The Insurance Code

PRESIDENTIAL DECREE NO. 612 ORDAINING AND INSTITUTING AN INSURANCE CODE OF THE PHILIPPINES I, Ferdinand E. Marcos, President of the Philippines, by virtue of the powers in me vested by the Constitution, do hereby decree & order the following GENERAL PROVISIONS SECTION !. "his #ecree shall be $nown as %"he Insurance Code%. *c+ SECTION !:. health *a+ *b+ Title III INSURABLE INTEREST Every person has an insurable interest in the life &

;f himself, of his spouse & of his children. ;f any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest. ;f any person under a legal obligation to him for the payment of money, or respecting property or services, of w-c death or illness might delay or prevent the performance. & ;f any person upon whose life any estate or interest vested in him depends.

SECTION &. 'henever used in this Code, the following terms shall have the respective meanings hereinafter set forth or indicated, unless the *d+ conte(t otherwise re)uires *!+

, %contract of insurance% is an agreement whereby one SECTION !!. "he insured shall have the right to change the underta$es for a consideration to indemnify another against loss, beneficiary he designated in the policy, unless he has e(pressly waived damage or liability arising fr. an un$nown or contingent event. this right in said policy.

, contract of suretyship shall be deemed to be an insurance contract, SECTION !&. "he interest of a beneficiary in a life insurance policy within the meaning of this Code, only if made by a surety who or w-c, as shall be forfeited when the beneficiary is the principal, accomplice, or such, is doing an insurance business as hereinafter provided. accessory in willfully bringing about the death of the insured. in w-c event, the nearest relative of the insured shall receive the proceeds of said *&+ "he term %doing an insurance business% or %transacting an insurance if not otherwise dis)ualified. insurance business%, within the meaning of this Code, shall include *a+ ma$ing or proposing to ma$e, as insurer, any SECTION !0. Every interest in property, whether real or personal, or insurance contract. *b+ ma$ing or proposing to ma$e, as surety, any relation thereto, or liability in respect thereof, of such nature that a any contract of suretyship as a vocation & not as merely contemplated peril might directly damnify the insured, is an insurable incidental to any other legitimate business or activity of the interest. surety. *c+ doing any $ind of business, including a reinsurance business, specifically recogni/ed as constituting the doing of an SECTION !3. ,n insurable interest in property may consist in insurance business within the meaning of this Code. *d+ doing or proposing to do any business in substance e)uivalent to any of ,n e(isting interest. the foregoing in a manner designed to evade the provisions of *a+ this Code. *b+ ,n inchoate interest founded on an e(isting interest. or In the application of the provisions of this Code the fact that no profit is ,n e(pectancy, coupled w- an e(isting interest in that out of w-c derived fr. the ma$ing of insurance contracts, agreements or transactions *c+ the e(pectancy arises. or that no separate or direct consideration is received therefor, shall not be deemed conclusive to show that the ma$ing thereof does not constitute the doing or transacting of an insurance business. SECTION !4. , carrier or depository of any $ind has an insurable interest in a thing held by him as such, to the e(tent of his liability but not *0+ ,s used in this code, the term %Commissioner% means the to e(ceed the value thereof. %Insurance Commissioner%. acd SECTION !5. , mere contingent or e(pectant interest in anything, not founded on an actual right to the thing, nor upon any valid contract for CHAPTER I THE CONTRACT OF INSURANCE it, is not insurable. Title I WHAT MAY BE INSURED SECTION !6. "he measure of an insurable interest in property is the SECTION 0. ,ny contingent or un$nown event, whether past or e(tent to w-c the insured might be damnified by loss or in1ury thereof. future, w-c may damnify a person having an insurable interest, or create a <o contract or policy of insurance on property shall be liability against him, may be insured against, sub1ect to the provisions of SECTION !7. enforceable e(cept for the benefit of some person having an insurable this chapter. interest in the property insured. "he consent of the husband is not necessary for the validity of an insurance policy ta$en out by a married woman on her life or that of her SECTION !9. ,n interest in property insured must e(ist when the children. insurance ta$es effect, & when the loss occurs, but not e(ist in the meantime. & interest in the life or health of a person insured must e(ist ,ny minor of the age of eighteen years or more, may, notwithstanding such when the insurance ta$es effect, but need not e(ist thereafter or when the minority, contract for life, health & accident insurance, w- any insurance loss occurs. company duly authori/ed to do business in the Philippines, provided the E(cept in the cases specified in the ne(t four sections, insurance is ta$en on his own life & the beneficiary appointed is the minor2s SECTION &:. estate or the minor2s father, mother, husband, wife, child, brother or sister. & in the cases of life, accident, & health insurance, a change of interest in any part of a thing insured unaccompanied by a corresponding change in "he married woman or the minor herein allowed to ta$e out an insurance interest in the insurance, suspends the insurance to an e)uivalent e(tent, until the interest in the thing & the interest in the insurance are vested in policy may e(ercise all the rights & privileges of an owner under a policy. the same person. ,ll rights, title & interest in the policy of insurance ta$en out by an original , change in interest in a thing insured, after the owner on the life or health of a minor shall automatically vest in the minor SECTION &!. upon the death of the original owner, unless otherwise provided for in the occurrence of an in1ury w-c results in a loss, does not affect the right of the insured to indemnity for the loss. policy. , change of interest in one or more several distinct SECTION 3. "he preceding section does not authori/e an SECTION &&. insurance for or against the drawing of any lottery, or for or against any things, separately insured by one policy, does not avoid the insurance as to the others. chance or tic$et in a lottery drawing a pri/e. , change on interest, by will or succession, on the SECTION 4. ,ll $inds of insurance are sub1ect to the provisions of SECTION &0. death of the insured, does not avoid an insurance. & his interest in the this chapter so far as the provisions can apply. insurance passes to the person ta$ing his interest in the thing insured. SECTION &3. , transfer of interest by one of several partners, 1oint owners, or owners in common, who are 1ointly insured, to the others, does SECTION 5. Every person, partnership, association, or corporation not avoid an insurance even though it has been agreed that the insurance duly authori/ed to transact insurance business as elsewhere provided in shall cease upon an alienation of the thing insured. this code, may be an insurer. SECTION &4. Every stipulation in a policy of insurance for the payment of loss whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such SECTION 7. 8nless the policy otherwise provides, where a interest, & every policy e(ecuted by way of gaming or wagering, is void. mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to Title IV CONCEALMENT a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, & any , neglect to communicate that w-c a party $nows & act of his, prior to the loss, w-c would otherwise avoid the insurance, will SECTION &5. have the same effect, although the property is in the hands of the ought to communicate, is called a concealment. mortgagee, but any act w-c, under the contract of insurance, is to be , concealment whether intentional or unintentional performed by the mortgagor, may be performed by the mortgagee therein SECTION &6. entitles the in1ured party to rescind a contract of insurance. *,s amended named, w- the same effect as if it had been performed by the mortgagor. by =atasang Pambansa =lg. 763+ SECTION 9. If an insurer assents to the transfer of an insurance fr. a mortgagor to a mortgagee, &, at the time of his assent, imposes further SECTION &7. Each party to a contract of insurance must obligation on the assignee, ma$ing a new contract w- him, the act of the communicated to the other, in good faith, all facts within his $nowledge w-c mortgagor cannot affect the rights of said assignee. are material to the contract & as to w-c he ma$es no warranty, & w-c the other has not the means of ascertaining. SECTION 6. ,nyone e(cept a public enemy may be insured. Title II PARTIES TO THE CONTRACT

The Insurance Code

SECTION &9. ,n intentional & fraudulent omission, on the part of SECTION 39. "he written instrument in w-c a contract of insurance is one insured, to communicate information of matters proving or tending to set forth, is called a policy of insurance. prove the falsity of a warranty, entitles the insurer to rescind. SECTION 4:. "he policy shall be in printed form w-c may contain SECTION 0:. <either party to a contract of insurance is bound to blan$ spaces. & any word, phrase, clause, mar$, sign, symbol, signature, communicate information of the matters following, e(cept in answer to the number, or word necessary to complete the contract of insurance shall be in)uiries of the other written on the blan$ spaces provided therein. *a+ *b+ "hose w-c the other $nows. ,ny rider, clause, warranty or endorsement purporting to be part of the contract of insurance & w-c is pasted or attached to said policy is not "hose w-c, in the e(ercise of ordinary care, the other ought to binding on the insured, unless the descriptive title or name of the rider, $now, & of w-c the former has no reason to suppose him clause, warranty or endorsement is also mentioned & written on the blan$ spaces provided in the policy. ignorant. 8nless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, w-c countersignature shall be ta$en as his agreement to "hose w-c prove or tend to prove the e(istence of a ris$ the contents of such rider, clause, warranty or endorsement. e(cluded by a warranty, & w-c are not otherwise material. & "hose of w-c the other waives communication. ?roup insurance & group annuity policies, however, may be typewritten & "hose w-c relate to a ris$ e(cepted fr. the policy & w-c are not need not be in printed form. otherwise material.

*c+ *d+ *e+

SECTION 4!. , policy of insurance must specify SECTION 0!. Materiality is to be determined not by the event, but solely by the probable & reasonable influence of the facts upon the party to "he parties between whom the contract is made. whom the communication is due, in forming his estimate of the *a+ disadvantages of the proposed contract, or in ma$ing his in)uiries. *b+ "he amount to be insured e(cept in the cases of open or running policies. SECTION 0&. Each party to a contract of insurance is bound to $now all the general causes w-c are open to his in)uiry, e)ually w- that of the other, & w-c may affect the political or material perils contemplated. & all *c+ "he premium, or if the insurance is of a character where the general usages of trade. e(act premium is only determinable upon the termination of the contract, a statement of the basis & rates upon w-c the final premium is to be determined. SECTION 00. "he right to information of material facts may be waived, either by the terms of the insurance or by neglect to ma$e in)uiry as to such facts, where they are distinctly implied in other facts of w-c *d+ "he property or life insured. information is communicated. *e+ "he interest of the insured in property insured, if he is not the SECTION 03. Information of the nature or amount of the interest of absolute owner thereof. one insured need not be communicated unless in answer to an in)uiry, e(cept as prescribed by section fifty>one. *f+ "he ris$s insured against. & SECTION 04. <either party to a contract of insurance is bound to *g+ "he period during w-c the insurance is to continue. communicate, even upon in)uiry, information of his own 1udgment upon the matters in )uestion. SECTION 4&. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. 'ithin si(ty days after the Title V REPRESENTATION issue of the cover note, a policy shall be issued in lieu thereof, including within its terms the identical insurance bound under the cover note & the SECTION 05. , representation may be oral or written. premium therefor. SECTION 06. , representation may be made at the time of, or Cover notes may be e(tended or renewed beyond such si(ty days w- the before, issuance of the policy. written approval of the Commissioner if he determines that such e(tension is not contrary to & is not for the purpose of violating any provisions of this SECTION 07. "he language of a representation is to be interpreted Code. "he Commissioner may promulgate rules & regulations governing such e(tensions for the purpose of preventing such violations & may by by the same rules as the language of contracts in general. such rules & regulations dispense w- the re)uirement of written approval by him in the case of e(tension in compliance w- such rules & regulations. SECTION 09. , representation as to the future is to be deemed a promise, unless it appears that it was merely a statement of belief or SECTION 40. "he insurance proceeds shall be applied e(clusively to e(pectation. the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy. SECTION 3:. , representation cannot )ualify an e(press provision in a contract of insurance, but it may )ualify an implied warranty. SECTION 43. 'hen an insurance contract is e(ecuted w- an agent or trustee as the insured, the fact that his principal or beneficiary is the real SECTION 3!. , representation may be altered or withdrawn before party in interest may be indicated by describing the insured as agent or the insurance is effected, but not afterwards. trustee, or by other general words in the policy. SECTION 3&. , representation must be presumed to refer to the SECTION 44. "o render an insurance effected by one partner or date on w-c the contract goes into effect. part>owner, applicable to the interest of his co>partners or other part>owners, it is necessary that the terms of the policy should be such as SECTION 30. 'hen a person insured has no personal $nowledge of are applicable to the 1oint or common interest. a fact, he may nevertheless repeat information w-c he has upon the sub1ect, & w-c he believes to be true, w- the e(planation that he does so on SECTION 45. 'hen the description of the insured in a policy is so the information of others. or he may submit the information, in its whole general that it may comprehend any person or any class of persons, only e(tent, to the insurer. & in neither case is he responsible for its truth, he who can show that it was intended to include him can claim the benefit unless it proceeds fr. an agent of the insured, whose duty it is to give the of the policy. information. SECTION 46. , policy may be so framed that it will inure to the SECTION 33. , representation is to be deemed false when the facts benefit of whomsoever, during the continuance of the ris$, may become fail to correspond w- its assertions or stipulations. the owner of the interest insured. SECTION 34. If a representation is false in a material point, whether affirmative or promissory, the in1ured party is entitled to rescind the contract fr. the time when the representation becomes false. "he right to rescind granted by this Code to the insurer is waived by the acceptance of premium payments despite $nowledge of the ground for rescission. *,s amended by =atasang Pambansa =lg. 763+ SECTION 47. "he mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy & the thing insured. SECTION 49. , policy is either open, valued or running.

,n open policy is one in w-c the value of the thing SECTION 35. "he materiality of a representation is determined by SECTION 5:. insured is not agreed upon, but is left to be ascertained in case of loss. the same rules as the materiality of a concealment. , valued policy is one w-c e(presses on its face an SECTION 36. "he provisions of this chapter apply as well to a SECTION 5!. agreement that the thing insured shall be valued at a specific sum. modification of a contract of insurance as to its original formation. , running policy is one w-c contemplates successive SECTION 37. 'henever a right to rescind a contract of insurance is SECTION 5&. given to the insurer by any provision of this chapter, such right must be insurances, & w-c provides that the ob1ect of the policy may be fr. time to time defined, especially as to the sub1ects of insurance, by additional e(ercised previous to the commencement of an action on the contract. statements or indorsements. ,fter a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years fr. the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. Title VI THE POLICY SECTION 50. , condition, stipulation, or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year fr. the time when the cause of action accrues, is void. SECTION 53. <o policy of insurance other than life shall be cancelled by the insurer e(cept upon prior notice thereof to the insured, &

The Insurance Code

no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following *a+ *b+ *c+ *d+ *e+ *f+ non>payment of premium. Provided, "hat no holder of a life insurance policy may avail himself of the privileges of this paragraph without sufficient cause as otherwise provided by law.

SECTION 7:. If a peril insured against has e(isted, & the insurer has been liable for any period, however short, the insured is not entitled to return of premiums, so far as that particular ris$ is concerned. conviction of a crime arising out of acts increasing the ha/ard insured against. SECTION 7!. , person insured is entitled to return of the premium when the contract is voidable, on account of fraud or misrepresentation of discovery of fraud or material misrepresentation. the insurer, or of his agent, or on account of facts, the e(istence of w-c the insured was ignorant without his fault. or when by any default of the discovery of willful or rec$less acts or omissions increasing the insured other than actual fraud, the insurer never incurred any liability ha/ard insured against. under the policy. physical changes in the property insured w-c result in the SECTION 7&. In case of an over>insurance by several insurers, the property becoming uninsurable. or insured is entitled to a ratable return of the premium, proportioned to the amount by w-c the aggregate sum insured in all the policies e(ceeds the a determination by the Commissioner that the continuation of the insurable value of the thing at ris$. policy would violate or would place the insurer in violation of this Code. Title IX LOSS SECTION 70. ,n agreement not to transfer the claim of the insured against the insurer after the loss has happened, is void if made before the loss e(cept as otherwise provided in the case of life insurance.

SECTION 54. ,ll notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy, & shall state *a+ w-c of the grounds set forth in section si(ty>four is relied upon & *b+ that, upon written re)uest of the named insured, the insurer will furnish the facts on w-c the cancellation is based.

SECTION 73. 8nless otherwise provided by the policy, an insurer is liable for a loss of w-c a peril insured against was the pro(imate cause, although a peril not contemplated by the contract may have been a remote SECTION 55. In case of insurance other than life, unless the insurer cause of the loss. but he is not liable for a loss w-c the peril insured against at least forty>five days in advance of the end of the policy period mails or was only a remote cause. delivers to the named insured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon ,n insurer is liable where the thing insured is rescued reduction of limits or elimination of coverages, the named insured shall be SECTION 74. entitled to renew the policy upon payment of the premium due on the fr. a peril insured against that would otherwise have caused a loss, if, in the effective date of the renewal. ,ny policy written for a term of less than one course of such rescue, the thing is e(posed to a peril not insured against, year shall be considered as if written for a term of one year. ,ny policy w-c permanently deprives the insured of its possession, in whole or in part. written for a term longer than one year or any policy w- no fi(ed e(piration or where a loss is caused by efforts to rescue the thing insured fr. a peril date shall be considered as if written for successive policy periods or terms insured against. of one year. SECTION 75. 'here a peril is especially e(cepted in a contract of insurance, a loss, w-c would not have occurred but for such peril, is Title VII WARRANTIES thereby e(cepted although the immediate cause of the loss was a peril w-c was not e(cepted. SECTION 56. , warranty is either e(pressed or implied. SECTION 76. ,n insurer is not liable for a loss caused by the willful SECTION 57. , warranty may relate to the past, the present, the act or through the connivance of the insured. but he is not e(onerated by future, or to any or all of these. the negligence of the insured, or of the insurance agents or others. SECTION 59. warranty. <o particular form of words is necessary to create a Title X NOTICE OF LOSS

SECTION 77. In case of loss upon an insurance against fire, an SECTION 6:. 'ithout pre1udice to section fifty>one, every e(press insurer is e(onerated, if notice thereof be not given to him by an insured, or warranty, made at or before the e(ecution of a policy, must be contained in some person entitled to the benefit of the insurance, without unnecessary the policy itself, or in another instrument signed by the insured & referred delay. to in the policy as ma$ing a part of it. SECTION 79. 'hen a preliminary proof of loss is re)uired by a SECTION 6!. , statement in a policy of matter relating to the person policy, the insured is not bound to give such proof as would be necessary or thing insured, or to the ris$, as a fact, is an e(press warranty thereof. in a court of 1ustice. but it is sufficient for him to give the best evidence w-c he has in his power at the time. SECTION 6&. , statement in a policy w-c imparts that it is intended to do or not to do a thing w-c materially affects the ris$, is a warranty that SECTION 9:. ,ll defects in a notice of loss, or in preliminary proof such act or omission shall ta$e place. thereof, w-c the insured might remedy, & w-c the insurer omits to specify to him, without unnecessary delay, as grounds of ob1ection, are waived. SECTION 60. 'hen, before the time arrives for the performance of a warranty relating to the future, a loss insured against happens, or SECTION 9!. #elay in the presentation to an insurer of notice or performance becomes unlawful at the place of the contract, or impossible, proof of loss is waived if caused by any act of him, or if he omits to ta$e the omission to fulfill the warranty does not avoid the policy. ob1ection promptly & specifically upon that ground. SECTION 63. "he violation of a material warranty, or other material SECTION 9&. If the policy re)uires, by way of preliminary proof of provision of a policy, on the part of either party thereto, entitles the other to loss, the certificate or testimony of a person other than the insured, it is rescind. sufficient for the insured to use reasonable diligence to procure it, & in case of the refusal of such person to give it, then to furnish reasonable SECTION 64. , policy may declare that a violation of specified evidence to the insurer that such refusal was not induced by any 1ust provisions thereof shall avoid it, otherwise the breach of an immaterial grounds of disbelief in the facts necessary to be certified or testified. provision does not avoid the policy. Title XI DOUBLE INSURANCE SECTION 65. , breach of warranty without fraud merely e(onerates an insurer fr. the time that it occurs, or where it is bro$en in its inception, SECTION 90. , double insurance e(ists where the same person is prevents the policy fr. attaching to the ris$. insured by several insurers separately in respect to the same sub1ect & interest. Title VIII PREMIUM SECTION 93. 'here the insured is overinsured by double insurance SECTION 66. ,n insurer is entitled to payment of the premium as soon as the thing insured is e(posed to the peril insured against. *a+ "he insured, unless the policy otherwise provides, may claim <otwithstanding any agreement to the contrary, no policy or contract of payment fr. the insurers in such order as he may select, up to insurance issued by an insurance company is valid & binding unless & until the amount for w-c the insurers are severally liable under their the premium thereof has been paid, e(cept in the case of a life or an respective contracts. industrial life policy whenever the grace period provision applies. SECTION 67. ,n ac$nowledgment in a policy or contract of insurance or the receipt of premium is conclusive evidence of its payment, so far as to ma$e the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid. SECTION 69. follows *a+ *b+ , person insured is entitled to a return of premium, as *b+ 'here the policy under w-c the insured claims is a valued policy, the insured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the sub1ect matter insured. 'here the policy under w-c the insured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any policy. 'here the insured receives any sum in e(cess of the valuation in the case of valued policies, or of the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves. Each insurer is bound, as between himself & the other insurers, to contribute ratably to the loss in proportion to the amount for

*c+

"o the whole premium if no part of his interest in the thing *d+ insured be e(posed to any of the perils insured against. 'here the insurance is made for a definite period of time & the insured surrenders his policy, to such portion of the premium as corresponds w- the une(pired time, at a pro rata rate, unless a short period rate has been agreed upon & appears on the face of *e+ the policy, after deducting fr. the whole premium any claim for loss or damage under the policy w-c has previously accrued.

The Insurance Code

w-c he is liable under his contract. Title XII REINSURANCE communicate, in addition to what is re)uired by section twenty>eight, all the information w-c he possesses, material to the ris$, e(cept such as is mentioned in Aection thirty, & to state the e(act & whole truth in relation to all matters that he represents, or upon in)uiry discloses or assumes to disclose.

SECTION 94. , contract of reinsurance is one by w-c an insurer procures a third person to insure him against loss or liability by reason of SECTION !:7. In marine insurance, information of the belief or such original insurance. e(pectation of a third person, in reference to a material fact, is material. SECTION 95. 'here an insurer obtains reinsurance, e(cept under automatic reinsurance treaties, he must communicate all the representations of the original insured, & also all the $nowledge & information he possesses, whether previously or subse)uently ac)uired, w-c are material to the ris$.

SECTION !:9. , person insured by a contract of marine insurance is presumed to have $nowledge, at the time of insuring, of a prior loss, if the information might possibly have reached him in the usual mode of transmission & at the usual rate of communication.

, concealment in a marine insurance, in respect to SECTION 96. , reinsurance is presumed to be a contract of SECTION !!:. any of the following matters, does not vitiate the entire contract, but merely indemnity against liability, & not merely against damage. e(onerates the insurer fr. a loss resulting fr. the ris$ concealed SECTION 97. reinsurance. "he original insured has no interest in a contract of CHAPTER II CLASSES OF INSURANCE Title I MARINE INSURANCE Sub-Title 1- A DEFINITION SECTION 99. *!+ *a+ Marine Insurance includes *a+ *b+ *c+ *d+ *e+ "he national character of the insured. "he liability of the thing insured to capture & detention. "he liability to sei/ure fr. breach of foreign laws of trade. "he want of necessary documents. "he use of false & simulated papers. Sub-Title 1-D REPRESENTATION SECTION !!!. If a representation by a person insured by a contract of marine insurance, is intentionally false in any material respect, or in respect of any fact on w-c the character & nature of the ris$ depends, the insurer may rescind the entire contract. SECTION !!&. "he eventual falsity of a representation as to e(pectation does not, in the absence of fraud, avoid a contract of marine insurance. Sub-Title 1-E IMPLIED WARRANTIES SECTION !!0. In every marine insurance upon a ship or freight, or freightage, or upon any thing w-c is the sub1ect of marine insurance, a warranty is implied that the ship is seaworthy. SECTION !!3. , ship is seaworthy when reasonably fit to perform the service & to encounter the ordinary perils of the voyage contemplated by the parties to the policy.

Insurance against loss of or damage to @essels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, securities, choses in action, evidences of debts, valuable papers, bottomry, & respondentia interests & all other $inds of property & interests therein, in respect to, appertaining to or in connection w- any & all ris$s or perils of navigation, transit or transportation, or while being assembled, pac$ed, crated, baled, compressed or similarly prepared for shipment or while awaiting shipment, or during any delays, storage, transhipment, or reshipment incident thereto, including war ris$s, marine builder2s ris$s, & all personal property floater ris$s. Person or property in connection w- or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection wthe construction, repair, operation, maintenance or use of the sub1ect matter of such insurance *but not including life insurance or surety bonds nor insurance against loss by reason of bodily in1ury to any person arising out of ownership, maintenance, or use of automobiles+.

*b+

*c+ *d+

SECTION !!4. ,n implied warranty of seaworthiness is complied w- if Precious stones, 1ewels, 1ewelry, precious metals, whether in the ship be seaworthy at the time of the of commencement of the ris$, e(cept in the following cases course of transportation or otherwise. =ridges, tunnels & other instrumentalities of transportation & *a+ communication *e(cluding buildings, their furniture & furnishings, fi(ed contents & supplies held in storage+. piers, wharves, doc$s & slips, & other aids to navigation & transportation, including dry doc$s & marine railways, dams & appurtenant facilities for the control of waterways. *b+ 'hen the insurance is made for a specified length of time, the implied warranty is not complied w- unless the ship be seaworthy at the commencement of every voyage it underta$es during that time. 'hen the insurance is upon the cargo w-c, by the terms of the policy, description of the voyage, or established custom of the trade, is to be transhipped at an intermediate port, the implied warranty is not complied w- unless each vessel upon w-c the cargo is shipped, or transhipped, be seaworthy at the commencement of each particular voyage.

*&+ %Marine protection & indemnity insurance,% meaning insurance against, or against legal liability of the insured for loss, damage, or e(pense incident to ownership, operation, chartering, maintenance, use, repair, or construction of any vessel, craft or instrumentality in use of ocean or inland waterways, including liability of the insured for personal in1ury, SECTION !!5. , warranty of seaworthiness e(tends not only to the illness or death or for loss of or damage to the property of another person. condition of the structure of the ship itself, but re)uires that it be properly laden, & provided w- a competent master, a sufficient number of competent Sub-Title 1-B INSURABLE INTEREST officers & seamen, & the re)uisite appurtenances & e)uipment, such as ballasts, cables & anchors, cordage & sails, food, water, fuel & lights, & SECTION !::. "he owner of a ship has in all cases an insurable other necessary or proper stores & implements for the voyage. interest in it, even when it has been chartered by one who covenants to pay him its value in case of loss Provided, "hat in this case the insurer 'here different portions of the voyage contemplated shall be liable for only that part of the loss w-c the insured cannot recover SECTION !!6. by a policy differ in respect to the things re)uisite to ma$e the ship fr. the charterer. seaworthy therefor, a warranty of seaworthiness is complied w- if, at the commencement of each portion, the ship is seaworthy w- reference to that SECTION !:!. "he insurable interest of the owner of the ship portion. hypothecated by bottomry is only the e(cess of its value over the amount secured by bottomry. SECTION !!7. 'hen the ship becomes unseaworthy during the voyage to w-c an insurance relates, an unreasonable delay in repairing the SECTION !:&. Freightage, in the sense of a policy of marine defect e(onerates the insurer on ship or shipowner2s interest fr. liability fr. insurance, signifies all the benefits derived by the owner, either fr. the any loss arising therefr.. chartering of the ship or its employment for the carriage of his own goods or those of others. SECTION !!9. , ship w-c is seaworthy for the purpose of an insurance upon the ship may, nevertheless, by reason of being unfitted to SECTION !:0. "he owner of a ship has an insurable interest in receive the cargo, be unseaworthy for the purpose of the insurance upon e(pected freightage w-c according to the ordinary & probable course of the cargo. things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage. SECTION !&:. 'here the nationality or neutrality of a ship or cargo is e(pressly warranted, it is implied that the ship will carry the re)uisite SECTION !:3. "he interest mentioned in the last section e(ists, in documents to show such nationality or neutrality & that it will not carry any case of a charter party, when the ship has bro$en ground on the chartered documents w-c cast reasonable suspicion thereon. voyage. If a price is to be paid for the carriage of goods it e(ists when they are actually on board, or there is some contract for putting them on board, & both ship & goods are ready for the specified voyage. SECTION !:4. ;ne who has an interest in the thing fr. w-c profits are e(pected to proceed has an insurable interest in the profits.

Sub-Title 1-F THE VOYAGE AND DEVIATION SECTION !:5. "he charterer of a ship has an insurable interest in it, SECTION !&!. 'hen the voyage contemplated by a marine insurance to the e(tent that he is liable to be damnified by its loss. policy is described by the places of beginning & ending, the voyage insured in one w-c conforms to the course of sailing fi(ed by mercantile Sub-Title 1-C CONCEALMENT usage between those places. SECTION !:6. In marine insurance each party is bound to

The Insurance Code

SECTION !&&. If the course of sailing is not fi(ed by mercantile usage, *b+ the voyage insured by a marine insurance policy is that way between the places specified, w-c to a master of ordinary s$ill & discretion, would mean the most natural, direct & advantageous. *c+ SECTION !&0. #eviation is a departure fr. the course of the voyage insured, mentioned in the last two sections, or an unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage. SECTION !&3. *a+ *b+ *c+ *d+ , deviation is proper *d+ If it is in1ured to such an e(tent as to reduce its value more than three>fourths. If the thing insured is a ship, & the contemplated voyage cannot be lawfully performed without incurring either an e(pense to the insured of more than three>fourths the value of the thing abandoned or a ris$ w-c a prudent man would not ta$e under the circumstances. or If the thing insured, being cargo or freightage, & the voyage cannot be performed, nor another ship procured by the master, within a reasonable time & w- reasonable diligence, to forward the cargo, without incurring the li$e e(pense or ris$ mentioned in the preceding sub>paragraph. =ut freightage cannot in any case be abandoned unless the ship is also abandoned. ,n abandonment must be neither partial nor

'hen caused by circumstances over w-c neither the master nor the owner of the ship has any control. 'hen necessary to comply w- a warranty, or to avoid a peril, whether or not the peril is insured against. 'hen made in good faith, & upon reasonable grounds of belief in its necessity to avoid a peril. or

SECTION !3:. conditional.

SECTION !3!. ,n abandonment must be made within a reasonable time after receipt of reliable information of the loss, but where the 'hen made in good faith, for the purpose of saving human life or information is of a doubtful character, the insured is entitled to a relieving another vessel in distress. reasonable time to ma$e in)uiry.

SECTION !&4. improper.

Every deviation not specified in the last section is SECTION !3&. 'here the information upon w-c an abandonment has been made proves incorrect, or the thing insured was so far restored when the abandonment was made that there was then in fact no total loss, the SECTION !&5. ,n insurer is not liable for any loss happening to the abandonment becomes ineffectual. thing insured subse)uent to an improper deviation. SECTION !30. ,bandonment is made by giving notice thereof to the Sub-Title 1-G LOSS insurer, w-c may be done orally, or in writing. Provided, "hat if the notice be done orally, a written notice of such abandonment shall be submitted within seven days fr. such oral notice. SECTION !&6. , loss may be either total or partial. SECTION !&7. SECTION !&9. SECTION !0:. *a+ *b+ *c+ Every loss w-c is not total is partial. , total loss may be either actual or constructive. ,n actual total loss is cause by SECTION !33. , notice of abandonment must be e(plicit, & must specify the particular cause of the abandonment, but need state only enough to show that there is probable cause therefor, & need not be accompanied w- proof of interest or of loss. SECTION !34. ,n abandonment can be sustained only upon the cause specified in the notice thereof.

, total destruction of the thing insured.

SECTION !35. ,n abandonment is e)uivalent to a transfer by the "he irretrievable loss of the thing by sin$ing, or by being bro$en insured of his interest to the insurer, w- all the chances of recovery & up. indemnity.

,ny damage to the thing w-c renders it valueless to the owner for SECTION !36. If a marine insurer pays for a loss as if it were an the purpose for w-c he held it. or actual total loss, he is entitled to whatever may remain of the thing insured, or its proceeds or salvage, as if there had been a formal abandonment. *d+ ,ny other event w-c effectively deprives the owner of the possession, at the port of destination, of the thing insured. SECTION !37. 8pon an abandonment, acts done in good faith by those who were agents of the insured in respect to the thing insured, SECTION !0!. , constructive total loss is one w-c gives to a person subse)uent to the loss, are at the ris$ of the insurer & for his benefit. insured a right to abandon, under Aection one hundred thirty>nine. SECTION !39. 'here notice of abandonment is properly given, the SECTION !0&. ,n actual loss may be presumed fr. the continued rights of the insured are not pre1udiced by the fact that the insurer refuses absence of a ship without being heard of. "he length of time w-c is to accept the abandonment. sufficient to raise this presumption depends on the circumstances of the case. SECTION !4:. "he acceptance of an abandonment may be either e(press or implied fr. the conduct of the insurer. "he mere silence of the SECTION !00. 'hen a ship is prevented, at an intermediate port, fr. insurer for an unreasonable length of time after notice shall be construed completing the voyage, by the perils insured against, the liability of a as an acceptance. marine insurer on the cargo continues after they are thus reshipped. SECTION !4!. "he acceptance of an abandonment, whether e(press <othing in this section shall prevent an insurer fr. re)uiring an additional or implied, is conclusive upon the parties, & admits the loss & the sufficiency of the abandonment. premium if the ha/ard be increased by this e(tension of liability. ,n abandonment once made & accepted is SECTION !03. In addition to the liability mentioned in the last section, SECTION !4&. a marine insurer is bound for damages, e(penses of discharging, storage, irrevocable, unless the ground upon w-c it was made proves to be unfounded. reshipment, e(tra freightage, & all other e(penses incurred in saving cargo reshipped pursuant to the last section, up to the amount insured. SECTION !40. ;n an accepted abandonment of a ship, freightage <othing in this or in the preceding section shall render a marine insurer earned previous to the loss belongs to the insurer of said freightage. but freightage subse)uently earned belongs to the insurer of the ship. liable for any amount in e(cess of the insured value or, if there be none, of the insurable value. SECTION !43. If an insurer refuses to accept a valid abandonment, SECTION !04. 8pon an actual total loss, a person insured is entitled he is liable as upon actual total loss, deducting fr. the amount any proceeds of the thing insured w-c may have come to the hands of the to payment without notice of abandonment. insured. SECTION !05. 'here it has been agreed that an insurance upon a If a person insured omits to abandon, he may particular thing, or class of things, shall be free fr. particular average, a SECTION !44. marine insurer is not liable for any particular average loss not depriving the nevertheless recover his actual loss. insured of the possession, at the port of destination, of the whole of such thing, or class of things, even though it becomes entirely worthless. but Sub-Title 1-I MEASURE OF INDEMNITY such insurer is liable for his proportion of all general average loss assessed upon the thing insured. SECTION !45. , valuation in a policy of marine insurance in conclusive between the parties thereto in the ad1ustment of either a partial SECTION !06. ,n insurance confined in terms to an actual loss does or total loss, if the insured has some interest at ris$, & there is no fraud on not cover a constructive total loss, but covers any loss, w-c necessarily his part. e(cept that when a thing has been hypothecated by bottomry or results in depriving the insured of the possession, at the port of destination, respondentia, before its insurance, & without the $nowledge of the person of the entire thing insured. actually procuring the insurance, he may show the real value. =ut a valuation fraudulent in fact, entitles the insurer to rescind the contract. Sub-Title 1-H ABANDONMENT SECTION !46. , marine insurer is liable upon a partial loss, only for SECTION !07. ,bandonment, in marine insurance, is the act of the such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured. insured by w-c, after a constructive total loss, he declares the relin)uishment to the insurer of his interest in the thing insured. SECTION !47. 'here profits are separately insured in a contract of SECTION !09. , person insured by a contract of marine insurance marine insurance, the insured is entitled to recover, in case of loss, a proportion of such profits e)uivalent to the proportion w-c the value of the may abandon the thing insured, or any particular portion thereof separately valued by the policy, or otherwise separately insured, & recover for a total property lost bears to the value of the whole. loss thereof, when the cause of the loss is a peril insured against SECTION !49. In case of a valued policy of marine insurance on *a+ If more than three>fourths thereof in value is actually lost, or freightage or cargo, if a part only of the sub1ect is e(posed to the ris$, the evaluation applies only in proportion to such part. would have to be e(pended to recover it fr. the peril.

The Insurance Code

SECTION !5:. 'hen profits are valued & insured by a contract of rebuilding or replacing of buildings or structures wholly or partially marine insurance, a loss of them is conclusively presumed fr. a loss of the damaged or destroyed. property out of w-c they are e(pected to arise, & the valuation fi(es their amount. SECTION !60. <o policy of fire insurance shall be pledged, hypothecated, or transferred to any person, firm or company who acts as SECTION !5!. In estimating a loss under an open policy of marine agent for or otherwise represents the issuing company, & any such pledge, insurance the following rules are to be observed hypothecation, or transfer hereafter made shall be void & of no effect insofar as it may affect other creditors of the insured. *a+ "he value of a ship is its value at the beginning of the ris$, including all articles or charges w-c add to its permanent value or Title III CASUALTY INSURANCE w-c are necessary to prepare it for the voyage insured. SECTION !63. Casualty insurance is insurance covering loss or *b+ "he value of the cargo is its actual cost to the insured, when liability arising fr. accident or mishap, e(cluding certain types of loss w-c by laden on board, or where the cost cannot be ascertained, its law or custom are considered as falling e(clusively within the scope of mar$et value at the time & place of lading, adding the charges other types of insurance such as fire or marine. It includes, but is not incurred in purchasing & placing it on board, but without limited to, employer2s liability insurance, motor vehicle liability insurance, reference to any loss incurred in raising money for its purchase, plate glassinsurance, burglary & theft insurance, personal accident & or to any drawbac$ on its e(portation, or to the fluctuation of the health insurance as written by non>life insurance companies, & other mar$et at the port of destination, or to e(penses incurred on the substantially similar $inds of insurance. way or on arrival. Title IV SURETYSHIP *c+ "he value of freightage is the gross freightage, e(clusive of primage, without reference to the cost of earning it. & SECTION !64. , contract of suretyship is an agreement whereby a party called the surety guarantees the performance by another party called *d+ "he cost of insurance is in each case to be added to the value the principal or obligor of an obligation or underta$ing in favor of a third thus estimated. party called the obligee. It includes official recogni/ances, stipulations, bonds or underta$ings issued by any company by virtue of & under the SECTION !5&. If cargo insured against partial loss arrives at the port provisions of ,ct <o. 405, as amended by ,ct <o. &&:5. of destination in a damaged condition, the loss of the insured is deemed to be the same proportion of the value w-c the mar$et price at that port, of the SECTION !65. "he liability of the surety or sureties shall be 1oint & thing so damaged, bears to the mar$et price it would have brought if several w- the obligor & shall be limited to the amount of the bond. It is sound. determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor & the obligee. *,s amended by SECTION !50. , marine insurer is liable for all the e(penses Presidential #ecree <o. !344+ attendant upon a loss w-c forces the ship into port to be repaired. & where it is stipulated in the policy that the insured shall labor for the recovery of SECTION !66. "he surety is entitled to payment of the premium as the property, the insurer is liable for the e(pense incurred thereby, such soon as the contract of suretyship or bond is perfected & delivered to the e(pense, in either case, being in addition to a total loss, if that afterwards obligor. <o contract of suretyship or bonding shall be valid & binding occurs. unless & until the premium therefor has been paid, e(cept where the obligee has accepted the bond, in w-c case the bond becomes valid & SECTION !53. , marine insurer is liable for a loss falling upon the enforceable irrespective of whether or not the premium has been paid by insured, through a contribution in respect to the thing insured, re)uired to the obligor to the surety. Provided, "hat if the contract of suretyship or be made by him towards a general average loss called for by a peril bond is not accepted by, or filed w- the obligee, the surety shall collect only insured against. provided, that the liability of the insurer shall be limited to reasonable amount, not e(ceeding fifty per centum of the premium due the proportion of contribution attaching to his policy value where this is less thereon as service fee plus the cost of stamps or other ta(es imposed for the issuance of the contract or bond. Provided, however, "hat if the than the contributing value of the thing insured. non>acceptance of the bond be due to the fault or negligence of the surety, no such service fee, stamps or ta(es shall be collected. SECTION !54. 'hen a person insured by a contract of marine insurance has a demand against others for contribution, he may claim the whole loss fr. the insurer, subrogating him to his own right to contribution. In the case of a continuing bond, the obligor shall pay the subse)uent =ut no such claim can be made upon the insurer after the separation of the annual premium as it falls due until the contract of suretyship is cancelled interests liable to the contribution, nor when the insured, having the right & by the obligee or by the Commissioner or by a court of competent opportunity to enforce the contribution fr. others, has neglected or waived 1urisdiction, as the case may be. the e(ercise of that right. SECTION !67. Pertinent provisions of the Civil Code of the Philippines SECTION !55. In the case of a partial loss of ship or its e)uipment, shall be applied in a suppletory character whenever necessary in the old materials are to be applied towards payment for the new. 8nless interpreting the provisions of a contract of suretyship. otherwise stipulated in the policy, a marine insurer is liable for only two>thirds of the remaining cost of repairs after such deduction, e(cept that Title V LIFE INSURANCE anchors must be paid in full. SECTION !69. Bife insurance is insurance on human lives & Title II FIRE INSURANCE insurance appertaining thereto or connected therewith. SECTION !56. ,s used in this Code, the term %fire insurance% shall SECTION !7:. ,n insurance upon life may be made payable on the include insurance against loss by fire, lightning, windstorm, tornado or death of the person, or on his surviving a specified period, or otherwise earth)ua$e & other allied ris$s, when such ris$s are covered by e(tension contingently on the continuance or cessation of life. to fire insurance policies or under separate policies. Every contract or pledge for the payment of endowments or annuities shall SECTION !57. ,n alteration in the use or condition of a thing insured be considered a life insurance contract for purpose of this Code fr. that to w-c it is limited by the policy made without the consent of the insurer, by means within the control of the insured, & increasing the ris$s, In the absence of a 1udicial guardian, the father, or in the latter2s absence entitles an insurer to rescind a contract of fire insurance. or incapacity, the mother, or any minor, who is an insured or a beneficiary under a contract of life, health or accident insurance, may e(ercise, in SECTION !59. ,n alteration in the use or condition of a thing insured behalf of said minor, any right under the policy, without necessity of court fr. that to w-c it is limited by the policy, w-c does not increase the ris$, does authority or the giving of a bond, where the interest of the minor in the not affect a contract of fire insurance. particular act involved does not e(ceed twenty thousand pesos. Auch right may include, but shall not be limited to, obtaining a policy loan, SECTION !6:. , contract of fire insurance is not affected by any act surrendering the policy, receiving the proceeds of the policy, & giving the of the insured subse)uent to the e(ecution of the policy, w-c does not minor2s consent to any transaction on the policy. violate its provisions, even though it increases the ris$ & is the cause of the loss. SECTION !7:>,. "he insurer in a life insurance contract shall be liable in case of suicides only when it is committed after the policy has been in SECTION !6!. If there is no valuation in the policy, the measure of force for a period of two years fr. the date of its issue or of its last indemnity in an insurance against fire is the e(pense it would be to the reinstatement, unless the policy provides a shorter period Provided, insured at the time of the commencement of the fire to replace the thing however, "hat suicide committed in the state of insanity shall be lost or in1ured in the condition in w-c at the time of the in1ury. but if there is compensable regardless of the date of commission. *,s amended by a valuation in a policy of fire insurance, the effect shall be the same as in a =atasang Pambansa =lg. 763+ policy of marine insurance. SECTION !7!. , policy of insurance upon life or health may pass by SECTION !6&. 'henever the insured desires to have a valuation transfer, will or succession to any person, whether he has an insurable named in his policy, insuring any building or structure against fire, he may interest or not, & such person may recover upon it whatever the insured re)uire such building or structure to be e(amined by an independent might have recovered. appraiser & the value of the insured2s interest therein may then be fi(ed as between the insurer & the insured. "he cost of such e(amination shall be SECTION !7&. <otice to an insurer of a transfer or be)uest thereof is paid for by the insured. , clause shall be inserted in such policy stating not necessary to preserve the validity of a policy of insurance upon life or substantially that the value of the insured2s interest in such building or health, unless thereby e(pressly re)uired. structure has been thus fi(ed. In the absence of any change increasing the ris$ without the consent of the insurer or of fraud on the part of the insured, SECTION !70. 8nless the interest of a person insured is susceptible then in case of a total loss under such policy, the whole amount so insured of e(act pecuniary measurement, the measure of indemnity under a policy upon the insured2s interest in such building or structure, as stated in the of insurance upon life or health is the sum fi(ed in the policy. policy upon w-c the insurers have received a premium, shall be paid, & in case of a partial loss the full amount of the partial loss shall be so paid, & CHAPTER III THE BUSINESS OF INSURANCE in case there are two or more policies covering the insured2s interest therein, each policy shall contribute pro rata to the payment of such whole or partial loss. =ut in no case shall the insurer be re)uired to pay more Title I INSURANCE COMPANIES ORGANI!ATION" CAPITALI!ATION AND AUTHORI!ATION than the amount thus stated in such policy. "his section shall not prevent the parties fr. stipulating in such policies concerning the repairing,

The Insurance Code

SECTION !73. For purposes of this Code, the term %insurer% or %insurance company% shall include all individuals, partnerships, associations, or corporations, including government>owned or controlled corporations or entities, engaged as principals in the insurance business, e(cepting mutual benefit associations. 8nless the conte(t otherwise re)uires, the terms shall also include professional reinsurers defined in section two hundred eighty. %#omestic company% shall include companies formed, organi/ed or e(isting under the laws of the Philippines. %Foreign company% when used without limitation shall include companies formed, organi/ed, or e(isting under any laws other than those of the Philippines. hundred eighty. Provided, further, that the Aecretary of Finance may, upon recommendation of the Insurance Commissioner, increase such minimum paid>up capital stoc$ re)uirement, under such terms & conditions as he may impose, to an amount w-c, in his opinion, would reasonably assure the safety of the interests of the policyholders & the public. "he Commissioner may, as a pre>licensing re)uirement of a new insurance company, in addition to the paid>up capital stoc$, re)uire the stoc$holders to pay in cash to the company in proportion to their subscription interests a contributed surplus fund of not less than one million pesos, in the case of a life insurance company, or not less than five hundred thousand pesos, in the case of an insurance company other than life. De may also re)uire such company to submit to him a business plan showing the company2s estimated receipts & disbursements, as well as the basis therefor, for the ne(t succeeding three years.

SECTION !74. Corporations formed or organi/ed to save any person or persons or other corporations harmless fr. loss, damage, or liability arising fr. any un$nown or future or contingent event, or to indemnify or to compensate any person or persons or other corporations for any such loss, damage, or liability, or to guarantee the performance of or compliance wcontractual obligations or the payment of debt of others shall be $nown as If organi/ed as a mutual company, in lieu of such capital stoc$, it must %insurance corporations%. have available cash assets of at least five million pesos above all liabilities for losses reported, e(penses, ta(es, legal reserve, & reinsurance of all "he provisions of the Corporation Baw shall apply to all insurance outstanding ris$s, & the contributed surplus fund e)ual to the amounts corporations now or hereafter engaged in business in the Philippines re)uired of stoc$ corporations. , stoc$ insurance company doing business insofar as they do not conflict w- the provisions of this chapter. in the Philippines may, sub1ect to the pertinent law & regulations w-c now are of hereafter may be in force, alter its organi/ation & transform itself into SECTION !75. <o person, partnership, or association of persons shall a mutual insurance company. *,s amended by Presidential #ecree <o. transact any insurance business in the Philippines e(cept as agent of a !344+. person or corporation authori/ed to do the business of insurance in the Philippines, unless possessed of the capital & assets re)uired of an SECTION !79. Every company must, before engaging in the business insurance corporation doing the same $ind of business in the Philippines & of insurance in the Philippines, file w- the Commissioner the following invested in the same manner. nor unless the Commissioner shall have granted to him or them a certificate to the effect that he or they have *a+ , certified copy of the last annual statement or a verified complied w- all the provisions of law w-c an insurance corporation doing financial statement e(hibiting the condition & affairs of such business in the Philippines is re)uired to observe. company. Every person, partnership, or association receiving any such certificate of *b+ authority shall be sub1ect to the insurance laws of the Philippines & to the 1urisdiction & supervision of the Commissioner in the same manner as if an insurance corporation authori/ed by the laws of the Philippines to engage in the business of insurance specified in the certificate. SECTION !76. <o insurance company shall transact any insurance business in the Philippines until after it shall have obtained a certificate of authority for that purpose fr. the Commissioner upon application therefor & payment by the company concerned of the fees hereinafter prescribed. *c+ If incorporated under the laws of the Philippines, a copy of the articles of incorporation & by>laws, & any amendments to either, certified by the Aecurities & E(change Commission to be a copy of that w-c is filed in its ;ffice. If incorporated under any laws other than those of the Philippines, a certificate fr. the Aecurities & E(change Commission showing that it is duly registered in the mercantile registry of that Commission in accordance w- the Corporation Baw. , copy of the articles of incorporation & by>laws, & any amendments to either, if organi/ed or formed under any law re)uiring such to be filed, duly certified by the officer having the custody of same, or if not so organi/ed, a copy of the law, charter or deed of settlement under w-c the deed of organi/ation is made, duly certified by the proper custodian thereof, or proved by affidavit to be a copy. also, a certificate under the hand & seal of the proper officer of such state or country having supervision of insurance business therein, if any there be, that such corporation or company is organi/ed under the laws of such state or country, w- the amount of capital stoc$ or assets & legal reserve re)uired by this Code. If not incorporated & of foreign domicile, aside fr. the certificate mentioned in paragraph *c+ of this section, a certificate setting forth the nature & character of the business, the location of the principal office, the name of the individual or names of the persons composing the partnership or association, the amount of actual capital employed or to be employed therein & the names of all officers & persons by whom the business is or may be managed.

"he Commissioner may refuse to issue a certificate of authority to any insurance company if, in his 1udgment, such refusal will best promote the interest of the people of this country. <o such certificate of authority shall be granted to any such company until the Commissioner shall have satisfied himself by such e(amination as he may ma$e & such evidence as he may re)uire that such company is )ualified by the laws of the Philippines to transact business therein, that the grant of such authority appears to be 1ustified in the light of economic re)uirements, & that the direction & administration, as well as the integrity & responsibility of the organi/ers & administrators, the financial organi/ation & the amount of capital, notwithstanding the provisions of section one hundred eighty>eight, reasonably assure the safety of the interests of the policyholders & the *d+ public.

In order to maintain the )uality of the management of the insurance companies & afford better protection to policyholders & the public in general, any person of good moral character, un)uestioned integrity & recogni/ed competence may be elected or appointed director or officer of insurance companies. "he Commissioner shall prescribe the )ualifications of the e(ecutive officers & other $ey officials of insurance companies for purposes of this section. "he certificate must be verified by the affidavit of the chief officer, secretary, agent, or manager of the company. & if there are any written <o person shall concurrently be a director &-or officer of an insurance articles of agreement of the company, a copy thereof must be accompany company & an ad1ustment company. such certificate.

Incumbent directors &-or officers affected by the above provisions are SECTION !9:. "he Commissioner must re)uire as a condition hereby allowed to hold on to their positions until the end of their terms or precedent to the transaction of insurance business in the Philippines by two years fr. the effectivity of this decree, w-cever is shorter. any foreign insurance company, that such company file in his office a written power of attorney designating some person who shall be a resident =efore issuing such certificate of authority, the Commissioner must be of the Philippines as its general agent, on whom any notice provided by satisfied that the name of the company is not that of any other $nown law or by any insurance policy, proof of loss, summons & other legal company transacting a similar business in the Philippines, or a name so processes may be served in all actions or other legal proceedings against such company, & consenting that service upon such general agent shall be similar as to be calculated to mislead the public. admitted & held as valid as if served upon the foreign company at its home office. ,ny such foreign company shall, as further condition precedent to Auch certificate of authority shall e(pire on the last day of Cune of each the transaction of insurance business in the Philippines, ma$e & file w- the year & shall be renewed annually if the company is continuing to comply w- Commissioner an agreement or stipulation, e(ecuted by the proper the provisions of this Code or the circulars, instructions, rulings or authorities of said company in form & substance as follows decisions of the Commissioner. Every company receiving any such certificates of authority shall be sub1ect to the provisions of this Code & %"he *name of company+ does hereby stipulate & agree in consideration of other related laws & to the 1urisdiction & supervision of the Commissioner. the permission granted by the Insurance Commissioner to transact business in the Philippines, that if at any time said company shall leave the <o insurance company may be authori/ed to transact in the Philippines the Philippines, or cease to transact business therein, or shall be without any business of life & non>life insurance concurrently unless specifically agent in the Philippines on whom any notice, proof of loss, summons, or authori/ed to do so. Provided, "hat the terms %life% & %non>life% insurance legal process may be served, then in any action or proceeding arising out shall be deemed to include health, accident & disability insurance. any business or transaction w-c occurred in the Philippines, service of any notice provided by law, or insurance policy, proof of loss, summons, or <o insurance company shall have e)uity in an ad1ustment company & other legal process may be made upon the Insurance Commissioner shall neither shall an ad1ustment company have an e)uity in an insurance have the same force & effect as if made upon the company.% company. 'henever such service of notice, proof of loss, summons, or other legal Insurance companies & ad1ustment companies presently affected by the process shall be made upon the Commission, he must, within ten days above provision shall have two years fr. the effectivity of this #ecree within thereafter, transmit by mail, postage paid, a copy of such notice, proof of w-c to divest of their stoc$holdings. *,s amended by Presidential #ecree loss, summons, or other legal process to the company at its home or <o. !344+. principal office. "he sending of such copy by the Commissioner shall be a necessary part of the service of the notice, proof of loss, or other legal SECTION !77. E(cept as provided in section two hundred eighty>one, process. no domestic insurance company shall, in a stoc$ corporation, engage in business in the Philippines unless possessed of a paid>up capital stoc$ SECTION !9!. <o insurance company organi/ed or e(isting under the e)ual to at least five million pesos. Provided, "hat a domestic insurance government or laws other than those of the Philippines shall engage in company already doing business in the Philippines w- a paid>up capital business in the Philippines unless possessed of paid>up unimpaired capital stoc$ w-c is less than five million pesos shall have a paid>up capital stoc$ or assets & reserve not less than that herein re)uired of domestic of at least three million pesos by #ecember thirty>one, nineteen hundred insurance companies, nor until it shall have deposited w- the seventy>eight, four million pesos by #ecember thirty>one, nineteen hundred Commissioner for the benefit & security of the policyholders & creditors of seventy>nine & five million pesos by #ecember thirty>one, nineteen such company in the Philippines, securities satisfactory to the

The Insurance Code

Commissioner consisting of good securities of the Philippines, including new issues of stoc$ of %registered enterprises%, as this term is defined in Eepublic ,ct <o. 4!75, otherwise $nown as the Investment Incentives ,ct, as amended, to the actual mar$et value of not less than the minimum paid>up capital re)uired of domestic insurance companies Provided, "hat at least fifty per centum of such securities shall consist of bonds or other evidences of debt of the ?overnment of the Philippines, its political subdivisions & instrumentalities, or of government>owned or controlled corporations & entities, including the Central =an$. "he total investment of a foreign insurance company in any registered enterprise shall not e(ceed twenty per centum of the net worth of said foreign insurance company nor twenty per centum of the capital of the registered enterprise, unless previously authori/ed in writing by the Commissioner. For purposes of this Code, the net worth of a foreign insurance company shall refer only to its net worth in the Philippines. SECTION !9&. "he Commissioner shall hold the securities, deposited as aforesaid, for the benefit & security of all the policyholders of the 0. company depositing the same, but shall as long as the company is solvent, permit the company to collect the interest or dividends on the securities so deposited, &, fr. time to time, w- his assent, to withdraw any of such securities, upon depositing w- said Commissioner other li$e securities, the mar$et value of w-c shall be e)ual to the mar$et value of such as may be withdrawn. In the event of any company ceasing to do business in the 3. Philippines the securities deposited as aforesaid shall be returned upon the company2s ma$ing application therefor & proving to the satisfaction of the Commissioner that it has no further liability under any of its policies in the Philippines. 4. SECTION !90. Every foreign company doing business in the Philippines shall set aside an amount corresponding to the legal reserves of the policies written in the Philippines & invest & $eep the same therein in accordance w- the provisions of this section. "he legal reserve therein 5. re)uired to be set aside shall be invested only in the classes of the Philippine securities described in section two hundred. Provided, however, "hat no investment in stoc$s or bonds of any single entity shall, in the aggregate e(ceed twenty per centum of the net worth of the investing company or twenty per centum of the capital of the issuing company, w-cever is the lesser unless otherwise approved in writing by the Commissioner. "he securities purchased & $ept in the Philippines under this section, shall not be sent out of the territorial 1urisdiction of the Philippines without the written consent of the Commissioner. Title II MARGIN OF INSOLVENCY SECTION !93. ,n insurance company doing business in the Philippines shall at all times maintain a margin of solvency w-c shall be an e(cess of the value of its admitted assets e(clusive of its paid>up capital, in the case of a domestic company, or an e(cess of the value of its admitted assets in the Philippines, e(clusive of its security deposits, in the case of a foreign company, over the amount of its liabilities, unearned premium & reinsurance reserves in the Philippines of at least two per mille of the total amount of its insurance in force as of the preceding calendar year on all policies, e(cept term insurance, in the case of a life insurance company, or of at least ten per centum of the total amount of its net premium written during the preceding calendar year, in the case of a company other than a life insurance company. Provided, "hat in either case, such margin shall in no event be less than five hundred thousand pesos. & Provided, further, "hat the term %paid>up capital% shall not include contributed surplus & capital paid in e(cess of par value. Auch assets, liabilities & reserves shall e(clude assets, liabilities & reserves included in separate accounts established in accordance w- section two hundred thirty>seven. 'henever the aforementioned margin be found to be less than that herein re)uired to be maintained, the Commissioner shall forthwith direct the company to ma$e good any such deficiency by cash, to be contributed by all stoc$holders of record in proportion to their respective interest, & paid to the treasurer of the company, within fifteen days fr. receipt of the order. Provided, "hat the company in the interim shall not be permitted to ta$e any new ris$ of any $ind or character unless & until it ma$e good any such deficiency. Provided, further, that a stoc$holder who aside fr. paying the contribution due fr. him, pays the contribution due fr. the another stoc$holder by reason of the failure or refusal of the latter to do so, shall have a lien on the certificates of stoc$ of the insurance company concerned appearing in its boo$s in the name of the defaulting stoc$holder on the date of default, as well as on any interests or dividends that have accrued or will accrue to the said certificates of stoc$, until the corresponding payment or reimbursement is made by the defaulting stoc$holder. *,s amended by Presidential #ecree <o. !344+ Title III ASSETS SECTION !95. In any determination of the financial condition of any insurance company doing business in the Philippines, there shall be allowed & admitted as assets only such assets owned by the insurance company concerned & w-c consist of !. Cash in the possession of the insurance company or in transit under its control, & the true & duly verified balance of any deposit of such company in a financially sound commercial ban$ or trust company. Investments in securities, including money mar$et instruments, & in real property ac)uired or held in accordance w- & sub1ect to the applicable provisions of this Code & the income reali/ed therefr. or accrued thereon. Boans granted by the insurance company concerned to the e(tent of that portion thereof ade)uately secured by non>speculative assets w- readily reali/able values in accordance w- & sub1ect to the limitations imposed by applicable provisions of this Code. Policy loans & other policy assets & liens on policies, contracts or certificates of a life insurance company, in an amount not e(ceeding legal reserves & other policy liabilities carried on each individual life insurance policy, contract or certificate. "he net amount of uncollected & deferred premiums & annuity considerations in the case of a life insurance company w-c carries the full mean tabular reserve liability. Eeinsurance recoverable by the ceding insurer *a+ fr. an insurer authori/ed to transact business in this country, the full amount thereof. or *b+ fr. an insurer not authori/ed in this country, in an amount not e(ceeding the liabilities carried by the ceding insurer for amounts withheld under a reinsurance treaty w- such unauthori/ed insurer as security for the payment of obligations thereunder if such funds are held sub1ect to withdrawal by, & under the control of, the ceding insurer. "he Commissioner may prescribe the conditions under w-c a ceding insurer may be allowed credit, as an asset or as a deduction fr. loss & unearned premium reserves, for reinsurance recoverable fr. an insurer not authori/ed in this country but w-c presents satisfactory evidence that it meets the applicable standards of solvency re)uired in this country. Funds withheld by a ceding insurer under a reinsurance treaty, provided reserves for unpaid losses & unearned premiums are ade)uately provided. #eposits or amounts recoverable fr. underwriting associations, syndicates & reinsurance funds, or fr. any suspended ban$ing institution, to the e(tent deemed by the Commissioner to be available for the payment of losses & claims & values to be determined by him. Electronic data processing machines, as may be authori/ed by the Commissioner to be ac)uired by the insurance company concerned, the ac)uisition cost of w-c to be amorti/ed in e)ual annual amounts within a period of five years fr. the date of ac)uisition thereof. ;ther assets, not inconsistent w- the provisions of paragraphs ! to 9 hereof, w-c are deemed by the Commissioner to be readily reali/able & available for the payment of losses & claims at values to be determined by him.

&.

6.

7.

9.

!:.

SECTION !96. In addition to such assets as the Commissioner may fr. time to time determine to be non>admitted assets of insurance companies doing business in the Philippines, the following assets shall in no case be allowed as admitted assets of an insurance company doing business in the Philippines, in any determination of its financial condition !. ?oodwill, trade names, & other li$e intangible assets. Prepaid or deferred charges for e(penses & commissions paid by such insurance company. ,dvances to officers *other than policy loans+, w-c are not ade)uately secured & w-c are not previously authori/ed by the Commissioner, as well as advances to employees, agents, & other persons on mere personal security. Ahares of stoc$ of such insurance company, owned by it, or any e)uity therein as well as loans secured thereby, or any proportionate interest in such shares of stoc$ through the ownership by such insurance company of an interest in another corporation or business unit. Furniture, furnishing, fi(tures, stationery, literature, & supplies. safes, e)uipment, library,

&. SECTION !94. <o domestic insurance corporation shall declare or distribute any dividend on its outstanding stoc$s e(cept fr. profits attested in a sworn statement to the Commissioner by the president or treasurer of 0. the corporation to be remaining on hand after retaining unimpaired *a+ *b+ *c+ *d+ *e+ "he entire paid>up capital stoc$. "he margin of solvency re)uired by section one hundred 3. ninety>four. In the case of life insurance corporation, the legal reserve fund re)uired by section two hundred eleven. In the case of corporations other than life, the legal reserve fund re)uired by section two hundred thirteen. , sum sufficient to pay all net losses reported, or in the course of settlement, & all liabilities for e(penses & ta(es. 4. 5. 6.

Items of ban$ credits representing chec$s, drafts or notes returned unpaid after the date of statement. "he amount, if any, by w-c the aggregate value of investments as carried in the ledger assets of such insurance company e(ceeds the aggregate value thereof as determined in accordance w- the provisions of this Code &-or the rules of the Commissioner.

,ny dividend declared or distributed under the preceding paragraph shall be reported to the Commissioner within thirty days after such declaration or distribution. If the Commissioner finds that any such corporation has declared or distributed any such dividend in violation of this section, he may order such corporation to cease & desist fr. doing business until the amount of such dividend or the portion thereof in e(cess of the amount allowed under this section has been restored to said corporation.

,ll non>admitted assets & all other assets of doubtful value or character included as ledger or non>ledger assets in any statement submitted by an insurance company to the Commissioner, or in any insurance e(aminer2s report to him, shall also be reported, to the e(tent of the value disallowed

The Insurance Code

as deductions fr. the gross assets of such insurance company, e(cept where the Commissioner permits a reserve to be carried among the liabilities of such insurance company in lieu of any such deduction. Title IV INVESTMENTS SECTION !97. <o insurance company shall loan any of its money or deposits to any person, corporation or association, e(cept upon first mortgage or deeds of trust of unencumbered, improved or unimproved real estate, including condominiums, in cities & centers of population of municipalities in the Philippines when the amount of such loan is not in e(cess of seventy per centum of the mar$et value of such real estate. or upon the security of first mortgages or deeds of trust of actually cultivated, improved & unencumbered agricultural lands in the Philippines when the *f+ amount of such loan is not in e(cess of forty per centum of the mar$et value of such land. or upon the purchase money mortgages or li$e securities received by it upon the sale or e(change of real property ac)uired pursuant to sections two hundred & two hundred two. or upon bonds or other evidences of debt of the ?overnment of the Philippines or its political subdivisions authori/ed by law to issue bonds, or upon bonds or other evidences of debt of government>owned or controlled corporations & instrumentalities including the Central =an$ or upon obligations issued or guaranteed by the International =an$ for Eeconstruction & #evelopment. or upon stoc$s, bonds or other evidences of debt as are specified in *g+ section two hundred. , life insurance company, however, may lend to any of its policyholders upon the security of the value of its policy such sum as may be determined pursuant to the provisions of the policy. Boans granted upon the security of real estate for a period longer than five *h+ years shall be amorti/ed in monthly, )uarterly, semi>annual or annual installments. Provided, "hat no such loans shall have a maturity in e(cess of twenty years. "he phrase %improved real estate% used above is hereby defined to mean land w- permanent building or buildings erected or being erected thereon. E(cept as otherwise approved by the Commissioner, in case the building *i+ or buildings on land do not belong to the owner of the latter, no loan shall be granted on the security of the real estate in )uestion unless both the owner of the building or buildings & the owner of the land sign the deed of mortgage, & unless the owner of the land is the ?overnment of the Philippines or one of its political subdivisions, in w-c event the owner is not re)uired to sign the deed of mortgage. *1+ SECTION !99. <o loan by any insurance company on the security of real estate shall be made unless the title to such real estate shall have first been registered in accordance w- the e(isting Band Eegistration ,ct, or shall be a titulo real duly registered, or have been previously registered under the provisions of the e(isting Mortgage Baw. SECTION &::. *!+ ,n insurance company may purchase, hold, own & convey such property, real & personal, as may have been mortgaged, pledged, or conveyed to it in good faith in trust for its benefit by reason of money loaned by it in pursuance of the regular business of the company, & such real or personal property as may have been purchased by it at sales under pledges, mortgages or deeds of trust for its benefit on account of money loaned by it. & such real & personal property as may have been conveyed to it by borrowers in satisfaction & discharge of loans made by the company to them Provided, however, "hat any real estate purchased by an insurance company in payment or by reason of any loan made by it shall be sold by the company within twenty years after the title thereto has been vested in it. entity or its predecessors has paid regular dividends upon its preferred or guaranteed stoc$s for a period of at least three years ne(t preceding the date of investment in such preferred or guaranteed stoc$. Provided, further, "hat if the stoc$s are guaranteed, the amount of stoc$s so guaranteed is not e(cess of fifty per centum of the amount of the preferred or common stoc$s, as the case may be, of the guaranteeing corporation. ,nd provided, finally, "hat no life insurance company shall invest in or loan upon obligations of any one institution in the $inds permitted under this sub>section an amount in e(cess of ten per centum of the total admitted assets of such insurer as of #ecember thirty>first ne(t preceding the date of such investment. Common stoc$s of any solvent corporation or institution created or e(isting under the laws of the Philippines upon w-c regular dividends shall have been paid for the three years ne(t preceding the purchase of such stoc$. Provided, however, "hat no life insurance company shall invest in or loan upon the obligations of any one corporation or institution in the $inds permitted under this sub>section an amount in e(cess of ten per centum of the total admitted assets of such insurer as of #ecember thirty>first ne(t preceding the date of such investment. Certificates, notes & other obligations issued by the trustees or receivers of any institution created or e(isting under the laws of the Philippines w-c, or the assets of w-c, are being administered under the direction of any court having 1urisdiction. Provided, however, "hat such certificates, notes or other obligations are ade)uately secured as to principal & interests. E)uipment trust obligations or certificates w-c are ade)uately secured or other ade)uately secured instruments evidencing an interest in e)uipment wholly or in part within the Philippines. Provided, however, "hat there is a right to receive determined portions of rental, purchase or other fi(ed obligatory payments for the use or purchase of such e)uipment. ,ny obligation of any corporation or institution created or e(isting under the laws of the Philippines w-c is, on the date of ac)uisition by the insurer, ade)uately secured & has )ualities & characteristics wherein the speculative elements are not predominant. Auch other securities as may be approved by the Commissioner.

*0+ ,ny domestic insurer w-c has outstanding insurance, annuity or reinsurance contracts in currencies other than the national currency of the Philippines may invest in, or otherwise ac)uire or loan upon securities & investments in such currency w-c are substantially of the same $inds, classes & investment grades as those eligible for investment under the foregoing subdivisions of this section. but the aggregate amount of such investment & of such cash in such currency w-c is at anytime held by such insurer shall not e(ceed one & one>half times the amount of its reserves & other obligations under such contracts or the amount w-c such insurer is re)uired by the law of any country or possession outside the Eepublic of the Philippines to be invest in such country or possession, w-cever shall be greater. SECTION &:!. ,n insurance company may *!+ invest in e)uities of other financial institutions, & *&+ engage in the buying & selling of short>term debt instruments. Provided, "hat any or all of such investments shall be w- the prior approval of the Commissioner.

SECTION &:&. ,ny life insurance company may *&+ ,n insurance company may purchase, hold, own & convey real & personal property as follows *a+ ,c)uire or construct housing pro1ects &, in connection w- any such pro1ect, may ac)uire land or any interest therein by *a+ "he lot w- building thereon in w-c the company conducts & purchase, lease or otherwise, or use land ac)uired pursuant to carries on its business. any other provision of this Code. Auch company may thereafter own, maintain, manage, collect or receive income fr., or sell & convey, any land or interest therein so ac)uired & any *b+ =onds or other evidences of debt of the ?overnment of the improvements thereon. "he aggregate boo$ value of the Philippines or its political subdivisions authori/ed by law to issue investments of any such company in all such pro1ects shall not bonds at the reasonable mar$et value thereof. e(ceed at the time of such investments twenty five per centum of the total admitted assets of such company on the thirty>first day *c+ =onds or other evidences of debt of the government>owned or of #ecember ne(t preceding. controlled corporations & entities, including the Central =an$. *d+ =onds, debentures or other evidences of indebtedness of any solvent corporations or institution created or e(isting under the laws of the Philippines. Provided, however, "hat the issuing, assuming or guaranteeing entity or its predecessors shall not have defaulted in the payment of interest on any of its securities & that during each of any three including the last two of the five fiscal years ne(t preceding the date of ac)uisition by such insurance company of such bonds, debentures, or other evidences of indebtedness, the net earnings of the issuing, assuming or guaranteeing institution available for its fi(ed charges, as hereinafter defined, shall have been not less than one & one>)uarter times the total of its fi(ed charges for such year. & provided, further, that no life insurance company shall invest in or loan upon the obligations of any one institution in the $inds permitted under this sub>section an amount in e(cess of twenty>five per centum of the total admitted assets of such insurer as of #ecember thirty>first ne(t preceding the date of such investment. *b+ ,c)uire real property, other than property to be used primarily for providing housing & property for accommodation of its own business, as an investment for the production of income, or may ac)uire real property to be improved or developed for such investment purpose pursuant to a program therefor, sub1ect to the condition that the cost of each parcel of real property so ac)uired under the authority of this paragraph *b+, including the estimated cost to the company of the improvement or development thereof, when added to the boo$ value of all other real property held by its pursuant to this paragraph *b+, shall not e(ceed twenty>five per centum of its admitted assets as of the thirty>first day of #ecember ne(t preceding.

,s used in this sub>section the term %net earnings available for fi(ed charges% shall mean net income after deducting operating & maintenance e(penses, ta(es other than income ta(es, depreciation & depletion. but e(cluding e(traordinary non>recurring items of income or e(pense appearing in the regular financial statement of the issuing, assuming or guaranteeing institution. "he term %fi(ed charges% shall include interest on funded & unfunded debt, amorti/ation of debt discount, & rentals for leased properties. *e+

SECTION &:0. Every domestic insurance company shall, to the e(tent of an amount e)ual in value to twenty>five per centum of the minimum paid>up capital re)uired under section one hundred eighty>eight, invest its funds only in securities, satisfactory to the Commissioner, consisting of bonds or other evidences of debt of the ?overnment of the Philippines or its political subdivisions or instrumentalities, or of government>owned or controlled corporations & entities, including the Central =an$ of the Philippines. Provided, "hat such investments shall at all times be maintained free fr. any lien or encumbrance. & Provided, further, "hat such securities shall be deposited w- & held by the Commissioner for the faithful performance by the depositing insurer of all its obligations under its insurance contracts. "he provisions of section one hundred ninety>two shall, so far as practicable, apply to the securities deposited under this section.

E(cept as otherwise provided in this Code, no 1udgment creditor or other Preferred or guaranteed stoc$s of any solvent corporation or claimant shall have the right to levy upon any of the securities of the institution created or e(isting under the laws of the Philippines. insurer held on deposit under this section or held on deposit pursuant to Provided, however, "hat the issuing, assuming or guaranteeing the re)uirement of the Commissioner. *,s amended by Presidential

The Insurance Code

#ecree <o. !344+ SECTION &:3. ,fter satisfying the re)uirements contained in the preceding section, any domestic non>life insurance company, shall invest, to an amount prescribed below, its funds in, or otherwise, ac)uire or loan upon, only the classes of investments described in section two hundred, *3+ including securities issued by any %registered enterprise%, as this term is defined in Eepublic ,ct <o. 4!75, otherwise $nown as the Investment Incentives ,ct, & such other classes of investments as may be authori/ed by the Commissioner for purposes of this section. Provided, "hat *a+ no more than twenty per centum of the net worth of such company as shown by its latest financial statement approved by the Commissioner shall be invested in the lot & building in w-c the insurance company conducts its business & *b+ the total investment of an insurance company in any registered enterprise shall not e(ceed twenty per centum of the net worth of said insurance company as shown by its aforesaid financial statement nor twenty per centum of the paid>up capital of the registered enterprise *4+ e(cluding the intended investment, unless previously authori/ed by the Commissioner. &, Provided, further, "hat such investments free fr. any lien or encumbrance, shall be at least e)ual in amount to the aggregate amount of *a+ its legal reserve, as provided in section two hundred thirteen, & *b+ its reserve fund held for reinsurance as provided for in the pertinent treaty provision in the case of reinsurance ceded to authori/ed insurers. *,s amended by Presidential #ecree <o. !344+ SECTION &:4. ,fter satisfying the re)uirements contained in sections one hundred ninety>one, one hundred ninety>three, two hundred three & *5+ two hundred four, any non>life insurance company may invest any portion of its funds representing earned surplus in any of the investments described in sections one hundred ninety>eight, two hundred & two hundred one, or in any securities issued by a %registered enterprise% mentioned in the preceding sections. Provided, "hat no investment in stoc$s or bonds of any single entity shall in the aggregate, e(ceed twenty per centum of the net worth of the insurance company as shown in its latest financial statement approved by the Commissioner or twenty per centum of the paid>up capital of the issuing company, w-cever is lesser, *6+ unless otherwise approved by the Commissioner. SECTION &:5. ,fter satisfying the minimum capital investment re)uired in section two hundred three, any life insurance company may invest its legal policy reserve, as provided in section two hundred eleven or in section two hundred twelve, in any of the classes of securities or types of investments described in sections one hundred ninety>eight, two hundred, two hundred one & two hundred two, sub1ect to the limitations therein contained, & in any securities issued by any %registered enterprise% mentioned in section two hundred four, free fr. any lien or encumbrance, in such amounts as may be approved by the Commissioner. Auch company may li$ewise invest any portion of its earned surplus in the aforesaid securities or investments sub1ect to the aforesaid limitations. SECTION &:6. ,ny investment made in violation of the applicable provisions of this title shall be considered non>admitted assets. SECTION &:7. *!+ foregoing provisions, an insurer may, at its option, value its holdings of stoc$ in a subsidiary insurance company in an amount not less than ac)uisition cost if such ac)uisition cost is less than the value determined as hereinbefore provided. Eeal estate re)uired by foreclosure or by deed in lieu thereof, in the absence of a recent appraisal deemed by the Commissioner to be reliable, shall not be valued at an amount greater than the unpaid principal of the defaulted loan at the date of such foreclosure or deed, together w- any ta(es & e(penses paid or incurred by such insurer at such time in connection w- such ac)uisition, & the cost of additions or improvements thereafter paid by such insurer & any amount or amounts thereafter paid by such insurer on any assessments levied for improvements in connection w- the property. Purchase money mortgages received on dispositions of real property held pursuant to section one hundred ninety>eight shall be valued in an amount e)uivalent to ninety per centum of the value of such real property. Purchase money mortgages received on disposition of real property otherwise held shall be valued in an amount not e(ceeding ninety per centum of the value of such real property as determined by an appraisal made by an appraiser at or about the time of disposition of such real property. "he stoc$ of a subsidiary of an insurer shall be valued on the basis of the greater of *i+ the value of only such subsidiary of the assets of such subsidiary as would constitute lawful investments for the insurer if ac)uired or held directly by the insurer or *ii+ such other value determined pursuant to standards & cumulative limitations, contained in a regulation to be promulgated by the Commissioner. <otwithstanding any provision contained in this section or elsewhere in this chapter, if the Commissioner find that the interests of policyholders so permit or re)uire, he may permit or re)uire any class or classes of insurers authori/ed to do business in this country to value their investments or any class or classes thereof as of any date heretofore or hereafter in accordance w- any applicable valuation or method.

SECTION &:9. It shall be the duty of the officers of the insurance company to report within the first fifteen days of every month all such investments as may be made by them during the preceding month, & the Commissioner may, if such investments or any of them seem in1udicious to him, re)uire the sale or disposal of the same. "he report shall also include a list of investments sold or disposed of by the company during the same period. Title V RESERVES

*&+

*0+

SECTION &!:. Every life insurance company, doing business in the Philippines, shall annually ma$e a valuation of all policies, additions thereto, unpaid dividends, & all other obligations outstanding on the ,ll bonds or other evidences of indebtedness having a fi(ed term thirty>first day of #ecember of the preceding year. ,ll such valuations shall & rate of interest & held by any life insurance company be made upon the net premiums basis, according to the standard adopted authori/ed to do business in this country, if amply secured & if by the company, w-c standard shall be stated in its annual report. not in default as to principal or interest, shall be valued as follows If purchased at par, at the par value. if purchased above or below par, on the basis of the purchase price ad1usted so as Auch standard of valuation whether of the net level premium, full to bring the value to par at maturity & so as to yield in the preliminary term, any modified preliminary term, or select & ultimate meantime the effective rate of interest at w-c the purchase was reserve basis, shall be according to a standard table of mortality w- interest made, or in the discretion of the Commissioner, on the basis of at not more than si( per centum compound interest. 'hen the preliminary the method of calculation commonly $nown as the pro>rata term basis is used, the term insurance shall be limited to the first policy method. In applying the foregoing rule the purchase price shall in year. no case be ta$en at a higher figure than the actual mar$et value at the time of ac)uisition. "he Commissioner shall have the "he results of such valuations shall be reported to the Commissioner on or power to determine the eligibility of any such investments for before the thirtieth day of ,pril of each year accompanied by a sworn valuation on the basis of amorti/ation, & may by regulation statement of the company2s actuary certifying to the figures & stating upon prescribe or limit the classes of securities so eligible for what mortality table it is based, upon what rate of interest the valuation is amorti/ation. ,ll bonds or other evidences of indebtedness w-c made, & the methods used in arriving at the result obtained. in the 1udgment of the Commissioner are not amply secured shall not be eligible for amorti/ation & shall be valued in SECTION &!!. "he aggregate net value so ascertained of the policies accordance w- paragraph two. "he Commissioner may, if he of such company shall be deemed its reserve liability, to provide for w-c it finds that the interest of policy holders so permit or re)uire, by shall hold funds in secure investments e)ual to such net value, above all official regulation permit or re)uire any class or classes of its other liabilities. & it shall be the duty of the Commissioner, after having insurers, other than life insurance companies, authori/ed to do verified, to such an e(tent as he may deem necessary, the valuation of all business in this country, to value their bonds or other evidences policies in force, to satisfy himself that the company has such amount in of indebtedness in accordance w- the foregoing rule. safe legal securities after all other debts & claims against it have been provided for. "he investments of all insurers authori/ed to do business in this country, e(cept securities sub1ect to amorti/ation & e(cept as "he reserve liability for variable contracts defined in section two hundred otherwise provided in this chapter, shall be valued, in the thirty>two shall be established in accordance w- actuarial procedures that discretion of the Commissioner, at their mar$et value, or at their recogni/e the variable nature of the benefits provided, & shall be approved appraised value, or at prices determined by him as representing by the Commissioner. their fair mar$et value. If the Commissioner finds that in view of the character of investments of any insurer authori/ed to do Every domestic life insurance company, conducted on business in this country it would be prudent for such insurer to SECTION &!&. establish a special reserve for possible losses or fluctuations in the mutual plan or a plan in w-c policyholders are by the terms of their the values of its investments, he may re)uire such insurer to policies entitled to share in the profits or surplus shall, on all policies of life establish such reserve, reasonable in amount, & may re)uire insurance heretofore or hereafter issued, under the conditions of w-c the that such reserve be maintained & reported in any statement or distribution of surplus is deferred to a fi(ed or specified time & contingent report of the financial condition of such insurer. "he upon the policy being in force & the insured living at that time, annually Commissioner may, in connection w- any e(amination or ascertain the amount of the surplus to w-c all such policies as separate re)uired financial statement of an authori/ed insurer, re)uire class are entitled, & shall annually apportion to such policies as a class the such insurer to furnish him complete financial statements & amount of the surplus so ascertained, & carry the amount of such audited report of the financial condition of any corporation of w-c apportioned surplus, plus the actual interest earnings & accretions to such the securities are owned wholly or partly by such insurer & may fund, as a distinct & separate liability to such class of policies on & for w-c cause an e(amination to be made of any subsidiary or affiliate of the same was accumulated, & no company or any of its officers shall be permitted to use any part of such apportioned surplus fund for any purpose such insurer. whatsoever other than for the e(press purpose for w-c the same was accumulated. "he stoc$ of an insurance company shall be valued at the lesser of its mar$et value or its boo$ value as shown by its last Every insurance company, other than life, shall approved annual statement or the last report on e(amination, SECTION &!0. w-cever is more recent. "he boo$ value of a share of common maintain a reserve for unearned premiums on its policies in force, w-c shall stoc$ of an insurance company shall be ascertained by dividing be charged as a liability in any determination of its financial condition. Auch *a+ the amount of its capital & surplus less the value of all of its reserve shall be e)ual to forty per centum of the gross premiums, less preferred stoc$, if any, outstanding, by *b+ the number of shares returns & cancellations, received on policies or ris$s having not more than of its common stoc$ issued & outstanding. <otwithstanding the a year to run, & pro rata on all gross premiums received on policies or ris$s having more than a year to run. Provided, "hat for marine cargo ris$s the

10

The Insurance Code

reserve shall be e)ual to forty per centum of the premiums written in the policies upon yearly ris$s, & the full amount of the premiums written during the last two months of the calendar year upon all other marine ris$s not terminated. SECTION &!3. In addition to its liabilities & reserves on contracts of insurance issued by it, every insurance company shall be charged w- the estimated amount of all of its other liabilities, including ta(es, e(penses & other obligations due or accrued at the date of statement, & including any special reserves re)uired by the Commissioner pursuant to the provisions of this Code. Title VI LIMIT OF SINGLE RIS# SECTION &!4. <o insurance company other than life, whether foreign or domestic, shall retain any ris$ on any one sub1ect of insurance in an amount e(ceeding twenty per centum of its net worth. For purposes of this section, the term %sub1ect of insurance% shall include all properties or ris$s insured by the same insurer that customarily are considered by non>life company underwriters to be sub1ect to loss or damage fr. the same occurrence of any ha/ard insured against. Eeinsurance ceded as authori/ed under the succeeding title shall be deducted in determining the ris$ retained. ,s to surety ris$, deduction shall also be made of the amount assumed by any other company authori/ed to transact surety business & the value of any security mortgage, pledged, or held sub1ect to the surety2s control & for the surety2s protection. Title VII REINSURANCE TRANSACTIONS SECTION &&&. <o life insurance company doing business in the Philippines shall reinsure its whole ris$ on any individual life or 1oint lives, or substantially all of its insurance in force, without having first obtained the written permission of the Commissioner. Title VIII ANNUAL STATEMENT SECTION &&0. Every insurance company doing business in the Philippines shall terminate its fiscal period on the thirty>first day of #ecember every year, & shall annually on or before the thirtieth day of ,pril of each year render to the Commissioner a statement signed & sworn to by the chief officer of such company showing, in such form & details as may be prescribed by the Commissioner, the e(act condition of its affairs on the preceding thirty>first day of #ecember. ,ny entry in the statement w-c is found to be false shall constitute a misdemeanor & the officer signing such statement shall be sub1ect to the penalty provided for under section four hundred nineteen. SECTION &&3. Every insurance company authori/ed under title ten of this chapter to issue, deliver or use variable contracts shall annually file wthe Commissioner separate annual statement of its separate variable accounts. Auch statement shall be on a form prescribed or approved by the Commissioner & shall include details as to all of the income, disbursements, assets & liability items of & associated w- the said separate variable accounts. Aaid statement shall be under oath of two officers of the company & shall be filed simultaneously w- the annual statement re)uired by the preceding section.

SECTION &&4. 'ithin thirty days after receipt of the annual statement SECTION &!5. ,n insurance company doing business in the approved by the Commissioner, every insurance company doing business Philippines may accept reinsurances only of such ris$s, & retain ris$ in the Philippines shall publish in two newspapers of general circulation in the City of Manila, one published in English & one in Pilipino, a full thereon within such limits, as it is otherwise authori/ed to insure. sypnosis of its annual financial statement showing fully the conditions of its business, & setting forth its resources & liabilities. SECTION &!6. <o insurance company doing business in the Philippines shall cede all or part of any ris$s situated in the Philippines by Title IX POLICY FORMS way of reinsurance directly to any foreign insurer not authori/ed to do business in the Philippines unless such foreign insurer or, if the services of a non>resident bro$er are utili/ed, such non>resident bro$er is represented SECTION &&5. <o policy, certificate or contract of insurance shall be in the Philippines by a resident agent duly registered w- the Commissioner issued or delivered within the Philippines unless in the form previously as re)uired in this Code. approved by the Commissioner, & no application form shall be used w-, & no rider, clause, warranty or endorsement shall be attached to, printed or "he resident agent of such unauthori/ed foreign insurer or non> resident stamped upon such policy, certificate or contract unless the form of such bro$er shall immediately upon registration furnish the Commissioner w- the application, rider, clause, warranty or endorsement has been approved by annual statement of such insurer, or of such company or companies where the Commissioner. such bro$er may place Philippine business as of the year preceding such registration, & annually thereafter as soon as available. SECTION &&6. In the case of individual life or endowment insurance, the policy shall contain in substance the following conditions SECTION &!7. ,ll insurance companies, both life & non>life, authori/ed to do business in the Philippines shall cede their e(cess ris$s to *a+ , provision that the policyholder is entitled to a grace period other companies similarly authori/ed to do business in the Philippines in either of thirty days or of one month within w-c the payment of such amounts & under such arrangements as would be consistent wany premium after the first may be made, sub1ect at the option of sound underwriting practices before they enter into reinsurance the insurer to an interest charge not in e(cess of si( per centum arrangements w- unauthori/ed foreign insurers. per annum for the number of days of grace elapsing before the payment of the premium, during w-c period of grace the policy shall continue in full force, but in case the policy becomes a SECTION &!9. ,ny insurance company doing business in the claim during the said period of grace before the overdue Philippines desiring to cede their e(cess ris$s to foreign insurance or premium is paid, the amount of such premium w- interest may de reinsurance companies not authori/ed to transact business in the deducted fr. the amount payable under the policy in settlement. Philippines may do so under the following conditions *!+ E(cept in facultative reinsurance & e(cess of loss covers, the full *b+ amount of the reserve fund re)uired by law shall be set up in the boo$s of & held by the ceding company for so long as the ris$ concerned is in force. Provided, "hat in case of facultative insurance, the ceding company shall show to the satisfaction of the Commissioner that the Philippine mar$et cannot provide the facilities sought abroad. *c+ "he reserve fund withheld shall be invested in bonds or other evidences of debt of the ?overnment of the Philippines or its political subdivisions or instrumentalities, or of government>owned or controlled corporations & entities, including the Central =an$, &-or other securities acceptable under section two hundred. , provision that the policy shall be incontestable after it shall have been in force during the lifetime of the insured for a period of two years fr. its date of issue as shown in the policy, or date of approval of last reinstatement, e(cept for non>payment of premium & e(cept for violation of the conditions of the policy relating to military or naval service in time of war. , provision that the policy shall constitute the entire contract between the parties, but if the company desires to ma$e the application a part of the contract it may do so provided a copy of such application shall be indorsed upon or attached to the policy when issued, & in such case the policy shall contain a provision that the policy & the application therefor shall constitute the entire contract between the parties. , provision that if the age of the insured is considered in determining the premium & the benefits accruing under the policy, & the age of the insured has been misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age. If the policy is participating, a provision that the company shall periodically ascertain & apportion any divisible surplus accruing on the policy under conditions specified therein. , provision specifying the options to w-c the policyholder is entitled to in the event of default in a premium payment after three full annual premiums shall have been paid. Auch option shall consist of , cash surrender value payable upon surrender of the policy w-c shall not be less than the reserve on the policy, the basis of w-c shall be indicated, for the then current policy year & any dividend additions thereto, reduced by a surrender charge w-c shall not be more than one>fifth of the entire reserve or two & one>half per centum of the amount insured & any dividend additions thereto. ;ne or more paid>up benefits on a plan or plans specified in the policy of such value as may be purchased by the cash surrender value. , provision that at anytime after a cash surrender value is available under the policy & while the policy is in force, the company will advance, on proper assignment or pledge of the policy & on sole security thereof, a sum e)ual to, or at the option of the owner of the policy, less than the cash surrender value on the policy, at a specified rate of interest, not more than the

*&+

Ahould any reinsurance agreement be for any reason cancelled or *d+ terminated, the ceding company concerned shall inform the Commissioner in writing of such cancellation or termination within thirty days fr. the date of such cancellation or termination or fr. the date notice or information of such cancellation or termination is received by such company as the case may be. *e+ SECTION &&:. Every insurance company authori/ed to do business in the Philippines shall report to the Commissioner on forms prescribed by him the particulars of reinsurance treaties as of the first day of Canuary of the year following the approval of this Code & shall thereafter similarly *f+ report to the Commissioner particulars of any new treaties or changes in e(isting treaties. SECTION &&!. <o credit shall be allowed as an admitted asset or as a deduction fr. liability, to any ceding insurer for reinsurance made, ceded, *!+ renewed, or otherwise becoming effective after Canuary first, nineteen hundred seventy>five, unless the reinsurance shall be payable by the assuming insurer on the basis of the liability of the ceding insurer under the contract or contracts reinsured without diminution because of the insolvency of the ceding insurer nor unless under the contract or contracts of reinsurance the liability for such reinsurance is assumed by the assuming insurer or insurers as of the same effective date. nor unless the *&+ reinsurance agreement provides that payments by the assuming insurer shall be made directly to the ceding insurer or to its li)uidator, receiver, or statutory successor e(cept *a+ where the contract specifically provides another payee of such reinsurance in the event of the insolvency of the ceding insurer & *b+ where the assuming insurer w- the consent of the *g+ direct insured or insureds has assumed such policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under such policies & in substitution for the obligations of the ceding insurer to such payees.

11

The Insurance Code

ma(imum allowed by law, to be determined by the company fr. time to time, but not more often than once a year, sub1ect to the approval of the Commissioner. & that the company will deduct fr. such loan value any e(isting indebtedness on the policy & any unpaid balance of the premium for the current policy year, & may collect interest in advance on the loan to the end of the current policy year, w-c provision may further provide that such loan may be deferred for not e(ceeding si( months after the application therefor is made. *h+ *!+ , table showing in figures cash surrender values & paid>up options available under the policy each year upon default in premium payments, during at least twenty years of the policy beginning w- the year in w-c the values & options first become available, together w- a provision that in the event of the failure *&+ of the policyholder to elect one of the said options within the time specified in the policy, one of said options shall automatically ta$e effect & no policyholder shall ever forfeit his right to same by reason of his failure to so elect. In case the proceeds of a policy are payable in installments or as an annuity, a table showing the minimum amounts of the installments or annuity payments. , provision that the policyholder shall be entitled to have the policy reinstated at any time within three years fr. the date of default of premium payment unless the cash surrender value has been duly paid, or the e(tension period has e(pired, upon production of evidence of insurability satisfactory to the company & upon payment of all overdue premiums & any indebtedness to the company upon said policy, w- interest rate not e(ceeding that w-c would have been applicable to said premiums & indebtedness in the policy years prior to reinstatement. *i+ employment or of membership in the class or classes eligible for coverage under the policy, such person shall be entitled to have issued to him by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits, provided application for the individual policy & payment of the first premium to the insurer shall be made within thirty days after such termination & provided further that the individual policy shall be on any one of the forms, e(cept term insurance, then customarily issued by the insurer at the age & for an amount not in e(cess of the coverage under the group policy. & the premium on the individual policy shall be at the insurer2s then customary rate applicable to the form & amount of the individual policy, to the class of ris$ to w-c such person then belongs, & to his age attained on the effective date of the individual policy. , provision that if the group policy terminates or is amended so as to terminate the insurance of any class of insured persons, every person insured thereunder at the date of such termination whose insurance terminates & who has been so insured for five years prior to such termination date shall be entitled to have issued to him by the insurer an individual policy of life insurance sub1ect to the same limitations as set forth in paragraph *h+, e(cept that the group policy may provide that the amount of such individual policy shall not e(ceed the smaller of *a+ the amount of the person2s life insurance protection ceasing less the amount of any life insurance for what he is or becomes eligible under any group policy issued or reinstated by the same or another reinsurer within thirty days after such termination, & *b+ two thousand pesos. , provision that if a person insured under the group policy dies during the thirty>day period within w-c he would have been entitled to an individual policy issued to him in accordance w- *h+ & *i+ above & before such individual policy shall have become effective, the amount of life insurance w-c he would have been entitled to have issued to him as an individual policy shall be payable as a claim under the group policy whether or not application for the individual policy or the payment of the first premium has been made. In the case of a policy issued to a creditor to insure debtors of such creditor, a provision that the insurer will furnish to the policyholder for delivery to each debtor insured under the policy a form w-c will contain a statement that the life of the debtor is insured under the policy & that any death benefit paid thereunder by reason of his death shall be applied to reduce or e(tinguish indebtedness.

*i+

*1+

,ny of the foregoing provisions or portions thereof not applicable to single *1+ premium or term policies shall to that e(tent not be incorporated therein. & any such policy may be issued & delivered in the Philippines w-c in the opinion of the Commissioner contains provisions on any one or more of the foregoing re)uirements more favorable to the policyholder than hereinbefore re)uired. "his section shall not apply to policies of group life or industrial life insurance. SECTION &&7. <o policy of group life insurance shall be issued & *$+ delivered in the Philippines unless it contains in substance the following provisions, or provisions w-c in the opinion of the Commissioner are more favorable to the persons insured, or at least as favorable to the persons insured & more favorable to the policy>holders *a+ , provision that the policyholder is entitled to a grace period of either thirty days or of one month for the payment of any premium due after the first, during w-c grace period the death benefit coverage shall continue in force, unless the policyholder shall have given the insurer written notice of discontinuance in advance of the date of discontinuance & in accordance w- the terms of the policy. "he policy may provide that the policyholder shall be liable for the payment of a pro rata premium for the time the policy is in force during such grace period. , provision that the validity of the policy shall not be contested, e(cept for non>payment of premiums after it has been in force for two years fr. its date of issue. & that no statement made by any insured under the policy relating to his insurability shall be used in contesting the validity of the insurance w- respect to w-c such statement was made after such insurance has been in force prior to the contest for a period of two years during such person2s lifetime nor unless contained in written instrument signed by him. , provision that a copy of the application, if any, of the policyholder shall be attached to the policy when issued, that all statements made by the policyholder or by persons insured shall be deemed representations & not warranties, & that no statement made by any insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such person or to his beneficiary.

"he provisions of paragraphs *f+ to *1+ shall not apply to policies issued to a creditor to insure his debtors. If a group life policy is on a plan of insurance other than term, it shall contain a non>forfeiture provision or provisions w-c in the opinion of the Commissioner is or are e)uitable to the insured or the policyholder. Provided, "hat nothing herein contained shall be so construed as to re)uire group life policies to contain the same non>forfeiture provisions as are re)uired of individual life policies. SECTION &&9. "he term %industrial life insurance% as used in this Code shall mean that form of life insurance under w-c the premiums are payable either monthly or oftener, if the face amount of insurance provided in any policy is not more than five hundred times that of the current statutory minimum daily wage in the City of Manila, & if the words %industrial policy% are printed upon the policy as part of the descriptive matter. ,n industrial life policy shall not lapse for non>payment of premium if such non>payment was due to the failure of the company to send its representative or agent to the insured at the residence of the insured or at some other place indicated by him for the purpose of collecting such premium. Provided, "hat the provisions of this paragraph shall not apply when the premium on the policy remains unpaid for a period of three months or twelve wee$s after the grace period has e(pired.

*b+

*c+

*d+

*e+

SECTION &0:. In the case of industrial life insurance, the policy shall , provision setting forth the conditions, if any, under w-c the contain in substance the following provisions insurer reserves the right to re)uire a person eligible for insurance to furnish evidence of individual insurability *a+ , provision that the insured is entitled to a grace period of four satisfactory to the insurer as a condition to part or all of his wee$s within w-c the payment of any premium after the first may coverage. be made, e(cept that where premiums are payable monthly, the period of grace shall be either one month or thirty days. & that during the period of grace, the policy shall continue in full force, , provision specifying an e)uitable ad1ustment of premiums or of but if during such grace period the policy becomes a claim, then benefits or of both to be made in the event that the age of a any overdue & unpaid premiums may be deducted fr. any person insured has been misstated, such provision to contain a amount payable under the policy in settlement. clear statement of the method of ad1ustment to be used. , provision that any sum becoming due by reason of death of *b+ the person insured shall be payable to the beneficiary designated by the insured, sub1ect to the provisions of the policy in the event that there is no designated beneficiary, as to all or any part of such sum, living at the death of the insured, & sub1ect to any right reserved by the insurer in the policy & set forth in the certificate to pay at its option a part of such sum not e(ceeding five hundred pesos to any person appearing to the insurer to be e)uitably entitled thereto by reason of having incurred funeral or other e(penses incident to the last illness or death of the person insured. *c+ , provision that the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to w-c he is entitled, to whom the insurance benefits are payable, & the rights set forth in paragraphs *h+, *i+ & *1+ following. , provision that if the insurance, or any portion of it, on a person covered under the policy ceases because of termination of *d+ , provision that the policy shall be incontestable after it has been in force during the lifetime of the insured for a specified period, not more than two years fr. its date of issue, e(cept for non>payment of premiums & e(cept for violation of the conditions of the policy relating to naval or military service, or services au(iliary thereto, & e(cept as to provisions relating to benefits in the event of disability as defined in the policy, & those granting additional insurance specifically against death by accident or by accidental means, or to additional insurance against loss of, or loss of use of, specific members of the body. , provision that the policy shall constitute the entire contract between the parties, or if a copy of the application is endorsed upon & attached to the policy when issued, a provision that the policy & the application therefor shall constitute the entire contract between the parties, & in the latter case, a provision that all statements made by the insured shall, in the absence of fraud, be deemed representations & not warranties. , provision that if the age of the person insured, or the age of any person, considered in determining the premium, or the

*f+

*g+

*h+

12

The Insurance Code

benefits accruing under the policy, has been misstated, any SECTION &0!. <o policy of industrial life insurance shall be issued or amount payable or benefit accruing under the policy shall be delivered in the Philippines if it contains any of the following provisions such as the premium paid would have purchased at the correct age. *a+ , provision that gives the insurer the right to declare the policy void because the insured has had any disease or ailment, , provision that if the policy is a participating policy, the company whether specified or not, or because the insured has received shall periodically ascertain & apportion any divisible surplus institutional, hospital, medical or surgical treatment or attention, accruing on the policy under the conditions specified therein. e(cept a provision w-c gives the insurer the right to declare the policy void if the insured has, within two years prior to the issuance of the policy, received institutional hospital, medical or , provision that in the event of default in premium payments surgical treatment or attention & if the insured or the claimant after three full years2 premiums have been paid, the policy shall under the policy fails to show that the condition occasioning such be converted into a stipulated form of insurance, & that in the treatment or attention was not of a serious nature or was not event of default in premium payments after five full years2 material to the ris$. premiums have been paid, a specified cash surrender value shall be available, in lieu of the stipulated form of insurance, at the option of the policyholder. "he net value of such stipulated *b+ , provision that gives the insurer the right to declare the policy form of insurance & the amount of such cash value shall not be void because the insured has been re1ected for insurance, less than the reserve on the policy & dividend additions thereto, unless such right be conditioned upon a showing by the insurer if any, at the end of the last completed policy year for w-c that $nowledge of such re1ection would have led to a refusal by premiums shall have been paid *the policy to specify the the insurer to ma$e such contract. mortality table, rate of interest & method of valuation adopted to compute such reserve+, e(clusive of any reserve on disability *c+ , provision that allows the company to pay the proceeds of the benefits & accidental death benefits, less an amount not to policy at the death of the insured to any person other than the e(ceed two & one>half per centum of the ma(imum amount named beneficiary, e(cept in accordance w- a standard provision insured by the policy & dividend additions thereto, if any, at the as specified under the provisions of paragraph *m+ of the end of the last completed policy year for w-c premiums shall preceding section. have been paid *the policy to specify the mortality table, rate of interest & method of valuation adopted to compute such , provision that limits the time within w-c any action at law or in reserve+, e(clusive of any reserve on disability benefits & *d+ e)uity may be commenced to less than si( years after the cause accidental death benefits, less an amount not to e(ceed two & of action shall accrue. & one>half per centum of the ma(imum amount insured by the policy & dividend additions thereto, if any, when the issue age is under ten years, & less an amount not to e(ceed two & one>half *e+ , provision that specifies any mode of settlement at maturity of per centum of the current amount insured by the policy & less value than the amount insured by the policy plus dividend dividend additions thereto, if any, if the issue age is ten years or additions, if any, less any indebtedness to the company on the older, & less any e(isting indebtedness to the company on or policy & less any premium that may by the terms of the policy be secured by the policy. deducted, payments to be made in accordance w- the terms of the policy. , provision that the policy may be surrendered to the company at its home office within a period of not less than si(ty days after <othing contained in this section nor in the provision of paragraph *b+ of the due date of a premium in default for the specified cash value, the preceding section, relating to incontestability, shall be construed as provided that the insurer may defer payment for not more than prohibiting the life insurance company fr. placing in its industrial life policies provisions limiting its liability w- respect to *!+ death resulting fr. aviation si( months after the application therefor is made. other than as a fare>paying passenger on a regularly scheduled route , table that shows in figures the non>forfeiture benefits available between definitely established airports. & *&+ military or naval service. under the policy every year upon default in payment of premiums Provided, "hat if the liability of the company is limited as herein provided, during at least the first twenty years of the policy, such table to such liability shall in no event be fi(ed at an amount less than the reserve begin w- the year in w-c such values become available, & a on the policy *e(cluding the reserve for any additional benefits in the event provision that the company will furnish upon re)uest an of death by accident or accidental means or for benefits in the event of any type of disability+, less any indebtedness on or secured by such policy. nor e(tension of such table beyond the year shown in the policy. shall any provision of this section apply to any provision in an industrial life insurance policy for additional benefits in the event of death by accident or , provision that specifies w-c one of the stipulated forms of accidental means. insurance provided for under the provision of paragraph *f+ of this section shall ta$e effect in the event of the insured2s failure, Title X VARIABLE CONTRACTS within si(ty days fr. the due date of the premium in default, to notify the insurer in writing as to w-c one of such forms he has SECTION &0&. selected. , provision that the policy may be reinstated at any time within *!+ two years fr. the due date of the premium in default unless the cash surrender value has been paid or the period of e(tended term insurance e(pired, upon production of evidence of insurability satisfactory to the company & payment of arrears of premiums w- interest at a rate not e(ceeding si( per centum per annum payable annually. , provision that when a policy shall become a claim by death of the insured, settlement shall be made upon receipt of due proof of death, or not later than two months after receipt of such proof. *&+ , title on the face & on the bac$ of the policy correctly describing its form. , space on the front or the bac$ of the policy for the name of the beneficiary designated by the insured w- a reservation of the insured2s right to designate or change the beneficiary after the issuance of the policy. "he policy may also provide that no designation or change of beneficiary shall be binding on the insurer until endorsed on the policy by the insurer, & that the insurer may refuse to endorse the name of any proposed beneficiary who does not appear to the insurer to have an insurable interest in the life of the insured. Auch policy may also *0+ contain a provision that if the beneficiary designated in the policy does not surrender the policy w- due proof of death within the period stated in the policy, w-c shall not be less than thirty days after the death of the insured, or if the beneficiary is the estate of the insured, or is a minor, or dies before the insured, or is not legally competent to give valid release, then the insurer may ma$e any payment thereunder to the e(ecutor or administrator of the insured, or to any of the insured2s relatives by blood or legal adoption or connections by marriage or to any person appearing to the insurer to be e)uitably entitled thereto by reason of having incurred e(pense for the maintenance, medical attention or burial of the insured. & *3+ , provision that when an industrial life insurance policy is issued providing for accidental or health benefits, or both, in addition to life insurance, the foregoing provisions shall apply only to the life insurance portion of the policy. ,ny of the foregoing provisions or portions thereof not applicable to non>participating or term policies shall to that e(tent not be incorporated therein. "he foregoing provisions shall not apply to policies issued or granted pursuant to the non>forfeiture provisions prescribed in provisions of paragraphs *f+ & *i+ of this section, nor shall provisions of paragraphs *f+, *g+, *h+, & *i+ hereof be re)uired in term insurance of twenty years or less but such term policies shall specify the mortality table, rate of interest, & method of computing reserves. <o insurance company authori/ed to transact business in the Philippines shall issue, deliver, sell or use any variable contract in the Philippines, unless & until such company shall have satisfied the Commissioner that its financial & general condition & its methods of operations, including the issue & sale of variable contracts, are not & will not be ha/ardous to the public or to its policy & contract owners. <o foreign insurance company shall be authori/ed to issue, deliver or sell any variable contract in the Philippines, unless it is li$ewise authori/ed to do so by the laws of its domicile. "he term %variable contract% shall mean any policy or contract on either a group or on an individual basis issued by an insurance company providing for benefits or other contractual payments or values thereunder to vary so as to reflect investment results of any segregated portfolio of investments or of a designated separate account in w-c amounts received in connection w- such contracts shall have been placed & accounted for separately & apart fr. other investments & accounts. "his contract may also provide benefits or values incidental thereto payable in fi(ed or variable amounts, or both. It shall not be deemed to be a %security% or %securities% as defined in "he Aecurities ,ct, as amended, or in the "he Investment Company ,ct, as amended, nor sub1ect to regulation under said ,cts. In determining the )ualifications of a company re)uesting authority to issue, deliver, sell or use variable contracts, the Commissioner shall always consider the following *a+ the history, financial & general condition of the company. Provided, "hat such company, if a foreign company, must have deposited w- the Commissioner for the benefit & security of its variable contract owners in the Philippines, securities satisfactory to the Commissioner consisting of bonds of the ?overnment of the Philippines or its instrumentalities w- an actual mar$et value of two million pesos. *b+ the character, responsibility & fitness of the officers & directors of the company. & *c+ the law & regulation under w-c the company is authori/ed in the state of domicile to issue such contracts. If after notice & hearing, the Commissioner shall find that the company is )ualified to issue, deliver, sell or use variable contracts in accordance w- this Code & the regulations & rules issued thereunder, the corresponding order of authori/ation shall be issued. ,ny decision or order denying authority to issue, deliver, sell or use variable contracts shall clearly & distinctly state the reasons & grounds on w-c it is based.

*e+

*f+

*g+

*h+

*i+

*1+

*$+

*l+ *m+

*n+

*a+

SECTION &00. ,ny insurance company issuing variable contracts pursuant to this Code may in its discretion issue contracts providing a combination of fi(ed amount & variable amount of benefits & for option lump>sum payment of benefits. SECTION &03. Every variable contract form delivered or issued for delivery in the Philippines, & every certified form evidencing variable

13

The Insurance Code

benefits issued pursuant to any such contract on a group basis, & the *e+ application, rider & endorsement forms applicable thereto & used in connection therewith, shall be sub1ect to the prior approval of the Commissioner. SECTION &04. Illustration of benefits payable under any variable &. contract shall not include or involve pro1ections of past investment e(perience into the future & shall conform w- the rules & regulations promulgated by the Commissioner. SECTION &05. @ariable contracts may be issued on the industrial life basis, provided that the pertinent provisions of this Code & of the rules & 0. regulations of the Commissioner governing variable contracts are complied w- in connection w- such contracts. SECTION &06. Every life insurance company authori/ed under the provisions of this Code to issue, deliver, sell or use variable contracts shall, in connection w- same, establish one or more separate accounts to be $nown as separate variable accounts. ,ll amounts received by the company in connection w- any such contracts w-c are re)uired by the terms thereof, to be collected or applied to one or more designated separate variable accounts shall be placed in such designated account or accounts. "he assets & liabilities of each such separate variable account shall at all times be clearly identifiable & distinguishable fr. the assets & liabilities in all other accounts of the company. <otwithstanding any provision of law to the contrary, the assets held in any such separate variable account shall not be chargeable w- liabilities arising out of any other business the company conduct but shall be held & applied e(clusively for the benefit of the owners or beneficiaries of the variable contracts applicable thereto. In the event of the insolvency of the company, the assets of each such separate variable account shall be applied to the contractual claims of the owners or beneficiaries of the variable contracts applicable thereto. E(cept as otherwise specifically provided by the contract, no sale, e(change or other transfer of assets may be made by a company, between any of its separate accounts or between any other investment account & one or more of its separate accounts, unless in the case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts wrespect to the separate account to w-c the transfer is made, or in case of a transfer fr. a separate account, such transfer would not cause the remaining assets of the account to become less than the reserves & other contract liabilities w- respect to such separate account. Auch transfer, whether into or fr. a separate account, shall be made by a transfer of cash, or by a transfer of securities having a valuation w-c could be readily determined in the mar$et place, provided that such transfer of securities is approved by the Commissioner. "he Commissioner may authori/e other transfers among such accounts, if, in his opinion, such transfer would not be ine)uitable. ,ll amounts & assets allocated to any such separate variable account shall be owned by the company & w- respect to same the company shall not be nor hold itself out to be a trustee. cdt SECTION &07. ,ny insurance company w-c has established one or more separate variable accounts pursuant to the preceding section may invest & re>invest all or any part of the assets allocated to any such account in the securities & investments authori/ed by sections one hundred ninety>eight, two hundred, two hundred one & two hundred two for any of the funds of an insurance company in such amount or amounts as may be approved by the Commissioner. In addition thereto, such company may also invest in common stoc$s or other e)uities w-c are listed on or admitted to trading in a securities e(change located in the Philippines, or w-c are publicly held & traded in the %over>the>counter mar$et% as defined by the Commissioner & as to w-c mar$et )uotations have been available. Provided, however, "hat no such company shall invest in e(cess of ten per centum of the assets of any such separate variable accounts in any one corporation issuing such common stoc$. "he assets & investments of such separate variable accounts shall not be ta$en into account in applying the )uantitative investment limitations applicable to other investments of the company. In the purchase of common capital stoc$ or other e)uities, the insurer shall designate to the bro$er, or to the seller if the purchase is not made through a bro$er, the specific variable account for w-c the investment is made. SECTION &09. ,ssets allocated to any separate variable account shall be valued at their mar$et value on the date of any valuation, or if there is no readily available mar$et then in accordance w- 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 & regulations of the Commissioner. compelling policyholders to institute suits to recover amounts due under its policies by offering without 1ustifiable reason substantially less than the amounts ultimately recovered in suits brought by them. Evidence as to numbers & types of valid & 1ustifiable complaints to the Commissioner against an insurance company, & the Commissioner2s complaint e(perience w- other insurance companies writing similar lines of insurance shall be admissible in evidence in an administrative or 1udicial proceeding brought under this section. If it is found, after notice & an opportunity to be heard, that an insurance company has violated this section, each instance of non>compliance w- paragraph *!+ may be treated as a separate violation of this section & shall be considered sufficient cause for the suspension or revocation of the company2s certificate of authority.

SECTION &3&. "he proceeds of a life insurance policy shall be paid immediately upon maturity of the policy, unless such proceeds are made payable in installments or as an annuity, in w-c case the installments, or annuities shall be paid as they become due Provided, however, "hat in the case of a policy maturing by the death of the insured, the proceeds thereof shall be paid within si(ty days after presentation of the claim & filing of the proof of the death of the insured. Eefusal or failure to pay the claim within the time prescribed herein will entitle the beneficiary to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary =oard, unless such failure or refusal to pay is based on the ground that the claim is fraudulent. "he proceeds of the policy maturing by the death of the insured payable to the beneficiary shall include the discounted value of all premiums paid in advance of their due dates, but are not due & payable at maturity. SECTION &30. "he amount of any loss or damage for w-c an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty days after proof loss is received by the insurer & ascertainment of the loss or damage is made either by agreement between the insured & the insurer or by arbitration. but if such ascertainment is not had or made within si(ty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt. Eefusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary =oard, unless such failure or refusal to pay is based on the ground that the claim is fraudulent. SECTION &33. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to ma$e a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld. & in the affirmative case, the insurance company shall be ad1udged to pay damages w-c shall consist of attorney2s fees & other e(penses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary =oard of the amount of the claim due the insured, fr. the date following the time prescribed in section two hundred forty>two or in section two hundred forty>three, as the case may be, until the claim is fully satisfied. Provided, "hat the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment. Title XII EXAMINATION OF COMPANIES SECTION &34. "he Commissioner shall re)uire every insurance company doing business in the Philippines to $eep its boo$s, records, accounts & vouchers in such manner that he or his authori/ed representatives may readily verify its annual statements & ascertain whether the company is solvent & has complied w- the provisions of this Code or the circulars, instructions, rulings or decisions of the Commissioner.

SECTION &35. "he Commissioner shall at least once a year & whenever he considers the public interest so demands, cause an e(amination to be made into the affairs, financial condition & method of business of every insurance company authori/ed to transact business in the Philippines & of any other person, firm or corporation managing the affairs &-or property of such insurance company. Auch company, as well as such managing person, firm or corporation, shall submit to the e(aminer SECTION &3:. "he reserve liability for variable contracts shall be all such boo$s, papers & securities as he may re)uire & such e(aminer established in accordance w- actuarial procedures that recogni/e the shall also have the power to e(amine the officers of such company under variable nature of the benefits provided, & shall be approved by the oath touching its business & financial condition, & the authority to transact Commissioner. business in the Philippines of any such company shall be suspended by the Commissioner if such e(amination is refused & such company shall not thereafter be allowed to transact further business in the Philippines until it Title XI CLAIMS SETTLEMENT has fully complied w- the provisions of this section. SECTION &3!. *!+ ?overnment>owned or controlled corporations or entities engaged in social private insurance shall similarly be sub1ect to such e(amination by the <o insurance company doing business in the Philippines shall refuse, Commissioner unless their respective charters otherwise provide. without 1ust cause, to pay or settle claims arising under coverages provided by its policies, nor shall any such company engage in unfair Title XIII SUSPENSION OR REVOCATION OF AUTHORITY claim settlement practices. ,ny of the following acts by an insurance company, if committed without 1ust cause & performed w- such If the Commissioner is of the opinion upon fre)uency as to indicate a general business practice, shall constitute SECTION &36. e(amination of other evidence that any domestic or foreign insurance unfair claim settlement practices company is in an unsound condition, or that it has failed to comply w- the $nowingly misrepresenting to claimants pertinent facts or policy provisions of law or regulations obligatory upon it, or that its condition or method of business is such as to render its proceedings ha/ardous to the provisions relating to coverage at issue. public or to its policyholders, or that its paid>up capital stoc$, in the case of a domestic stoc$ company, or its available cash assets, in the case of a failing to ac$nowledge w- reasonable promptness pertinent domestic mutual company, or its security deposits, in the case of a foreign communications w- respect to claims arising under its policies. company, is impaired or deficient, or that the margin of solvency re)uired of such company is deficient, the Commissioner is authori/ed to suspend failing to adopt & implement reasonable standards for the prompt or revo$e all certificates of authority granted to such insurance company, investigation of claims arising under its policies. its officers & agents, & no new business shall thereafter be done by such company or for such company by its agent in the Philippines while such not attempting in good faith to effectuate prompt, fair & e)uitable suspension, revocation or disability continues or until its authority to do settlement of claims submitted in w-c liability has become business is restored by the Commissioner. =efore restoring such authority, the Commissioner shall re)uire the company concerned to submit to him a reasonably clear. or business plan showing the company2s estimated receipts & disbursements,

*a+ *b+ *c+ *d+

14

The Insurance Code

as well as the basis therefor, for the ne(t succeeding three years. *,s amended by Presidential #ecree <o. !!3! & further amended by amended by Presidential #ecree <o. !344+ Presidential #ecree <o. !344+ SECTION &4:. In case of li)uidation of an insurance company, after payment of the cost of the proceedings, including reasonable e(penses & SECTION &37. If at any time before, or after, the suspension or fees incurred in the li)uidation to be allowed by the Court, the revocation of the certificate of authority of an insurance company as Commissioner shall pay all allowed claims against such company, under provided in the preceding title, the Commissioner finds that such company order of the Court, in accordance w- their legal priority. is in a state of continuing inability or unwillingness to maintain a condition of solvency or li)uidity deemed ade)uate to protect the interest of policy SECTION &4!. "he receiver or the li)uidator, as the case may be, holders & creditors, he may appoint a conservator to ta$e charge the designated under the provisions of this title shall not be sub1ect to any assets, liabilities, & the management of such company, collect all moneys action, claim or demand by, or liability to, any person in respect of anything & debts due said company & e(ercise all powers necessary to preserve done or omitted to be done in good faith in the e(ercise, or in connection the assets of said company, reorgani/e the management thereof, & restore w- the e(ercise, of the powers conferred on such receiver or li)uidator. its viability. "he said conservator shall have the power to overrule or revo$e the actions of the previous management & board of directors of the Title XVI CONSOLIDATION AND MERGER OF INSURANCE said company, any provision of law, or of the articles of incorporation or COMPANIES by>laws of the company, to the contrary notwithstanding, & such other powers as the Commissioner shall deem necessary. SECTION &4&. 8pon prior notice to the Commissioner, two or more domestic insurance companies, acting through their respective boards of "he conservator may be another insurance company doing business in the directors, may negotiate to merge into a single corporation w-c shall be one Philippines, by officer or officers of such company, or any other competent of the constituent corporations, or consolidate into a single corporation w-c & )ualified person, firm or corporation. "he remuneration of the shall be a new corporation to be formed by the consolidation. , common conservator & other e(penses attendant to the conservation shall be borne agreement of the proposed merger or consolidation shall be drawn up for by the insurance company concerned. submission to the stoc$holders or members of the constituent companies for adoption & approved in accordance w- the provisions of the respective "he conservator shall not be sub1ect to any action, claim or demand by, or by>laws of the constituent companies & all e(isting laws that may be liability to, any person in respect of anything done or omitted to be done in pertinent. good faith in the e(ercise, or in connection w- the e(ercise, of the powers conferred on the conservator. SECTION &40. Auch agreement shall include, aside fr. the proposed merger or consolidation, provisions relative to the manner of transfer of "he conservator appointed shall report & be responsible to the assets to & assumption of liabilities by the absorbing or ac)uiring company Commissioner until such time as the Commissioner is satisfied that the fr. the absorbed or dissolved company or companies. the proposed articles insurance company can continue to operate on its own & the of merger or consolidation & by>laws of the surviving or ac)uiring company. conservatorship shall li$ewise be terminated should be Commissioner, on the corporate name to be adopted w-c should not be that of any other the basis of the report of the conservator or of his own findings, determine e(isting company transacting similar business or one so similar as to be that the continuance in business of the insurance company would be calculated to mislead the public. the rights of the stoc$holders or members ha/ardous to policy holders & creditors, in w-c case the provisions of "itle of the absorbed or dissolved companies. date of effectivity of the merger or !4 shall apply. consolidation. & such particulars as may be necessary to e(plain & ma$e manifest the ob1ects & purposes of the absorbing or ac)uiring company. Title XV PROCEEDINGS UPON INSOLVENCY SECTION &43. 8pon e(ecution of such agreement to merge or SECTION &39. 'henever, upon e(amination or other evidence, it consolidate by & between or among the boards of directors of the shall be disclosed that the condition of any insurance company doing constituent companies, notice thereof shall be mailed immediately to their business in the Philippines is one of insolvency, or that its continuance in policyholders & creditors. "he company or companies to be absorbed or business would be ha/ardous to its policyholders & creditors, the dissolved shall discharge all its accrued liabilities. otherwise, such liabilities Commissioner shall forthwith order the company to cease & desist fr. shall, w- the consent of its creditors, be transferred to & assumed by the transacting business in the Philippines & shall designate a receiver to absorbing or ac)uiring company, or such liabilities be reinsured by the immediately ta$e charge of its assets & liabilities, as e(peditiously as latter. In the case of such policies as are sub1ect to cancellation by the possible collect & gather all the assets & administer the same for the company or companies to be absorbed or dissolved, same may be benefit of its policyholders & creditors, & e(ercise all the powers necessary cancelled pursuant to the terms thereof in lieu of such transfer, for these purposes including, but not limited to, bringing suits & foreclosing assumption, or reinsurance. mortgages in the name of the insurance company. SECTION &44. 8pon approval or adoption in the meetings of the "he Commissioner shall thereupon determine within thirty days whether stoc$holders or members called for the purpose in each of the constituent the insurance company may be reorgani/ed or otherwise placed in such companies of the agreement to merge or consolidate, all stoc$holders or condition so that it may be permitted to resume business w- safety to its members dissenting or ob1ecting to merger or consolidation shall be paid policyholders & creditors & shall prescribe the conditions under w-c such the value of their shares by the company concerned in accordance w- the resumption of business shall ta$e place as well as the time for fulfillment of by>laws thereof. such conditions. In such case, the e(penses & fees in the collection & administration of the insurance company shall be determined by the SECTION &45. 8pon the approval or adoption of the agreement to Commissioner & shall be paid out of the assets of such company. merge or consolidate by the stoc$holders or members of the constituent companies, the corresponding articles of merger or of consolidation shall If the Commissioner shall determine & confirm within the said period that be duly e(ecuted by the presidents & attested by the corporate secretaries the insurance company is solvent, as defined hereunder, or cannot resume & shall bear the corporate seals of the merging or consolidating companies business w- safety to its policyholders & creditors, he shall, if the public setting forth interest re)uires, order its li)uidation, indicate the manner of its li)uidation & approve a li)uidation plan & implement it immediately. "he *!+ "he plan of merger or the plan of consolidation. Commissioner shall designate a competent & )ualified person as li)uidator who shall ta$e over the functions of the receiver previously designated &, *&+ ,s to each corporation, the number of shares outstanding, or in w- all convenient speed, reinsure all its outstanding policies, convert the case of mutual corporations, the number of members. & assets of the insurance company to cash, or sell, assign or otherwise dispose of the same to the policyholders, creditors & other parties for the ,s to each corporation, the number of shares or members voted purpose of settling the liabilities or paying the debts of such company & he *0+ for & against such plan respectively. "hereafter, a certified copy may, in the name of the company, institute such actions as may be of such articles of merger or consolidation, together w- a necessary in the appropriate Court to collect & recover accounts & assets certificate of approval or adoption by the stoc$holders or of the insurance company, & to do such other acts as may be necessary to members of such articles of merger or consolidation, verified by complete the li)uidation as ordered by the Commissioner. affidavits of such officers & under the seal of the constituent companies, shall be submitted to the Commissioner, together w"he provisions of any law to the contrary notwithstanding, the actions of such other papers or documents w-c the Commissioner may the Commissioner under this Aection shall be final & e(ecutory, & can be re)uire, for his consideration. set aside by the Court upon petition by the company & only if there is convincing proof that the action is plainly arbitrary & made in bad faith. "he "he articles of merger or of consolidation, signed & Commissioner, through the Aolicitor ?eneral, shall then file the SECTION &46. corresponding answer reciting the proceeding ta$en & praying the verified as hereinabove re)uired, shall be filed w- the Aecurities & E(change Commission for its e(amination & approval. assistance of the Court in the li)uidation of the company. <o restraining order or in1unction shall be issued by the Court en1oining the Commissioner fr. implementing his actions under this Aection, unless there is convincing SECTION &47. 8pon receipt fr. the Aecurities & E(change proof that the action of the Commissioner is plainly arbitrary & made in bad Commission of the certificate of merger or of consolidation, the constituent faith & the petitioner or plaintiff files w- the cler$ or Cudge of the Court in companies shall surrender to the Commissioner their respective w-c the action is pending a bond e(ecuted in favor of the Commissioner in certificates of authority to transact insurance business. "he absorbing or an amount to be fi(ed by the Court. "he restraining order or in1unction shall surviving company in case of merger, or the newly formed company in be refused or, if granted, shall be dissolved upon filing by the case of consolidation, shall immediately file w- the commissioner the Commissioner, if he so desires, of a bond in an amount twice the amount corresponding application for issuance of a new certificate of authority to of the bond of the petitioner or plaintiff conditioned that it will pay the transact insurance business, together w- a certified copy of the certificate damages w-c the petition or plaintiff may suffer by the refusal or the of merger or of consolidation, & of the certificate of increase of stoc$s, if dissolution of the in1unction. "he provisions of Eule 47 of the <ew Eules of there is any, issued by the Aecurities & E(change Commission. Court insofar as they are applicable shall govern the issuance & dissolution of the restraining order or in1unction contemplated in this Aection. SECTION &49. <othing in this title shall be construed to enlarge the powers of the absorbing or surviving company in case of merger, or the ,ll proceedings under this "itle shall be given preference in the Courts. newly formed company in case of consolidation, e(cept those conferred by "he Commissioner shall not be re)uired to pay any fee to any public officer the certificate of merger or of consolidation & the articles of merger of for filing, recording, or in any manner authenticating any paper or consolidation, or the amended articles of incorporation, as registered wthe Aecurities & E(change Commission. instrument relating to the proceedings. ,s used in this "itle, the term %Insolvency% shall mean the inability of an insurance company to pay its lawful obligations as they fall due in the usual & ordinary course of business as may be shown by its failure to maintain the margin of solvency re)uired under Aection !93 of this Code. *,s SECTION &5:. <o director, officer, or stoc$holder of any such constituent companies shall receive any fee, commission, compensation, or other valuable consideration whatsoever, directly or indirectly, or in any manner aiding, promoting or assisting in such merger or consolidation. Title XIV APPOINTMENT OF CONSERVATOR

15

The Insurance Code

SECTION &5!. "he merger of consolidation of companies under, this Code shall be sub1ect to the provisions of the Corporation Baw, &, in those cases specified in Eepublic ,ct <o. 4344, as amended, be further sub1ect to the provisions of said law. Title XVII MUTUALI!ATION OF STOC# LIFE INSURANCE COMPANIES SECTION &5&. ,ny domestic stoc$ life insurance company doing business in the Philippines may convert itself into an incorporated mutual life insurer. "o that end it may provide & carry out a plan for the ac)uisition of the outstanding shares of its capital stoc$ for the benefit of its policyholders, or any class or classes of its policyholders, by complying wthe re)uirements of this chapter. SECTION &50. Auch plan shall include appropriate proceedings for amending the insurer2s articles of incorporation to give effect to the ac)uisition, by said insurer, for the benefit of its policyholders or any class or classes thereof, of the outstanding shares of its capital stoc$ & the conversion of the insurer fr. a stoc$ corporation into a non>stoc$ corporation for the benefit of its members. "he members of such non>stoc$ corporation shall be the policyholders fr. time to time of the class or classes for whose benefit the stoc$ of the insurer was ac)uired, & the policyholders of such other class or classes as may be specified in such corporation2s articles of incorporation as they may be amended fr. time to time. Auch plan shall be *!+ *&+ ,dopted by a vote of a ma1ority of the directors. ,pproved by the vote of the holders of at least a ma1ority of the outstanding shares at a special meeting of shareholders called for that purpose, or by the written consent of such sharesholders. Aubmitted to the Commissioner & approved by him in writing. ,pproved by a ma1ority vote of all the policyholders of the class or classes for whose benefit the stoc$ is to be ac)uired voting at an election by the policyholders called for that purpose, sub1ect to the provisions of section two hundred si(ty>five. "he terms %policyholder% or %policyholders% as used in this chapter shall be deemed to mean the person or persons insured under an individual policy of life insurance, or of health & accident insurance, or of any combination of life, health & accident insurance. "hey shall also include the person or persons to whom any annuity or pure endowment is presently or prospectively payable by the terms of an individual annuity or pure endowment contract, e(cept where the policy or contract declares some other person to be the owner or holder thereof, in w-c case such other person shall be deemed policyholder. In any case where a policy or contract names two or more persons as 1oint insured, payees, owners or holders thereof, the persons so named shall be deemed collectively to be one policyholder for the purpose of this chapter. In any case where a policy or contract shall have been assigned by assignment absolute on its face to an assignee other than the insurer, & such assignment shall have been filed at the principal office of the insurer at least thirty days prior to the date of any election or meeting referred to in this chapter, then such assignee shall be deemed at such election or meeting to be the policyholder. For the purpose of this chapter the terms %policyholder% & %policyholders% include the employer to whom, or a president, secretary or other e(ecutive officer of any corporation or association to w-c a master group policy has been issued, but e(clude the holders of certificates or policies issued under or in connection w- a master group policy. =eneficiaries under unmatured contracts shall not as such be deemed to be policyholders. Filed w- the Commissioner after having been approved as provided in this section. "he decision, act or certificate of a ma1ority of the inspectors shall be effective in all respects as the decision, act or certificate of all. "he inspectors of election shall determine the number of policyholders, the voting power of each, the policyholders represented at the meeting or voting by mail, the e(istence of a )uorum & the authenticity, validity & effect of pro(ies. "hey shall receives votes, hear & determine all challenges & )uestions in any way arising in connection w- the right to vote, count & tabulate all votes, determine the result, & do such other acts as are proper to conduct the vote w- fairness to all policyholders. "he inspectors of election shall, before commencing performance of their duties, subscribe to & file w- the insurer & w- the Commissioner on oath that they, & each of them, will perform their duties impartially, in good faith, to the best of their ability & as e(peditiously as in practicable. ;n the re)uest of the insurer, the Commissioner, a policyholder or his pro(y, the inspectors shall ma$e a report in writing of any challenge or )uestion or matter determined by them & e(ecute a certificate of any fact found by them. "hey shall also certify the result of such vote to the insurer & to the Commissioner. ,ny report or certificate made by them shall be prima facie evidence of facts stated therein. ,ll necessary e(penses incurred in connection w- such election shall be paid by the insurer. For the purpose of this section, a )uorum shall consist of five per centum of the policyholders of such insurer entitled to vote at such election. SECTION &55. In carrying out any such plan, the insurer may ac)uire any shares of its own stoc$ by gift, be)uest or purchase. ,ny shares so ac)uired shall, unless as a result of such ac)uisition all of the shares of the insurer shall have been ac)uired, be ac)uired in trust for the policyholders of the class or classes for whose benefit the plan provides that the stoc$ of the insurer shall be ac)uired as hereinafter provided. Auch shares shall be assigned & transferred on the boo$s of such insurer & approved by the Commissioner. Auch trustees shall hold such stoc$ in trust until all of the outstanding shares of capital stoc$ of such insurer have been ac)uired, but for not longer than thirty years w- such e(tensions of not more than five years each as may be granted by the Commissioner. Auch e(tensions may be granted by the Commissioner if the plan so provides & if in his opinion the plan of ac)uisition of all of such stoc$ can be completed within a reasonable period. Auch trustees shall vote such stoc$ at all corporate meetings at w-c stoc$holders have the right to vote. 'hen all the outstanding shares of capital stoc$ of such insurer have been ac)uired, all said shares shall be cancelled, the certificate of amendment of the insurer2s articles of incorporation giving effect thereto shall be filed in accordance w- the provisions of the Corporation Baw, & the insurer shall become a non>stoc$ corporation for the profit of its members & such trust shall thereupon terminate. "hereafter such corporation shall be conducted for the mutual benefit, ratably, of its policyholders of the class or classes for whose benefit the stoc$ was ac)uired & shall have power to issue non>assessable policies on a reserve basis sub1ect to all provisions of law applicable to incorporated life insurers issuing nonassessable policies on a reserve basis. Policies so issued may be upon the basis of full or partial participation therein as agreed between the insurer & the insured. 8pon the termination of any such voting trust, either in accordance w- its terms or as hereinabove provided, such plan of mutuali/ation shall terminate, unless theretofore completed. 8pon such termination, unless the plan of mutuali/ation provides for the disposition of the shares ac)uired by the insurer under such plan or for the disposition of the proceeds thereof, the shares held by such trustees shall be disposed of in accordance w- an order of the court of competent 1urisdiction in the 1udicial district in w-c is located the principal office of such insurer, made upon a verified petition of the Commissioner. SECTION &56. ,ny such plan of mutuali/ation may provide for the creation of a voting trust under a trust agreement for the holding & voting by three or more trustees of any portion or all of the shares of the insurer not re)uired upon the adoption of such plan. "he voting trustees shall be named in accordance w- such plan or, if no provision is made therein for the naming of such trustees, then by the insurer. "he voting trust agreement & voting trustees shall be sub1ect to the approval of the Commissioner. ,ny or all of the trustees under such voting trust agreement may be the same person or persons as any or all of the trustees referred to in section two hundred si(ty>si(. Auch voting trust agreement shall provide that in the event of ac)uisition by the insurer of any of the shares of stoc$ held thereunder in accordance w- the provisions of the plan, such shares so ac)uired together w- the voting rights thereof shall be transferred by the trustees named under the provisions of this section to the trustees named under the provisions of section two hundred si(ty>si(. ,ny voting trust agreement created pursuant to the provisions of this section may be made irrevocable for not longer than thirty years & thereafter until the termination of the trust provided for in section two hundred si(ty>si(. "he trust created pursuant to the provisions of this section shall terminate in any event upon termination of the trust provided for in section two hundred si(ty>si(. 8pon the termination of the trust created pursuant to the provisions of this section, any shares held in such trust shall revert to the persons entitled thereto by law. SECTION &57. Every payment for the ac)uisition of any shares of the capital stoc$ of such insurer, the purchase price of w-c is not fi(ed by such plan, shall be sub1ect to the prior approval of the Commissioner. <either such plan, nor any such payment, may be approved by the Commissioner unless he finds that the rights & interests of the insurer, its policyholders, & shareholders are protected.

*0+ *3+

*4+

SECTION &53. "he Commissioner shall e(amine the plan submitted to him under the provisions of sub>paragraph three of section two hundred si(ty>three. De shall not approve such plan unless in his opinion the rights & interest of the insurer, its policyholders & shareholders are protected nor unless he is satisfied that the plan will be fair & e)uitable in its operation. SECTION &54. "he election prescribed by sub>paragraph four of section two hundred si(ty>three shall be called by the board of directors or the president, & every policyholder of the class or classes for whose benefit the stoc$ is to be ac)uired, whose insurance shall have been in force for at least one year prior to such election shall have one vote, regardless of the number of policies or amount of insurance he holds, & regardless of whether such policies are policies of life insurance or policies of health & accident insurance or annuity contracts. <otice of such election shall be given to policyholders entitled to vote by mail fr. the principal office of such insurer at least thirty days prior to the date set for such election, in a sealed envelope, postage prepaid, addressed to each such policyholder at his last $nown address. @oting shall be by one of the following methods

SECTION &59. "he trustees referred to in section two hundred si(ty>si( shall file w- such insurer & w- the Commissioner a verified *!+ ,t a meeting of such policyholders, held pursuant to such notice, acceptance of their appointments & verified declarations that they will faithfully discharge their duties as such trustees. ,ll dividends & other by ballot in person or by pro(y. sums received by said trustees on the shares held by them, after paying the necessary e(penses of e(ecuting their trust, shall be immediately *&+ If not by the method described in the preceding sub>paragraph, repaid to such insurer for the benefit of all who are, or may become, then by mail pursuant to a procedure & on forms to be policyholders of such insurance of the class or classes for whose benefit prescribed by such plan. the stoc$ of such insurer was ac)uired & entitled to participate in the profits thereof & shall be added to & become part of the assets of such insurer. Auch election shall be conducted under the direction & supervision of three impartial & disinterested inspectors appointed by the insurer & approved by SECTION &59>,. If, at any time within the period provided in the plan for the Commissioner. In case any person appointed as inspector fails to the ac)uisition of the outstanding shares of stoc$ of the insurer, ninety appear at such meeting or fails or refuses to act at such election, the percent thereof has already been ac)uired & transferred to the trustees vacancy, if occurring in advance of the convening of the meeting or in under the plan, the insurer by a vote of a ma1ority of the directors may advance of the opening of the mail vote, may be filled in the manner determine to ma$e an offer, w- the permission of the Commissioner & prescribed for the appointment of inspectors &, if occurring at the meeting sub1ect to such re)uirement as he may specify, to ac)uire by purchase all or during the canvass of the mail vote, may be filled by the person acting of the shares not theretofore ac)uired under the plan, at a specified price as chairman of said meeting or designated for that purpose in such plan. w-c the insurer considers to be their fair value as of the date of ma$ing

16

The Insurance Code

such offer. If the offer to ac)uire is permitted by the Commissioner, the insurer shall ma$e a written offer by registered mail to each shareholder whose shares have not theretofore been ac)uired under the plan or otherwise, offering to ac)uire all his shares at such price if accepted in writing within thirty days after the mailing of such offer. ,ny shareholder accepting such offer, within the time therefor shall, within si(ty days after his acceptance, transfer to the insurer the certificates representing such shares &, upon doing so, shall be paid by the insurer the amount of such offer for his shares. ,ny share so ac)uired shall be assigned & transferred to the trustees under the plan & held by them as shares ac)uired pursuant to the plan. Each shareholder who does not accept such offer to ac)uire his shares within the time stated in such offer for acceptance thereof shall within fifteen days after the e(piration of such offer apply to the Aecretary of Finance for determination of the fair value of his shares as of the date of ma$ing such offer. "he Aecretary of Finance may himself, after due notice & hearing, determine upon the evidence received the fair value of the shares as of the date of ma$ing such offer, or appoint three impartial & disinterested persons to appraise the fair value of such shares w- such direction as he shall deem proper & necessary to e(pedite the proceedings. 8pon completion of the appraisal proceedings, the appraisers shall file w- the Aecretary of Finance their report in writing stating the fair value of such shares as of the date of the ma$ing of such offer & setting forth their findings in support of such statement. "he appraisers shall furnish each party to the proceedings a copy of their appraisal report, & within ten days after receipt thereof any such party may signify his ob1ection, if any, to the report or move for the approval thereof. 8pon the e(piration of the period of ten days referred to above, the report shall be set for hearing, after w-c the Aecretary of Finance shall issue an order adopting, modifying or re1ecting the report in whole or in part or he may receive further evidence or may recommit it w- instructions. 'henever the Aecretary of Finance shall determine in any manner, as aforesaid, the fair value of such shares, he may also determine the terms of payment thereof by the insurer. "he e(penses incidental to the proceedings including charges of the appraisers, if any, shall be paid e)ually by the insurer & the shareholder. be no such officer, or in case of his neglect or refusal, by any director or member. ,t the option of the insurer such notice may be imprinted on premium notices of receipts or on both. , notice may be given by such insurer to any member either personally, or by mail, or other means of written communication, charges prepaid, addressed to such member at his address appearing on the boo$s of the insurer, or given by him to the insurer for the purpose of notice. If a member gives no address, notice shall be deemed to have been given him if sent by mail or other means of written communication addressed to the place where the principal office of the insurer is situated, or if published at least once in some newspaper of general circulation in the place in w-c said office is located. <otice of any meeting of members shall be sent to each member entitled thereto not less than seven days before such meeting, unless the by>laws provide otherwise. <otice of any meeting of members shall specify the place, the day & the hour of the meeting & the general nature of the business to be transacted. <otice of an annual meeting to be held at the time & place specified in sub>paragraph one of this section shall be sufficiently given if published at least once in each of four successive wee$s in a newspaper of general circulation in the place in w-c the principal office of such insurer is located, & if so published no other notice of such meeting shall be re)uired. *3+ "he presence in person or by pro(y of five per centum of the members entitled to vote at any meeting shall constitute a )uorum for the transaction of business, unless otherwise provided by the by>laws. Each such member shall have one vote at any meeting of members regardless of the number of policies or the amount of insurance that such member holds & regardless of whether such policies are policies of life insurance, or of health & accident insurance, or both. ,ny member entitled to vote shall have the right to do so either in person or by an agent or agents authori/ed by a written pro(y e(ecuted by such person or his duly authori/ed agent & filed w- the secretary of such insurer. "he directors of the insurer in office at the time the insurer is mutuali/ed as provided in this chapter shall continue in office until the first annual meeting of members. ,t the first annual meeting of members & at each annual meeting thereafter directors shall be elected by the members for the term or terms authori/ed by this chapter. "he articles of incorporation or the bay>laws may provide that the directors may be divided into two or more classes whose terms of office shall e(pire at different times, but no terms shall continue longer than si( years. In the absence of such provisions, each director, e(cept members of the board of directors at the time the insurer is mutuali/ed, shall be elected for a term of one year. ,ll directors shall hold office for a term for w-c they are elected & until their successors are elected & )ualified. , director may, but need not be a member or policyholder of the insurer of w-c he is acting as director. @acancies in the board of directors may be filled by a ma1ority of the remaining directors, though less than a )uorum, & each director so elected shall hold office until the ne(t annual meeting. ,ll insurers mutuali/ed under the provisions of this chapter shall be sub1ect to all other applicable provisions of this Code & of the Corporation Baw.

*4+

"he findings of the Aecretary of Finance on all )uestions of fact raised at the hearing of the application for determination of the fair value of such shares shall be conclusive upon all parties to the proceedings. "he order of *5+ the Aecretary of Finance determining the fair value of the shares & the terms of payment thereof shall have the force & effect of a 1udgment w-c shall be appealable on any )uestion of law. Auch order shall become final & e(ecutory fifteen days after receipt thereof by the parties to the proceedings. 8pon any such order becoming final & fr. w-c no appeal is pending, or *6+ when the time to appeal therefr. has e(pired, each shareholder party to the proceedings shall transfer his shares to the insurer & surrender to the said insurer the certificates representing such shares & the insurer shall ma$e payment therefor as provided in such order. ,ny shares so ac)uired by the insurer shall be assigned & transferred to the trustees & held by them as shares ac)uired pursuant to the plan. ,ny shareholder who does not apply to the Aecretary of Finance in the manner & within the time hereinbefore prescribed shall be deemed to have accepted the offer referred to above, effective, however, upon the e(piration of the time hereinabove prescribed for ma$ing such application, & such shareholder2s time for accepting such offer shall, for that purpose only, be deemed to have been e(tended accordingly. *7+

,ny offer to ac)uire shares made pursuant to this section shall, e(cept as otherwise provided herein, be irrevocable until all proceedings upon such offer have been completed or all shares have otherwise been earlier SECTION &6&. "he provisions of Commonwealth ,ct <o. 70, ac)uired by the insurer. otherwise $nown as the Aecurities ,ct, as amended, shall not apply to any of the following ,ny shareholder who has e(pressly or impliedly accepted the plan or the offer to ac)uire his shares not theretofore ac)uired under the plan, & any *a+ Ahares of the capital stoc$ of such insurer ac)uired as provided shareholder who has re1ected such plan or such offer & has applied, as in section two hundred si(ty>si( & assigned & transferred to the aforesaid, to the Aecretary of Finance for a determination of the fair value trustees as is provided in said section, & the assignment & of his shares subse)uent to w-c an agreement has been reached or a final transfer of said shares as so provided. order issued fi(ing such fair value but who fails to surrender his certificates for cancellation upon payment of the amount to w-c he is entitled, may be ,ny certificate or other instrument issued to a policyholder of compelled to do so by an order of the Aecretary of Finance for that *b+ such mutuali/ed insurer conferring or evidencing membership in purpose & such order may provide that upon failure of such shareholder to such mutuali/ed insurer or conferring or evidencing such surrender such certificates for cancellation such order shall stand in lieu of member2s right to participate in the profits or share in the assets such surrender & cancellation. *,s amended by Presidential #ecree <o. of such mutuali/ed insurer by the virtue of his membership !&7:+ therein, & the issuance of such certificate or other instrument. SECTION &6:. Auch insurer, after mutuali/ation, shall be a "he plan for the ac)uisition of the outstanding shares of the continuation of the original insurer, & such mutuali/ation shall not affect *c+ capital stoc$ of such insurer authori/ed by the provisions of this such insurer2s certificate of authority nor e(isting suits, rights or contracts chapter, the submission of said plan to the Commissioner & to e(cept as provided in said plan for the ac)uisition of the outstanding the policyholders of such insurer as provided in this chapter, & shares of the capital stoc$ of such insurer, approved as provided in this the approval & carrying out of said plan or any part thereof in chapter. Auch insurer, after mutuali/ation, shall e(ercise all the rights & accordance w- the provisions of this chapter. powers & shall perform all the duties conferred or imposed by law upon insurers writing the classes of insurance written by it, & to protect rights & Title XVIII WITHDRAWAL OF FOREIGN INSURANCE COMPANIES contracts e(isting prior to mutuali/ation, sub1ect to the effect of said plan. "he board of directors of such insurer, prior to mutuali/ation, may adopt amendments to its by>laws to ta$e effect upon mutuali/ation. SECTION &60. , foreign insurance company doing business in the Philippines, upon payment of the fee hereinafter prescribed & surrender to the Commissioner of its certificate of authority, may apply to withdraw fr. SECTION &6!. the Philippines. Auch application shall be duly e(ecuted in writing, *!+ ,n annual meeting of members shall be held at ten o2cloc$ in the accompanied by evidence of due authority for such e(ecution, properly morning of the fourth "uesday of March of each year at the principal ac$nowledged. office of the insurer, unless a different time or place be provided in the SECTION &63. "he Commissioner shall publish the application for by>laws. withdrawal daily for a period of one wee$ in two newspapers of general *&+ Apecial meetings of the members, for any purpose or purposes circulation in the City of Manila, one in English & the other in Pilipino. "he whatsoever, may be called at any time by the president, or by the e(penses of such publication shall be paid by the insurance company filing board of directors, or by one or more members holding not less than such application. one>fifth of the voting power of such insurer, or by such other officers SECTION &64. Every foreign insurance company desiring to withdraw or persons as the by>laws authori/e. fr. the Philippines shall, prior to such withdrawal, discharge its liabilities to policyholders & creditors in this country. In case of its policies insuring *0+ <otice of all meetings of members whether annual or special shall be given in writing to the members entitled to vote by the secretary, or an residents of the Philippines, it shall cause the primary liabilities under such assistant secretary, or other person charged w- that duty, or if there policies to be reinsured & assumed by another insurance company

17

The Insurance Code

authori/ed to transact business in the Philippines. In the case of such policies as are sub1ect to cancellation by the withdrawing company, it may cancel such policies pursuant to the terms thereof in lieu of such reinsurance & assumption of liabilities. *c+ SECTION &65. "he Commissioner shall ma$e an e(amination of the boo$s & records of the withdrawing company, & if, upon such e(amination, the Commissioner finds that the insurer has no outstanding liabilities to *d+ residents of the Philippines, it shall cancel the withdrawing company2s certificate of authority, if une(pired, & shall permit the insurer to withdraw. "he cost & e(penses of all such e(amination shall be paid as prescribed in *e+ section four hundred seventeen. more of the voting securities of any other person. Provided, "hat no person shall be deemed to control another person solely by reason of his being an officer or director of such other person. %Dolding company% means any person who directly or indirectly controls any authori/ed insurer. %Controlled insurer% means an authori/ed insurer controlled directly or indirectly by a holding company. %Controlled person% means any person, other than a controlled insurer, who is controlled directly or indirectly by a holding company.

SECTION &66. 8pon the failure of such withdrawing insurance company or its agents in the Philippines to pay the e(penses of such %Dolding company system% means a holding company together publication within thirty days after the presentation of the bill therefor, the *f+ w- its controlled insurers & controlled persons. Commissioner shall collect such fee fr. the deposit furnished in accordance w- the provisions of section one hundred ninety>one. SECTION &70. <otwithstanding paragraph *b+ of section two hundred SECTION &67. , foreign life insurance company that withdraws fr. the eighty>two, the Commissioner may determine after notice & opportunity to Philippines shall be considered a %servicing insurance company% if its be heard, that a person e(ercises directly or indirectly either alone or business transactions are confined to accepting periodic premium pursuant to an agreement w- one or more other persons such a controlling payments fr., or granting policy loans & paying cash surrender values of influence over the management or policies of an authori/ed insurer as to outstanding policies to, or reviving lapsed policies of, Philippine ma$e it necessary or appropriate in the public interest or for the protection of policyholders or stoc$holders of the insurer that the person be deemed policyholders, & such other related services. to control the insurer. SECTION &69. <o company shall act as a servicing insurance company until after it shall have obtained a special certification of authority to act as such fr. the Commissioner upon application therefor & payment by the company of the fees hereinafter prescribed. Auch certificate shall e(pire on the last day of Cune of each year & shall be renewed annually, while the company continues to service its policyholders, & to comply w- all the applicable provisions of law & regulations. SECTION &73. "he Commissioner may determine upon application that any person, either alone or pursuant to agreement w- one or more other persons, does not or will not upon the ta$ing of some proposed action control another person. "he filing of an application hereunder in good faith by any person shall relieve the applicant fr. any obligation or liability imposed by this title w- respect to the sub1ect of the application, e(cept as contained in section two hundred ninety>four, until the Commissioner has acted upon the application. 'ithin thirty days or such Title XIX PROFESSIONAL REINSURERS further period as he may prescribe, the Commissioner may prospectively revo$e or modify his determination, after notice & opportunity to be heard, SECTION &7:. E(cept as otherwise provided in this Code, no person, whenever in his 1udgment revocation or modification is consistent w- his partnership, association or corporation shall transact any business in the title. Philippines as a professional reinsurer until it shall have obtained a certificate of authority for that purpose fr. the Commissioner upon the SECTION &74. <otwithstanding any other provisions of this title, the application therefor & payment by such person, partnership, association or following shall not be deemed holding companies corporation of the fees hereinafter prescribed. ,s used in this Code, the term %professional reinsurer% shall mean any person, partnership, authori/ed insurers or reinsurers or their subsidiaries. association or corporation that transacts solely & e(clusively reinsurance *a+ business in the Philippines. *b+ the ?overnment of the Philippines, or any political subdivision, agency or instrumentality thereof, or any corporation w-c is "he Commissioner may refuse to issue a certificate of authority to any wholly owned directly or indirectly by one or more of the such person, partnership, association or corporation if, in his 1udgment, foregoing. such refusal will best promote public interest. <o such certificate of authority shall be granted to any such person, partnership, association or corporation unless & until the Commissioner shall have satisfied himself by "he Commissioner may conditionally or unconditionally e(empt any such e(amination as he may ma$e & such evidence as he may re)uire that specified person or class of persons fr. any of the obligations or liabilities such person, partnership, association or corporation is )ualified by the imposed under this title, if & to the e(tent he finds the e(emption necessary laws of the Philippines to transact business therein as a professional to appropriate in the public interest or not adverse to the interests of policyholders or stoc$holders & consistent w- the purposes of this title. reinsurer. =efore issuing such certificate of authority of the Commissioner must be SECTION &75. satisfied that the name of the applicant is not that of any other $nown company transacting insurance or reinsurance business in the Philippines, *!+ Every person who on the date this Code ta$es effect is a controlled or a name so similar as to be calculated to mislead the public. insurer & every person who thereafter becomes a controlled insurer, shall, within si(ty days thereafter, or within thirty days after becoming a controlled insurer, w-cever is later, register w- the Commissioner. Auch certificate of authority shall e(pire on the last day of Cune of each Auch registration shall be amended within thirty days following any year & shall be renewed annually if such person, partnership, association, change in the identity of its holding company. "he Commissioner may or corporation is continuing to comply w- provisions of this Code, or the grant one or more reasonable e(tensions of the time to register. circulars, instructions, rulings, or decisions of the Commissioner & such other pertinent law, rules & regulations. *&+ Every registrant shall furnish the Commissioner w- the following Every such person, partnership, association, or corporation receiving such information concerning its holding company *a+ a copy of its charter certificate of authority shall be sub1ect to the provisions of this Code & or articles of incorporation & its by>laws, *b+ the identities of its other related laws, & to the 1urisdiction & supervision of the Commissioner. principal shareholders, officers, directors & controlled persons, & *c+ information as to its capital structure & financial condition, & a description of its principal business activities. SECTION &7!. ,ny person, partnership, association, or corporation authori/ed to transact solely reinsurance business must have a paid>up Every controlled insurer shall file w- the Commissioner capital stoc$ of at least ten million pesos, twenty>five per centum of w-c SECTION &76. must be invested in securities satisfactory to the Commissioner, consisting such reports or material as he may direct for the purpose of disclosing of bonds or other evidences of debt of the ?overnment of the Philippines information concerning the operations of persons within the holding or its political subdivisions or instrumentalities, or of government>owned or company system w-c may materially affect the operations, management or controlled corporations & entities, including the Central =an$ of the financial condition of the insurer. Philippines, & deposited w- the Commissioner, & the remaining seventy>five per centum in such other securities as may be allowed & SECTION &77. Every holding company & every controlled person permitted by the Commissioner, w-c securities shall at all times be within a holding company system shall be sub1ect to e(amination by order maintained free fr. any lien or encumbrance. Provided, "hat reinsurers of the Commissioner if he has cause to believe that the operations of such already doing business as such in the Philippines shall comply w- the persons may materially affect the operations, management or financial re)uirement of this section by increasing their respective capital as herein condition of any controlled insurer w- the system & that he is unable to provided not later than #ecember thirty>one, nineteen hundred eighty. obtain relevant information fr. such controlled insurer. "he grounds relied Provided, Further, "hat the provisions of this chapter applicable to upon by the Commissioner for such e(amination shall be stated in his insurance companies shall so far as practicable be li$ewise applicable to order, w-c order shall be sub1ect to 1udicial review only at the instance of professional reinsurers. *,s amended by Presidential #ecree <o. !344+. the person sought to be e(amined. Auch e(amination shall be confined to matters specified in the order. "he cost of such e(amination shall be Title XX HOLDING COMPANIES assessed against the person e(amined & no portion thereof shall thereafter be reimbursed to it directly or indirectly by the controlled insurer. SECTION &7&. ,s used in this title, the following terms shall have the "he Commissioner shall $eep the contents of each respective meanings hereinafter set forth unless the conte(t shall SECTION &79. report made pursuant to this title & any information obtained by him in otherwise re)uire connection therewith confidential & shall not ma$e the same public without *a+ %Person% means an individual, partnership, firm, association, the prior written consent of the controlled insurer to w-c it pertains unless corporation, trust, any similar entity or any combination of the the Commissioner after notice & an opportunity to be heard shall determine that the interests of policyholders, stoc$holders or the public will be served foregoing acting in concert. by the publication thereof. In any action or proceeding by the Commissioner against the person e(amined or any other person within the *b+ %Control%, including the terms %controlling%, %controlled by% & same holding company system a report of such e(amination published by %under common control w-%, means the possession directly or him shall be admissible as evidence of the facts stated therein. indirectly of the power to direct or cause the direction of the management & policies of a person, whether through the "ransactions within a holding company system to w-c ownership of voting securities by a contract other than a SECTION &9:. commercial contract for goods or non>management services or a controlled insurer is a party shall be sub1ect to the following otherwise. Aub1ect to section two hundred eight>four, control "he terms shall be fair & e)uitable. shall be presumed to e(ist if any person directly or indirectly *a+ owns, controls or holds w- the power to vote forty per centum or

18

The Insurance Code

*b+ *c+ charges or fees for services performed shall be reasonable. SECTION &94. <otwithstanding the control of an authori/ed insurer by any person, the officers & directors of the insurer shall not thereby be relieved of any obligation or liability to w-c they would otherwise be sub1ect by law, & the insurer shall be managed so as to assure its separate operating identity consistent w- this title. <othing herein shall preclude an authori/ed insurer fr. having or sharing a common management or cooperative or 1oint use of personnel, property or services w- one or more other persons under arrangements meeting the standards of section two hundred ninety. e(penses incurred & payments received shall be allocated to the *!+ insurer on an e)uitable basis in conformity w- customary insurance accounting practices consistently applied.

"he boo$s, accounts & records of each party to all such transactions shall be maintained as to clearly & accurately disclose the nature & details of the transactions including such accounting information as is necessary to *&+ support the reasonableness of the charges or fees to the respective parties. SECTION &9!. "he prior written approval of the Commissioner shall be re)uired for the following transactions between a controlled insurer & any person in its holding company system sales, purchases, e(changes, loans or e(tensions of credit, or investments, involving five per centum or more of the insurer2s admitted assets as of the thirty>first day of #ecember ne(t preceding.

SECTION &95. "o the e(tent that any information or material is set forth in forms or other matter on file w- any government agency or in a registration form filed w- the Commissioner by another person within the same holding company system, the controlled insurer may comply w- the registration or reporting re)uirements of this title by referring in its registration form or report to such other filed matter & attaching a copy SECTION &9&. "he following transactions between a controlled thereof certified by the insurer as a true & complete copy, to such insurer & any person in its holding company system may not be entered registration form or report or, if such other filed matter is on file w- the into unless the insurer has notified the Commissioner in writing of its Commissioner, incorporating such matter by reference. intention to enter into any such transaction at least thirty days prior thereto, or such shorter period as he may permit, & he has not disapproved it within SECTION &96. <o holding company or controlled person shall directly such period or indirectly or through another person do or cause to be done for or in behalf of the controlled insurer any act intended to affect the insurance *a+ sales, purchases, e(changes, loans or e(tensions of credit, or operations of the insurer w-c, if done by the insurer, would violate any investments, involving more than one>half of one per centum but provision of this Code. less than five per centum of the insurer2s admitted assets as of the thirty>first day of #ecember ne(t preceding. SECTION &97. In addition to any other penalty provided by law, the Commissioner may, upon the willful failure of any person within a holding company system to comply w- this title or any regulation or order *b+ reinsurance treaties or agreements. promulgated hereunder *c+ *d+ rendering of services on a regular or systematic basis. or any material transaction, specified by regulation, w-c the Commissioner determines may adversely affect the interest of the insurer2s policyholders or stoc$holders or of the public. *a+ proceed under title fourteen or title fifteen, Chapter III, of this Code w- respect to insurer within the holding company system. or revo$e or refuse to renew the authority to do business in this country of an insurer within the holding company system or refuse to issue such authority to any other insurer in the system. or direct that, in addition to any other penalty provided by law, such person forfeit to the people of this country a sum not e(ceeding five hundred pesos for a first violation & two thousand five hundred pesos for any subse)uent violation. ,n additional sum not e(ceeding two thousand five hundred pesos shall be imposed for each month during w-c any such violation shall continue. CHAPTER IV SALES AGENCIES AND TECHNICAL SERVICES Title I INSURANCE AGENTS AND INSURANCE BRO#ERS SECTION &99. <o insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission or other compensation to any person for services in obtaining insurance, unless such person shall have first procured fr. the Commissioner a license to act as an insurance agent of such company or as an insurance bro$er as hereinafter provided.

*b+

<othing herein contained shall be deemed to authori/e or permit any transaction w-c, in the case of a non>controlled insurer, would be otherwise contrary to law. SECTION &90. "he Commissioner, in reviewing transactions pursuant to sections two hundred ninety>one & two hundred ninety>two, shall consider whether the transactions comply w- the standard set forth in section two hundred ninety & whether they may adversely affect the interests of policyholders. "his section shall not apply to transactions sub1ect to other sections of this Code w-c impose notice or approval re)uirements greater than those prescribed by this title. SECTION &93. *!+ <o person, other than an authori/ed insurer, shall ac)uire control of any domestic insurer, whether by purchase of its securities or otherwise, e(cept *a+ after twenty days written notice to its insurer or such shorter period as the Commissioner may permit, of its intention to ac)uire control, & *b+ w- the prior written approval of the Commissioner. "he Commissioner shall disapprove the ac)uisition of control of a domestic insurer if he determines, after notice & an opportunity to be heard, that such action is reasonably necessary to protect the interest of the people of this country. "he following shall be the only factors to be considered by him in reaching the foregoing determination *a+ the financial condition of the ac)uiring person or & the insurer. *b+ the trustworthiness of the ac)uiring person or any of its officers or directors. *c+ a plan for the proper & effective conduct of the insurer2s operations. *d+ the source of the funds or assets for the ac)uisition. *e+ the fairness of any e(change of stoc$, assets, cash or other consideration for the stoc$ or assets to be received. *f+ whether the effect of the ac)uisition may be substantially to lessen competition in any line of commerce in insurance or to tend to create a monopoly therein. & *g+ whether the ac)uisition is li$ely to be ha/ardous or pre1udicial to the insurer2s policyholders or stoc$holders. *c+

*&+

*0+

*3+

<o person shall act as an insurance agent or as an insurance bro$er in the solicitation or procurement of applications for insurance, or receive for services in obtaining insurance, any commission or other compensation fr. any insurance company doing business in the Philippines, or any agent thereof, without first procuring a license to act fr. the Commissioner, w-c must be renewed annually on the first day of Canuary, or within si( months thereafter. Auch license shall be issued by the Commissioner only upon the written application of the person desiring it, such application if for a license to act as insurance agent, being approved & countersigned by the company such person desires to represent, & shall be upon a form prescribed by the Commissioner giving such information as he may re)uire, & upon payment of the corresponding fee hereinafter prescribed. "he Commissioner shall satisfy himself as to competence & trustworthiness of the applicant & shall have the right to refuse to issue or renew & to suspend or revo$e any such license in his discretion. <o such "he following conditions affecting any controlled insurer, regardless of license shall be valid after the thirtieth day of Cune of the year following its when such control has been ac)uired, are violations of this title *a+ issuance unless it is renewed. *,s amended by Presidential #ecree <o. the controlling person or any of its officers or directors have !344+ demonstrated untrustworthiness. & *b+ the effect of retention of control may be substantially to lessen competition in any line of commerce in ,ny person who for compensation solicits or obtains insurance in this country or to tend to create a monopoly therein. If, SECTION 0::. after notice & an opportunity to be heard, the Commissioner insurance on behalf of any insurance company or transmits for a person determines that any of the foregoing violations e(ists, he shall reduce other than himself an application for a policy or contract of insurance to or his findings to writing & shall issue an order based thereon & cause fr. such company or offers or assumes to act in the negotiating of such the same to be served upon the insurer & upon all persons affected insurance shall be an insurance agent within the intent of this section & thereby directing any person found to be in violation thereof to ta$e shall thereby become liable to all the duties, re)uirements, liabilities & appropriate action to cure such violation. 8pon the failure of any such penalties to w-c an insurance agent is sub1ect. person to comply w- such order, section two hundred ninety>eight shall become applicable. SECTION 0:!. ,ny person who for any compensation, commission or other thing of value acts or aids in any manner in soliciting, negotiating or "he Commissioner may re)uire the submission of such information as procuring the ma$ing of any insurance contract or in placing ris$ or ta$ing he deems necessary to determine whether any ac)uisition or out insurance, on behalf of an insured other than himself, shall be an retention of control complies w- this title & may re)uire, as a condition insurance bro$er within the intent of this Code, & shall thereby become of approval of such ac)uisition or retention of control, that all or any liable to all the duties, re)uirements, liabilities & penalties to w-c an portion of such information be disclosed to the insurer2s stoc$holders. insurance bro$er is sub1ect. 8nless sub1ect to registration under section two hundred eighty>si( or unless ac)uisition of its control is sub1ect to paragraphs one & two hereof, every authori/ed insurer shall, on or before the first day of Culy, nineteen hundred seventy>five, or within thirty days after any event re)uiring notice hereunder, w-cever is later, notify the Commissioner in writing of the identity of any person whom the insurer then $nows or has reason to believe controls or has ta$en any action, other than preliminary negotiations or discussion, to ac)uire control of the insurer. SECTION 0:&. Every applicant for an insurance bro$er2s license shall file w- the application & shall thereafter maintain in force while so licensed, a bond in favor of the people of the Eepublic of the Philippines e(ecuted by a company authori/ed to become surety upon official recogni/ances, stipulations, bonds & underta$ings. "he bond shall be in such amount as may be fi(ed by the Commissioner, but in no case less than one hundred thousand pesos, & shall be conditioned upon full accounting & due payment to the person entitled thereto of funds coming into the bro$er2s possession through insurance transactions under license. "he bond shall remain in force until released by the Commissioner, or until cancelled by the surety. 'ithout pre1udice to any liability previously incurred thereunder,

*4+

19

The Insurance Code

the surety may cancel the bond on thirty days advance written notice to $ind sent by registered mail to the last registered address of such general both the bro$er & the Commissioner. agent of the company concerned or to the Commissioner shall be sufficient service & deemed as if served on the insurance company itself. 8pon approval of the application, the applicant must also file two errors & omissions *professional liability or professional indemnity+ policies issued SECTION 0:9. E(cept as otherwise provided by law or treaty, it shall separately by two insurance companies authori/ed to do business in the be unlawful for any person, partnership, association or corporation in the Philippines, satisfactory to the Commissioner to indemnify the applicant Philippines, for himself or itself, or for some other person, partnership, against any claim or claims for breach of duty as insurance bro$er w-c may association or corporation, either to procure, receive or forward be made against him by reason of any negligent act, error or omission, applications of insurance in, or to issue or to deliver or accept policies or whenever or wherever committed or alleged to have been committed, on contracts of insurance of or for, any insurance company or companies not the part of the applicant or any person who has been, is now, or may authori/ed to transact business in the Philippines, covering ris$s, life or hereafter during the subsistence of the policies be employed by the said nonlife, situated in the Philippines. & any such person, partnership, applicant in his capacity as insurance bro$er, provided that the filing of any association or corporation violating the provisions of this section shall be claim or claims under one of such policies shall preclude the filing of the deemed guilty of a penal offense, & upon conviction thereof, shall for each said claim or claims under the other policy. "he said policies shall be in such offense be punished by a fine of ten thousand pesos, or such amounts as may be prescribed by the Insurance Commissioner, imprisonment of si( months, or both at the discretion of the court. Provided, depending upon the si/e or amount of the bro$ing business of the "hat the provisions of this section shall not apply to reinsurance. applicant, but in no case shall the amount of each of such policies be less than five hundred thousand pesos. *,s amended by Presidential #ecree Title II REINSURANCE BRO#ERS <o. !344+ SECTION 0:0. "he Commissioner shall, in order to determine the competence of every applicant to have the $ind of license applied for, re)uire such applicant to submit to a written e(amination & to pass the same to the satisfaction of the Commissioner. Auch e(amination shall be held at such times & places as the Commissioner shall fr. time to time determine. SECTION 0!:. E(cept as provided in the ne(t succeeding title, no person shall act as reinsurance bro$er in the Philippines unless he is authori/ed as such by the Commissioner.

, reinsurance bro$er is one who, for compensation, not being a duly authori/ed agent, employee or officer of an insurer in w-c any reinsurance is effected, act or aids in any manner in negotiating contracts of reinsurance, or placing ris$s of effecting reinsurance, for any insurance SECTION 0:3. ,n applicant for the written e(amination mentioned in company authori/ed to do business in the Philippines. the preceding section must be of good moral character & must not have been convicted of any crime involving moral turpitude. De must 8pon application & payment of the corresponding fee satisfactorily show to the Commissioner that he has been trained in the SECTION 0!!. hereinafter prescribed, & the filing of two errors & omissions *professional $ind of insurance contemplated in the license applied for. liability or professional indemnity+ policies hereinafter described, a person may, if found )ualified, be issued a license to act as reinsurance bro$er by Auch e(amination may be waived if it is shown to the satisfaction of the the Commissioner. <o such license shall be valid after the thirtieth day of Commissioner that the applicant has undergone e(tensive education &-or Cune of the year following its issuance unless it is renewed. *,s amended training in insurance. by Presidential #ecree <o. !344+ SECTION 0:4. ,n application for the issuance or renewal of a license to act as an insurance agent or insurance bro$er may be refused, or such license, if already issued or renewed, shall be suspended or revo$ed if the Commissioner finds that the applicant for, or holder of, such license *a+ *b+ *c+ *d+ *e+ *f+ "he errors & omissions *professional liability or professional indemnity+ policies mentioned above shall indemnify the applicant against any claim or claims for breach of duty as reinsurance bro$er w-c may be made against him by reason of any negligent act, error or omission, whenever or wherever committed or alleged to have been committed, on the part of the has willfully violated any provision of this Code. or applicant or any person who has been, is now, or may hereafter during the subsistence of the policies be employed by the said applicant in his has intentionally made a material misstatement in the application capacity as reinsurance bro$er. Provided, "hat the filing of any claim or claims under one of such policies shall preclude the filing of the said claim to )ualify for such license. or or claims under the other policy. "he said policies shall be issued separately by two insurance companies authori/ed to do business in the has obtained or attempted to obtain a license by fraud or Philippines & shall be in such amounts as may be prescribed by the misrepresentation. or Insurance Commissioner, depending upon the si/e or amount of the bro$ing business of the applicant, but in no case shall the amount of each has been guilty of fraudulent or dishonest practices. or of such policies be less than five hundred thousand pesos. *,s amended by Presidential #ecree <o. !344+ has misappropriated or converted to his own use or illegally withheld moneys re)uired to be held in a fiduciary capacity. SECTION 0!&. "he Commissioner may recall, suspend or revo$e the license granted to a reinsurance bro$er for violation of any e(isting law, rule & regulation, or any provision of this Code after due notice & hearing. has not demonstrated trustworthiness & competence to transact business as an insurance agent or insurance bro$er in such manner as to safeguard the public. or Title III RESIDENT AGENTS has materially misrepresented the terms & conditions of policies SECTION 0!0. <o person shall act as resident agent, as hereinafter or contracts of insurance w-c he see$s to sell or has sold. or defined, unless he is registered as such w- the Commissioner.

*g+ *h+

has failed to pass the written e(amination prescribed, if not SECTION 0!3. "he term %resident agent%, as used in this title, is one otherwise e(empt fr. ta$ing the same. duly appointed by a foreign insurer or bro$er not authori/ed to do business in the Philippines to receive in its behalf notices, summons & legal In addition to the foregoing causes, no license to act as insurance agent or processes in connection w- actions or other legal proceedings against such insurance bro$er shall be renewed if the holder thereof has not been foreign insurer or bro$er. actively engaged as such agent or bro$er in accordance w- such rules as the Commissioner may prescribe. *,s amended by Presidential #ecree SECTION 0!4. "he application for a certificate of registration as <o. !7!3+ resident agent filed w- the Commissioner must be accompanied w- *a+ a copy of the power of attorney, duly notari/ed & authenticated by the SECTION 0:5. "he premium, or any portion thereof, w-c an insurance Philippine Consul in the place where such foreign insurer or bro$er is agent or insurance bro$er collects fr. an insured & w-c is to be paid to an domiciled, empowering the applicant to act as resident agent & to receive insurance company because of the assumption of liability through the notices, summons & legal processes for & in behalf of such foreign insurer issuance of policies or contracts of insurance, shall be held by the agent or or bro$er in connection w- any action or legal proceeding against such bro$er in a fiduciary capacity & shall not be misappropriated or converted foreign insurer or bro$er. & *b+ a copy of the corresponding certificate issued by the =oard of Investments as re)uired under Aection 3 of to his own use or illegally withheld by the agent or bro$er. Eepublic ,ct <o. 4344, if such foreign insurer or bro$er is not otherwise e(empt fr. such re)uirement. ,ny insurance company w-c delivers to an insurance agent or insurance bro$er a policy or contract of insurance shall be deemed to have It shall be the duty of such resident agent to notify authori/ed such agent or bro$er to receive on its behalf payment of any SECTION 0!5. premium w-c is due on such policy or contract of insurance at the time of immediately the Commissioner of any change of his office address. its issuance or delivery or w-c becomes due thereon. SECTION 0!6. , certificate of registration issued to a resident agent SECTION 0:6. ,ny provision of e(isting laws to the contrary shall e(pire on the thirtieth day of Cune of the year following its issuance notwithstanding, no person shall, within the Philippines, sell or offer for sale unless it is renewed. a variable contract or do or perform any act or thing in the sale, negotiation, ma$ing or consummating of any variable contract other than "he Commissioner may, after due notice & hearing, recall or cancel the for himself unless such person shall have a valid & current license fr. the certificate of registration issued to a resident agent for violation of any Commissioner authori/ing such person to act as a variable contract agent. e(isting law, rule or regulation, or any provision of this Code. *,s amended <o such license shall be issued unless & until the Commissioner is by Presidential #ecree <o. !344+. satisfied, after e(amination that such person is by training, $nowledge, ability & character )ualified to act as such agent. ,ny such license may be Title IV NON-LIFE COMPANY UNDERWRITER withdrawn & cancelled by the Commissioner after notice & hearing, if he shall find that the holder thereof does not then have the )ualifications SECTION 0!7. <o person shall act, & no company shall employ any re)uired for the issuance of such license. person, as non>life company underwriter, whose duty & responsibility it shall be to select, evaluate & accept ris$s for, & to determine the terms & SECTION 0:7. It shall be unlawful for any person, company or conditions, including those pertaining to amounts of retentions, under w-c corporation in the Philippines to act as general agent of any insurance such ris$s are to be accepted by the company, unless such underwriter is company unless he is empowered by a written power of attorney duly registered as such w- the Commissioner. e(ecuted by such insurance company, & registered w- the Commissioner to receive notices, summons & legal processes for & in behalf of the Every non>life insurance company doing business in insurance company concerned in connection w- actions or other legal SECTION 0!9. proceedings against said insurance company. It shall be the duty of said the Philippines must maintain at all times a register of ris$s accepted & a claims register for each line of ris$s engaged in by such non>life insurance general agent to notify the Commissioner of his post office address in the Philippines, or any change thereof. <otices, summons, or processes of any company w- such entries therein as are now or as may hereafter be

20

The Insurance Code

re)uired by the Commissioner, & it shall be the responsibility of the underwriter on the particular line or ris$ involved to see to it that the said registers are well maintained & $ept, & that all entries therein are properly & correctly recorded. Auch registers shall be open to inspection & e(amination of duly authori/ed representative of the Commissioner at all times during business hours. SECTION 0&:. <o person shall be registered w- the Commissioner, unless such person shall be at least twenty>one years of age on the date of such registration. a resident of the Philippines. of good moral character & w- no conviction of any crime involving moral turpitude. has had at the time such registration is made at least two years of underwriting wor$ in the particular line or ris$ involved. & has passed such )ualifying written e(amination that the Commissioner shall conduct at such time & in such place as he may decide to hold for applicants desiring to act as underwriters. Auch e(amination shall not be re)uired of any person who has served as non>life company underwriter for a period of at least five years, if the Commissioner is satisfied of the applicant2s competence as shown by the results of his underwriting wor$ in the non>life insurance company or companies that employed him in that capacity. "he minimum underwriting e(perience herein re)uired may be reduced or waived if it is shown to the satisfaction of the Commissioner that the non>life company underwriter has undergone e(tensive education &-or training in insurance. himself as an ad1uster. SECTION 00:. "he Commissioner may suspend or revo$e any ad1uster2s license if, after giving notice & hearing to the ad1uster concerned, the Commissioner finds that the said ad1uster *!+ has violated any provision of this Code & of the circulars, rulings & instructions of the Commissioner or has violated any law in the course of his dealings as an ad1uster. or *&+ has made a material misstatement in the application for such license. or *0+ has been guilty of fraudulent or dishonest practices. or *3+ has demonstrated his incompetence or untrustworthiness to act as ad1uster. or *4+ has made patently un1ust valuation of loss. or *5+ has failed to ma$e a report of the ad1ustment he proposed within si(ty days fr. the date of the filing of the claim by the insured w- the insurer, unless prevented so to do by reasons beyond his control. or has refused to allow an e(amination into his affairs or method of doing business as hereinafter provided. SECTION 00!. Every ad1uster shall submit to the Commissioner a )uarterly report of all losses w-c are the sub1ect of ad1ustment effected by him during each month in the form prescribed by the Commissioner. "he report shall be filed within one month after the end of each )uarter.

SECTION 00&. Every ad1uster shall $eep his or its boo$s, records, reports, accounts, & vouchers in such manner that the Commissioner or his duly authori/ed representatives may readily verify the )uarterly reports of the said ad1uster & ascertain whether the said ad1uster has complied wSECTION 0&!. ,ny applicant who misrepresents or omits any material the provisions of law or regulations obligatory upon him or whether the fact in his application for registration as a non>life company underwriter, or method of doing business of the said ad1uster has been fair, 1ust & honest. commits any dishonest act in ta$ing or in connection w- the )ualifying written e(amination for underwriters, shall be barred fr. being registered as SECTION 000. "he Commissioner shall, at least once a year & such non>life company underwriter &, if already registered, his registration whenever he considers the public interest so demands, cause an shall be cancelled & the certificate of registration issued in his favor shall e(amination to be made into the affairs & method of doing business of be recalled immediately by the Commissioner. every ad1uster. In the event that the certificate of authority of a non>life insurance company to transact business is suspended or revo$ed due to business failure arising largely fr. the imprudent & in1udicious acceptance of ris$s by the underwriter concerned, the registration of such underwriter shall li$ewise be cancelled & his certificate of registration shall be recalled by the Commissioner, & no similar certificate shall thereafter be issued in his favor. SECTION 003. ,ny violation of any provision of this title shall be punished by a fine of not more than ten thousand pesos, or by imprisonment in the discretion of the court. Provided, "hat, in case of a partnership, association or corporation, the said penalty shall be imposed upon the partner, president, manager, managing director, director or person in charge of its business or responsible for the violation.

Title VI ACTUARIES SECTION 0&&. <o certificate of registration issued to an underwriter shall be valid after the thirtieth day of Cune of the year following its SECTION 004. <o life insurance company shall be licensed to do issuance unless it is renewed. business in the Philippines nor shall any life insurance company doing business in the Philippines be allowed to continue doing such business "he Commissioner may, after due notice & hearing, also suspend or unless they shall engage the services of an actuary duly accredited w- the cancel such certificate for violation of e(isting laws, rules & regulations or Commissioner who shall, during his tenure of office, be directly responsible of any provisions of this Code. *,s amended by Presidential #ecree <o. for the direction & supervision of all actuarial wor$ connected w- or that !344+ may be involved in the business of the insurance company. Title V AD$USTERS SECTION 0&0. <o person, partnership, association, or corporation shall act as an ad1uster, as hereinafter defined, unless authori/ed so to act by virtue of a license issued or renewed by the Commissioner pursuant to the provisions of this Code. Provided, "hat in the case of a natural person, he must be a Filipino citi/en & in the case of a partnership, association or corporation, at least si(ty per centum of its capital must be owned by citi/ens of the Philippines. SECTION 0&3. public ad1uster. ,n ad1uster may be an independent ad1uster or a SECTION 005. ,ny person may be officially accredited by the Commissioner to act as any actuary in any life insurance company or in any mutual benefit association authori/ed to do business in the Philippines upon application therefor & the payment of the corresponding fee hereinafter prescribed, Provided that *!+ he is a fellow of good standing of the ,cturial Aociety of the Philippines at the time of his appointment & remains in such good standing during the tenure of his engagement. or *&+ in the case of one who is not a fellow of the ,cturial Aociety of the Philippines, he meets all the re)uirements of the said Aociety for accreditation as a fellow of the Aociety, & has been given permission by the pertinent government authorities in the Philippines to render services in the Philippines, in the event that he is not a citi/en of the Philippines.

"he term %independent ad1uster% means any person, partnership, <o certificate of registration issued under this title shall be valid after the association or corporation w-c, for money, commission or any other thing of thirtieth day of Cune of the year following its issuance unless it is renewed. value, acts for or on behalf of an insurer in the ad1usting of claims arising *,s amended by Presidential #ecree <o. !344+ under insurance contracts or policies issued by such insurer. SECTION 006. "he following documents, w-c are fr. time to time "he term %public ad1uster% means any person, partnership, association or submitted to the Commissioner by a life insurance company authori/ed to do business in the Philippines, shall be duly certified by an accredited corporation w-c, for money, commission or any other thing of value, acts on behalf of an insured in negotiating for, or effecting, the settlement of a actuary employed by such company claim or claims of the said insured arising under insurance contracts or policies, or w-c advertises for or solicits employment as an ad1uster of such !. Policy reserves & net due & deferred premiums. claims. &. Atatements of bases & net premiums, loading for gross SECTION 0&4. For every line of insurance claim ad1ustment, ad1usters premiums, & on non>forfeiture values & reserves, when applying shall be licensed either as independent ad1usters or as public ad1usters. <o for approval of gross premiums, reserves & non>forfeiture values. ad1uster shall act on behalf of an insurer unless said ad1uster is licensed as an independent ad1uster. & no ad1uster shall act on behalf of an insured 0. Policies of insurance under any plan submitted to the unless said ad1uster is licensed as a public ad1uster Provided, however, Commissioner as re)uired by law. "hat when a firm or person has been licensed as public ad1uster, he shall not be granted another license as independent ad1uster & vice versa. 3. ,nnual statements & valuation reports submitted to the Commissioner as re)uired by law. <o license, however, shall be re)uired of any company ad1uster who is a salaried employee of an insurance company for the ad1ustment of claims 4. Financial pro1ection showing the probable income & outgo & filed under policies issued by such insurance company. reserve re)uirements, enumerating the acturial assumptions & bases of pro1ections. SECTION 0&5. Auch license or any renewal thereof may be issued by the Commissioner upon written application filed by the person interested @aluation of annuity funds or retirement plans. on the form or forms prescribed by the Commissioner, w-c shall contain 5. such information as he may re)uire, & upon payment of the corresponding fee hereinafter prescribed. ,ny life insurance company authori/ed to do business in the Philippines may employ any person who is not officially accredited under either of the SECTION 0&6. "he Commissioner shall conduct, at such times, & in )ualifications for any $ind of acturial wor$, provided that he shall not, at any such places as he may decide to hold, written e(aminations to determine time, have the authority to certify to the correctness of the foregoing the competence & ability of applicants desiring to act as ad1uster of documents. insurance claims. SECTION 007. <o accredited actuary shall serve more than one client SECTION 0&7. Every ad1uster2s license issued hereunder shall be or employer at the same time. Dowever, one already in the employ of an valid until after the thirtieth day of Cune of the year following the issuance insurance company may be allowed by the Commissioner to serve a of such license unless it is renewed. *,s amended by Presidential #ecree mutual benefit association or any other insurance company, provided the following conditions are first complied w- *a+ that the re)uest to engage his <o. !344+ services by the other employer is in writing. *b+ that his present employer ac)uiesced to it in writing. & *c+ that he furnishes the Commissioner wSECTION 0&9. <othing contained in this title shall apply to any duly copies of said re)uest & ac)uiescence. licensed attorney>at>law who acts or aids in ad1usting insurance claims as an incident to the practice of his profession & who does not advertise Title VII RATING ORGANI!ATION AND RATE MA#ING

21

The Insurance Code

SECTION 009. Every organi/ation w-c now e(ists or w-c may *a+ hereafter be formed for the purpose of ma$ing rates to be used by more than one insurance company authori/ed to do business in the Philippines shall be $nown as a %rating organi/ation.% "he term %rate% as used in this title shall generally mean the ratio of the premium to the amount insured & shall include, as the conte(t may re)uire, either the consideration to be *b+ paid or charged for insurance contracts, including surety bonds, or the elements & factors forming the basis for the determination or application of the same, or both. *c+ SECTION 03:. Every rating organi/ation w-c now e(ists or w-c may hereafter be formed shall be sub1ect to the provisions of this title. SECTION 03!. <o rating organi/ation hereafter formed shall commence rate>ma$ing operations until it shall have obtained a license fr. the Commissioner. =efore obtaining such license, such rating organi/ation shall file w- the Commissioner a notice of its intention to commence rate>ma$ing operations, a copy of its constitution, articles of agreement or association, or of incorporation, & its by>laws, a list of insurance companies that have agreed to become members or subscribers, & such other information concerning such rating organi/ation & its operations as may be re)uired by the Commissioner. If the Commissioner finds that the organi/ation has complied w- the provisions of law & that it has a sufficient number of members or subscribers & is otherwise )ualified to function as a rating organi/ation, the Commissioner may issue a license to such rating organi/ation authori/ing it to ma$e rates for the $inds of insurance or subdivisions thereof as may be specified in such license. <o license issued to a rating organi/ation shall be valid after the thirtieth day of Cune of the year following its issuance unless it is renewed. <o rating organi/ation w-c now e(ists & is not licensed pursuant to this section shall continue rate>ma$ing operations until it shall have obtained fr. the Commissioner a license w-c he may issue if satisfied that such organi/ation is complying wthe provisions of this title. Every rating organi/ation shall notify the Commissioner promptly of every change in *!+ its constitution, its articles of agreement or association or its certificate of incorporation, & its by>laws rules & regulations governing the conduct of its business, & *&+ its list of members & subscribers. *d+ =asic classification, manual, minimum, class, or schedule rates or rating plans, shall be made & adopted for all such ris$s. ,ny departure fr. such rates shall be in accordance w- schedules, rating plans & rules filed w- the Commissioner. aisa dc Eates shall be reasonable & ade)uate for the class of ris$s to w-c they apply. <o rate shall discriminate unfairly between ris$s involving essentially the same ha/ards & e(pense elements or between ris$s in the application of li$e charges & credits. Consideration shall be given to the past & prospective loss e(perience, including the conflagration & catastrophe ha/ards, if any, to all factors reasonably attributable to the class of ris$s, to a reasonable profit, to commissions paid during the most recent annual period & to past & prospective other e(penses. In case of fire insurance rates, consideration shall be given to the e(perience of the fire insurance business during a period of not less than five years ne(t preceding the year in w-c the review is made. Eis$ may be grouped by classifications for the establishment of rates & minimum premiums. Classification rates may be modified to produce rates for individual ris$s in accordance w- rating plans w-c establish standards for measuring variations in ha/ards or e(pense provisions, or both. Auch standards may measure any difference among ris$s that can be demonstrated to have a probable effect upon losses or e(penses.

*e+

SECTION 04:. <o rating organi/ation & no insurance company w-c ma$es & files its own rates shall ma$e or promulgate any rate or schedule of rates w-c is to be applied to any fire ris$ on the condition that the whole amount of insurance on any ris$ or any specified part thereof shall be placed w- the members of or subscribers to such rating organi/ation or wsuch insurer.

Every insurance company doing business in the , %member% means an insurer who participates in or is entitled to SECTION 04!. Philippines shall annually file w- the rating organi/ation of w-c it is a participate in the management of a rating organi/ation. member or subscriber, or w- such other agency as the Commissioner may , %subscriber% means an insurer w-c is furnished at its re)uest w- rates & designate, a statistical report showing a classification schedule of its rating manuals by a rating organi/ation of w-c it is not a member. *,s premiums & losses on all $inds or types of insurance business to w-c section three hundred forty>nine is applicable, & such other information as amended by Presidential #ecree <o. !344+ the Commissioner may deem necessary or e(pedient for the administration of the provisions of this title. SECTION 03&. Each rating organi/ation shall furnish its rating service without discrimination to all of its members & subscribers, & shall, sub1ect Every non>life rating organi/ation & every non>life to reasonable rules & regulations, permit any insurance company doing SECTION 04&. business in the Philippines, not admitted to membership, to become a insurance company doing business in the Philippines shall file w- the subscriber to its rating services for any $ind of insurance or subdivisions Commissioner, e(cept as to ris$s w-c by general custom of the business thereof. <otice of proposed changes in such rules & regulations shall be are not written according to manual rates or rating plans, every rate given to subscribers. "he reasonableness of any rule or regulation in its manual, schedule of rates, classification of ris$s, rating plan, & every other application to subscribers, or the refusal of any rating organi/ation to admit rating rule & every modification of any of the foregoing w-c it proposes to an insurance company as a subscriber, shall, at the re)uest of any use. ,n insurance company may satisfy its obligation to ma$e such filings subscriber or any such insurance company, be reviewed by the for any $ind or type of insurance by becoming a member of or subscriber to Commissioner at a hearing held upon at least ten days2 written notice to a rating organi/ation w-c ma$es such filings for such $ind or type of such rating organi/ation & to such subscriber or insurance company. "he insurance, & by authori/ing the Commissioner to accept such filings of the rating organi/ation on behalf of such insurance company. Commissioner may, after such hearing, issue an appropriate order. SECTION 030. <o rating organi/ation or any other association shall refuse to do business w-, or prohibit or prevent the payment of commissions to, any person licensed as an insurance bro$er pursuant to the provisions of title one of this chapter. SECTION 033. Eating organi/ation shall be sub1ect to e(amination by the Commissioner, as often as he may deem such e(amination e(pedient, pursuant to the provisions of this Code applicable to the e(amination of insurance companies. De shall cause such an e(amination of each rating organi/ation to be made at least once in every five years. SECTION 034. "he Commissioner may suspend or revo$e the license of any rating organi/ation w-c fails to comply w- his order within the time limited by such order, or any e(tension thereof w-c he may grant. "he Commissioner may determine when a suspension of license shall become effective & it shall remain in effect for the period fi(ed by him, unless he modifies or rescinds such suspension. SECTION 040. Every manual or schedule of rates & every rating plan filed as provided in the preceding section shall state or clearly indicate the character & e(tent of the coverage to w-c any such rate or any modification thereof will be applied. SECTION 043. "he Commissioner shall review filings as soon as reasonably possible after they have been made in order to determine whether they meet the re)uirements of this title. 'hen a filing is not accompanied by the information upon w-c the insurance company supports such filing, & the Commissioner does not have sufficient information to determine whether such filing meets the re)uirements of this title, he shall re)uire such insurance company to furnish the information upon w-c it supports such filing. "he information furnished in support of a filing may include *!+ the e(perience or 1udgment of the insurance company or rating organi/ation ma$ing the filing, *&+ its interpretation of any statistical data it relies upon, *0+ the e(perience of other insurance companies or rating organi/ation, or *3+ any other relevant factors.

SECTION 044. If the Commissioner finds that any rate filings SECTION 035. ,ny rating organi/ation may subscribe for or purchase theretofore filed w- him do not comply w- the provisions of this title or that acturial, technical or other services, & such services shall be available to all they provide rates or rules w-c are inade)uate, e(cessive, unfairly members & subscribers without discrimination. discriminatory or otherwise unreasonable, he may order the same withdrawn & at the e(piration of si(ty days thereafter the same shall be SECTION 036. ,ny rating organi/ation may provide for the deemed no longer on file. =efore ma$ing any such finding & order, the e(amination of policies, daily reports, binders, renewal certificates, Commissioner shall give notice, not less than ten days in advance, & a endorsements or other evidences of insurance, or the cancellation thereof, hearing, to the rating organi/ation, or to the insurer, w-c filed the same. & may ma$e reasonable rules governing their submission. Auch rules shall Auch order shall not affect any contract or policy made or issued prior to contain a provision that in the event an insurance company does not within the e(piration of such si(ty day period. si(ty days furnish satisfactory evidence to the rating organi/ation of the correction of any error or omission previously called to its attention by the SECTION 045. <o member or subscriber of a rating organi/ation, & rating organi/ation, it shall be the duty of the rating organi/ation to notify no insurance company doing business in the Philippines, or agent, the Commissioner thereof. ,ll information so submitted for e(amination employee or other representative of such company, & no insurance bro$er shall be confidential. shall charge or demand a rate or receive a premium w-c deviates fr. the rates, rating plans, classifications, schedules, rules & standards, made & SECTION 037. Cooperation among rating organi/ations or among last filed by a rating organi/ation or by or on behalf of the insurance rating organi/ations & insurers in rate ma$ing or in other matters within the company, or shall issue or ma$e any policy or contract involving violation of scope of this title is hereby authori/ed, provided the filings resulting fr. such such rate filings. cooperation are sub1ect to all provisions of this title w-c are applicable to filings generally. "he Commissioner may review such cooperative activities SECTION 046. <otwithstanding any other provisions of this title, upon & practices & if he finds that any such activity or practice is unfair or the written application of the insurer, stating his reasons therefor, filed w- & unreasonable or otherwise inconsistent w- the provisions of this title, he approved by the Commissioner, a rate in e(cess of that provided by a filing may issue a written order specifying in what respects such activity or otherwise applicable may be used on any specific ris$. practice is unfair or unreasonable or otherwise inconsistent w- the provisions of this title, & re)uiring the discontinuance of such activity or SECTION 047. 'henever the Commissioner shall determine, after practice. notice & a hearing, that the rates charged or filed on any class of ris$s are e(cessive, discriminatory, inade)uate or unreasonable, he shall order that SECTION 039. Every rating organi/ation & every insurance company such rates be appropriately ad1usted. For the purpose of applying the w-c ma$es & files its own rates, shall ma$e rates for all ris$s rated by such provisions of this section, the Commissioner may fr. time to time approve organi/ation or insurance company in accordance w- the following reasonable classifications of ris$s for any or all such classes, having due provisions regard to the past & prospective loss e(perience, including conflagration or catastrophe ha/ards, if any, to all other relevant factors & to a reasonable

22

The Insurance Code

profit. insurance company2s net worth & the aggregate net worth of all life insurance companies or all non>life insurance companies, as the case may SECTION 049. <othing contained in this title shall be construed as be, as shown in their latest financial statements approved by the re)uiring any insurer to become a member of or subscriber to any rating Commissioner. "his proportion applied to the five million pesos shall be the contribution of a particular company to the corresponding ,ccount of the organi/ation. Aecurity Fund. SECTION 05:. ,greements may be made among insurance companies w- respect to the e)uitable apportionment among them of insurance w-c may be afforded applicants who are in good faith entitled to but are unable to procure such insurance through ordinary methods & such insurance companies may agree among themselves on the use of reasonable rates & modifications for such insurance, such agreements & rate modifications to be sub1ect to the approval of the Commissioner. Provided, however, "hat the provisions of this section shall not be deemed to apply to wor$men2s compensation insurance. SECTION 05!. <o insurance company doing business in the Philippines or any agent thereof, no insurance bro$er, & no employee or other representative of any such insurance company, agent, or bro$er, shall ma$e, procure or negotiate any contract of insurance or agreement as to policy contract, other than is plainly e(pressed in the policy or other written contract issued or to be issued as evidence thereof, or shall directly or indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employee of such insured, either as an inducement to the ma$ing of such insurance or after such insurance has been effected, any rebate fr. the premium w-c is specified in the policy, or any special favor or advantage in the dividends or other benefits to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any $ind, directly or indirectly, w-c is not specified in such policy or contract of insurance. nor shall any such company, or any agent thereof, as to any policy or contract of insurance issued, ma$e any discrimination against any Filipino in the sense that he is given less advantageous rates, dividends or other policy conditions or privileges than are accorded to other nationals because of his race. "he amount of five million pesos in each ,ccount shall be in the form of a revolving trust fund. "he respective contributions of the companies shall remain as admitted assets in their boo$s & any disbursement therefr. shall be deducted proportionately fr. the contributions of each company w-c will be allowed as deductions for income ta( purposes. ,ny earnings of the Fund shall be turned over to the contributing companies in proportion to their contributions. In the case of disbursements of funds fr. the Fund as provided in the foregoing paragraph, the life & non>life companies, as the case may be, shall replenish the amount disbursed in direct proportion to the individual company2s net worth & the aggregate net worth of the life or non>life companies, as the case may be. Dowever, in no case shall the Fund e(ceed the aggregate amount of ten million pesos, or five million pesos for each ,ccount. Ahould the Fund, Bife of <on>Bife ,ccount, as the case may be, be inade)uate for a disbursement as provided for, then the Bife or <on>Bife companies, as the case may be, shall contribute to the Fund their respective shares in the proportion previously mentioned. SECTION 057. "he Commissioner may adopt, amend, & enforce all reasonable rules & regulations necessary for the proper administration of the Fund & of the ,ccounts. In the event any insurer shall fail to ma$e any payment re)uired by this title, or that any payment made is incorrect, he shall have full authority to e(amine all the boo$s & records of the insurer for the purpose of ascertaining the facts & shall determine the correct amount to be paid & may proceed in any court of competent 1urisdiction to recover for the benefit of the Fund or of the ,ccount concerned any sum shown to be due upon such e(amination & determination. ,ny insurer w-c fails to ma$e any payment to the Fund or to the ,ccount concerned when due, shall thereby forfeit to said Fund or ,ccount concerned a penalty of five per centum of the amount determined to be due as provided by this title, plus one per centum of such amount for each month of delay or fraction thereof, after the e(piration of the first month of such delay, but the Commissioner, if satisfied that the delay was e(cusable, may remit all or any part of such penalty. "he Commissioner, in his discretion, may suspend or revo$e the certificate of authority to do business in the Philippines of any insurance company w-c shall fail to comply w- this title or to pay any penalty imposed in accordance therewith.

SECTION 05&. <o insurance company doing business in the Philippines, & no officer, director, or agent thereof, & no insurance bro$er or any other person, partnership or corporation shall issue or circulate or cause or permit to be issued or circulated any literature, illustration, circular or statement of any sort misrepresenting the terms of any policy issued by any insurance company of the benefits or advantages promised thereby, or any misleading estimate of the dividends or share of surplus to be received thereon, or shall use any name or title of any policy or class of policies misrepresenting the true nature thereof. nor shall any such company or agent thereof, or any other person, partnership or corporation ma$e any misleading representation or incomplete comparison of policies to any person insured in such company for the purpose of inducing or tending to induce such person to lapse, forfeit, or surrender his said insurance. SECTION 059. "he ,ccounts created by this title shall be separate & apart fr. each other & fr. any other fund. "he "reasurer of the Philippines SECTION 050. If the Commissioner, after notice & hearing, finds that shall be the custodian of the Bife ,ccount & <on>Bife ,ccount of the any insurance company, rating organi/ation, agent, bro$er or other person Aecurity Fund. & all disbursements fr. any ,ccount shall be made by the has violated any of the provisions of this title, it shall order the payment of "reasurer of the Philippines upon vouchers signed by the Commissioner or a fine not to e(ceed five hundred pesos for each such offense, & shall his deputy, as hereinafter provided. "he moneys of said ,ccount may be immediately revo$e the license issued to such insurance company, rating invested by the Commissioner only in bonds or other evidences of debt of organi/ation, agent, or bro$er. "he issuance, procurement or negotiation of the government of the Philippines or its political subdivisions or a single policy or contract of insurance shall be deemed a separate instrumentalities. "he Commissioner may sell any of the securities in w-c offense. an ,ccount is in vested, if advisable, for its proper administration or in the best interest of such ,ccount. Title VIII PROVISION COMMON TO AGENTS" BRO#ERS" AND AD$USTERS SECTION 06:. Payments fr. either the Bife Insurance ,ccount or <on>Bife ,ccount, as the case may be, shall be made by the "reasurer of SECTION 053. , license issued to a partnership, association or the Philippines to the Commissioner, upon the authority of appropriate corporation to act as an insurance agent, general agent, insurance bro$er, certificate filed w- him by the Commissioner acting in such capacity. reinsurance bro$er, or ad1uster shall authori/e only the individual named in the license who shall )ualify therefor as though an individual licensee. "he SECTION 06!. "he Commissioner may, in his discretion, designate or Commissioner shall charge, & the licensee shall pay, a full additional appoint a duly authori/ed representative or representatives to appear & license fee as to each respective individual so named in such license in defend before any court or other body or official having 1urisdiction any or e(cess of one. all actions or proceedings against principals or assureds on insurance policies or contracts issued to them where the insurer has become Bicenses & certificates of registration issued under the provisions of this insolvent or unable to meet its insurance obligations. "he Commissioner chapter may be renewed by the filing of notices of intention on forms to be shall have, as of the date of insolvency of such insurer or as of the date of prescribed by the Commissioner & payment of the fees therefor. *,s its inability meet its insurance obligations, only the rights w-c such insurer would have had if it had not become insolvent or unable to meet its amended by Presidential #ecree <o. !344+ insurance obligations. For the purpose of this title the Commissioner shall have power to employ such counsel, cler$s & assistants as he may deem CHAPTER V SECURITY FUND necessary. SECTION 054. "here is hereby created a fund to be $nown as the %Aecurity Fund% w-c shall be used in the payment of allowed claims against an insurance company authori/ed to transact business in the Philippines remaining unpaid by reason of the solvency of such company. "he said Fund may also be used to reinsure the policy of the insolvent insurer in any solvent insurer authori/ed to do business in the Philippines as provided in section two hundred forty>nine. In the event of national emergency or calamity, the Fund may li$ewise be used to pay insured claims w-c otherwise would not be compensable under the provisions of the policy. <o payment fr. the Aecurity Fund shall, however, be made to any person who owns or controls ten per centum or more of the voting shares of stoc$ of the insolvent insurer & no payment on any one claim shall e(ceed twenty thousand pesos. SECTION 06&. "he e(pense of administering an ,ccount shall be paid out of the ,ccount concerned. "he Commissioner shall serve as administrator of the Fund & of the ,ccounts without additional compensation, but may be allowed & paid fr. the ,ccount concerned e(penses incurred in the performance of his duties in connection w- said ,ccount. "he compensation of those persons employed payable fr. the ,ccount concerned. "he Commissioner shall include in his annual report to the Aecretary of Finance a statement of the e(penses of administration of the Fund & of the Bife ,ccount & <on>Bife ,ccount for the preceding year. CHAPTER VI INSURANCE COMPULSORY MOTOR VEHICLE LIABILITY

For purposes of this chapter SECTION 055. Auch Fund shall consist of all payments made to the SECTION 060. Fund by insurance companies authori/ed to do business in the Philippines. Payments made by life insurance companies shall be treated separately fr. *a+ %Motor @ehicle% is any vehicle as defined in section three, those made by non>life insurance companies & the corresponding fund paragraph *a+ of Eepublic ,ct <umbered Four "housand ;ne shall be called %Bife ,ccount% & %<on>Bife ,ccount%, respectively, & shall be Dundred "hirty>Ai(, ;therwise $nown as the %Band held & administered as such by the Commissioner in accordance w- the "ransportation & "raffic Code.% provisions of this title. "he %Bife ,ccount% shall be utili/ed e(clusively for disbursements that refer to life insurance companies, while the %<on>Bife *b+ %Passenger% is any fare paying person being transported & ,ccount% shall be utili/ed e(clusively for disbursements that refer to conveyed in & by a motor vehicle for transportation of non>life insurance companies. passengers for compensation, including persons e(pressly authori/ed by law or by the vehicle2s operator or his agents to SECTION 056. ,ll insurance companies doing business in the ride without fare. Philippines shall contribute to the Aecurity Fund, Bife or <on>Bife ,ccount, as the case may be, on or before the fifteenth day of Cune, nineteen *c+ %"hird>Party% is any person other than a passenger as defined in hundred & seventy>five, the aggregate amount of five million pesos for this section & shall also e(clude a member of the household, or each ,ccount. "he contributions of the life insurance companies & of the a member of the family within the second degree of non>life insurance companies shall be in direct proportion to the ratio consanguinity or affinity, of a motor vehicle owner or land between a particular life insurance company or a particular non>life transportation operator, as li$ewise defined herein, or his

23

The Insurance Code

employee in respect of death, bodily in1ury, or damage to the payment of claims for death or bodily in1uries w- the coverages set forth property arising out of & in the course of employment. *,s herein. *,s amended by Presidential #ecree <o. !344 & !7!3+ amended by Presidential #ecree <o. !7!3 & !97!+ SECTION 067. ,ny claim for death or in1ury to any passenger or third %;wner% or %Motor vehicle owner% means the actual legal owner party pursuant to the provisions of this chapter shall be paid without the of a motor vehicle, in whose name such vehicle is duly registered necessity of proving fault or negligence of any $ind. Provided, "hat for w- the Band "ransportation Commission. purposes of this section F %Band transportation operator% means the owner or owners of *i+ motor vehicles for transportation of passengers for compensation, including school buses. *ii+ %Insurance policy% or %Policy% refers to a contract of insurance against passenger & thirty>party liability for death or bodily in1uries & damaged to property arising fr. motor vehicle *a+ accidents. *,s amended by Presidential #ecree <o. !344 & !7!3+ *b+ "he total indemnity in respect of any person shall not e(ceed five thousand pesos. "he following proofs of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim Police report of accident. & #eath certificate & evidence sufficient to establish the proper payee. or Medical report & evidence of medical or hospital disbursement in respect of w-c refund is claimed. Claim may be made against one motor vehicle only. In the case of an occupant of a vehicle, claim shall lie against the insurer of the vehicle in w-c the occupant is riding, mounting or dismounting fr.. In any other case, claim shall lie against the insurer of the directly offending vehicle. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained.

*d+

*e+

*f+

SECTION 063. It shall be unlawful for any land transportation operator or owner of a motor vehicle to operate the same in the public highways unless there is in force in relation thereto a policy of insurance or guaranty *c+ in cash or surety bond issued in accordance w- the provisions of this chapter to indemnify the death, bodily in1ury, &-or damage to property of a third>party or passenger, as the case may be, arising fr. the use thereof. *iii+ *,s amended by Presidential #ecree <o. !344 & !7!3+ SECTION 064. "he Commissioner shall furnish the Band "ransportation Commissioner w- a list of insurance companies authori/ed to issue the policy of insurance or surety bond re)uired by this chapter. *,s amended by Presidential #ecree <o. !7!3+ SECTION 065. "he Band "ransportation Commission shall not allow the registration or renewal of registration of any motor vehicle without first re)uiring fr. the land transportation operator or motor vehicle owner concerned the presentation & filing of a substantiating documentation in a form approved by the Commissioner evidencing that the policy of insurance or guaranty in cash or surety bond re)uired by this chapter is in effect. *,s amended by Presidential #ecree <o. !344+

SECTION 069. <o land transportation operator or owner of motor vehicle shall be unreasonably denied the policy of insurance or surety bond re)uired by this chapter by the insurance companies authori/ed to issue the same, otherwise, the Band "ransportation Commission shall re)uire fr. said land transportation operator or owner of the vehicle, in lieu of a policy of insurance or surety bond, a certificate that a cash deposit has been made w- the Commissioner in such amount re)uired as limits of indemnity in section three hundred seventy>seven to answer for the passenger &-or third>party liability of such land transportation operator or SECTION 066. Every land transportation operator & every owner of a owner of the vehicle. motor vehicle shall, before applying for the registration or renewal of registration of any motor vehicle, at his option, either secure an insurance policy or surety bond issued by any insurance company authori/ed by the <o insurance company may issue the policy of insurance or surety bond Commissioner or ma$e a cash deposit in such amount as herein re)uired re)uired under this chapter unless so authori/ed under e(isting laws. as limit of liability for purposes specified in section three hundred "he authority to engage in the casualty &-or surety lines of business of an seventy>four. insurance company that refuses to issue or renew, without 1ust cause, the *!+ In the case of a land transportation operator the insurance insurance policy or surety bond therein re)uired shall be withdrawn guaranty in cash or surety bond shall cover liability for death or immediately. *,s amended by Presidential #ecree <o. !344 & !7!3+ bodily in1uries of third>parties &-or passengers arising out of the use of such vehicle in the amount not less than twelve thousand SECTION 07:. <o cancellation of the policy shall be valid unless pesos per passenger or third party & an amount, for each of written notice thereof is given to the land transportation operator or owner such categories, in any one accident of not less than that set of the vehicle & to the Band "ransportation Commission at least fifteen forth in the following scale F days prior to the intended effective date thereof. Motor vehicles w- an authori/ed capacity of twenty>si( or more 8pon receipt of such notice, the Band "ransportation Commission, unless it receives evidence of a new valid insurance or guaranty in cash or surety passengers Fifty thousand pesos. bond as prescribed in this chapter, or an endorsement of revival of the *b+ Motor vehicles w- an authori/ed capacity of fr. twelve to cancelled one, shall order the immediate confiscation of the plates of the motor vehicle covered by such cancelled policy. "he same may be twenty>five passengers Forty thousand pesos. re>issued only upon presentation of a new insurance policy or that a guaranty in cash or surety band has been made or posted w- the *c+ Motor vehicles w- an authori/ed capacity of fr. si( to eleven Commissioner & w-c meets the re)uirements of this chapter, or an passengers "hirty thousand pesos. endorsement or revival of the cancelled one. *,s amended by Presidential #ecree <o. !344+ *d+ Motor vehicles w- an authori/ed capacity of five or less passengers Five thousand pesos multiplied by the authori/ed SECTION 07!. If the cancellation of the policy or surety bond is capacity. contemplated by the land transportation operator or owner of the vehicle, he shall, before the policy or surety bond ceases to be effective, secure a Provided, however, "hat such cash deposit made to, or surety bond posted similar policy of insurance or surety bond to replace the policy or surety w-, the Commissioner shall be resorted to by him in cases of accidents the bond to be cancelled or ma$e a cash deposit in sufficient amount w- the indemnities for w-c to third>parties &-or passengers are not settled Commissioner & without any gap, file the re)uired documentation w- the accordingly by the land transportation operator &, in that event, the said Band "ransportation Commission, & notify the insurance company cash deposit shall be replenished or such surety bond shall be restored w- concerned of the cancellation of its policy or surety bond. *,s amended by si(ty days after impairment or e(piry, as the case may be, by such land Presidential #ecree <o. !344+ transportation operator, otherwise, he shall secure the insurance policy re)uired by this chapter. "he aforesaid cash deposit may be invested by SECTION 07&. In case of change of ownership of a motor vehicle, or the Commissioner in readily mar$etable government bonds &-or securities. change of the engine of an insured vehicle, there shall be no need of issuing a new policy until the ne(t date of registration or renewal of *&+ In the case of an owner of a motor vehicle, the insurance or registration of such vehicle, & provided that the insurance company shall guaranty in cash or surety bond shall cover liability for death or agree to continue the policy, such change of ownership or such change of in1ury to third parties in an amount not less than that set forth in the engine shall be indicated in a corresponding endorsement by the the following scale in any one accident insurance company concerned, & a signed duplicate of such endorsement shall, within a reasonable time, be filed w- the Band "ransportation Commission. I. Private Cars *a+ *a+ *b+ *c+ II. *a+ *b+ *c+ *d+ "he =antam Bight Deavy "wenty thousand pesos. "wenty thousand pesos. "hirty thousand pesos. SECTION 070. In the settlement & payment of claims, the indemnity shall not be availed of by any accident victim or claimant as an instrument of enrichment by reason of an accident, but as an assistance or restitution insofar as can fairly be ascertained.

SECTION 073. ,ny person having any claim upon the policy issued pursuant to this Chapter shall, without any unnecessary delay, present to ;ther Private @ehicles the insurance company concerned a written notice of claim setting forth the nature, e(tent & duration of the in1uries sustained as certified by a duly licensed physician. <otice of claim must be filed within si( months fr. date "ricycles, motorcycles, & scooters "welve thousand pesos. of accident, otherwise, the claim shall be deemed waived. ,ction or suit for recovery of damage due to loss or in1ury must be brought, in proper cases, @ehicles w- an unladen weight of &,5:: $ilos or less "wenty w- the Commissioner or the Courts within one year fr. denial of the claim, thousand pesos. otherwise, the claimant2s right of action shall prescribe. *,s amended by Presidential #ecree !7!3 & =atasang Pambansa =lg. 763+ @ehicles w- an unladen weight of between &,5:! $ilos & 0,90: $ilos "hirty thousand pesos. SECTION 074. "he insurance company concerned shall forthwith ascertain the truth & e(tent of the claim & ma$e payment within five @ehicles w- an unladen weight over 0,90: $ilos Fifty thousand wor$ing days after reaching an agreement. If no agreement is reached, the pesos. insurance company shall pay only the %no>fault% indemnity provided in section three hundred seventy>eight without pre1udice to the claimant fr. Commissioner may, if warranted, set forth schedule of indemnities for pursuing his claim further, in w-c case, he shall not be re)uired or

24

The Insurance Code

compelled by the insurance company to e(ecute any )uit claim or authori/ed to transact business in the Philippines for the account of the document releasing it fr. liability under the policy of insurance or surety particular association constituting the ?uaranty Fund. bond issued. *,s amended by Presidential #ecree <o. !344+ ,ny accrual to such fund, be it interest earned or dividend additions on In case of any dispute in the enforcement of the provisions of any policy moneys or securities so deposited, may, w- the prior approval of the issued pursuant to this chapter, the ad1udication of such dispute shall be Commissioner, be withdrawn by the association if there is no pending within the original & e(clusive 1urisdiction of the Commissioner, sub1ect to benefit claim against it, including interest thereon or dividend additions the limitations provided in section four hundred si(teen. thereto. SECTION 075. It shall be unlawful for a land transportation operator or "he Commissioner, prior to or after licensing a mutual benefit association, owner of motor vehicle to re)uire his or its drivers or other employees to may re)uire such association to increase its ?uaranty Fund fr. the initial contribute in the payment of premiums. minimum amount re)uired to an amount e)ual to at least ten per centum of its assets, if such assets e(ceed one hundred thousand pesos, but in no SECTION 076. <o government office or agency having the duty of case shall such increase e(ceed the ma(imum amount of capital implementing the provisions of this chapter nor any official or employee investment re)uired of a domestic insurance company under section two thereof shall act as agent in procuring the insurance policy or surety bond hundred & three of this Code. *,s amended by Presidential #ecree <o. provided for herein. "he commission of an agent procuring the said policy !344+ or bond shall in no case e(ceed ten per centum of the amount of the premiums therefor. SECTION 090. Every mutual benefit association licensed to do business as such shall issue membership certificates to its members specifying the benefits to w-c such members are entitled. SECTION 077. ,ny land transportation operator or owner of motor vehicle or any other person violating any of the provisions of the preceding sections shall be punished by a fine of not less than five hundred pesos but Auch certificates, together w- the articles of incorporation of the association not more than one thousand pesos &-or imprisonment for not more than si( or its constitution & by>laws, & all e(isting laws as may be pertinent shall months. "he violation of section three hundred seventy>seven by a land constitute the agreement, as of the date of its issuance, between the transportation operator shall be a sufficient cause for the revocation of the association & the member. "he membership certificate shall be in a form certificate of public convenience issued by the =oard of "ransportation previously approved by the Commissioner. covering the vehicle concerned. SECTION 093. , mutual benefit association may, by reinsurance SECTION 079. 'henever any violation of the provisions of this agreement, cede in whole or in part any individual ris$ or ris$s under chapter is committed by a corporation or association, or by a government certificates of insurance issued by it, only to a life insurance company office or entity, the e(ecutive officer or officers of said corporation, authori/ed to transact business or to a professional reinsurer authori/ed to association or government office or entity who shall have $nowingly accept life ris$s in the Philippines. Provided, "hat copy of the draft of such permitted, or failed to prevent, said violation shall be held liable as reinsurance agreement shall be submitted to the Commissioner for his principals. approval. "he association may ta$e credit for the reserves on such ceded ris$s to the e(tent reinsured. CHAPTER VII MUTUAL BENEFIT ASSOCIATIONS AND TRUSTS FOR CHARITABLE USES SECTION 094. "he constitution or by>laws of a mutual benefit association must distinctly state the purpose for w-c dues &-or assessments are made & collected & the portion thereof w-c may be used Title I MUTUAL BENEFIT ASSOCIATIONS for e(penses. SECTION 09:. ,ny society, association or corporation, without capital stoc$, formed or organi/ed not for profit but mainly for the purpose of paying sic$ benefits to members, or of furnishing financial support to members while out of employment, or of paying to relatives of deceased members of fi(ed or any sum of money, irrespective of whether such aim or purpose is carried out by means of fi(ed dues or assessments collected regularly fr. the members, or of providing, by the issuance of certificates of insurance, payment of its members of accident or life insurance benefits out of such fi(ed & regular dues or assessments, but in no case shall include any society, association, or corporation w- such mutual benefit features & w-c shall be carried out purely fr. voluntary contributions collected not regularly & or no fi(ed amount fr. whomsoever may contribute, shall be $nown as a mutual benefit association within the intent of this Code. #eath benefit & other relief funds shall be created & used e(clusively for paying benefits due the members under their respective membership certificates. , general fund shall li$ewise be created & used for e(penses of administration of the association. SECTION 095. Every outstanding membership certificate must have, after three full years of being continuously in force, an e)uity value e)uivalent to at least fifty per centum of the total membership dues collected thereon.

SECTION 096. Every mutual benefit association must accumulate & maintain, out of the periodic dues collected fr. its members, sufficient reserves for the payment of claims or obligations for w-c it shall hold funds in securities satisfactory to the Commissioner consisting of bonds of the ,ny society, association, or corporation principally organi/ed as labor ?overnment of the Philippines, or any of its political subdivisions & union shall be governed by the Babor Code notwithstanding any mutual instrumentalities, or in such other good securities as may be approved by benefit feature provisions in its charter as incident to its organi/ation. the Commissioner. In no case shall a mutual benefit association be organi/ed & authori/ed to transact business as a charitable or benevolent organi/ation, & whenever it has this feature as incident to its e(istence, the corresponding charter provision shall be revised to conform w- the provision of this section. Mutual benefit association, already licensed to transact business as such on the date this Code becomes effective, having charitable or benevolent feature shall abandon such incidental purpose upon effectivity of this Code if they desire to continue operating as such mutual benefit associations. *,s amended by Presidential #ecree <o. !344+ "he reserve liability shall be established in accordance w- acturial procedures & shall be approved by the Commissioner.

"he articles of incorporation or the constitution & by>laws of a mutual benefit association must provide that if its reserve as to all or any class of certificates becomes impaired, its board of directors or trustees may re)uire that there shall be paid by the members to the association the amount of the members2 e)uitable proportion of such deficiency as ascertained by said board & that if the payment be not made it shall stand as an indebtedness against the membership certificates of the defaulting SECTION 09!. , mutual benefit association, before it may transact as members & draw interest not to e(ceed five per centum per annum such, must first secure a license fr. the Commissioner. "he application for compounded annually. such license shall be filed w- the Commissioner together w- certified true copies of the articles of incorporation or the constitution & by>laws of the SECTION 097. , mutual benefit association may invest such portion association, & all amendments thereto, & such other documents or of its funds as shall not be re)uired to meet pending claims & other testimonies as the Commissioner may re)uire. obligations in any of the classes of investments or types of securities in w-c life insurance companies doing business in the Philippines may invest. <o license shall be granted to a mutual benefit association until the Commissioner shall have been satisfied by such e(amination as may ma$e It may also grant loans to members on the security of a pledge or chattel & such evidence as he may re)uire that the association is )ualified under mortgage of personal properties of the borrowers, or in the absence e(isting laws to operate & transact business as such. "he Commissioner thereof, on the security of the membership certificate of the borrowing may refuse to issue a license to any mutual benefit association if, in his members, in w-c event such loan shall become a first lien on the proceed 1udgment, such refusal will best promote the interest of the members of thereof. such association & of the people of this country. ,ny license issued shall e(pire on the last day of Cune of the year following its issuance &, upon "he Commissioner or any of his duly designated proper application, may be renewed if the association is continuing to SECTION 099. comply w- e(isting laws, rules & regulations, orders, instructions, rulings & representatives, shall have the power of visitation, audit & e(amination into the affairs, financial condition, & methods of doing business of all mutual decisions of the Commissioner. Every association receiving any such license shall be sub1ect to the supervision of the Commissioner. Provided, benefit associations, & he shall cause such e(amination to be made at "hat no such license shall be granted to any such association if such least once every two years or whenever it may be deemed proper & necessary. Free access to the boo$s, records & documents of the association has no actuary. association shall be accorded to the Commissioner, to his representatives, in such manner that the Commissioner or his representatives may readily ,ll mutual benefit association e(isting & licensed as such under the verify or determine the true affairs, financial condition, & method of doing provisions of ,rticle Eight, Chapter Forty>;ne of the Eevised business of such association. In the course of such e(amination, the ,dministrative Code, as amended by ,ct <o. 05!&, shall, upon effectivity Commissioner or his duly designated representatives shall have authority of this Code, surrender their respective licenses to the Commissioner & to administer oaths & ta$e testimony or other evidence on any matter apply for new licenses under the provisions of this code if they still desire relating to the affairs of the association. to continue operating as such mutual benefit associations. SECTION 09&. <o mutual benefit association shall be issued a license to operate as such unless it has constituted & established a ?uaranty Fund by depositing w- the Commissioner an initial minimum amount of ten thousand pesos in cash, or in government securities w- a total value e)ual to such amount, to answer for any valid benefit claim of any of its members. ,ll minutes of the proceedings of the board of directors or trustees of the association, & those of the regular or special meetings of the members, shall be ta$e, & a copy thereof, in English or in Pilipino, shall be submitted to the Commissioner2s representatives or e(aminers in the course of such e(amination.

, copy of the findings of such e(amination, together w- the recommendations of the Commissioner, shall be furnished the association ,ll moneys received by the Commissioner for this purpose must be for its information & compliance, & the same shall be ta$en up immediately deposited by him in interest>bearing deposits w- any ban$ or ban$s in the meetings of the board of directors or trustees & of the members of

25

The Insurance Code

the association. SECTION 3::. Every mutual benefit association shall, annually on or before the thirtieth day of ,pril of each year, render to the Commissioner an annual statement in such form & details as may be prescribed by the Commissioner, signed & sworn to by the president, secretary, treasurer, & actuary of the association, showing the e(act condition of its affairs on the preceding thirty>first day of #ecember. SECTION 3:!. <o money, aid or benefit to be paid, provided or tendered by any mutual benefit association, shall be liable to attachment, garnishment, or other process, or be sei/ed, ta$en, appropriated, or applied by any legal or e)uitable process to pay any debt of liability of a member or beneficiary, or any other person who may have a right thereunder, either before or after payment. SECTION 3:&. ,ny member of a mutual benefit association shall have the right at all times to change the beneficiary or beneficiaries or add another beneficiary or other beneficiaries in accordance w- the rules & regulations of the association unless he has e(pressly waived this right in the membership certificate. Every association may, under such rules as it may adopt, limit the scope of beneficiaries & provide that no beneficiary shall have or obtain any vested interest in the proceeds of any certificate until the certificate has become due & payable under the terms of the membership certificate. SECTION 3!:. "he term %trust for charitable uses%, within the intent of this Code, shall include, all the real or personal properties or funds, as well as those ac)uired w- the fruits or income therefr. or in e(change or substitution thereof, given to or received by any person, corporation, association, foundation, or entity, e(cept the <ational ?overnment, it instrumentalities or political subdivisions, for charitable, benevolent, educational, pious, religious, or other uses for the benefit of the public at large or a particular portion thereof or for the benefit of an indefinite number of persons. SECTION 3!!. "he term %trustee% shall include any individual, corporation, association, foundation, or entity, e(cept the <ational ?overnment, its instrumentalities or political subdivisions, in charge of, or acting for, or concerned w- the administration of, the trust referred to in the section immediately preceding & w- the proper application of trust property. SECTION 3!&. "he term %trust property% shall include all real or personal properties or funds pertaining to the trust as well as those ac)uired w- the fruits or income therefr. or in e(change or substitution thereof. SECTION 3!0. ,ll trustees shall, before entering in the performance of the duties of their trust, obtain a certificate of registration fr. the Commissioner.

"rustees who are already discharging the duties of their trust on the date SECTION 3:0. ,ny chapter affiliate independently licensed as a this Code becomes effective may continue as such, sub1ect to the mutual benefit association may consolidate or merge w- any other similar provisions of this Code. chapter affiliate or w- the mother association. ,ll provisions of this Code governing mutual benefit associations & such SECTION 3:3. ,ny mutual benefit association may be converted into other provisions herein, whenever practicable & necessary, shall be & licensed as a mutual life insurance company by complying w- the applicable to trusts for charitable uses. re)uirements of the pertinent provisions of this Code & submitting the specific plan for such conversion to the Commissioner for his approval. CHAPTER VIII THE INSURANCE COMMISSIONER Auch plan, as approved, shall then be submitted to the members either in the regular meeting or in a special meeting called for the purpose for their Title I ADMINISTRATIVE AND AD$UDICATORY POWERS adoption. "he affirmative vote of at least two>thirds of all the members shall be necessary in order to consider such plan as adopted. SECTION 3!3. "he Insurance Commissioner shall have the duty to <o such conversion shall ta$e effect unless & until approved by the see that all laws relating to insurance, insurance companies & other insurance matters, mutual benefit associations, & trusts for charitable uses Commissioner. are faithfully e(ecuted & to perform the duties imposed upon him by this Code, & shall, notwithstanding any e(isting laws to the contrary, have sole SECTION 3:4. <o mutual benefit association shall be dissolved & e(clusive authority to regulate the issuance & sale of variable contracts without first notifying the Commissioner & furnishing him w- a certified copy as defined in section two hundred thirty>two & to provide for the licensing of of the resolution authori/ing the dissolution, duly adopted by the affirmative persons selling such contracts, & to issue such reasonable rules & vote of two>thirds of the members at a meeting called for that purpose, the regulations governing the same. financial statements as of the date of the resolution, & such other papers or documents as may be re)uired by the Commissioner. "he Commissioner may issue such ruling, instructions, circulars, orders & decision as he may deem necessary to secure the enforcement of the <o dissolution shall proceed until & unless approved by the Commissioner provisions of this Code, sub1ect to the approval of the Aecretary of & all proceedings in connection therewith shall be witnessed & attested by Finance. E(cept as otherwise specified, decisions made by the his duly designated representative. Commissioner shall be appealable to the Aecretary of Finance. <o mutual benefit association shall be officially declared as dissolved until SECTION 3!4. In addition to the administrative sanctions provided after the Commissioner so certifies that all outstanding claims against the elsewhere in this Code, the Insurance Commissioner is hereby authori/ed, association have been duly settled & li)uidated. at his discretion, to impose upon the insurance companies, their directors &-or officers &-or agents, for any willful failure or refusal to comply w-, or SECTION 3:5. "he Commissioner shall after notice & hearing, have violation of any provision of this Code, or any order, instruction, regulation, the power either to suspend or revo$e the licensed issued to a mutual or ruling of the Insurance Commissioner, or any commission or benefit association if he finds that the association has irregularities, &-or conducting business in an unsafe or unsound manner as may be determined by the Insurance Commissioner, the following *a+ failed to comply w- any provision of this Code. *a+ fines not in e(cess of five hundred pesos a day. & *b+ failed to comply w- any other law or regulation obligatory upon it. *b+ suspension, or after due hearing, removal of directors &-or officers &-or agents. *c+ failed to comply w- any order, ruling, instruction, re)uirement, or recommendation of the Commissioner. SECTION 3!5. "he Commissioner shall have the power to ad1udicate claims & complaints involving any loss, damage or liability for w-c in insurer *d+ e(ceeded its power to the pre1udice of its members. may be answerable under any $ind of policy or contract of insurance, or for w-c such insurer may be liable under a contract of suretyship, or for w-c a *e+ conducted its business fraudulently or ha/ardously. reinsurer may be sued under any contract of reinsurance it may have entered into. or for w-c a mutual benefit association may be held liable *f+ rendered its affairs & condition to one of insolvency. or under the membership certificates it has issued to its members, where the amount of any such loss, damage or liability, e(cluding interest, cost & *g+ failed to carry out its aims & purposes for w-c it was organi/ed attorney2s fees, being claimed or sued upon any $ind of insurance, bond, reinsurance contract, or membership certificate does not e(ceed in any due to any cause. single claim one hundred thousand pesos. ,fter receipt of the order fr. the Commissioner suspending or revo$ing the license, the association must immediately e(ert efforts to remove such "he insurer or surety may, in the same action file a counterclaim against cause or causes w-c brought about the order, &, upon proper showing, the insured or the obligee. may apply w- the Commissioner for the lifting of the order & restoration or revival of the license so revo$ed or suspended. "he insurer or surety may also file a cross>claim against a party for any claim arising out of the transaction or occurrence that is the sub1ect matter SECTION 3:6. For failure to remove such cause or causes w-c of the original action or of a counterclaim therein. cdasia brought about the suspension or revocation of the license of a mutual benefit association, the Commissioner shall apply under this Code for an 'ith leave of the Commissioner, an insurer or surety may file a third>party order fr. the proper court to li)uidate such association. complaint against its reinsurers for indemnification, contribution, subrogation or any other relief, in respect of the transaction that is the "he provisions of titles fourteen & fifteen, chapter three, pertaining to the sub1ect matter of the original action filed w- the Commissioner. appointment of a conservator & proceedings upon insolvency of an insurance company, shall, insofar as practicable, apply to mutual benefit "he party filing an action pursuant to the provisions of this section thereby associations. submits his person to the 1urisdiction of the Commissioner. "he Commissioner shall ac)uire 1urisdiction over the person of the impleaded SECTION 3:7. "o secure the enforcement of any provision under this party or parties in accordance w- & pursuant to the provisions of the Eules title, the Commissioner may issue such rules, rulings, instructions, orders & of Court. circulars, sub1ect to the approval of the Aecretary of Finance. "he authority to ad1udicate granted to the Commissioner under this section SECTION 3:9. "he violation of any provision of this title shall sub1ect shall be concurrent w- that of the civil courts, but the filing of a complaint wthe person violating or the officer of the association responsible therefor to the Commissioner shall preclude the civil courts fr. ta$ing cogni/ance of a a fine of not e(ceeding one thousand pesos, or imprisonment of not suit involving the same sub1ect matter. e(ceeding three years, or both such fine & imprisonment, at the discretion of the court. ,ny decision, order or ruling rendered by the Commissioner after a hearing shall have the force & effect of a 1udgment. ,ny party may appeal fr. a final order, ruling or decision of the Commissioner by filing w- the Commissioner Title II TRUSTS FOR CHARITABLE USES within thirty days fr. receipt of copy of such order, ruling or decision a notice of appeal to the Intermediate ,ppellate Court in the manner

26

The Insurance Code

provided for in the Eules of Court for appeals fr. the Eegional "rial Court to filing a fee of ten pesos. Provided, "hat a fine of ten pesos shall be the Intermediate ,ppellate Court. *,s amended by =atasang Pambansa imposed & collected by the Commissioner for each wee$ of delay, or any =lg. 763+ fraction thereof, in the filing of the annual statement. ,s soon as a decision, order or ruling has become final & e(ecutory, the *0+ For the e(amination prescribed in section two hundred forty>si(, the Commissioner shall motu propio or on motion of the interested party, issue Commissioner shall collect & receive fees according to the amount of a writ of e(ecution re)uired the sheriff or the proper officer to whom it is its total assets, in the case of a domestic company, or of its assets in directed to e(ecute said decision, order or award, pursuant to Eule the Philippines, in the case of a foreign company, as follows thirty>nine of the Eules of Court. *a+ "wo million pesos or more but less than four million pesos, Four For the purpose of any proceeding under this section, the Commissioner, hundred pesos. or any officer thereof designated by him, empowered to administer oaths & affirmation, subpoena witnesses, compel their attendance, ta$e evidence, *b+ Four million pesos or more but less than si( million pesos, Eight & re)uire the production of any boo$s, papers, documents, or contracts or hundred pesos. other records w-c are relevant or material to the in)uiry. In case of contumacy by, or refusal to obey a subpoena issued to any person, the Ai( million pesos or more but less than eight million pesos, ;ne Commissioner may invo$e the aid of any court of first instance within the *c+ thousand two hundred pesos. 1urisdiction of w-c such proceeding is carried on, where such person resides or carries on his own business, in re)uiring the attendance & testimony of witnesses & the production of boo$s, papers, documents, *d+ Eight million pesos or more but less than ten million pesos, ;ne contracts or other records. ,nd such court may issue an order re)uiring thousand si( hundred pesos. such person to appear before the Commissioner, or officer designated by the Commissioner, there to produce records, if so ordered or to give *e+ "en million pesos or more, "wo thousand pesos. testimony touching the matter in )uestion. ,ny failure to obey such order of the court may be published by such court as a contempt thereof. Provided, "hat if the said e(amination is made in places outside the Metropolitan Manila area, besides these fees, the Commissioner shall , full & complete record shall be $ept of all proceedings had before the re)uire of the company e(amined the payment of the actual & necessary commissioner, or the officers thereof designated by him, & all testimony travelling & subsistence e(penses of the e(aminer or e(aminers shall be ta$en down & transcribed by a stenographer appointed by the concerned. Commissioner. , transcribed copy of the evidence & proceeding, or any specific part thereof, of any hearing ta$en by a stenographer appointed by the Commissioner, being certified by such stenographer to be a true & correct transcript of the testimony on this hearing of a particular witness, or of a specific proof thereof, carefully compared by him fr. his original notes, & to be a correct statement of evidence & proceeding had in such hearing so purporting to be ta$en & subscribed, may be received as evidence by the Commissioner & by any court w- the same effect as if such stenographer were present & testified to the facts so certified. *,s amended by Presidential #ecree <o. !344+ Title II FEES AND OTHER SOURCES OF FUNDS SECTION 3!6. *!+ For the e(amination prescribed in section three hundred ninety>nine, the Commissioner shall collect & receive a minimum fee of one hundred pesos fr. the mutual benefit association e(amined. Provided, "hat if such association has total assets of more than one hundred thousand pesos, an additional fee of ten pesos for every fifty thousand pesos in e(cess thereof shall be imposed. Provided, Further, "hat such fee shall not e(ceed two thousand pesos. *3+ For the filing of an application to withdraw fr. the Philippines under title eighteen, the Commissioner shall collect & receive fr. the foreign company so withdrawing a fee of one thousand pesos. "he Commissioner may fi( & collect fees or charges for documents, transcripts, or other materials w-c may be furnished by him not in e(cess of reasonable cost. *,s amended by Presidential #ecree <o. !344+

*4+

For the issuance or renewal of certificates of authority, licenses & certificates of registration, pursuant to pertinent provisions of this SECTION 3!7. If the total e(penses of the Insurance Commissioner Code, the Commissioner shall collect & receive fees w-c shall be not for every fiscal year e(ceed the aggregate amount of the fees collected less than the following under the pertinent provisions of this Code, the e(cess shall be charged against the Insurance Fund, w-c shall hereafter be created out of the For each certificate of authority issued to an insurance company proceeds of ta(es on insurance premiums mentioned in section two hundred fifty>five of the <ational Internal Eevenue Code, as amended. doing business in the Philippines, two hundred pesos. Provided, however, "hat pending the creation of said Insurance Fund, the of section two, three & four of Eepublic ,ct <umbered "wo For each special certificate of authority issued to a servicing provisions Dundred Aeventy>Five, shall continue to remain in force & effect. insurance company, one hundred pesos. For each license issued to a general agent of an insurance company, fifty pesos. For each license issued to an insurance agent, twenty>five pesos. MISCELLANEOUS PROVISIONS

SECTION 3!9. ,ny person, company or corporation sub1ect to the supervision & control of the Commissioner who violates any provision of this Code, for w-c no penalty is provided, shall be deemed guilty of a penal offense, & upon conviction be punished by a fine not e(ceeding ten For each license issued to an agent of variable contract policy, thousand pesos or imprisonment of si( months, or both, at the discretion of the court. twenty>five pesos. If the offense is committed by a company or corporation, the officers, directors, or other persons responsible for its operation, management, or administration, unless it can be proved that they have ta$en no part in the For each license issued to an reinsurance bro$er, one hundred pesos. commission of the offense, shall li$ewise be guilty of a penal offense, & upon conviction be punished by a fine not e(ceeding ten thousand pesos For each license issued to an insurance ad1uster, one hundred pesos. or imprisonment of si( months, or both, at the discretion of the court. For each license issued to an insurance bro$er, one hundred pesos. SECTION 3&:. ,ll criminal actions for the violation of any of the provisions of this Code shall prescribed after three years fr. the discovery of such violation Provided, "hat such actions shall in any event prescribe For each certificate of registration issued to a resident agent, fifty after ten years fr. the commission of such violation. pesos. For each certificate of registration issued to an actuary, fifty pesos. For each license issued to a rating organi/ation, one hundred pesos.

SECTION 3&!. ,ny person, partnership, association or corporation heretofore authori/ed, licensed or registered by the Insurance Commissioner shall be deemed to have been authori/ed, licensed or For each certificate of registration issued to a non>life company registered under the provisions of this Code & shall be governed by the provisions thereof Provided, however, "hat where any such person, underwriter, fifty pesos. partnership, association or corporation is affected by the new re)uirements of this Code, said person, partnership association or corporation shall, For each license issued to a mutual benefit association, ten pesos. unless otherwise herein provided, be given a period of one year fr. the effectivity of this Code within w-c to comply w- the same. For each certificate of registration issued to a trust for charitable uses, ten pesos. SECTION 3&&. E(cept as e(pressly provided by this Code, all laws or parts thereof inconsistent w- any provision of this Code shall be deemed ,ll certificates of authority & all other licenses, as well as all certificates of repealed. registration, issued to any person, partnership, association or corporation under the pertinent provisions of this Code for w-c no e(piration date has SECTION 3&0. Ahould any provisions of this Code or any part thereof been prescribed, shall e(pire on the last day of Cune of each year & shall be declared invalid, the other provisions, so far as they are separable fr. be renewed annually upon application therefor & payment of the the invalid ones, shall remain in force. corresponding fee, if the licensee or holder of such license or certificate is continuing to comply w- all the applicable provisions of e(isting laws, & of SECTION 3&3. "his Code shall ta$e effect immediately. rules, instructions, orders & decisions of the Commissioner. *&+ For the filing of the annual statement referred to in section two #;<E in the City of Manila, this !7th day of #ecember, in the year of ;ur hundred twenty>three, the Commissioner shall collect & receive fr. the Bord, nineteen hundred & seventy>four. insurance company so filing a fee of five hundred pesos. Provided, "hat a fine of one hundred pesos shall be imposed & collected by the Commissioner for each wee$ of delay, or any fraction thereof, in the filing of the annual statement.

For the filing of annual statement referred to in section four hundred, the Commissioner shall collect & receive fr. the mutual benefit association so

27