GENERAL PROVISIONS death of the original owner, unless otherwise

Sec. 1. This Decree shall be known as "The Insurance provided for in the policy.
Code". Sec. 4. The preceding section does not authorize an
Sec. 2. Whenever used in this Code, the following insurance for or against the drawing of any lottery, or
terms shall have the respective meanings hereinafter for or against any chance or ticket in a lottery
set forth or indicated, unless the context otherwise drawing a prize.
requires:chanroblesvirtuallawlibrary Sec. 5. All kinds of insurance are subject to the
(1) A "contract of insurance" is an agreement provisions of this chapter so far as the provisions can
whereby one undertakes for a consideration to apply.
indemnify another against loss, damage or liability Title 2
arising from an unknown or contingent event. PARTIES TO THE CONTRACT
A contract of suretyship shall be deemed to be an Sec. 6. Every person, partnership, association, or
insurance contract, within the meaning of this Code, corporation duly authorized to transact insurance
only if made by a surety who or which, as such, is business as elsewhere provided in this code, may be
doing an insurance business as hereinafter provided. an insurer.
(2) The term "doing an insurance Sec. 7. Anyone except a public enemy may be
business" or "transacting an insurance business", insured.
within the meaning of this Code, shall Sec. 8. Unless the policy otherwise provides, where a
include:chanroblesvirtuallawlibrary mortgagor of property effects insurance in his own
(a) making or proposing to make, as insurer, any name providing that the loss shall be payable to the
insurance contract; mortgagee, or assigns a policy of insurance to a
(b) making or proposing to make, as surety, any mortgagee, the insurance is deemed to be upon the
contract of suretyship as a vocation and not as merely interest of the mortgagor, who does not cease to be a
incidental to any other legitimate business or activity party to the original contract, and any act of his, prior
of the surety; to the loss, which would otherwise avoid the
(c) doing any kind of business, including a insurance, will have the same effect, although the
reinsurance business, specifically recognized as property is in the hands of the mortgagee, but any
constituting the doing of an insurance business within act which, under the contract of insurance, is to be
the meaning of this Code; performed by the mortgagor, may be performed by
the mortgagee therein named, with the same effect
(d) doing or proposing to do any business in
as if it had been performed by the mortgagor.
substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this Sec. 9. If an insurer assents to the transfer of an
Code. insurance from a mortgagor to a mortgagee, and, at
the time of his assent, imposes further obligation on
In the application of the provisions of this Code the
the assignee, making a new contract with him, the
fact that no profit is derived from the making of
act of the mortgagor cannot affect the rights of said
insurance contracts, agreements or transactions or
assignee.
that no separate or direct consideration is received
therefor, shall not be deemed conclusive to show that Title 3
the making thereof does not constitute the doing or INSURABLE INTEREST
transacting of an insurance business. Sec. 10. Every person has an insurable interest in the
(3) As used in this code, the life and health:chanroblesvirtuallawlibrary
term "Commissioner" means the "Insurance (a) Of himself, of his spouse and of his children;
Commissioner". chanrobles virtual law library (b) Of any person on whom he depends wholly or in
Chapter 1 part for education or support, or in whom he has a
THE CONTRACT OF INSURANCE pecuniary interest;
Title 1 (c) Of any person under a legal obligation to him for
WHAT MAY BE INSURED the payment of money, or respecting property or
Sec. 3. Any contingent or unknown event, whether services, of which death or illness might delay or
past or future, which may damnify a person having an prevent the performance; and
insurable interest, or create a liability against him, (d) Of any person upon whose life any estate or
may be insured against, subject to the provisions of interest vested in him depends.
this chapter. Sec. 11. The insured shall have the right to change
The consent of the husband is not necessary for the the beneficiary he designated in the policy, unless he
validity of an insurance policy taken out by a married has expressly waived this right in said policy.
woman on her life or that of her children. Sec. 12. The interest of a beneficiary in a life
Any minor of the age of eighteen years or more, may, insurance policy shall be forfeited when the
notwithstanding such minority, contract for life, health beneficiary is the principal, accomplice, or accessory
and accident insurance, with any insurance company in willfully bringing about the death of the insured; in
duly authorized to do business in the Philippines, which event, the nearest relative of the insured shall
provided the insurance is taken on his own life and receive the proceeds of said insurance if not
the beneficiary appointed is the minor's estate or the otherwise disqualified.
minor's father, mother, husband, wife, child, brother Sec. 13. Every interest in property, whether real or
or sister. personal, or any relation thereto, or liability in respect
The married woman or the minor herein allowed to thereof, of such nature that a contemplated peril
take out an insurance policy may exercise all the might directly damnify the insured, is an insurable
rights and privileges of an owner under a policy. interest.
All rights, title and interest in the policy of insurance Sec. 14. An insurable interest in property may consist
taken out by an original owner on the life or health of in:chanroblesvirtuallawlibrary
a minor shall automatically vest in the minor upon the (a) An existing interest;
(b) An inchoate interest founded on an existing Sec. 29. An intentional and fraudulent omission, on
interest; or the part of one insured, to communicate information
(c) An expectancy, coupled with an existing interest in of matters proving or tending to prove the falsity of a
that out of which the expectancy arises. warranty, entitles the insurer to rescind.
Sec. 15. A carrier or depository of any kind has an Sec. 30. Neither party to a contract of insurance is
insurable interest in a thing held by him as such, to bound to communicate information of the matters
the extent of his liability but not to exceed the value following, except in answer to the inquiries of the
thereof. other:chanroblesvirtuallawlibrary
Sec. 16. A mere contingent or expectant interest in (a) Those which the other knows;
anything, not founded on an actual right to the thing, (b) Those which, in the exercise of ordinary care, the
nor upon any valid contract for it, is not insurable. other ought to know, and of which the former has no
Sec. 17. The measure of an insurable interest in reason to suppose him ignorant;
property is the extent to which the insured might be (c) Those of which the other waives communication;
damnified by loss or injury thereof. (d) Those which prove or tend to prove the existence
Sec. 18. No contract or policy of insurance on of a risk excluded by a warranty, and which are not
property shall be enforceable except for the benefit of otherwise material; and
some person having an insurable interest in the (e) Those which relate to a risk excepted from the
property insured. policy and which are not otherwise material.
Sec. 19. An interest in property insured must exist Sec. 31. Materiality is to be determined not by the
when the insurance takes effect, and when the loss event, but solely by the probable and reasonable
occurs, but not exist in the meantime; and interest in influence of the facts upon the party to whom the
the life or health of a person insured must exist when communication is due, in forming his estimate of the
the insurance takes effect, but need not exist disadvantages of the proposed contract, or in making
thereafter or when the loss occurs. his inquiries.
Sec. 20. Except in the cases specified in the next four Sec. 32. Each party to a contract of insurance is
sections, and in the cases of life, accident, and health bound to know all the general causes which are open
insurance, a change of interest in any part of a thing to his inquiry, equally with that of the other, and
insured unaccompanied by a corresponding change in which may affect the political or material perils
interest in the insurance, suspends the insurance to contemplated; and all general usages of trade.
an equivalent extent, until the interest in the thing Sec. 33. The right to information of material facts
and the interest in the insurance are vested in the may be waived, either by the terms of the insurance
same person. or by neglect to make inquiry as to such facts, where
Sec. 21. A change in interest in a thing insured, after they are distinctly implied in other facts of which
the occurrence of an injury which results in a loss, information is communicated.
does not affect the right of the insured to indemnity Sec. 34. Information of the nature or amount of the
for the loss. interest of one insured need not be communicated
Sec. 22. A change of interest in one or more several unless in answer to an inquiry, except as prescribed
distinct things, separately insured by one policy, does by section fifty-one.
not avoid the insurance as to the others. Sec. 35. Neither party to a contract of insurance is
Sec. 23. A change on interest, by will or succession, bound to communicate, even upon inquiry,
on the death of the insured, does not avoid an information of his own judgment upon the matters in
insurance; and his interest in the insurance passes to question.
the person taking his interest in the thing insured. Title 5
Sec. 24. A transfer of interest by one of several REPRESENTATION
partners, joint owners, or owners in common, who Sec. 36. A representation may be oral or written.
are jointly insured, to the others, does not avoid an
Sec. 37. A representation may be made at the time
insurance even though it has been agreed that the
of, or before, issuance of the policy.
insurance shall cease upon an alienation of the thing
insured. Sec. 38. The language of a representation is to be
interpreted by the same rules as the language of
Sec. 25. Every stipulation in a policy of insurance for
contracts in general.
the payment of loss whether the person insured has
or has not any interest in the property insured, or Sec. 39. A representation as to the future is to be
that the policy shall be received as proof of such deemed a promise, unless it appears that it was
interest, and every policy executed by way of gaming merely a statement of belief or expectation.
or wagering, is void. Sec. 40. A representation cannot qualify an express
Title 4 provision in a contract of insurance, but it may qualify
CONCEALMENT an implied warranty.
Sec. 26. A neglect to communicate that which a party Sec. 41. A representation may be altered or
knows and ought to communicate, is called a withdrawn before the insurance is effected, but not
concealment. afterwards.
Sec. 27. A concealment whether intentional or Sec. 42. A representation must be presumed to refer
unintentional entitles the injured party to rescind a to the date on which the contract goes into effect.
contract of insurance. (As amended by Batasang Sec. 43. When a person insured has no personal
Pambansa Blg. 874) knowledge of a fact, he may nevertheless repeat
Sec. 28. Each party to a contract of insurance must information which he has upon the subject, and which
communicated to the other, in good faith, all facts he believes to be true, with the explanation that he
within his knowledge which are material to the does so on the information of others; or he may
contract and as to which he makes no warranty, and submit the information, in its whole extent, to the
which the other has not the means of ascertaining. insurer; and in neither case is he responsible for its
truth, unless it proceeds from an agent of the (g) The period during which the insurance is to
insured, whose duty it is to give the information. continue.
Sec. 44. A representation is to be deemed false when Sec. 52. Cover notes may be issued to bind insurance
the facts fail to correspond with its assertions or temporarily pending the issuance of the policy.
stipulations. Within sixty days after the issue of the cover note, a
Sec. 45. If a representation is false in a material policy shall be issued in lieu thereof, including within
point, whether affirmative or promissory, the injured its terms the identical insurance bound under the
party is entitled to rescind the contract from the time cover note and the premium therefor. chanrobles
when the representation becomes false. The right to virtual law library
rescind granted by this Code to the insurer is waived Cover notes may be extended or renewed beyond
by the acceptance of premium payments despite such sixty days with the written approval of the
knowledge of the ground for rescission. (As amended Commissioner if he determines that such extension is
by Batasang Pambansa Blg. 874). not contrary to and is not for the purpose of violating
Sec. 46. The materiality of a representation is any provisions of this Code. The Commissioner may
determined by the same rules as the materiality of a promulgate rules and regulations governing such
concealment. extensions for the purpose of preventing such
Sec. 47. The provisions of this chapter apply as well violations and may by such rules and regulations
to a modification of a contract of insurance as to its dispense with the requirement of written approval by
original formation. him in the case of extension in compliance with such
rules and regulations.
Sec. 48. Whenever a right to rescind a contract of
insurance is given to the insurer by any provision of Sec. 53. The insurance proceeds shall be applied
this chapter, such right must be exercised previous to exclusively to the proper interest of the person in
the commencement of an action on the contract. whose name or for whose benefit it is made unless
otherwise specified in the policy.
After a policy of life insurance made payable on the
death of the insured shall have been in force during Sec. 54. When an insurance contract is executed with
the lifetime of the insured for a period of two years an agent or trustee as the insured, the fact that his
from the date of its issue or of its last reinstatement, principal or beneficiary is the real party in interest
the insurer cannot prove that the policy is void ab may be indicated by describing the insured as agent
initio or is rescindible by reason of the fraudulent or trustee, or by other general words in the policy.
concealment or misrepresentation of the insured or Sec. 55. To render an insurance effected by one
his agent. partner or part-owner, applicable to the interest of his
Title 6 co-partners or other part-owners, it is necessary that
THE POLICY the terms of the policy should be such as are
applicable to the joint or common interest.
Sec. 49. The written instrument in which a contract of
insurance is set forth, is called a policy of insurance. Sec. 56. When the description of the insured in a
policy is so general that it may comprehend any
Sec. 50. The policy shall be in printed form which may
person or any class of persons, only he who can show
contain blank spaces; and any word, phrase, clause,
that it was intended to include him can claim the
mark, sign, symbol, signature, number, or word
benefit of the policy.
necessary to complete the contract of insurance shall
be written on the blank spaces provided therein. Sec. 57. A policy may be so framed that it will inure
to the benefit of whomsoever, during the continuance
Any rider, clause, warranty or endorsement
of the risk, may become the owner of the interest
purporting to be part of the contract of insurance and
insured.
which is pasted or attached to said policy is not
binding on the insured, unless the descriptive title or Sec. 58. The mere transfer of a thing insured does
name of the rider, clause, warranty or endorsement is not transfer the policy, but suspends it until the same
also mentioned and written on the blank spaces person becomes the owner of both the policy and the
provided in the policy. thing insured.
Unless applied for by the insured or owner, any rider, Sec. 59. A policy is either open, valued or running.
clause, warranty or endorsement issued after the Sec. 60. An open policy is one in which the value of
original policy shall be countersigned by the insured the thing insured is not agreed upon, but is left to be
or owner, which countersignature shall be taken as ascertained in case of loss.
his agreement to the contents of such rider, clause, Sec. 61. A valued policy is one which expresses on its
warranty or endorsement. face an agreement that the thing insured shall be
Group insurance and group annuity policies, however, valued at a specific sum.
may be typewritten and need not be in printed form. Sec. 62. A running policy is one which contemplates
Sec. 51. A policy of insurance must successive insurances, and which provides that the
specify:chanroblesvirtuallawlibrary object of the policy may be from time to time defined,
(a) The parties between whom the contract is made; especially as to the subjects of insurance, by
additional statements or indorsements.
(b) The amount to be insured except in the cases of
open or running policies; Sec. 63. A condition, stipulation, or agreement in any
policy of insurance, limiting the time for commencing
(c) The premium, or if the insurance is of a character
an action thereunder to a period of less than one year
where the exact premium is only determinable upon
from the time when the cause of action accrues, is
the termination of the contract, a statement of the
void.
basis and rates upon which the final premium is to be
determined; Sec. 64. No policy of insurance other than life shall be
cancelled by the insurer except upon prior notice
(d) The property or life insured;
thereof to the insured, and no notice of cancellation
(e) The interest of the insured in property insured, if shall be effective unless it is based on the occurrence,
he is not the absolute owner thereof; after the effective date of the policy, of one or more
(f) The risks insured against; and of the following:chanroblesvirtuallawlibrary
(a) non-payment of premium; where it is broken in its inception, prevents the policy
(b) conviction of a crime arising out of acts increasing from attaching to the risk.
the hazard insured against; Title 8
(c) discovery of fraud or material misrepresentation; PREMIUM
(d) discovery of willful or reckless acts or omissions Sec. 77. An insurer is entitled to payment of the
increasing the hazard insured against; premium as soon as the thing insured is exposed to
(e) physical changes in the property insured which the peril insured against. Notwithstanding any
result in the property becoming uninsurable; or agreement to the contrary, no policy or contract of
insurance issued by an insurance company is valid
(f) a determination by the Commissioner that the
and binding unless and until the premium thereof has
continuation of the policy would violate or would
been paid, except in the case of a life or an industrial
place the insurer in violation of this Code.
life policy whenever the grace period provision
Sec. 65. All notices of cancellation mentioned in the applies.
preceding section shall be in writing, mailed or
Sec. 78. An acknowledgment in a policy or contract of
delivered to the named insured at the address shown
insurance or the receipt of premium is conclusive
in the policy, and shall state (a) which of the grounds
evidence of its payment, so far as to make the policy
set forth in section sixty-four is relied upon and (b)
binding, notwithstanding any stipulation therein that it
that, upon written request of the named insured, the
shall not be binding until the premium is actually paid.
insurer will furnish the facts on which the cancellation
is based. Sec. 79. A person insured is entitled to a return of
premium, as follows:chanroblesvirtuallawlibrary
Sec. 66. In case of insurance other than life, unless
the insurer at least forty-five days in advance of the (a) To the whole premium if no part of his interest in
end of the policy period mails or delivers to the the thing insured be exposed to any of the perils
named insured at the address shown in the policy insured against;
notice of its intention not to renew the policy or to (b) Where the insurance is made for a definite period
condition its renewal upon reduction of limits or of time and the insured surrenders his policy, to such
elimination of coverages, the named insured shall be portion of the premium as corresponds with the
entitled to renew the policy upon payment of the unexpired time, at a pro rata rate, unless a short
premium due on the effective date of the renewal. period rate has been agreed upon and appears on the
Any policy written for a term of less than one year face of the policy, after deducting from the whole
shall be considered as if written for a term of one premium any claim for loss or damage under the
year. Any policy written for a term longer than one policy which has previously accrued; Provided, That
year or any policy with no fixed expiration date shall no holder of a life insurance policy may avail himself
be considered as if written for successive policy of the privileges of this paragraph without sufficient
periods or terms of one year. cause as otherwise provided by law.
Title 7
WARRANTIES Sec. 80. If a peril insured against has existed, and the
Sec. 67. A warranty is either expressed or implied. insurer has been liable for any period, however short,
the insured is not entitled to return of premiums, so
Sec. 68. A warranty may relate to the past, the
far as that particular risk is concerned.
present, the future, or to any or all of these.
Sec. 81. A person insured is entitled to return of the
Sec. 69. No particular form of words is necessary to
premium when the contract is voidable, on account of
create a warranty.
fraud or misrepresentation of the insurer, or of his
Sec. 70. Without prejudice to section fifty-one, every agent, or on account of facts, the existence of which
express warranty, made at or before the execution of the insured was ignorant without his fault; or when
a policy, must be contained in the policy itself, or in by any default of the insured other than actual fraud,
another instrument signed by the insured and the insurer never incurred any liability under the
referred to in the policy as making a part of it. policy.
Sec. 71. A statement in a policy of matter relating to Sec. 82. In case of an over-insurance by several
the person or thing insured, or to the risk, as a fact, is insurers, the insured is entitled to a ratable return of
an express warranty thereof. the premium, proportioned to the amount by which
Sec. 72. A statement in a policy which imparts that it the aggregate sum insured in all the policies exceeds
is intended to do or not to do a thing which materially the insurable value of the thing at risk.
affects the risk, is a warranty that such act or Title 9
omission shall take place. LOSS
Sec. 73. When, before the time arrives for the Sec. 83. An agreement not to transfer the claim of the
performance of a warranty relating to the future, a insured against the insurer after the loss has
loss insured against happens, or performance happened, is void if made before the loss except as
becomes unlawful at the place of the contract, or otherwise provided in the case of life insurance.
impossible, the omission to fulfill the warranty does
Sec. 84. Unless otherwise provided by the policy, an
not avoid the policy.
insurer is liable for a loss of which a peril insured
Sec. 74. The violation of a material warranty, or other against was the proximate cause, although a peril not
material provision of a policy, on the part of either contemplated by the contract may have been a
party thereto, entitles the other to rescind. remote cause of the loss; but he is not liable for a
Sec. 75. A policy may declare that a violation of loss which the peril insured against was only a remote
specified provisions thereof shall avoid it, otherwise cause.
the breach of an immaterial provision does not avoid Sec. 85. An insurer is liable where the thing insured is
the policy. rescued from a peril insured against that would
Sec. 76. A breach of warranty without fraud merely otherwise have caused a loss, if, in the course of such
exonerates an insurer from the time that it occurs, or rescue, the thing is exposed to a peril not insured
against, which permanently deprives the insured of its
possession, in whole or in part; or where a loss is (e) Each insurer is bound, as between himself and the
caused by efforts to rescue the thing insured from a other insurers, to contribute ratably to the loss in
peril insured against. proportion to the amount for which he is liable under
Sec. 86. Where a peril is especially excepted in a his contract.
contract of insurance, a loss, which would not have Title 12
occurred but for such peril, is thereby excepted REINSURANCE
although the immediate cause of the loss was a peril Sec. 95. A contract of reinsurance is one by which an
which was not excepted. insurer procures a third person to insure him against
Sec. 87. An insurer is not liable for a loss caused by loss or liability by reason of such original insurance.
the willful act or through the connivance of the Sec. 96. Where an insurer obtains reinsurance, except
insured; but he is not exonerated by the negligence under automatic reinsurance treaties, he must
of the insured, or of the insurance agents or others. communicate all the representations of the original
Title 10 insured, and also all the knowledge and information
NOTICE OF LOSS he possesses, whether previously or subsequently
Sec. 88. In case of loss upon an insurance against acquired, which are material to the risk.
fire, an insurer is exonerated, if notice thereof be not Sec. 97. A reinsurance is presumed to be a contract
given to him by an insured, or some person entitled of indemnity against liability, and not merely against
to the benefit of the insurance, without unnecessary damage.
delay. Sec. 98. The original insured has no interest in a
Sec. 89. When a preliminary proof of loss is required contract of reinsurance.
by a policy, the insured is not bound to give such Chapter II
proof as would be necessary in a court of justice; but CLASSES OF INSURANCE
it is sufficient for him to give the best evidence which Title I
he has in his power at the time. MARINE INSURANCE
Sec. 90. All defects in a notice of loss, or in Sub-Title 1- A
preliminary proof thereof, which the insured might DEFINITION
remedy, and which the insurer omits to specify to
Sec. 99. Marine Insurance
him, without unnecessary delay, as grounds of
includes:chanroblesvirtuallawlibrary
objection, are waived.
(1) Insurance against loss of or damage
Sec. 91. Delay in the presentation to an insurer of
to:chanroblesvirtuallawlibrary
notice or proof of loss is waived if caused by any act
of him, or if he omits to take objection promptly and
specifically upon that ground. (a) Vessels, craft, aircraft, vehicles, goods, freights,
cargoes, merchandise, effects, disbursements, profits,
Sec. 92. If the policy requires, by way of preliminary
moneys, securities, choses in action, evidences of
proof of loss, the certificate or testimony of a person
debts, valuable papers, bottomry, and respondentia
other than the insured, it is sufficient for the insured
interests and all other kinds of property and interests
to use reasonable diligence to procure it, and in case
therein, in respect to, appertaining to or in connection
of the refusal of such person to give it, then to furnish
with any and all risks or perils of navigation, transit or
reasonable evidence to the insurer that such refusal
transportation, or while being assembled, packed,
was not induced by any just grounds of disbelief in
crated, baled, compressed or similarly prepared for
the facts necessary to be certified or testified.
shipment or while awaiting shipment, or during any
Title 11 delays, storage, transhipment, or reshipment incident
DOUBLE INSURANCE thereto, including war risks, marine builder's risks,
Sec. 93. A double insurance exists where the same and all personal property floater risks;
person is insured by several insurers separately in (b) Person or property in connection with or
respect to the same subject and interest. appertaining to a marine, inland marine, transit or
Sec. 94. Where the insured is overinsured by double transportation insurance, including liability for loss of
insurance:chanroblesvirtuallawlibrary or damage arising out of or in connection with the
(a) The insured, unless the policy otherwise provides, construction, repair, operation, maintenance or use of
may claim payment from the insurers in such order as the subject matter of such insurance (but not
he may select, up to the amount for which the including life insurance or surety bonds nor insurance
insurers are severally liable under their respective against loss by reason of bodily injury to any person
contracts; arising out of ownership, maintenance, or use of
(b) Where the policy under which the insured claims automobiles);
is a valued policy, the insured must give credit as (c) Precious stones, jewels, jewelry, precious metals,
against the valuation for any sum received by him whether in course of transportation or otherwise;
under any other policy without regard to the actual (d) Bridges, tunnels and other instrumentalities of
value of the subject matter insured; transportation and communication (excluding
(c) Where the policy under which the insured claims is buildings, their furniture and furnishings, fixed
an unvalued policy he must give credit, as against the contents and supplies held in storage); piers,
full insurable value, for any sum received by him wharves, docks and slips, and other aids to navigation
under any policy; and transportation, including dry docks and marine
(d) Where the insured receives any sum in excess of railways, dams and appurtenant facilities for the
the valuation in the case of valued policies, or of the control of waterways.
insurable value in the case of unvalued policies, he (2) "Marine protection and indemnity
must hold such sum in trust for the insurers, insurance," meaning insurance against, or against
according to their right of contribution among legal liability of the insured for loss, damage, or
themselves; expense incident to ownership, operation, chartering,
maintenance, use, repair, or construction of any
vessel, craft or instrumentality in use of ocean or
inland waterways, including liability of the insured for Sec. 111. If a representation by a person insured by a
personal injury, illness or death or for loss of or contract of marine insurance, is intentionally false in
damage to the property of another person. any material respect, or in respect of any fact on
Sub-Title 1-B which the character and nature of the risk depends,
INSURABLE INTEREST the insurer may rescind the entire contract.
Sec. 100. The owner of a ship has in all cases an Sec. 112. The eventual falsity of a representation as
insurable interest in it, even when it has been to expectation does not, in the absence of fraud,
chartered by one who covenants to pay him its value avoid a contract of marine insurance.
in case of loss: Provided, That in this case the insurer Sub-Title 1-E
shall be liable for only that part of the loss which the IMPLIED WARRANTIES
insured cannot recover from the charterer. Sec. 113. In every marine insurance upon a ship or
Sec. 101. The insurable interest of the owner of the freight, or freightage, or upon any thing which is the
ship hypothecated by bottomry is only the excess of subject of marine insurance, a warranty is implied
its value over the amount secured by bottomry. that the ship is seaworthy.
Sec. 102. Freightage, in the sense of a policy of Sec. 114. A ship is seaworthy when reasonably fit to
marine insurance, signifies all the benefits derived by perform the service and to encounter the ordinary
the owner, either from the chartering of the ship or perils of the voyage contemplated by the parties to
its employment for the carriage of his own goods or the policy.
those of others. Sec. 115. An implied warranty of seaworthiness is
Sec. 103. The owner of a ship has an insurable complied with if the ship be seaworthy at the time of
interest in expected freightage which according to the the of commencement of the risk, except in the
ordinary and probable course of things he would have following cases:chanroblesvirtuallawlibrary
earned but for the intervention of a peril insured (a) When the insurance is made for a specified length
against or other peril incident to the voyage. of time, the implied warranty is not complied with
Sec. 104. The interest mentioned in the last section unless the ship be seaworthy at the commencement
exists, in case of a charter party, when the ship has of every voyage it undertakes during that time;
broken ground on the chartered voyage. If a price is (b) When the insurance is upon the cargo which, by
to be paid for the carriage of goods it exists when the terms of the policy, description of the voyage, or
they are actually on board, or there is some contract established custom of the trade, is to be transhipped
for putting them on board, and both ship and goods at an intermediate port, the implied warranty is not
are ready for the specified voyage. complied with unless each vessel upon which the
Sec. 105. One who has an interest in the thing from cargo is shipped, or transhipped, be seaworthy at the
which profits are expected to proceed has an commencement of each particular voyage.
insurable interest in the profits. Sec. 116. A warranty of seaworthiness extends not
Sec. 106. The charterer of a ship has an insurable only to the condition of the structure of the ship itself,
interest in it, to the extent that he is liable to be but requires that it be properly laden, and provided
damnified by its loss. with a competent master, a sufficient number of
Sub-Title 1-C competent officers and seamen, and the requisite
CONCEALMENT appurtenances and equipment, such as ballasts,
Sec. 107. In marine insurance each party is bound to cables and anchors, cordage and sails, food, water,
communicate, in addition to what is required by fuel and lights, and other necessary or proper stores
section twenty-eight, all the information which he and implements for the voyage.
possesses, material to the risk, except such as is Sec. 117. Where different portions of the voyage
mentioned in Section thirty, and to state the exact contemplated by a policy differ in respect to the
and whole truth in relation to all matters that he things requisite to make the ship seaworthy therefor,
represents, or upon inquiry discloses or assumes to a warranty of seaworthiness is complied with if, at the
disclose. commencement of each portion, the ship is seaworthy
Sec. 108. In marine insurance, information of the with reference to that portion.
belief or expectation of a third person, in reference to Sec. 118. When the ship becomes unseaworthy
a material fact, is material. during the voyage to which an insurance relates, an
Sec. 109. A person insured by a contract of marine unreasonable delay in repairing the defect exonerates
insurance is presumed to have knowledge, at the time the insurer on ship or shipowner's interest from
of insuring, of a prior loss, if the information might liability from any loss arising therefrom.
possibly have reached him in the usual mode of Sec. 119. A ship which is seaworthy for the purpose
transmission and at the usual rate of communication. of an insurance upon the ship may, nevertheless, by
Sec. 110. A concealment in a marine insurance, in reason of being unfitted to receive the cargo, be
respect to any of the following matters, does not unseaworthy for the purpose of the insurance upon
vitiate the entire contract, but merely exonerates the the cargo.
insurer from a loss resulting from the risk Sec. 120. Where the nationality or neutrality of a ship
concealed:chanroblesvirtuallawlibrary or cargo is expressly warranted, it is implied that the
(a) The national character of the insured; ship will carry the requisite documents to show such
nationality or neutrality and that it will not carry any
(b) The liability of the thing insured to capture and
documents which cast reasonable suspicion thereon.
detention;
Sub-Title 1-F
(c) The liability to seizure from breach of foreign laws
THE VOYAGE AND DEVIATION
of trade;
Sec. 121. When the voyage contemplated by a marine
(d) The want of necessary documents;
insurance policy is described by the places of
(e) The use of false and simulated papers. beginning and ending, the voyage insured in one
Sub-Title 1-D which conforms to the course of sailing fixed by
REPRESENTATION mercantile usage between those places.
Sec. 122. If the course of sailing is not fixed by excess of the insured value or, if there be none, of
mercantile usage, the voyage insured by a marine the insurable value.
insurance policy is that way between the places Sec. 135. Upon an actual total loss, a person insured
specified, which to a master of ordinary skill and is entitled to payment without notice of
discretion, would mean the most natural, direct and abandonment.
advantageous. Sec. 136. Where it has been agreed that an insurance
Sec. 123. Deviation is a departure from the course of upon a particular thing, or class of things, shall be
the voyage insured, mentioned in the last two free from particular average, a marine insurer is not
sections, or an unreasonable delay in pursuing the liable for any particular average loss not depriving the
voyage or the commencement of an entirely different insured of the possession, at the port of destination,
voyage. of the whole of such thing, or class of things, even
Sec. 124. A deviation is though it becomes entirely worthless; but such
proper:chanroblesvirtuallawlibrary insurer is liable for his proportion of all general
(a) When caused by circumstances over which neither average loss assessed upon the thing insured.
the master nor the owner of the ship has any control; Sec. 137. An insurance confined in terms to an actual
(b) When necessary to comply with a warranty, or to loss does not cover a constructive total loss, but
avoid a peril, whether or not the peril is insured covers any loss, which necessarily results in depriving
against; the insured of the possession, at the port of
(c) When made in good faith, and upon reasonable destination, of the entire thing insured.
grounds of belief in its necessity to avoid a peril; or Sub-Title 1-H
(d) When made in good faith, for the purpose of ABANDONMENT
saving human life or relieving another vessel in Sec. 138. Abandonment, in marine insurance, is the
distress. act of the insured by which, after a constructive total
Sec. 125. Every deviation not specified in the last loss, he declares the relinquishment to the insurer of
section is improper. his interest in the thing insured.
Sec. 126. An insurer is not liable for any loss Sec. 139. A person insured by a contract of marine
happening to the thing insured subsequent to an insurance may abandon the thing insured, or any
improper deviation. particular portion thereof separately valued by the
policy, or otherwise separately insured, and recover
Sub-Title 1-G
for a total loss thereof, when the cause of the loss is
LOSS
a peril insured against:chanroblesvirtuallawlibrary
Sec. 127. A loss may be either total or partial.
(a) If more than three-fourths thereof in value is
Sec. 128. Every loss which is not total is partial. actually lost, or would have to be expended to
Sec. 129. A total loss may be either actual or recover it from the peril;
constructive. (b) If it is injured to such an extent as to reduce its
Sec. 130. An actual total loss is cause value more than three-fourths;
by:chanroblesvirtuallawlibrary (c) If the thing insured is a ship, and the
(a) A total destruction of the thing insured; contemplated voyage cannot be lawfully performed
(b) The irretrievable loss of the thing by sinking, or by without incurring either an expense to the insured of
being broken up; more than three-fourths the value of the thing
(c) Any damage to the thing which renders it abandoned or a risk which a prudent man would not
valueless to the owner for the purpose for which he take under the circumstances; or
held it; or (d) If the thing insured, being cargo or freightage,
(d) Any other event which effectively deprives the and the voyage cannot be performed, nor another
owner of the possession, at the port of destination, of ship procured by the master, within a reasonable time
the thing insured. and with reasonable diligence, to forward the cargo,
without incurring the like expense or risk mentioned
Sec. 131. A constructive total loss is one which gives
in the preceding sub-paragraph. But freightage
to a person insured a right to abandon, under Section
cannot in any case be abandoned unless the ship is
one hundred thirty-nine.
also abandoned.
Sec. 132. An actual loss may be presumed from the
Sec. 140. An abandonment must be neither partial
continued absence of a ship without being heard of.
nor conditional.
The length of time which is sufficient to raise this
presumption depends on the circumstances of the Sec. 141. An abandonment must be made within a
case. reasonable time after receipt of reliable information of
the loss, but where the information is of a doubtful
Sec. 133. When a ship is prevented, at an
character, the insured is entitled to a reasonable time
intermediate port, from completing the voyage, by
to make inquiry.
the perils insured against, the liability of a marine
insurer on the cargo continues after they are thus Sec. 142. Where the information upon which an
reshipped. abandonment has been made proves incorrect, or the
Nothing in this section shall prevent an insurer from thing insured was so far restored when the
requiring an additional premium if the hazard be abandonment was made that there was then in fact
increased by this extension of liability. no total loss, the abandonment becomes ineffectual.
Sec. 134. In addition to the liability mentioned in the Sec. 143. Abandonment is made by giving notice
last section, a marine insurer is bound for damages, thereof to the insurer, which may be done orally, or in
expenses of discharging, storage, reshipment, extra writing; Provided, That if the notice be done orally, a
freightage, and all other expenses incurred in saving written notice of such abandonment shall be
cargo reshipped pursuant to the last section, up to submitted within seven days from such oral notice.
the amount insured. Sec. 144. A notice of abandonment must be explicit,
Nothing in this or in the preceding section shall and must specify the particular cause of the
render a marine insurer liable for any amount in abandonment, but need state only enough to show
that there is probable cause therefor, and need not Sec. 160. When profits are valued and insured by a
be accompanied with proof of interest or of loss. contract of marine insurance, a loss of them is
Sec. 145. An abandonment can be sustained only conclusively presumed from a loss of the property out
upon the cause specified in the notice thereof. of which they are expected to arise, and the valuation
Sec. 146. An abandonment is equivalent to a transfer fixes their amount.
by the insured of his interest to the insurer, with all Sec. 161. In estimating a loss under an open policy of
the chances of recovery and indemnity. marine insurance the following rules are to be
Sec. 147. If a marine insurer pays for a loss as if it observed:chanroblesvirtuallawlibrary
were an actual total loss, he is entitled to whatever (a) The value of a ship is its value at the beginning of
may remain of the thing insured, or its proceeds or the risk, including all articles or charges which add to
salvage, as if there had been a formal abandonment. its permanent value or which are necessary to
Sec. 148. Upon an abandonment, acts done in good prepare it for the voyage insured;
faith by those who were agents of the insured in (b) The value of the cargo is its actual cost to the
respect to the thing insured, subsequent to the loss, insured, when laden on board, or where the cost
are at the risk of the insurer and for his benefit. cannot be ascertained, its market value at the time
Sec. 149. Where notice of abandonment is properly and place of lading, adding the charges incurred in
given, the rights of the insured are not prejudiced by purchasing and placing it on board, but without
the fact that the insurer refuses to accept the reference to any loss incurred in raising money for its
abandonment. purchase, or to any drawback on its exportation, or to
the fluctuation of the market at the port of
Sec. 150. The acceptance of an abandonment may be
destination, or to expenses incurred on the way or on
either express or implied from the conduct of the
arrival;
insurer. The mere silence of the insurer for an
unreasonable length of time after notice shall be (c) The value of freightage is the gross freightage,
construed as an acceptance. exclusive of primage, without reference to the cost of
earning it; and
Sec. 151. The acceptance of an abandonment,
whether express or implied, is conclusive upon the (d) The cost of insurance is in each case to be added
parties, and admits the loss and the sufficiency of the to the value thus estimated.
abandonment. Sec. 162. If cargo insured against partial loss arrives
Sec. 152. An abandonment once made and accepted at the port of destination in a damaged condition, the
is irrevocable, unless the ground upon which it was loss of the insured is deemed to be the same
made proves to be unfounded. proportion of the value which the market price at that
port, of the thing so damaged, bears to the market
Sec. 153. On an accepted abandonment of a ship,
price it would have brought if sound.
freightage earned previous to the loss belongs to the
insurer of said freightage; but freightage Sec. 163. A marine insurer is liable for all the
subsequently earned belongs to the insurer of the expenses attendant upon a loss which forces the ship
ship. into port to be repaired; and where it is stipulated in
the policy that the insured shall labor for the recovery
Sec. 154. If an insurer refuses to accept a valid
of the property, the insurer is liable for the expense
abandonment, he is liable as upon actual total loss,
incurred thereby, such expense, in either case, being
deducting from the amount any proceeds of the thing
in addition to a total loss, if that afterwards occurs.
insured which may have come to the hands of the
insured. Sec. 164. A marine insurer is liable for a loss falling
upon the insured, through a contribution in respect to
Sec. 155. If a person insured omits to abandon, he
the thing insured, required to be made by him
may nevertheless recover his actual loss.
towards a general average loss called for by a peril
Sub-Title 1-I insured against; provided, that the liability of the
MEASURE OF INDEMNITY insurer shall be limited to the proportion of
Sec. 156. A valuation in a policy of marine insurance contribution attaching to his policy value where this is
in conclusive between the parties thereto in the less than the contributing value of the thing insured.
adjustment of either a partial or total loss, if the Sec. 165. When a person insured by a contract of
insured has some interest at risk, and there is no marine insurance has a demand against others for
fraud on his part; except that when a thing has been contribution, he may claim the whole loss from the
hypothecated by bottomry or respondentia, before its insurer, subrogating him to his own right to
insurance, and without the knowledge of the person contribution. But no such claim can be made upon the
actually procuring the insurance, he may show the insurer after the separation of the interests liable to
real value. But a valuation fraudulent in fact, entitles the contribution, nor when the insured, having the
the insurer to rescind the contract. right and opportunity to enforce the contribution from
Sec. 157. A marine insurer is liable upon a partial others, has neglected or waived the exercise of that
loss, only for such proportion of the amount insured right.
by him as the loss bears to the value of the whole Sec. 166. In the case of a partial loss of ship or its
interest of the insured in the property insured. equipment, the old materials are to be applied
Sec. 158. Where profits are separately insured in a towards payment for the new. Unless otherwise
contract of marine insurance, the insured is entitled to stipulated in the policy, a marine insurer is liable for
recover, in case of loss, a proportion of such profits only two-thirds of the remaining cost of repairs after
equivalent to the proportion which the value of the such deduction, except that anchors must be paid in
property lost bears to the value of the whole. full.
Sec. 159. In case of a valued policy of marine Title 2
insurance on freightage or cargo, if a part only of the FIRE INSURANCE
subject is exposed to the risk, the evaluation applies Sec. 167. As used in this Code, the term "fire
only in proportion to such part. insurance" shall include insurance against loss by fire,
lightning, windstorm, tornado or earthquake and
other allied risks, when such risks are covered by plate glassinsurance, burglary and theft insurance,
extension to fire insurance policies or under separate personal accident and health insurance as written by
policies. non-life insurance companies, and other substantially
Sec. 168. An alteration in the use or condition of a similar kinds of insurance.
thing insured from that to which it is limited by the Title 4
policy made without the consent of the insurer, by SURETYSHIP
means within the control of the insured, and Sec. 175. A contract of suretyship is an agreement
increasing the risks, entitles an insurer to rescind a whereby a party called the surety guarantees the
contract of fire insurance. performance by another party called the principal or
Sec. 169. An alteration in the use or condition of a obligor of an obligation or undertaking in favor of a
thing insured from that to which it is limited by the third party called the obligee. It includes official
policy, which does not increase the risk, does not recognizances, stipulations, bonds or undertakings
affect a contract of fire insurance. chanrobles virtual issued by any company by virtue of and under the
law library provisions of Act No. 536, as amended by Act No.
Sec. 170. A contract of fire insurance is not affected 2206.
by any act of the insured subsequent to the execution Sec. 176. The liability of the surety or sureties shall
of the policy, which does not violate its provisions, be joint and several with the obligor and shall be
even though it increases the risk and is the cause of limited to the amount of the bond. It is determined
the loss. strictly by the terms of the contract of suretyship in
Sec. 171. If there is no valuation in the policy, the relation to the principal contract between the obligor
measure of indemnity in an insurance against fire is and the obligee.(As amended by Presidential Decree
the expense it would be to the insured at the time of No. 1455).
the commencement of the fire to replace the thing Sec. 177. The surety is entitled to payment of the
lost or injured in the condition in which at the time of premium as soon as the contract of suretyship or
the injury; but if there is a valuation in a policy of fire bond is perfected and delivered to the obligor. No
insurance, the effect shall be the same as in a policy contract of suretyship or bonding shall be valid and
of marine insurance. binding unless and until the premium therefor has
Sec. 172. Whenever the insured desires to have a been paid, except where the obligee has accepted the
valuation named in his policy, insuring any building or bond, in which case the bond becomes valid and
structure against fire, he may require such building or enforceable irrespective of whether or not the
structure to be examined by an independent premium has been paid by the obligor to the
appraiser and the value of the insured's interest surety: Provided, That if the contract of suretyship or
therein may then be fixed as between the insurer and bond is not accepted by, or filed with the obligee, the
the insured. The cost of such examination shall be surety shall collect only reasonable amount, not
paid for by the insured. A clause shall be inserted in exceeding fifty per centum of the premium due
such policy stating substantially that the value of the thereon as service fee plus the cost of stamps or
insured's interest in such building or structure has other taxes imposed for the issuance of the contract
been thus fixed. In the absence of any change or bond: Provided, however, That if the non-
increasing the risk without the consent of the insurer acceptance of the bond be due to the fault or
or of fraud on the part of the insured, then in case of negligence of the surety, no such service fee, stamps
a total loss under such policy, the whole amount so or taxes shall be collected.
insured upon the insured's interest in such building or In the case of a continuing bond, the obligor shall pay
structure, as stated in the policy upon which the the subsequent annual premium as it falls due until
insurers have received a premium, shall be paid, and the contract of suretyship is cancelled by the obligee
in case of a partial loss the full amount of the partial or by the Commissioner or by a court of competent
loss shall be so paid, and in case there are two or jurisdiction, as the case may be. chanrobles virtual
more policies covering the insured's interest therein, law library
each policy shall contribute pro rata to the payment Sec. 178. Pertinent provisions of the Civil Code of the
of such whole or partial loss. But in no case shall the Philippines shall be applied in a suppletory character
insurer be required to pay more than the amount thus whenever necessary in interpreting the provisions of a
stated in such policy. This section shall not prevent contract of suretyship.
the parties from stipulating in such policies Title 5
concerning the repairing, rebuilding or replacing of LIFE INSURANCE
buildings or structures wholly or partially damaged or
Sec. 179. Life insurance is insurance on human lives
destroyed.
and insurance appertaining thereto or connected
Sec. 173. No policy of fire insurance shall be pledged, therewith.
hypothecated, or transferred to any person, firm or
Sec. 180. An insurance upon life may be made
company who acts as agent for or otherwise
payable on the death of the person, or on his
represents the issuing company, and any such
surviving a specified period, or otherwise contingently
pledge, hypothecation, or transfer hereafter made
on the continuance or cessation of life.
shall be void and of no effect insofar as it may affect
other creditors of the insured. Every contract or pledge for the payment of
endowments or annuities shall be considered a life
Title 3
insurance contract for purpose of this Code.
CASUALTY INSURANCE
In the absence of a judicial guardian, the father, or in
Sec. 174. Casualty insurance is insurance covering
the latter's absence or incapacity, the mother, or any
loss or liability arising from accident or mishap,
minor, who is an insured or a beneficiary under a
excluding certain types of loss which by law or
contract of life, health or accident insurance, may
custom are considered as falling exclusively within the
exercise, in behalf of said minor, any right under the
scope of other types of insurance such as fire or
policy, without necessity of court authority or the
marine. It includes, but is not limited to, employer's
giving of a bond, where the interest of the minor in
liability insurance, motor vehicle liability insurance,
the particular act involved does not exceed twenty that he or they have complied with all the provisions
thousand pesos. Such right may include, but shall not of law which an insurance corporation doing business
be limited to, obtaining a policy loan, surrendering the in the Philippines is required to observe.
policy, receiving the proceeds of the policy, and giving Every person, partnership, or association receiving
the minor's consent to any transaction on the policy. any such certificate of authority shall be subject to
Sec. 180-A. The insurer in a life insurance contract the insurance laws of the Philippines and to the
shall be liable in case of suicides only when it is jurisdiction and supervision of the Commissioner in
committed after the policy has been in force for a the same manner as if an insurance corporation
period of two years from the date of its issue or of its authorized by the laws of the Philippines to engage in
last reinstatement, unless the policy provides a the business of insurance specified in the certificate.
shorter period: Provided, however, That suicide Sec. 187. No insurance company shall transact any
committed in the state of insanity shall be insurance business in the Philippines until after it shall
compensable regardless of the date of have obtained a certificate of authority for that
commission. (As amended by Batasang Pambansa purpose from the Commissioner upon application
Blg. 874). therefor and payment by the company concerned of
Sec. 181. A policy of insurance upon life or health the fees hereinafter prescribed.
may pass by transfer, will or succession to any The Commissioner may refuse to issue a certificate of
person, whether he has an insurable interest or not, authority to any insurance company if, in his
and such person may recover upon it whatever the judgment, such refusal will best promote the interest
insured might have recovered. of the people of this country. No such certificate of
Sec. 182. Notice to an insurer of a transfer or bequest authority shall be granted to any such company until
thereof is not necessary to preserve the validity of a the Commissioner shall have satisfied himself by such
policy of insurance upon life or health, unless thereby examination as he may make and such evidence as
expressly required. he may require that such company is qualified by the
Sec. 183. Unless the interest of a person insured is laws of the Philippines to transact business therein,
susceptible of exact pecuniary measurement, the that the grant of such authority appears to be
measure of indemnity under a policy of insurance justified in the light of economic requirements, and
upon life or health is the sum fixed in the policy. that the direction and administration, as well as the
Chapter III integrity and responsibility of the organizers and
THE BUSINESS OF INSURANCE administrators, the financial organization and the
amount of capital, notwithstanding the provisions of
Title 1
section one hundred eighty-eight, reasonably assure
INSURANCE COMPANIES, ORGANIZATION,
the safety of the interests of the policyholders and the
CAPITALIZATION AND AUTHORIZATION
public.
Sec. 184. For purposes of this Code, the
In order to maintain the quality of the management
term "insurer" or "insurance company" shall include
of the insurance companies and afford better
all individuals, partnerships, associations, or
protection to policyholders and the public in general,
corporations, including government-owned or
any person of good moral character, unquestioned
controlled corporations or entities, engaged as
integrity and recognized competence may be elected
principals in the insurance business, excepting mutual
or appointed director or officer of insurance
benefit associations. Unless the context otherwise
companies. The Commissioner shall prescribe the
requires, the terms shall also include professional
qualifications of the executive officers and other key
reinsurers defined in section two hundred
officials of insurance companies for purposes of this
eighty. "Domestic company" shall include companies
section.
formed, organized or existing under the laws of the
Philippines. "Foreign company" when used without No person shall concurrently be a director and/or
limitation shall include companies formed, organized, officer of an insurance company and an adjustment
or existing under any laws other than those of the company.
Philippines. Incumbent directors and/or officers affected by the
Sec. 185. Corporations formed or organized to save above provisions are hereby allowed to hold on to
any person or persons or other corporations harmless their positions until the end of their terms or two
from loss, damage, or liability arising from any years from the effectivity of this decree, whichever is
unknown or future or contingent event, or to shorter.
indemnify or to compensate any person or persons or Before issuing such certificate of authority, the
other corporations for any such loss, damage, or Commissioner must be satisfied that the name of the
liability, or to guarantee the performance of or company is not that of any other known company
compliance with contractual obligations or the transacting a similar business in the Philippines, or a
payment of debt of others shall be known name so similar as to be calculated to mislead the
as "insurance corporations". public.
The provisions of the Corporation Law shall apply to Such certificate of authority shall expire on the last
all insurance corporations now or hereafter engaged day of June of each year and shall be renewed
in business in the Philippines insofar as they do not annually if the company is continuing to comply with
conflict with the provisions of this chapter. the provisions of this Code or the circulars,
Sec. 186. No person, partnership, or association of instructions, rulings or decisions of the
persons shall transact any insurance business in the Commissioner. Every company receiving any such
Philippines except as agent of a person or corporation certificates of authority shall be subject to the
authorized to do the business of insurance in the provisions of this Code and other related laws and to
Philippines, unless possessed of the capital and assets the jurisdiction and supervision of the Commissioner.
required of an insurance corporation doing the same No insurance company may be authorized to transact
kind of business in the Philippines and invested in the in the Philippines the business of life and non-life
same manner; nor unless the Commissioner shall insurance concurrently unless specifically authorized
have granted to him or them a certificate to the effect to do so: Provided, That the terms "life" and "non-
life" insurance shall be deemed to include health, registered in the mercantile registry of that
accident and disability insurance. Commission in accordance with the Corporation Law.
No insurance company shall have equity in an A copy of the articles of incorporation and by-laws,
adjustment company and neither shall an adjustment and any amendments to either, if organized or
company have an equity in an insurance company. formed under any law requiring such to be filed, duly
Insurance companies and adjustment companies certified by the officer having the custody of same, or
presently affected by the above provision shall have if not so organized, a copy of the law, charter or deed
two years from the effectivity of this Decree within of settlement under which the deed of organization is
which to divest of their stockholdings. (As amended made, duly certified by the proper custodian thereof,
by Presidential Decree No. 1455). or proved by affidavit to be a copy; also, a certificate
under the hand and seal of the proper officer of such
Sec. 188. Except as provided in section two hundred
state or country having supervision of insurance
eighty-one, no domestic insurance company shall, in
business therein, if any there be, that such
a stock corporation, engage in business in the
corporation or company is organized under the laws
Philippines unless possessed of a paid-up capital stock
of such state or country, with the amount of capital
equal to at least five million pesos: Provided, That a
stock or assets and legal reserve required by this
domestic insurance company already doing business
Code;
in the Philippines with a paid-up capital stock which is
less than five million pesos shall have a paid-up (d) If not incorporated and of foreign domicile, aside
capital stock of at least three million pesos by from the certificate mentioned in paragraph (c) of this
December thirty-one, nineteen hundred seventy- section, a certificate setting forth the nature and
eight, four million pesos by December thirty-one, character of the business, the location of the principal
nineteen hundred seventy-nine and five million pesos office, the name of the individual or names of the
by December thirty-one, nineteen hundred persons composing the partnership or association, the
eighty: Provided, further, that the Secretary of amount of actual capital employed or to be employed
Finance may, upon recommendation of the Insurance therein and the names of all officers and persons by
Commissioner, increase such minimum paid-up capital whom the business is or may be managed.
stock requirement, under such terms and conditions The certificate must be verified by the affidavit of the
as he may impose, to an amount which, in his chief officer, secretary, agent, or manager of the
opinion, would reasonably assure the safety of the company; and if there are any written articles of
interests of the policyholders and the agreement of the company, a copy thereof must be
public. chanrobles virtual law library accompany such certificate.
The Commissioner may, as a pre-licensing Sec. 190. The Commissioner must require as a
requirement of a new insurance company, in addition condition precedent to the transaction of insurance
to the paid-up capital stock, require the stockholders business in the Philippines by any foreign insurance
to pay in cash to the company in proportion to their company, that such company file in his office a
subscription interests a contributed surplus fund of written power of attorney designating some person
not less than one million pesos, in the case of a life who shall be a resident of the Philippines as its
insurance company, or not less than five hundred general agent, on whom any notice provided by law
thousand pesos, in the case of an insurance company or by any insurance policy, proof of loss, summons
other than life. He may also require such company to and other legal processes may be served in all actions
submit to him a business plan showing the company's or other legal proceedings against such company, and
estimated receipts and disbursements, as well as the consenting that service upon such general agent shall
basis therefor, for the next succeeding three years. be admitted and held as valid as if served upon the
If organized as a mutual company, in lieu of such foreign company at its home office. Any such foreign
capital stock, it must have available cash assets of at company shall, as further condition precedent to the
least five million pesos above all liabilities for losses transaction of insurance business in the Philippines,
reported, expenses, taxes, legal reserve, and make and file with the Commissioner an agreement
reinsurance of all outstanding risks, and the or stipulation, executed by the proper authorities of
contributed surplus fund equal to the amounts said company in form and substance as
required of stock corporations. A stock insurance follows:chanroblesvirtuallawlibrary
company doing business in the Philippines may, "The (name of company) does hereby stipulate and
subject to the pertinent law and regulations which agree in consideration of the permission granted by
now are of hereafter may be in force, alter its the Insurance Commissioner to transact business in
organization and transform itself into a mutual the Philippines, that if at any time said company shall
insurance company. (As amended by Presidential leave the Philippines, or cease to transact business
Decree No. 1455). therein, or shall be without any agent in the
Sec. 189. Every company must, before engaging in Philippines on whom any notice, proof of loss,
the business of insurance in the Philippines, file with summons, or legal process may be served, then in
the Commissioner the any action or proceeding arising out any business or
following:chanroblesvirtuallawlibrary transaction which occurred in the Philippines, service
of any notice provided by law, or insurance policy,
(a) A certified copy of the last annual statement or a
proof of loss, summons, or other legal process may
verified financial statement exhibiting the condition
be made upon the Insurance Commissioner shall have
and affairs of such company;
the same force and effect as if made upon the
(b) If incorporated under the laws of the Philippines, company."
a copy of the articles of incorporation and by-laws,
Whenever such service of notice, proof of loss,
and any amendments to either, certified by the
summons, or other legal process shall be made upon
Securities and Exchange Commission to be a copy of
the Commission, he must, within ten days thereafter,
that which is filed in its Office;
transmit by mail, postage paid, a copy of such notice,
(c) If incorporated under any laws other than those of proof of loss, summons, or other legal process to the
the Philippines, a certificate from the Securities and company at its home or principal office. The sending
Exchange Commission showing that it is duly
of such copy by the Commissioner shall be a Title 2
necessary part of the service of the notice, proof of MARGIN OF INSOLVENCY
loss, or other legal process. Sec. 194. An insurance company doing business in
Sec. 191. No insurance company organized or existing the Philippines shall at all times maintain a margin of
under the government or laws other than those of the solvency which shall be an excess of the value of its
Philippines shall engage in business in the Philippines admitted assets exclusive of its paid-up capital, in the
unless possessed of paid-up unimpaired capital or case of a domestic company, or an excess of the
assets and reserve not less than that herein required value of its admitted assets in the Philippines,
of domestic insurance companies, nor until it shall exclusive of its security deposits, in the case of a
have deposited with the Commissioner for the benefit foreign company, over the amount of its liabilities,
and security of the policyholders and creditors of such unearned premium and reinsurance reserves in the
company in the Philippines, securities satisfactory to Philippines of at least two per mille of the total
the Commissioner consisting of good securities of the amount of its insurance in force as of the preceding
Philippines, including new issues of stock calendar year on all policies, except term insurance,
of "registered enterprises", as this term is defined in in the case of a life insurance company, or of at least
Republic Act No. 5186, otherwise known as ten per centum of the total amount of its net
theInvestment Incentives Act, as amended, to the premium written during the preceding calendar year,
actual market value of not less than the minimum in the case of a company other than a life insurance
paid-up capital required of domestic insurance company: Provided, That in either case, such margin
companies: Provided, That at least fifty per centum of shall in no event be less than five hundred thousand
such securities shall consist of bonds or other pesos: and Provided, further, That the term "paid-up
evidences of debt of the Government of the capital"shall not include contributed surplus and
Philippines, its political subdivisions and capital paid in excess of par value. Such assets,
instrumentalities, or of government-owned or liabilities and reserves shall exclude assets, liabilities
controlled corporations and entities, including the and reserves included in separate accounts
Central Bank. The total investment of a foreign established in accordance with section two hundred
insurance company in any registered enterprise shall thirty-seven. Whenever the aforementioned margin
not exceed twenty per centum of the net worth of be found to be less than that herein required to be
said foreign insurance company nor twenty per maintained, the Commissioner shall forthwith direct
centum of the capital of the registered enterprise, the company to make good any such deficiency by
unless previously authorized in writing by the cash, to be contributed by all stockholders of record
Commissioner. in proportion to their respective interest, and paid to
For purposes of this Code, the net worth of a foreign the treasurer of the company, within fifteen days
insurance company shall refer only to its net worth in from receipt of the order: Provided, That the
the Philippines. company in the interim shall not be permitted to take
Sec. 192. The Commissioner shall hold the securities, any new risk of any kind or character unless and until
deposited as aforesaid, for the benefit and security of it make good any such deficiency: Provided, further,
all the policyholders of the company depositing the that a stockholder who aside from paying the
same, but shall as long as the company is solvent, contribution due from him, pays the contribution due
permit the company to collect the interest or from the another stockholder by reason of the failure
dividends on the securities so deposited, and, from or refusal of the latter to do so, shall have a lien on
time to time, with his assent, to withdraw any of such the certificates of stock of the insurance company
securities, upon depositing with said Commissioner concerned appearing in its books in the name of the
other like securities, the market value of which shall defaulting stockholder on the date of default, as well
be equal to the market value of such as may be as on any interests or dividends that have accrued or
withdrawn. In the event of any company ceasing to will accrue to the said certificates of stock, until the
do business in the Philippines the securities deposited corresponding payment or reimbursement is made by
as aforesaid shall be returned upon the company's the defaulting stockholder. (As amended by
making application therefor and proving to the Presidential Decree No. 1455).
satisfaction of the Commissioner that it has no Sec. 195. No domestic insurance corporation shall
further liability under any of its policies in the declare or distribute any dividend on its outstanding
Philippines. stocks except from profits attested in a sworn
Sec. 193. Every foreign company doing business in statement to the Commissioner by the president or
the Philippines shall set aside an amount treasurer of the corporation to be remaining on hand
corresponding to the legal reserves of the policies after retaining unimpaired:chanroblesvirtuallawlibrary
written in the Philippines and invest and keep the (a) The entire paid-up capital stock;
same therein in accordance with the provisions of this (b) The margin of solvency required by section one
section. The legal reserve therein required to be set hundred ninety-four;
aside shall be invested only in the classes of the (c) In the case of life insurance corporation, the legal
Philippine securities described in section two reserve fund required by section two hundred eleven;
hundred: Provided, however, That no investment in (d) In the case of corporations other than life, the
stocks or bonds of any single entity shall, in the legal reserve fund required by section two hundred
aggregate exceed twenty per centum of the net worth thirteen;
of the investing company or twenty per centum of the
(e) A sum sufficient to pay all net losses reported, or
capital of the issuing company, whichever is the
in the course of settlement, and all liabilities for
lesser unless otherwise approved in writing by the
expenses and taxes.
Commissioner. The securities purchased and kept in
the Philippines under this section, shall not be sent Any dividend declared or distributed under the
out of the territorial jurisdiction of the Philippines preceding paragraph shall be reported to the
without the written consent of the Commissioner. Commissioner within thirty days after such declaration
or distribution.
If the Commissioner finds that any such corporation 9. Electronic data processing machines, as may be
has declared or distributed any such dividend in authorized by the Commissioner to be acquired by the
violation of this section, he may order such insurance company concerned, the acquisition cost of
corporation to cease and desist from doing business which to be amortized in equal annual amounts within
until the amount of such dividend or the portion a period of five years from the date of acquisition
thereof in excess of the amount allowed under this thereof.
section has been restored to said corporation. 10. Other assets, not inconsistent with the provisions
Title 3 of paragraphs 1 to 9 hereof, which are deemed by
ASSETS the Commissioner to be readily realizable and
Sec. 196. In any determination of the financial available for the payment of losses and claims at
condition of any insurance company doing business in values to be determined by him.
the Philippines, there shall be allowed and admitted Sec. 197. In addition to such assets as the
as assets only such assets owned by the insurance Commissioner may from time to time determine to be
company concerned and which consist non-admitted assets of insurance companies doing
of:chanroblesvirtuallawlibrary business in the Philippines, the following assets shall
1. Cash in the possession of the insurance company in no case be allowed as admitted assets of an
or in transit under its control, and the true and duly insurance company doing business in the Philippines,
verified balance of any deposit of such company in a in any determination of its financial
financially sound commercial bank or trust company. condition:chanroblesvirtuallawlibrary
2. Investments in securities, including money market 1. Goodwill, trade names, and other like intangible
instruments, and in real property acquired or held in assets.
accordance with and subject to the applicable 2. Prepaid or deferred charges for expenses and
provisions of this Code and the income realized commissions paid by such insurance company.
therefrom or accrued thereon. 3. Advances to officers (other than policy loans),
3. Loans granted by the insurance company which are not adequately secured and which are not
concerned to the extent of that portion thereof previously authorized by the Commissioner, as well as
adequately secured by non-speculative assets with advances to employees, agents, and other persons on
readily realizable values in accordance with and mere personal security.
subject to the limitations imposed by applicable 4. Shares of stock of such insurance company, owned
provisions of this Code. by it, or any equity therein as well as loans secured
4. Policy loans and other policy assets and liens on thereby, or any proportionate interest in such shares
policies, contracts or certificates of a life insurance of stock through the ownership by such insurance
company, in an amount not exceeding legal reserves company of an interest in another corporation or
and other policy liabilities carried on each individual business unit.
life insurance policy, contract or certificate. 5. Furniture, furnishing, fixtures, safes, equipment,
5. The net amount of uncollected and deferred library, stationery, literature, and supplies.
premiums and annuity considerations in the case of a 6. Items of bank credits representing checks, drafts or
life insurance company which carries the full mean notes returned unpaid after the date of statement.
tabular reserve liability. 7. The amount, if any, by which the aggregate value
6. Reinsurance recoverable by the ceding of investments as carried in the ledger assets of such
insurer:chanroblesvirtuallawlibrary insurance company exceeds the aggregate value
thereof as determined in accordance with the
(a) from an insurer authorized to transact business in provisions of this Code and/or the rules of the
this country, the full amount thereof; or Commissioner.
(b) from an insurer not authorized in this country, in All non-admitted assets and all other assets of
an amount not exceeding the liabilities carried by the doubtful value or character included as ledger or non-
ceding insurer for amounts withheld under a ledger assets in any statement submitted by an
reinsurance treaty with such unauthorized insurer as insurance company to the Commissioner, or in any
security for the payment of obligations thereunder if insurance examiner's report to him, shall also be
such funds are held subject to withdrawal by, and reported, to the extent of the value disallowed as
under the control of, the ceding insurer. The deductions from the gross assets of such insurance
Commissioner may prescribe the conditions under company, except where the Commissioner permits a
which a ceding insurer may be allowed credit, as an reserve to be carried among the liabilities of such
asset or as a deduction from loss and unearned insurance company in lieu of any such deduction.
premium reserves, for reinsurance recoverable from Title 4
an insurer not authorized in this country but which INVESTMENTS
presents satisfactory evidence that it meets the Sec. 198. No insurance company shall loan any of its
applicable standards of solvency required in this money or deposits to any person, corporation or
country. association, except upon first mortgage or deeds of
trust of unencumbered, improved or unimproved real
7. Funds withheld by a ceding insurer under a estate, including condominiums, in cities and centers
reinsurance treaty, provided reserves for unpaid of population of municipalities in the Philippines when
losses and unearned premiums are adequately the amount of such loan is not in excess of seventy
provided. per centum of the market value of such real estate;
8. Deposits or amounts recoverable from underwriting or upon the security of first mortgages or deeds of
associations, syndicates and reinsurance funds, or trust of actually cultivated, improved and
from any suspended banking institution, to the extent unencumbered agricultural lands in the Philippines
deemed by the Commissioner to be available for the when the amount of such loan is not in excess of
payment of losses and claims and values to be forty per centum of the market value of such land; or
determined by him. upon the purchase money mortgages or like securities
received by it upon the sale or exchange of real (d) Bonds, debentures or other evidences of
property acquired pursuant to sections two hundred indebtedness of any solvent corporations or institution
and two hundred two; or upon bonds or other created or existing under the laws of the
evidences of debt of the Government of the Philippines: Provided, however, That the issuing,
Philippines or its political subdivisions authorized by assuming or guaranteeing entity or its predecessors
law to issue bonds, or upon bonds or other evidences shall not have defaulted in the payment of interest on
of debt of government-owned or controlled any of its securities and that during each of any three
corporations and instrumentalities including the including the last two of the five fiscal years next
Central Bank or upon obligations issued or preceding the date of acquisition by such insurance
guaranteed by the International Bank for company of such bonds, debentures, or other
Reconstruction and Development; or upon stocks, evidences of indebtedness, the net earnings of the
bonds or other evidences of debt as are specified in issuing, assuming or guaranteeing institution available
section two hundred. for its fixed charges, as hereinafter defined, shall
A life insurance company, however, may lend to any have been not less than one and one-quarter times
of its policyholders upon the security of the value of the total of its fixed charges for such year;
its policy such sum as may be determined pursuant to and Provided, further, that no life insurance company
the provisions of the policy. shall invest in or loan upon the obligations of any one
Loans granted upon the security of real estate for a institution in the kinds permitted under this sub-
period longer than five years shall be amortized in section an amount in excess of twenty-five per
monthly, quarterly, semi-annual or annual centum of the total admitted assets of such insurer as
installments; Provided, That no such loans shall have of December thirty-first next preceding the date of
a maturity in excess of twenty years. such investment.
The phrase "improved real estate" used above is As used in this sub-section the term "net earnings
hereby defined to mean land with permanent building available for fixed charges" shall mean net income
or buildings erected or being erected thereon. Except after deducting operating and maintenance expenses,
as otherwise approved by the Commissioner, in case taxes other than income taxes, depreciation and
the building or buildings on land do not belong to the depletion; but excluding extraordinary non-recurring
owner of the latter, no loan shall be granted on the items of income or expense appearing in the regular
security of the real estate in question unless both the financial statement of the issuing, assuming or
owner of the building or buildings and the owner of guaranteeing institution. The term "fixed
the land sign the deed of mortgage, and unless the charges"shall include interest on funded and
owner of the land is the Government of the unfunded debt, amortization of debt discount, and
Philippines or one of its political subdivisions, in which rentals for leased properties.
event the owner is not required to sign the deed of (e) Preferred or guaranteed stocks of any solvent
mortgage. corporation or institution created or existing under the
Sec. 199. No loan by any insurance company on the laws of the Philippines: Provided, however, That the
security of real estate shall be made unless the title to issuing, assuming or guaranteeing entity or its
such real estate shall have first been registered in predecessors has paid regular dividends upon its
accordance with the existing Land Registration Act, or preferred or guaranteed stocks for a period of at least
shall be a titulo real duly registered, or have been three years next preceding the date of investment in
previously registered under the provisions of the such preferred or guaranteed stock: Provided, further,
existing Mortgage Law. That if the stocks are guaranteed, the amount of
stocks so guaranteed is not excess of fifty per centum
Sec. 200. (1) An insurance company may purchase,
of the amount of the preferred or common stocks, as
hold, own and convey such property, real and
the case may be, of the guaranteeing corporation:
personal, as may have been mortgaged, pledged, or
and Provided, finally, That no life insurance company
conveyed to it in good faith in trust for its benefit by
shall invest in or loan upon obligations of any one
reason of money loaned by it in pursuance of the
institution in the kinds permitted under this sub-
regular business of the company, and such real or
section an amount in excess of ten per centum of the
personal property as may have been purchased by it
total admitted assets of such insurer as of December
at sales under pledges, mortgages or deeds of trust
thirty-first next preceding the date of such
for its benefit on account of money loaned by it; and
investment.
such real and personal property as may have been
conveyed to it by borrowers in satisfaction and (f) Common stocks of any solvent corporation or
discharge of loans made by the company to institution created or existing under the laws of the
them: Provided, however, That any real estate Philippines upon which regular dividends shall have
purchased by an insurance company in payment or by been paid for the three years next preceding the
reason of any loan made by it shall be sold by the purchase of such stock: Provided, however, That no
company within twenty years after the title thereto life insurance company shall invest in or loan upon
has been vested in it. the obligations of any one corporation or institution in
the kinds permitted under this sub-section an amount
(2) An insurance company may purchase, hold, own
in excess of ten per centum of the total admitted
and convey real and personal property as
assets of such insurer as of December thirty-first next
follows:chanroblesvirtuallawlibrary
preceding the date of such investment.
(a) The lot with building thereon in which the
(g) Certificates, notes and other obligations issued by
company conducts and carries on its business.
the trustees or receivers of any institution created or
(b) Bonds or other evidences of debt of the existing under the laws of the Philippines which, or
Government of the Philippines or its political the assets of which, are being administered under the
subdivisions authorized by law to issue bonds at the direction of any court having jurisdiction; Provided,
reasonable market value thereof. however, That such certificates, notes or other
(c) Bonds or other evidences of debt of the obligations are adequately secured as to principal and
government-owned or controlled corporations and interests.
entities, including the Central Bank.
(h) Equipment trust obligations or certificates which under section one hundred eighty-eight, invest its
are adequately secured or other adequately secured funds only in securities, satisfactory to the
instruments evidencing an interest in equipment Commissioner, consisting of bonds or other evidences
wholly or in part within the Philippines: Provided, of debt of the Government of the Philippines or its
however, That there is a right to receive determined political subdivisions or instrumentalities, or of
portions of rental, purchase or other fixed obligatory government-owned or controlled corporations and
payments for the use or purchase of such equipment. entities, including the Central Bank of the
(i) Any obligation of any corporation or institution Philippines: Provided, That such investments shall at
created or existing under the laws of the Philippines all times be maintained free from any lien or
which is, on the date of acquisition by the insurer, encumbrance; and Provided, further, That such
adequately secured and has qualities and securities shall be deposited with and held by the
characteristics wherein the speculative elements are Commissioner for the faithful performance by the
not predominant. depositing insurer of all its obligations under its
(j) Such other securities as may be approved by the insurance contracts. The provisions of section one
Commissioner. hundred ninety-two shall, so far as practicable, apply
to the securities deposited under this section.
(3) Any domestic insurer which has outstanding
insurance, annuity or reinsurance contracts in Except as otherwise provided in this Code, no
currencies other than the national currency of the judgment creditor or other claimant shall have the
Philippines may invest in, or otherwise acquire or loan right to levy upon any of the securities of the insurer
upon securities and investments in such currency held on deposit under this section or held on deposit
which are substantially of the same kinds, classes and pursuant to the requirement of the Commissioner. (As
investment grades as those eligible for investment amended by Presidential Decree No. 1455).
under the foregoing subdivisions of this section; but Sec. 204. After satisfying the requirements contained
the aggregate amount of such investment and of such in the preceding section, any domestic non-life
cash in such currency which is at anytime held by insurance company, shall invest, to an amount
such insurer shall not exceed one and one-half times prescribed below, its funds in, or otherwise, acquire
the amount of its reserves and other obligations or loan upon, only the classes of investments
under such contracts or the amount which such described in section two hundred, including securities
insurer is required by the law of any country or issued by any "registered enterprise", as this term is
possession outside the Republic of the Philippines to defined in Republic Act No. 5186, otherwise known as
be invest in such country or possession, whichever the Investment Incentives Act, and such other classes
shall be greater. of investments as may be authorized by the
Sec. 201. An insurance company may (1) invest in Commissioner for purposes of this section:Provided,
equities of other financial institutions, and (2) engage That (a) no more than twenty per centum of the net
in the buying and selling of short-term debt worth of such company as shown by its latest
instruments: Provided, That any or all of such financial statement approved by the Commissioner
investments shall be with the prior approval of the shall be invested in the lot and building in which the
Commissioner. insurance company conducts its business and (b) the
total investment of an insurance company in any
Sec. 202. Any life insurance company
registered enterprise shall not exceed twenty per
may:chanroblesvirtuallawlibrary
centum of the net worth of said insurance company
(a) Acquire or construct housing projects and, in as shown by its aforesaid financial statement nor
connection with any such project, may acquire land or twenty per centum of the paid-up capital of the
any interest therein by purchase, lease or otherwise, registered enterprise excluding the intended
or use land acquired pursuant to any other provision investment, unless previously authorized by the
of this Code. Such company may thereafter own, Commissioner: and, Provided, further, That such
maintain, manage, collect or receive income from, or investments free from any lien or encumbrance, shall
sell and convey, any land or interest therein so be at least equal in amount to the aggregate amount
acquired and any improvements thereon. The of (a) its legal reserve, as provided in section two
aggregate book value of the investments of any such hundred thirteen, and (b) its reserve fund held for
company in all such projects shall not exceed at the reinsurance as provided for in the pertinent treaty
time of such investments twenty five per centum of provision in the case of reinsurance ceded to
the total admitted assets of such company on the authorized insurers. (As amended by Presidential
thirty-first day of December next preceding; Decree No.1455).
(b) Acquire real property, other than property to be Sec. 205. After satisfying the requirements contained
used primarily for providing housing and property for in sections one hundred ninety-one, one hundred
accommodation of its own business, as an investment ninety-three, two hundred three and two hundred
for the production of income, or may acquire real four, any non-life insurance company may invest any
property to be improved or developed for such portion of its funds representing earned surplus in
investment purpose pursuant to a program therefor, any of the investments described in sections one
subject to the condition that the cost of each parcel of hundred ninety-eight, two hundred and two hundred
real property so acquired under the authority of this one, or in any securities issued by a "registered
paragraph (b), including the estimated cost to the enterprise" mentioned in the preceding
company of the improvement or development thereof, sections: Provided, That no investment in stocks or
when added to the book value of all other real bonds of any single entity shall in the aggregate,
property held by its pursuant to this paragraph (b), exceed twenty per centum of the net worth of the
shall not exceed twenty-five per centum of its insurance company as shown in its latest financial
admitted assets as of the thirty-first day of December statement approved by the Commissioner or twenty
next preceding. per centum of the paid-up capital of the issuing
Sec. 203. Every domestic insurance company shall, to company, whichever is lesser, unless otherwise
the extent of an amount equal in value to twenty-five approved by the Commissioner.
per centum of the minimum paid-up capital required
Sec. 206. After satisfying the minimum capital securities are owned wholly or partly by such insurer
investment required in section two hundred three, and may cause an examination to be made of any
any life insurance company may invest its legal policy subsidiary or affiliate of such insurer.
reserve, as provided in section two hundred eleven or (3) The stock of an insurance company shall be
in section two hundred twelve, in any of the classes valued at the lesser of its market value or its book
of securities or types of investments described in value as shown by its last approved annual statement
sections one hundred ninety-eight, two hundred, two or the last report on examination, whichever is more
hundred one and two hundred two, subject to the recent. The book value of a share of common stock of
limitations therein contained, and in any securities an insurance company shall be ascertained by
issued by any "registered enterprise" mentioned in dividing (a) the amount of its capital and surplus less
section two hundred four, free from any lien or the value of all of its preferred stock, if any,
encumbrance, in such amounts as may be approved outstanding, by (b) the number of shares of its
by the Commissioner. Such company may likewise common stock issued and outstanding.
invest any portion of its earned surplus in the Notwithstanding the foregoing provisions, an insurer
aforesaid securities or investments subject to the may, at its option, value its holdings of stock in a
aforesaid limitations. subsidiary insurance company in an amount not less
Sec. 207. Any investment made in violation of the than acquisition cost if such acquisition cost is less
applicable provisions of this title shall be considered than the value determined as hereinbefore provided.
non-admitted assets. (4) Real estate required by foreclosure or by deed in
Sec. 208. (1) All bonds or other evidences of lieu thereof, in the absence of a recent appraisal
indebtedness having a fixed term and rate of interest deemed by the Commissioner to be reliable, shall not
and held by any life insurance company authorized to be valued at an amount greater than the unpaid
do business in this country, if amply secured and if principal of the defaulted loan at the date of such
not in default as to principal or interest, shall be foreclosure or deed, together with any taxes and
valued as follows: If purchased at par, at the par expenses paid or incurred by such insurer at such
value; if purchased above or below par, on the basis time in connection with such acquisition, and the cost
of the purchase price adjusted so as to bring the of additions or improvements thereafter paid by such
value to par at maturity and so as to yield in the insurer and any amount or amounts thereafter paid
meantime the effective rate of interest at which the by such insurer on any assessments levied for
purchase was made, or in the discretion of the improvements in connection with the
Commissioner, on the basis of the method of property. chanrobles virtual law library
calculation commonly known as the pro-rata method. (5) Purchase money mortgages received on
In applying the foregoing rule the purchase price shall dispositions of real property held pursuant to section
in no case be taken at a higher figure than the actual one hundred ninety-eight shall be valued in an
market value at the time of acquisition. The amount equivalent to ninety per centum of the value
Commissioner shall have the power to determine the of such real property. Purchase money mortgages
eligibility of any such investments for valuation on the received on disposition of real property otherwise held
basis of amortization, and may by regulation prescribe shall be valued in an amount not exceeding ninety per
or limit the classes of securities so eligible for centum of the value of such real property as
amortization. All bonds or other evidences of determined by an appraisal made by an appraiser at
indebtedness which in the judgment of the or about the time of disposition of such real property.
Commissioner are not amply secured shall not be (6) The stock of a subsidiary of an insurer shall be
eligible for amortization and shall be valued in valued on the basis of the greater of (i) the value of
accordance with paragraph two. The Commissioner only such subsidiary of the assets of such subsidiary
may, if he finds that the interest of policy holders so as would constitute lawful investments for the insurer
permit or require, by official regulation permit or if acquired or held directly by the insurer or (ii) such
require any class or classes of insurers, other than life other value determined pursuant to standards and
insurance companies, authorized to do business in cumulative limitations, contained in a regulation to be
this country, to value their bonds or other evidences promulgated by the Commissioner.
of indebtedness in accordance with the foregoing
(7) Notwithstanding any provision contained in this
rule.
section or elsewhere in this chapter, if the
(2) The investments of all insurers authorized to do Commissioner find that the interests of policyholders
business in this country, except securities subject to so permit or require, he may permit or require any
amortization and except as otherwise provided in this class or classes of insurers authorized to do business
chapter, shall be valued, in the discretion of the in this country to value their investments or any class
Commissioner, at their market value, or at their or classes thereof as of any date heretofore or
appraised value, or at prices determined by him as hereafter in accordance with any applicable valuation
representing their fair market value. If the or method.
Commissioner finds that in view of the character of
Sec. 209. It shall be the duty of the officers of the
investments of any insurer authorized to do business
insurance company to report within the first fifteen
in this country it would be prudent for such insurer to
days of every month all such investments as may be
establish a special reserve for possible losses or
made by them during the preceding month, and the
fluctuations in the values of its investments, he may
Commissioner may, if such investments or any of
require such insurer to establish such reserve,
them seem injudicious to him, require the sale or
reasonable in amount, and may require that such
disposal of the same. The report shall also include a
reserve be maintained and reported in any statement
list of investments sold or disposed of by the
or report of the financial condition of such insurer.
company during the same period.
The Commissioner may, in connection with any
examination or required financial statement of an Title 5
authorized insurer, require such insurer to furnish him RESERVES
complete financial statements and audited report of Sec. 210. Every life insurance company, doing
the financial condition of any corporation of which the business in the Philippines, shall annually make a
valuation of all policies, additions thereto, unpaid the last two months of the calendar year upon all
dividends, and all other obligations outstanding on other marine risks not terminated.
the thirty-first day of December of the preceding Sec. 214. In addition to its liabilities and reserves on
year. All such valuations shall be made upon the net contracts of insurance issued by it, every insurance
premiums basis, according to the standard adopted company shall be charged with the estimated amount
by the company, which standard shall be stated in its of all of its other liabilities, including taxes, expenses
annual report. and other obligations due or accrued at the date of
Such standard of valuation whether of the net level statement, and including any special reserves
premium, full preliminary term, any modified required by the Commissioner pursuant to the
preliminary term, or select and ultimate reserve basis, provisions of this Code.
shall be according to a standard table of mortality Title 6
with interest at not more than six per centum LIMIT OF SINGLE RISK
compound interest. When the preliminary term basis Sec. 215. No insurance company other than life,
is used, the term insurance shall be limited to the first whether foreign or domestic, shall retain any risk on
policy year. any one subject of insurance in an amount exceeding
The results of such valuations shall be reported to the twenty per centum of its net worth. For purposes of
Commissioner on or before the thirtieth day of April of this section, the term "subject of insurance" shall
each year accompanied by a sworn statement of the include all properties or risks insured by the same
company's actuary certifying to the figures and insurer that customarily are considered by non-life
stating upon what mortality table it is based, upon company underwriters to be subject to loss or
what rate of interest the valuation is made, and the damage from the same occurrence of any hazard
methods used in arriving at the result obtained. insured against.
Sec. 211. The aggregate net value so ascertained of Reinsurance ceded as authorized under the
the policies of such company shall be deemed its succeeding title shall be deducted in determining the
reserve liability, to provide for which it shall hold risk retained. As to surety risk, deduction shall also be
funds in secure investments equal to such net value, made of the amount assumed by any other company
above all its other liabilities; and it shall be the duty of authorized to transact surety business and the value
the Commissioner, after having verified, to such an of any security mortgage, pledged, or held subject to
extent as he may deem necessary, the valuation of all the surety's control and for the surety's protection.
policies in force, to satisfy himself that the company Title 7
has such amount in safe legal securities after all other REINSURANCE TRANSACTIONS
debts and claims against it have been provided for.
Sec. 216. An insurance company doing business in
The reserve liability for variable contracts defined in the Philippines may accept reinsurances only of such
section two hundred thirty-two shall be established in risks, and retain risk thereon within such limits, as it
accordance with actuarial procedures that recognize is otherwise authorized to insure.
the variable nature of the benefits provided, and shall
Sec. 217. No insurance company doing business in
be approved by the Commissioner.
the Philippines shall cede all or part of any risks
Sec. 212. Every domestic life insurance company, situated in the Philippines by way of reinsurance
conducted on the mutual plan or a plan in which directly to any foreign insurer not authorized to do
policyholders are by the terms of their policies entitled business in the Philippines unless such foreign insurer
to share in the profits or surplus shall, on all policies or, if the services of a non-resident broker are
of life insurance heretofore or hereafter issued, under utilized, such non-resident broker is represented in
the conditions of which the distribution of surplus is the Philippines by a resident agent duly registered
deferred to a fixed or specified time and contingent with the Commissioner as required in this Code.
upon the policy being in force and the insured living
The resident agent of such unauthorized foreign
at that time, annually ascertain the amount of the
insurer or non- resident broker shall immediately
surplus to which all such policies as separate class are
upon registration furnish the Commissioner with the
entitled, and shall annually apportion to such policies
annual statement of such insurer, or of such company
as a class the amount of the surplus so ascertained,
or companies where such broker may place Philippine
and carry the amount of such apportioned surplus,
business as of the year preceding such registration,
plus the actual interest earnings and accretions to
and annually thereafter as soon as available.
such fund, as a distinct and separate liability to such
class of policies on and for which the same was Sec. 218. All insurance companies, both life and non-
accumulated, and no company or any of its officers life, authorized to do business in the Philippines shall
shall be permitted to use any part of such cede their excess risks to other companies similarly
apportioned surplus fund for any purpose whatsoever authorized to do business in the Philippines in such
other than for the express purpose for which the amounts and under such arrangements as would be
same was accumulated. consistent with sound underwriting practices before
they enter into reinsurance arrangements with
Sec. 213. Every insurance company, other than life,
unauthorized foreign insurers.
shall maintain a reserve for unearned premiums on its
policies in force, which shall be charged as a liability Sec. 219. Any insurance company doing business in
in any determination of its financial condition. Such the Philippines desiring to cede their excess risks to
reserve shall be equal to forty per centum of the foreign insurance or reinsurance companies not
gross premiums, less returns and cancellations, authorized to transact business in the Philippines may
received on policies or risks having not more than a do so under the following
year to run, and pro rata on all gross premiums conditions:chanroblesvirtuallawlibrary
received on policies or risks having more than a year (1) Except in facultative reinsurance and excess of
to run: Provided, That for marine cargo risks the loss covers, the full amount of the reserve fund
reserve shall be equal to forty per centum of the required by law shall be set up in the books of and
premiums written in the policies upon yearly risks, held by the ceding company for so long as the risk
and the full amount of the premiums written during concerned is in force: Provided, That in case of
facultative insurance, the ceding company shall show such statement shall be subject to the penalty
to the satisfaction of the Commissioner that the provided for under section four hundred nineteen.
Philippine market cannot provide the facilities sought Sec. 224. Every insurance company authorized under
abroad. title ten of this chapter to issue, deliver or use
(2) The reserve fund withheld shall be invested in variable contracts shall annually file with the
bonds or other evidences of debt of the Government Commissioner separate annual statement of its
of the Philippines or its political subdivisions or separate variable accounts. Such statement shall be
instrumentalities, or of government-owned or on a form prescribed or approved by the
controlled corporations and entities, including the Commissioner and shall include details as to all of the
Central Bank, and/or other securities acceptable income, disbursements, assets and liability items of
under section two hundred. and associated with the said separate variable
Should any reinsurance agreement be for any reason accounts. Said statement shall be under oath of two
cancelled or terminated, the ceding company officers of the company and shall be filed
concerned shall inform the Commissioner in writing of simultaneously with the annual statement required by
such cancellation or termination within thirty days the preceding section.
from the date of such cancellation or termination or Sec. 225. Within thirty days after receipt of the
from the date notice or information of such annual statement approved by the Commissioner,
cancellation or termination is received by such every insurance company doing business in the
company as the case may be. Philippines shall publish in two newspapers of general
Sec. 220. Every insurance company authorized to do circulation in the City of Manila, one published in
business in the Philippines shall report to the English and one in Pilipino, a full sypnosis of its
Commissioner on forms prescribed by him the annual financial statement showing fully the
particulars of reinsurance treaties as of the first day conditions of its business, and setting forth its
of January of the year following the approval of this resources and liabilities.
Code and shall thereafter similarly report to the Title 9
Commissioner particulars of any new treaties or POLICY FORMS
changes in existing treaties. Sec. 226. No policy, certificate or contract of
Sec. 221. No credit shall be allowed as an admitted insurance shall be issued or delivered within the
asset or as a deduction from liability, to any ceding Philippines unless in the form previously approved by
insurer for reinsurance made, ceded, renewed, or the Commissioner, and no application form shall be
otherwise becoming effective after January first, used with, and no rider, clause, warranty or
nineteen hundred seventy-five, unless the reinsurance endorsement shall be attached to, printed or stamped
shall be payable by the assuming insurer on the basis upon such policy, certificate or contract unless the
of the liability of the ceding insurer under the contract form of such application, rider, clause, warranty or
or contracts reinsured without diminution because of endorsement has been approved by the
the insolvency of the ceding insurer nor unless under Commissioner.
the contract or contracts of reinsurance the liability Sec. 227. In the case of individual life or endowment
for such reinsurance is assumed by the assuming insurance, the policy shall contain in substance the
insurer or insurers as of the same effective date; nor following conditions:chanroblesvirtuallawlibrary
unless the reinsurance agreement provides that (a) A provision that the policyholder is entitled to a
payments by the assuming insurer shall be made grace period either of thirty days or of one month
directly to the ceding insurer or to its liquidator, within which the payment of any premium after the
receiver, or statutory successor except (a) where the first may be made, subject at the option of the
contract specifically provides another payee of such insurer to an interest charge not in excess of six per
reinsurance in the event of the insolvency of the centum per annum for the number of days of grace
ceding insurer and (b) where the assuming insurer elapsing before the payment of the premium, during
with the consent of the direct insured or insureds has which period of grace the policy shall continue in full
assumed such policy obligations of the ceding insurer force, but in case the policy becomes a claim during
as direct obligations of the assuming insurer to the the said period of grace before the overdue premium
payees under such policies and in substitution for the is paid, the amount of such premium with interest
obligations of the ceding insurer to such payees. may de deducted from the amount payable under the
Sec. 222. No life insurance company doing business in policy in settlement;
the Philippines shall reinsure its whole risk on any (b) A provision that the policy shall be incontestable
individual life or joint lives, or substantially all of its after it shall have been in force during the lifetime of
insurance in force, without having first obtained the the insured for a period of two years from its date of
written permission of the Commissioner. issue as shown in the policy, or date of approval of
Title 8 last reinstatement, except for non-payment of
ANNUAL STATEMENT premium and except for violation of the conditions of
Sec. 223. Every insurance company doing business in the policy relating to military or naval service in time
the Philippines shall terminate its fiscal period on the of war;
thirty-first day of December every year, and shall (c) A provision that the policy shall constitute the
annually on or before the thirtieth day of April of each entire contract between the parties, but if the
year render to the Commissioner a statement signed company desires to make the application a part of the
and sworn to by the chief officer of such company contract it may do so provided a copy of such
showing, in such form and details as may be application shall be indorsed upon or attached to the
prescribed by the Commissioner, the exact condition policy when issued, and in such case the policy shall
of its affairs on the preceding thirty-first day of contain a provision that the policy and the application
December. therefor shall constitute the entire contract between
Any entry in the statement which is found to be false the parties;
shall constitute a misdemeanor and the officer signing (d) A provision that if the age of the insured is
considered in determining the premium and the
benefits accruing under the policy, and the age of the Any of the foregoing provisions or portions thereof
insured has been misstated, the amount payable not applicable to single premium or term policies shall
under the policy shall be such as the premium would to that extent not be incorporated therein; and any
have purchased at the correct age; such policy may be issued and delivered in the
(e) If the policy is participating, a provision that the Philippines which in the opinion of the Commissioner
company shall periodically ascertain and apportion contains provisions on any one or more of the
any divisible surplus accruing on the policy under foregoing requirements more favorable to the
conditions specified therein; policyholder than hereinbefore required.
(f) A provision specifying the options to which the This section shall not apply to policies of group life or
policyholder is entitled to in the event of default in a industrial life insurance.
premium payment after three full annual premiums Sec. 228. No policy of group life insurance shall be
shall have been paid. Such option shall consist issued and delivered in the Philippines unless it
of:chanroblesvirtuallawlibrary contains in substance the following provisions, or
provisions which in the opinion of the Commissioner
(1) A cash surrender value payable upon surrender of are more favorable to the persons insured, or at least
the policy which shall not be less than the reserve on as favorable to the persons insured and more
the policy, the basis of which shall be indicated, for favorable to the policy-
the then current policy year and any dividend holders:chanroblesvirtuallawlibrary
additions thereto, reduced by a surrender charge (a) A provision that the policyholder is entitled to a
which shall not be more than one-fifth of the entire grace period of either thirty days or of one month for
reserve or two and one-half per centum of the the payment of any premium due after the first,
amount insured and any dividend additions thereto; during which grace period the death benefit coverage
(2) One or more paid-up benefits on a plan or plans shall continue in force, unless the policyholder shall
specified in the policy of such value as may be have given the insurer written notice of
purchased by the cash surrender value; discontinuance in advance of the date of
discontinuance and in accordance with the terms of
(g) A provision that at anytime after a cash surrender
the policy. The policy may provide that the
value is available under the policy and while the policy
policyholder shall be liable for the payment of a pro
is in force, the company will advance, on proper
rata premium for the time the policy is in force during
assignment or pledge of the policy and on sole
such grace period;
security thereof, a sum equal to, or at the option of
the owner of the policy, less than the cash surrender (b) A provision that the validity of the policy shall not
value on the policy, at a specified rate of interest, not be contested, except for non-payment of premiums
more than the maximum allowed by law, to be after it has been in force for two years from its date
determined by the company from time to time, but of issue; and that no statement made by any insured
not more often than once a year, subject to the under the policy relating to his insurability shall be
approval of the Commissioner; and that the company used in contesting the validity of the insurance with
will deduct from such loan value any existing respect to which such statement was made after such
indebtedness on the policy and any unpaid balance of insurance has been in force prior to the contest for a
the premium for the current policy year, and may period of two years during such person's lifetime nor
collect interest in advance on the loan to the end of unless contained in written instrument signed by him;
the current policy year, which provision may further (c) A provision that a copy of the application, if any,
provide that such loan may be deferred for not of the policyholder shall be attached to the policy
exceeding six months after the application therefor is when issued, that all statements made by the
made; policyholder or by persons insured shall be deemed
(h) A table showing in figures cash surrender values representations and not warranties, and that no
and paid-up options available under the policy each statement made by any insured shall be used in any
year upon default in premium payments, during at contest unless a copy of the instrument containing
least twenty years of the policy beginning with the the statement is or has been furnished to such person
year in which the values and options first become or to his beneficiary;
available, together with a provision that in the event (d) A provision setting forth the conditions, if any,
of the failure of the policyholder to elect one of the under which the insurer reserves the right to require
said options within the time specified in the policy, a person eligible for insurance to furnish evidence of
one of said options shall automatically take effect and individual insurability satisfactory to the insurer as a
no policyholder shall ever forfeit his right to same by condition to part or all of his coverage;
reason of his failure to so elect; (e) A provision specifying an equitable adjustment of
(i) In case the proceeds of a policy are payable in premiums or of benefits or of both to be made in the
installments or as an annuity, a table showing the event that the age of a person insured has been
minimum amounts of the installments or annuity misstated, such provision to contain a clear statement
payments; of the method of adjustment to be used;
(j) A provision that the policyholder shall be entitled (f) A provision that any sum becoming due by reason
to have the policy reinstated at any time within three of death of the person insured shall be payable to the
years from the date of default of premium payment beneficiary designated by the insured, subject to the
unless the cash surrender value has been duly paid, provisions of the policy in the event that there is no
or the extension period has expired, upon production designated beneficiary, as to all or any part of such
of evidence of insurability satisfactory to the company sum, living at the death of the insured, and subject to
and upon payment of all overdue premiums and any any right reserved by the insurer in the policy and set
indebtedness to the company upon said policy, with forth in the certificate to pay at its option a part of
interest rate not exceeding that which would have such sum not exceeding five hundred pesos to any
been applicable to said premiums and indebtedness in person appearing to the insurer to be equitably
the policy years prior to reinstatement. entitled thereto by reason of having incurred funeral
or other expenses incident to the last illness or death a group life policy is on a plan of insurance other than
of the person insured; term, it shall contain a non-forfeiture provision or
(g) A provision that the insurer will issue to the provisions which in the opinion of the Commissioner is
policyholder for delivery to each person insured an or are equitable to the insured or the
individual certificate setting forth a statement as to policyholder: Provided, That nothing herein contained
the insurance protection to which he is entitled, to shall be so construed as to require group life policies
whom the insurance benefits are payable, and the to contain the same non-forfeiture provisions as are
rights set forth in paragraphs (h), (i) and (j) required of individual life policies.
following; Sec. 229. The term "industrial life insurance" as used
(h) A provision that if the insurance, or any portion of in this Code shall mean that form of life insurance
it, on a person covered under the policy ceases under which the premiums are payable either monthly
because of termination of employment or of or oftener, if the face amount of insurance provided
membership in the class or classes eligible for in any policy is not more than five hundred times that
coverage under the policy, such person shall be of the current statutory minimum daily wage in the
entitled to have issued to him by the insurer, without City of Manila, and if the words "industrial policy" are
evidence of insurability, an individual policy of life printed upon the policy as part of the descriptive
insurance without disability or other supplementary matter.
benefits, provided application for the individual policy An industrial life policy shall not lapse for non-
and payment of the first premium to the insurer shall payment of premium if such non-payment was due to
be made within thirty days after such termination and the failure of the company to send its representative
provided further that:chanroblesvirtuallawlibrary or agent to the insured at the residence of the
insured or at some other place indicated by him for
(1) the individual policy shall be on any one of the the purpose of collecting such premium: Provided,
forms, except term insurance, then customarily issued That the provisions of this paragraph shall not apply
by the insurer at the age and for an amount not in when the premium on the policy remains unpaid for a
excess of the coverage under the group policy; and period of three months or twelve weeks after the
(2) the premium on the individual policy shall be at grace period has expired.
the insurer's then customary rate applicable to the Sec. 230. In the case of industrial life insurance, the
form and amount of the individual policy, to the class policy shall contain in substance the following
of risk to which such person then belongs, and to his provisions:chanroblesvirtuallawlibrary
age attained on the effective date of the individual (a) A provision that the insured is entitled to a grace
policy. period of four weeks within which the payment of any
premium after the first may be made, except that
(i) A provision that if the group policy terminates or is where premiums are payable monthly, the period of
amended so as to terminate the insurance of any grace shall be either one month or thirty days; and
class of insured persons, every person insured that during the period of grace, the policy shall
thereunder at the date of such termination whose continue in full force, but if during such grace period
insurance terminates and who has been so insured the policy becomes a claim, then any overdue and
for five years prior to such termination date shall be unpaid premiums may be deducted from any amount
entitled to have issued to him by the insurer an payable under the policy in settlement;
individual policy of life insurance subject to the same (b) A provision that the policy shall be incontestable
limitations as set forth in paragraph (h), except that after it has been in force during the lifetime of the
the group policy may provide that the amount of such insured for a specified period, not more than two
individual policy shall not exceed the smaller of (a) years from its date of issue, except for non-payment
the amount of the person's life insurance protection of premiums and except for violation of the conditions
ceasing less the amount of any life insurance for what of the policy relating to naval or military service, or
he is or becomes eligible under any group policy services auxiliary thereto, and except as to provisions
issued or reinstated by the same or another reinsurer relating to benefits in the event of disability as
within thirty days after such termination, and (b) two defined in the policy, and those granting additional
thousand pesos; insurance specifically against death by accident or by
(j) A provision that if a person insured under the accidental means, or to additional insurance against
group policy dies during the thirty-day period within loss of, or loss of use of, specific members of the
which he would have been entitled to an individual body;
policy issued to him in accordance with (h) and (i) (c) A provision that the policy shall constitute the
above and before such individual policy shall have entire contract between the parties, or if a copy of
become effective, the amount of life insurance which the application is endorsed upon and attached to the
he would have been entitled to have issued to him as policy when issued, a provision that the policy and the
an individual policy shall be payable as a claim under application therefor shall constitute the entire contract
the group policy whether or not application for the between the parties, and in the latter case, a
individual policy or the payment of the first premium provision that all statements made by the insured
has been made; shall, in the absence of fraud, be deemed
(k) In the case of a policy issued to a creditor to representations and not warranties;
insure debtors of such creditor, a provision that the (d) A provision that if the age of the person insured,
insurer will furnish to the policyholder for delivery to or the age of any person, considered in determining
each debtor insured under the policy a form which the premium, or the benefits accruing under the
will contain a statement that the life of the debtor is policy, has been misstated, any amount payable or
insured under the policy and that any death benefit benefit accruing under the policy shall be such as the
paid thereunder by reason of his death shall be premium paid would have purchased at the correct
applied to reduce or extinguish indebtedness. age;
The provisions of paragraphs (f) to (j) shall not apply (e) A provision that if the policy is a participating
to policies issued to a creditor to insure his debtors. If policy, the company shall periodically ascertain and
apportion any divisible surplus accruing on the policy (l) A title on the face and on the back of the policy
under the conditions specified therein; correctly describing its form;
(f) A provision that in the event of default in premium (m) A space on the front or the back of the policy for
payments after three full years' premiums have been the name of the beneficiary designated by the insured
paid, the policy shall be converted into a stipulated with a reservation of the insured's right to designate
form of insurance, and that in the event of default in or change the beneficiary after the issuance of the
premium payments after five full years' premiums policy. The policy may also provide that no
have been paid, a specified cash surrender value shall designation or change of beneficiary shall be binding
be available, in lieu of the stipulated form of on the insurer until endorsed on the policy by the
insurance, at the option of the policyholder. The net insurer, and that the insurer may refuse to endorse
value of such stipulated form of insurance and the the name of any proposed beneficiary who does not
amount of such cash value shall not be less than the appear to the insurer to have an insurable interest in
reserve on the policy and dividend additions thereto, the life of the insured. Such policy may also contain a
if any, at the end of the last completed policy year for provision that if the beneficiary designated in the
which premiums shall have been paid (the policy to policy does not surrender the policy with due proof of
specify the mortality table, rate of interest and death within the period stated in the policy, which
method of valuation adopted to compute such shall not be less than thirty days after the death of
reserve), exclusive of any reserve on disability the insured, or if the beneficiary is the estate of the
benefits and accidental death benefits, less an insured, or is a minor, or dies before the insured, or is
amount not to exceed two and one-half per not legally competent to give valid release, then the
centum of the maximum amount insured by the policy insurer may make any payment thereunder to the
and dividend additions thereto, if any, at the end of executor or administrator of the insured, or to any of
the last completed policy year for which premiums the insured's relatives by blood or legal adoption or
shall have been paid (the policy to specify the connections by marriage or to any person appearing
mortality table, rate of interest and method of to the insurer to be equitably entitled thereto by
valuation adopted to compute such reserve), reason of having incurred expense for the
exclusive of any reserve on disability benefits and maintenance, medical attention or burial of the
accidental death benefits, less an amount not to insured; and
exceed two and one-half per centum of the maximum (n) A provision that when an industrial life insurance
amount insured by the policy and dividend additions policy is issued providing for accidental or health
thereto, if any, when the issue age is under ten years, benefits, or both, in addition to life insurance, the
and less an amount not to exceed two and one- foregoing provisions shall apply only to the life
half per centum of the current amount insured by the insurance portion of the policy.
policy and dividend additions thereto, if any, if the Any of the foregoing provisions or portions thereof
issue age is ten years or older, and less any existing not applicable to non-participating or term policies
indebtedness to the company on or secured by the shall to that extent not be incorporated therein. The
policy; foregoing provisions shall not apply to policies issued
(g) A provision that the policy may be surrendered to or granted pursuant to the non-forfeiture provisions
the company at its home office within a period of not prescribed in provisions of paragraphs (f) and (i) of
less than sixty days after the due date of a premium this section, nor shall provisions of paragraphs (f),
in default for the specified cash value, provided that (g), (h), and (i) hereof be required in term insurance
the insurer may defer payment for not more than six of twenty years or less but such term policies shall
months after the application therefor is made; specify the mortality table, rate of interest, and
(h) A table that shows in figures the non-forfeiture method of computing reserves.
benefits available under the policy every year upon Sec. 231. No policy of industrial life insurance shall be
default in payment of premiums during at least the issued or delivered in the Philippines if it contains any
first twenty years of the policy, such table to begin of the following provisions:chanroblesvirtuallawlibrary
with the year in which such values become available, (a) A provision that gives the insurer the right to
and a provision that the company will furnish upon declare the policy void because the insured has had
request an extension of such table beyond the year any disease or ailment, whether specified or not, or
shown in the policy; because the insured has received institutional,
(i) A provision that specifies which one of the hospital, medical or surgical treatment or attention,
stipulated forms of insurance provided for under the except a provision which gives the insurer the right to
provision of paragraph (f) of this section shall take declare the policy void if the insured has, within two
effect in the event of the insured's failure, within sixty years prior to the issuance of the policy, received
days from the due date of the premium in default, to institutional hospital, medical or surgical treatment or
notify the insurer in writing as to which one of such attention and if the insured or the claimant under the
forms he has selected; policy fails to show that the condition occasioning
(j) A provision that the policy may be reinstated at such treatment or attention was not of a serious
any time within two years from the due date of the nature or was not material to the risk;
premium in default unless the cash surrender value (b) A provision that gives the insurer the right to
has been paid or the period of extended term declare the policy void because the insured has been
insurance expired, upon production of evidence of rejected for insurance, unless such right be
insurability satisfactory to the company and payment conditioned upon a showing by the insurer that
of arrears of premiums with interest at a rate not knowledge of such rejection would have led to a
exceeding six per centum per annum payable refusal by the insurer to make such contract;
annually; (c) A provision that allows the company to pay the
(k) A provision that when a policy shall become a proceeds of the policy at the death of the insured to
claim by death of the insured, settlement shall be any person other than the named beneficiary, except
made upon receipt of due proof of death, or not later in accordance with a standard provision as specified
than two months after receipt of such proof;
under the provisions of paragraph (m) of the Philippines, securities satisfactory to the
preceding section; Commissioner consisting of bonds of the Government
(d) A provision that limits the time within which any of the Philippines or its instrumentalities with an
action at law or in equity may be commenced to less actual market value of two million pesos; (b) the
than six years after the cause of action shall accrue; character, responsibility and fitness of the officers and
and directors of the company; and (c) the law and
(e) A provision that specifies any mode of settlement regulation under which the company is authorized in
at maturity of less value than the amount insured by the state of domicile to issue such contracts.
the policy plus dividend additions, if any, less any (4) If after notice and hearing, the Commissioner
indebtedness to the company on the policy and less shall find that the company is qualified to issue,
any premium that may by the terms of the policy be deliver, sell or use variable contracts in accordance
deducted, payments to be made in accordance with with this Code and the regulations and rules issued
the terms of the policy. thereunder, the corresponding order of authorization
Nothing contained in this section nor in the provision shall be issued. Any decision or order denying
of paragraph (b) of the preceding section, relating to authority to issue, deliver, sell or use variable
incontestability, shall be construed as prohibiting the contracts shall clearly and distinctly state the reasons
life insurance company from placing in its industrial and grounds on which it is based.
life policies provisions limiting its liability with respect Sec. 233. Any insurance company issuing variable
to: (1) death resulting from aviation other than as a contracts pursuant to this Code may in its discretion
fare-paying passenger on a regularly scheduled route issue contracts providing a combination of fixed
between definitely established airports; and (2) amount and variable amount of benefits and for
military or naval service: Provided, That if the liability option lump-sum payment of benefits.
of the company is limited as herein provided, such Sec. 234. Every variable contract form delivered or
liability shall in no event be fixed at an amount less issued for delivery in the Philippines, and every
than the reserve on the policy (excluding the reserve certified form evidencing variable benefits issued
for any additional benefits in the event of death by pursuant to any such contract on a group basis, and
accident or accidental means or for benefits in the the application, rider and endorsement forms
event of any type of disability), less any indebtedness applicable thereto and used in connection therewith,
on or secured by such policy; nor shall any provision shall be subject to the prior approval of the
of this section apply to any provision in an industrial Commissioner.
life insurance policy for additional benefits in the Sec. 235. Illustration of benefits payable under any
event of death by accident or accidental means. variable contract shall not include or involve
Title 10 projections of past investment experience into the
VARIABLE CONTRACTS future and shall conform with the rules and
Sec. 232. (1) No insurance company authorized to regulations promulgated by the Commissioner.
transact business in the Philippines shall issue, Sec. 236. Variable contracts may be issued on the
deliver, sell or use any variable contract in the industrial life basis, provided that the pertinent
Philippines, unless and until such company shall have provisions of this Code and of the rules and
satisfied the Commissioner that its financial and regulations of the Commissioner governing variable
general condition and its methods of operations, contracts are complied with in connection with such
including the issue and sale of variable contracts, are contracts.
not and will not be hazardous to the public or to its Sec. 237. Every life insurance company authorized
policy and contract owners. No foreign insurance under the provisions of this Code to issue, deliver, sell
company shall be authorized to issue, deliver or sell or use variable contracts shall, in connection with
any variable contract in the Philippines, unless it is same, establish one or more separate accounts to be
likewise authorized to do so by the laws of its known as separate variable accounts. All amounts
domicile. received by the company in connection with any such
(2) The term "variable contract" shall mean any policy contracts which are required by the terms thereof, to
or contract on either a group or on an individual basis be collected or applied to one or more designated
issued by an insurance company providing for separate variable accounts shall be placed in such
benefits or other contractual payments or values designated account or accounts. The assets and
thereunder to vary so as to reflect investment results liabilities of each such separate variable account shall
of any segregated portfolio of investments or of a at all times be clearly identifiable and distinguishable
designated separate account in which amounts from the assets and liabilities in all other accounts of
received in connection with such contracts shall have the company. Notwithstanding any provision of law to
been placed and accounted for separately and apart the contrary, the assets held in any such separate
from other investments and accounts. This contract variable account shall not be chargeable with
may also provide benefits or values incidental thereto liabilities arising out of any other business the
payable in fixed or variable amounts, or both. It shall company conduct but shall be held and applied
not be deemed to be a "security" or"securities" as exclusively for the benefit of the owners or
defined in The Securities Act, as amended, or in the beneficiaries of the variable contracts applicable
The Investment Company Act, as amended, nor thereto. In the event of the insolvency of the
subject to regulation under said Acts. company, the assets of each such separate variable
(3) In determining the qualifications of a company account shall be applied to the contractual claims of
requesting authority to issue, deliver, sell or use the owners or beneficiaries of the variable contracts
variable contracts, the Commissioner shall always applicable thereto. Except as otherwise specifically
consider the following: (a) the history, financial and provided by the contract, no sale, exchange or other
general condition of the company: Provided, That transfer of assets may be made by a company,
such company, if a foreign company, must have between any of its separate accounts or between any
deposited with the Commissioner for the benefit and other investment account and one or more of its
security of its variable contract owners in the separate accounts, unless in the case of a transfer
into a separate account, such transfer is made solely unfair claim settlement
to establish the account or to support the operation of practices:chanroblesvirtuallawlibrary
the contracts with respect to the separate account to (a) knowingly misrepresenting to claimants pertinent
which the transfer is made, or in case of a transfer facts or policy provisions relating to coverage at
from a separate account, such transfer would not issue;
cause the remaining assets of the account to become (b) failing to acknowledge with reasonable
less than the reserves and other contract liabilities promptness pertinent communications with respect to
with respect to such separate account. Such transfer, claims arising under its policies;
whether into or from a separate account, shall be
(c) failing to adopt and implement reasonable
made by a transfer of cash, or by a transfer of
standards for the prompt investigation of claims
securities having a valuation which could be readily
arising under its policies;
determined in the market place, provided that such
transfer of securities is approved by the (d) not attempting in good faith to effectuate prompt,
Commissioner. The Commissioner may authorize fair and equitable settlement of claims submitted in
other transfers among such accounts, if, in his which liability has become reasonably clear; or
opinion, such transfer would not be inequitable. All (e) compelling policyholders to institute suits to
amounts and assets allocated to any such separate recover amounts due under its policies by offering
variable account shall be owned by the company and without justifiable reason substantially less than the
with respect to same the company shall not be nor amounts ultimately recovered in suits brought by
hold itself out to be a trustee. them.
Sec. 238. Any insurance company which has (2) Evidence as to numbers and types of valid and
established one or more separate variable accounts justifiable complaints to the Commissioner against an
pursuant to the preceding section may invest and re- insurance company, and the Commissioner's
invest all or any part of the assets allocated to any complaint experience with other insurance companies
such account in the securities and investments writing similar lines of insurance shall be admissible in
authorized by sections one hundred ninety-eight, two evidence in an administrative or judicial proceeding
hundred, two hundred one and two hundred two for brought under this section.
any of the funds of an insurance company in such (3) If it is found, after notice and an opportunity to be
amount or amounts as may be approved by the heard, that an insurance company has violated this
Commissioner. In addition thereto, such company section, each instance of non-compliance with
may also invest in common stocks or other equities paragraph (1) may be treated as a separate violation
which are listed on or admitted to trading in a of this section and shall be considered sufficient cause
securities exchange located in the Philippines, or for the suspension or revocation of the company's
which are publicly held and traded in the "over-the- certificate of authority.
counter market" as defined by the Commissioner and Sec. 242. The proceeds of a life insurance policy shall
as to which market quotations have been be paid immediately upon maturity of the policy,
available: Provided, however, That no such company unless such proceeds are made payable in
shall invest in excess of ten per centum of the assets installments or as an annuity, in which case the
of any such separate variable accounts in any one installments, or annuities shall be paid as they
corporation issuing such common stock. The assets become due: Provided, however, That in the case of a
and investments of such separate variable accounts policy maturing by the death of the insured, the
shall not be taken into account in applying the proceeds thereof shall be paid within sixty days after
quantitative investment limitations applicable to other presentation of the claim and filing of the proof of the
investments of the company. In the purchase of death of the insured. Refusal or failure to pay the
common capital stock or other equities, the insurer claim within the time prescribed herein will entitle the
shall designate to the broker, or to the seller if the beneficiary to collect interest on the proceeds of the
purchase is not made through a broker, the specific policy for the duration of the delay at the rate of
variable account for which the investment is made. twice the ceiling prescribed by the Monetary Board,
Sec. 239. Assets allocated to any separate variable unless such failure or refusal to pay is based on the
account shall be valued at their market value on the ground that the claim is fraudulent.
date of any valuation, or if there is no readily The proceeds of the policy maturing by the death of
available market then in accordance with the terms of the insured payable to the beneficiary shall include
the variable contract applicable to such assets, or if the discounted value of all premiums paid in advance
there are no such contract terms then in such manner of their due dates, but are not due and payable at
as may be prescribed by the rules and regulations of maturity.
the Commissioner.
Sec. 243. The amount of any loss or damage for
Sec. 240. The reserve liability for variable contracts which an insurer may be liable, under any policy other
shall be established in accordance with actuarial than life insurance policy, shall be paid within thirty
procedures that recognize the variable nature of the days after proof loss is received by the insurer and
benefits provided, and shall be approved by the ascertainment of the loss or damage is made either
Commissioner. by agreement between the insured and the insurer or
Title 11 by arbitration; but if such ascertainment is not had or
CLAIMS SETTLEMENT made within sixty days after such receipt by the
Sec. 241. (1) No insurance company doing business in insurer of the proof of loss, then the loss or damage
the Philippines shall refuse, without just cause, to pay shall be paid within ninety days after such receipt.
or settle claims arising under coverages provided by Refusal or failure to pay the loss or damage within
its policies, nor shall any such company engage in the time prescribed herein will entitle the assured to
unfair claim settlement practices. Any of the following collect interest on the proceeds of the policy for the
acts by an insurance company, if committed without duration of the delay at the rate of twice the ceiling
just cause and performed with such frequency as to prescribed by the Monetary Board, unless such failure
indicate a general business practice, shall constitute or refusal to pay is based on the ground that the
claim is fraudulent.
Sec. 244. In case of any litigation for the enforcement insurance company, its officers and agents, and no
of any policy or contract of insurance, it shall be the new business shall thereafter be done by such
duty of the Commissioner or the Court, as the case company or for such company by its agent in the
may be, to make a finding as to whether the payment Philippines while such suspension, revocation or
of the claim of the insured has been unreasonably disability continues or until its authority to do
denied or withheld; and in the affirmative case, the business is restored by the Commissioner. Before
insurance company shall be adjudged to pay damages restoring such authority, the Commissioner shall
which shall consist of attorney's fees and other require the company concerned to submit to him a
expenses incurred by the insured person by reason of business plan showing the company's estimated
such unreasonable denial or withholding of payment receipts and disbursements, as well as the basis
plus interest of twice the ceiling prescribed by the therefor, for the next succeeding three years. (As
Monetary Board of the amount of the claim due the amended by Presidential Decree No. 1455).
insured, from the date following the time prescribed Title 14
in section two hundred forty-two or in section two APPOINTMENT OF CONSERVATOR
hundred forty-three, as the case may be, until the Sec. 248. If at any time before, or after, the
claim is fully satisfied; Provided, That the failure to suspension or revocation of the certificate of authority
pay any such claim within the time prescribed in said of an insurance company as provided in the preceding
sections shall be considered prima facie evidence of title, the Commissioner finds that such company is in
unreasonable delay in payment. a state of continuing inability or unwillingness to
Title 12 maintain a condition of solvency or liquidity deemed
EXAMINATION OF COMPANIES adequate to protect the interest of policy holders and
Sec. 245. The Commissioner shall require every creditors, he may appoint a conservator to take
insurance company doing business in the Philippines charge the assets, liabilities, and the management of
to keep its books, records, accounts and vouchers in such company, collect all moneys and debts due said
such manner that he or his authorized representatives company and exercise all powers necessary to
may readily verify its annual statements and ascertain preserve the assets of said company, reorganize the
whether the company is solvent and has complied management thereof, and restore its viability. The
with the provisions of this Code or the circulars, said conservator shall have the power to overrule or
instructions, rulings or decisions of the Commissioner. revoke the actions of the previous management and
Sec. 246. The Commissioner shall at least once a year board of directors of the said company, any provision
and whenever he considers the public interest so of law, or of the articles of incorporation or by-laws of
demands, cause an examination to be made into the the company, to the contrary notwithstanding, and
affairs, financial condition and method of business of such other powers as the Commissioner shall deem
every insurance company authorized to transact necessary.
business in the Philippines and of any other person, The conservator may be another insurance company
firm or corporation managing the affairs and/or doing business in the Philippines, by officer or officers
property of such insurance company. Such company, of such company, or any other competent and
as well as such managing person, firm or corporation, qualified person, firm or corporation. The
shall submit to the examiner all such books, papers remuneration of the conservator and other expenses
and securities as he may require and such examiner attendant to the conservation shall be borne by the
shall also have the power to examine the officers of insurance company concerned.
such company under oath touching its business and The conservator shall not be subject to any action,
financial condition, and the authority to transact claim or demand by, or liability to, any person in
business in the Philippines of any such company shall respect of anything done or omitted to be done in
be suspended by the Commissioner if such good faith in the exercise, or in connection with the
examination is refused and such company shall not exercise, of the powers conferred on the conservator.
thereafter be allowed to transact further business in The conservator appointed shall report and be
the Philippines until it has fully complied with the responsible to the Commissioner until such time as
provisions of this section. the Commissioner is satisfied that the insurance
Government-owned or controlled corporations or company can continue to operate on its own and the
entities engaged in social private insurance shall conservatorship shall likewise be terminated should
similarly be subject to such examination by the be Commissioner, on the basis of the report of the
Commissioner unless their respective charters conservator or of his own findings, determine that the
otherwise provide. continuance in business of the insurance company
Title 13 would be hazardous to policy holders and creditors, in
SUSPENSION OR REVOCATION OF AUTHORITY which case the provisions of Title 15 shall apply.
Sec. 247. If the Commissioner is of the opinion upon Title 15
examination of other evidence that any domestic or PROCEEDINGS UPON INSOLVENCY
foreign insurance company is in an unsound Sec. 249. Whenever, upon examination or other
condition, or that it has failed to comply with the evidence, it shall be disclosed that the condition of
provisions of law or regulations obligatory upon it, or any insurance company doing business in the
that its condition or method of business is such as to Philippines is one of insolvency, or that its
render its proceedings hazardous to the public or to continuance in business would be hazardous to its
its policyholders, or that its paid-up capital stock, in policyholders and creditors, the Commissioner shall
the case of a domestic stock company, or its available forthwith order the company to cease and desist from
cash assets, in the case of a domestic mutual transacting business in the Philippines and shall
company, or its security deposits, in the case of a designate a receiver to immediately take charge of its
foreign company, is impaired or deficient, or that the assets and liabilities, as expeditiously as possible
margin of solvency required of such company is collect and gather all the assets and administer the
deficient, the Commissioner is authorized to suspend same for the benefit of its policyholders and creditors,
or revoke all certificates of authority granted to such and exercise all the powers necessary for these
purposes including, but not limited to, bringing suits As used in this Title, the term "Insolvency" shall mean
and foreclosing mortgages in the name of the the inability of an insurance company to pay its lawful
insurance company. obligations as they fall due in the usual and ordinary
The Commissioner shall thereupon determine within course of business as may be shown by its failure to
thirty days whether the insurance company may be maintain the margin of solvency required under
reorganized or otherwise placed in such condition so Section 194 of this Code. (As amended by Presidential
that it may be permitted to resume business with Decree No. 1141 and further amended by Presidential
safety to its policyholders and creditors and shall Decree No. 1455).
prescribe the conditions under which such resumption Sec. 250. In case of liquidation of an insurance
of business shall take place as well as the time for company, after payment of the cost of the
fulfillment of such conditions. In such case, the proceedings, including reasonable expenses and fees
expenses and fees in the collection and administration incurred in the liquidation to be allowed by the Court,
of the insurance company shall be determined by the the Commissioner shall pay all allowed claims against
Commissioner and shall be paid out of the assets of such company, under order of the Court, in
such company. accordance with their legal priority.
If the Commissioner shall determine and confirm Sec. 251. The receiver or the liquidator, as the case
within the said period that the insurance company is may be, designated under the provisions of this title
solvent, as defined hereunder, or cannot resume shall not be subject to any action, claim or demand
business with safety to its policyholders and creditors, by, or liability to, any person in respect of anything
he shall, if the public interest requires, order its done or omitted to be done in good faith in the
liquidation, indicate the manner of its liquidation and exercise, or in connection with the exercise, of the
approve a liquidation plan and implement it powers conferred on such receiver or liquidator.
immediately. The Commissioner shall designate a Title 16
competent and qualified person as liquidator who CONSOLIDATION AND MERGER OF INSURANCE
shall take over the functions of the receiver previously COMPANIES
designated and, with all convenient speed, reinsure Sec. 252. Upon prior notice to the Commissioner, two
all its outstanding policies, convert the assets of the or more domestic insurance companies, acting
insurance company to cash, or sell, assign or through their respective boards of directors, may
otherwise dispose of the same to the policyholders, negotiate to merge into a single corporation which
creditors and other parties for the purpose of settling shall be one of the constituent corporations, or
the liabilities or paying the debts of such company consolidate into a single corporation which shall be a
and he may, in the name of the company, institute new corporation to be formed by the consolidation. A
such actions as may be necessary in the appropriate common agreement of the proposed merger or
Court to collect and recover accounts and assets of consolidation shall be drawn up for submission to the
the insurance company, and to do such other acts as stockholders or members of the constituent
may be necessary to complete the liquidation as companies for adoption and approved in accordance
ordered by the Commissioner. with the provisions of the respective by-laws of the
The provisions of any law to the contrary constituent companies and all existing laws that may
notwithstanding, the actions of the Commissioner be pertinent.
under this Section shall be final and executory, and Sec. 253. Such agreement shall include, aside from
can be set aside by the Court upon petition by the the proposed merger or consolidation, provisions
company and only if there is convincing proof that the relative to the manner of transfer of assets to and
action is plainly arbitrary and made in bad faith. The assumption of liabilities by the absorbing or acquiring
Commissioner, through the Solicitor General, shall company from the absorbed or dissolved company or
then file the corresponding answer reciting the companies; the proposed articles of merger or
proceeding taken and praying the assistance of the consolidation and by-laws of the surviving or
Court in the liquidation of the company. No acquiring company; the corporate name to be
restraining order or injunction shall be issued by the adopted which should not be that of any other
Court enjoining the Commissioner from implementing existing company transacting similar business or one
his actions under this Section, unless there is so similar as to be calculated to mislead the public;
convincing proof that the action of the Commissioner the rights of the stockholders or members of the
is plainly arbitrary and made in bad faith and the absorbed or dissolved companies; date of effectivity
petitioner or plaintiff files with the Clerk or Judge of of the merger or consolidation; and such particulars
the Court in which the action is pending a bond as may be necessary to explain and make manifest
executed in favor of the Commissioner in an amount the objects and purposes of the absorbing or
to be fixed by the Court. The restraining order or acquiring company.
injunction shall be refused or, if granted, shall be
Sec. 254. Upon execution of such agreement to
dissolved upon filing by the Commissioner, if he so
merge or consolidate by and between or among the
desires, of a bond in an amount twice the amount of
boards of directors of the constituent companies,
the bond of the petitioner or plaintiff conditioned that
notice thereof shall be mailed immediately to their
it will pay the damages which the petition or plaintiff
policyholders and creditors. The company or
may suffer by the refusal or the dissolution of the
companies to be absorbed or dissolved shall
injunction. The provisions of Rule 58 of the New Rules
discharge all its accrued liabilities; otherwise, such
of Court insofar as they are applicable shall govern
liabilities shall, with the consent of its creditors, be
the issuance and dissolution of the restraining order
transferred to and assumed by the absorbing or
or injunction contemplated in this Section.
acquiring company, or such liabilities be reinsured by
All proceedings under this Title shall be given the latter. In the case of such policies as are subject
preference in the Courts. The Commissioner shall not to cancellation by the company or companies to be
be required to pay any fee to any public officer for absorbed or dissolved, same may be cancelled
filing, recording, or in any manner authenticating any pursuant to the terms thereof in lieu of such transfer,
paper or instrument relating to the proceedings. assumption, or reinsurance.
Sec. 255. Upon approval or adoption in the meetings Title 17
of the stockholders or members called for the purpose MUTUALIZATION OF STOCK LIFE INSURANCE
in each of the constituent companies of the COMPANIES
agreement to merge or consolidate, all stockholders Sec. 262. Any domestic stock life insurance company
or members dissenting or objecting to merger or doing business in the Philippines may convert itself
consolidation shall be paid the value of their shares into an incorporated mutual life insurer. To that end it
by the company concerned in accordance with the by- may provide and carry out a plan for the acquisition
laws thereof. of the outstanding shares of its capital stock for the
Sec. 256. Upon the approval or adoption of the benefit of its policyholders, or any class or classes of
agreement to merge or consolidate by the its policyholders, by complying with the requirements
stockholders or members of the constituent of this chapter.
companies, the corresponding articles of merger or of Sec. 263. Such plan shall include appropriate
consolidation shall be duly executed by the presidents proceedings for amending the insurer's articles of
and attested by the corporate secretaries and shall incorporation to give effect to the acquisition, by said
bear the corporate seals of the merging or insurer, for the benefit of its policyholders or any
consolidating companies setting class or classes thereof, of the outstanding shares of
forth:chanroblesvirtuallawlibrary its capital stock and the conversion of the insurer
(1) The plan of merger or the plan of consolidation; from a stock corporation into a non-stock corporation
(2) As to each corporation, the number of shares for the benefit of its members. The members of such
outstanding, or in case of mutual corporations, the non-stock corporation shall be the policyholders from
number of members; and time to time of the class or classes for whose benefit
(3) As to each corporation, the number of shares or the stock of the insurer was acquired, and the
members voted for and against such plan policyholders of such other class or classes as may be
respectively. Thereafter, a certified copy of such specified in such corporation's articles of incorporation
articles of merger or consolidation, together with a as they may be amended from time to time. Such
certificate of approval or adoption by the stockholders plan shall be:chanroblesvirtuallawlibrary
or members of such articles of merger or (1) Adopted by a vote of a majority of the directors;
consolidation, verified by affidavits of such officers (2) Approved by the vote of the holders of at least a
and under the seal of the constituent companies, shall majority of the outstanding shares at a special
be submitted to the Commissioner, together with meeting of shareholders called for that purpose, or by
such other papers or documents which the the written consent of such sharesholders;
Commissioner may require, for his consideration. (3) Submitted to the Commissioner and approved by
Sec. 257. The articles of merger or of consolidation, him in writing;
signed and verified as hereinabove required, shall be (4) Approved by a majority vote of all the
filed with the Securities and Exchange Commission for policyholders of the class or classes for whose benefit
its examination and approval. the stock is to be acquired voting at an election by
Sec. 258. Upon receipt from the Securities and the policyholders called for that purpose, subject to
Exchange Commission of the certificate of merger or the provisions of section two hundred sixty-five. The
of consolidation, the constituent companies shall terms "policyholder"or "policyholders" as used in this
surrender to the Commissioner their respective chapter shall be deemed to mean the person or
certificates of authority to transact insurance persons insured under an individual policy of life
business. The absorbing or surviving company in case insurance, or of health and accident insurance, or of
of merger, or the newly formed company in case of any combination of life, health and accident
consolidation, shall immediately file with the insurance. They shall also include the person or
commissioner the corresponding application for persons to whom any annuity or pure endowment is
issuance of a new certificate of authority to transact presently or prospectively payable by the terms of an
insurance business, together with a certified copy of individual annuity or pure endowment contract,
the certificate of merger or of consolidation, and of except where the policy or contract declares some
the certificate of increase of stocks, if there is any, other person to be the owner or holder thereof, in
issued by the Securities and Exchange Commission. which case such other person shall be deemed
Sec. 259. Nothing in this title shall be construed to policyholder. In any case where a policy or contract
enlarge the powers of the absorbing or surviving names two or more persons as joint insured, payees,
company in case of merger, or the newly formed owners or holders thereof, the persons so named
company in case of consolidation, except those shall be deemed collectively to be one policyholder for
conferred by the certificate of merger or of the purpose of this chapter. In any case where a
consolidation and the articles of merger of policy or contract shall have been assigned by
consolidation, or the amended articles of assignment absolute on its face to an assignee other
incorporation, as registered with the Securities and than the insurer, and such assignment shall have
Exchange Commission. been filed at the principal office of the insurer at least
Sec. 260. No director, officer, or stockholder of any thirty days prior to the date of any election or
such constituent companies shall receive any fee, meeting referred to in this chapter, then such
commission, compensation, or other valuable assignee shall be deemed at such election or meeting
consideration whatsoever, directly or indirectly, or in to be the policyholder. For the purpose of this chapter
any manner aiding, promoting or assisting in such the terms "policyholder" and "policyholders" include
merger or consolidation. the employer to whom, or a president, secretary or
other executive officer of any corporation or
Sec. 261. The merger of consolidation of companies
association to which a master group policy has been
under, this Code shall be subject to the provisions of
issued, but exclude the holders of certificates or
the Corporation Law, and, in those cases specified in
policies issued under or in connection with a master
Republic Act No. 5455, as amended, be further
group policy. Beneficiaries under unmatured contracts
subject to the provisions of said law.
shall not as such be deemed to be policyholders;
(5) Filed with the Commissioner after having been certificate made by them shall be prima
approved as provided in this section. facie evidence of facts stated therein. All necessary
Sec. 264. The Commissioner shall examine the plan expenses incurred in connection with such election
submitted to him under the provisions of sub- shall be paid by the insurer. For the purpose of this
paragraph three of section two hundred sixty-three. section, a quorum shall consist of five per centum of
He shall not approve such plan unless in his opinion the policyholders of such insurer entitled to vote at
the rights and interest of the insurer, its policyholders such election.
and shareholders are protected nor unless he is Sec. 266. In carrying out any such plan, the insurer
satisfied that the plan will be fair and equitable in its may acquire any shares of its own stock by gift,
operation. chanrobles virtual law library bequest or purchase. Any shares so acquired shall,
Sec. 265. The election prescribed by sub-paragraph unless as a result of such acquisition all of the shares
four of section two hundred sixty-three shall be called of the insurer shall have been acquired, be acquired
by the board of directors or the president, and every in trust for the policyholders of the class or classes for
policyholder of the class or classes for whose benefit whose benefit the plan provides that the stock of the
the stock is to be acquired, whose insurance shall insurer shall be acquired as hereinafter provided.
have been in force for at least one year prior to such Such shares shall be assigned and transferred on the
election shall have one vote, regardless of the books of such insurer and approved by the
number of policies or amount of insurance he holds, Commissioner. Such trustees shall hold such stock in
and regardless of whether such policies are policies of trust until all of the outstanding shares of capital
life insurance or policies of health and accident stock of such insurer have been acquired, but for not
insurance or annuity contracts. Notice of such election longer than thirty years with such extensions of not
shall be given to policyholders entitled to vote by mail more than five years each as may be granted by the
from the principal office of such insurer at least thirty Commissioner. Such extensions may be granted by
days prior to the date set for such election, in a the Commissioner if the plan so provides and if in his
sealed envelope, postage prepaid, addressed to each opinion the plan of acquisition of all of such stock can
such policyholder at his last known address. be completed within a reasonable period. Such
Voting shall be by one of the following trustees shall vote such stock at all corporate
methods:chanroblesvirtuallawlibrary meetings at which stockholders have the right to
vote. When all the outstanding shares of capital stock
(1) At a meeting of such policyholders, held pursuant
of such insurer have been acquired, all said shares
to such notice, by ballot in person or by proxy.
shall be cancelled, the certificate of amendment of
(2) If not by the method described in the preceding the insurer's articles of incorporation giving effect
sub-paragraph, then by mail pursuant to a procedure thereto shall be filed in accordance with the
and on forms to be prescribed by such plan. provisions of the Corporation Law, and the insurer
Such election shall be conducted under the direction shall become a non-stock corporation for the profit of
and supervision of three impartial and disinterested its members and such trust shall thereupon
inspectors appointed by the insurer and approved by terminate. Thereafter such corporation shall be
the Commissioner. In case any person appointed as conducted for the mutual benefit, ratably, of its
inspector fails to appear at such meeting or fails or policyholders of the class or classes for whose benefit
refuses to act at such election, the vacancy, if the stock was acquired and shall have power to issue
occurring in advance of the convening of the meeting non-assessable policies on a reserve basis subject to
or in advance of the opening of the mail vote, may be all provisions of law applicable to incorporated life
filled in the manner prescribed for the appointment of insurers issuing nonassessable policies on a reserve
inspectors and, if occurring at the meeting or during basis. Policies so issued may be upon the basis of full
the canvass of the mail vote, may be filled by the or partial participation therein as agreed between the
person acting as chairman of said meeting or insurer and the insured.
designated for that purpose in such plan. The Upon the termination of any such voting trust, either
decision, act or certificate of a majority of the in accordance with its terms or as hereinabove
inspectors shall be effective in all respects as the provided, such plan of mutualization shall terminate,
decision, act or certificate of all. The inspectors of unless theretofore completed. Upon such termination,
election shall determine the number of policyholders, unless the plan of mutualization provides for the
the voting power of each, the policyholders disposition of the shares acquired by the insurer
represented at the meeting or voting by mail, the under such plan or for the disposition of the proceeds
existence of a quorum and the authencity, validity thereof, the shares held by such trustees shall be
and effect of proxies. They shall receives votes, hear disposed of in accordance with an order of the court
and determine all challenges and questions in any of competent jurisdiction in the judicial district in
way arising in connection with the right to vote, count which is located the principal office of such insurer,
and tabulate all votes, determine the result, and do made upon a verified petition of the Commissioner.
such other acts as are proper to conduct the vote
Sec. 267. Any such plan of mutualization may provide
with fairness to all policyholders. The inspectors of
for the creation of a voting trust under a trust
election shall, before commencing performance of
agreement for the holding and voting by three or
their duties, subscribe to and file with the insurer and
more trustees of any portion or all of the shares of
with the Commissioner on oath that they, and each of
the insurer not required upon the adoption of such
them, will perform their duties impartially, in good
plan. The voting trustees shall be named in
faith, to the best of their ability and as expeditiously
accordance with such plan or, if no provision is made
as in practicable. On the request of the insurer, the
therein for the naming of such trustees, then by the
Commissioner, a policyholder or his proxy, the
insurer. The voting trust agreement and voting
inspectors shall make a report in writing of any
trustees shall be subject to the approval of the
challenge or question or matter determined by them
Commissioner. Any or all of the trustees under such
and execute a certificate of any fact found by them.
voting trust agreement may be the same person or
They shall also certify the result of such vote to the
persons as any or all of the trustees referred to in
insurer and to the Commissioner. Any report or
section two hundred sixty-six. Such voting trust
agreement shall provide that in the event of for acceptance thereof shall within fifteen days after
acquisition by the insurer of any of the shares of the expiration of such offer apply to the Secretary of
stock held thereunder in accordance with the Finance for determination of the fair value of his
provisions of the plan, such shares so acquired shares as of the date of making such offer. The
together with the voting rights thereof shall be Secretary of Finance may himself, after due notice
transferred by the trustees named under the and hearing, determine upon the evidence received
provisions of this section to the trustees named under the fair value of the shares as of the date of making
the provisions of section two hundred sixty-six. Any such offer, or appoint three impartial and
voting trust agreement created pursuant to the disinterested persons to appraise the fair value of
provisions of this section may be made irrevocable for such shares with such direction as he shall deem
not longer than thirty years and thereafter until the proper and necessary to expedite the proceedings.
termination of the trust provided for in section two Upon completion of the appraisal proceedings, the
hundred sixty-six. The trust created pursuant to the appraisers shall file with the Secretary of Finance their
provisions of this section shall terminate in any event report in writing stating the fair value of such shares
upon termination of the trust provided for in section as of the date of the making of such offer and setting
two hundred sixty-six. Upon the termination of the forth their findings in support of such statement. The
trust created pursuant to the provisions of this appraisers shall furnish each party to the proceedings
section, any shares held in such trust shall revert to a copy of their appraisal report, and within ten days
the persons entitled thereto by law. after receipt thereof any such party may signify his
Sec. 268. Every payment for the acquisition of any objection, if any, to the report or move for the
shares of the capital stock of such insurer, the approval thereof. Upon the expiration of the period of
purchase price of which is not fixed by such plan, ten days referred to above, the report shall be set for
shall be subject to the prior approval of the hearing, after which the Secretary of Finance shall
Commissioner. Neither such plan, nor any such issue an order adopting, modifying or rejecting the
payment, may be approved by the Commissioner report in whole or in part or he may receive further
unless he finds that the rights and interests of the evidence or may recommit it with instructions.
insurer, its policyholders, and shareholders are Whenever the Secretary of Finance shall determine in
protected. any manner, as aforesaid, the fair value of such
Sec. 269. The trustees referred to in section two shares, he may also determine the terms of payment
hundred sixty-six shall file with such insurer and with thereof by the insurer. The expenses incidental to the
the Commissioner a verified acceptance of their proceedings including charges of the appraisers, if
appointments and verified declarations that they will any, shall be paid equally by the insurer and the
faithfully discharge their duties as such trustees. All shareholder. chanrobles virtual law library
dividends and other sums received by said trustees The findings of the Secretary of Finance on all
on the shares held by them, after paying the questions of fact raised at the hearing of the
necessary expenses of executing their trust, shall be application for determination of the fair value of such
immediately repaid to such insurer for the benefit of shares shall be conclusive upon all parties to the
all who are, or may become, policyholders of such proceedings. The order of the Secretary of Finance
insurance of the class or classes for whose benefit the determining the fair value of the shares and the terms
stock of such insurer was acquired and entitled to of payment thereof shall have the force and effect of
participate in the profits thereof and shall be added to a judgment which shall be appealable on any
and become part of the assets of such insurer. question of law. Such order shall become final and
Sec. 269-A. If, at any time within the period provided executory fifteen days after receipt thereof by the
in the plan for the acquisition of the outstanding parties to the proceedings.
shares of stock of the insurer, ninety percent thereof Upon any such order becoming final and from which
has already been acquired and transferred to the no appeal is pending, or when the time to appeal
trustees under the plan, the insurer by a vote of a therefrom has expired, each shareholder party to the
majority of the directors may determine to make an proceedings shall transfer his shares to the insurer
offer, with the permission of the Commissioner and and surrender to the said insurer the certificates
subject to such requirement as he may specify, to representing such shares and the insurer shall make
acquire by purchase all of the shares not theretofore payment therefor as provided in such order. Any
acquired under the plan, at a specified price which shares so acquired by the insurer shall be assigned
the insurer considers to be their fair value as of the and transferred to the trustees and held by them as
date of making such offer. shares acquired pursuant to the plan.
If the offer to acquire is permitted by the Any shareholder who does not apply to the Secretary
Commissioner, the insurer shall make a written offer of Finance in the manner and within the time
by registered mail to each shareholder whose shares hereinbefore prescribed shall be deemed to have
have not theretofore been acquired under the plan or accepted the offer referred to above, effective,
otherwise, offering to acquire all his shares at such however, upon the expiration of the time hereinabove
price if accepted in writing within thirty days after the prescribed for making such application, and such
mailing of such offer. Any shareholder accepting such shareholder's time for accepting such offer shall, for
offer, within the time therefor shall, within sixty days that purpose only, be deemed to have been extended
after his acceptance, transfer to the insurer the accordingly.
certificates representing such shares and, upon doing Any offer to acquire shares made pursuant to this
so, shall be paid by the insurer the amount of such section shall, except as otherwise provided herein, be
offer for his shares. Any share so acquired shall be irrevocable until all proceedings upon such offer have
assigned and transferred to the trustees under the been completed or all shares have otherwise been
plan and held by them as shares acquired pursuant to earlier acquired by the insurer.
the plan. Any shareholder who has expressly or impliedly
Each shareholder who does not accept such offer to accepted the plan or the offer to acquire his shares
acquire his shares within the time stated in such offer not theretofore acquired under the plan, and any
shareholder who has rejected such plan or such offer once in each of four successive weeks in a newspaper
and has applied, as aforesaid, to the Secretary of of general circulation in the place in which the
Finance for a determination of the fair value of his principal office of such insurer is located, and if so
shares subsequent to which an agreement has been published no other notice of such meeting shall be
reached or a final order issued fixing such fair value required.
but who fails to surrender his certificates for (4) The presence in person or by proxy of five per
cancellation upon payment of the amount to which he centum of the members entitled to vote at any
is entitled, may be compelled to do so by an order of meeting shall constitute a quorum for the transaction
the Secretary of Finance for that purpose and such of business, unless otherwise provided by the by-
order may provide that upon failure of such laws.
shareholder to surrender such certificates for (5) Each such member shall have one vote at any
cancellation such order shall stand in lieu of such meeting of members regardless of the number of
surrender and cancellation. (As amended by policies or the amount of insurance that such member
Presidential Decree No. 1280). holds and regardless of whether such policies are
Sec. 270. Such insurer, after mutualization, shall be a policies of life insurance, or of health and accident
continuation of the original insurer, and such insurance, or both. Any member entitled to vote shall
mutualization shall not affect such insurer's certificate have the right to do so either in person or by an
of authority nor existing suits, rights or contracts agent or agents authorized by a written proxy
except as provided in said plan for the acquisition of executed by such person or his duly authorized agent
the outstanding shares of the capital stock of such and filed with the secretary of such insurer.
insurer, approved as provided in this chapter. Such (6) The directors of the insurer in office at the time
insurer, after mutualization, shall exercise all the the insurer is mutualized as provided in this chapter
rights and powers and shall perform all the duties shall continue in office until the first annual meeting
conferred or imposed by law upon insurers writing the of members. At the first annual meeting of members
classes of insurance written by it, and to protect and at each annual meeting thereafter directors shall
rights and contracts existing prior to mutualization, be elected by the members for the term or terms
subject to the effect of said plan. The board of authorized by this chapter.
directors of such insurer, prior to mutualization, may
(7) The articles of incorporation or the bay-laws may
adopt amendments to its by-laws to take effect upon
provide that the directors may be divided into two or
mutualization.
more classes whose terms of office shall expire at
Sec. 271. (1) An annual meeting of members shall be different times, but no terms shall continue longer
held at ten o'clock in the morning of the fourth than six years. In the absence of such provisions,
Tuesday of March of each year at the principal office each director, except members of the board of
of the insurer, unless a different time or place be directors at the time the insurer is mutualized, shall
provided in the by-laws. be elected for a term of one year. All directors shall
(2) Special meetings of the members, for any purpose hold office for a term for which they are elected and
or purposes whatsoever, may be called at any time by until their successors are elected and qualified. A
the president, or by the board of directors, or by one director may, but need not be a member or
or more members holding not less than one-fifth of policyholder of the insurer of which he is acting as
the voting power of such insurer, or by such other director. Vacancies in the board of directors may be
officers or persons as the by-laws authorize. filled by a majority of the remaining directors, though
(3) Notice of all meetings of members whether annual less than a quorum, and each director so elected shall
or special shall be given in writing to the members hold office until the next annual meeting.
entitled to vote by the secretary, or an assistant (8) All insurers mutualized under the provisions of this
secretary, or other person charged with that duty, or chapter shall be subject to all other applicable
if there be no such officer, or in case of his neglect or provisions of this Code and of the Corporation Law.
refusal, by any director or member. At the option of Sec. 272. The provisions of Commonwealth Act No.
the insurer such notice may be imprinted on premium 83, otherwise known as the Securities Act, as
notices of receipts or on both. amended, shall not apply to any of the
A notice may be given by such insurer to any member following:chanroblesvirtuallawlibrary
either personally, or by mail, or other means of (a) Shares of the capital stock of such insurer
written communication, charges prepaid, addressed acquired as provided in section two hundred sixty-six
to such member at his address appearing on the and assigned and transferred to the trustees as is
books of the insurer, or given by him to the insurer provided in said section, and the assignment and
for the purpose of notice. If a member gives no transfer of said shares as so provided;
address, notice shall be deemed to have been given
(b) Any certificate or other instrument issued to a
him if sent by mail or other means of written
policyholder of such mutualized insurer conferring or
communication addressed to the place where the
evidencing membership in such mutualized insurer or
principal office of the insurer is situated, or if
conferring or evidencing such member's right to
published at least once in some newspaper of general
participate in the profits or share in the assets of such
circulation in the place in which said office is located.
mutualized insurer by the virtue of his membership
Notice of any meeting of members shall be sent to therein, and the issuance of such certificate or other
each member entitled thereto not less than seven instrument;
days before such meeting, unless the by-laws provide
(c) The plan for the acquisition of the outstanding
otherwise.
shares of the capital stock of such insurer authorized
Notice of any meeting of members shall specify the by the provisions of this chapter, the submission of
place, the day and the hour of the meeting and the said plan to the Commissioner and to the
general nature of the business to be transacted. policyholders of such insurer as provided in this
Notice of an annual meeting to be held at the time chapter, and the approval and carrying out of said
and place specified in sub-paragraph one of this plan or any part thereof in accordance with the
section shall be sufficiently given if published at least provisions of this chapter.
 Title 18 payment by such person, partnership, association or
WITHDRAWAL OF FOREIGN INSURANCE COMPANIES corporation of the fees hereinafter prescribed. As
Sec. 273. A foreign insurance company doing used in this Code, the term "professional
business in the Philippines, upon payment of the fee reinsurer" shall mean any person, partnership,
hereinafter prescribed and surrender to the association or corporation that transacts solely and
Commissioner of its certificate of authority, may apply exclusively reinsurance business in the Philippines.
to withdraw from the Philippines. Such application The Commissioner may refuse to issue a certificate of
shall be duly executed in writing, accompanied by authority to any such person, partnership, association
evidence of due authority for such execution, properly or corporation if, in his judgment, such refusal will
acknowledged. best promote public interest. No such certificate of
Sec. 274. The Commissioner shall publish the authority shall be granted to any such person,
application for withdrawal daily for a period of one partnership, association or corporation unless and
week in two newspapers of general circulation in the until the Commissioner shall have satisfied himself by
City of Manila, one in English and the other in Pilipino. such examination as he may make and such evidence
The expenses of such publication shall be paid by the as he may require that such person, partnership,
insurance company filing such application. association or corporation is qualified by the laws of
Sec. 275. Every foreign insurance company desiring the Philippines to transact business therein as a
to withdraw from the Philippines shall, prior to such professional reinsurer.
withdrawal, discharge its liabilities to policyholders Before issuing such certificate of authority of the
and creditors in this country. In case of its policies Commissioner must be satisfied that the name of the
insuring residents of the Philippines, it shall cause the applicant is not that of any other known company
primary liabilities under such policies to be reinsured transacting insurance or reinsurance business in the
and assumed by another insurance company Philippines, or a name so similar as to be calculated
authorized to transact business in the Philippines. In to mislead the public.
the case of such policies as are subject to cancellation Such certificate of authority shall expire on the last
by the withdrawing company, it may cancel such day of June of each year and shall be renewed
policies pursuant to the terms thereof in lieu of such annually if such person, partnership, association, or
reinsurance and assumption of liabilities. corporation is continuing to comply with provisions of
Sec. 276. The Commissioner shall make an this Code, or the circulars, instructions, rulings, or
examination of the books and records of the decisions of the Commissioner and such other
withdrawing company, and if, upon such examination, pertinent law, rules and regulations.
the Commissioner finds that the insurer has no Every such person, partnership, association, or
outstanding liabilities to residents of the Philippines, it corporation receiving such certificate of authority shall
shall cancel the withdrawing company's certificate of be subject to the provisions of this Code and other
authority, if unexpired, and shall permit the insurer to related laws, and to the jurisdiction and supervision of
withdraw. The cost and expenses of all such the Commissioner.
examination shall be paid as prescribed in section four Sec. 281. Any person, partnership, association, or
hundred seventeen. corporation authorized to transact solely reinsurance
Sec. 277. Upon the failure of such withdrawing business must have a paid-up capital stock of at least
insurance company or its agents in the Philippines to ten million pesos, twenty-five per centum of which
pay the expenses of such publication within thirty must be invested in securities satisfactory to the
days after the presentation of the bill therefor, the Commissioner, consisting of bonds or other evidences
Commissioner shall collect such fee from the deposit of debt of the Government of the Philippines or its
furnished in accordance with the provisions of section political subdivisions or instrumentalities, or of
one hundred ninety-one. government-owned or controlled corporations and
Sec. 278. A foreign life insurance company that entities, including the Central Bank of the Philippines,
withdraws from the Philippines shall be considered and deposited with the Commissioner, and the
a "servicing insurance company" if its business remaining seventy-five per centum in such other
transactions are confined to accepting periodic securities as may be allowed and permitted by the
premium payments from, or granting policy loans and Commissioner, which securities shall at all times be
paying cash surrender values of outstanding policies maintained free from any lien or
to, or reviving lapsed policies of, Philippine encumbrance: Provided, That reinsurers already doing
policyholders, and such other related services. business as such in the Philippines shall comply with
Sec. 279. No company shall act as a servicing the requirement of this section by increasing their
insurance company until after it shall have obtained a respective capital as herein provided not later than
special certification of authority to act as such from December thirty-one, nineteen hundred
the Commissioner upon application therefor and eighty: Provided, Further, That the provisions of this
payment by the company of the fees hereinafter chapter applicable to insurance companies shall so far
prescribed. Such certificate shall expire on the last as practicable be likewise applicable to professional
day of June of each year and shall be renewed reinsurers. (As amended by Presidential Decree No.
annually, while the company continues to service its 1455).
policyholders, and to comply with all the applicable Title 20
provisions of law and regulations. HOLDING COMPANIES
Title 19 Sec. 282. As used in this title, the following terms
PROFESSIONAL REINSURERS shall have the respective meanings hereinafter set
Sec. 280. Except as otherwise provided in this Code, forth unless the context shall otherwise
no person, partnership, association or corporation require:chanroblesvirtuallawlibrary
shall transact any business in the Philippines as a (a) "Person" means an individual, partnership, firm,
professional reinsurer until it shall have obtained a association, corporation, trust, any similar entity or
certificate of authority for that purpose from the any combination of the foregoing acting in concert;
Commissioner upon the application therefor and
(b) "Control", including the Sec. 286. (1) Every person who on the date this Code
terms "controlling", "controlled by" and "under takes effect is a controlled insurer and every person
common control with", means the possession directly who thereafter becomes a controlled insurer, shall,
or indirectly of the power to direct or cause the within sixty days thereafter, or within thirty days after
direction of the management and policies of a person, becoming a controlled insurer, whichever is later,
whether through the ownership of voting securities by register with the Commissioner. Such registration
a contract other than a commercial contract for goods shall be amended within thirty days following any
or non-management services or otherwise. Subject to change in the identity of its holding company. The
section two hundred eight-four, control shall be Commissioner may grant one or more reasonable
presumed to exist if any person directly or indirectly extensions of the time to register.
owns, controls or holds with the power to vote forty (2) Every registrant shall furnish the Commissioner
per centum or more of the voting securities of any with the following information concerning its holding
other person: Provided, That no person shall be company: (a) a copy of its charter or articles of
deemed to control another person solely by reason of incorporation and its by-laws, (b) the identities of its
his being an officer or director of such other person; principal shareholders, officers, directors and
(c) "Holding company" means any person who controlled persons, and (c) information as to its
directly or indirectly controls any authorized insurer; capital structure and financial condition, and a
(d) "Controlled insurer" means an authorized insurer description of its principal business activities.
controlled directly or indirectly by a holding company; Sec. 287. Every controlled insurer shall file with the
(e) "Controlled person" means any person, other than Commissioner such reports or material as he may
a controlled insurer, who is controlled directly or direct for the purpose of disclosing information
indirectly by a holding company; concerning the operations of persons within the
(f) "Holding company system" means a holding holding company system which may materially affect
company together with its controlled insurers and the operations, management or financial condition of
controlled persons. the insurer.
Sec. 283. Notwithstanding paragraph (b) of section Sec. 288. Every holding company and every controlled
two hundred eighty-two, the Commissioner may person within a holding company system shall be
determine after notice and opportunity to be heard, subject to examination by order of the Commissioner
that a person exercises directly or indirectly either if he has cause to believe that the operations of such
alone or pursuant to an agreement with one or more persons may materially affect the operations,
other persons such a controlling influence over the management or financial condition of any controlled
management or policies of an authorized insurer as to insurer with the system and that he is unable to
make it necessary or appropriate in the public interest obtain relevant information from such controlled
or for the protection of policyholders or stockholders insurer. The grounds relied upon by the
of the insurer that the person be deemed to control Commissioner for such examination shall be stated in
the insurer. his order, which order shall be subject to judicial
review only at the instance of the person sought to be
Sec. 284. The Commissioner may determine upon
examined. Such examination shall be confined to
application that any person, either alone or pursuant
matters specified in the order. The cost of such
to agreement with one or more other persons, does
examination shall be assessed against the person
not or will not upon the taking of some proposed
examined and no portion thereof shall thereafter be
action control another person. The filing of an
reimbursed to it directly or indirectly by the controlled
application hereunder in good faith by any person
insurer.
shall relieve the applicant from any obligation or
liability imposed by this title with respect to the Sec. 289. The Commissioner shall keep the contents
subject of the application, except as contained in of each report made pursuant to this title and any
section two hundred ninety-four, until the information obtained by him in connection therewith
Commissioner has acted upon the application. Within confidential and shall not make the same public
thirty days or such further period as he may without the prior written consent of the controlled
prescribe, the Commissioner may prospectively insurer to which it pertains unless the Commissioner
revoke or modify his determination, after notice and after notice and an opportunity to be heard shall
opportunity to be heard, whenever in his judgment determine that the interests of policyholders,
revocation or modification is consistent with his title. stockholders or the public will be served by the
publication thereof. In any action or proceeding by
Sec. 285. Notwithstanding any other provisions of this
the Commissioner against the person examined or
title, the following shall not be deemed holding
any other person within the same holding company
companies:chanroblesvirtuallawlibrary
system a report of such examination published by him
(a) authorized insurers or reinsurers or their shall be admissible as evidence of the facts stated
subsidiaries; therein.
(b) the Government of the Philippines, or any political Sec. 290. Transactions within a holding company
subdivision, agency or instrumentality thereof, or any system to which a controlled insurer is a party shall
corporation which is wholly owned directly or be subject to the following:chanroblesvirtuallawlibrary
indirectly by one or more of the foregoing.
(a) The terms shall be fair and equitable;
The Commissioner may conditionally or
(b) charges or fees for services performed shall be
unconditionally exempt any specified person or class
reasonable;
of persons from any of the obligations or liabilities
imposed under this title, if and to the extent he finds (c) expenses incurred and payments received shall be
the exemption necessary to appropriate in the public allocated to the insurer on an equitable basis in
interest or not adverse to the interests of conformity with customary insurance accounting
policyholders or stockholders and consistent with the practices consistently applied.
purposes of this title. The books, accounts and records of each party to all
such transactions shall be maintained as to clearly
and accurately disclose the nature and details of the
transactions including such accounting information as (e) the fairness of any exchange of stock, assets,
is necessary to support the reasonableness of the cash or other consideration for the stock or assets to
charges or fees to the respective parties. be received;
Sec. 291. The prior written approval of the (f) whether the effect of the acquisition may be
Commissioner shall be required for the following substantially to lessen competition in any line of
transactions between a controlled insurer and any commerce in insurance or to tend to create a
person in its holding company system: sales, monopoly therein; and
purchases, exchanges, loans or extensions of credit, (g) whether the acquisition is likely to be hazardous
or investments, involving five per centum or more of or prejudicial to the insurer's policyholders or
the insurer's admitted assets as of the thirty-first day stockholders.
of December next preceding. (3) The following conditions affecting any controlled
Sec. 292. The following transactions between a insurer, regardless of when such control has been
controlled insurer and any person in its holding acquired, are violations of this title: (a) the controlling
company system may not be entered into unless the person or any of its officers or directors have
insurer has notified the Commissioner in writing of its demonstrated untrustworthiness; and (b) the effect of
intention to enter into any such transaction at least retention of control may be substantially to lessen
thirty days prior thereto, or such shorter period as he competition in any line of commerce in insurance in
may permit, and he has not disapproved it within this country or to tend to create a monopoly therein.
such period:chanroblesvirtuallawlibrary If, after notice and an opportunity to be heard, the
(a) sales, purchases, exchanges, loans or extensions Commissioner determines that any of the foregoing
of credit, or investments, involving more than one- violations exists, he shall reduce his findings to
half of one per centum but less than five per centum writing and shall issue an order based thereon and
of the insurer's admitted assets as of the thirty-first cause the same to be served upon the insurer and
day of December next preceding; upon all persons affected thereby directing any
(b) reinsurance treaties or agreements; person found to be in violation thereof to take
(c) rendering of services on a regular or systematic appropriate action to cure such violation. Upon the
basis; or failure of any such person to comply with such order,
section two hundred ninety-eight shall become
(d) any material transaction, specified by regulation,
applicable.
which the Commissioner determines may adversely
affect the interest of the insurer's policyholders or (4) The Commissioner may require the submission of
stockholders or of the public. such information as he deems necessary to determine
whether any acquisition or retention of control
Nothing herein contained shall be deemed to
complies with this title and may require, as a
authorize or permit any transaction which, in the case
condition of approval of such acquisition or retention
of a non-controlled insurer, would be otherwise
of control, that all or any portion of such information
contrary to law.
be disclosed to the insurer's stockholders.
Sec. 293. The Commissioner, in reviewing
(5) Unless subject to registration under section two
transactions pursuant to sections two hundred ninety-
hundred eighty-six or unless acquisition of its control
one and two hundred ninety-two, shall consider
is subject to paragraphs one and two hereof, every
whether the transactions comply with the standard
authorized insurer shall, on or before the first day of
set forth in section two hundred ninety and whether
July, nineteen hundred seventy-five, or within thirty
they may adversely affect the interests of
days after any event requiring notice hereunder,
policyholders. This section shall not apply to
whichever is later, notify the Commissioner in writing
transactions subject to other sections of this Code
of the identity of any person whom the insurer then
which impose notice or approval requirements greater
knows or has reason to believe controls or has taken
than those prescribed by this title.
any action, other than preliminary negotiations or
Sec. 294. (1) No person, other than an authorized discussion, to acquire control of the insurer.
insurer, shall acquire control of any domestic insurer,
Sec. 295. (1) Notwithstanding the control of an
whether by purchase of its securities or otherwise,
authorized insurer by any person, the officers and
except (a) after twenty days written notice to its
directors of the insurer shall not thereby be relieved
insurer or such shorter period as the Commissioner
of any obligation or liability to which they would
may permit, of its intention to acquire control, and (b)
otherwise be subject by law, and the insurer shall be
with the prior written approval of the Commissioner.
managed so as to assure its separate operating
(2) The Commissioner shall disapprove the acquisition identity consistent with this title.
of control of a domestic insurer if he determines, after
(2) Nothing herein shall preclude an authorized
notice and an opportunity to be heard, that such
insurer from having or sharing a common
action is reasonably necessary to protect the interest
management or cooperative or joint use of personnel,
of the people of this country. The following shall be
property or services with one or more other persons
the only factors to be considered by him in reaching
under arrangements meeting the standards of section
the foregoing
two hundred ninety.
determination:chanroblesvirtuallawlibrary
Sec. 296. To the extent that any information or
(a) the financial condition of the acquiring person or
material is set forth in forms or other matter on file
and the insurer;
with any government agency or in a registration form
(b) the trustworthiness of the acquiring person or any filed with the Commissioner by another person within
of its officers or directors; the same holding company system, the controlled
(c) a plan for the proper and effective conduct of the insurer may comply with the registration or reporting
insurer's operations; requirements of this title by referring in its
(d) the source of the funds or assets for the registration form or report to such other filed matter
acquisition; and attaching a copy thereof certified by the insurer
as a true and complete copy, to such registration
form or report or, if such other filed matter is on file
with the Commissioner, incorporating such matter by shall thereby become liable to all the duties,
reference. requirements, liabilities and penalties to which an
Sec. 297. No holding company or controlled person insurance agent is subject.
shall directly or indirectly or through another person Sec. 301. Any person who for any compensation,
do or cause to be done for or in behalf of the commission or other thing of value acts or aids in any
controlled insurer any act intended to affect the manner in soliciting, negotiating or procuring the
insurance operations of the insurer which, if done by making of any insurance contract or in placing risk or
the insurer, would violate any provision of this Code. taking out insurance, on behalf of an insured other
Sec. 298. In addition to any other penalty provided by than himself, shall be an insurance broker within the
law, the Commissioner may, upon the willful failure of intent of this Code, and shall thereby become liable to
any person within a holding company system to all the duties, requirements, liabilities and penalties to
comply with this title or any regulation or order which an insurance broker is subject.
promulgated hereunder:chanroblesvirtuallawlibrary Sec. 302. Every applicant for an insurance broker's
(a) proceed under title fourteen or title fifteen, license shall file with the application and shall
Chapter III, of this Code with respect to insurer within thereafter maintain in force while so licensed, a bond
the holding company system; or in favor of the people of the Republic of the
(b) revoke or refuse to renew the authority to do Philippines executed by a company authorized to
business in this country of an insurer within the become surety upon official recognizances,
holding company system or refuse to issue such stipulations, bonds and undertakings. The bond shall
authority to any other insurer in the system; or be in such amount as may be fixed by the
Commissioner, but in no case less than one hundred
(c) direct that, in addition to any other penalty
thousand pesos, and shall be conditioned upon full
provided by law, such person forfeit to the people of
accounting and due payment to the person entitled
this country a sum not exceeding five hundred pesos
thereto of funds coming into the broker's possession
for a first violation and two thousand five hundred
through insurance transactions under license. The
pesos for any subsequent violation. An additional sum
bond shall remain in force until released by the
not exceeding two thousand five hundred pesos shall
Commissioner, or until cancelled by the surety.
be imposed for each month during which any such
Without prejudice to any liability previously incurred
violation shall continue.
thereunder, the surety may cancel the bond on thirty
Chapter IV days advance written notice to both the broker and
SALES AGENCIES AND TECHNICAL SERVICES the Commissioner.
Title 1 Upon approval of the application, the applicant must
INSURANCE AGENTS AND INSURANCE BROKERS also file two errors and omissions (professional
Sec. 299. No insurance company doing business in liability or professional indemnity) policies issued
the Philippines, nor any agent thereof, shall pay any separately by two insurance companies authorized to
commission or other compensation to any person for do business in the Philippines, satisfactory to the
services in obtaining insurance, unless such person Commissioner to indemnify the applicant against any
shall have first procured from the Commissioner a claim or claims for breach of duty as insurance broker
license to act as an insurance agent of such company which may be made against him by reason of any
or as an insurance broker as hereinafter provided. negligent act, error or omission, whenever or
No person shall act as an insurance agent or as an wherever committed or alleged to have been
insurance broker in the solicitation or procurement of committed, on the part of the applicant or any person
applications for insurance, or receive for services in who has been, is now, or may hereafter during the
obtaining insurance, any commission or other subsistence of the policies be employed by the said
compensation from any insurance company doing applicant in his capacity as insurance broker, provided
business in the Philippines, or any agent thereof, that the filing of any claim or claims under one of
without first procuring a license to act from the such policies shall preclude the filing of the said claim
Commissioner, which must be renewed annually on or claims under the other policy. The said policies
the first day of January, or within six months shall be in such amounts as may be prescribed by the
thereafter. Such license shall be issued by the Insurance Commissioner, depending upon the size or
Commissioner only upon the written application of the amount of the broking business of the applicant, but
person desiring it, such application if for a license to in no case shall the amount of each of such policies
act as insurance agent, being approved and be less than five hundred thousand pesos. (As
countersigned by the company such person desires to amended by Presidential Decree No. 1455).
represent, and shall be upon a form prescribed by the Sec. 303. The Commissioner shall, in order to
Commissioner giving such information as he may determine the competence of every applicant to have
require, and upon payment of the corresponding fee the kind of license applied for, require such applicant
hereinafter prescribed. The Commissioner shall satisfy to submit to a written examination and to pass the
himself as to competence and trustworthiness of the same to the satisfaction of the Commissioner. Such
applicant and shall have the right to refuse to issue or examination shall be held at such times and places as
renew and to suspend or revoke any such license in the Commissioner shall from time to time determine.
his discretion. No such license shall be valid after the Sec. 304. An applicant for the written examination
thirtieth day of June of the year following its issuance mentioned in the preceding section must be of good
unless it is renewed. (As amended by Presidential moral character and must not have been convicted of
Decree No. 1455). any crime involving moral turpitude. He must
Sec. 300. Any person who for compensation solicits or satisfactorily show to the Commissioner that he has
obtains insurance on behalf of any insurance been trained in the kind of insurance contemplated in
company or transmits for a person other than himself the license applied for.
an application for a policy or contract of insurance to Such examination may be waived if it is shown to the
or from such company or offers or assumes to act in satisfaction of the Commissioner that the applicant
the negotiating of such insurance shall be an
insurance agent within the intent of this section and
has undergone extensive education and/or training in empowered by a written power of attorney duly
insurance. executed by such insurance company, and registered
Sec. 305. An application for the issuance or renewal with the Commissioner to receive notices, summons
of a license to act as an insurance agent or insurance and legal processes for and in behalf of the insurance
broker may be refused, or such license, if already company concerned in connection with actions or
issued or renewed, shall be suspended or revoked if other legal proceedings against said insurance
the Commissioner finds that the applicant for, or company. It shall be the duty of said general agent to
holder of, such license:chanroblesvirtuallawlibrary notify the Commissioner of his post office address in
(a) has willfully violated any provision of this Code; or the Philippines, or any change thereof. Notices,
summons, or processes of any kind sent by registered
(b) has intentionally made a material misstatement in
mail to the last registered address of such general
the application to qualify for such license; or
agent of the company concerned or to the
(c) has obtained or attempted to obtain a license by Commissioner shall be sufficient service and deemed
fraud or misrepresentation; or as if served on the insurance company itself.
(d) has been guilty of fraudulent or dishonest Sec. 309. Except as otherwise provided by law or
practices; or treaty, it shall be unlawful for any person,
(e) has misappropriated or converted to his own use partnership, association or corporation in the
or illegally withheld moneys required to be held in a Philippines, for himself or itself, or for some other
fiduciary capacity; person, partnership, association or corporation, either
(f) has not demonstrated trustworthiness and to procure, receive or forward applications of
competence to transact business as an insurance insurance in, or to issue or to deliver or accept
agent or insurance broker in such manner as to policies or contracts of insurance of or for, any
safeguard the public; or insurance company or companies not authorized to
(g) has materially misrepresented the terms and transact business in the Philippines, covering risks, life
conditions of policies or contracts of insurance which or nonlife, situated in the Philippines; and any such
he seeks to sell or has sold; or person, partnership, association or corporation
violating the provisions of this section shall be
(h) has failed to pass the written examination
deemed guilty of a penal offense, and upon conviction
prescribed, if not otherwise exempt from taking the
thereof, shall for each such offense be punished by a
same.
fine of ten thousand pesos, or imprisonment of six
In addition to the foregoing causes, no license to act months, or both at the discretion of the
as insurance agent or insurance broker shall be court: Provided, That the provisions of this section
renewed if the holder thereof has not been actively shall not apply to reinsurance.
engaged as such agent or broker in accordance with
Title 2
such rules as the Commissioner may prescribe. (As
REINSURANCE BROKERS
amended by Presidential Decree No. 1814).
Sec. 310. Except as provided in the next succeeding
Sec. 306. The premium, or any portion thereof, which
title, no person shall act as reinsurance broker in the
an insurance agent or insurance broker collects from
Philippines unless he is authorized as such by the
an insured and which is to be paid to an insurance
Commissioner.
company because of the assumption of liability
through the issuance of policies or contracts of A reinsurance broker is one who, for compensation,
insurance, shall be held by the agent or broker in a not being a duly authorized agent, employee or
fiduciary capacity and shall not be misappropriated or officer of an insurer in which any reinsurance is
converted to his own use or illegally withheld by the effected, act or aids in any manner in negotiating
agent or broker. contracts of reinsurance, or placing risks of effecting
reinsurance, for any insurance company authorized to
Any insurance company which delivers to an
do business in the Philippines.
insurance agent or insurance broker a policy or
contract of insurance shall be deemed to have Sec. 311. Upon application and payment of the
authorized such agent or broker to receive on its corresponding fee hereinafter prescribed, and the
behalf payment of any premium which is due on such filing of two errors and omissions (professional
policy or contract of insurance at the time of its liability or professional indemnity) policies hereinafter
issuance or delivery or which becomes due thereon. described, a person may, if found qualified, be issued
a license to act as reinsurance broker by the
Sec. 307. Any provision of existing laws to the
Commissioner. No such license shall be valid after the
contrary notwithstanding, no person shall, within the
thirtieth day of June of the year following its issuance
Philippines, sell or offer for sale a variable contract or
unless it is renewed. (As amended by Presidential
do or perform any act or thing in the sale,
Decree No. 1455).
negotiation, making or consummating of any variable
contract other than for himself unless such person The errors and omissions (professional liability or
shall have a valid and current license from the professional indemnity) policies mentioned above
Commissioner authorizing such person to act as a shall indemnify the applicant against any claim or
variable contract agent. No such license shall be claims for breach of duty as reinsurance broker which
issued unless and until the Commissioner is satisfied, may be made against him by reason of any negligent
after examination that such person is by training, act, error or omission, whenever or wherever
knowledge, ability and character qualified to act as committed or alleged to have been committed, on the
such agent. Any such license may be withdrawn and part of the applicant or any person who has been, is
cancelled by the Commissioner after notice and now, or may hereafter during the subsistence of the
hearing, if he shall find that the holder thereof does policies be employed by the said applicant in his
not then have the qualifications required for the capacity as reinsurance broker; Provided, That the
issuance of such license. filing of any claim or claims under one of such policies
shall preclude the filing of the said claim or claims
Sec. 308. It shall be unlawful for any person,
under the other policy. The said policies shall be
company or corporation in the Philippines to act as
issued separately by two insurance companies
general agent of any insurance company unless he is
authorized to do business in the Philippines and shall underwriter on the particular line or risk involved to
be in such amounts as may be prescribed by the see to it that the said registers are well maintained
Insurance Commissioner, depending upon the size or and kept, and that all entries therein are properly and
amount of the broking business of the applicant, but correctly recorded. Such registers shall be open to
in no case shall the amount of each of such policies inspection and examination of duly authorized
be less than five hundred thousand pesos. (As representative of the Commissioner at all times during
amended by Presidential Decree No. 1455). business hours.
Sec. 312. The Commissioner may recall, suspend or Sec. 320. No person shall be registered with the
revoke the license granted to a reinsurance broker for Commissioner, unless such person shall be at least
violation of any existing law, rule and regulation, or twenty-one years of age on the date of such
any provision of this Code after due notice and registration; a resident of the Philippines; of good
hearing. moral character and with no conviction of any crime
Title 3 involving moral turpitude; has had at the time such
RESIDENT AGENTS registration is made at least two years of underwriting
Sec. 313. No person shall act as resident agent, as work in the particular line or risk involved; and has
hereinafter defined, unless he is registered as such passed such qualifying written examination that the
with the Commissioner. Commissioner shall conduct at such time and in such
place as he may decide to hold for applicants desiring
Sec. 314. The term "resident agent", as used in this
to act as underwriters.
title, is one duly appointed by a foreign insurer or
Such examination shall not be required of any person
broker not authorized to do business in the
who has served as non-life company underwriter for a
Philippines to receive in its behalf notices, summons
period of at least five years, if the Commissioner is
and legal processes in connection with actions or
satisfied of the applicant's competence as shown by
other legal proceedings against such foreign insurer
the results of his underwriting work in the non-life
or broker.
insurance company or companies that employed him
Sec. 315. The application for a certificate of in that capacity. The minimum underwriting
registration as resident agent filed with the experience herein required may be reduced or waived
Commissioner must be accompanied if it is shown to the satisfaction of the Commissioner
with:chanroblesvirtuallawlibrary that the non-life company underwriter has undergone
(a) a copy of the power of attorney, duly notarized extensive education and/or training in insurance.
and authenticated by the Philippine Consul in the Sec. 321. Any applicant who misrepresents or omits
place where such foreign insurer or broker is any material fact in his application for registration as
domiciled, empowering the applicant to act as a non-life company underwriter, or commits any
resident agent and to receive notices, summons and dishonest act in taking or in connection with the
legal processes for and in behalf of such foreign qualifying written examination for underwriters, shall
insurer or broker in connection with any action or be barred from being registered as such non-life
legal proceeding against such foreign insurer or company underwriter and, if already registered, his
broker; and registration shall be cancelled and the certificate of
(b) a copy of the corresponding certificate issued by registration issued in his favor shall be recalled
the Board of Investments as required under Section 4 immediately by the Commissioner.
of Republic Act No. 5455, if such foreign insurer or In the event that the certificate of authority of a non-
broker is not otherwise exempt from such life insurance company to transact business is
requirement. suspended or revoked due to business failure arising
Sec. 316. It shall be the duty of such resident agent largely from the imprudent and injudicious acceptance
to notify immediately the Commissioner of any of risks by the underwriter concerned, the registration
change of his office address. of such underwriter shall likewise be cancelled and his
Sec. 317. A certificate of registration issued to a certificate of registration shall be recalled by the
resident agent shall expire on the thirtieth day of June Commissioner, and no similar certificate shall
of the year following its issuance unless it is renewed. thereafter be issued in his favor.
The Commissioner may, after due notice and hearing, Sec. 322. No certificate of registration issued to an
recall or cancel the certificate of registration issued to underwriter shall be valid after the thirtieth day of
a resident agent for violation of any existing law, rule June of the year following its issuance unless it is
or regulation, or any provision of this Code. (As renewed.
amended by Presidential Decree No. 1455). The Commissioner may, after due notice and hearing,
Title 4 also suspend or cancel such certificate for violation of
NON-LIFE COMPANY UNDERWRITER existing laws, rules and regulations or of any
provisions of this Code. (As amended by Presidential
Sec. 318. No person shall act, and no company shall
Decree No. 1455).
employ any person, as non-life company underwriter,
whose duty and responsibility it shall be to select, Title 5
evaluate and accept risks for, and to determine the ADJUSTERS
terms and conditions, including those pertaining to Sec. 323. No person, partnership, association, or
amounts of retentions, under which such risks are to corporation shall act as an adjuster, as hereinafter
be accepted by the company, unless such underwriter defined, unless authorized so to act by virtue of a
is registered as such with the Commissioner. license issued or renewed by the Commissioner
Sec. 319. Every non-life insurance company doing pursuant to the provisions of this
business in the Philippines must maintain at all times Code: Provided, That in the case of a natural person,
a register of risks accepted and a claims register for he must be a Filipino citizen and in the case of a
each line of risks engaged in by such non-life partnership, association or corporation, at least sixty
insurance company with such entries therein as are per centum of its capital must be owned by citizens of
now or as may hereafter be required by the the Philippines.
Commissioner, and it shall be the responsibility of the
Sec. 324. An adjuster may be an independent of the claim by the insured with the insurer, unless
adjuster or a public adjuster. prevented so to do by reasons beyond his control; or
The term "independent adjuster" means any person, (7) has refused to allow an examination into his
partnership, association or corporation which, for affairs or method of doing business as hereinafter
money, commission or any other thing of value, acts provided.
for or on behalf of an insurer in the adjusting of Sec. 331. Every adjuster shall submit to the
claims arising under insurance contracts or policies Commissioner a quarterly report of all losses which
issued by such insurer. are the subject of adjustment effected by him during
The term "public adjuster" means any person, each month in the form prescribed by the
partnership, association or corporation which, for Commissioner. The report shall be filed within one
money, commission or any other thing of value, acts month after the end of each quarter.
on behalf of an insured in negotiating for, or Sec. 332. Every adjuster shall keep his or its books,
effecting, the settlement of a claim or claims of the records, reports, accounts, and vouchers in such
said insured arising under insurance contracts or manner that the Commissioner or his duly authorized
policies, or which advertises for or solicits representatives may readily verify the quarterly
employment as an adjuster of such claims. reports of the said adjuster and ascertain whether the
Sec. 325. For every line of insurance claim said adjuster has complied with the provisions of law
adjustment, adjusters shall be licensed either as or regulations obligatory upon him or whether the
independent adjusters or as public adjusters. No method of doing business of the said adjuster has
adjuster shall act on behalf of an insurer unless said been fair, just and honest.
adjuster is licensed as an independent adjuster; and Sec. 333. The Commissioner shall, at least once a
no adjuster shall act on behalf of an insured unless year and whenever he considers the public interest so
said adjuster is licensed as a public demands, cause an examination to be made into the
adjuster: Provided, however, That when a firm or affairs and method of doing business of every
person has been licensed as public adjuster, he shall adjuster.
not be granted another license as independent Sec. 334. Any violation of any provision of this title
adjuster and vice versa. shall be punished by a fine of not more than ten
No license, however, shall be required of any thousand pesos, or by imprisonment in the discretion
company adjuster who is a salaried employee of an of the court; Provided, That, in case of a partnership,
insurance company for the adjustment of claims filed association or corporation, the said penalty shall be
under policies issued by such insurance company. imposed upon the partner, president, manager,
Sec. 326. Such license or any renewal thereof may be managing director, director or person in charge of its
issued by the Commissioner upon written application business or responsible for the violation.
filed by the person interested on the form or forms Title 6
prescribed by the Commissioner, which shall contain ACTUARIES
such information as he may require, and upon Sec. 335. No life insurance company shall be licensed
payment of the corresponding fee hereinafter to do business in the Philippines nor shall any life
prescribed. insurance company doing business in the Philippines
Sec. 327. The Commissioner shall conduct, at such be allowed to continue doing such business unless
times, and in such places as he may decide to hold, they shall engage the services of an actuary duly
written examinations to determine the competence accredited with the Commissioner who shall, during
and ability of applicants desiring to act as adjuster of his tenure of office, be directly responsible for the
insurance claims. direction and supervision of all actuarial work
Sec. 328. Every adjuster's license issued hereunder connected with or that may be involved in the
shall be valid until after the thirtieth day of June of business of the insurance company.
the year following the issuance of such license unless Sec. 336. Any person may be officially accredited by
it is renewed. (As amended by Presidential Decree the Commissioner to act as any actuary in any life
No. 1455). insurance company or in any mutual benefit
Sec. 329. Nothing contained in this title shall apply to association authorized to do business in the
any duly licensed attorney-at-law who acts or aids in Philippines upon application therefor and the payment
adjusting insurance claims as an incident to the of the corresponding fee hereinafter
practice of his profession and who does not advertise prescribed: Provided, That: (1) he is a fellow of good
himself as an adjuster. standing of the Acturial Society of the Philippines at
Sec. 330. The Commissioner may suspend or revoke the time of his appointment and remains in such good
any adjuster's license if, after giving notice and standing during the tenure of his engagement; or (2)
hearing to the adjuster concerned, the Commissioner in the case of one who is not a fellow of the Acturial
finds that the said adjuster:chanroblesvirtuallawlibrary Society of the Philippines, he meets all the
(1) has violated any provision of this Code and of the requirements of the said Society for accreditation as a
circulars, rulings and instructions of the Commissioner fellow of the Society, and has been given permission
or has violated any law in the course of his dealings by the pertinent government authorities in the
as an adjuster; or Philippines to render services in the Philippines, in the
event that he is not a citizen of the Philippines.
(2) has made a material misstatement in the
application for such license; or No certificate of registration issued under this title
shall be valid after the thirtieth day of June of the
(3) has been guilty of fraudulent or dishonest
year following its issuance unless it is renewed. (As
practices; or
amended by Presidential Decree No. 1455).
(4) has demonstrated his incompetence or
Sec. 337. The following documents, which are from
untrustworthiness to act as adjuster; or
time to time submitted to the Commissioner by a life
(5) has made patently unjust valuation of loss; or insurance company authorized to do business in the
(6) has failed to make a report of the adjustment he Philippines, shall be duly certified by an accredited
proposed within sixty days from the date of the filing
actuary employed by such a rating organization shall be valid after the thirtieth
company:chanroblesvirtuallawlibrary day of June of the year following its issuance unless it
1. Policy reserves and net due and deferred is renewed. No rating organization which now exists
premiums. and is not licensed pursuant to this section shall
2. Statements of bases and net premiums, loading for continue rate-making operations until it shall have
gross premiums, and on non-forfeiture values and obtained from the Commissioner a license which he
reserves, when applying for approval of gross may issue if satisfied that such organization is
premiums, reserves and non-forfeiture values. complying with the provisions of this title. Every
rating organization shall notify the Commissioner
3. Policies of insurance under any plan submitted to
promptly of every change in (1) its constitution, its
the Commissioner as required by law.
articles of agreement or association or its certificate
4. Annual statements and valuation reports submitted of incorporation, and its by-laws rules and regulations
to the Commissioner as required by law. governing the conduct of its business, and (2) its list
5. Financial projection showing the probable income of members and subscribers.
and outgo and reserve requirements, enumerating A "member" means an insurer who participates in or
the acturial assumptions and bases of projections. is entitled to participate in the management of a
6. Valuation of annuity funds or retirement plans. rating organization.
Any life insurance company authorized to do business A "subscriber" means an insurer which is furnished at
in the Philippines may employ any person who is not its request with rates and rating manuals by a rating
officially accredited under either of the qualifications organization of which it is not a member. (As
for any kind of acturial work, provided that he shall amended by Presidential Decree No. 1455).
not, at any time, have the authority to certify to the
Sec. 342. Each rating organization shall furnish its
correctness of the foregoing documents.
rating service without discrimination to all of its
Sec. 338. No accredited actuary shall serve more than members and subscribers, and shall, subject to
one client or employer at the same time. However, reasonable rules and regulations, permit any
one already in the employ of an insurance company insurance company doing business in the Philippines,
may be allowed by the Commissioner to serve a not admitted to membership, to become a subscriber
mutual benefit association or any other insurance to its rating services for any kind of insurance or
company, provided the following conditions are first subdivisions thereof. Notice of proposed changes in
complied with: (a) that the request to engage his such rules and regulations shall be given to
services by the other employer is in writing; (b) that subscribers. The reasonableness of any rule or
his present employer acquiesced to it in writing; and regulation in its application to subscribers, or the
(c) that he furnishes the Commissioner with copies of refusal of any rating organization to admit an
said request and acquiescence. insurance company as a subscriber, shall, at the
Title 7 request of any subscriber or any such insurance
RATING ORGANIZATION AND RATE MAKING company, be reviewed by the Commissioner at a
Sec. 339. Every organization which now exists or hearing held upon at least ten days' written notice to
which may hereafter be formed for the purpose of such rating organization and to such subscriber or
making rates to be used by more than one insurance insurance company. The Commissioner may, after
company authorized to do business in the Philippines such hearing, issue an appropriate order.
shall be known as a "rating organization." The Sec. 343. No rating organization or any other
term "rate" as used in this title shall generally mean association shall refuse to do business with, or
the ratio of the premium to the amount insured and prohibit or prevent the payment of commissions to,
shall include, as the context may require, either the any person licensed as an insurance broker pursuant
consideration to be paid or charged for insurance to the provisions of title one of this chapter.
contracts, including surety bonds, or the elements Sec. 344. Rating organization shall be subject to
and factors forming the basis for the determination or examination by the Commissioner, as often as he may
application of the same, or both. deem such examination expedient, pursuant to the
Sec. 340. Every rating organization which now exists provisions of this Code applicable to the examination
or which may hereafter be formed shall be subject to of insurance companies. He shall cause such an
the provisions of this title. examination of each rating organization to be made
Sec. 341. No rating organization hereafter formed at least once in every five years.
shall commence rate-making operations until it shall Sec. 345. The Commissioner may suspend or revoke
have obtained a license from the Commissioner. the license of any rating organization which fails to
Before obtaining such license, such rating comply with his order within the time limited by such
organization shall file with the Commissioner a notice order, or any extension thereof which he may grant.
of its intention to commence rate-making operations, The Commissioner may determine when a suspension
a copy of its constitution, articles of agreement or of license shall become effective and it shall remain in
association, or of incorporation, and its by-laws, a list effect for the period fixed by him, unless he modifies
of insurance companies that have agreed to become or rescinds such suspension.
members or subscribers, and such other information Sec. 346. Any rating organization may subscribe for
concerning such rating organization and its operations or purchase acturial, technical or other services, and
as may be required by the Commissioner. If the such services shall be available to all members and
Commissioner finds that the organization has subscribers without discrimination.
complied with the provisions of law and that it has a
Sec. 347. Any rating organization may provide for the
sufficient number of members or subscribers and is
examination of policies, daily reports, binders,
otherwise qualified to function as a rating
renewal certificates, endorsements or other evidences
organization, the Commissioner may issue a license to
of insurance, or the cancellation thereof, and may
such rating organization authorizing it to make rates
make reasonable rules governing their submission.
for the kinds of insurance or subdivisions thereof as
Such rules shall contain a provision that in the event
may be specified in such license. No license issued to
an insurance company does not within sixty days
furnish satisfactory evidence to the rating schedule of its premiums and losses on all kinds or
organization of the correction of any error or omission types of insurance business to which section three
previously called to its attention by the rating hundred forty-nine is applicable, and such other
organization, it shall be the duty of the rating information as the Commissioner may deem
organization to notify the Commissioner thereof. All necessary or expedient for the administration of the
information so submitted for examination shall be provisions of this title.
confidential. Sec. 352. Every non-life rating organization and every
Sec. 348. Cooperation among rating organizations or non-life insurance company doing business in the
among rating organizations and insurers in rate Philippines shall file with the Commissioner, except as
making or in other matters within the scope of this to risks which by general custom of the business are
title is hereby authorized, provided the filings not written according to manual rates or rating plans,
resulting from such cooperation are subject to all every rate manual, schedule of rates, classification of
provisions of this title which are applicable to filings risks, rating plan, and every other rating rule and
generally. The Commissioner may review such every modification of any of the foregoing which it
cooperative activities and practices and if he finds proposes to use. An insurance company may satisfy
that any such activity or practice is unfair or its obligation to make such filings for any kind or type
unreasonable or otherwise inconsistent with the of insurance by becoming a member of or subscriber
provisions of this title, he may issue a written order to a rating organization which makes such filings for
specifying in what respects such activity or practice is such kind or type of insurance, and by authorizing the
unfair or unreasonable or otherwise inconsistent with Commissioner to accept such filings of the rating
the provisions of this title, and requiring the organization on behalf of such insurance company.
discontinuance of such activity or practice. Sec. 353. Every manual or schedule of rates and
Sec. 349. Every rating organization and every every rating plan filed as provided in the preceding
insurance company which makes and files its own section shall state or clearly indicate the character
rates, shall make rates for all risks rated by such and extent of the coverage to which any such rate or
organization or insurance company in accordance with any modification thereof will be applied.
the following provisions:chanroblesvirtuallawlibrary Sec. 354. The Commissioner shall review filings as
(a) Basic classification, manual, minimum, class, or soon as reasonably possible after they have been
schedule rates or rating plans, shall be made and made in order to determine whether they meet the
adopted for all such risks. Any departure from such requirements of this title. When a filing is not
rates shall be in accordance with schedules, rating accompanied by the information upon which the
plans and rules filed with the Commissioner; insurance company supports such filing, and the
(b) Rates shall be reasonable and adequate for the Commissioner does not have sufficient information to
class of risks to which they apply; determine whether such filing meets the requirements
(c) No rate shall discriminate unfairly between risks of this title, he shall require such insurance company
involving essentially the same hazards and expense to furnish the information upon which it supports such
elements or between risks in the application of like filing. The information furnished in support of a filing
charges and credits; may include: (1) the experience or judgment of the
insurance company or rating organization making the
(d) Consideration shall be given to the past and
filing; (2) its interpretation of any statistical data it
prospective loss experience, including the
relies upon; (3) the experience of other insurance
conflagration and catastrophe hazards, if any, to all
companies or rating organization; or (4) any other
factors reasonably attributable to the class of risks, to
relevant factors.
a reasonable profit, to commissions paid during the
most recent annual period and to past and Sec. 355. If the Commissioner finds that any rate
prospective other expenses. In case of fire insurance filings theretofore filed with him do not comply with
rates, consideration shall be given to the experience the provisions of this title or that they provide rates or
of the fire insurance business during a period of not rules which are inadequate, excessive, unfairly
less than five years next preceding the year in which discriminatory or otherwise unreasonable, he may
the review is made; order the same withdrawn and at the expiration of
sixty days thereafter the same shall be deemed no
(e) Risk may be grouped by classifications for the
longer on file. Before making any such finding and
establishment of rates and minimum premiums.
order, the Commissioner shall give notice, not less
Classification rates may be modified to produce rates
than ten days in advance, and a hearing, to the rating
for individual risks in accordance with rating plans
organization, or to the insurer, which filed the same.
which establish standards for measuring variations in
Such order shall not affect any contract or policy
hazards or expense provisions, or both. Such
made or issued prior to the expiration of such sixty
standards may measure any difference among risks
day period.
that can be demonstrated to have a probable effect
upon losses or expenses. Sec. 356. No member or subscriber of a rating
organization, and no insurance company doing
Sec. 350. No rating organization and no insurance
business in the Philippines, or agent, employee or
company which makes and files its own rates shall
other representative of such company, and no
make or promulgate any rate or schedule of rates
insurance broker shall charge or demand a rate or
which is to be applied to any fire risk on the condition
receive a premium which deviates from the rates,
that the whole amount of insurance on any risk or
rating plans, classifications, schedules, rules and
any specified part thereof shall be placed with the
standards, made and last filed by a rating
members of or subscribers to such rating organization
organization or by or on behalf of the insurance
or with such insurer.
company, or shall issue or make any policy or
Sec. 351. Every insurance company doing business in contract involving violation of such rate filings.
the Philippines shall annually file with the rating
Sec. 357. Notwithstanding any other provisions of this
organization of which it is a member or subscriber, or
title, upon the written application of the insurer,
with such other agency as the Commissioner may
stating his reasons therefor, filed with and approved
designate, a statistical report showing a classification
by the Commissioner, a rate in excess of that misleading representation or incomplete comparison
provided by a filing otherwise applicable may be used of policies to any person insured in such company for
on any specific risk. the purpose of inducing or tending to induce such
Sec. 358. Whenever the Commissioner shall person to lapse, forfeit, or surrender his said
determine, after notice and a hearing, that the rates insurance.
charged or filed on any class of risks are excessive, Sec. 363. If the Commissioner, after notice and
discriminatory, inadequate or unreasonable, he shall hearing, finds that any insurance company, rating
order that such rates be appropriately adjusted. For organization, agent, broker or other person has
the purpose of applying the provisions of this section, violated any of the provisions of this title, it shall
the Commissioner may from time to time approve order the payment of a fine not to exceed five
reasonable classifications of risks for any or all such hundred pesos for each such offense, and shall
classes, having due regard to the past and immediately revoke the license issued to such
prospective loss experience, including conflagration or insurance company, rating organization, agent, or
catastrophe hazards, if any, to all other relevant broker. The issuance, procurement or negotiation of a
factors and to a reasonable profit. single policy or contract of insurance shall be deemed
Sec. 359. Nothing contained in this title shall be a separate offense.
construed as requiring any insurer to become a Title 8
member of or subscriber to any rating organization. PROVISION COMMON TO AGENTS, BROKERS,
Sec. 360. Agreements may be made among insurance AND ADJUSTERS
companies with respect to the equitable Sec. 364. A license issued to a partnership,
apportionment among them of insurance which may association or corporation to act as an insurance
be afforded applicants who are in good faith entitled agent, general agent, insurance broker, reinsurance
to but are unable to procure such insurance through broker, or adjuster shall authorize only the individual
ordinary methods and such insurance companies may named in the license who shall qualify therefor as
agree among themselves on the use of reasonable though an individual licensee. The Commissioner shall
rates and modifications for such insurance, such charge, and the licensee shall pay, a full additional
agreements and rate modifications to be subject to license fee as to each respective individual so named
the approval of the Commissioner; Provided, in such license in excess of one.
however, That the provisions of this section shall not Licenses and certificates of registration issued under
be deemed to apply to workmen's compensation the provisions of this chapter may be renewed by the
insurance. filing of notices of intention on forms to be prescribed
Sec. 361. No insurance company doing business in by the Commissioner and payment of the fees
the Philippines or any agent thereof, no insurance therefor. (As amended by Presidential Decree No.
broker, and no employee or other representative of 1455).
any such insurance company, agent, or broker, shall Chapter V
make, procure or negotiate any contract of insurance SECURITY FUND
or agreement as to policy contract, other than is Sec. 365. There is hereby created a fund to be known
plainly expressed in the policy or other written as the "Security Fund" which shall be used in the
contract issued or to be issued as evidence thereof, or payment of allowed claims against an insurance
shall directly or indirectly, by giving or sharing a company authorized to transact business in the
commission or in any manner whatsoever, pay or Philippines remaining unpaid by reason of the
allow or offer to pay or allow to the insured or to any solvency of such company. The said Fund may also
employee of such insured, either as an inducement to be used to reinsure the policy of the insolvent insurer
the making of such insurance or after such insurance in any solvent insurer authorized to do business in the
has been effected, any rebate from the premium Philippines as provided in section two hundred forty-
which is specified in the policy, or any special favor or nine. In the event of national emergency or calamity,
advantage in the dividends or other benefits to accrue the Fund may likewise be used to pay insured claims
thereon, or shall give or offer to give any valuable which otherwise would not be compensable under the
consideration or inducement of any kind, directly or provisions of the policy. No payment from the
indirectly, which is not specified in such policy or Security Fund shall, however, be made to any person
contract of insurance; nor shall any such company, or who owns or controls ten per centum or more of the
any agent thereof, as to any policy or contract of voting shares of stock of the insolvent insurer and no
insurance issued, make any discrimination against any payment on any one claim shall exceed twenty
Filipino in the sense that he is given less thousand pesos.
advantageous rates, dividends or other policy Sec. 366. Such Fund shall consist of all payments
conditions or privileges than are accorded to other made to the Fund by insurance companies authorized
nationals because of his race. to do business in the Philippines. Payments made by
Sec. 362. No insurance company doing business in life insurance companies shall be treated separately
the Philippines, and no officer, director, or agent from those made by non-life insurance companies
thereof, and no insurance broker or any other person, and the corresponding fund shall be called "Life
partnership or corporation shall issue or circulate or Account" and "Non-Life Account", respectively, and
cause or permit to be issued or circulated any shall be held and administered as such by the
literature, illustration, circular or statement of any sort Commissioner in accordance with the provisions of
misrepresenting the terms of any policy issued by any this title. The "Life Account" shall be utilized
insurance company of the benefits or advantages exclusively for disbursements that refer to life
promised thereby, or any misleading estimate of the insurance companies, while the "Non-Life
dividends or share of surplus to be received thereon, Account" shall be utilized exclusively for
or shall use any name or title of any policy or class of disbursements that refer to non-life insurance
policies misrepresenting the true nature thereof; nor companies.
shall any such company or agent thereof, or any Sec. 367. All insurance companies doing business in
other person, partnership or corporation make any the Philippines shall contribute to the Security Fund,
Life or Non-Life Account, as the case may be, on or from any Account shall be made by the Treasurer of
before the fifteenth day of June, nineteen hundred the Philippines upon vouchers signed by the
and seventy-five, the aggregate amount of five million Commissioner or his deputy, as hereinafter provided.
pesos for each Account. The contributions of the life The moneys of said Account may be invested by the
insurance companies and of the non-life insurance Commissioner only in bonds or other evidences of
companies shall be in direct proportion to the ratio debt of the government of the Philippines or its
between a particular life insurance company or a political subdivisions or instrumentalities. The
particular non-life insurance company's net worth and Commissioner may sell any of the securities in which
the aggregate net worth of all life insurance an Account is in vested, if advisable, for its proper
companies or all non-life insurance companies, as the administration or in the best interest of such Account.
case may be, as shown in their latest financial Sec. 370. Payments from either the Life Insurance
statements approved by the Commissioner. This Account or Non-Life Account, as the case may be,
proportion applied to the five million pesos shall be shall be made by the Treasurer of the Philippines to
the contribution of a particular company to the the Commissioner, upon the authority of appropriate
corresponding Account of the Security Fund. certificate filed with him by the Commissioner acting
The amount of five million pesos in each Account shall in such capacity.
be in the form of a revolving trust fund. The Sec. 371. The Commissioner may, in his discretion,
respective contributions of the companies shall designate or appoint a duly authorized representative
remain as admitted assets in their books and any or representatives to appear and defend before any
disbursement therefrom shall be deducted court or other body or official having jurisdiction any
proportionately from the contributions of each or all actions or proceedings against principals or
company which will be allowed as deductions for assureds on insurance policies or contracts issued to
income tax purposes. Any earnings of the Fund shall them where the insurer has become insolvent or
be turned over to the contributing companies in unable to meet its insurance obligations. The
proportion to their contributions. Commissioner shall have, as of the date of insolvency
In the case of disbursements of funds from the Fund of such insurer or as of the date of its inability meet
as provided in the foregoing paragraph, the life and its insurance obligations, only the rights which such
non-life companies, as the case may be, shall insurer would have had if it had not become insolvent
replenish the amount disbursed in direct proportion to or unable to meet its insurance obligations. For the
the individual company's net worth and the aggregate purpose of this title the Commissioner shall have
net worth of the life or non-life companies, as the power to employ such counsel, clerks and assistants
case may be. However, in no case shall the Fund as he may deem necessary.
exceed the aggregate amount of ten million pesos, or Sec. 372. The expense of administering an Account
five million pesos for each Account. shall be paid out of the Account concerned. The
Should the Fund, Life of Non-Life Account, as the Commissioner shall serve as administrator of the Fund
case may be, be inadequate for a disbursement as and of the Accounts without additional compensation,
provided for, then the Life or Non-Life companies, as but may be allowed and paid from the Account
the case may be, shall contribute to the Fund their concerned expenses incurred in the performance of
respective shares in the proportion previously his duties in connection with said Account. The
mentioned. compensation of those persons employed payable
Sec. 368. The Commissioner may adopt, amend, and from the Account concerned. The Commissioner shall
enforce all reasonable rules and regulations necessary include in his annual report to the Secretary of
for the proper administration of the Fund and of the Finance a statement of the expenses of administration
Accounts. In the event any insurer shall fail to make of the Fund and of the Life Account and Non-Life
any payment required by this title, or that any Account for the preceding year.
payment made is incorrect, he shall have full Chapter VI
authority to examine all the books and records of the COMPULSORY MOTOR VEHICLE
insurer for the purpose of ascertaining the facts and LIABILITYINSURANCE
shall determine the correct amount to be paid and Sec. 373. For purposes of this
may proceed in any court of competent jurisdiction to chapter:chanroblesvirtuallawlibrary
recover for the benefit of the Fund or of the Account (a) "Motor Vehicle" is any vehicle as defined in section
concerned any sum shown to be due upon such three, paragraph (a) of Republic Act Numbered Four
examination and determination. Any insurer which Thousand One Hundred Thirty-Six, Otherwise known
fails to make any payment to the Fund or to the as the "Land Transportation and Traffic Code."
Account concerned when due, shall thereby forfeit to
(b) "Passenger" is any fare paying person being
said Fund or Account concerned a penalty of five per
transported and conveyed in and by a motor vehicle
centum of the amount determined to be due as
for transportation of passengers for compensation,
provided by this title, plus one per centum of such
including persons expressly authorized by law or by
amount for each month of delay or fraction thereof,
the vehicle's operator or his agents to ride without
after the expiration of the first month of such delay,
fare.
but the Commissioner, if satisfied that the delay was
excusable, may remit all or any part of such penalty. (c) "Third-Party" is any person other than a
The Commissioner, in his discretion, may suspend or passenger as defined in this section and shall also
revoke the certificate of authority to do business in exclude a member of the household, or a member of
the Philippines of any insurance company which shall the family within the second degree of consanguinity
fail to comply with this title or to pay any penalty or affinity, of a motor vehicle owner or land
imposed in accordance therewith. transportation operator, as likewise defined herein, or
his employee in respect of death, bodily injury, or
Sec. 369. The Accounts created by this title shall be
damage to property arising out of and in the course
separate and apart from each other and from any
of employment. (As amended by Presidential Decree
other fund. The Treasurer of the Philippines shall be
No. 1814 and 1981).
the custodian of the Life Account and Non-Life
Account of the Security Fund; and all disbursements
(d) "Owner" or "motor vehicle owner" means the transportation operator and, in that event, the said
actual legal owner of a motor vehicle, in whose name cash deposit shall be replenished or such surety bond
such vehicle is duly registered with the Land shall be restored with sixty days after impairment or
Transportation Commission; expiry, as the case may be, by such land
(e) "Land transportation operator" means the owner transportation operator, otherwise, he shall secure
or owners of motor vehicles for transportation of the insurance policy required by this chapter. The
passengers for compensation, including school buses; aforesaid cash deposit may be invested by the
(f) "Insurance policy" or "Policy" refers to a contract Commissioner in readily marketable government
of insurance against passenger and thirty-party bonds and/or securities.
liability for death or bodily injuries and damaged to (2) In the case of an owner of a motor vehicle, the
property arising from motor vehicle accidents. (As insurance or guaranty in cash or surety bond shall
amended by Presidential Decree No. 1455 and 1814). cover liability for death or injury to third parties in an
Sec. 374. It shall be unlawful for any land amount not less than that set forth in the following
transportation operator or owner of a motor vehicle to scale in any one accident:chanroblesvirtuallawlibrary
operate the same in the public highways unless there I. Private Cars
is in force in relation thereto a policy of insurance or
guaranty in cash or surety bond issued in accordance (a) Bantam : Twenty thousand pesos;
with the provisions of this chapter to indemnify the (b) Light : Twenty thousand pesos;
death, bodily injury, and/or damage to property of a (c) Heavy : Thirty thousand pesos;
third-party or passenger, as the case may be, arising
from the use thereof. (As amended by Presidential II. Other Private Vehicles
Decree No. 1455 and 1814).
Sec. 375. The Commissioner shall furnish the Land (a) Tricycles, motorcyles, and scooters : Twelve
Transportation Commissioner with a list of insurance thousand pesos;
companies authorized to issue the policy of insurance (b) Vehicles with an unladen weight of 2,600 kilos or
or surety bond required by this chapter. (As amended less : Twenty thousand pesos;
by Presidential Decree No. 1814). (c) Vehicles with an unladen weight of between 2,601
Sec. 376. The Land Transportation Commission shall kilos and 3,930 kilos : Thirty thousand pesos;
not allow the registration or renewal of registration of (d) Vehicles with an unladen weight over 3,930 kilos :
any motor vehicle without first requiring from the land Fifty thousand pesos.
transportation operator or motor vehicle owner The Commissioner may, if warranted, set forth
concerned the presentation and filing of a schedule of indemnities for the payment of claims for
substantiating documentation in a form approved by death or bodily injuries with the coverages set forth
the Commissioner evidencing that the policy of herein. (As amended by Presidential Decree No. 1455
insurance or guaranty in cash or surety bond required and 1814).
by this chapter is in effect. (As amended by Sec. 378. Any claim for death or injury to any
Presidential Decree No. 1455). passenger or third party pursuant to the provisions of
Sec. 377. Every land transportation operator and this chapter shall be paid without the necessity of
every owner of a motor vehicle shall, before applying proving fault or negligence of any kind; Provided,
for the registration or renewal of registration of any That for purposes of this
motor vehicle, at his option, either secure an section:chanroblesvirtuallawlibrary
insurance policy or surety bond issued by any (i) The total indemnity in respect of any person shall
insurance company authorized by the Commissioner not exceed five thousand pesos;
or make a cash deposit in such amount as herein
(ii) The following proofs of loss, when submitted
required as limit of liability for purposes specified in
under oath, shall be sufficient evidence to
section three hundred seventy-four.
substantiate the claim:chanroblesvirtuallawlibrary
(1) In the case of a land transportation operator, the
insurance guaranty in cash or surety bond shall cover
(a) Police report of accident; and
liability for death or bodily injuries of third-parties
and/or passengers arising out of the use of such (b) Death certificate and evidence sufficient to
vehicle in the amount not less than twelve thousand establish the proper payee; or
pesos per passenger or third party and an amount, (c) Medical report and evidence of medical or hospital
for each of such categories, in any one accident of disbursement in respect of which refund is claimed;
not less than that set forth in the following
scale:chanroblesvirtuallawlibrary (iii) Claim may be made against one motor vehicle
(a) Motor vehicles with an authorized capacity of only. In the case of an occupant of a vehicle, claim
twenty-six or more passengers: Fifty thousand pesos; shall lie against the insurer of the vehicle in which the
(b) Motor vehicles with an authorized capacity of from occupant is riding, mounting or dismounting from. In
twelve to twenty-five passengers: Forty thousand any other case, claim shall lie against the insurer of
pesos; the directly offending vehicle. In all cases, the right of
the party paying the claim to recover against the
(c) Motor vehicles with an authorized capacity of from
owner of the vehicle responsible for the accident shall
six to eleven passengers: Thirty thousand pesos;
be maintained.
(d) Motor vehicles with an authorized capacity of five
Sec. 379. No land transportation operator or owner of
or less passengers: Five thousand pesos multiplied by
motor vehicle shall be unreasonably denied the policy
the authorized capacity.
of insurance or surety bond required by this chapter
Provided, however, That such cash deposit made to, by the insurance companies authorized to issue the
or surety bond posted with, the Commissioner shall same, otherwise, the Land Transportation
be resorted to by him in cases of accidents the Commission shall require from said land
indemnities for which to third-parties and/or transportation operator or owner of the vehicle, in
passengers are not settled accordingly by the land lieu of a policy of insurance or surety bond, a
certificate that a cash deposit has been made with the due to loss or injury must be brought, in proper
Commissioner in such amount required as limits of cases, with the Commissioner or the Courts within
indemnity in section three hundred seventy-seven to one year from denial of the claim, otherwise, the
answer for the passenger and/or third-party liability of claimant's right of action shall prescribe. (As amended
such land transportation operator or owner of the by Presidential Decree 1814 and Batas Pambansa Blg.
vehicle. 874).
No insurance company may issue the policy of Sec. 385. The insurance company concerned shall
insurance or surety bond required under this chapter forthwith ascertain the truth and extent of the claim
unless so authorized under existing laws. and make payment within five working days after
The authority to engage in the casualty and/or surety reaching an agreement. If no agreement is reached,
lines of business of an insurance company that the insurance company shall pay only the "no-
refuses to issue or renew, without just cause, the fault" indemnity provided in section three hundred
insurance policy or surety bond therein required shall seventy-eight without prejudice to the claimant from
be withdrawn immediately. (As amended by pursuing his claim further, in which case, he shall not
Presidential Decree No. 1455 and 1814). be required or compelled by the insurance company
Sec. 380. No cancellation of the policy shall be valid to execute any quit claim or document releasing it
unless written notice thereof is given to the land from liability under the policy of insurance or surety
transportation operator or owner of the vehicle and to bond issued. (As amended by Presidential Decree No.
the Land Transportation Commission at least fifteen 1455).
days prior to the intended effective date thereof. In case of any dispute in the enforcement of the
Upon receipt of such notice, the Land Transportation provisions of any policy issued pursuant to this
Commission, unless it receives evidence of a new chapter, the adjudication of such dispute shall be
valid insurance or guaranty in cash or surety bond as within the original and exclusive jurisdiction of the
prescribed in this chapter, or an endorsement of Commissioner, subject to the limitations provided in
revival of the cancelled one, shall order the immediate section four hundred sixteen.
confiscation of the plates of the motor vehicle covered Sec. 386. It shall be unlawful for a land transportation
by such cancelled policy. The same may be re-issued operator or owner of motor vehicle to require his or
only upon presentation of a new insurance policy or its drivers or other employees to contribute in the
that a guaranty in cash or surety band has been payment of premiums.
made or posted with the Commissioner and which Sec. 387. No government office or agency having the
meets the requirements of this chapter, or an duty of implementing the provisions of this chapter
endorsement or revival of the cancelled one. (As nor any official or employee thereof shall act as agent
amended by Presidential Decree No. 1455). in procuring the insurance policy or surety bond
Sec. 381. If the cancellation of the policy or surety provided for herein. The commission of an agent
bond is contemplated by the land transportation procuring the said policy or bond shall in no case
operator or owner of the vehicle, he shall, before the exceed ten per centum of the amount of the
policy or surety bond ceases to be effective, secure a premiums therefor.
similar policy of insurance or surety bond to replace Sec. 388. Any land transportation operator or owner
the policy or surety bond to be cancelled or make a of motor vehicle or any other person violating any of
cash deposit in sufficient amount with the the provisions of the preceding sections shall be
Commissioner and without any gap, file the required punished by a fine of not less than five hundred pesos
documentation with the Land Transportation but not more than one thousand pesos and/or
Commission, and notify the insurance company imprisonment for not more than six months. The
concerned of the cancellation of its policy or surety violation of section three hundred seventy-seven by a
bond. (As amended by Presidential Decree No. 1455). land transportation operator shall be a sufficient
Sec. 382. In case of change of ownership of a motor cause for the revocation of the certificate of public
vehicle, or change of the engine of an insured vehicle, convenience issued by the Board of Transportation
there shall be no need of issuing a new policy until covering the vehicle concerned.
the next date of registration or renewal of registration Sec. 389. Whenever any violation of the provisions of
of such vehicle, and provided that the insurance this chapter is committed by a corporation or
company shall agree to continue the policy, such association, or by a government office or entity, the
change of ownership or such change of the engine executive officer or officers of said corporation,
shall be indicated in a corresponding endorsement by association or government office or entity who shall
the insurance company concerned, and a signed have knowingly permitted, or failed to prevent, said
duplicate of such endorsement shall, within a violation shall be held liable as principals.
reasonable time, be filed with the Land Chapter VII
Transportation Commission. MUTUAL BENEFIT ASSOCIATIONS AND
Sec. 383. In the settlement and payment of claims, TRUSTS FOR CHARITABLE USES
the indemnity shall not be availed of by any accident Title 1
victim or claimant as an instrument of enrichment by MUTUAL BENEFIT ASSOCIATIONS
reason of an accident, but as an assistance or
Sec. 390. Any society, association or corporation,
restitution insofar as can fairly be ascertained.
without capital stock, formed or organized not for
Sec. 384. Any person having any claim upon the profit but mainly for the purpose of paying sick
policy issued pursuant to this Chapter shall, without benefits to members, or of furnishing financial
any unnecessary delay, present to the insurance support to members while out of employment, or of
company concerned a written notice of claim setting paying to relatives of deceased members of fixed or
forth the nature, extent and duration of the injuries any sum of money, irrespective of whether such aim
sustained as certified by a duly licensed physician. or purpose is carried out by means of fixed dues or
Notice of claim must be filed within six months from assessments collected regularly from the members, or
date of accident, otherwise, the claim shall be of providing, by the issuance of certificates of
deemed waived. Action or suit for recovery of damage insurance, payment of its members of accident or life
insurance benefits out of such fixed and regular dues All moneys received by the Commissioner for this
or assessments, but in no case shall include any purpose must be deposited by him in interest-bearing
society, association, or corporation with such mutual deposits with any bank or banks authorized to
benefit features and which shall be carried out purely transact business in the Philippines for the account of
from voluntary contributions collected not regularly the particular association constituting the Guaranty
and or no fixed amount from whomsoever may Fund.
contribute, shall be known as a mutual benefit Any accrual to such fund, be it interest earned or
association within the intent of this Code. dividend additions on moneys or securities so
Any society, association, or corporation principally deposited, may, with the prior approval of the
organized as labor union shall be governed by Commissioner, be withdrawn by the association if
the Labor Code notwithstanding any mutual benefit there is no pending benefit claim against it, including
feature provisions in its charter as incident to its interest thereon or dividend additions thereto.
organization. The Commissioner, prior to or after licensing a mutual
In no case shall a mutual benefit association be benefit association, may require such association to
organized and authorized to transact business as a increase its Guaranty Fund from the initial minimum
charitable or benevolent organization, and whenever amount required to an amount equal to at least ten
it has this feature as incident to its existence, the per centum of its assets, if such assets exceed one
corresponding charter provision shall be revised to hundred thousand pesos, but in no case shall such
conform with the provision of this section. Mutual increase exceed the maximum amount of capital
benefit association, already licensed to transact investment required of a domestic insurance company
business as such on the date this Code becomes under section two hundred and three of this
effective, having charitable or benevolent feature Code. (As amended by Presidential Decree No. 1455).
shall abandon such incidental purpose upon effectivity Sec. 393. Every mutual benefit association licensed to
of this Code if they desire to continue operating as do business as such shall issue membership
such mutual benefit associations. (As amended by certificates to its members specifying the benefits to
Presidential Decree No. 1455). which such members are entitled.
Sec. 391. A mutual benefit association, before it may Such certificates, together with the articles of
transact as such, must first secure a license from the incorporation of the association or its constitution and
Commissioner. The application for such license shall by-laws, and all existing laws as may be pertinent
be filed with the Commissioner together with certified shall constitute the agreement, as of the date of its
true copies of the articles of incorporation or the issuance, between the association and the member.
constitution and by-laws of the association, and all The membership certificate shall be in a form
amendments thereto, and such other documents or previously approved by the Commissioner.
testimonies as the Commissioner may require.
Sec. 394. A mutual benefit association may, by
No license shall be granted to a mutual benefit reinsurance agreement, cede in whole or in part any
association until the Commissioner shall have been individual risk or risks under certificates of insurance
satisfied by such examination as may make and such issued by it, only to a life insurance company
evidence as he may require that the association is authorized to transact business or to a professional
qualified under existing laws to operate and transact reinsurer authorized to accept life risks in the
business as such. The Commissioner may refuse to Philippines: Provided, That copy of the draft of such
issue a license to any mutual benefit association if, in reinsurance agreement shall be submitted to the
his judgment, such refusal will best promote the Commissioner for his approval. The association may
interest of the members of such association and of take credit for the reserves on such ceded risks to the
the people of this country. Any license issued shall extent reinsured.
expire on the last day of June of the year following its
Sec. 395. The constitution or by-laws of a mutual
issuance and, upon proper application, may be
benefit association must distinctly state the purpose
renewed if the association is continuing to comply
for which dues and/or assessments are made and
with existing laws, rules and regulations, orders,
collected and the portion thereof which may be used
instructions, rulings and decisions of the
for expenses.
Commissioner. Every association receiving any such
license shall be subject to the supervision of the Death benefit and other relief funds shall be created
Commissioner: Provided, That no such license shall be and used exclusively for paying benefits due the
granted to any such association if such association members under their respective membership
has no actuary. certificates. A general fund shall likewise be created
and used for expenses of administration of the
All mutual benefit association existing and licensed as
association.
such under the provisions of Article Eight, Chapter
Forty-One of the Revised Administrative Code, as Sec. 396. Every outstanding membership certificate
amended by Act No. 3612, shall, upon effectivity of must have, after three full years of being continuously
this Code, surrender their respective licenses to the in force, an equity value equivalent to at least
Commissioner and apply for new licenses under the fifty per centum of the total membership dues
provisions of this code if they still desire to continue collected thereon.
operating as such mutual benefit associations. Sec. 397. Every mutual benefit association must
Sec. 392. No mutual benefit association shall be accumulate and maintain, out of the periodic dues
issued a license to operate as such unless it has collected from its members, sufficient reserves for the
constituted and established a Guaranty Fund by payment of claims or obligations for which it shall
depositing with the Commissioner an initial minimum hold funds in securities satisfactory to the
amount of ten thousand pesos in cash, or in Commissioner consisting of bonds of the Government
government securities with a total value equal to such of the Philippines, or any of its political subdivisions
amount, to answer for any valid benefit claim of any and instrumentalities, or in such other good securities
of its members. as may be approved by the Commissioner.
The reserve liability shall be established in accordance process to pay any debt of liability of a member or
with acturial procedures and shall be approved by the beneficiary, or any other person who may have a
Commissioner. right thereunder, either before or after payment.
The articles of incorporation or the constitution and Sec. 402. Any member of a mutual benefit association
by-laws of a mutual benefit association must provide shall have the right at all times to change the
that if its reserve as to all or any class of certificates beneficiary or beneficiaries or add another beneficiary
becomes impaired, its board of directors or trustees or other beneficiaries in accordance with the rules
may require that there shall be paid by the members and regulations of the association unless he has
to the association the amount of the members' expressly waived this right in the membership
equitable proportion of such deficiency as ascertained certificate. Every association may, under such rules as
by said board and that if the payment be not made it it may adopt, limit the scope of beneficiaries and
shall stand as an indebtedness against the provide that no beneficiary shall have or obtain any
membership certificates of the defaulting members vested interest in the proceeds of any certificate until
and draw interest not to exceed five per centum per the certificate has become due and payable under the
annum compounded annually. terms of the membership certificate.
Sec. 398. A mutual benefit association may invest Sec. 403. Any chapter affiliate independently licensed
such portion of its funds as shall not be required to as a mutual benefit association may consolidate or
meet pending claims and other obligations in any of merge with any other similar chapter affiliate or with
the classes of investments or types of securities in the mother association.
which life insurance companies doing business in the Sec. 404. Any mutual benefit association may be
Philippines may invest. converted into and licensed as a mutual life insurance
It may also grant loans to members on the security of company by complying with the requirements of the
a pledge or chattel mortgage of personal properties of pertinent provisions of this Code and submitting the
the borrowers, or in the absence thereof, on the specific plan for such conversion to the Commissioner
security of the membership certificate of the for his approval. Such plan, as approved, shall then
borrowing members, in which event such loan shall be submitted to the members either in the regular
become a first lien on the proceed thereof. meeting or in a special meeting called for the purpose
Sec. 399. The Commissioner or any of his duly for their adoption. The affirmative vote of at least
designated representatives, shall have the power of two-thirds of all the members shall be necessary in
visitation, audit and examination into the affairs, order to consider such plan as adopted.
financial condition, and methods of doing business of No such conversion shall take effect unless and until
all mutual benefit associations, and he shall cause approved by the Commissioner.
such examination to be made at least once every two Sec. 405. No mutual benefit association shall be
years or whenever it may be deemed proper and dissolved without first notifying the Commissioner and
necessary. Free access to the books, records and furnishing him with a certified copy of the resolution
documents of the association shall be accorded to the authorizing the dissolution, duly adopted by the
Commissioner, to his representatives, in such manner affirmative vote of two-thirds of the members at a
that the Commissioner or his representatives may meeting called for that purpose, the financial
readily verify or determine the true affairs, financial statements as of the date of the resolution, and such
condition, and method of doing business of such other papers or documents as may be required by the
association. In the course of such examination, the Commissioner.
Commissioner or his duly designated representatives No dissolution shall proceed until and unless approved
shall have authority to administer oaths and take by the Commissioner and all proceedings in
testimony or other evidence on any matter relating to connection therewith shall be witnessed and attested
the affairs of the association. by his duly designated representative.
All minutes of the proceedings of the board of No mutual benefit association shall be officially
directors or trustees of the association, and those of declared as dissolved until after the Commissioner so
the regular or special meetings of the members, shall certifies that all outstanding claims against the
be take, and a copy thereof, in English or in Pilipino, association have been duly settled and liquidated.
shall be submitted to the Commissioner's
Sec. 406. The Commissioner shall after notice and
representatives or examiners in the course of such
hearing, have the power either to suspend or revoke
examination.
the licensed issued to a mutual benefit association if
A copy of the findings of such examination, together he finds that the association
with the recommendations of the Commissioner, shall has:chanroblesvirtuallawlibrary
be furnished the association for its information and
(a) failed to comply with any provision of this Code;
compliance, and the same shall be taken up
immediately in the meetings of the board of directors (b) failed to comply with any other law or regulation
or trustees and of the members of the association. obligatory upon it;
Sec. 400. Every mutual benefit association shall, (c) failed to comply with any order, ruling, instruction,
annually on or before the thirtieth day of April of each requirement, or recommendation of the
year, render to the Commissioner an annual Commissioner;
statement in such form and details as may be (d) exceeded its power to the prejudice of its
prescribed by the Commissioner, signed and sworn to members;
by the president, secretary, treasurer, and actuary of (e) conducted its business fraudulently or
the association, showing the exact condition of its hazardously;
affairs on the preceding thirty-first day of December. (f) rendered its affairs and condition to one of
Sec. 401. No money, aid or benefit to be paid, insolvency; or
provided or tendered by any mutual benefit (g) failed to carry out its aims and purposes for which
association, shall be liable to attachment, it was organized due to any cause.
garnishment, or other process, or be seized, taken,
appropriated, or applied by any legal or equitable
After receipt of the order from the Commissioner Sec. 414. The Insurance Commissioner shall have the
suspending or revoking the license, the association duty to see that all laws relating to insurance,
must immediately exert efforts to remove such cause insurance companies and other insurance matters,
or causes which brought about the order, and, upon mutual benefit associations, and trusts for charitable
proper showing, may apply with the Commissioner for uses are faithfully executed and to perform the duties
the lifting of the order and restoration or revival of imposed upon him by this Code, and shall,
the license so revoked or suspended. notwithstanding any existing laws to the contrary,
Sec. 407. For failure to remove such cause or causes have sole and exclusive authority to regulate the
which brought about the suspension or revocation of issuance and sale of variable contracts as defined in
the license of a mutual benefit association, the section two hundred thirty-two and to provide for the
Commissioner shall apply under this Code for an order licensing of persons selling such contracts, and to
from the proper court to liquidate such association. issue such reasonable rules and regulations governing
The provisions of titles fourteen and fifteen, chapter the same.
three, pertaining to the appointment of a conservator The Commissioner may issue such rulings,
and proceedings upon insolvency of an insurance instructions, circulars, orders and decision as he may
company, shall, insofar as practicable, apply to deem necessary to secure the enforcement of the
mutual benefit associations. provisions of this Code, subject to the approval of the
Sec. 408. To secure the enforcement of any provision Secretary of Finance. Except as otherwise specified,
under this title, the Commissioner may issue such decisions made by the Commissioner shall be
rules, rulings, instructions, orders and circulars, appealable to the Secretary of Finance.
subject to the approval of the Secretary of Finance. Sec. 415. In addition to the administrative sanctions
Sec. 409. The violation of any provision of this title provided elsewhere in this Code, the Insurance
shall subject the person violating or the officer of the Commissioner is hereby authorized, at his discretion,
association responsible therefor to a fine of not to impose upon the insurance companies, their
exceeding one thousand pesos, or imprisonment of directors and/or officers and/or agents, for any willful
not exceeding three years, or both such fine and failure or refusal to comply with, or violation of any
imprisonment, at the discretion of the court. provision of this Code, or any order, instruction,
regulation, or ruling of the Insurance Commissioner,
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or any commission or irregularities, and/or conducting
TRUSTS FOR CHARITABLE USES
business in an unsafe or unsound manner as may be
Sec. 410. The term "trust for charitable uses", within determined by the Insurance Commissioner, the
the intent of this Code, shall include, all the real or following:chanroblesvirtuallawlibrary
personal properties or funds, as well as those
(a) fines not in excess of five hundred pesos a day;
acquired with the fruits or income therefrom or in
and
exchange or substitution thereof, given to or received
by any person, corporation, association, foundation, (b) suspension, or after due hearing, removal of
or entity, except the National Government, its directors and/or officers and/or agents.
instrumentalities or political subdivisions, for Sec. 416. The Commissioner shall have the power to
charitable, benevolent, educational, pious, religious, adjudicate claims and complaints involving any loss,
or other uses for the benefit of the public at large or a damage or liability for which in insurer may be
particular portion thereof or for the benefit of an answerable under any kind of policy or contract of
indefinite number of persons. insurance, or for which such insurer may be liable
Sec. 411. The term "trustee" shall include any under a contract of suretyship, or for which a
individual, corporation, association, foundation, or reinsurer may be sued under any contract of
entity, except the National Government, its reinsurance it may have entered into; or for which a
instrumentalities or political subdivisions, in charge of, mutual benefit association may be held liable under
or acting for, or concerned with the administration of, the membership certificates it has issued to its
the trust referred to in the section immediately members, where the amount of any such loss,
preceding and with the proper application of trust damage or liability, excluding interest, cost and
property. attorney's fees, being claimed or sued upon any kind
of insurance, bond, reinsurance contract, or
Sec. 412. The term "trust property" shall include all
membership certificate does not exceed in any single
real or personal properties or funds pertaining to the
claim one hundred thousand pesos.
trust as well as those acquired with the fruits or
income therefrom or in exchange or substitution The insurer or surety may, in the same action file a
thereof. counterclaim against the insured or the obligee.
The insurer or surety may also file a cross-claim
Sec. 413. All trustees shall, before entering in the
against a party for any claim arising out of the
performance of the duties of their trust, obtain a
transaction or occurrence that is the subject matter of
certificate of registration from the Commissioner.
the original action or of a counterclaim therein.
Trustees who are already discharging the duties of
their trust on the date this Code becomes effective With leave of the Commissioner, an insurer or surety
may continue as such, subject to the provisions of may file a third-party complaint against its reinsurers
this Code. for indemnification, contribution, subrogation or any
All provisions of this Code governing mutual benefit other relief, in respect of the transaction that is the
associations and such other provisions herein, subject matter of the original action filed with the
whenever practicable and necessary, shall be Commissioner.
applicable to trusts for charitable uses. The party filing an action pursuant to the provisions
Chapter VIII of this section thereby submits his person to the
THE INSURANCE COMMISSIONER jurisdiction of the Commissioner. The Commissioner
shall acquire jurisdiction over the person of the
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impleaded party or parties in accordance with and
ADMINISTRATIVE AND ADJUDICATORY POWERS
pursuant to the provisions of the Rules of Court.
The authority to adjudicate granted to the which shall be not less than the
Commissioner under this section shall be concurrent following:chanroblesvirtuallawlibrary
with that of the civil courts, but the filing of a For each certificate of authority issued to an
complaint with the Commissioner shall preclude the insurance company doing business in the Philippines,
civil courts from taking cognizance of a suit involving two hundred pesos.
the same subject matter. For each special certificate of authority issued to a
Any decision, order or ruling rendered by the servicing insurance company, one hundred pesos.
Commissioner after a hearing shall have the force and
For each license issued to a general agent of an
effect of a judgment. Any party may appeal from a
insurance company, fifty pesos.
final order, ruling or decision of the Commissioner by
filing with the Commissioner within thirty days from For each license issued to an insurance agent,
receipt of copy of such order, ruling or decision a twenty-five pesos.
notice of appeal to the Intermediate Appellate Court For each license issued to an agent of variable
in the manner provided for in the Rules of Court for contract policy, twenty-five pesos.
appeals from the Regional Trial Court to the For each license issued to an insurance broker, one
Intermediate Appellate Court. (As amended by Batas hundred pesos.
Pambansa Blg. 874). For each license issued to an reinsurance broker, one
As soon as a decision, order or ruling has become hundred pesos.
final and executory, the Commissioner shall motu For each license issued to an insurance adjuster, one
proprio or on motion of the interested party, issue a hundred pesos.
writ of execution requiring the sheriff or the proper
For each certificate of registration issued to an
officer to whom it is directed to execute said decision,
actuary, fifty pesos.
order or award, pursuant to Rule thirty-nine of
the Rules of Court. For each certificate of registration issued to a resident
For the purpose of any proceeding under this section, agent, fifty pesos.
the Commissioner, or any officer thereof designated For each license issued to a rating organization, one
by him, empowered to administer oaths and hundred pesos.
affirmation, subpoena witnesses, compel their For each certificate of registration issued to a non-life
attendance, take evidence, and require the production company underwriter, fifty pesos.
of any books, papers, documents, or contracts or For each license issued to a mutual benefit
other records which are relevant or material to the association, ten pesos.
inquiry. In case of contumacy by, or refusal to obey a For each certificate of registration issued to a trust for
subpoena issued to any person, the Commissioner charitable uses, ten pesos.
may invoke the aid of any court of first instance
All certificates of authority and all other licenses, as
within the jurisdiction of which such proceeding is
well as all certificates of registration, issued to any
carried on, where such person resides or carries on
person, partnership, association or corporation under
his own business, in requiring the attendance and
the pertinent provisions of this Code for which no
testimony of witnesses and the production of books,
expiration date has been prescribed, shall expire on
papers, documents, contracts or other records. And
the last day of June of each year and shall be
such court may issue an order requiring such person
renewed annually upon application therefor and
to appear before the Commissioner, or officer
payment of the corresponding fee, if the licensee or
designated by the Commissioner, there to produce
holder of such license or certificate is continuing to
records, if so ordered or to give testimony touching
comply with all the applicable provisions of existing
the matter in question. Any failure to obey such order
laws, and of rules, instructions, orders and decisions
of the court may be published by such court as a
of the Commissioner.
contempt thereof.
(2) For the filing of the annual statement referred to
A full and complete record shall be kept of all
in section two hundred twenty-three, the
proceedings had before the commissioner, or the
Commissioner shall collect and receive from the
officers thereof designated by him, and all testimony
insurance company so filing a fee of five hundred
shall be taken down and transcribed by a
pesos: Provided, That a fine of one hundred pesos
stenographer appointed by the Commissioner.
shall be imposed and collected by the Commissioner
A transcribed copy of the evidence and proceeding, or for each week of delay, or any fraction thereof, in the
any specific part thereof, of any hearing taken by a filing of the annual statement.
stenographer appointed by the Commissioner, being
For the filing of annual statement referred to in
certified by such stenographer to be a true and
section four hundred, the Commissioner shall collect
correct transcript of the testimony on this hearing of a
and receive from the mutual benefit association so
particular witness, or of a specific proof thereof,
filing a fee of ten pesos: Provided, That a fine of ten
carefully compared by him from his original notes,
pesos shall be imposed and collected by the
and to be a correct statement of evidence and
Commissioner for each week of delay, or any fraction
proceeding had in such hearing so purporting to be
thereof, in the filing of the annual statement.
taken and subscribed, may be received as evidence
by the Commissioner and by any court with the same (3) For the examination prescribed in section two
effect as if such stenographer were present and hundred forty-six, the Commissioner shall collect and
testified to the facts so certified. (As amended by receive fees according to the amount of its total
Presidential Decree No. 1455). assets, in the case of a domestic company, or of its
assets in the Philippines, in the case of a foreign
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company, as follows:chanroblesvirtuallawlibrary
FEES AND OTHER SOURCES OF FUNDS
(a) Two million pesos or more but less than four
Sec. 417. (1) For the issuance or renewal of
million pesos, Four hundred pesos;
certificates of authority, licenses and certificates of
registration, pursuant to pertinent provisions of this (b) Four million pesos or more but less than six
Code, the Commissioner shall collect and receive fees million pesos, Eight hundred pesos;
(c) Six million pesos or more but less than eight registered under the provisions of this Code and shall
million pesos, One thousand two hundred pesos; be governed by the provisions thereof: Provided,
(d) Eight million pesos or more but less than ten however, That where any such person, partnership,
million pesos, One thousand six hundred pesos; association or corporation is affected by the new
(e) Ten million pesos or more, Two thousand pesos; requirements of this Code, said person, partnership
Provided, That if the said examination is made in association or corporation shall, unless otherwise
places outside the Metropolitan Manila area, besides herein provided, be given a period of one year from
these fees, the Commissioner shall require of the the effectivity of this Code within which to comply
company examined the payment of the actual and with the same.
necessary travelling and subsistence expenses of the Sec. 422. Except as expressly provided by this Code,
examiner or examiners concerned. all laws or parts thereof inconsistent with any
For the examination prescribed in section three provision of this Code shall be deemed repealed.
hundred ninety-nine, the Commissioner shall collect Sec. 423. Should any provisions of this Code or any
and receive a minimum fee of one hundred pesos part thereof be declared invalid, the other provisions,
from the mutual benefit association so far as they are separable from the invalid ones,
examined:Provided, That if such association has total shall remain in force.
assets of more than one hundred thousand pesos, an Sec. 424. This Code shall take effect immediately.
additional fee of ten pesos for every fifty thousand DONE in the City of Manila, this 18th day of
pesos in excess thereof shall be imposed: Provided, December, in the year of Our Lord, nineteen hundred
further, That such fee shall not exceed two thousand and seventy-four.
pesos.
(4) For the filing of an application to withdraw from
the Philippines under title eighteen, the Commissioner
shall collect and receive from the foreign company so
withdrawing a fee of one thousand pesos.
(5) The Commissioner may fix and collect fees or
charges for documents, transcripts, or other materials
which may be furnished by him not in excess of
reasonable cost. (As amended by Presidential Decree
No. 1455).
Sec. 418. If the total expenses of the Insurance
Commissioner for every fiscal year exceed the
aggregate amount of the fees collected under the
pertinent provisions of this Code, the excess shall be
charged against the Insurance Fund, which shall
hereafter be created out of the proceeds of taxes on
insurance premiums mentioned in section two
hundred fifty-five of the National Internal Revenue
Code, as amended: Provided, however, That pending
the creation of said Insurance Fund, the provisions of
section two, three and four of Republic Act Numbered
Two Hundred Seventy-Five, shall continue to remain
in force and effect.
MISCELLANEOUS PROVISIONS
Sec. 419. Any person, company or corporation subject
to the supervision and control of the Commissioner
who violates any provision of this Code, for which no
penalty is provided, shall be deemed guilty of a penal
offense, and upon conviction be punished by a fine
not exceeding ten thousand pesos or imprisonment of
six months, or both, at the discretion of the court.
If the offense is committed by a company or
corporation, the officers, directors, or other persons
responsible for its operation, management, or
administration, unless it can be proved that they have
taken no part in the commission of the offense, shall
likewise be guilty of a penal offense, and upon
conviction be punished by a fine not exceeding ten
thousand pesos or imprisonment of six months, or
both, at the discretion of the court.
Sec. 420. All criminal actions for the violation of any
of the provisions of this Code shall prescribed after
three years from the discovery of such
violation: Provided, That such actions shall in any
event prescribe after ten years from the commission
of such violation.
Sec. 421. Any person, partnership, association or
corporation heretofore authorized, licensed or
registered by the Insurance Commissioner shall be
deemed to have been authorized, licensed or