in what respects such activity or practice is unfair or unreasonable or
otherwise inconsistent with the provisions of this title, and requiring the
discontinuance of such activity or practice.
Sec. 349. Every rating organization and every insurance company which makes
and files its own rates, shall make rates for all risks rated by such organization
or
insurance
company
in
accordance
with
the
following
provisions:chanroblesvirtuallawlibrary
(a) Basic classification, manual, minimum, class, or schedule rates or rating
plans, shall be made and adopted for all such risks. Any departure from such
rates shall be in accordance with schedules, rating plans and rules filed with the
Commissioner;
(b) Rates shall be reasonable and adequate for the class of risks to which they
apply;
(c) No rate shall discriminate unfairly between risks involving essentially the
same hazards and expense elements or between risks in the application of like
charges and credits;
(d) Consideration shall be given to the past and prospective loss experience,

including the conflagration and catastrophe hazards, if any, to all factors

reasonably attributable to the class of risks, to a reasonable profit, to
commissions paid during the most recent annual period and to past and
prospective other expenses. In case of fire insurance rates, consideration shall
be given to the experience of the fire insurance business during a period of not
less than five years next preceding the year in which the review is made;
(e) Risk may be grouped by classifications for the establishment of rates and
minimum premiums. Classification rates may be modified to produce rates for
individual risks in accordance with rating plans which establish standards for
measuring variations in hazards or expense provisions, or both. Such standards
may measure any difference among risks that can be demonstrated to have a
probable effect upon losses or expenses.
Sec. 350. No rating organization and no insurance company which makes and
files its own rates shall make or promulgate any rate or schedule of rates which
is to be applied to any fire risk on the condition that the whole amount of
insurance on any risk or any specified part thereof shall be placed with the
members of or subscribers to such rating organization or with such insurer.
Sec. 351. Every insurance company doing business in the Philippines shall
annually file with the rating organization of which it is a member or subscriber,
or with such other agency as the Commissioner may designate, a statistical
report showing a classification schedule of its premiums and losses on all kinds
or types of insurance business to which section three hundred forty-nine is
applicable, and such other information as the Commissioner may deem
necessary or expedient for the administration of the provisions of this title.
Sec. 352. Every non-life rating organization and every non-life insurance
company doing business in the Philippines shall file with the Commissioner,
except as to risks which by general custom of the business are not written
according to manual rates or rating plans, every rate manual, schedule of rates,
classification of risks, rating plan, and every other rating rule and every
modification of any of the foregoing which it proposes to use. An insurance
company may satisfy its obligation to make such filings for any kind or type of
insurance by becoming a member of or subscriber to a rating organization which
makes such filings for such kind or type of insurance, and by authorizing the
Commissioner to accept such filings of the rating organization on behalf of such
insurance company.
Sec. 353. Every manual or schedule of rates and every rating plan filed as
provided in the preceding section shall state or clearly indicate the character and
extent of the coverage to which any such rate or any modification thereof will be
applied.
Sec. 354. The Commissioner shall review filings as soon as reasonably possible
after they have been made in order to determine whether they meet the
requirements of this title. When a filing is not accompanied by the information
upon which the insurance company supports such filing, and the Commissioner

does not have sufficient information to determine whether such filing meets the
requirements of this title, he shall require such insurance company to furnish the
information upon which it supports such filing. The information furnished in
support of a filing may include: (1) the experience or judgment of the insurance
company or rating organization making the filing; (2) its interpretation of any
statistical data it relies upon; (3) the experience of other insurance companies
or rating organization; or (4) any other relevant factors.
Sec. 355. If the Commissioner finds that any rate filings theretofore filed with
him do not comply with the provisions of this title or that they provide rates or
rules which are inadequate, excessive, unfairly discriminatory or otherwise
unreasonable, he may order the same withdrawn and at the expiration of sixty
days thereafter the same shall be deemed no longer on file. Before making any
such finding and order, the Commissioner shall give notice, not less than ten
days in advance, and a hearing, to the rating organization, or to the insurer,
which filed the same. Such order shall not affect any contract or policy made or
issued prior to the expiration of such sixty day period.
Sec. 356. No member or subscriber of a rating organization, and no insurance
company doing business in the Philippines, or agent, employee or other
representative of such company, and no insurance broker shall charge or
demand a rate or receive a premium which deviates from the rates, rating plans,
classifications, schedules, rules and standards, made and last filed by a rating
organization or by or on behalf of the insurance company, or shall issue or make
any policy or contract involving violation of such rate filings.
Sec. 357. Notwithstanding any other provisions of this title, upon the written
application of the insurer, stating his reasons therefor, filed with and approved
by the Commissioner, a rate in excess of that provided by a filing otherwise
applicable may be used on any specific risk.
Sec. 358. Whenever the Commissioner shall determine, after notice and a
hearing, that the rates charged or filed on any class of risks are excessive,
discriminatory, inadequate or unreasonable, he shall order that such rates be
appropriately adjusted. For the purpose of applying the provisions of this
section, the Commissioner may from time to time approve reasonable
classifications of risks for any or all such classes, having due regard to the past
and prospective loss experience, including conflagration or catastrophe hazards,
if any, to all other relevant factors and to a reasonable profit.
Sec. 359. Nothing contained in this title shall be construed as requiring any
insurer to become a member of or subscriber to any rating organization.
Sec. 360. Agreements may be made among insurance companies with respect to
the equitable apportionment among them of insurance which may be afforded
applicants who are in good faith entitled to but are unable to procure such
insurance through ordinary methods and such insurance companies may agree
among themselves on the use of reasonable rates and modifications for such
insurance, such agreements and rate modifications to be subject to the approval

of the Commissioner; Provided, however, That the provisions of this section shall
not be deemed to apply to workmen's compensation insurance.
Sec. 361. No insurance company doing business in the Philippines or any agent
thereof, no insurance broker, and no employee or other representative of any
such insurance company, agent, or broker, shall make, procure or negotiate any
contract of insurance or agreement as to policy contract, other than is plainly
expressed in the policy or other written contract issued or to be issued as
evidence thereof, or shall directly or indirectly, by giving or sharing a
commission or in any manner whatsoever, pay or allow or offer to pay or allow
to the insured or to any employee of such insured, either as an inducement to
the making of such insurance or after such insurance has been effected, any
rebate from the premium which is specified in the policy, or any special favor or
advantage in the dividends or other benefits to accrue thereon, or shall give or
offer to give any valuable consideration or inducement of any kind, directly or
indirectly, which is not specified in such policy or contract of insurance; nor shall
any such company, or any agent thereof, as to any policy or contract of
insurance issued, make any discrimination against any Filipino in the sense that
he is given less advantageous rates, dividends or other policy conditions or
privileges than are accorded to other nationals because of his race.
Sec. 362. No insurance company doing business in the Philippines, and no
officer, director, or agent thereof, and no insurance broker or any other person,
partnership or corporation shall issue or circulate or cause or permit to be issued
or circulated any literature, illustration, circular or statement of any sort
misrepresenting the terms of any policy issued by any insurance company of the
benefits or advantages promised thereby, or any misleading estimate of the
dividends or share of surplus to be received thereon, or shall use any name or
title of any policy or class of policies misrepresenting the true nature thereof;
nor shall any such company or agent thereof, or any other person, partnership or
corporation make any misleading representation or incomplete comparison of
policies to any person insured in such company for the purpose of inducing or
tending to induce such person to lapse, forfeit, or surrender his said insurance.
Sec. 363. If the Commissioner, after notice and hearing, finds that any insurance
company, rating organization, agent, broker or other person has violated any of
the provisions of this title, it shall order the payment of a fine not to exceed five
hundred pesos for each such offense, and shall immediately revoke the license
issued to such insurance company, rating organization, agent, or broker. The
issuance, procurement or negotiation of a single policy or contract of insurance
shall be deemed a separate offense.
Title 8
PROVISION COMMON TO AGENTS, BROKERS,
AND ADJUSTERS
Sec. 364. A license issued to a partnership, association or corporation to act as
an insurance agent, general agent, insurance broker, reinsurance broker, or

adjuster shall authorize only the individual named in the license who shall
qualify therefor as though an individual licensee. The Commissioner shall
charge, and the licensee shall pay, a full additional license fee as to each
respective individual so named in such license in excess of one.
Licenses and certificates of registration issued under the provisions of this
chapter may be renewed by the filing of notices of intention on forms to be
prescribed by the Commissioner and payment of the fees therefor. (As amended
by Presidential Decree No. 1455).
Chapter V
SECURITY FUND
Sec. 365. There is hereby created a fund to be known as the "Security
Fund" which shall be used in the payment of allowed claims against an insurance
company authorized to transact business in the Philippines remaining unpaid by
reason of the solvency of such company. The said Fund may also be used to
reinsure the policy of the insolvent insurer in any solvent insurer authorized to
do business in the Philippines as provided in section two hundred forty-nine. In
the event of national emergency or calamity, the Fund may likewise be used to
pay insured claims which otherwise would not be compensable under the
provisions of the policy. No payment from the Security Fund shall, however, be
made to any person who owns or controls ten per centum or more of the voting
shares of stock of the insolvent insurer and no payment on any one claim shall
exceed twenty thousand pesos.
Sec. 366. Such Fund shall consist of all payments made to the Fund by insurance
companies authorized to do business in the Philippines. Payments made by life
insurance companies shall be treated separately from those made by non-life
insurance companies and the corresponding fund shall be called "Life
Account" and "Non-Life Account", respectively, and shall be held and
administered as such by the Commissioner in accordance with the provisions of
this title. The "Life Account" shall be utilized exclusively for disbursements that
refer to life insurance companies, while the "Non-Life Account" shall be utilized
exclusively for disbursements that refer to non-life insurance companies.
Sec. 367. All insurance companies doing business in the Philippines shall
contribute to the Security Fund, Life or Non-Life Account, as the case may be, on
or before the fifteenth day of June, nineteen hundred and seventy-five, the
aggregate amount of five million pesos for each Account. The contributions of
the life insurance companies and of the non-life insurance companies shall be in
direct proportion to the ratio between a particular life insurance company or a
particular non-life insurance company's net worth and the aggregate net worth
of all life insurance companies or all non-life insurance companies, as the case
may be, as shown in their latest financial statements approved by the
Commissioner. This proportion applied to the five million pesos shall be the
contribution of a particular company to the corresponding Account of the
Security Fund.

The amount of five million pesos in each Account shall be in the form of a
revolving trust fund. The respective contributions of the companies shall remain
as admitted assets in their books and any disbursement therefrom shall be
deducted proportionately from the contributions of each company which will be
allowed as deductions for income tax purposes. Any earnings of the Fund shall
be turned over to the contributing companies in proportion to their
contributions.
In the case of disbursements of funds from the Fund as provided in the
foregoing paragraph, the life and non-life companies, as the case may be, shall
replenish the amount disbursed in direct proportion to the individual company's
net worth and the aggregate net worth of the life or non-life companies, as the
case may be. However, in no case shall the Fund exceed the aggregate amount
of
ten
million
pesos,
or
five
million
pesos
for
each
Account.
Should the Fund, Life of Non-Life Account, as the case may be, be inadequate for
a disbursement as provided for, then the Life or Non-Life companies, as the case
may be, shall contribute to the Fund their respective shares in the proportion
previously mentioned.
Sec. 368. The Commissioner may adopt, amend, and enforce all reasonable rules
and regulations necessary for the proper administration of the Fund and of the
Accounts. In the event any insurer shall fail to make any payment required by
this title, or that any payment made is incorrect, he shall have full authority to
examine all the books and records of the insurer for the purpose of ascertaining
the facts and shall determine the correct amount to be paid and may proceed in
any court of competent jurisdiction to recover for the benefit of the Fund or of
the Account concerned any sum shown to be due upon such examination and
determination. Any insurer which fails to make any payment to the Fund or to
the Account concerned when due, shall thereby forfeit to said Fund or Account
concerned a penalty of five per centum of the amount determined to be due as
provided by this title, plus one per centum of such amount for each month of
delay or fraction thereof, after the expiration of the first month of such delay,
but the Commissioner, if satisfied that the delay was excusable, may remit all or
any part of such penalty. The Commissioner, in his discretion, may suspend or
revoke the certificate of authority to do business in the Philippines of any
insurance company which shall fail to comply with this title or to pay any penalty
imposed in accordance therewith.
Sec. 369. The Accounts created by this title shall be separate and apart from
each other and from any other fund. The Treasurer of the Philippines shall be the
custodian of the Life Account and Non-Life Account of the Security Fund; and all
disbursements from any Account shall be made by the Treasurer of the
Philippines upon vouchers signed by the Commissioner or his deputy, as
hereinafter provided. The moneys of said Account may be invested by the
Commissioner only in bonds or other evidences of debt of the government of the
Philippines or its political subdivisions or instrumentalities. The Commissioner

may sell any of the securities in which an Account is in vested, if advisable, for
its proper administration or in the best interest of such Account.
Sec. 370. Payments from either the Life Insurance Account or Non-Life Account,
as the case may be, shall be made by the Treasurer of the Philippines to the
Commissioner, upon the authority of appropriate certificate filed with him by the
Commissioner acting in such capacity.
Sec. 371. The Commissioner may, in his discretion, designate or appoint a duly
authorized representative or representatives to appear and defend before any
court or other body or official having jurisdiction any or all actions or
proceedings against principals or assureds on insurance policies or contracts
issued to them where the insurer has become insolvent or unable to meet its
insurance obligations. The Commissioner shall have, as of the date of insolvency
of such insurer or as of the date of its inability meet its insurance obligations,
only the rights which such insurer would have had if it had not become insolvent
or unable to meet its insurance obligations. For the purpose of this title the
Commissioner shall have power to employ such counsel, clerks and assistants as
he may deem necessary.
Sec. 372. The expense of administering an Account shall be paid out of the
Account concerned. The Commissioner shall serve as administrator of the Fund
and of the Accounts without additional compensation, but may be allowed and
paid from the Account concerned expenses incurred in the performance of his
duties in connection with said Account. The compensation of those persons
employed payable from the Account concerned. The Commissioner shall include
in his annual report to the Secretary of Finance a statement of the expenses of
administration of the Fund and of the Life Account and Non-Life Account for the
preceding year.
Chapter VI
COMPULSORY MOTOR VEHICLE
LIABILITYINSURANCE
Sec.
373.
For
purposes
of
this
chapter:chanroblesvirtuallawlibrary
(a) "Motor Vehicle" is any vehicle as defined in section three, paragraph (a) of
Republic Act Numbered Four Thousand One Hundred Thirty-Six, Otherwise
known as the "Land Transportation and Traffic Code."
(b) "Passenger" is any fare paying person being transported and conveyed in
and by a motor vehicle for transportation of passengers for compensation,
including persons expressly authorized by law or by the vehicle's operator or his
agents to ride without fare.
(c) "Third-Party" is any person other than a passenger as defined in this section
and shall also exclude a member of the household, or a member of the family
within the second degree of consanguinity or affinity, of a motor vehicle owner
or land transportation operator, as likewise defined herein, or his employee in
respect of death, bodily injury, or damage to property arising out of and in the
course of employment. (As amended by Presidential Decree No. 1814 and 1981).

(d) "Owner" or "motor vehicle owner" means the actual legal owner of a motor
vehicle, in whose name such vehicle is duly registered with the Land
Transportation Commission;
(e) "Land transportation operator" means the owner or owners of motor
vehicles for transportation of passengers for compensation, including school
buses;
(f) "Insurance policy" or "Policy" refers to a contract of insurance against
passenger and thirty-party liability for death or bodily injuries and damaged to
property arising from motor vehicle accidents. (As amended by Presidential
Decree No. 1455 and 1814).
Sec. 374. It shall be unlawful for any land transportation operator or owner of a
motor vehicle to operate the same in the public highways unless there is in force
in relation thereto a policy of insurance or guaranty in cash or surety bond
issued in accordance with the provisions of this chapter to indemnify the death,
bodily injury, and/or damage to property of a third-party or passenger, as the
case may be, arising from the use thereof. (As amended by Presidential Decree
No. 1455 and 1814).
Sec. 375. The Commissioner shall furnish the Land Transportation Commissioner
with a list of insurance companies authorized to issue the policy of insurance or
surety bond required by this chapter. (As amended by Presidential Decree No.
1814).
Sec. 376. The Land Transportation Commission shall not allow the registration or
renewal of registration of any motor vehicle without first requiring from the land
transportation operator or motor vehicle owner concerned the presentation and
filing of a substantiating documentation in a form approved by the Commissioner
evidencing that the policy of insurance or guaranty in cash or surety bond
required by this chapter is in effect. (As amended by Presidential Decree No.
1455).
Sec. 377. Every land transportation operator and every owner of a motor vehicle
shall, before applying for the registration or renewal of registration of any motor
vehicle, at his option, either secure an insurance policy or surety bond issued by
any insurance company authorized by the Commissioner or make a cash deposit
in such amount as herein required as limit of liability for purposes specified in
section three hundred seventy-four.
(1) In the case of a land transportation operator, the insurance guaranty in cash
or surety bond shall cover liability for death or bodily injuries of third-parties
and/or passengers arising out of the use of such vehicle in the amount not less
than twelve thousand pesos per passenger or third party and an amount, for
each of such categories, in any one accident of not less than that set forth in the
following scale:chanroblesvirtuallawlibrary
(a) Motor vehicles with an authorized capacity of twenty-six or more
passengers: Fifty thousand pesos;
(b) Motor vehicles with an authorized capacity of from twelve to twenty-five

passengers: Forty thousand pesos;

(c) Motor vehicles with an authorized capacity of from six to eleven passengers:
Thirty thousand pesos;
(d) Motor vehicles with an authorized capacity of five or less passengers: Five
thousand pesos multiplied by the authorized capacity.
Provided, however, That such cash deposit made to, or surety bond posted with,
the Commissioner shall be resorted to by him in cases of accidents the
indemnities for which to third-parties and/or passengers are not settled
accordingly by the land transportation operator and, in that event, the said cash
deposit shall be replenished or such surety bond shall be restored with sixty
days after impairment or expiry, as the case may be, by such land transportation
operator, otherwise, he shall secure the insurance policy required by this
chapter. The aforesaid cash deposit may be invested by the Commissioner in
readily marketable government bonds and/or securities.
(2) In the case of an owner of a motor vehicle, the insurance or guaranty in cash
or surety bond shall cover liability for death or injury to third parties in an
amount not less than that set forth in the following scale in any one
accident:chanroblesvirtuallawlibrary
I.
Private
Cars
(a)
Bantam
:
(b)
Light
:
(c) Heavy : Thirty thousand pesos;
II.

Other

Twenty
Twenty

Private

thousand
thousand

pesos;
pesos;

Vehicles

(a) Tricycles, motorcyles, and scooters

:
Twelve thousand pesos;
(b) Vehicles with an unladen weight of 2,600 kilos or less : Twenty thousand
pesos;
(c) Vehicles with an unladen weight of between 2,601 kilos and 3,930 kilos :
Thirty
thousand
pesos;
(d) Vehicles with an unladen weight over 3,930 kilos : Fifty thousand pesos.
The Commissioner may, if warranted, set forth schedule of indemnities for the
payment of claims for death or bodily injuries with the coverages set forth
herein. (As amended by Presidential Decree No. 1455 and 1814).
Sec. 378. Any claim for death or injury to any passenger or third party pursuant
to the provisions of this chapter shall be paid without the necessity of proving
fault or negligence of any kind; Provided, That for purposes of this
section:chanroblesvirtuallawlibrary
(i) The total indemnity in respect of any person shall not exceed five thousand
pesos;
(ii) The following proofs of loss, when submitted under oath, shall be sufficient
evidence
to
substantiate
the
claim:chanroblesvirtuallawlibrary

(a) Police report of accident; and

(b) Death certificate and evidence sufficient to establish the proper payee; or
(c) Medical report and evidence of medical or hospital disbursement in respect
of which refund is claimed;
(iii) Claim may be made against one motor vehicle only. In the case of an
occupant of a vehicle, claim shall lie against the insurer of the vehicle in which
the occupant is riding, mounting or dismounting from. In any other case, claim
shall lie against the insurer of the directly offending vehicle. In all cases, the
right of the party paying the claim to recover against the owner of the vehicle
responsible for the accident shall be maintained.
Sec. 379. No land transportation operator or owner of motor vehicle shall be
unreasonably denied the policy of insurance or surety bond required by this
chapter by the insurance companies authorized to issue the same, otherwise,
the Land Transportation Commission shall require from said land transportation
operator or owner of the vehicle, in lieu of a policy of insurance or surety bond, a
certificate that a cash deposit has been made with the Commissioner in such
amount required as limits of indemnity in section three hundred seventy-seven
to answer for the passenger and/or third-party liability of such land
transportation operator or owner of the vehicle.
No insurance company may issue the policy of insurance or surety bond required
under this chapter unless so authorized under existing laws.
The authority to engage in the casualty and/or surety lines of business of an
insurance company that refuses to issue or renew, without just cause, the
insurance policy or surety bond therein required shall be withdrawn
immediately. (As amended by Presidential Decree No. 1455 and 1814).
Sec. 380. No cancellation of the policy shall be valid unless written notice
thereof is given to the land transportation operator or owner of the vehicle and
to the Land Transportation Commission at least fifteen days prior to the intended
effective
date
thereof.
Upon receipt of such notice, the Land Transportation Commission, unless it
receives evidence of a new valid insurance or guaranty in cash or surety bond as
prescribed in this chapter, or an endorsement of revival of the cancelled one,
shall order the immediate confiscation of the plates of the motor vehicle covered
by such cancelled policy. The same may be re-issued only upon presentation of a
new insurance policy or that a guaranty in cash or surety band has been made or
posted with the Commissioner and which meets the requirements of this
chapter, or an endorsement or revival of the cancelled one. (As amended by
Presidential Decree No. 1455).
Sec. 381. If the cancellation of the policy or surety bond is contemplated by the
land transportation operator or owner of the vehicle, he shall, before the policy
or surety bond ceases to be effective, secure a similar policy of insurance or

surety bond to replace the policy or surety bond to be cancelled or make a cash
deposit in sufficient amount with the Commissioner and without any gap, file the
required documentation with the Land Transportation Commission, and notify
the insurance company concerned of the cancellation of its policy or surety
bond. (As amended by Presidential Decree No. 1455).
Sec. 382. In case of change of ownership of a motor vehicle, or change of the
engine of an insured vehicle, there shall be no need of issuing a new policy until
the next date of registration or renewal of registration of such vehicle, and
provided that the insurance company shall agree to continue the policy, such
change of ownership or such change of the engine shall be indicated in a
corresponding endorsement by the insurance company concerned, and a signed
duplicate of such endorsement shall, within a reasonable time, be filed with the
Land Transportation Commission.
Sec. 383. In the settlement and payment of claims, the indemnity shall not be
availed of by any accident victim or claimant as an instrument of enrichment by
reason of an accident, but as an assistance or restitution insofar as can fairly be
ascertained.
Sec. 384. Any person having any claim upon the policy issued pursuant to this
Chapter shall, without any unnecessary delay, present to the insurance company
concerned a written notice of claim setting forth the nature, extent and duration
of the injuries sustained as certified by a duly licensed physician. Notice of claim
must be filed within six months from date of accident, otherwise, the claim shall
be deemed waived. Action or suit for recovery of damage due to loss or injury
must be brought, in proper cases, with the Commissioner or the Courts within
one year from denial of the claim, otherwise, the claimant's right of action shall
prescribe. (As amended by Presidential Decree 1814 and Batas Pambansa Blg.
874).
Sec. 385. The insurance company concerned shall forthwith ascertain the truth
and extent of the claim and make payment within five working days after
reaching an agreement. If no agreement is reached, the insurance company shall
pay only the "no-fault" indemnity provided in section three hundred seventyeight without prejudice to the claimant from pursuing his claim further, in which
case, he shall not be required or compelled by the insurance company to execute
any quit claim or document releasing it from liability under the policy of
insurance or surety bond issued. (As amended by Presidential Decree No. 1455).
In case of any dispute in the enforcement of the provisions of any policy issued
pursuant to this chapter, the adjudication of such dispute shall be within the
original and exclusive jurisdiction of the Commissioner, subject to the limitations
provided in section four hundred sixteen.
Sec. 386. It shall be unlawful for a land transportation operator or owner of
motor vehicle to require his or its drivers or other employees to contribute in the
payment of premiums.
Sec. 387. No government office or agency having the duty of implementing the

provisions of this chapter nor any official or employee thereof shall act as agent
in procuring the insurance policy or surety bond provided for herein. The
commission of an agent procuring the said policy or bond shall in no case exceed
ten per centum of the amount of the premiums therefor.
Sec. 388. Any land transportation operator or owner of motor vehicle or any
other person violating any of the provisions of the preceding sections shall be
punished by a fine of not less than five hundred pesos but not more than one
thousand pesos and/or imprisonment for not more than six months. The
violation of section three hundred seventy-seven by a land transportation
operator shall be a sufficient cause for the revocation of the certificate of public
convenience issued by the Board of Transportation covering the vehicle
concerned.
Sec. 389. Whenever any violation of the provisions of this chapter is committed
by a corporation or association, or by a government office or entity, the
executive officer or officers of said corporation, association or government office
or entity who shall have knowingly permitted, or failed to prevent, said violation
shall be held liable as principals.
Chapter VII
MUTUAL BENEFIT ASSOCIATIONS AND
TRUSTS FOR CHARITABLE USES
Title 1
MUTUAL BENEFIT ASSOCIATIONS
Sec. 390. Any society, association or corporation, without capital stock, formed
or organized not for profit but mainly for the purpose of paying sick benefits to
members, or of furnishing financial support to members while out of
employment, or of paying to relatives of deceased members of fixed or any sum
of money, irrespective of whether such aim or purpose is carried out by means
of fixed dues or assessments collected regularly from the members, or of
providing, by the issuance of certificates of insurance, payment of its members
of accident or life insurance benefits out of such fixed and regular dues or
assessments, but in no case shall include any society, association, or corporation
with such mutual benefit features and which shall be carried out purely from
voluntary contributions collected not regularly and or no fixed amount from
whomsoever may contribute, shall be known as a mutual benefit association
within the intent of this Code.
Any society, association, or corporation principally organized as labor union shall
be governed by the Labor Code notwithstanding any mutual benefit feature
provisions
in
its
charter
as
incident
to
its
organization.
In no case shall a mutual benefit association be organized and authorized to
transact business as a charitable or benevolent organization, and whenever it
has this feature as incident to its existence, the corresponding charter provision
shall be revised to conform with the provision of this section. Mutual benefit
association, already licensed to transact business as such on the date this Code

becomes effective, having charitable or benevolent feature shall abandon such

incidental purpose upon effectivity of this Code if they desire to continue
operating as such mutual benefit associations. (As amended by Presidential
Decree No. 1455).
Sec. 391. A mutual benefit association, before it may transact as such, must first
secure a license from the Commissioner. The application for such license shall be
filed with the Commissioner together with certified true copies of the articles of
incorporation or the constitution and by-laws of the association, and all
amendments thereto, and such other documents or testimonies as the
Commissioner may require.
No license shall be granted to a mutual benefit association until the
Commissioner shall have been satisfied by such examination as may make and
such evidence as he may require that the association is qualified under existing
laws to operate and transact business as such. The Commissioner may refuse to
issue a license to any mutual benefit association if, in his judgment, such refusal
will best promote the interest of the members of such association and of the
people of this country. Any license issued shall expire on the last day of June of
the year following its issuance and, upon proper application, may be renewed if
the association is continuing to comply with existing laws, rules and regulations,
orders, instructions, rulings and decisions of the Commissioner. Every
association receiving any such license shall be subject to the supervision of the
Commissioner: Provided, That no such license shall be granted to any such
association if such association has no actuary.
All mutual benefit association existing and licensed as such under the provisions
of Article Eight, Chapter Forty-One of the Revised Administrative Code, as
amended by Act No. 3612, shall, upon effectivity of this Code, surrender their
respective licenses to the Commissioner and apply for new licenses under the
provisions of this code if they still desire to continue operating as such mutual
benefit associations.
Sec. 392. No mutual benefit association shall be issued a license to operate as
such unless it has constituted and established a Guaranty Fund by depositing
with the Commissioner an initial minimum amount of ten thousand pesos in
cash, or in government securities with a total value equal to such amount, to
answer for any valid benefit claim of any of its members.
All moneys received by the Commissioner for this purpose must be deposited by
him in interest-bearing deposits with any bank or banks authorized to transact
business in the Philippines for the account of the particular association
constituting the Guaranty Fund.
Any accrual to such fund, be it interest earned or dividend additions on moneys
or securities so deposited, may, with the prior approval of the Commissioner, be
withdrawn by the association if there is no pending benefit claim against it,
including interest thereon or dividend additions thereto.
The Commissioner, prior to or after licensing a mutual benefit association, may

require such association to increase its Guaranty Fund from the initial minimum
amount required to an amount equal to at least ten per centum of its assets, if
such assets exceed one hundred thousand pesos, but in no case shall such
increase exceed the maximum amount of capital investment required of a
domestic insurance company under section two hundred and three of this
Code. (As amended by Presidential Decree No. 1455).
Sec. 393. Every mutual benefit association licensed to do business as such shall
issue membership certificates to its members specifying the benefits to which
such members are entitled.
Such certificates, together with the articles of incorporation of the association or
its constitution and by-laws, and all existing laws as may be pertinent shall
constitute the agreement, as of the date of its issuance, between the association
and the member. The membership certificate shall be in a form previously
approved by the Commissioner.
Sec. 394. A mutual benefit association may, by reinsurance agreement, cede in
whole or in part any individual risk or risks under certificates of insurance issued
by it, only to a life insurance company authorized to transact business or to a
professional reinsurer authorized to accept life risks in the Philippines: Provided,
That copy of the draft of such reinsurance agreement shall be submitted to the
Commissioner for his approval. The association may take credit for the reserves
on such ceded risks to the extent reinsured.
Sec. 395. The constitution or by-laws of a mutual benefit association must
distinctly state the purpose for which dues and/or assessments are made and
collected and the portion thereof which may be used for expenses.
Death benefit and other relief funds shall be created and used exclusively for
paying benefits due the members under their respective membership
certificates. A general fund shall likewise be created and used for expenses of
administration of the association.
Sec. 396. Every outstanding membership certificate must have, after three full
years of being continuously in force, an equity value equivalent to at least
fifty per centum of the total membership dues collected thereon.
Sec. 397. Every mutual benefit association must accumulate and maintain, out of
the periodic dues collected from its members, sufficient reserves for the
payment of claims or obligations for which it shall hold funds in securities
satisfactory to the Commissioner consisting of bonds of the Government of the
Philippines, or any of its political subdivisions and instrumentalities, or in such
other good securities as may be approved by the Commissioner.
The reserve liability shall be established in accordance with acturial procedures
and shall be approved by the Commissioner.
The articles of incorporation or the constitution and by-laws of a mutual benefit
association must provide that if its reserve as to all or any class of certificates
becomes impaired, its board of directors or trustees may require that there shall
be paid by the members to the association the amount of the members'

equitable proportion of such deficiency as ascertained by said board and that if

the payment be not made it shall stand as an indebtedness against the
membership certificates of the defaulting members and draw interest not to
exceed five per centum per annum compounded annually.
Sec. 398. A mutual benefit association may invest such portion of its funds as
shall not be required to meet pending claims and other obligations in any of the
classes of investments or types of securities in which life insurance companies
doing business in the Philippines may invest.
It may also grant loans to members on the security of a pledge or chattel
mortgage of personal properties of the borrowers, or in the absence thereof, on
the security of the membership certificate of the borrowing members, in which
event such loan shall become a first lien on the proceed thereof.
Sec. 399. The Commissioner or any of his duly designated representatives, shall
have the power of visitation, audit and examination into the affairs, financial
condition, and methods of doing business of all mutual benefit associations, and
he shall cause such examination to be made at least once every two years or
whenever it may be deemed proper and necessary. Free access to the books,
records and documents of the association shall be accorded to the
Commissioner, to his representatives, in such manner that the Commissioner or
his representatives may readily verify or determine the true affairs, financial
condition, and method of doing business of such association. In the course of
such examination, the Commissioner or his duly designated representatives shall
have authority to administer oaths and take testimony or other evidence on any
matter relating to the affairs of the association.
All minutes of the proceedings of the board of directors or trustees of the
association, and those of the regular or special meetings of the members, shall
be take, and a copy thereof, in English or in Pilipino, shall be submitted to the
Commissioner's representatives or examiners in the course of such examination.
A copy of the findings of such examination, together with the recommendations
of the Commissioner, shall be furnished the association for its information and
compliance, and the same shall be taken up immediately in the meetings of the
board of directors or trustees and of the members of the association.
Sec. 400. Every mutual benefit association shall, annually on or before the
thirtieth day of April of each year, render to the Commissioner an annual
statement in such form and details as may be prescribed by the Commissioner,
signed and sworn to by the president, secretary, treasurer, and actuary of the
association, showing the exact condition of its affairs on the preceding thirtyfirst day of December.
Sec. 401. No money, aid or benefit to be paid, provided or tendered by any
mutual benefit association, shall be liable to attachment, garnishment, or other
process, or be seized, taken, appropriated, or applied by any legal or equitable
process to pay any debt of liability of a member or beneficiary, or any other
person who may have a right thereunder, either before or after payment.

Sec. 402. Any member of a mutual benefit association shall have the right at all
times to change the beneficiary or beneficiaries or add another beneficiary or
other beneficiaries in accordance with the rules and regulations of the
association unless he has expressly waived this right in the membership
certificate. Every association may, under such rules as it may adopt, limit the
scope of beneficiaries and provide that no beneficiary shall have or obtain any
vested interest in the proceeds of any certificate until the certificate has become
due and payable under the terms of the membership certificate.
Sec. 403. Any chapter affiliate independently licensed as a mutual benefit
association may consolidate or merge with any other similar chapter affiliate or
with the mother association.
Sec. 404. Any mutual benefit association may be converted into and licensed as
a mutual life insurance company by complying with the requirements of the
pertinent provisions of this Code and submitting the specific plan for such
conversion to the Commissioner for his approval. Such plan, as approved, shall
then be submitted to the members either in the regular meeting or in a special
meeting called for the purpose for their adoption. The affirmative vote of at least
two-thirds of all the members shall be necessary in order to consider such plan
as adopted.
No such conversion shall take effect unless and until approved by the
Commissioner.
Sec. 405. No mutual benefit association shall be dissolved without first notifying
the Commissioner and furnishing him with a certified copy of the resolution
authorizing the dissolution, duly adopted by the affirmative vote of two-thirds of
the members at a meeting called for that purpose, the financial statements as of
the date of the resolution, and such other papers or documents as may be
required by the Commissioner.
No dissolution shall proceed until and unless approved by the Commissioner and
all proceedings in connection therewith shall be witnessed and attested by his
duly designated representative.
No mutual benefit association shall be officially declared as dissolved until after
the Commissioner so certifies that all outstanding claims against the association
have been duly settled and liquidated.
Sec. 406. The Commissioner shall after notice and hearing, have the power
either to suspend or revoke the licensed issued to a mutual benefit association if
he finds that the association has:chanroblesvirtuallawlibrary
(a) failed to comply with any provision of this Code;
(b) failed to comply with any other law or regulation obligatory upon it;
(c) failed to comply with any order, ruling, instruction, requirement, or
recommendation of the Commissioner;
(d) exceeded its power to the prejudice of its members;
(e) conducted its business fraudulently or hazardously;
(f) rendered its affairs and condition to one of insolvency; or

(g) failed to carry out its aims and purposes for which it was organized due to
any cause.
After receipt of the order from the Commissioner suspending or revoking the
license, the association must immediately exert efforts to remove such cause or
causes which brought about the order, and, upon proper showing, may apply
with the Commissioner for the lifting of the order and restoration or revival of
the license so revoked or suspended.
Sec. 407. For failure to remove such cause or causes which brought about the
suspension or revocation of the license of a mutual benefit association, the
Commissioner shall apply under this Code for an order from the proper court to
liquidate such association.
The provisions of titles fourteen and fifteen, chapter three, pertaining to the
appointment of a conservator and proceedings upon insolvency of an insurance
company, shall, insofar as practicable, apply to mutual benefit associations.
Sec. 408. To secure the enforcement of any provision under this title, the
Commissioner may issue such rules, rulings, instructions, orders and circulars,
subject to the approval of the Secretary of Finance.
Sec. 409. The violation of any provision of this title shall subject the person
violating or the officer of the association responsible therefor to a fine of not
exceeding one thousand pesos, or imprisonment of not exceeding three years, or
both such fine and imprisonment, at the discretion of the court.
Title 2
TRUSTS FOR CHARITABLE USES
Sec. 410. The term "trust for charitable uses", within the intent of this Code,
shall include, all the real or personal properties or funds, as well as those
acquired with the fruits or income therefrom or in exchange or substitution
thereof, given to or received by any person, corporation, association, foundation,
or entity, except the National Government, its instrumentalities or political
subdivisions, for charitable, benevolent, educational, pious, religious, or other
uses for the benefit of the public at large or a particular portion thereof or for
the benefit of an indefinite number of persons.
Sec. 411. The term "trustee" shall include any individual, corporation,
association, foundation, or entity, except the National Government, its
instrumentalities or political subdivisions, in charge of, or acting for, or
concerned with the administration of, the trust referred to in the section
immediately preceding and with the proper application of trust property.
Sec. 412. The term "trust property" shall include all real or personal properties
or funds pertaining to the trust as well as those acquired with the fruits or
income therefrom or in exchange or substitution thereof.
Sec. 413. All trustees shall, before entering in the performance of the duties of
their trust, obtain a certificate of registration from the Commissioner.
Trustees who are already discharging the duties of their trust on the date this
Code becomes effective may continue as such, subject to the provisions of this

Code.
All provisions of this Code governing mutual benefit associations and such other
provisions herein, whenever practicable and necessary, shall be applicable to
trusts for charitable uses.
Chapter VIII
THE INSURANCE COMMISSIONER
Title 1
ADMINISTRATIVE AND ADJUDICATORY POWERS
Sec. 414. The Insurance Commissioner shall have the duty to see that all laws
relating to insurance, insurance companies and other insurance matters, mutual
benefit associations, and trusts for charitable uses are faithfully executed and to
perform the duties imposed upon him by this Code, and shall, notwithstanding
any existing laws to the contrary, have sole and exclusive authority to regulate
the issuance and sale of variable contracts as defined in section two hundred
thirty-two and to provide for the licensing of persons selling such contracts, and
to issue such reasonable rules and regulations governing the same.
The Commissioner may issue such rulings, instructions, circulars, orders and
decision as he may deem necessary to secure the enforcement of the provisions
of this Code, subject to the approval of the Secretary of Finance. Except as
otherwise specified, decisions made by the Commissioner shall be appealable to
the Secretary of Finance.
Sec. 415. In addition to the administrative sanctions provided elsewhere in this
Code, the Insurance Commissioner is hereby authorized, at his discretion, to
impose upon the insurance companies, their directors and/or officers and/or
agents, for any willful failure or refusal to comply with, or violation of any
provision of this Code, or any order, instruction, regulation, or ruling of the
Insurance Commissioner, or any commission or irregularities, and/or conducting
business in an unsafe or unsound manner as may be determined by the
Insurance Commissioner, the following:chanroblesvirtuallawlibrary
(a) fines not in excess of five hundred pesos a day; and
(b) suspension, or after due hearing, removal of directors and/or officers and/or
agents.
Sec. 416. The Commissioner shall have the power to adjudicate claims and
complaints involving any loss, damage or liability for which in insurer may be
answerable under any kind of policy or contract of insurance, or for which such
insurer may be liable under a contract of suretyship, or for which a reinsurer
may be sued under any contract of reinsurance it may have entered into; or for
which a mutual benefit association may be held liable under the membership
certificates it has issued to its members, where the amount of any such loss,
damage or liability, excluding interest, cost and attorney's fees, being claimed or
sued upon any kind of insurance, bond, reinsurance contract, or membership
certificate does not exceed in any single claim one hundred thousand pesos.
The insurer or surety may, in the same action file a counterclaim against the

insured
or
the
obligee.
The insurer or surety may also file a cross-claim against a party for any claim
arising out of the transaction or occurrence that is the subject matter of the
original action or of a counterclaim therein.
With leave of the Commissioner, an insurer or surety may file a third-party
complaint against its reinsurers for indemnification, contribution, subrogation or
any other relief, in respect of the transaction that is the subject matter of the
original action filed with the Commissioner.
The party filing an action pursuant to the provisions of this section thereby
submits his person to the jurisdiction of the Commissioner. The Commissioner
shall acquire jurisdiction over the person of the impleaded party or parties in
accordance with and pursuant to the provisions of theRules of Court.
The authority to adjudicate granted to the Commissioner under this section shall
be concurrent with that of the civil courts, but the filing of a complaint with the
Commissioner shall preclude the civil courts from taking cognizance of a suit
involving
the
same
subject
matter.
Any decision, order or ruling rendered by the Commissioner after a hearing shall
have the force and effect of a judgment. Any party may appeal from a final
order, ruling or decision of the Commissioner by filing with the Commissioner
within thirty days from receipt of copy of such order, ruling or decision a notice
of appeal to the Intermediate Appellate Court in the manner provided for in
the Rules of Court for appeals from the Regional Trial Court to the Intermediate
Appellate Court. (As amended by Batas Pambansa Blg. 874).
As soon as a decision, order or ruling has become final and executory, the
Commissioner shall motu proprio or on motion of the interested party, issue a
writ of execution requiring the sheriff or the proper officer to whom it is directed
to execute said decision, order or award, pursuant to Rule thirty-nine of
the Rules
of
Court.
For the purpose of any proceeding under this section, the Commissioner, or any
officer thereof designated by him, empowered to administer oaths and
affirmation, subpoena witnesses, compel their attendance, take evidence, and
require the production of any books, papers, documents, or contracts or other
records which are relevant or material to the inquiry. In case of contumacy by,
or refusal to obey a subpoena issued to any person, the Commissioner may
invoke the aid of any court of first instance within the jurisdiction of which such
proceeding is carried on, where such person resides or carries on his own
business, in requiring the attendance and testimony of witnesses and the
production of books, papers, documents, contracts or other records. And such
court may issue an order requiring such person to appear before the
Commissioner, or officer designated by the Commissioner, there to produce
records, if so ordered or to give testimony touching the matter in question. Any
failure to obey such order of the court may be published by such court as a
contempt thereof.

A full and complete record shall be kept of all proceedings had before the
commissioner, or the officers thereof designated by him, and all testimony shall
be taken down and transcribed by a stenographer appointed by the
Commissioner.
A transcribed copy of the evidence and proceeding, or any specific part thereof,
of any hearing taken by a stenographer appointed by the Commissioner, being
certified by such stenographer to be a true and correct transcript of the
testimony on this hearing of a particular witness, or of a specific proof thereof,
carefully compared by him from his original notes, and to be a correct statement
of evidence and proceeding had in such hearing so purporting to be taken and
subscribed, may be received as evidence by the Commissioner and by any court
with the same effect as if such stenographer were present and testified to the
facts so certified. (As amended by Presidential Decree No. 1455).
Title 2
FEES AND OTHER SOURCES OF FUNDS
Sec. 417. (1) For the issuance or renewal of certificates of authority, licenses
and certificates of registration, pursuant to pertinent provisions of this Code, the
Commissioner shall collect and receive fees which shall be not less than the
following:chanroblesvirtuallawlibrary
For each certificate of authority issued to an insurance company doing business
in the Philippines, two hundred pesos.
For each special certificate of authority issued to a servicing insurance company,
one hundred pesos.
For each license issued to a general agent of an insurance company, fifty pesos.
For each license issued to an insurance agent, twenty-five pesos.
For each license issued to an agent of variable contract policy, twenty-five
pesos.
For each license issued to an insurance broker, one hundred pesos.
For each license issued to an reinsurance broker, one hundred pesos.
For each license issued to an insurance adjuster, one hundred pesos.
For each certificate of registration issued to an actuary, fifty pesos.
For each certificate of registration issued to a resident agent, fifty pesos.
For each license issued to a rating organization, one hundred pesos.
For each certificate of registration issued to a non-life company underwriter,
fifty pesos.
For each license issued to a mutual benefit association, ten pesos.
For each certificate of registration issued to a trust for charitable uses, ten
pesos.
All certificates of authority and all other licenses, as well as all certificates of
registration, issued to any person, partnership, association or corporation under
the pertinent provisions of this Code for which no expiration date has been
prescribed, shall expire on the last day of June of each year and shall be
renewed annually upon application therefor and payment of the corresponding

fee, if the licensee or holder of such license or certificate is continuing to comply

with all the applicable provisions of existing laws, and of rules, instructions,
orders and decisions of the Commissioner.
(2) For the filing of the annual statement referred to in section two hundred
twenty-three, the Commissioner shall collect and receive from the insurance
company so filing a fee of five hundred pesos: Provided, That a fine of one
hundred pesos shall be imposed and collected by the Commissioner for each
week of delay, or any fraction thereof, in the filing of the annual statement.
For the filing of annual statement referred to in section four hundred, the
Commissioner shall collect and receive from the mutual benefit association so
filing a fee of ten pesos: Provided, That a fine of ten pesos shall be imposed and
collected by the Commissioner for each week of delay, or any fraction thereof, in
the filing of the annual statement.
(3) For the examination prescribed in section two hundred forty-six, the
Commissioner shall collect and receive fees according to the amount of its total
assets, in the case of a domestic company, or of its assets in the Philippines, in
the case of a foreign company, as follows:chanroblesvirtuallawlibrary
(a) Two million pesos or more but less than four million pesos, Four hundred
pesos;
(b) Four million pesos or more but less than six million pesos, Eight hundred
pesos;
(c) Six million pesos or more but less than eight million pesos, One thousand
two hundred pesos;
(d) Eight million pesos or more but less than ten million pesos, One thousand six
hundred pesos;
(e)
Ten
million
pesos
or
more,
Two
thousand
pesos;
Provided, That if the said examination is made in places outside the Metropolitan
Manila area, besides these fees, the Commissioner shall require of the company
examined the payment of the actual and necessary travelling and subsistence
expenses of the examiner or examiners concerned.
For the examination prescribed in section three hundred ninety-nine, the
Commissioner shall collect and receive a minimum fee of one hundred pesos
from the mutual benefit association examined: Provided, That if such association
has total assets of more than one hundred thousand pesos, an additional fee of
ten pesos for every fifty thousand pesos in excess thereof shall be
imposed: Provided, further, That such fee shall not exceed two thousand pesos.
(4) For the filing of an application to withdraw from the Philippines under title
eighteen, the Commissioner shall collect and receive from the foreign company
so withdrawing a fee of one thousand pesos.
(5) The Commissioner may fix and collect fees or charges for documents,
transcripts, or other materials which may be furnished by him not in excess of
reasonable cost. (As amended by Presidential Decree No. 1455).
Sec. 418. If the total expenses of the Insurance Commissioner for every fiscal

year exceed the aggregate amount of the fees collected under the pertinent
provisions of this Code, the excess shall be charged against the Insurance Fund,
which shall hereafter be created out of the proceeds of taxes on insurance
premiums mentioned in section two hundred fifty-five of the National Internal
Revenue Code, as amended: Provided, however, That pending the creation of
said Insurance Fund, the provisions of section two, three and four of Republic
Act Numbered Two Hundred Seventy-Five, shall continue to remain in force and
effect.
MISCELLANEOUS PROVISIONS
Sec. 419. Any person, company or corporation subject to the supervision and
control of the Commissioner who violates any provision of this Code, for which
no penalty is provided, shall be deemed guilty of a penal offense, and upon
conviction be punished by a fine not exceeding 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.
FERDINAND E. MARCOS

President
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Since 19.07.98