Republic of the Philippines “(1) Making or proposing to make, as insurer,

Congress of the Philippines any insurance contract;

Metro Manila
Fifteenth Congress “(2) Making or proposing to make, as surety, any
Third Regular Session contract of suretyship as a vocation and not as
merely incidental to any other legitimate
Begun and held in Metro Manila, on Monday, the business or activity of the surety;
twenty-third day of July, two thousand twelve.
“(3) Doing any kind of business, including a
[REPUBLIC ACT NO. 10607] reinsurance business, specifically recognized as
constituting the doing of an insurance business
AN ACT STRENGTHENING THE INSURANCE within the meaning of this Code;
INDUSTRY, FURTHER AMENDING
PRESIDENTIAL DECREE NO. 612, “(4) Doing or proposing to do any business in
OTHERWISE KNOWN AS “THE INSURANCE substance equivalent to any of the foregoing in a
CODE”, AS AMENDED BY PRESIDENTIAL manner designed to evade the provisions of this
DECREE NOS. 1141, 1280, 1455, 1460, 1814 Code.
AND 1981, AND BATAS PAMBANSA BLG. 874,
AND FOR OTHER PURPOSES “In the application of the provisions of this Code,
the fact that no profit is derived from the making
Be it enacted by the Senate and House of of insurance contracts, agreements or
Representatives of the Philippines in Congress transactions or that no separate or direct
assembled: consideration is received therefor, shall not be
deemed conclusive to show that the making
SECTION 1. Presidential Decree No. 612, as thereof does not constitute the doing or
amended, is hereby further amended to read as transacting of an insurance business.
follows:
“(c) As used in this Code, the
“GENERAL PROVISIONS term Commissioner means the Insurance
Commissioner.
“SECTION 1. This Decree shall be known as
‘The Insurance Code’. “CHAPTER I

“SEC. 2. Whenever used in this Code, the “THE CONTRACT OF INSURANCE

following terms shall have the respective
meanings hereinafter set forth or indicated, “TITLE 1
unless the context otherwise requires:
“WHAT MAY BE INSURED
“(a) A contract of insurance is an agreement
whereby one undertakes for a consideration to “SEC. 3. Any contingent or unknown event,
indemnify another against loss, damage or whether past or future, which may damnify a
liability arising from an unknown or contingent person having an insurable interest, or create a
event. liability against him, may be insured against,
subject to the provisions of this chapter.
“A contract of suretyship shall be deemed to be
an insurance contract, within the meaning of this “The consent of the spouse is not necessary for
Code, only if made by a surety who or which, as the validity of an insurance policy taken out by a
such, is doing an insurance business as married person on his or her life or that of his or
hereinafter provided. her children.

“(b) The term doing an insurance “All rights, title and interest in the policy of
business or transacting an insurance business, insurance taken out by an original owner on the
within the meaning of this Code, shall include: life or health of the person insured shall
automatically vest in the latter upon the death of “SEC. 10. Every person has an insurable
the original owner, unless otherwise provided for interest in the life and health:
in the policy.
“(a) Of himself, of his spouse and of his children;
“SEC. 4. The preceding section does not
authorize an insurance for or against the “(b) Of any person on whom he depends wholly
drawing of any lottery, or for or against any or in part for education or support, or in whom he
chance or ticket in a lottery drawing a prize. has a pecuniary interest;

“SEC. 5. All kinds of insurance are subject to the “(c) Of any person under a legal obligation to
provisions of this chapter so far as the provisions him for the payment of money, or respecting
can apply. property or services, of which death or illness
might delay or prevent the performance; and
“TITLE 2
“(d) Of any person upon whose life any estate or
“PARTIES TO THE CONTRACT interest vested in him depends.

“SEC. 6. Every corporation, partnership, or “SEC. 11. The insured shall have the right to
association, duly authorized to transact change the beneficiary he designated in the
insurance business as elsewhere provided in policy, unless he has expressly waived this right
this Code, may be an insurer. in said policy. Notwithstanding the foregoing, in
the event the insured does not change the
“SEC. 7. Anyone except a public enemy may be beneficiary during his lifetime, the designation
insured. shall be deemed irrevocable.

“SEC. 8. Unless the policy otherwise provides, “SEC. 12. The interest of a beneficiary in a life
where a mortgagor of property effects insurance insurance policy shall be forfeited when the
in his own name providing that the loss shall be beneficiary is the principal, accomplice, or
payable to the mortgagee, or assigns a policy of accessory in willfully bringing about the death of
insurance to a mortgagee, the insurance is the insured. In such a case, the share forfeited
deemed to be upon the interest of the shall pass on to the other beneficiaries, unless
mortgagor, who does not cease to be a party to otherwise disqualified. In the absence of other
the original contract, and any act of his, prior to beneficiaries, the proceeds shall be paid in
the loss, which would otherwise avoid the accordance with the policy contract. If the policy
insurance, will have the same effect, although contract is silent, the proceeds shall be paid to
the property is in the hands of the mortgagee, the estate of the insured.
but any act which, under the contract of
insurance, is to be performed by the mortgagor, “SEC. 13. Every interest in property, whether
may be performed by the mortgagee therein real or personal, or any relation thereto, or
named, with the same effect as if it had been liability in respect thereof, of such nature that a
performed by the mortgagor. contemplated peril might directly damnify the
insured, is an insurable interest.
“SEC. 9. If an insurer assents to the transfer of
an insurance from a mortgagor to a mortgagee, “SEC. 14. An insurable interest in property may
and, at the time of his assent, imposes further consist in:
obligations on the assignee, making a new
contract with him, the acts of the mortgagor “(a) An existing interest;
cannot affect the rights of said assignee.
“(b) An inchoate interest founded on an existing
“TITLE 3 interest; or

“INSURABLE INTEREST
“(c) An expectancy, coupled with an existing insurance passes to the person taking his
interest in that out of which the expectancy interest in the thing insured.
arises.
“SEC. 24. A transfer of interest by one of several
“SEC. 15. A carrier or depository of any kind has partners, joint owners, or owners in common,
an insurable interest in a thing held by him as who are jointly insured, to the others, does not
such, to the extent of his liability but not to avoid an insurance even though it has been
exceed the value thereof. agreed that the insurance shall cease upon an
alienation of the thing insured.
“SEC. 16. A mere contingent or expectant
interest in any thing, not founded on an actual “SEC. 25. Every stipulation in a policy of
right to the thing, nor upon any valid contract for insurance for the payment of loss whether the
it, is not insurable. person insured has or has not any interest in the
property insured, or that the policy shall be
“SEC. 17. The measure of an insurable interest received as proof of such interest, and every
in property is the extent to which the insured policy executed by way of gaming or wagering,
might be damnified by loss or injury thereof. is void.

“SEC. 18. No contract or policy of insurance on “CHAPTER III

property shall be enforceable except for the
benefit of some person having an insurable “THE BUSINESS OF INSURANCE
interest in the property insured.
“TITLE 1
“SEC. 19. An interest in property insured must
exist when the insurance takes effect, and when “INSURANCE COMPANIES, ORGANIZATION,
the loss occurs, but need not exist in the CAPITALIZATION AND AUTHORIZATION
meantime; and interest in the life or health of a
person insured must exist when the insurance “SEC. 190. For purposes of this Code, the
takes effect, but need not exist thereafter or term insurer or insurance company shall include
when the loss occurs. all partnerships, associations, cooperatives or
corporations, including government-owned or
“SEC. 20. Except in the cases specified in the -controlled corporations or entities, engaged as
next four sections, and in the cases of life, principals in the insurance business, excepting
accident, and health insurance, a change of mutual benefit associations. Unless the context
interest in any part of a thing insured otherwise requires, the term shall also include
unaccompanied by a corresponding change of professional reinsurers defined in Section
interest in the insurance, suspends the 288. Domestic company shall include companies
insurance to an equivalent extent, until the formed, organized or existing under the laws of
interest in the thing and the interest in the the Philippines. Foreign company when used
insurance are vested in the same person. without limitation shall include companies
formed, organized, or existing under any laws
“SEC. 21. A change of interest in a thing other than those of the Philippines.
insured, after the occurrence of an injury which
results in a loss, does not affect the right of the “SEC. 191. The provisions of the Corporation
insured to indemnity for the loss. Code, as amended, shall apply to all insurance
corporations now or hereafter engaged in
“SEC. 22. A change of interest in one or more of business in the Philippines insofar as they do not
several distinct things, separately insured by one conflict with the provisions of this chapter.
policy, does not avoid the insurance as to the
others. “SEC. 192. No corporation, partnership, or
association of persons shall transact any
“SEC. 23. A change of interest, by will or insurance business in the Philippines except as
succession, on the death of the insured, does agent of a corporation, partnership or
not avoid an insurance; and his interest in the association authorized to do the business of
insurance in the Philippines, unless possessed other key officials of insurance companies for
of the capital and assets required of an purposes of this section.
insurance corporation doing the same kind of
business in the Philippines and invested in the “No person shall concurrently be a Director
same manner; unless the Commissioner shall and/or Officer of an insurance company and an
have granted it a certificate to the effect that it adjustment company.
has complied with all the provisions of this Code.
“Before issuing such certificate of authority, the
“Every entity receiving any such certificate of Commissioner must be satisfied that the name
authority shall be subject to the insurance and of the company is not that of any other known
other applicable laws of the Philippines and to company transacting a similar business in the
the jurisdiction and supervision of the Philippines, or a name so similar as to be
Commissioner. calculated to mislead the public. The
Commissioner may issue rules and regulations
“SEC. 193. No insurance company shall transact on the use of names of insurance companies
any insurance business in the Philippines until and other supervised persons or entities.
after it shall have obtained a certificate of
authority for that purpose from the “The certificate of authority issued by the
Commissioner upon application therefor and Commissioner shall expire on the last day of
payment by the company concerned of the fees December, three (3) years following its date of
hereinafter prescribed. issuance, and shall be renewable every three (3)
years thereafter, subject to the company’s
“The Commissioner may refuse to issue a continuing compliance with the provisions of this
certificate of authority to any insurance company Code, circulars, instructions, rulings or decisions
if, in his judgment, such refusal will best promote of the Commission.
the interest of the people of this country. No
such certificate of authority shall be granted to “Every company receiving any such certificates
any such company until the Commissioner shall of authority shall be subject to the provisions of
have satisfied himself by such examination as this Code and other related laws and to the
he may make and such evidence as he may jurisdiction and supervision of the
require that such company is qualified by the Commissioner.
laws of the Philippines to transact business
therein, that the grant of such authority appears “No insurance company may be authorized to
to be justified in the light of local economic transact in the Philippines the business of life
requirements, and that the direction and and non-life insurance concurrently, unless
administration, as well as the integrity and specifically authorized to do so by the
responsibility of the organizers and Commissioner: Provided, That the
administrators, the financial organization and the terms life and non–life insurance shall be
amount of capital, reasonably assure the safety deemed to include health, accident and disability
of the interests of the policyholders and the insurance.
public.
“No insurance company shall have equity in an
“In order to maintain the quality of the adjustment company and neither shall an
management of the insurance companies and adjustment company have equity in an
afford better protection to policyholders and the insurance company.
public in general, any person of good moral
character, unquestioned integrity and recognized
competence may be elected or appointed “No insurance company issued with a valid
director or officer of insurance companies in certificate of authority to transact insurance
accordance with the pertinent provisions business anywhere in the Philippines by the
contained in the corporate governance circulars Insurance Commissioner, shall be barred,
prescribed by the Commissioner. In addition prevented, or disenfranchised from issuing any
hereto, the Commissioner shall prescribe the insurance policy or from transacting any
qualifications of directors, executive officers and insurance business within the scope or coverage
of its certificate of authority, anywhere in the
Philippines, by any local government unit or “The Secretary of Finance may, upon
authority, for whatever guise or reason recommendation of the Commissioner, increase
whatsoever, including under any kind of such minimum paid-up capital stock or cash
ordinance, accreditation system, or scheme. Any assets requirement under such terms and
local ordinance or local government unit conditions as he may impose, to an amount
regulatory issuance imposing such restriction or which, in his opinion, would reasonably assure
disenfranchisement on any insurance company the safety of the interests of the policyholders
shall be deemed null and void ab initio. and the public. The minimum paid-up capital and
net worth requirement must remain unimpaired
“SEC. 194. Except as provided in Section 289, for the continuance of the license. The
no new domestic life or non-life insurance Commissioner may require the adoption of the
company shall, in a stock corporation, engage in risk-based capital approach and other
business in the Philippines unless possessed of internationally accepted forms of capital
a paid-up capital equal to at least One billion framework.
pesos (P1,000,000,000.00): Provided, That a
domestic insurance company already doing “For the purpose of this section, net worth shall
business in the Philippines shall have a net consist of:
worth by June 30, 2013 of Two hundred fifty
million pesos (P250,000,000.00). Furthermore, “(a) Paid-up capital;
said company must have by December 31,
2016, an additional Three hundred million pesos “(b) Retained earnings;
(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; “(c) Unimpaired surplus; and
and by December 31, 2022, an additional Four
hundred million pesos (P400,000,000.00) in net “(d) Revaluation of assets as may be approved
worth. by the Commissioner.

“The Commissioner may, as a pre-licensing “The Commission may adopt for purposes of
requirement of a new insurance company, in compliance with capital build up requirement
addition to the paid-up capital stock, require the under this Code the recognition as part of the
stockholders to pay in cash to the company in capital account, capital notes or debentures
proportion to their subscription interests a which are subordinate to all credits and senior
contributed surplus fund of not less than One only to common capital stocks.
hundred million pesos (P100,000,000.00). He
may also require such company to submit to him “The President of the Philippines may order a
a business plan showing the company’s periodic review every two (2) years the capital
estimated receipts and disbursements, as well structure set out above to determine the capital
as the basis therefor, for the next succeeding adequacy of the local insurance industry from
three (3) years. and after the integration and liberalization of the
financial services, including insurance, in the
“If organized as a mutual company, in lieu of ASEAN Region. For this purpose, a review
such net worth, it must have available total committee consisting of representatives from the
members equity in an amount to be determined Department of Finance (DOF), the Insurance
by the Insurance Commission above all liabilities Commission (IC), the National Economic and
for losses reported; expenses, taxes, legal Development Authority (NEDA), the Securities
reserve, and reinsurance of all outstanding risks, and Exchange Commission (SEC) and other
and the contributed surplus fund equal to the agencies which the President may designate
amounts required of stock corporations. A stock shall conduct the review and may recommend to
insurance company doing business in the the President to adopt for implementation the
Philippines may, subject to the pertinent law and necessary capital adjustment.
regulation which now or hereafter may be in
force, alter its organization and transform itself “SEC. 195. Every company must, before
into a mutual insurance company. engaging in the business of insurance in the
Philippines, file with the Commissioner the “SEC. 196. The Commissioner must require as a
following: condition precedent to the transaction of
insurance business in the Philippines by any
“(a) A certified copy of the last annual statement foreign insurance company, that such company
or a verified financial statement exhibiting the file in his office a written power of attorney
condition and affairs of such company; designating some person who shall be a
resident of the Philippines as its general agent,
on whom any notice provided by law or by any
“(b) If incorporated under the laws of the
insurance policy, proof of loss, summons and
Philippines, a copy of the articles of
other legal processes may be served in all
incorporation and bylaws, and any amendments
actions or other legal proceedings against such
to either, certified by the Securities and
company, and consenting that service upon
Exchange Commission to be a copy of that
such general agent shall be admitted and held
which is filed in its Office;
as valid as if served upon the foreign company
at its home office. Any such foreign company
“(c) If incorporated under any laws other than shall, as further condition precedent to the
those of the Philippines, a certificate from the transaction of insurance business in the
Securities and Exchange Commission showing Philippines, make and file with the
that it is duly registered in the mercantile registry Commissioner an agreement or stipulation,
of that Commission in accordance with the executed by the proper authorities of said
Corporation Code. A copy of the articles of company in form and substance as follows:
incorporation and bylaws, and any amendments
to either, if organized or formed under any law
“The (name of company) does hereby stipulate
requiring such to be filed, duly certified by the
and agree in consideration of the permission
officer having the custody of same, or if not so
granted by the Insurance Commissioner to
organized, a copy of the law, charter or deed of
transact business in the Philippines, that if at any
settlement under which the deed of organization
time said company shall leave the Philippines, or
is made, duly certified by the proper custodian
cease to transact business therein, or shall be
thereof, or proved by affidavit to be a copy; also,
without any agent in the Philippines on whom
a certificate under the hand and seal of the
any notice, proof of loss, summons, or legal
proper officer of such state or country having
process may be served, then in any action or
supervision of insurance business therein, if any
proceeding arising out of any business or
there be, that such corporation or company is
transaction which occurred in the Philippines,
organized under the laws of such state or
service of any notice provided by law, or
country, with the amount of capital stock or
insurance policy, proof of loss, summons, or
assets and legal reserve required by this Code;
other legal process may be made upon the
Insurance Commissioner, and that such service
“(d) If not incorporated and of foreign domicile, upon the Insurance Commissioner shall have
aside from the certificate mentioned in the same force and effect as if made upon the
paragraph (c) of this section, a certificate setting company.
forth the nature and character of the business,
the location of the principal office, the name of
“Whenever such service of notice, proof of loss,
the individual or names of the persons
summons, or other legal process shall be made
composing the partnership or association, the
upon the Commissioner, he must, within ten (10)
amount of actual capital employed or to be
days thereafter, transmit by mail, postage paid, a
employed therein, and the names of all officers
copy of such notice, proof of loss, summons, or
and persons by whom the business is or may be
other legal process to the company at its home
managed.
or principal office. The sending of such copy by
the Commissioner shall be a necessary part of
“The certificate must be verified by the affidavit the service of the notice, proof of loss, or other
of the chief officer, secretary, agent, or manager legal process.
of the company; and if there are any written
articles of agreement of the company, a copy
“SEC. 197. No insurance company organized or
thereof must accompany such certificate.
existing under the government or laws other
than those of the Philippines shall engage in
business in the Philippines unless possessed of company upon the Commissioner’s written
unimpaired capital or assets and reserve of not approval and only after the company has duly
less than One billion pesos (P1,000,000,000.00), proven in its application therefor that it has no
nor until it shall have deposited with the further liability whatsoever under any of its
Commissioner for the benefit and security of the policies nor to any of its creditors in the
policyholders and creditors of such company in Philippines.
the Philippines, securities satisfactory to the
Commissioner consisting of good securities of “SEC. 199. Every foreign company doing
the Philippines, including new issues of stock of business in the Philippines shall set aside an
registered enterprises, as this term is defined in amount corresponding to the legal reserves of
Executive Order No. 226 of 1987, as amended, the policies written in the Philippines and invest
to the actual market value of not less than the and keep the same therein in accordance with
amount herein required: Provided, That at least the provisions of this section. The legal reserve
fifty percent (50%) of such securities shall therein required to be set aside shall be invested
consist of bonds or other instruments of debt of only in the classes of Philippine securities
the Government of the Philippines, its political described in Section 206: Provided, however,
subdivisions and instrumentalities, or of That no investment in stocks or bonds of any
government-owned or -controlled corporations single entity shall, in the aggregate exceed
and entities, including the Bangko Sentral ng twenty percent (20%) of the net worth of the
Pilipinas: Provided, further, That the total investing company or twenty percent (20%) of
investment of a foreign insurance company in the capital of the issuing company, whichever is
any registered enterprise shall not exceed the lesser, unless otherwise approved in writing
twenty percent (20%) of the net worth of said by the Commissioner. The securities purchased
foreign insurance company nor twenty percent and kept in the Philippines under this section,
(20%) of the capital of the registered enterprise, shall not be sent out of the territorial jurisdiction
unless previously authorized in writing by the of the Philippines without the written consent of
Commissioner. the Commissioner.

“The Commissioner may, as a pre-licensing “TITLE 2

requirement of a new branch office of a foreign
insurance company, in addition to the required “SOLVENCY
asset or net worth, require the company to have
an additional surplus fund in an amount to be
determined by the Insurance Commission. “SEC. 200. An insurance company doing
business in the Philippines shall at all times
maintain the minimum paid-up capital, and net
“For purposes of this Code, the net worth of a worth requirements as prescribed by the
foreign insurance company shall refer only to its Commissioner. Such solvency requirements
net worth in the Philippines. shall be based on internationally accepted
solvency frameworks and adopted only after due
“SEC. 198. The Commissioner shall hold the consultation with the insurance industry
securities, deposited as required in the associations.
immediately preceding section, for the benefit
and security of all the policyholders and creditors “Whenever the aforementioned requirement be
of the company depositing the same: Provided, found to be less than that herein required to be
That the Commissioner may as long as the maintained, the Commissioner shall forthwith
company is solvent, permit the company to direct the company to make good any such
collect the interest or dividends on the securities deficiency by cash, to be contributed by all
so deposited, and, from time to time, with his stockholders of record in proportion to their
assent, to withdraw any of such securities, upon respective interests, and paid to the treasurer of
depositing with said Commissioner other like the company, within fifteen (15) days from
securities, the market value of which shall be receipt of the order: Provided, That the company
equal to the market value of such as may be in the interim shall not be permitted to take any
withdrawn. In the event of any company ceasing new risk of any kind or character unless and until
to do business in the Philippines, the securities it make good any such deficiency: Provided;
deposited as aforesaid shall be returned to the further, That a stockholder who aside from
paying the contribution due from him, pays the “The Commissioner shall prescribe solvency
contribution due from another stockholder by requirements for branches of foreign insurance
reason of the failure or refusal of the latter to do companies operating in the Philippines.
so, shall have a lien on the certificates of stock
of the insurance company concerned appearing “TITLE 3
in its books in the name of the defaulting
stockholder on the date of default, as well as on “ASSETS
any interests or dividends that have accrued or
will accrue to the said certificates of stock, until
the corresponding payment or reimbursement is “SEC. 202. In any determination of the financial
made by the defaulting stockholder. condition of any insurance company doing
business in the Philippines, there shall be
allowed and admitted as assets only such assets
“SEC. 201. No domestic insurance corporation legally or beneficially owned by the insurance
shall declare or distribute any dividend on its company concerned as determined by the
outstanding stocks unless it has met the Commissioner which consist of:
minimum paid-up capital and net worth
requirements under Section 194 and except
from profits attested in a sworn statement to the “(a) Cash in the possession of the insurance
Commissioner by the president or treasurer of company or in transit under its control, and the
the corporation to be remaining on hand after true and duly verified balance of any deposit of
retaining unimpaired: such company in a financially sound bank or
trust company duly authorized by the Bangko
Sentral ng Pilipinas.
“(a) The entire paid-up capital stock;
“(b) Investments in securities, including money
“(b) The solvency requirements defined by market instruments, and in real property
Section 200; acquired or held in accordance with and subject
to the applicable provisions of this Code and the
“(c) In the case of life insurance corporations, income realized therefrom or accrued thereon.
the legal reserve fund required by Section 217;
“(c) Loans granted by the insurance company
“(d) In the case of corporations other than life, concerned to the extent of that portion thereof
the legal reserve fund required by Section 219; adequately secured by non-speculative assets
and with readily realizable values in accordance with
and subject to the limitations imposed by
“(e) A sum sufficient to pay all net losses applicable provisions of this Code.
reported, or in the course of settlement, and all
liabilities for expenses and taxes. “(d) Policy loans and other policy assets and
liens on policies, contracts or certificates of a life
“Any dividend declared or distributed under the insurance company, in an amount not exceeding
preceding paragraph shall be reported to the legal reserves and other policy liabilities carried
Commissioner within thirty (30) days after such on each individual life insurance policy, contract
declaration or distribution. or certificate.

“If the Commissioner finds that any such “(e) The net amount of uncollected and deferred
corporation has declared or distributed any such premiums and annuity considerations in the
dividend in violation of this section, he may order case of a life insurance company which carries
such corporation to cease and desist from doing the full mean tabular reserve liability.
business until the amount of such dividend or
the portion thereof in excess of the amount “(f) Reinsurance recoverable by the ceding
allowed under this section has been restored to insurer:
said corporation.
“(1) From an insurer authorized to transact
business in this country, the full amount thereof;
or
“(2) From an insurer not authorized in this admitted assets of an insurance company doing
country, in an amount not exceeding the business in the Philippines, in any determination
liabilities carried by the ceding insurer for of its financial condition:
amounts withheld under a reinsurance treaty
with such unauthorized insurer as security for “(a) Goodwill, trade names, and other like
the payment of obligations thereunder if such intangible assets.
funds are held subject to withdrawal by, and
under the control of, the ceding insurer. The “(b) Prepaid or deferred charges for expenses
Commissioner may prescribe the conditions and commissions paid by such insurance
under which a ceding insurer may be allowed company.
credit, as an asset or as a deduction from loss
and unearned premium reserves, for
reinsurance recoverable from an insurer not “(c) Advances to officers (other than policy
authorized in this country but which presents loans), which are not adequately secured and
satisfactory evidence that it meets the applicable which are not previously authorized by the
standards of solvency required in this country. Commissioner, as well as advances to
employees, agents, and other persons on mere
personal security.
“(g) Funds withheld by a ceding insurer under a
reinsurance treaty, provided reserves for unpaid
losses and unearned premiums are adequately “(d) Shares of stock of such insurance company,
provided. owned by it, or any equity therein as well as
loans secured thereby, or any proportionate
interest in such shares of stock through the
“(h) Deposits or amounts recoverable from ownership by such insurance company of an
underwriting associations, syndicates and interest in another corporation or business unit.
reinsurance funds, or from any suspended
banking institution, to the extent deemed by the
Commissioner to be available for the payment of “(e) Furniture, furnishing, fixtures, safes,
losses and claims and values to be determined equipment, library, stationery, literature, and
by him. supplies.

“(i) Electronic data processing machines, as may “(f) Items of bank credits representing checks,
be authorized by the Commissioner to be drafts or notes returned unpaid after the date of
acquired by the insurance company concerned, statement.
the acquisition cost of which to be amortized in
equal annual amounts within a period of five (5) “(g) The amount, if any, by which the aggregate
years from the date of acquisition thereof. value of investments as carried in the ledger
assets of such insurance company exceeds the
“(j) Investments in mutual funds, real estate aggregate value thereof as determined in
investment trusts, salary loans, unit investment accordance with the provisions of this Code
trust funds and special deposit accounts, subject and/or the rules of the Commissioner.
to the conditions as may be provided for by the
Commissioner. “All non-admitted assets and all other assets of
doubtful value or character included as ledger or
“(k) Other assets, not inconsistent with the non-ledger assets in any statement submitted by
provisions of paragraphs (a) to (j) hereof, which an insurance company to the Commissioner, or
are deemed by the Commissioner to be readily in any insurance examiner’s report to him, shall
realizable and available for the payment of also be reported, to the extent of the value
losses and claims at values to be determined by disallowed as deductions from the gross assets
him in a circular, rule or regulation. of such insurance company, except where the
Commissioner permits a reserve to be carried
among the liabilities of such insurance company
“SEC. 203. In addition to such assets as the in lieu of any such deduction.
Commissioner may from time to time determine
to be non-admitted assets of insurance
companies doing business in the Philippines, the “TITLE 4
following assets shall in no case be allowed as
“INVESTMENTS commercial banks, investment houses or other
financial intermediaries duly registered with the
“SEC. 204. A life insurance company may lend Bangko Sentral ng Pilipinas; or
to any of its policyholders upon the security of
the value of its policy such sum as may be “(h) Pledges of shares of stock, bonds or other
determined pursuant to the provisions of the instruments of indebtedness specified in Section
policy. 209; or

“No insurance company shall loan any of its “(i) Chattel mortgages over equipment not more
money or deposits to any person, corporation or than three (3) years old; and
association, except upon the security of any of
the following: “(j) Such other security as may be approved by
the Commissioner.
“(a) First mortgage or deeds of trust of
registered, unencumbered, improved or “The loans provided in the preceding subsection
unimproved real estate, including shall be subject to the following conditions:
condominiums;
“(1) The amount of loan secured by real estate
“(b) First mortgages or deeds of trust of actually mortgage over a non-agricultural land shall not
cultivated, improved and unencumbered exceed seventy percent (70%) of its appraised
agricultural lands in the Philippines; value, and in the case of a loan secured by a
real estate mortgage over an agricultural land,
“(c) Purchase money mortgages, lease purchase the amount of loan shall not exceed forty percent
agreements or similar securities executed or (40%) of its market value: Provided, That, in no
received by it on account of the sale or case shall such loan have a maturity period in
exchange of real property acquired pursuant to excess of twenty-five (25) years;
Sections 206 and 208;
“(2) Unless approved by the Commissioner, no
“(d) Bonds or other instruments of indebtedness loan may be granted upon the security of a
issued or guaranteed by the Government of the mortgage on improved real estate if the
Philippines or its political subdivisions authorized improvements thereon do not belong to the
by law to incur such obligations or issue such owner of the land, and the owner of the
guarantees or of government-owned or improvements does not sign the deed of
-controlled corporations and instrumentalities mortgage. However, if the owner of the land is
including the Bangko Sentral ng Pilipinas; or the Government of the Philippines or any of its
political subdivisions and a long-term lease has
“(e) Obligations issued or guaranteed by been executed in favor of the owner of the
universal banks, commercial banks, offshore improvements, the owner of the land need not
banking units, investment houses or other be a party to the deed of mortgage. The
financial intermediaries duly registered with the expiration date of the lease shall not, however,
Bangko Sentral ng Pilipinas; or precede the maturity of the loan. The phrase
‘improved real estate’ as used herein shall mean
land with permanent building or buildings
“(f) Obligations issued or guaranteed by foreign
erected thereon;
banks or corporations, each of which shall have
total net worth of at least One hundred fifty
million US dollars ($US150,000,000.00) or such “(3) Lease-agreements or similar securities
other higher net worth as may be prescribed by received on the sale of real estate property shall
the Insurance Commission, as shown in their not exceed one hundred percent (100%) of the
financial statements as of the immediately selling price of said property, or one hundred
preceding fiscal year; or percent (100%) of its market value at the time of
its disposition, whichever amount is lower.
However, in no case shall such agreement have
“(g) Assignments of monetary instruments such
a maturity period not exceeding thirty (30) years;
as cash deposits, deposit certificates or other
similar instruments of universal banks,
“(4) Loans secured by shares of stock of solvent net worth as shown by its latest financial
corporations or institutions shall not exceed fifty statement approved by the Commissioner.
percent (50%) of:
“(2) Bonds or other instruments of indebtedness
“(i) The weighted average market price for the of the Government of the Philippines or its
one hundred eighty (180) days preceding the political subdivisions authorized by law to issue
approval of the loan for shares listed in the stock bonds at the reasonable market value thereof.
exchange; and
“(3) Bonds or other instruments of debt of
“(ii) For unlisted shares, the adjusted book value government-owned or -controlled corporations
of such shares. and entities, including the Bangko Sentral ng
Pilipinas.
“(5) Loans secured by the chattel mortgages
over equipment shall not exceed seventy “(4) Bonds, debentures or other instruments of
percent (70%) of the market value of said indebtedness of any solvent corporation or
equipment. institution created or existing under the laws of
the Philippines: Provided, however, That the
“SEC. 205. No loan by any insurance company issuing, assuming or guaranteeing entity or its
on the security of real estate shall be made predecessors shall not have defaulted in the
unless the title to such real estate shall have first payment of interest on any of its securities and
been registered in accordance with the existing that during each of any three (3) including the
Land Registration Act, or shall have been last two (2) of the five (5) fiscal years next
previously registered under the provisions of the preceding the date of acquisition by such
existing Mortgage Law and the lien or interest of insurance company of such bonds, debentures,
the insurance company as mortgagee has been or other instruments of indebtedness, the net
registered. earnings of the issuing, assuming or
guaranteeing institution available for its fixed
charges, as hereinafter defined, shall have been
“SEC. 206. (a) An insurance company may
not less than one and one-quarter (1¼) times
purchase, hold, own and convey such property,
the total of its fixed charges for such
real and personal, as may have been
year: Provided, further, That no life insurance
mortgaged, pledged, or conveyed to it in good
company shall invest in or loan upon the
faith in trust for its benefit by reason of money
obligations of any one institution in the kinds
loaned by it in pursuance of the regular business
permitted under this subsection an amount in
of the company, and such real or personal
excess of twenty-five percent (25%) of the total
property as may have been purchased by it at
admitted assets of such insurer as of December
sales under pledges, mortgages or deeds of
thirty-first next preceding the date of such
trust for its benefit on account of money loaned
investment.
by it; and such real and personal property as
may have been conveyed to it by borrowers in
satisfaction and discharge of loans made by the “As used in this subsection the term net
company in payment or by reason of any loan earnings available for fixed charges shall mean
made by the company in payment or by reason net income after deducting operating and
of any loan made by it shall be sold by the maintenance expenses, taxes other than income
company within twenty (20) years after the title taxes, depreciation and depletion; but excluding
thereto has been vested in it. extraordinary nonrecurring items of income or
expense appearing in the regular financial
statement of the issuing, assuming or
“(b) An insurance company may purchase, hold,
guaranteeing institution. The term fixed
and own the following:
charges shall include interest on funded and
unfunded debt, amortization of debt discount,
“(1) Real properties which serve as its main and rentals for leased properties.
place of business and/or branch
offices: Provided, That such investment shall not
“(5) Preferred or guaranteed stocks of any
in the overall exceed twenty percent (20%) of its
solvent corporation or institution created or
existing under the laws of the
Philippines: Provided, That if the stocks are “(10) Any obligation of any corporation or
guaranteed, the amount of stocks so guaranteed institution created or existing under the laws of
is not in excess of fifty percent (50%) of the the Philippines which is, on the date of
amount of the preferred or common stocks, as acquisition by the insurer, adequately secured
the case may be, of the guaranteeing and has qualities and characteristics wherein the
corporation: Provided, finally, That no life speculative elements are not predominant.
insurance company shall invest in or loan upon
obligations of any one institution in the kinds “(11) Such other securities as may be approved
permitted under this subsection an amount in by the Commissioner.
excess of ten percent (10%) of the total admitted
assets of such insurer as of December thirty-first “(c) Any domestic insurer which has outstanding
next preceding the date of such investment. insurance, annuity or reinsurance contracts in
currencies other than the national currency of
“(6) Common stocks of any solvent corporation the Philippines may invest in, or otherwise
or institution created or existing under the laws acquire or loan upon securities and investments
of the Philippines: Provided, however, That no in such currency which are substantially of the
life insurance company shall invest in or loan same kinds, classes and investment grades as
upon the obligations of any one corporation or those eligible for investment under the foregoing
institution in the kinds permitted under this subdivisions of this section; but the aggregate
subsection an amount in excess of ten percent amount of such investments and of such cash in
(10%) of the total admitted assets of such such currency which is at any time held by such
insurer as of December thirty-first next preceding insurer shall not exceed one and one-half (1½)
the date of such investment. times the amount of its reserves and other
obligations under such contracts or the amount
“(7) Securities issued by a registered enterprise, which such insurer is required by the law of any
as this term is defined in Executive Order No. country or possession outside the Republic of
226, otherwise known as the Omnibus the Philippines to be invested in such country or
Investments Code of 1987, as possession, whichever shall be greater.
amended: Provided, That the total investment of
a domestic non-life insurance company in any “SEC. 207. An insurance company may:
registered enterprise shall not exceed twenty
percent (20%) of the net worth of said insurance “(1) Invest in equities of other financial
company as shown by its aforesaid financial institutions; and
statement unless previously authorized by the
Commissioner.
“(2) Engage in the buying and selling of long-
term debt instruments: Provided, That any or all
“(8) Certificates, notes and other obligations of such investments shall be with the prior
issued by the trustees or receivers of any approval of the Commissioner. Insurance
institution created or existing under the laws of companies may, however, invest in listed
the Philippines which, or the assets of which, are equities of other financial institutions without
being administered under the direction of any need of prior approval by the Commissioner.
court having jurisdiction: Provided, however,
That such certificates, notes or other obligations
are adequately secured as to principal and “SEC. 208. Any life insurance company may:
interests.
“(a) Acquire or construct housing projects and, in
“(9) Equipment trust obligations or certificates connection with any such project, may acquire
which are adequately secured or other land or any interest therein by purchase, lease
adequately secured instruments evidencing an or otherwise, or use land acquired pursuant to
interest in equipment wholly or in part within the any other provision of this Code. Such company
Philippines: Provided, however, That there is a may thereafter own, maintain, manage, collect or
right to receive determined portions of rental, receive income from, or sell and convey, any
purchase or other fixed obligatory payments for land or interest therein so acquired and any
the use or purchase of such equipment. improvements thereon. The aggregate book
value of the investments of any such company in
all such projects shall not exceed at the time of “SEC. 210. After satisfying the requirements
such investments twenty-five percent (25%) of contained in the preceding section, any domestic
the total admitted assets of such company on non-life insurance company, shall invest, to an
the thirty-first day of December next amount prescribed below, its funds in, or
preceding: Provided, That the funds of the otherwise, acquire or loan upon, only the classes
company for the payment of pending claims and of investments described in Section 206,
obligations shall not be used for such including securities issued by any registered
investments. enterprise, as this term is defined in Executive
Order No. 226, otherwise known as ‘The
“(b) Acquire real property, other than property to Omnibus Investments Code of 1987’ and such
be used primarily for providing housing and other classes of investments as may be
property for accommodation of its own business, authorized by the Commissioner for purposes of
as an investment for the production of income, this section: Provided, That:
or may acquire real property to be improved or
developed for such investment purpose pursuant “(a) No more than twenty percent (20%) of the
to a program therefor, subject to the condition net worth of such company as shown by its
that the cost of each parcel of real property so latest financial statement approved by the
acquired under the authority of this paragraph Commissioner shall be invested in the lot and
(b), including the estimated cost to the company building in which the insurance company
of the improvement or development thereof, conducts its business; and
when added to the book value of all other real
property held by it pursuant to this paragraph “(b) The total investment of an insurance
(b), shall not exceed twenty-five percent (25%) company in any registered enterprise shall not
of its admitted assets as of the thirty-first day of exceed twenty percent (20%) of the net worth of
December next preceding. said insurance company as shown by its
aforesaid financial statement nor twenty percent
“SEC. 209. Every domestic insurance company (20%) of the paid-up capital of the registered
shall, to the extent of an amount equal in value enterprise excluding the intended investment,
to twenty-five percent (25%) of the minimum net unless previously authorized by the
worth required under Section 194, invest its Commissioner: Provided, further,That such
funds only in securities, satisfactory to the investments, free from any lien or encumbrance,
Commissioner, consisting of bonds or other shall be at least equal in amount to the
instruments of debt of the Government of the aggregate amount of: (1) its legal reserve, as
Philippines or its political subdivisions or provided in Section 219, and (2) its reserve fund
instrumentalities, or of government-owned or held for reinsurance as provided for in the
-controlled corporations and entities, including pertinent treaty provision in the case of
the Bangko Sentral ng Pilipinas: Provided, That reinsurance ceded to authorized insurers.
such investments shall at all times be
maintained free from any lien or “SEC. 211. After satisfying the requirements
encumbrance: Provided, further, That such contained in Sections 197, 199, 209 and 210,
securities shall be deposited with and held by any non-life insurance company may invest any
the Commissioner for the faithful performance by portion of its funds representing earned surplus
the depositing insurer of all its obligations under in any of the investments described in Sections
its insurance contracts. The provisions of 204, 206 and 207, or in any securities issued by
Section 198 shall, so far as practicable, apply to a registered enterprise mentioned in the
the securities deposited under this section. preceding sections: Provided, That no
investment in stocks or bonds of any single
“Except as otherwise provided in this Code, no entity shall in the aggregate, exceed twenty
judgment creditor or other claimant shall have percent (20%) of the net worth of the insurance
the right to levy upon any of the securities of the company as shown in its latest financial
insurer held on deposit under this section or held statement approved by the Commissioner or
on deposit pursuant to the requirement of the twenty percent (20%) of the paid-up capital of
Commissioner. the issuing company, whichever is lesser, unless
otherwise approved by the Commissioner.
“SEC. 212. After satisfying the minimum capital less impairment and unrecoverable amount or at
investment required in Section 209, any life valuation representing their fair market value. If
insurance company may invest its legal policy the Commissioner finds that in view of the
reserve, as provided in Section 217 or in Section character of investments of any insurer
218, in any of the classes of securities or types authorized to do business in this country it would
of investments described in Sections 204, 206, be prudent for such insurer to establish a special
207 and 208, subject to the limitations therein reserve for possible losses or fluctuations in the
contained, and in any securities issued by any values of its investments, he may require such
registered enterprise mentioned in Section 210, insurer to establish such reserve, reasonable in
free from any lien or encumbrance, in such amount, and include a report thereon in any
amounts as may be approved by the statement or report of the financial condition of
Commissioner. Such company may likewise such insurer. The Commissioner may, in
invest any portion of its earned surplus in the connection with any examination or required
aforesaid securities or investments subject to the financial statement of an authorized insurer,
aforesaid limitations. require such insurer to furnish him complete
financial statements and audited report of the
“SEC. 213. Any investment made in violation of financial condition of any corporation of which
the applicable provisions of this title shall be the securities are owned wholly or partly by such
considered non-admitted assets. insurer and may cause an examination to be
made of any subsidiary or affiliate of such
insurer as appropriate to specific investments as
“SEC. 214. (a) All bonds or other instruments of
provided in appropriate circulars issued by the
indebtedness having a fixed term and rate of
Commissioner.
interest and held by any life insurance company
authorized to do business in this country, if
amply secured and if not in default as to “(c) Investments in equity of an insurance
principal or interest, shall be valued based on company shall be valued as follows:
their amortized cost using effective interest
method less impairment and unrecoverable “(1) Listed stocks shall be valued at market
amount based on appropriate measurement value and periodically adjusted to reflect market
methods which are generally accepted in the changes through a special valuation account to
industry and accepted by the Commissioner. reflect their realizable value when sold;
The Commissioner shall have the power to
determine the eligibility of any such investments “(2) Unlisted stocks shall be valued at adjusted
for valuation on the basis of amortization, and book value based on the latest unqualified
may by regulation prescribe or limit the classes audited financial statements of the company
of securities so eligible for amortization. All which issued such stocks; and
bonds or other instruments of indebtedness
which in the judgment of the Commissioner are “(3) Stocks of a corporation under the control of
not amply secured shall not be eligible for the insurer shall be valued using the equity
amortization and shall be valued in accordance method which is the cost plus or minus the share
with paragraph two. The Commissioner may, if of the controlling company in the earnings or
he finds that the interest of policyholders so losses of the controlled company after
permit or require, by official regulation permit or acquisition of such stocks.
require any class or classes of insurers, other
than life insurance companies authorized to do
business in this country, to value their bonds or “(d) The stock of an insurance company shall be
other instruments of indebtedness in accordance valued at the lesser of its market value or its
with the foregoing rule. book value as shown by its last approved
audited financial statement or the last report on
examination, whichever is more recent. The
“(b) The investments of all insurers authorized to book value of a share of common stock of an
do business in this country, except securities insurance company shall be ascertained by
subject to amortization and except as otherwise dividing (1) the amount of its capital and surplus
provided in this chapter, shall be valued, in the less the value of all of its preferred stock, if any,
discretion of the Commissioner, at their outstanding, by (2) the number of shares of its
amortized cost using effective interest method common stock issued and outstanding.
“Notwithstanding the foregoing provisions, an accordance with any applicable valuation or
insurer may, at its option, value its holdings of method.
stock in a subsidiary insurance company in an
amount not less than acquisition cost if such “SEC. 215. It shall be the duty of the officers of
acquisition cost is less than the value the insurance company to report within the first
determined as hereinbefore provided. fifteen (15) days of every month all such
investments as may be made by them during the
“(e) Real estate acquired by foreclosure or by preceding month, and the Commissioner may, if
deed in lieu thereof, in the absence of a recent such investments or any of them seem
appraisal deemed by the Commissioner to be injudicious to him, require the sale or disposal of
reliable, shall not be valued at an amount the same. The report shall also include a list of
greater than the unpaid principal of the defaulted investments sold or disposed of by the company
loan at the date of such foreclosure or deed, during the same period.
together with any taxes and expenses paid or
incurred by such insurer at such time in “TITLE 5
connection with such acquisition, and the cost of
additions or improvements thereafter paid by “RESERVES
such insurer and any amount or amounts
thereafter paid by such insurer or any
assessments levied for improvements in “SEC. 216. Every life insurance company, doing
connection with the property. business in the Philippines, shall annually make
a valuation of all policies, additions thereto,
unpaid dividends, and all other obligations
“(f) Purchase money mortgages received on outstanding on the thirty-first day of December of
dispositions of real property held pursuant to the preceding year. All such valuations shall be
Section 208 shall be valued in an amount made according to the standard adopted by the
equivalent to ninety percent (90%) of the value company, as prescribed by the Commissioner in
of such real property. Purchase money accordance with internationally accepted
mortgages received on disposition of real actuarial standards, which standard shall be
property otherwise held shall be valued in an stated in its annual report.
amount not exceeding ninety percent (90%) of
the value of such real property as determined by
an appraisal made by an appraiser at or about “Such standard of valuations shall be according
the time of disposition of such real property. to a standard table of mortality with interest to be
determined by the Insurance Commissioner.
When the preliminary term basis is used, the
“(g) The stock of a subsidiary of an insurer shall term insurance shall be limited to the first policy
be valued on the basis of the greater of: year.

“(1) The value of only such of the assets of such “The results of such valuations shall be reported
subsidiary as would constitute lawful to the Commissioner on or before the thirtieth
investments for the insurer if acquired or held day of April of each year accompanied by a
directly by the insurer; or sworn statement of a designated company
officer and stating the methods and assumptions
“(2) Such other value determined pursuant to used in arriving at the values reported.
standards and cumulative limitations, contained
in a regulation to be promulgated by the “SEC. 217. The aggregate net value so
Commissioner. ascertained of the policies of such company
shall be deemed its reserve liability, to provide
“(h) Notwithstanding any provision contained in for which it shall hold funds in secure
this section or elsewhere in this chapter, if the investments equal to such net value, above all
Commissioner finds that the interests of its other liabilities; and it shall be the duty of the
policyholders so permit or require, he may Commissioner, after having verified, to such an
permit or require any class or classes of insurers extent as he may deem necessary, the valuation
authorized to do business in this country to value of all policies in force, to satisfy himself that the
their investments or any class or classes thereof company has such amount in safe legal
as of any date heretofore or hereafter in
securities after all other debts and claims against
it have been provided for.

“The reserve liability for variable contracts

defined in Section 238 shall be established in
accordance with actuarial procedures that
recognize the variable nature of the benefits
provided, and shall be approved by the
Commissioner.

“SEC. 218. Every life insurance company,

conducted on the mutual plan or a plan in which
policyholders are by the terms of their policies
entitled to share in the profits or surplus shall, on
all policies of life insurance heretofore or
hereafter issued, under the conditions of which
the distribution of surplus is deferred to a fixed or
specified time and contingent upon the policy
being in force and the insured living at that time,
annually ascertain the amount of the surplus to
which all such policies as a separate class are
entitled, and shall annually apportion to such
policies as a class the amount of the surplus so
ascertained, and carry the amount of such
apportioned surplus, plus the actual interest
earnings and accretions to such fund, as a
distinct and separate liability to such class of
policies on and for which the same was
accumulated, and no company or any of its
officers shall be permitted to use any part of
such apportioned surplus fund for any purpose
whatsoever other than for the express purpose
for which the same was accumulated.

“SEC. 219. Every insurance company, other

than life, shall maintain a reserve for unearned
premiums on its policies in force, which shall be
charged as a liability in any determination of its
financial condition. Such reserve shall be
calculated based on the twenty-fourth (24 th)
method.

“SEC. 220. In addition to its liabilities and

reserves on contracts of insurance issued by it,
every insurance company shall be charged with
the estimated amount of all of its other liabilities,
including taxes, expenses and other obligations
due or accrued at the date of statement, and
including any special reserves required by the
Commissioner pursuant to the provisions of this
Code.