Fifteenth Congress "(3) Doing any kind of business, including

Third Regular Session a reinsurance business, specifically

recognized as constituting the doing of an
Begun and held in Metro Manila, on Monday, the twenty- insurance business within the meaning of
third day of July, two thousand twelve. this Code;

REPUBLIC ACT NO. 10607 "(4) Doing or proposing to do any

business in substance equivalent to any
AN ACT STRENGTHENING THE INSURANCE of the foregoing in a manner designed to
INDUSTRY, FURTHER AMENDING PRESIDENTIAL evade the provisions of this Code.
DECREE NO. 612, OTHERWISE KNOWN AS "THE
INSURANCE CODE", AS AMENDED BY "In the application of the provisions of this
PRESIDENTIAL DECREE NOS. 1141, 1280, 1455, 1460, Code, the fact that no profit is derived
1814 AND 1981, AND BATAS PAMBANSA BLG. 874, from the making of insurance contracts,
AND FOR OTHER PURPOSES agreements or transactions or that no
separate or direct consideration is
Be it enacted by the Senate and House of received therefor, shall not be deemed
Representatives of the Philippines in Congress conclusive to show that the making
assembled: thereof does not constitute the doing or
transacting of an insurance business.
Section 1. Presidential Decree No. 612, as amended, is
"(c) As used in this Code, the
hereby further amended to read as follows:
term Commissioner means the Insurance
Commissioner.
"GENERAL PROVISIONS
"CHAPTER I
"Section 1. This Decree shall be known as ‘The Insurance "THE CONTRACT OF INSURANCE
Code’.
"TITLE 1
"Section 2. Whenever used in this Code, the following "WHAT MAY BE INSURED
terms shall have the respective meanings hereinafter set
forth or indicated, unless the context otherwise requires:
"Section 3. Any contingent or unknown event, whether
past or future, which may damnify a person having an
"(a) A contract of insurance is an agreement insurable interest, or create a liability against him, may be
whereby one undertakes for a consideration to insured against, subject to the provisions of this chapter.
indemnify another against loss, damage or liability
arising from an unknown or contingent event.
"The consent of the spouse is not necessary for the
validity of an insurance policy taken out by a married
"A contract of suretyship shall be deemed to be person on his or her life or that of his or her children.
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 "All rights, title and interest in the policy of insurance taken
hereinafter provided. out by an original owner on the life or health of the person
insured shall automatically vest in the latter upon the
death of the original owner, unless otherwise provided for
"(b) The term doing an insurance in the policy.
business or transacting an insurance business,
within the meaning of this Code, shall include:
"Section 4. The preceding section does not authorize an
insurance for or against the drawing of any lottery, or for
"(1) Making or proposing to make, as or against any chance or ticket in a lottery drawing a prize.
insurer, any insurance contract;
"Section 5. All kinds of insurance are subject to the
"(2) Making or proposing to make, as provisions of this chapter so far as the provisions can
surety, any contract of suretyship as a apply.
vocation and not as merely incidental to
any other legitimate business or activity of
the surety;
 "TITLE 2 "Section 12. The interest of a beneficiary in a life
"PARTIES TO THE CONTRACT insurance policy shall be forfeited when the beneficiary is
the principal, accomplice, or accessory in willfully bringing
"Section 6. Every corporation, partnership, or association, about the death of the insured. In such a case, the share
duly authorized to transact insurance business as forfeited shall pass on to the other beneficiaries, unless
elsewhere provided in this Code, may be an insurer. otherwise disqualified. In the absence of other
beneficiaries, the proceeds shall be paid in accordance
"Section 7. Anyone except a public enemy may be with the policy contract. If the policy contract is silent, the
insured. proceeds shall be paid to the estate of the insured.

"Section 13. Every interest in property, whether real or

"Section 8. Unless the policy otherwise provides, where a
personal, or any relation thereto, or liability in respect
mortgagor of property effects insurance in his own name
providing that the loss shall be payable to the mortgagee, thereof, of such nature that a contemplated peril might
or assigns a policy of insurance to a mortgagee, the directly damnify the insured, is an insurable interest.
insurance is deemed to be upon the interest of the
mortgagor, who does not cease to be a party to the "Section 14. An insurable interest in property may consist
original contract, and any act of his, prior to the loss, in:
which would otherwise avoid the insurance, will have the
same effect, although the property is in the hands of the "(a) An existing interest;
mortgagee, but any act which, under the contract of
insurance, is to be performed by the mortgagor, may be "(b) An inchoate interest founded on an existing
performed by the mortgagee therein named, with the interest; or
same effect as if it had been performed by the mortgagor.
"(c) An expectancy, coupled with an existing
"Section 9. If an insurer assents to the transfer of an interest in that out of which the expectancy arises.
insurance from a mortgagor to a mortgagee, and, at the
time of his assent, imposes further obligations on the
"Section 15. A carrier or depository of any kind has an
assignee, making a new contract with him, the acts of the insurable interest in a thing held by him as such, to the
mortgagor cannot affect the rights of said assignee.
extent of his liability but not to exceed the value thereof.

"Section 16. A mere contingent or expectant interest in

any thing, not founded on an actual right to the thing, nor
"TITLE 3 upon any valid contract for it, is not insurable.
"INSURABLE INTEREST
"Section 17. The measure of an insurable interest in
"Section 10. Every person has an insurable interest in the property is the extent to which the insured might be
life and health: damnified by loss or injury thereof.

"(a) Of himself, of his spouse and of his children; "Section 18. No contract or policy of insurance on property
shall be enforceable except for the benefit of some person
"(b) Of any person on whom he depends wholly or having an insurable interest in the property insured.
in part for education or support, or in whom he
has a pecuniary interest; "Section 19. An interest in property insured must exist
when the insurance takes effect, and when the loss
"(c) Of any person under a legal obligation to him occurs, but need not exist in the meantime; and interest in
for the payment of money, or respecting property the life or health of a person insured must exist when the
or services, of which death or illness might delay insurance takes effect, but need not exist thereafter or
or prevent the performance; and when the loss occurs.

"(d) Of any person upon whose life any estate or "Section 20. Except in the cases specified in the next four
interest vested in him depends. sections, and in the cases of life, accident, and health
insurance, a change of interest in any part of a thing
"Section 11. The insured shall have the right to change insured unaccompanied by a corresponding change of
the beneficiary he designated in the policy, unless he has interest in the insurance, suspends the insurance to an
expressly waived this right in said policy. Notwithstanding equivalent extent, until the interest in the thing and the
the foregoing, in the event the insured does not change interest in the insurance are vested in the same person.
the beneficiary during his lifetime, the designation shall be
deemed irrevocable. "Section 21. A change of interest in a thing insured, after
the occurrence of an injury which results in a loss, does
not affect the right of the insured to indemnity for the loss.
"Section 22. A change of interest in one or more of several "(d) Those which prove or tend to prove the
distinct things, separately insured by one policy, does not existence of a risk excluded by a warranty, and
avoid the insurance as to the others. which are not otherwise material; and

"Section 23. A change of interest, by will or succession, on "(e) Those which relate to a risk excepted from
the death of the insured, does not avoid an insurance; and the policy and which are not otherwise material.
his interest in the insurance passes to the person taking
his interest in the thing insured. "Section 31. Materiality is to be determined not by the
event, but solely by the probable and reasonable influence
"Section 24. A transfer of interest by one of several of the facts upon the party to whom the communication is
partners, joint owners, or owners in common, who are due, in forming his estimate of the disadvantages of the
jointly insured, to the others, does not avoid an insurance proposed contract, or in making his inquiries.
even though it has been agreed that the insurance shall
cease upon an alienation of the thing insured. "Section 32. Each party to a contract of insurance is
bound to know all the general causes which are open to
"Section 25. Every stipulation in a policy of insurance for his inquiry, equally with that of the other, and which may
the payment of loss whether the person insured has or affect the political or material perils contemplated; and all
has not any interest in the property insured, or that the general usages of trade.
policy shall be received as proof of such interest, and
every policy executed by way of gaming or wagering, is "Section 33. The right to information of material facts may
void. be waived, either by the terms of insurance or by neglect
to make inquiry as to such facts, where they are distinctly
implied in other facts of which information is
communicated.
"TITLE 4
"CONCEALMENT "Section 34. Information of the nature or amount of the
interest of one insured need not be communicated unless
"Section 26. A neglect to communicate that which a party in answer to an inquiry, except as prescribed by Section
knows and ought to communicate, is called a 51.
concealment.
"Section 35. Neither party to a contract of insurance is
"Section 27. A concealment whether intentional or bound to communicate, even upon inquiry, information of
unintentional entitles the injured party to rescind a contract his own judgment upon the matters in question.
of insurance.

"Section 28. Each party to a contract of insurance must

communicate to the other, in good faith, all facts within his "TITLE 5
knowledge which are material to the contract and as to "REPRESENTATION
which he makes no warranty, and which the other has not
the means of ascertaining. "Section 36. A representation may be oral or written.

"Section 29. An intentional and fraudulent omission, on "Section 37. A representation may be made at the time of,
the part of one insured, to communicate information of or before, issuance of the policy.
matters proving or tending to prove the falsity of a
warranty, entitles the insurer to rescind.
"Section 38. The language of a representation is to be
interpreted by the same rules as the language of contracts
"Section 30. Neither party to a contract of insurance is in general.
bound to communicate information of the matters
following, except in answer to the inquiries of the other:
"Section 39. A representation as to the future is to be
deemed a promise, unless it appears that it was merely a
"(a) Those which the other knows; statement of belief or expectation.

"(b) Those which, in the exercise of ordinary care, "Section 40. A representation cannot qualify an express
the other ought to know, and of which the former provision in a contract of insurance, but it may qualify an
has no reason to suppose him ignorant; implied warranty.

"(c) Those of which the other waives "Section 41. A representation may be altered or withdrawn
communication; before the insurance is effected, but not afterwards.
"Section 42. A representation must be presumed to refer "Any rider, clause, warranty or endorsement purporting to
to the date on which the contract goes into effect. be part of the contract of insurance and which is pasted or
attached to said policy is not binding on the insured,
"Section 43. When a person insured has no personal unless the descriptive title or name of the rider, clause,
knowledge of a fact, he may nevertheless repeat warranty or endorsement is also mentioned and written on
information which he has upon the subject, and which he the blank spaces provided in the policy.
believes to be true, with the explanation that he does so
on the information of others; or he may submit the "Unless applied for by the insured or owner, any rider,
information, in its whole extent, to the insurer; and in clause, warranty or endorsement issued after the original
neither case is he responsible for its truth, unless it policy shall be countersigned by the insured or owner,
proceeds from an agent of the insured, whose duty it is to which countersignature shall be taken as his agreement to
give the information. the contents of such rider, clause, warranty or
endorsement.
"Section 44. A representation is to be deemed false when
the facts fail to correspond with its assertions or "Notwithstanding the foregoing, the policy may be in
stipulations. electronic form subject to the pertinent provisions of
Republic Act No. 8792, otherwise known as the ‘Electronic
"Section 45. If a representation is false in a material point, Commerce Act’ and to such rules and regulations as may
whether affirmative or promissory, the injured party is be prescribed by the Commissioner.
entitled to rescind the contract from the time when the
representation becomes false. "Section 51. A policy of insurance must specify:

"Section 46. The materiality of a representation is "(a) The parties between whom the contract is
determined by the same rules as the materiality of a made;
concealment.
"(b) The amount to be insured except in the cases
"Section 47. The provisions of this chapter apply as well to of open or running policies;
a modification of a contract of insurance as to its original
formation. "(c) The premium, or if the insurance is of a
character where the exact premium is only
"Section 48. Whenever a right to rescind a contract of determinable upon the termination of the contract,
insurance is given to the insurer by any provision of this a statement of the basis and rates upon which the
chapter, such right must be exercised previous to the final premium is to be determined;
commencement of an action on the contract.
"(d) The property or life insured;
"After a policy of life insurance made payable on the death
of the insured shall have been in force during the lifetime "(e) The interest of the insured in property
of the insured for a period of two (2) years from the date of insured, if he is not the absolute owner thereof;
its issue or of its last reinstatement, the insurer cannot
prove that the policy is void ab initio or is rescindable by
"(f) The risks insured against; and
reason of the fraudulent concealment or
misrepresentation of the insured or his agent.
"(g) The period during which the insurance is to
continue.

"Section 52. Cover notes may be issued to bind insurance

temporarily pending the issuance of the policy. Within
sixty (60) days after issue of a cover note, a policy shall
"TITLE 6 be issued in lieu thereof, including within its terms the
"THE POLICY identical insurance bound under the cover note and the
premium therefor.
"Section 49. The written instrument in which a contract of
insurance is set forth, is called a policy of insurance.

"Section 50. The policy shall be in printed form which may

contain blank spaces; and any word, phrase, clause,
mark, sign, symbol, signature, number, or word necessary
to complete the contract of insurance shall be written on
the blank spaces provided therein.
"Cover notes may be extended or renewed beyond such "Section 63. A condition, stipulation, or agreement in any
sixty (60) days with the written approval of the policy of insurance, limiting the time for commencing an
Commissioner if he determines that such extension is not action thereunder to a period of less than one (1) year
contrary to and is not for the purpose of violating any from the time when the cause of action accrues, is void.
provisions of this Code. The Commissioner may
promulgate rules and regulations governing such "Section 64. No policy of insurance other than life shall be
extensions for the purpose of preventing such violations cancelled by the insurer except upon prior notice thereof
and may by such rules and regulations dispense with the to the insured, and no notice of cancellation shall be
requirement of written approval by him in the case of effective unless it is based on the occurrence, after the
extension in compliance with such rules and regulations. effective date of the policy, of one or more of the following:

"Section 53. The insurance proceeds shall be applied "(a) Nonpayment of premium;
exclusively to the proper interest of the person in whose
name or for whose benefit it is made unless otherwise "(b) Conviction of a crime arising out of acts
specified in the policy.
increasing the hazard insured against;

"Section 54. When an insurance contract is executed with

"(c) Discovery of fraud or material
an agent or trustee as the insured, the fact that his misrepresentation;
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. "(d) Discovery of willful or reckless acts or
omissions increasing the hazard insured against;
"Section 55. To render an insurance effected by one
partner or part-owner, applicable to the interest of his co- "(e) Physical changes in the property insured
partners or other part-owners, it is necessary that the which result in the property becoming
terms of the policy should be such as are applicable to the uninsurable;
joint or common interest.
"(f) Discovery of other insurance coverage that
"Section 56. When the description of the insured in a makes the total insurance in excess of the value
policy is so general that it may comprehend any person or of the property insured; or
any class of persons, only he who can show that it was
intended to include him, can claim the benefit of the "(g) A determination by the Commissioner that the
policy. continuation of the policy would violate or would
place the insurer in violation of this Code.
"Section 57. A policy may be so framed that it will inure to
the benefit of whomsoever, during the continuance of the "Section 65. All notices of cancellation mentioned in the
risk, may become the owner of the interest insured. preceding section shall be in writing, mailed or delivered
to the named insured at the address shown in the policy,
"Section 58. The mere transfer of a thing insured does not or to his broker provided the broker is authorized in writing
transfer the policy, but suspends it until the same person by the policy owner to receive the notice of cancellation on
becomes the owner of both the policy and the thing his behalf, and shall state:
insured.
"(a) Which of the grounds set forth in Section 64 is
"Section 59. A policy is either open, valued or running. relied upon; and

"Section 60. An open policy is one in which the value of "(b) That, upon written request of the named
the thing insured is not agreed upon, and the amount of insured, the insurer will furnish the facts on which
the insurance merely represents the insurer’s maximum the cancellation is based.
liability. The value of such thing insured shall be
ascertained at the time of the loss.

"Section 61. A valued policy is one which expresses on its

face an agreement that the thing insured shall be valued
at a specific sum.

"Section 62. A running policy is one which contemplates

successive insurances, and which provides that the object
of the policy may be from time to time defined, especially
as to the subjects of insurance, by additional statements
or indorsements.1âwphi1
"Section 66. In case of insurance other than life, unless "TITLE 8
the insurer at least forty-five (45) days in advance of the "PREMIUM
end of the policy period mails or delivers to the named
insured at the address shown in the policy notice of its "Section 77. An insurer is entitled to payment of the
intention not to renew the policy or to condition its renewal premium as soon as the thing insured is exposed to the
upon reduction of limits or elimination of coverages, the peril insured against. Notwithstanding any agreement to
named insured shall be entitled to renew the policy upon the contrary, no policy or contract of insurance issued by
payment of the premium due on the effective date of the an insurance company is valid and binding unless and
renewal. Any policy written for a term of less than one (1) until the premium thereof has been paid, except in the
year shall be considered as if written for a term of one (1) case of a life or an industrial life policy whenever the
year. Any policy written for a term longer than one (1) year grace period provision applies, or whenever under the
or any policy with no fixed expiration date shall be broker and agency agreements with duly licensed
considered as if written for successive policy periods or intermediaries, a ninety (90)-day credit extension is given.
terms of one (1) year. No credit extension to a duly licensed intermediary should
exceed ninety (90) days from date of issuance of the
"TITLE 7 policy.
"WARRANTIES
"Section 78. Employees of the Republic of the Philippines,
"Section 67. A warranty is either expressed or implied. including its political subdivisions and instrumentalities,
and government-owned or -controlled corporations, may
"Section 68. A warranty may relate to the past, the pay their insurance premiums and loan obligations
present, the future, or to any or all of these. through salary deduction: Provided, That the treasurer,
cashier, paymaster or official of the entity employing the
"Section 69. No particular form of words is necessary to government employee is authorized, notwithstanding the
provisions of any existing law, rules and regulations to the
create a warranty.
contrary, to make deductions from the salary, wage or
income of the latter pursuant to the agreement between
"Section 70. Without prejudice to Section 51, every the insurer and the government employee and to remit
express warranty, made at or before the execution of a such deductions to the insurer concerned, and collect
policy, must be contained in the policy itself, or in another such reasonable fee for its services.
instrument signed by the insured and referred to in the
policy as making a part of it.
"Section 79. An acknowledgment in a policy or contract of
insurance or the receipt of premium is conclusive
"Section 71. A statement in a policy, of a matter relating to evidence of its payment, so far as to make the policy
the person or thing insured, or to the risk, as fact, is an binding, notwithstanding any stipulation therein that it shall
express warranty thereof. not be binding until the premium is actually paid.

"Section 72. A statement in a policy, which imparts that it "Section 80. A person insured is entitled to a return of
is intended to do or not to do a thing which materially premium, as follows:
affects the risk, is a warranty that such act or omission
shall take place.
"(a) To the whole premium if no part of his interest
in the thing insured be exposed to any of the
"Section 73. When, before the time arrives for the perils insured against;
performance of a warranty relating to the future, a loss
insured against happens, or performance becomes
"(b) Where the insurance is made for a definite
unlawful at the place of the contract, or impossible, the
period of time and the insured surrenders his
omission to fulfill the warranty does not avoid the policy.
policy, to such portion of the premium as
corresponds with the unexpired time, at a pro rata
"Section 74. The violation of a material warranty, or other rate, unless a short period rate has been agreed
material provision of a policy, on the part of either party upon and appears on the face of the policy, after
thereto, entitles the other to rescind. deducting from the whole premium any claim for
loss or damage under the policy which has
"Section 75. A policy may declare that a violation of previously accrued: Provided, That no holder of a
specified provisions thereof shall avoid it, otherwise the life insurance policy may avail himself of the
breach of an immaterial provision does not avoid the privileges of this paragraph without sufficient
policy. cause as otherwise provided by law.

"Section 76. A breach of warranty without fraud merely "Section 81. If a peril insured against has existed, and the
exonerates an insurer from the time that it occurs, or insurer has been liable for any period, however short, the
where it is broken in its inception, prevents the policy from insured is not entitled to return of premiums, so far as that
attaching to the risk. particular risk is concerned.
"Section 82. A person insured is entitled to a return of the "TITLE 10
premium when the contract is voidable, and subsequently "NOTICE OF LOSS
annulled under the provisions of the Civil Code; or on
account of the fraud or misrepresentation of the insurer, or "Section 90. In case of loss upon an insurance against
of his agent, or on account of facts, or the existence of fire, an insurer is exonerated, if written notice thereof be
which the insured was ignorant of without his fault; or not given to him by an insured, or some person entitled to
when by any default of the insured other than actual fraud, the benefit of the insurance, without unnecessary delay.
the insurer never incurred any liability under the policy. For other non-life insurance, the Commissioner may
specify the period for the submission of the notice of loss.
"A person insured is not entitled to a return of premium if
the policy is annulled, rescinded or if a claim is denied by "Section 91. When a preliminary proof of loss is required
reason of fraud. 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
"Section 83. In case of an over insurance by several for him to give the best evidence which he has in his
insurers other than life, the insured is entitled to a ratable power at the time.
return of the premium, proportioned to the amount by
which the aggregate sum insured in all the policies "Section 92. All defects in a notice of loss, or in
exceeds the insurable value of the thing at risk. preliminary proof thereof, which the insured might remedy,
and which the insurer omits to specify to him, without
"Section 84. An insurer may contract and accept unnecessary delay, as grounds of objection, are waived.
payments, in addition to regular premium, for the purpose
of paying future premiums on the policy or to increase the "Section 93. Delay in the presentation to an insurer of
benefits thereof. notice or proof of loss is waived if caused by any act of
him, or if he omits to take objection promptly and
"TITLE 9 specifically upon that ground.
"LOSS
"Section 94. If the policy requires, by way of preliminary
"Section 85. An agreement not to transfer the claim of the proof of loss, the certificate or testimony of a person other
insured against the insurer after the loss has happened, is than the insured, it is sufficient for the insured to use
void if made before the loss except as otherwise provided reasonable diligence to procure it, and in case of the
in the case of life insurance. refusal of such person to give it, then to furnish
reasonable evidence to the insurer that such refusal was
"Section 86. Unless otherwise provided by the policy, an not induced by any just grounds of disbelief in the facts
insurer is liable for a loss of which a peril insured against necessary to be certified or testified.
was the proximate cause, although a peril not
contemplated by the contract may have been a remote "TITLE 11
cause of the loss; but he is not liable for a loss of which "DOUBLE INSURANCE
the peril insured against was only a remote cause.
"Section 95. A double insurance exists where the same
"Section 87. An insurer is liable where the thing insured is person is insured by several insurers separately in respect
rescued from a peril insured against that would otherwise to the same subject and interest.
have caused a loss, if, in the course of such rescue, the
thing is exposed to a peril not insured against, which "Section 96. Where the insured in a policy other than life is
permanently deprives the insured of its possession, in over insured by double insurance:
whole or in part; or where a loss is caused by efforts to
rescue the thing insured from a peril insured against.
"(a) The insured, unless the policy otherwise
provides, may claim payment from the insurers in
"Section 88. Where a peril is especially excepted in a such order as he may select, up to the amount for
contract of insurance, a loss, which would not have which the insurers are severally liable under their
occurred but for such peril, is thereby excepted although respective contracts;
the immediate cause of the loss was a peril which was not
excepted. "(b) Where the policy under which the insured
claims is a valued policy, any sum received by
"Section 89. An insurer is not liable for a loss caused by him under any other policy shall be deducted from
the willful act or through the connivance of the insured; but the value of the policy without regard to the actual
he is not exonerated by the negligence of the insured, or value of the subject matter insured;
of the insurance agents or others.
 "(c) Where the policy under which the insured "CHAPTER II
claims is an unvalued policy, any sum received by "CLASSES OF INSURANCE
him under any policy shall be deducted against
the full insurable value, for any sum received by "TITLE I
him under any policy; "MARINE INSURANCE

"(d) Where the insured receives any sum in "SUB-TITLE 1-A

excess of the valuation in the case of valued
policies, or of the insurable value in the case of
"DEFINITION
unvalued policies, he must hold such sum in trust
for the insurers, according to their right of
contribution among themselves; "Section 101. Marine Insurance includes:

"(e) Each insurer is bound, as between himself "(a) Insurance against loss of or damage to:
and the other insurers, to contribute ratably to the
loss in proportion to the amount for which he is "(1) Vessels, craft, aircraft, vehicles,
liable under his contract. goods, freights, cargoes, merchandise,
effects, disbursements, profits, moneys,
securities, choses in action, instruments
of debts, valuable papers, bottomry, and
respondentia interests and all other kinds
"TITLE 12
of property and interests therein, in
"REINSURANCE respect to, appertaining to or in
connection with any and all risks or perils
"Section 97. A contract of reinsurance is one by which an of navigation, transit or transportation, or
insurer procures a third person to insure him against loss while being assembled, packed, crated,
or liability by reason of such original insurance. baled, compressed or similarly prepared
for shipment or while awaiting shipment,
"Section 98. Where an insurer obtains reinsurance, except or during any delays, storage,
under automatic reinsurance treaties, he must transhipment, or reshipment incident
communicate all the representations of the original thereto, including war risks, marine
insured, and also all the knowledge and information he builder’s risks, and all personal property
possesses, whether previously or subsequently acquired, floater risks;
which are material to the risk.
"(2) Person or property in connection with
"Section 99. A reinsurance is presumed to be a contract of or appertaining to a marine, inland
indemnity against liability, and not merely against marine, transit or transportation
damage. insurance, including liability for loss of or
damage arising out of or in connection
"Section 100. The original insured has no interest in a with the construction, repair, operation,
contract of reinsurance. maintenance or use of the subject matter
of such insurance (but not including life
insurance or surety bonds nor insurance
against loss by reason of bodily injury to
any person arising out of ownership,
maintenance, or use of automobiles);

"(3) Precious stones, jewels, jewelry,

precious metals, whether in course of
transportation or otherwise; and

"(4) Bridges, tunnels and other

instrumentalities of transportation and
communication (excluding buildings, their
furniture and furnishings, fixed contents
and supplies held in storage); piers,
wharves, docks and slips, and other aids
to navigation and transportation, including
dry docks and marine railways, dams and
appurtenant facilities for the control of
waterways.
 "(b) Marine protection and indemnity insurance, "SUB-TITLE 1-C
meaning insurance against, or against legal "CONCEALMENT
liability of the insured for loss, damage, or
expense incident to ownership, operation, "Section 109. In marine insurance, each party is bound to
chartering, maintenance, use, repair, or communicate, in addition to what is required by Section
construction of any vessel, craft or instrumentality 28, all the information which he possesses, material to the
in use of ocean or inland waterways, including risk, except such as is mentioned in Section 30, and to
liability of the insured for personal injury, illness or state the exact and whole truth in relation to all matters
death or for loss of or damage to the property of that he represents, or upon inquiry discloses or assumes
another person. to disclose.

"SUB-TITLE 1-B "Section 110. In marine insurance, information of the

"INSURABLE INTEREST belief or expectation of a third person, in reference to a
material fact, is material.
"Section 102. The owner of a ship has in all cases an
insurable interest in it, even when it has been chartered by "Section 111. A person insured by a contract of marine
one who covenants to pay him its value in case of insurance is presumed to have knowledge, at the time of
loss: Provided, That in this case the insurer shall be liable insuring, of a prior loss, if the information might possibly
for only that part of the loss which the insured cannot have reached him in the usual mode of transmission and
recover from the charterer. at the usual rate of communication.

"Section 103. The insurable interest of the owner of the "Section 112. A concealment in a marine insurance, in
ship hypothecated by bottomry is only the excess of its respect to any of the following matters, does not vitiate the
value over the amount secured by bottomry. entire contract, but merely exonerates the insurer from a
loss resulting from the risk concealed:
"Section 104. Freightage, in the sense of a policy of
marine insurance, signifies all the benefits derived by the "(a) The national character of the insured;
owner, either from the chartering of the ship or its
employment for the carriage of his own goods or those of
"(b) The liability of the thing insured to capture
others.
and detention;

"Section 105. The owner of a ship has an insurable "(c) The liability to seizure from breach of foreign
interest in expected freightage which according to the laws of trade;
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. "(d) The want of necessary documents; and

"Section 106. The interest mentioned in the last section "(e) The use of false and simulated papers.
exists, in case of a charter party, when the ship has
broken ground on the chartered voyage. If a price is to be "SUB-TITLE 1-D
paid for the carriage of goods it exists when they are "REPRESENTATION
actually on board, or there is some contract for putting
them on board, and both ship and goods are ready for the "Section 113. If a representation by a person insured by a
specified voyage. contract of marine insurance, is intentionally false in any
material respect, or in respect of any fact on which the
"Section 107. One who has an interest in the thing from character and nature of the risk depends, the insurer may
which profits are expected to proceed has an insurable rescind the entire contract.
interest in the profits.
"Section 114. The eventual falsity of a representation as to
"Section 108. The charterer of a ship has an insurable expectation does not, in the absence of fraud, avoid a
interest in it, to the extent that he is liable to be damnified contract of marine insurance.
by its loss.
 "SUB-TITLE 1-E "Section 122. Where the nationality or neutrality of a ship
"IMPLIED WARRANTIES or cargo is expressly warranted, it is implied that the ship
will carry the requisite documents to show such nationality
"Section 115. In every marine insurance upon a ship or or neutrality and that it will not carry any documents which
freight, or freightage, or upon any thing which is the cast reasonable suspicion thereon.
subject of marine insurance, a warranty is implied that the
ship is seaworthy. "SUB-TITLE 1-F
"THE VOYAGE AND DEVIATION
"Section 116. A ship is seaworthy when reasonably fit to
perform the service and to encounter the ordinary perils of "Section 123. When the voyage contemplated by a marine
the voyage contemplated by the parties to the policy. insurance policy is described by the places of beginning
and ending, the voyage insured is one which conforms to
"Section 117. An implied warranty of seaworthiness is the course of sailing fixed by mercantile usage between
complied with if the ship be seaworthy at the time of the those places.
commencement of the risk, except in the following cases:
"Section 124. If the course of sailing is not fixed by
"(a) When the insurance is made for a specified mercantile usage, the voyage insured by a marine
length of time, the implied warranty is not insurance policy is that way between the places specified,
complied with unless the ship be seaworthy at the which to a master of ordinary skill and discretion, would
commencement of every voyage it undertakes mean the most natural, direct and advantageous.
during that time;
"Section 125. Deviation is a departure from the course of
"(b) When the insurance is upon the cargo which, the voyage insured, mentioned in the last two (2) sections,
by the terms of the policy, description of the or an unreasonable delay in pursuing the voyage or the
voyage, or established custom of the trade, is to commencement of an entirely different voyage.
be transhipped at an intermediate port, the
implied warranty is not complied with unless each "Section 126. A deviation is proper:
vessel upon which the cargo is shipped, or
transhipped, be seaworthy at the commencement "(a) When caused by circumstances over which
of each particular voyage. neither the master nor the owner of the ship has
any control;
"Section 118. A warranty of seaworthiness extends not
only to the condition of the structure of the ship itself, but "(b) When necessary to comply with a warranty,
requires that it be properly laden, and provided with a or to avoid a peril, whether or not the peril is
competent master, a sufficient number of competent insured against;
officers and seamen, and the requisite appurtenances and
equipment, such as ballasts, cables and anchors, cordage "(c) When made in good faith, and upon
and sails, food, water, fuel and lights, and other necessary reasonable grounds of belief in its necessity to
or proper stores and implements for the voyage.
avoid a peril; or

"Section 119. Where different portions of the voyage

"(d) When made in good faith, for the purpose of
contemplated by a policy differ in respect to the things saving human life or relieving another vessel in
requisite to make the ship seaworthy therefor, a warranty distress.
of seaworthiness is complied with if, at the
commencement of each portion, the ship is seaworthy
with reference to that portion. "Section 127. Every deviation not specified in the last
section is improper.
"Section 120. When the ship becomes unseaworthy
during the voyage to which an insurance relates, an "Section 128. An insurer is not liable for any loss
unreasonable delay in repairing the defect exonerates the happening to the thing insured subsequent to an improper
insurer on ship or shipowner’s interest from liability from deviation.
any loss arising therefrom.

"Section 121. A ship which is seaworthy for the purpose of

an insurance upon the ship may, nevertheless, by reason
of being unfitted to receive the cargo, be unseaworthy for
the purpose of insurance upon the cargo.
 "SUB-TITLE 1-G "Section 138. Where it has been agreed that an insurance
"LOSS upon a particular thing, or class of things, shall be free
from particular average, a marine insurer is not liable for
"Section 129. A loss may be either total or partial. 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
"Section 130. Every loss which is not total is partial.
entirely worthless; but such insurer is liable for his
proportion of all general average loss assessed upon the
"Section 131. A total loss may be either actual or thing insured.
constructive.
"Section 139. An insurance confined in terms to an actual
"Section 132. An actual total loss is caused by: loss does not cover a constructive total loss, but covers
any loss, which necessarily results in depriving the
"(a) A total destruction of the thing insured; insured of the possession, at the port of destination, of the
entire thing insured.
"(b) The irretrievable loss of the thing by sinking,
or by being broken up; "SUB-TITLE 1-H
"ABANDONMENT
"(c) Any damage to the thing which renders it
valueless to the owner for the purpose for which "Section 140. Abandonment, in marine insurance, is the
he held it; or act of the insured by which, after a constructive total loss,
he declares the relinquishment to the insurer of his
"(d) Any other event which effectively deprives the interest in the thing insured.
owner of the possession, at the port of
destination, of the thing insured. "Section 141. A person insured by a contract of marine
insurance may abandon the thing insured, or any
"Section 133. A constructive total loss is one which gives particular portion thereof separately valued by the policy,
to a person insured a right to abandon, under Section 141. or otherwise separately insured, and recover for a total
loss thereof, when the cause of the loss is a peril insured
"Section 134. An actual loss may be presumed from the against:
continued absence of a ship without being heard of. The
length of time which is sufficient to raise this presumption "(a) If more than three-fourths (¾) thereof in value
depends on the circumstances of the case. is actually lost, or would have to be expended to
recover it from the peril;
"Section 135. When a ship is prevented, at an
intermediate port, from completing the voyage, by the "(b) If it is injured to such an extent as to reduce
perils insured against, the liability of a marine insurer on its value more than three-fourths (¾);
the cargo continues after they are thus reshipped.
"(c) If the thing insured is a ship, and the
"Nothing in this section shall prevent an insurer from contemplated voyage cannot be lawfully
requiring an additional premium if the hazard be increased performed without incurring either an expense to
by this extension of liability. the insured of more than three-fourths (¾) the
value of the thing abandoned or a risk which a
"Section 136. In addition to the liability mentioned in the prudent man would not take under the
last section, a marine insurer is bound for damages, circumstances; or
expenses of discharging, storage, reshipment, extra
freightage, and all other expenses incurred in saving "(d) If the thing insured, being cargo or freightage,
cargo reshipped pursuant to the last section, up to the and the voyage cannot be performed, nor another
amount insured. ship procured by the master, within a reasonable
time and with reasonable diligence, to forward the
"Nothing in this or in the preceding section shall render a cargo, without incurring the like expense or risk
marine insurer liable for any amount in excess of the mentioned in the preceding subparagraph. But
insured value or, if there be none, of the insurable value. freightage cannot in any case be abandoned
unless the ship is also abandoned.
"Section 137. Upon an actual total loss, a person insured
is entitled to payment without notice of abandonment. "Section 142. An abandonment must be neither partial nor
conditional.
"Section 143. An abandonment must be made within a "Section 155. On an accepted abandonment of a ship,
reasonable time after receipt of reliable information of the freightage earned previous to the loss belongs to the
loss, but where the information is of a doubtful character, insurer of said freightage; but freightage subsequently
the insured is entitled to a reasonable time to make earned belongs to the insurer of the ship.
inquiry.
"Section 156. If an insurer refuses to accept a valid
"Section 144. Where the information upon which an abandonment, he is liable as upon an actual total loss,
abandonment has been made proves incorrect, or the deducting from the amount any proceeds of the thing
thing insured was so far restored when the abandonment insured which may have come to the hands of the insured.
was made that there was then in fact no total loss, the
abandonment becomes ineffectual. "Section 157. If a person insured omits to abandon, he
may nevertheless recover his actual loss.
"Section 145. Abandonment is made by giving notice
thereof to the insurer, which may be done orally, or in "SUB-TITLE 1-I
writing: Provided, That if the notice be done orally, a "MEASURE OF INDEMNITY
written notice of such abandonment shall be submitted
within seven (7) days from such oral notice.
"Section 158. A valuation in a policy of marine insurance
is conclusive between the parties thereto in the
"Section 146. A notice of abandonment must be explicit, adjustment of either a partial or total loss, if the insured
and must specify the particular cause of the has some interest at risk, and there is no fraud on his part;
abandonment, but need state only enough to show that except that when a thing has been hypothecated by
there is probable cause therefor, and need not be bottomry or respondentia, before its insurance, and
accompanied with proof of interest or of loss. without the knowledge of the person actually procuring the
insurance, he may show the real value. But a valuation
"Section 147. An abandonment can be sustained only fraudulent in fact, entitles the insurer to rescind the
upon the cause specified in the notice thereof. contract.

"Section 148. An abandonment is equivalent to a transfer "Section 159. A marine insurer is liable upon a partial loss,
by the insured of his interest to the insurer, with all the only for such proportion of the amount insured by him as
chances of recovery and indemnity. the loss bears to the value of the whole interest of the
insured in the property insured.
"Section 149. If a marine insurer pays for a loss as if it
were an actual total loss, he is entitled to whatever may "Section 160. Where profits are separately insured in a
remain of the thing insured, or its proceeds or salvage, as contract of marine insurance, the insured is entitled to
if there had been a formal abandonment. recover, in case of loss, a proportion of such profits
equivalent to the proportion which the value of the
"Section 150. Upon an abandonment, acts done in good property lost bears to the value of the whole.
faith by those who were agents of the insured in respect to
the thing insured, subsequent to the loss, are at the risk of "Section 161. In case of a valued policy of marine
the insurer, and for his benefit. insurance on freightage or cargo, if a part only of the
subject is exposed to risk, the valuation applies only in
"Section 151. Where notice of abandonment is properly proportion to such part.
given, the rights of the insured are not prejudiced by the
fact that the insurer refuses to accept the abandonment. "Section 162. When profits are valued and insured by a
contract of marine insurance, a loss of them is
"Section 152. The acceptance of an abandonment may be conclusively presumed from a loss of the property out of
either express or implied from the conduct of the insurer. which they are expected to arise, and the valuation fixes
The mere silence of the insurer for an unreasonable their amount.
length of time after notice shall be construed as an
acceptance. "Section 163. In estimating a loss under an open policy of
marine insurance the following rules are to be observed:
"Section 153. The acceptance of an abandonment,
whether express or implied, is conclusive upon the "(a) The value of a ship is its value at the
parties, and admits the loss and the sufficiency of the beginning of the risk, including all articles or
abandonment. charges which add to its permanent value or
which are necessary to prepare it for the voyage
"Section 154. An abandonment once made and accepted insured;
is irrevocable, unless the ground upon which it was made
proves to be unfounded.
 "(b) The value of the cargo is its actual cost to the "TITLE 2
insured, when laden on board, or where the cost "FIRE INSURANCE
cannot be ascertained, its market value at the
time and place of lading, adding the charges "Section 169. As used in this Code, the term fire
incurred in purchasing and placing it on board, but insurance shall include insurance against loss by fire,
without reference to any loss incurred in raising lightning, windstorm, tornado or earthquake and other
money for its purchase, or to any drawback on its allied risks, when such risks are covered by extension to
exportation, or to the fluctuation of the market at fire insurance policies or under separate policies.
the port of destination, or to expenses incurred on
the way or on arrival;
"Section 170. An alteration in the use or condition of a
thing insured from that to which it is limited by the policy
"(c) The value of freightage is the gross made without the consent of the insurer, by means within
freightage, exclusive of primage, without the control of the insured, and increasing the risks, entitles
reference to the cost of earning it; and an insurer to rescind a contract of fire insurance.

"(d) The cost of insurance is in each case to be "Section 171. An alteration in the use or condition of a
added to the value thus estimated. thing insured from that to which it is limited by the policy,
which does not increase the risk, does not affect a
"Section 164. If cargo insured against partial loss contract of fire insurance.
arrives at the port of destination in a damaged
condition, the loss of the insured is deemed to be "Section 172. A contract of fire insurance is not affected
the same proportion of the value which the market by any act of the insured subsequent to the execution of
price at that port, of the thing so damaged, bears the policy, which does not violate its provisions, even
to the market price it would have brought if sound. though it increases the risk and is the cause of the loss.

"Section 165. A marine insurer is liable for all the "Section 173. If there is no valuation in the policy, the
expenses attendant upon a loss which forces the ship into measure of indemnity in an insurance against fire is the
port to be repaired; and where it is stipulated in the policy expense it would be to the insured at the time of the
that the insured shall labor for the recovery of the commencement of the fire to replace the thing lost or
property, the insurer is liable for the expense incurred injured in the condition in which it was at the time of the
thereby, such expense, in either case, being in addition to injury; but if there is a valuation in a policy of fire
a total loss, if that afterwards occurs. insurance, the effect shall be the same as in a policy of
marine insurance.
"Section 166. A marine insurer is liable for a loss falling
upon the insured, through a contribution in respect to the "Section 174. Whenever the insured desires to have a
thing insured, required to be made by him towards a valuation named in his policy, insuring any building or
general average loss called for by a peril insured structure against fire, he may require such building or
against: Provided, That the liability of the insurer shall be structure to be examined by an independent appraiser
limited to the proportion of contribution attaching to his and the value of the insured’s interest therein may then be
policy value where this is less than the contributing value fixed as between the insurer and the insured. The cost of
of the thing insured. such examination shall be paid for by the insured. A
clause shall be inserted in such policy stating substantially
"Section 167. When a person insured by a contract of that the value of the insured’s interest in such building or
marine insurance has a demand against others for structure has been thus fixed. In the absence of any
contribution, he may claim the whole loss from the insurer, change increasing the risk without the consent of the
subrogating him to his own right to contribution. But no insurer or of fraud on the part of the insured, then in case
such claim can be made upon the insurer after the of a total loss under such policy, the whole amount so
separation of the interests liable to contribution, nor when insured upon the insured’s interest in such building or
the insured, having the right and opportunity to enforce structure, as stated in the policy upon which the insurers
contribution from others, has neglected or waived the have received a premium, shall be paid, and in case of a
exercise of that right. partial loss the full amount of the partial loss shall be so
paid, and in case there are two (2) or more policies
"Section 168. In the case of a partial loss of ship or its covering the insured’s interest therein, each policy shall
equipment, the old materials are to be applied towards contribute pro rata to the payment of such whole or partial
payment for the new. Unless otherwise stipulated in the loss. But in no case shall the insurer be required to pay
policy, a marine insurer is liable for only two-thirds (2/3) of more than the amount thus stated in such policy. This
the remaining cost of repairs after such deduction, except section shall not prevent the parties from stipulating in
that anchors must be paid in full. such policies concerning the repairing, rebuilding or
replacing of buildings or structures wholly or partially
damaged or destroyed.
"Section 175. No policy of fire insurance shall be pledged, "In the case of a continuing bond, the obligor shall pay the
hypothecated, or transferred to any person, firm or subsequent annual premium as it falls due until the
company who acts as agent for or otherwise represents contract of suretyship is cancelled by the obligee or by the
the issuing company, and any such pledge, Commissioner or by a court of competent jurisdiction, as
hypothecation, or transfer hereafter made shall be void the case may be.
and of no effect insofar as it may affect other creditors of
the insured. "Section 180. Pertinent provisions of the Civil Code of the
Philippines shall be applied in a suppletory character
"TITLE 3 whenever necessary in interpreting the provisions of a
"CASUALTY INSURANCE contract of suretyship.

"Section 176. Casualty insurance is insurance covering "TITLE 5

loss or liability arising from accident or mishap, excluding "LIFE INSURANCE
certain types of loss which by law or custom are
considered as falling exclusively within the scope of other "Section 181. Life insurance is insurance on human lives
types of insurance such as fire or marine. It includes, but and insurance appertaining thereto or connected
is not limited to, employer’s liability insurance, motor therewith.
vehicle liability insurance, plate glass insurance, burglary
and theft insurance, personal accident and health "Every contract or undertaking for the payment of
insurance as written by non-life insurance companies, and
annuities including contracts for the payment of lump
other substantially similar kinds of insurance.
sums under a retirement program where a life insurance
company manages or acts as a trustee for such retirement
"TITLE 4 program shall be considered a life insurance contract for
"SURETYSHIP purposes of this Code.

"Section 177. A contract of suretyship is an agreement "Section 182. An insurance upon life may be made
whereby a party called the surety guarantees the payable on the death of the person, or on his surviving a
performance by another party called the principal or specified period, or otherwise contingently on the
obligor of an obligation or undertaking in favor of a third continuance or cessation of life.
party called the obligee. It includes official recognizances,
stipulations, bonds or undertakings issued by any
"Every contract or pledge for the payment of endowments
company by virtue of and under the provisions of Act No.
or annuities shall be considered a life insurance contract
536, as amended by Act No. 2206. for purposes of this Code.

"Section 178. The liability of the surety or sureties shall be

"In the absence of a judicial guardian, the father, or in the
joint and several with the obligor and shall be limited to
latter’s absence or incapacity, the mother, of any minor,
the amount of the bond. It is determined strictly by the
who is an insured or a beneficiary under a contract of life,
terms of the contract of suretyship in relation to the health, or accident insurance, may exercise, in behalf of
principal contract between the obligor and the obligee. said minor, any right under the policy, without necessity of
court authority or the giving of a bond, where the interest
"Section 179. The surety is entitled to payment of the of the minor in the particular act involved does not exceed
premium as soon as the contract of suretyship or bond is Five hundred thousand pesos (P500,000.00) or in such
perfected and delivered to the obligor. No contract of reasonable amount as may be determined by the
suretyship or bonding shall be valid and binding unless Commissioner. Such right may include, but shall not be
and until the premium therefor has been paid, except limited to, obtaining a policy loan, surrendering the policy,
where the obligee has accepted the bond, in which case receiving the proceeds of the Policy, and giving the
the bond becomes valid and enforceable irrespective of minor’s consent to any transaction on the policy.
whether or not the premium has been paid by the obligor
to the surety: Provided, That if the contract of suretyship
"In the absence or in case of the incapacity of the father or
or bond is not accepted by, or filed with the obligee, the
mother, the grandparent, the eldest brother or sister at
surety shall collect only a reasonable amount, not
least eighteen (18) years of age, or any relative who has
exceeding fifty percent (50%) of the premium due thereon
actual custody of the minor insured or beneficiary, shall
as service fee plus the cost of stamps or other taxes
act as a guardian without need of a court order or judicial
imposed for the issuance of the contract or appointment as such guardian, as long as such person is
bond: Provided, however, That if the nonacceptance of
not otherwise disqualified or incapacitated. Payment made
the bond be due to the fault or negligence of the surety,
by the insurer pursuant to this section shall relieve such
no such service fee, stamps or taxes shall be collected.
insurer of any liability under the contract.
"Section 183. The insurer in a life insurance contract shall "CHAPTER II-A
be liable in case of suicide only when it is committed after "FINANCIAL REPORTING FRAMEWORK
the policy has been in force for a period of two (2) years
from the date of its issue or of its last reinstatement, "Section 189. All companies regulated by the
unless the policy provides a shorter period: Provided, Commission, unless otherwise required by law, should
however, That suicide committed in the state of insanity comply with the financial reporting frameworks adopted by
shall be compensable regardless of the date of the Commission for purposes of creating the statutory
commission. financial reports and the annual statements to be
submitted to the Commission. Financial reporting
"Section 184. A policy of insurance upon life or health may framework means a set of accounting and reporting
pass by transfer, will or succession to any person, principles, standards, interpretations and pronouncements
whether he has an insurable interest or not, and such that must be adopted in the preparation and submission of
person may recover upon it whatever the insured might the statutory financial statements and reports required by
have recovered. the Commission. This financial reporting framework is not
the same as the financial reporting framework used to
"Section 185. Notice to an insurer of a transfer or bequest prepare the financial statements that the Securities and
thereof is not necessary to preserve the validity of a policy Exchange Commission may require. The main purpose of
of insurance upon life or health, unless thereby expressly the statutory statements is to present important
required. information about the level of risk and solvency situation
of insurers. In prescribing the applicable statutory financial
reporting framework, the Commissioner shall take into
"Section 186. Unless the interest of a person insured is
account international standards concerning solvency and
susceptible of exact pecuniary measurement, the
insurance company reporting as well as generally
measure of indemnity under a policy of insurance upon life
accepted actuarial principles concerning financial
or health is the sum fixed in the policy.
reporting promulgated by the Actuarial Society of the
Philippines.

"The assets and investments discussed in Sections 204 to

"TITLE 6 215 shall be accounted for in accordance with this section.
"MICROINSURANCE
"The valuation of reserves shall be accounted for in
"Section 187. Microinsurance is a financial product or accordance with Title 5 of this Code.
service that meets the risk protection needs of the poor
where:
"CHAPTER III
"THE BUSINESS OF INSURANCE
"(a) The amount of contributions, premiums, fees
or charges, computed on a daily basis, does not
"TITLE 1
exceed seven and a half percent (7.5%) of the
current daily minimum wage rate for "INSURANCE COMPANIES, ORGANIZATION,
nonagricultural workers in Metro Manila; and CAPITALIZATION AND AUTHORIZATION

"Section 190. For purposes of this Code, the

"(b) The maximum sum of guaranteed benefits is
term insurer or insurance company shall include all
not more than one thousand (1,000) times of the
current daily minimum wage rate for partnerships, associations, cooperatives or corporations,
nonagricultural workers in Metro Manila. including government-owned or -controlled corporations or
entities, engaged as principals in the insurance business,
excepting mutual benefit associations. Unless the context
"Section 188. No insurance company or mutual benefit otherwise requires, the term shall also include
association shall engage in the business of professional reinsurers defined in Section 288. Domestic
microinsurance unless it possesses all the requirements companyshall include companies formed, organized or
as may be prescribed by the Commissioner. The existing under the laws of the Philippines. Foreign
Commissioner shall issue such rules and regulations company when used without limitation shall include
governing microinsurance. companies formed, organized, or existing under any laws
other than those of the Philippines.

"Section 191. The provisions of the Corporation Code, as

amended, shall apply to all insurance corporations now or
hereafter engaged in business in the Philippines insofar
as they do not conflict with the provisions of this chapter.
"Section 192. No corporation, partnership, or association "Before issuing such certificate of authority, the
of persons shall transact any insurance business in the Commissioner must be satisfied that the name of the
Philippines except as agent of a corporation, partnership company is not that of any other known company
or association authorized to do the business of insurance transacting a similar business in the Philippines, or a
in the Philippines, unless possessed of the capital and name so similar as to be calculated to mislead the public.
assets required of an insurance corporation doing the The Commissioner may issue rules and regulations on the
same kind of business in the Philippines and invested in use of names of insurance companies and other
the same manner; unless the Commissioner shall have supervised persons or entities.
granted it a certificate to the effect that it has complied
with all the provisions of this Code. "The certificate of authority issued by the Commissioner
shall expire on the last day of December, three (3) years
"Every entity receiving any such certificate of authority following its date of issuance, and shall be renewable
shall be subject to the insurance and other applicable laws every three (3) years thereafter, subject to the company’s
of the Philippines and to the jurisdiction and supervision of continuing compliance with the provisions of this Code,
the Commissioner. circulars, instructions, rulings or decisions of the
Commission.
"Section 193. No insurance company shall transact any
insurance business in the Philippines until after it shall "Every company receiving any such certificates of
have obtained a certificate of authority for that purpose authority shall be subject to the provisions of this Code
from the Commissioner upon application therefor and and other related laws and to the jurisdiction and
payment by the company concerned of the fees supervision of the Commissioner.
hereinafter prescribed.
"No insurance company may be authorized to transact in
"The Commissioner may refuse to issue a certificate of the Philippines the business of life and non-life insurance
authority to any insurance company if, in his judgment, concurrently, unless specifically authorized to do so by the
such refusal will best promote the interest of the people of Commissioner: Provided, That the terms life and non-
this country. No such certificate of authority shall be lifeinsurance shall be deemed to include health, accident
granted to any such company until the Commissioner and disability insurance.
shall have satisfied himself by such examination as he
may make and such evidence as he may require that such "No insurance company shall have equity in an
company is qualified by the laws of the Philippines to adjustment company and neither shall an adjustment
transact business therein, that the grant of such authority company have equity in an insurance company.
appears to be justified in the light of local economic
requirements, and that the direction and administration, as "No insurance company issued with a valid certificate of
well as the integrity and responsibility of the organizers authority to transact insurance business anywhere in the
and administrators, the financial organization and the
Philippines by the Insurance Commissioner, shall be
amount of capital, reasonably assure the safety of the
barred, prevented, or disenfranchised from issuing any
interests of the policyholders and the public.
insurance policy or from transacting any insurance
business within the scope or coverage of its certificate of
"In order to maintain the quality of the management of the authority, anywhere in the Philippines, by any local
insurance companies and afford better protection to government unit or authority, for whatever guise or reason
policyholders and the public in general, any person of whatsoever, including under any kind of ordinance,
good moral character, unquestioned integrity and accreditation system, or scheme. Any local ordinance or
recognized competence may be elected or appointed local government unit regulatory issuance imposing such
director or officer of insurance companies in accordance restriction or disenfranchisement on any insurance
with the pertinent provisions contained in the corporate company shall be deemed null and void ab initio.
governance circulars prescribed by the Commissioner. In
addition hereto, the Commissioner shall prescribe the
"Section 194. Except as provided in Section 289, no new
qualifications of directors, executive officers and other key
domestic life or non-life insurance company shall, in a
officials of insurance companies for purposes of this stock corporation, engage in business in the Philippines
section. unless possessed of a paid-up capital equal to at least
One billion pesos (P1,000,000,000.00): Provided, That a
"No person shall concurrently be a Director and/or Officer domestic insurance company already doing business in
of an insurance company and an adjustment company. the Philippines shall have a net worth by June 30, 2013 of
Two hundred fifty million pesos (P250,000,000.00).
Furthermore, said company must have by December 31,
2016, an additional Three hundred million pesos
(P300,000,000.00) in net worth; by December 31, 2019,
an additional Three hundred fifty million pesos
(P350,000,000.00) in net worth; and by December 31,
2022, an additional Four hundred million pesos in the ASEAN Region. For this purpose, a review
(P400,000,000.00) in net worth. committee consisting of representatives from the
Department of Finance (DOF), the Insurance Commission
"The Commissioner may, as a pre-licensing requirement (IC), the National Economic and Development Authority
of a new insurance company, in addition to the paid-up (NEDA), the Securities and Exchange Commission (SEC)
capital stock, require the stockholders to pay in cash to and other agencies which the President may designate
the company in proportion to their subscription interests a shall conduct the review and may recommend to the
contributed surplus fund of not less than One hundred President to adopt for implementation the necessary
million pesos (P100,000,000.00). He may also require capital adjustment.
such company to submit to him a business plan showing
the company’s estimated receipts and disbursements, as "Section 195. Every company must, before engaging in
well as the basis therefor, for the next succeeding three the business of insurance in the Philippines, file with the
(3) years. Commissioner the following:

"If organized as a mutual company, in lieu of such net "(a) A certified copy of the last annual statement
worth, it must have available total members equity in an or a verified financial statement exhibiting the
amount to be determined by the Insurance Commission condition and affairs of such company;
above all liabilities for losses reported; expenses, taxes,
legal reserve, and reinsurance of all outstanding risks, and "(b) If incorporated under the laws of the
the contributed surplus fund equal to the amounts Philippines, a copy of the articles of incorporation
required of stock corporations. A stock insurance and bylaws, and any amendments to either,
company doing business in the Philippines may, subject to certified by the Securities and Exchange
the pertinent law and regulation which now or hereafter Commission to be a copy of that which is filed in
may be in force, alter its organization and transform itself its Office;
into a mutual insurance company.
"(c) If incorporated under any laws other than
"The Secretary of Finance may, upon recommendation of those of the Philippines, a certificate from the
the Commissioner, increase such minimum paid-up Securities and Exchange Commission showing
capital stock or cash assets requirement under such terms that it is duly registered in the mercantile registry
and conditions as he may impose, to an amount which, in of that Commission in accordance with the
his opinion, would reasonably assure the safety of the Corporation Code. A copy of the articles of
interests of the policyholders and the public. The minimum incorporation and bylaws, and any amendments
paid-up capital and net worth requirement must remain to either, if organized or formed under any law
unimpaired for the continuance of the license. The requiring such to be filed, duly certified by the
Commissioner may require the adoption of the risk-based officer having the custody of same, or if not so
capital approach and other internationally accepted forms organized, a copy of the law, charter or deed of
of capital framework. settlement under which the deed of organization
is made, duly certified by the proper custodian
"For the purpose of this section, net worth shall consist of: thereof, or proved by affidavit to be a copy; also, a
certificate under the hand and seal of the proper
"(a) Paid-up capital; officer of such state or country having supervision
of insurance business therein, if any there be, that
such corporation or company is organized under
"(b) Retained earnings;
the laws of such state or country, with the amount
of capital stock or assets and legal reserve
"(c) Unimpaired surplus; and required by this Code;

"(d) Revaluation of assets as may be approved by "(d) If not incorporated and of foreign domicile,
the Commissioner. aside from the certificate mentioned in paragraph
(c) of this section, a certificate setting forth the
"The Commission may adopt for purposes of compliance nature and character of the business, the location
with capital build up requirement under this Code the of the principal office, the name of the individual
recognition as part of the capital account, capital notes or or names of the persons composing the
debentures which are subordinate to all credits and senior partnership or association, the amount of actual
only to common capital stocks. capital employed or to be employed therein, and
the names of all officers and persons by whom
"The President of the Philippines may order a periodic the business is or may be managed.
review every two (2) years the capital structure set out
above to determine the capital adequacy of the local
insurance industry from and after the integration and
liberalization of the financial services, including insurance,
"The certificate must be verified by the affidavit of the chief is defined in Executive Order No. 226 of 1987, as
officer, secretary, agent, or manager of the company; and amended, to the actual market value of not less than the
if there are any written articles of agreement of the amount herein required: Provided, That at least fifty
company, a copy thereof must accompany such percent (50%) of such securities shall consist of bonds or
certificate. other instruments of debt of the Government of the
Philippines, its political subdivisions and instrumentalities,
"Section 196. The Commissioner must require as a or of government-owned or -controlled corporations and
condition precedent to the transaction of insurance entities, including the Bangko Sentral ng
business in the Philippines by any foreign insurance Pilipinas: Provided, further, That the total investment of a
company, that such company file in his office a written foreign insurance company in any registered enterprise
power of attorney designating some person who shall be a shall not exceed twenty percent (20%) of the net worth of
resident of the Philippines as its general agent, on whom said foreign insurance company nor twenty percent (20%)
any notice provided by law or by any insurance policy, of the capital of the registered enterprise, unless
proof of loss, summons and other legal processes may be previously authorized in writing by the Commissioner.
served in all actions or other legal proceedings against
such company, and consenting that service upon such "The Commissioner may, as a pre-licensing requirement
general agent shall be admitted and held as valid as if of a new branch office of a foreign insurance company, in
served upon the foreign company at its home office. Any addition to the required asset or net worth, require the
such foreign company shall, as further condition company to have an additional surplus fund in an amount
precedent to the transaction of insurance business in the to be determined by the Insurance Commission.
Philippines, make and file with the Commissioner an
agreement or stipulation, executed by the proper "For purposes of this Code, the net worth of a foreign
authorities of said company in form and substance as insurance company shall refer only to its net worth in the
follows: Philippines.

"The (name of company) does hereby stipulate and agree "Section 198. The Commissioner shall hold the securities,
in consideration of the permission granted by the deposited as required in the immediately preceding
Insurance Commissioner to transact business in the section, for the benefit and security of all the policyholders
Philippines, that if at any time said company shall leave and creditors of the company depositing the
the Philippines, or cease to transact business therein, or same: Provided, That the Commissioner may as long as
shall be without any agent in the Philippines on whom any the company is solvent, permit the company to collect the
notice, proof of loss, summons, or legal process may be interest or dividends on the securities so deposited, and,
served, then in any action or proceeding arising out of any from time to time, with his assent, to withdraw any of such
business or transaction which occurred in the Philippines, securities, upon depositing with said Commissioner other
service of any notice provided by law, or insurance policy, like securities, the market value of which shall be equal to
proof of loss, summons, or other legal process may be the market value of such as may be withdrawn. In the
made upon the Insurance Commissioner, and that such event of any company ceasing to do business in the
service upon the Insurance Commissioner shall have the Philippines, the securities deposited as aforesaid shall be
same force and effect as if made upon the company. returned to the company upon the Commissioner’s written
approval and only after the company has duly proven in its
"Whenever such service of notice, proof of loss, application therefor that it has no further liability
summons, or other legal process shall be made upon the whatsoever under any of its policies nor to any of its
Commissioner, he must, within ten (10) days thereafter, creditors in the Philippines.
transmit by mail, postage paid, a copy of such notice,
proof of loss, summons, or other legal process to the "Section 199. Every foreign company doing business in
company at its home or principal office. The sending of the Philippines shall set aside an amount corresponding to
such copy by the Commissioner shall be a necessary part the legal reserves of the policies written in the Philippines
of the service of the notice, proof of loss, or other legal and invest and keep the same therein in accordance with
process. the provisions of this section. The legal reserve therein
required to be set aside shall be invested only in the
"Section 197. No insurance company organized or classes of Philippine securities described in Section
existing under the government or laws other than those of 206: Provided, however, That no investment in stocks or
the Philippines shall engage in business in the Philippines bonds of any single entity shall, in the aggregate exceed
unless possessed of unimpaired capital or assets and twenty percent (20%) of the net worth of the investing
reserve of not less than One billion pesos company or twenty percent (20%) of the capital of the
(P1,000,000,000.00), nor until it shall have deposited with issuing company, whichever is the lesser, unless
the Commissioner for the benefit and security of the otherwise approved in writing by the Commissioner. The
policyholders and creditors of such company in the securities purchased and kept in the Philippines under this
Philippines, securities satisfactory to the Commissioner section, shall not be sent out of the territorial jurisdiction of
consisting of good securities of the Philippines, including the Philippines without the written consent of the
new issues of stock of registered enterprises, as this term Commissioner.
 "TITLE 2 "If the Commissioner finds that any such corporation has
"SOLVENCY declared or distributed any such dividend in violation of
this section, he may order such corporation to cease and
"Section 200. An insurance company doing business in desist from doing business until the amount of such
the Philippines shall at all times maintain the minimum dividend or the portion thereof in excess of the amount
paid-up capital, and net worth requirements as prescribed allowed under this section has been restored to said
by the Commissioner. Such solvency requirements shall corporation.
be based on internationally accepted solvency
frameworks and adopted only after due consultation with "The Commissioner shall prescribe solvency requirements
the insurance industry associations. for branches of foreign insurance companies operating in
the Philippines.
"Whenever the aforementioned requirement be found to
be less than that herein required to be maintained, the "TITLE 3
Commissioner shall forthwith direct the company to make "ASSETS
good any such deficiency by cash, to be contributed by all
stockholders of record in proportion to their respective "Section 202. In any determination of the financial
interests, and paid to the treasurer of the company, within condition of any insurance company doing business in the
fifteen (15) days from receipt of the order: Provided, That Philippines, there shall be allowed and admitted as assets
the company in the interim shall not be permitted to take only such assets legally or beneficially owned by the
any new risk of any kind or character unless and until it insurance company concerned as determined by the
make good any such deficiency: Provided; further, That a Commissioner which consist of:
stockholder who aside from paying the contribution due
from him, pays the contribution due from another
"(a) Cash in the possession of the insurance
stockholder by reason of the failure or refusal of the latter company or in transit under its control, and the
to do so, shall have a lien on the certificates of stock of
true and duly verified balance of any deposit of
the insurance company concerned appearing in its books
such company in a financially sound bank or trust
in the name of the defaulting stockholder on the date of
company duly authorized by the Bangko Sentral
default, as well as on any interests or dividends that have
ng Pilipinas.
accrued or will accrue to the said certificates of stock, until
the corresponding payment or reimbursement is made by
the defaulting stockholder. "(b) Investments in securities, including money
market instruments, and in real property acquired
or held in accordance with and subject to the
"Section 201. No domestic insurance corporation shall
applicable provisions of this Code and the income
declare or distribute any dividend on its outstanding realized therefrom or accrued thereon.
stocks unless it has met the minimum paid-up capital and
net worth requirements under Section 194 and except
from profits attested in a sworn statement to the "(c) Loans granted by the insurance company
Commissioner by the president or treasurer of the concerned to the extent of that portion thereof
corporation to be remaining on hand after retaining adequately secured by non-speculative assets
unimpaired: with readily realizable values in accordance with
and subject to the limitations imposed by
applicable provisions of this Code.
"(a) The entire paid-up capital stock;
"(d) Policy loans and other policy assets and liens
"(b) The solvency requirements defined by on policies, contracts or certificates of a life
Section 200; insurance company, in an amount not exceeding
legal reserves and other policy liabilities carried
"(c) In the case of life insurance corporations, the on each individual life insurance policy, contract
legal reserve fund required by Section 217; or certificate.

"(d) In the case of corporations other than life, the "(e) The net amount of uncollected and deferred
legal reserve fund required by Section 219; and premiums and annuity considerations in the case
of a life insurance company which carries the full
"(e) A sum sufficient to pay all net losses reported, mean tabular reserve liability.
or in the course of settlement, and all liabilities for
expenses and taxes.

"Any dividend declared or distributed under the preceding

paragraph shall be reported to the Commissioner within
thirty (30) days after such declaration or distribution.
"(f) Reinsurance recoverable by the ceding "Section 203. In addition to such assets as the
insurer: Commissioner may from time to time determine to be non-
admitted assets of insurance companies doing business in
"(1) From an insurer authorized to the Philippines, the following assets shall in no case be
transact business in this country, the full allowed as admitted assets of an insurance company
amount thereof; or doing business in the Philippines, in any determination of
its financial condition:
"(2) From an insurer not authorized in this
country, in an amount not exceeding the "(a) Goodwill, trade names, and other like
liabilities carried by the ceding insurer for intangible assets.
amounts withheld under a reinsurance
treaty with such unauthorized insurer as "(b) Prepaid or deferred charges for expenses and
security for the payment of obligations commissions paid by such insurance company.
thereunder if such funds are held subject
to withdrawal by, and under the control of, "(c) Advances to officers (other than policy loans),
the ceding insurer. The Commissioner which are not adequately secured and which are
may prescribe the conditions under which not previously authorized by the Commissioner,
a ceding insurer may be allowed credit, as well as advances to employees, agents, and
as an asset or as a deduction from loss other persons on mere personal security.
and unearned premium reserves, for
reinsurance recoverable from an insurer
"(d) Shares of stock of such insurance company,
not authorized in this country but which
owned by it, or any equity therein as well as loans
presents satisfactory evidence that it
secured thereby, or any proportionate interest in
meets the applicable standards of such shares of stock through the ownership by
solvency required in this country.
such insurance company of an interest in another
corporation or business unit.
"(g) Funds withheld by a ceding insurer under a
reinsurance treaty, provided reserves for unpaid "(e) Furniture, furnishing, fixtures, safes,
losses and unearned premiums are adequately equipment, library, stationery, literature, and
provided.
supplies.

"(h) Deposits or amounts recoverable from

"(f) Items of bank credits representing checks,
underwriting associations, syndicates and drafts or notes returned unpaid after the date of
reinsurance funds, or from any suspended statement.
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 "(g) The amount, if any, by which the aggregate
him. value of investments as carried in the ledger
assets of such insurance company exceeds the
aggregate value thereof as determined in
"(i) Electronic data processing machines, as may
accordance with the provisions of this Code
be authorized by the Commissioner to be
and/or the rules of the Commissioner.
acquired by the insurance company concerned,
the acquisition cost of which to be amortized in
equal annual amounts within a period of five (5) "All non-admitted assets and all other assets of doubtful
years from the date of acquisition thereof. 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
"(j) Investments in mutual funds, real estate
to him, shall also be reported, to the extent of the value
investment trusts, salary loans, unit investment
disallowed as deductions from the gross assets of such
trust funds and special deposit accounts, subject insurance company, except where the Commissioner
to the conditions as may be provided for by the
permits a reserve to be carried among the liabilities of
Commissioner.
such insurance company in lieu of any such deduction.

"(k) Other assets, not inconsistent with the

provisions of paragraphs (a) to (j) hereof, which
are deemed by the Commissioner to be readily
realizable and available for the payment of losses
and claims at values to be determined by him in a
circular, rule or regulation.
 "TITLE 4 "(i) Chattel mortgages over equipment not more
"INVESTMENTS than three (3) years old; and

"Section 204. A life insurance company may lend to any of "(j) Such other security as may be approved by
its policyholders upon the security of the value of its policy the Commissioner.
such sum as may be determined pursuant to the
provisions of the policy. "The loans provided in the preceding subsection shall be
subject to the following conditions:
"No insurance company shall loan any of its money or
deposits to any person, corporation or association, except "(1) The amount of loan secured by real estate
upon the security of any of the following: mortgage over a non-agricultural land shall not
exceed seventy percent (70%) of its appraised
"(a) First mortgage or deeds of trust of registered, value, and in the case of a loan secured by a real
unencumbered, improved or unimproved real estate mortgage over an agricultural land, the
estate, including condominiums; amount of loan shall not exceed forty percent
(40%) of its market value: Provided, That, in no
"(b) First mortgages or deeds of trust of actually case shall such loan have a maturity period in
cultivated, improved and unencumbered excess of twenty-five (25) years;
agricultural lands in the Philippines;
"(2) Unless approved by the Commissioner, no
"(c) Purchase money mortgages, lease purchase loan may be granted upon the security of a
agreements or similar securities executed or mortgage on improved real estate if the
received by it on account of the sale or exchange improvements thereon do not belong to the owner
of real property acquired pursuant to Sections 206 of the land, and the owner of the improvements
and 208; does not sign the deed of mortgage. However, if
the owner of the land is the Government of the
Philippines or any of its political subdivisions and
"(d) Bonds or other instruments of indebtedness
issued or guaranteed by the Government of the a long-term lease has been executed in favor of
the owner of the improvements, the owner of the
Philippines or its political subdivisions authorized
land need not be a party to the deed of mortgage.
by law to incur such obligations or issue such
The expiration date of the lease shall not,
guarantees or of government-owned or -controlled
however, precede the maturity of the loan. The
corporations and instrumentalities including the
Bangko Sentral ng Pilipinas; or phrase ‘improved real estate’ as used herein shall
mean land with permanent building or buildings
erected thereon;
"(e) Obligations issued or guaranteed by universal
banks, commercial banks, offshore banking units,
"(3) Lease-agreements or similar securities
investment houses or other financial
intermediaries duly registered with the Bangko received on the sale of real estate property shall
Sentral ng Pilipinas; or not exceed one hundred percent (100%) of the
selling price of said property, or one hundred
percent (100%) of its market value at the time of
"(f) Obligations issued or guaranteed by foreign its disposition, whichever amount is lower.
banks or corporations, each of which shall have However, in no case shall such agreement have a
total net worth of at least One hundred fifty million maturity period not exceeding thirty (30) years;
US dollars ($US150,000,000.00) or such other
higher net worth as may be prescribed by the
"(4) Loans secured by shares of stock of solvent
Insurance Commission, as shown in their financial
corporations or institutions shall not exceed fifty
statements as of the immediately preceding fiscal
percent (50%) of:
year; or

"(i) The weighted average market price for

"(g) Assignments of monetary instruments such
the one hundred eighty (180) days
as cash deposits, deposit certificates or other
preceding the approval of the loan for
similar instruments of universal banks,
commercial banks, investment houses or other shares listed in the stock exchange; and
financial intermediaries duly registered with the
Bangko Sentral ng Pilipinas; or "(ii) For unlisted shares, the adjusted
book value of such shares.
"(h) Pledges of shares of stock, bonds or other
instruments of indebtedness specified in Section "(5) Loans secured by the chattel mortgages over
209; or equipment shall not exceed seventy percent
(70%) of the market value of said equipment.
"Section 205. No loan by any insurance company on the fixed charges, as hereinafter defined,
security of real estate shall be made unless the title to shall have been not less than one and
such real estate shall have first been registered in one-quarter (1¼) times the total of its
accordance with the existing Land Registration Act, or fixed charges for such year: Provided,
shall have been previously registered under the provisions further, That no life insurance company
of the existing Mortgage Law and the lien or interest of the shall invest in or loan upon the obligations
insurance company as mortgagee has been registered. of any one institution in the kinds
permitted under this subsection an
"Section 206. (a) An insurance company may purchase, amount in excess of twenty-five percent
hold, own and convey such property, real and personal, (25%) of the total admitted assets of such
as may have been mortgaged, pledged, or conveyed to it insurer as of December thirty-first next
in good faith in trust for its benefit by reason of money preceding the date of such investment.
loaned by it in pursuance of the regular business of the
company, and such real or personal property as may have "As used in this subsection the term net earnings
been purchased by it at sales under pledges, mortgages available for fixed charges shall mean net income
or deeds of trust for its benefit on account of money after deducting operating and maintenance
loaned by it; and such real and personal property as may expenses, taxes other than income taxes,
have been conveyed to it by borrowers in satisfaction and depreciation and depletion; but excluding
discharge of loans made by the company in payment or extraordinary nonrecurring items of income or
by reason of any loan made by the company in payment expense appearing in the regular financial
or by reason of any loan made by it shall be sold by the statement of the issuing, assuming or
company within twenty (20) years after the title thereto guaranteeing institution. The term fixed
has been vested in it. charges shall include interest on funded and
unfunded debt, amortization of debt discount, and
"(b) An insurance company may purchase, hold, and own rentals for leased properties.
the following:
"(5) Preferred or guaranteed stocks of any solvent
"(1) Real properties which serve as its main place corporation or institution created or existing under
of business and/or branch offices: Provided, That the laws of the Philippines: Provided, That if the
such investment shall not in the overall exceed stocks are guaranteed, the amount of stocks so
twenty percent (20%) of its net worth as shown by guaranteed is not in excess of fifty percent (50%)
its latest financial statement approved by the of the amount of the preferred or common stocks,
Commissioner. as the case may be, of the guaranteeing
corporation: Provided, finally, That no life
"(2) Bonds or other instruments of indebtedness insurance company shall invest in or loan upon
of the Government of the Philippines or its political obligations of any one institution in the kinds
permitted under this subsection an amount in
subdivisions authorized by law to issue bonds at
excess of ten percent (10%) of the total admitted
the reasonable market value thereof.
assets of such insurer as of December thirty-first
next preceding the date of such investment.
"(3) Bonds or other instruments of debt of
government-owned or -controlled corporations
"(6) Common stocks of any solvent corporation or
and entities, including the Bangko Sentral ng
institution created or existing under the laws of the
Pilipinas.
Philippines: Provided, however, That no life
insurance company shall invest in or loan upon
"(4) Bonds, debentures or other instruments of the obligations of any one corporation or
indebtedness of any solvent corporation or institution in the kinds permitted under this
institution created or existing under the laws of the subsection an amount in excess of ten percent
Philippines: (10%) of the total admitted assets of such insurer
as of December thirty-first next preceding the date
Provided, however, That the issuing, of such investment.
assuming or guaranteeing entity or its
predecessors shall not have defaulted in "(7) Securities issued by a registered enterprise,
the payment of interest on any of its as this term is defined in Executive Order No.
securities and that during each of any 226, otherwise known as the Omnibus
three (3) including the last two (2) of the Investments Code of 1987, as
five (5) fiscal years next preceding the amended: Provided, That the total investment of a
date of acquisition by such insurance domestic non-life insurance company in any
company of such bonds, debentures, or registered enterprise shall not exceed twenty
other instruments of indebtedness, the percent (20%) of the net worth of said insurance
net earnings of the issuing, assuming or company as shown by its aforesaid financial
guaranteeing institution available for its
 statement unless previously authorized by the "Section 208. Any life insurance company may:
Commissioner.
"(a) Acquire or construct housing projects and, in
"(8) Certificates, notes and other obligations connection with any such project, may acquire
issued by the trustees or receivers of any land or any interest therein by purchase, lease or
institution created or existing under the laws of the otherwise, or use land acquired pursuant to any
Philippines which, or the assets of which, are other provision of this Code. Such company may
being administered under the direction of any thereafter own, maintain, manage, collect or
court having jurisdiction: Provided, however, That receive income from, or sell and convey, any land
such certificates, notes or other obligations are or interest therein so acquired and any
adequately secured as to principal and interests. improvements thereon. The aggregate book value
of the investments of any such company in all
"(9) Equipment trust obligations or certificates such projects shall not exceed at the time of such
which are adequately secured or other adequately investments twenty-five percent (25%) of the total
secured instruments evidencing an interest in admitted assets of such company on the thirty-
equipment wholly or in part within the first day of December next preceding: Provided,
Philippines: Provided, however, That there is a That the funds of the company for the payment of
right to receive determined portions of rental, pending claims and obligations shall not be used
purchase or other fixed obligatory payments for for such investments.
the use or purchase of such equipment.
"(b) Acquire real property, other than property to
"(10) Any obligation of any corporation or be used primarily for providing housing and
institution created or existing under the laws of the property for accommodation of its own business,
Philippines which is, on the date of acquisition by as an investment for the production of income, or
the insurer, adequately secured and has qualities may acquire real property to be improved or
and characteristics wherein the speculative developed for such investment purpose pursuant
elements are not predominant. to a program therefor, subject to the condition that
the cost of each parcel of real property so
"(11) Such other securities as may be approved acquired under the authority of this paragraph (b),
by the Commissioner. including the estimated cost to the company of the
improvement or development thereof, when
added to the book value of all other real property
"(c) Any domestic insurer which has outstanding held by it pursuant to this paragraph (b), shall not
insurance, annuity or reinsurance contracts in currencies exceed twenty-five percent (25%) of its admitted
other than the national currency of the Philippines may assets as of the thirty-first day of December next
invest in, or otherwise acquire or loan upon securities and preceding.
investments in such currency which are substantially of
the same kinds, classes and investment grades as those
"Section 209. Every domestic insurance company shall, to
eligible for investment under the foregoing subdivisions of
the extent of an amount equal in value to twenty-five
this section; but the aggregate amount of such
investments and of such cash in such currency which is at percent (25%) of the minimum net worth required under
any time held by such insurer shall not exceed one and Section 194, invest its funds only in securities, satisfactory
to the Commissioner, consisting of bonds or other
one-half (1½) times the amount of its reserves and other
instruments of debt of the Government of the Philippines
obligations under such contracts or the amount which
or its political subdivisions or instrumentalities, or of
such insurer is required by the law of any country or
government-owned or -controlled corporations and
possession outside the Republic of the Philippines to be
invested in such country or possession, whichever shall entities, including the Bangko Sentral ng
Pilipinas: Provided, That such investments shall at all
be greater.
times be maintained free from any lien or
encumbrance: Provided, further, That such securities shall
"Section 207. An insurance company may: be deposited with and held by the Commissioner for the
faithful performance by the depositing insurer of all its
"(1) Invest in equities of other financial institutions; obligations under its insurance contracts. The provisions
and of Section 198 shall, so far as practicable, apply to the
securities deposited under this section.
"(2) Engage in the buying and selling of long-term
debt instruments: Provided, That any or all of "Except as otherwise provided in this Code, no judgment
such investments shall be with the prior approval creditor or other claimant shall have the right to levy upon
of the Commissioner. Insurance companies may, any of the securities of the insurer held on deposit under
however, invest in listed equities of other financial this section or held on deposit pursuant to the requirement
institutions without need of prior approval by the of the Commissioner.
Commissioner.
"Section 210. After satisfying the requirements contained any portion of its earned surplus in the aforesaid securities
in the preceding section, any domestic non-life insurance or investments subject to the aforesaid limitations.
company, shall invest, to an amount prescribed below, its
funds in, or otherwise, acquire or loan upon, only the "Section 213. Any investment made in violation of the
classes of investments described in Section 206, including applicable provisions of this title shall be considered non-
securities issued by any registered enterprise, as this term admitted assets.
is defined in Executive Order No. 226, otherwise known
as ‘The Omnibus Investments Code of 1987′ and such "Section 214. (a) All bonds or other instruments of
other classes of investments as may be authorized by the indebtedness having a fixed term and rate of interest and
Commissioner for purposes of this section: Provided,
held by any life insurance company authorized to do
That:
business in this country, if amply secured and if not in
default as to principal or interest, shall be valued based on
"(a) No more than twenty percent (20%) of the net their amortized cost using effective interest method less
worth of such company as shown by its latest impairment and unrecoverable amount based on
financial statement approved by the appropriate measurement methods which are generally
Commissioner shall be invested in the lot and accepted in the industry and accepted by the
building in which the insurance company conducts Commissioner. The Commissioner shall have the power
its business; and to determine the eligibility of any such investments for
valuation on the basis of amortization, and may by
"(b) The total investment of an insurance regulation prescribe or limit the classes of securities so
company in any registered enterprise shall not eligible for amortization. All bonds or other instruments of
exceed twenty percent (20%) of the net worth of indebtedness which in the judgment of the Commissioner
said insurance company as shown by its are not amply secured shall not be eligible for amortization
aforesaid financial statement nor twenty percent and shall be valued in accordance with paragraph two.
(20%) of the paid-up capital of the registered The Commissioner may, if he finds that the interest of
enterprise excluding the intended investment, policyholders so permit or require, by official regulation
unless previously authorized by the permit or require any class or classes of insurers, other
Commissioner: Provided, further, That such than life insurance companies authorized to do business
investments, free from any lien or encumbrance, in this country, to value their bonds or other instruments of
shall be at least equal in amount to the aggregate indebtedness in accordance with the foregoing rule.
amount of: (1) its legal reserve, as provided in
Section 219, and (2) its reserve fund held for "(b) The investments of all insurers authorized to do
reinsurance as provided for in the pertinent treaty business in this country, except securities subject to
provision in the case of reinsurance ceded to amortization and except as otherwise provided in this
authorized insurers. chapter, shall be valued, in the discretion of the
Commissioner, at their amortized cost using effective
"Section 211. After satisfying the requirements contained interest method less impairment and unrecoverable
in Sections 197, 199, 209 and 210, any non-life insurance amount or at valuation representing their fair market
company may invest any portion of its funds representing value. If the Commissioner finds that in view of the
earned surplus in any of the investments described in character of investments of any insurer authorized to do
Sections 204, 206 and 207, or in any securities issued by business in this country it would be prudent for such
a registered enterprise mentioned in the preceding insurer to establish a special reserve for possible losses
sections: Provided, That no investment in stocks or bonds or fluctuations in the values of its investments, he may
of any single entity shall in the aggregate, exceed twenty require such insurer to establish such reserve, reasonable
percent (20%) of the net worth of the insurance company in amount, and include a report thereon in any statement
as shown in its latest financial statement approved by the or report of the financial condition of such insurer. The
Commissioner or twenty percent (20%) of the paid-up Commissioner may, in connection with any examination or
capital of the issuing company, whichever is lesser, unless required financial statement of an authorized insurer,
otherwise approved by the Commissioner. require such insurer to furnish him complete financial
statements and audited report of the financial condition of
"Section 212. After satisfying the minimum capital any corporation of which the securities are owned wholly
investment required in Section 209, any life insurance or partly by such insurer and may cause an examination
company may invest its legal policy reserve, as provided to be made of any subsidiary or affiliate of such insurer as
in Section 217 or in Section 218, in any of the classes of appropriate to specific investments as provided in
securities or types of investments described in Sections appropriate circulars issued by the Commissioner.
204, 206, 207 and 208, subject to the limitations therein
contained, and in any securities issued by any registered
enterprise mentioned in Section 210, free from any lien or
encumbrance, in such amounts as may be approved by
the Commissioner. Such company may likewise invest
"(c) Investments in equity of an insurance company shall "(g) The stock of a subsidiary of an insurer shall be valued
be valued as follows: on the basis of the greater of:

"(1) Listed stocks shall be valued at market value "(1) The value of only such of the assets of such
and periodically adjusted to reflect market subsidiary as would constitute lawful investments
changes through a special valuation account to for the insurer if acquired or held directly by the
reflect their realizable value when sold; insurer; or

"(2) Unlisted stocks shall be valued at adjusted "(2) Such other value determined pursuant to
book value based on the latest unqualified audited standards and cumulative limitations, contained in
financial statements of the company which issued a regulation to be promulgated by the
such stocks; and Commissioner.

"(3) Stocks of a corporation under the control of "(h) Notwithstanding any provision contained in this
the insurer shall be valued using the equity section or elsewhere in this chapter, if the Commissioner
method which is the cost plus or minus the share finds that the interests of policyholders so permit or
of the controlling company in the earnings or require, he may permit or require any class or classes of
losses of the controlled company after acquisition insurers authorized to do business in this country to value
of such stocks. their investments or any class or classes thereof as of any
date heretofore or hereafter in accordance with any
"(d) The stock of an insurance company shall be valued at applicable valuation or method.
the lesser of its market value or its book value as shown
by its last approved audited financial statement or the last "Section 215. It shall be the duty of the officers of the
report on examination, whichever is more recent. The insurance company to report within the first fifteen (15)
book value of a share of common stock of an insurance days of every month all such investments as may be
company shall be ascertained by dividing (1) the amount made by them during the preceding month, and the
of its capital and surplus less the value of all of its Commissioner may, if such investments or any of them
preferred stock, if any, outstanding, by (2) the number of seem injudicious to him, require the sale or disposal of the
shares of its common stock issued and outstanding. same. The report shall also include a list of investments
sold or disposed of by the company during the same
"Notwithstanding the foregoing provisions, an insurer may, period.
at its option, value its holdings of stock in a subsidiary
insurance company in an amount not less than acquisition "TITLE 5
cost if such acquisition cost is less than the value "RESERVES
determined as hereinbefore provided.
"Section 216. Every life insurance company, doing
"(e) Real estate acquired by foreclosure or by deed in lieu business in the Philippines, shall annually make a
thereof, in the absence of a recent appraisal deemed by valuation of all policies, additions thereto, unpaid
the Commissioner to be reliable, shall not be valued at an dividends, and all other obligations outstanding on the
amount greater than the unpaid principal of the defaulted thirty-first day of December of the preceding year. All such
loan at the date of such foreclosure or deed, together with valuations shall be made according to the standard
any taxes and expenses paid or incurred by such insurer adopted by the company, as prescribed by the
at such time in connection with such acquisition, and the Commissioner in accordance with internationally accepted
cost of additions or improvements thereafter paid by such actuarial standards, which standard shall be stated in its
insurer and any amount or amounts thereafter paid by annual report.
such insurer or any assessments levied for improvements
in connection with the property. "Such standard of valuations shall be according to a
standard table of mortality with interest to be determined
"(f) Purchase money mortgages received on dispositions by the Insurance Commissioner. When the preliminary
of real property held pursuant to Section 208 shall be term basis is used, the term insurance shall be limited to
valued in an amount equivalent to ninety percent (90%) of the first policy year.
the value of such real property. Purchase money
mortgages received on disposition of real property "The results of such valuations shall be reported to the
otherwise held shall be valued in an amount not Commissioner on or before the thirtieth day of April of
exceeding ninety percent (90%) of the value of such real each year accompanied by a sworn statement of a
property as determined by an appraisal made by an designated company officer and stating the methods and
appraiser at or about the time of disposition of such real assumptions used in arriving at the values reported.
property.
"Section 217. The aggregate net value so ascertained of TITLE 6
the policies of such company shall be deemed its reserve "LIMIT OF SINGLE RISK
liability, to provide for which it shall hold funds in secure
investments equal to such net value, above all its other "Section 221. No insurance company other than life,
liabilities; and it shall be the duty of the Commissioner, whether foreign or domestic, shall retain any risk on any
after having verified, to such an extent as he may deem one subject of insurance in an amount exceeding twenty
necessary, the valuation of all policies in force, to satisfy percent (20%) of its net worth. For purposes of this
himself that the company has such amount in safe legal section, the term subject of insurance shall include all
securities after all other debts and claims against it have properties or risks insured by the same insurer that
been provided for. customarily are considered by non-life company
underwriters to be subject to loss or damage from the
"The reserve liability for variable contracts defined in same occurrence of any hazard insured against.
Section 238 shall be established in accordance with
actuarial procedures that recognize the variable nature of "The Commissioner may issue regulations providing for a
the benefits provided, and shall be approved by the maximum limit on the overall retained risks of insurers to
Commissioner. serve as a catastrophe cover requirement for the same.

"Section 218. Every life insurance company, conducted on "Reinsurance ceded as authorized under the succeeding
the mutual plan or a plan in which policyholders are by the title shall be deducted in determining the risk retained. As
terms of their policies entitled to share in the profits or to surety risk, deduction shall also be made of the amount
surplus shall, on all policies of life insurance heretofore or assumed by any other company authorized to transact
hereafter issued, under the conditions of which the surety business and the value of any security mortgaged,
distribution of surplus is deferred to a fixed or specified pledged, or held subject to the surety’s control and for the
time and contingent upon the policy being in force and the surety’s protection.
insured living at that time, annually ascertain the amount
of the surplus to which all such policies as a separate
"TITLE 7
class are entitled, and shall annually apportion to such
"REINSURANCE TRANSACTIONS
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 "Section 222. An insurance company doing business in
such fund, as a distinct and separate liability to such class the Philippines may accept reinsurances only of such
of policies on and for which the same was accumulated, risks, and retain risk thereon within such limits, as it is
and no company or any of its officers shall be permitted to otherwise authorized to insure.
use any part of such apportioned surplus fund for any
purpose whatsoever other than for the express purpose "Section 223. No insurance company doing business in
for which the same was accumulated. the Philippines shall cede all or part of any risks situated
in the Philippines by way of reinsurance directly to any
"Section 219. Every insurance company, other than life, foreign insurer not authorized to do business in the
shall maintain a reserve for unearned premiums on its Philippines unless such foreign insurer or, if the services
policies in force, which shall be charged as a liability in of a nonresident broker are utilized, such nonresident
any determination of its financial condition. Such reserve broker is represented in the Philippines by a resident
shall be calculated based on the twenty-fourth (24th) agent duly registered with the Commissioner as required
method. in this Code.

"Section 220. In addition to its liabilities and reserves on "The resident agent of such unauthorized foreign insurer
contracts of insurance issued by it, every insurance or nonresident broker shall immediately upon registration
company shall be charged with the estimated amount of furnish the Commissioner with the annual statement of
all of its other liabilities, including taxes, expenses and such insurer, or of such company or companies where
other obligations due or accrued at the date of statement, such broker may place Philippine business as of the year
and including any special reserves required by the preceding such registration, and annually thereafter as
Commissioner pursuant to the provisions of this Code. soon as available.

"Section 224. All insurance companies, both life and non-

life, authorized to do business in the Philippines shall cede
their excess risks to other companies similarly authorized
to do business in the Philippines in such amounts and
under such arrangements as would be consistent with
sound underwriting practices before they enter into
reinsurance arrangements with unauthorized foreign
insurers.
"Section 225. Any insurance company doing business in "TITLE 8
the Philippines desiring to cede their excess risks to "ANNUAL STATEMENT
foreign insurance or reinsurance companies not
authorized to transact business in the Philippines may do "Section 229. Every insurance company doing business in
so under such terms and conditions which the the Philippines shall terminate its fiscal period on the
Commissioner may prescribe. thirty-first day of December every year, and shall annually
on or before the thirtieth day of April of each year render
"Should any reinsurance agreement be for any reason to the Commissioner a statement signed and sworn to by
cancelled or terminated, the ceding company concerned the chief officer of such company showing, in such form
shall inform the Commissioner in writing of such and details as may be prescribed by the Commissioner,
cancellation or termination within thirty (30) days from the the exact condition of its affairs on the preceding thirty-first
date of such cancellation or termination or from the date day of December.
notice or information of such cancellation or termination is
received by such company as the case may be. "The annual statement shall be prepared in accordance
with the financial reporting framework as determined by
"Section 226. Every insurance company authorized to do the Commissioner. In addition, the Commissioner may
business in the Philippines shall report to the require other relevant information. The form and details of
Commissioner on forms prescribed by him the particulars such other relevant information shall be prescribed by the
of reinsurance treaties or any new treaties or changes in Commissioner and shall form part of the supplementary
existing treaties within three (3) months from their schedules to the annual statement.
effectivity.
"Any entry in the statement which is found to be false shall
"Section 227. No credit shall be allowed as an admitted constitute a misdemeanor and the officer signing such
asset or as a deduction from liability, to any ceding insurer statement shall be subject to the penalty provided for
for reinsurance made, ceded, renewed, or otherwise under Section 442.
becoming effective after January 1, 1975, unless the
reinsurance shall be payable by the assuming insurer on "Section 230. Every insurance company authorized under
the basis of the liability of the ceding insurer under the Title 10 of this chapter to issue, deliver or use variable
contract or contracts reinsured without diminution because contracts shall annually file with the Commissioner
of the insolvency of the ceding insurer nor unless under separate annual statement of its separate variable
the contract or contracts of reinsurance the liability for accounts. Such statement shall be on a form prescribed or
such reinsurance is assumed by the assuming insurer or approved by the Commissioner and shall include details
insurers as of the same effective date; nor unless the as to all of the income, disbursements, assets and liability
reinsurance agreement provides that payments by the items of and associated with the said separate variable
assuming insurer shall be made directly to the ceding accounts. Said statement shall be under oath of two (2)
insurer or to its liquidator, receiver, or statutory successor officers of the company and shall be filed simultaneously
except: with the annual statement required by the preceding
section.
"(a) Where the contract specifically provides
another payee of such reinsurance in the event of "Section 231. Within thirty (30) days after receipt of the
the insolvency of the ceding insurer; and annual statement approved by the Commissioner, every
insurance company doing business in the Philippines shall
"(b) Where the assuming insurer with the consent publish in a newspaper of general circulation, a full
of the direct insured or insureds has assumed synopsis of its annual financial statement showing fully the
such policy obligations of the ceding insurer as conditions of its business, and setting forth its resources
direct obligations of the assuming insurer to the and liabilities in accordance with such form prescribed by
payees under such policies and in substitution for the Commissioner.
the obligations of the ceding insurer to such
payees. "The Commissioner shall have the authority to make,
amend, and rescind such accounting rules and regulations
"Section 228. No life insurance company doing business as may be necessary to carry out the provisions of this
in the Philippines shall reinsure its whole risk on any Code, and define accounting, technical and trade terms
individual life or joint lives, or substantially all of its used in this Code: Provided, That such shall be in
insurance in force, without having first obtained the written accordance with internationally accepted accounting
permission of the Commissioner. standards. Among other things, the Commissioner may
prescribe the form or forms in which required information
shall be set forth, the items or details to be shown in the
balance sheet and income statement, and the methods to
be followed in the preparation of accounts, appraisal or
valuation of assets and liabilities, determination of
recurring and nonrecurring income, differentiation of
investment and operating income, and in the preparation, "(d) A provision that if the age of the insured is
where the Commissioner deems it necessary or desirable, considered in determining the premium and the
of consolidated balance sheets or income accounts of any benefits accruing under the policy, and the age of
person directly or indirectly controlling or controlled by the the insured has been misstated, the amount
insurance company. payable under the policy shall be such as the
premium would have purchased at the correct
age;

"TITLE 9 "(e) If the policy is participating, a provision that

"POLICY FORMS the company shall periodically ascertain and
apportion any divisible surplus accruing on the
policy under conditions specified therein;
"Section 232. No policy, certificate or contract of insurance
shall be issued or delivered within the Philippines unless
in the form previously approved by the Commissioner, and "(f) A provision specifying the options to which the
no application form shall be used with, and no rider, policyholder is entitled to in the event of default in
clause, warranty or endorsement shall be attached to, a premium payment after three (3) full annual
printed or stamped upon such policy, certificate or premiums shall have been paid. Such option shall
contract unless the form of such application, rider, clause, consist of:
warranty or endorsement has been approved by the
Commissioner. "(1) A cash surrender value payable upon
surrender of the policy which shall not be
"Section 233. In the case of individual life or endowment less than the reserve on the policy, the
insurance, the policy shall contain in substance the basis of which shall be indicated, for the
following conditions: then current policy year and any dividend
additions thereto, reduced by a surrender
charge which shall not be more than one-
"(a) A provision that the policyholder is entitled to
fifth (1/5) of the entire reserve or two and
a grace period either of thirty (30) days or of one
(1) month within which the payment of any one-half percent (2½%) of the amount
premium after the first may be made, subject at insured and any dividend additions
thereto; and
the option of the insurer to an interest charge not
in excess of six percent (6%) per annum for the
number of days of grace elapsing before the "(2) One or more paid-up benefits on a
payment of the premium, during which period of plan or plans specified in the policy of
grace the policy shall continue in full force, but in such value as may be purchased by the
case the policy becomes a claim during the said cash surrender value.
period of grace before the overdue premium is
paid, the amount of such premium with interest "(g) A provision that at any time after a cash
may be deducted from the amount payable under surrender value is available under the policy and
the policy in settlement; while the policy is in force, the company will
advance, on proper assignment or pledge of the
"(b) A provision that the policy shall be policy and on sole security thereof, a sum equal
incontestable after it shall have been in force to, or at the option of the owner of the policy, less
during the lifetime of the insured for a period of than the cash surrender value on the policy, at a
two (2) years from its date of issue as shown in specified rate of interest, not more than the
the policy, or date of approval of last maximum allowed by law, to be determined by the
reinstatement, except for nonpayment of premium company from time to time, but not more often
and except for violation of the conditions of the than once a year, subject to the approval of the
policy relating to military or naval service in time Commissioner; and that the company will deduct
of war; from such loan value any existing indebtedness
on the policy and any unpaid balance of the
premium for the current policy year, and may
"(c) A provision that the policy shall constitute the
collect interest in advance on the loan to the end
entire contract between the parties, but if the
of the current policy year, which provision may
company desires to make the application a part of
further provide that such loan may be deferred for
the contract it may do so provided a copy of such
application shall be indorsed upon or attached to not exceeding six (6) months after the application
the policy when issued, and in such case the therefor is made;
policy shall contain a provision that the policy and
the application therefor shall constitute the entire
contract between the parties;
 "(h) A table showing in figures cash surrender a pro rata premium for the time the policy is in
values and paid-up options available under the force during such grace period;
policy each year upon default in premium
payments, during at least twenty (20) years of the "(b) A provision that the validity of the policy shall
policy beginning with the year in which the values not be contested, except for nonpayment of
and options first become available, together with a premiums after it has been in force for two (2)
provision that in the event of the failure of the years from its date of issue; and that no statement
policyholder to elect one of the said options within made by any insured under the policy relating to
the time specified in the policy, one of said his insurability shall be used in contesting the
options shall automatically take effect and no validity of the insurance with respect to which
policyholder shall ever forfeit his right to same by such statement was made after such insurance
reason of his failure to so elect; has been in force prior to the contest for a period
of two (2) years during such person’s lifetime nor
"(i) In case the proceeds of a policy are payable in unless contained in a written instrument signed by
installments or as an annuity, a table showing the him;
minimum amounts of the installments or annuity
payments; "(c) A provision that a copy of the application, if
any, of the policyholder shall be attached to the
"(j) A provision that the policyholder shall be policy when issued, that all statements made by
entitled to have the policy reinstated at any time the policyholder or by persons insured shall be
within three (3) years from the date of default of deemed representations and not warranties, and
premium payment unless the cash surrender that no statement made by any insured shall be
value has been duly paid, or the extension period used in any contest unless a copy of the
has expired, upon production of evidence of instrument containing the statement is or has
insurability satisfactory to the company and upon been furnished to such person or to his
payment of all overdue premiums and any beneficiary;
indebtedness to the company upon said policy,
with interest rate not exceeding that which would "(d) A provision setting forth the conditions, if any,
have been applicable to said premiums and under which the insurer reserves the right to
indebtedness in the policy years prior to require a person eligible for insurance to furnish
reinstatement. evidence of individual insurability satisfactory to
the insurer as a condition to part or all of his
"Any of the foregoing provisions or portions thereof not coverage;
applicable to single premium or term policies shall to that
extent not be incorporated therein; and any such policy "(e) A provision specifying an equitable
may be issued and delivered in the Philippines which in adjustment of premiums or of benefits or of both
the opinion of the Commissioner contains provisions on to be made in the event that the age of a person
any one or more of the foregoing requirements more insured has been misstated, such provision to
favorable to the policyholder than hereinbefore required. contain a clear statement of the method of
adjustment to be used;
"This section shall not apply to policies of group life or
industrial life insurance. "(f) A provision that any sum becoming due by
reason of death of the person insured shall be
"Section 234. No policy of group life insurance shall be payable to the beneficiary designated by the
issued and delivered in the Philippines unless it contains insured, subject to the provisions of the policy in
in substance the following provisions, or provisions which the event that there is no designated beneficiary,
in the opinion of the Commissioner are more favorable to as to all or any part of such sum, living at the
the persons insured, or at least as favorable to the death of the insured, and subject to any right
persons insured and more favorable to the policyholders: reserved by the insurer in the policy and set forth
in the certificate to pay at its option a part of such
"(a) A provision that the policyholder is entitled to sum not exceeding Five hundred pesos (P500.00)
a grace period of either thirty (30) days or of one to any person appearing to the insurer to be
(1) month for the payment of any premium due equitably entitled thereto by reason of having
after the first, during which grace period the death incurred funeral or other expenses incident to the
benefit coverage shall continue in force, unless last illness or, death of the person insured;
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
"(g) A provision that the insurer will issue to the individual policy or the payment of the first
policyholder for delivery to each person insured a premium has been made;
statement as to the insurance protection to which
he is entitled, to whom the insurance benefits are "(k) In the case of a policy issued to a creditor to
payable, and the rights set forth in paragraphs (h), insure debtors of such creditor, a provision that
(i) and (j) following; the insurer will furnish to the policyholder for
delivery to each debtor insured under the policy a
"(h) A provision that if the insurance, or any form which will contain a statement that the life of
portion of it, on a person covered under the policy the debtor is insured under the policy and that any
ceases because of termination of employment or death benefit paid thereunder by reason of his
of membership in the class or classes eligible for death shall be applied to reduce or extinguish
coverage under the policy, such person shall be indebtedness.
entitled to have issued to him by the insurer,
without evidence of insurability, an individual "The provisions of paragraphs (f) to (j) shall not apply to
policy of life insurance without disability or other policies issued to a creditor to insure his debtors. If a
supplementary benefits, provided application for group life policy is on a plan of insurance other than term,
the individual policy and payment of the first it shall contain a non-forfeiture provision or provisions
premium to the insurer shall be made within thirty which in the opinion of the Commissioner is or are
(30) days after such termination, and provided equitable to the insured or the policyholder: Provided,
further that: That nothing herein contained shall be so construed as to
require group life policies to contain the same non-
"(1) The individual policy shall be on any forfeiture provisions as are required of individual life
one of the forms, except term insurance, policies.
then customarily issued by the insurer at
the age and for an amount not in excess "Section 235. The term industrial life insurance as used in
of the coverage under the group policy; this Code shall mean that form of life insurance under
and which the premiums are payable either monthly or oftener,
if the face amount of insurance provided in any policy is
"(2) The premium on the individual policy not more than five hundred times that of the current
shall be at the insurer’s then customary statutory minimum daily wage in the City of Manila, and if
rate applicable to the form and amount of the words industrial policy are printed upon the policy as
the individual policy, to the class of risk to part of the descriptive matter.
which such person then belongs, and to
his age attained on the effective date of "An industrial life policy shall not lapse for nonpayment of
the individual policy. premium if such nonpayment was due to the failure of the
company to send its representative or agent to the insured
"(i) A provision that if the group policy terminates at the residence of the insured or at some other place
or is amended so as to terminate the insurance of indicated by him for the purpose of collecting such
any class of insured persons, every person premium: Provided, That the provisions of this paragraph
insured thereunder at the date of such termination shall not apply when the premium on the policy remains
whose insurance terminates and who has been so unpaid for a period of three (3) months or twelve (12)
insured for five (5) years prior to such termination weeks after the grace period has expired.
date shall be entitled to have issued to him by the
insurer an individual policy of life insurance "Section 236. In the case of industrial life insurance, the
subject to the same limitations as set forth in policy shall contain in substance the following provisions:
paragraph (h), except that the group policy may
provide that the amount of such individual policy
"(a) A provision that the insured is entitled to a
shall not exceed the amount of the person’s life
grace period of four (4) weeks within which the
insurance protection ceasing;
payment of any premium after the first may be
made, except that where premiums are payable
"(j) A provision that if a person insured under the monthly, the period of grace shall be either one
group policy dies during the thirty (30)-day period (1) month or thirty (30) days; and that during the
within which he would have been entitled to an period of grace, the policy shall continue in full
individual policy issued to him in accordance with force, but if during such grace period the policy
paragraphs (h) and (i) above and before such becomes a claim, then any overdue and unpaid
individual policy shall have become effective, the premiums may be deducted from any amount
amount of life insurance which he would have payable under the policy in settlement;
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
"(b) A provision that the policy shall be exceed two and one-half percent (2½%) of the
incontestable after it has been in force during the current amount insured by the policy and dividend
lifetime of the insured for a specified period, not additions thereto, if any, if the issue age is ten
more than two (2) years from its date of issue, (10) years or older, and less any existing
except for nonpayment of premiums and except indebtedness to the company on or secured by
for violation of the conditions of the policy relating the policy;
to naval or military service, or services auxiliary
thereto, and except as to provisions relating to "(g) A provision that the policy may be
benefits in the event of disability as defined in the surrendered to the company at its home office
policy, and those granting additional insurance within a period of not less than sixty (60) days
specifically against death by accident or by after the due date of a premium in default for the
accidental means, or to additional insurance specified cash value: Provided, That the insurer
against loss of, or loss of use of, specific may defer payment for not more than six (6)
members of the body; months after the application therefor is made;

"(c) A provision that the policy shall constitute the "(h) A table that shows in figures the nonforfeiture
entire contract between the parties, or if a copy of benefits available under the policy every year
the application is endorsed upon and attached to upon default in payment of premiums during at
the policy when issued, a provision that the policy least the first twenty (20) years of the policy, such
and the application therefor shall constitute the table to begin with the year in which such values
entire contract between the parties, and in the become available, and a provision that the
latter case, a provision that all statements made company will furnish upon request an extension of
by the insured shall, in the absence of fraud, be such table beyond the year shown in the policy;
deemed representations and not warranties;
"(i) A provision that specifies which one of the
"(d) A provision that if the age of the person stipulated forms of insurance provided for under
insured, or the age of any person, considered in the provision of paragraph (f) of this section shall
determining the premium, or the benefits accruing take effect in the event of the insured’s failure,
under the policy, has been misstated, any amount within sixty (60) days from the due date of the
payable or benefit accruing under the policy shall premium in default, to notify the insurer in writing
be such as the premium paid would have as to which one of such forms he has selected;
purchased at the correct age;
"(j) A provision that the policy may be reinstated at
"(e) A provision that if the policy is a participating any time within two (2) years from the due date of
policy, the company shall periodically ascertain the premium in default unless the cash surrender
and apportion any divisible surplus accruing on value has been paid or the period of extended
the policy under the conditions specified therein; term insurance expired, upon production of
evidence of insurability satisfactory to the
"(f) A provision that in the event of default in company and payment of arrears of premiums
premium payments after three (3) full years’ with interest at a rate not exceeding six percent
premiums have been paid, the policy shall be (6%) per annum payable annually;
converted into a stipulated form of insurance, and
that in the event of default in premium payments "(k) A provision that when a policy shall become a
after five (5) full years’ premiums have been paid, claim by death of the insured, settlement shall be
a specified cash surrender value shall be made upon receipt of due proof of death, or not
available, in lieu of the stipulated form of later than two (2) months after receipt of such
insurance, at the option of the policyholder. The proof;
net value of such stipulated form of insurance and
the amount of such cash value shall not be less
"(l) A title on the face and on the back of the policy
than the reserve on the policy and dividend correctly describing its form;
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 "(m) A space on the front or the back of the policy
table, rate of interest and method of valuation for the name of the beneficiary designated by the
adopted to compute such reserve), exclusive of insured with a reservation of the insured’s right to
any reserve on disability benefits and accidental designate or change the beneficiary after the
death benefits, less an amount not to exceed two issuance of the policy. The policy may also
and one-half percent (2½%) of the maximum provide that no designation or change of
amount insured by the policy and dividend beneficiary shall be binding on the insurer until
additions thereto, if any, when the issue age is endorsed on the policy by the insurer, and that the
under ten (10) years, and less an amount not to 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 "(c) A provision that allows the company to pay
the insured. Such policy may also contain a the proceeds of the policy at the death of the
provision that if the beneficiary designated in the insured to any person other than the named
policy does not surrender the policy with due beneficiary, except in accordance with a standard
proof of death within the period stated in the provision as specified under the provisions of
policy, which shall not be less than thirty (30) days paragraph (m) of the preceding section;
after the death of the insured, or if the beneficiary
is the estate of the insured, or is a minor, or dies "(d) A provision that limits the time within which
before the insured, or is not legally competent to any action at law or in equity may be commenced
give valid release, then the insurer may make any to less than six (6) years after the cause of action
payment thereunder to the executor or shall accrue; and
administrator of the insured, or to any of the
insured’s relatives by blood or legal adoption or
"(e) A provision that specifies any mode of
connections by marriage or to any person settlement at maturity of less value than the
appearing to the insurer to be equitably entitled amount insured by the policy plus dividend
thereto by reason of having incurred expense for
additions, if any, less any indebtedness to the
the maintenance, medical attention or burial of the
company on the policy and less any premium that
insured; and
may by the terms of the policy be deducted,
payments to be made in accordance with the
"(n) A provision that when an industrial life terms of the policy.
insurance policy is issued providing for accidental
or health benefits, or both, in addition to life
"Nothing contained in this section nor in the provision of
insurance, the foregoing provisions shall apply
paragraph (b) of the preceding section, relating to
only to the life insurance portion of the policy.
incontestability, shall be construed as prohibiting the life
insurance company from placing in its industrial life
"Any of the foregoing provisions or portions thereof not policies provisions limiting its liability with respect to:
applicable to nonparticipating or term policies shall to that
extent not be incorporated therein. The foregoing
"(1) Death resulting from aviation other than as a
provisions shall not apply to policies issued or granted fare-paying passenger on a regularly scheduled
pursuant to the nonforfeiture provisions prescribed in route between definitely established airports; and
provisions of paragraphs (f) and (i) of this section, nor
shall provisions of paragraphs (f), (g), (h), and (i) hereof
be required in term insurance of twenty (20) years or less "(2) Military or naval service: Provided, That if the
but such term policies shall specify the mortality table, rate liability of the company is limited as herein
of interest, and method of computing reserves. 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
"Section 237. No policy of industrial life insurance shall be
in the event of death by accident or accidental
issued or delivered in the Philippines if it contains any of
means or for benefits in the event of any type of
the following provisions:
disability), less any indebtedness on or secured
by such policy; nor shall any provision of this
"(a) A provision that gives the insurer the right to section apply to any provision in an industrial life
declare the policy void because the insured has insurance policy for additional benefits in the
had any disease or ailment, whether specified or event of death by accident or accidental means.
not, or because the insured has received
institutional, hospital, medical or surgical
treatment or attention, except a provision which
gives the insurer the right to declare the policy
void if the insured has, within two (2) years prior
to the issuance of the policy, received institutional,
hospital, medical or surgical treatment or attention
and if the insured or the claimant under the policy
fails to show that the condition occasioning such
treatment or attention was not of a serious nature
or was not material to the risk;

"(b) A provision that gives the insurer the right to

declare the policy void because the insured has
been rejected for insurance, unless such right be
conditioned upon a showing by the insurer that
knowledge of such rejection would have led to a
refusal by the insurer to make such contract;
 "TITLE 10 "(d) If after notice and hearing, the Commissioner shall
"VARIABLE CONTRACTS find that the company is qualified to issue, deliver, sell or
use variable contracts in accordance with this Code and
"Section 238. (a) No insurance company authorized to the regulations and rules issued thereunder, the
transact business in the Philippines shall issue, deliver, corresponding order of authorization shall be issued. Any
sell or use any variable contract in the Philippines, unless decision or order denying authority to issue, deliver, sell or
and until such company shall have satisfied the use variable contracts shall clearly and distinctly state the
Commissioner that its financial and general condition and reasons and grounds on which it is based.
its methods of operations, including the issue and sale of
variable contracts, are not and will not be hazardous to "Section 239. Any insurance company issuing variable
the public or to its policy and contract owners. No foreign contracts pursuant to this Code may in its discretion issue
insurance company shall be authorized to issue, deliver or contracts providing a combination of fixed amount and
sell any variable contract in the Philippines, unless it is variable amount of benefits and for option lump-sum
likewise authorized to do so by the laws of its domicile. payment of benefits.

"(b) The term variable contract shall mean any policy or "Section 240. Every variable contract form delivered or
contract on either a group or on an individual basis issued issued for delivery in the Philippines, and every certified
by an insurance company providing for benefits or other form evidencing variable benefits issued pursuant to any
contractual payments or values thereunder to vary so as such contract on a group basis, and the application, rider
to reflect investment results of any segregated portfolio of and endorsement forms applicable thereto and used in
investments or of a designated separate account in which connection therewith, shall be subject to the prior approval
amounts received in connection with such contracts shall of the Commissioner.
have been placed and accounted for separately and apart
from other investments and accounts. This contract may "Section 241. Illustration of benefits payable under any
also provide benefits or values incidental thereto payable variable contract shall not include or involve projections of
in fixed or variable amounts, or both. It shall not be past investment experience into the future and shall
deemed to be a security or securities as defined in The conform with the rules and regulations promulgated by the
Securities Act, as amended, or in the Investment Commissioner.
Company Act, as amended, nor subject to regulations
under said Acts. "Section 242. Variable contracts may be issued on the
industrial life basis, provided that the pertinent provisions
"(c) In determining the qualifications of a company of this Code and of the rules and regulations of the
requesting authority to issue, deliver, sell or use variable Commissioner governing variable contracts are complied
contracts, the Commissioner shall always consider the with in connection with such contracts.
following:
"Section 243. Every life insurance company authorized
"(1) The history, financial and general condition of under the provisions of this Code to issue, deliver, sell or
the company: Provided, That such company, if a use variable contracts shall, in connection with the same,
foreign company, must have deposited with the establish one or more separate accounts to be known as
Commissioner for the benefit and security of its separate variable accounts. All amounts received by the
variable contract owners in the Philippines, company in connection with any such contracts which are
securities satisfactory to the Commissioner required by the terms thereof, to be allocated or applied to
consisting of bonds of the Government of the one or more designated separate variable accounts shall
Philippines or its instrumentalities with an actual be placed in such designated account or accounts. The
market value of Two million pesos assets and liabilities of each such separate variable
(P2,000,000.00); account shall at all times be clearly identifiable and
distinguishable from the assets and liabilities in all other
"(2) The character, responsibility and fitness of the accounts of the company. Notwithstanding any provision
officers and directors of the company; and of law to the contrary, the assets held in any such
separate variable account shall not be chargeable with
"(3) The law and regulation under which the liabilities arising out of any other business the company
company is authorized in the state of domicile to may conduct but shall be held and applied exclusively for
issue such contracts. the benefit of the owners or beneficiaries of the variable
contracts applicable thereto. In the event of the insolvency
of the company, the assets of each such separate variable
account shall be applied to the contractual claims of the
owners or beneficiaries of the variable contracts
applicable thereto. Except as otherwise specifically
provided by the contract, no sale, exchange or other
transfer of assets may be made by a company, between
any of its separate accounts or between any other
investment account and one or more of its separate
accounts, unless in the case of a transfer into a separate
account, such transfer is made solely to establish the
account or to support the operation of the contracts with
respect to the separate account to which the transfer is
made, or in case of a transfer from a separate account,
such transfer would not cause the remaining assets of the
account to become less than the reserves and other
contract liabilities with respect to such separate account.
Such transfer, whether into or from a separate account,
shall be made by a transfer of cash, or by a transfer of
securities having a valuation which could be readily
determined in the market place: Provided, That such
transfer of securities is approved by the Commissioner.
The Commissioner may authorize other transfers among
such accounts, if, in his opinion, such transfers would not
be inequitable. All amounts and assets allocated to any
such separate variable account shall be owned by the
company and with respect to the same the company shall
not be nor hold itself out to be a trustee.

"Section 244. Any insurance company which has

established one or more separate variable accounts
pursuant to the preceding section may invest and reinvest
all or any part of the assets allocated to any such account
in the securities and investments authorized by Sections
204, 206, 207 and 208 for any of the funds of an
insurance company in such amount or amounts as may
be approved by the Commissioner. In addition thereto,
such company may also invest in common stocks or other
equities which are listed on or admitted to trading in a
securities exchange located in the Philippines, or which
are publicly held and traded in the over-the-counter
market as defined by the Commissioner and as to which
market quotations have been available: Provided,
however, That no such company shall invest in excess of
ten percent (10%) of the assets of any such separate
variable accounts in any one corporation issuing such
common stock. The assets and investments of such
separate variable accounts shall not be taken into account
in applying the quantitative investment limitations
applicable to other investments of the company. In the
purchase of common capital stock or other equities, the
insurer shall designate to the broker, or to the seller if the
purchase is not made through a broker, the specific
variable account for which the investment is made.

"Section 245. Assets allocated to any separate variable

account shall be valued at their market value on the date
of any valuation, or if there is no readily available market
value then in accordance with the terms of the variable
contract applicable to such assets, or if there are no such
contract terms then in such manner as may be prescribed
by the rules and regulations of the Commissioner.

"Section 246. The reserve liability for variable contracts

shall be established in accordance with actuarial
procedures that recognize the variable nature of the
benefits provided, and shall be approved by the
Commissioner.