Presidential Decree No. 63

Section Forty-eight of Act Numbered twenty-four hundred and twenty-seven,

otherwise known as "The Insurance Act", is amended to read as follows:

• Section 48

  A written instrument, in which a contract of insurance is set forth, is called a policy of insurance.

  • The policy shall be in the printed form which may contain blank spaces, and

    any word, phrase or clause necessary to complete a particular contract of insurance

    shall be typewritten on the blank spaces provided therein.

  • Any rider, clause, warranty or endorsement purporting to be part of the contract

    of insurance and which is pasted or attached to said policy is hereby declared

    not binding on the insured, unless the descriptive title or name of the rider,

    clause, warranty, or endorsement is also mentioned and typewritten on the blank

    spaces provided in the policy.

  • The Insurance Commission shall promulgate complimentary rules and regulations

    as will govern the requirements and procedures to be followed in the event policy

    alterations and amendments are necessary during the currency of an insurance policy."'

Section One hundred seventy-one of the same Act is further amended to

read as follows:

• Section 171

  It shall be the duty of the Insurance Commission to see that all laws

  relating to insurance and insurance companies are faithfully executed and to perform

  the duties imposed upon it by this Act.

  • It may issue such rulings, instructions and orders as it may deem necessary

    to secure the enforcement of the provisions of this Act, subject to the approval

    of the Secretary of Finance.

  • Any decision made by the Insurance Commission by virtue of the powers conferred

    upon it by this Act shall be appealable, unless otherwise specified, to the Secretary

    of Finance, whose decision shall be final.

• Section 171-(A)

  The Insurance Commission shall have the power to adjudicate claims

  and complaints involving any loss, damage or liability for which an insurer may

  be answerable under any kind of policy or contract of insurance or for which such

  insurer may be liable under any contract of guaranty or suretyship, including

  official recognizances, stipulations, bonds and undertakings issued under authority

  granted pursuant to Act No. 536, as amended by Act No. 2206, where the amount

  of any such loss, damage or liability being claimed or sued upon any kind of insurance

  or bond contract does not exceed in any single claim one hundred thousand pesos

  (P100,000.00), and any decision, order or ruling rendered by the Insurance Commission

  after a hearing shall have the force and effect of a judgment.

  • The aggrieved party may, within thirty (30) days from receipt, appeal from such

    decision, order or ruling to the Supreme Court.

  • The provisions of Rule 43 of the Rules of Court shall insofar as practicable

    apply to appeals from the Insurance Commission to the Supreme Court."'

Section One hundred seventy-two of the same Act is further amended to

read as follows:

• Section 172

  After the becoming effective of this Act, no foreign or domestic insurance

  company shall transact any insurance business in the Philippines until after it

  shall have obtained a certificate of authority for that purpose from the Insurance

  Commission upon application therefor and payment by the company concerned of the

  fees hereinafter prescribed.

  • The Insurance Commission may refuse to issue a certificate of authority to nay

    insurance company if, in its judgment, such refusal will best promote the interest

    of the people of this country. No such certificate of authority shall be granted

    to any such company until the Insurance Commission shall have satisfied itself

    by such examination as it may make and such evidence as it may require that such

    company is qualified by the laws of the Philippines to transact therein the kind

    or kinds of business applied for. Such certificate of authority shall expire on

    the last day of June of each year and shall be renewed annually if the company

    is continuing to comply with all the provisions of this chapter or the circulars,

    instructions or rulings of the Insurance Commission. Before issuing such certificate

    of authority, the Insurance Commission must be satisfied that the name of the

    company is not that of any other known company transacting a similar business,

    or a name so similar as to be calculated to mislead the public. Every company

    receiving any such certificate of authority shall be subject to the insurance

    laws of the Philippines and to the jurisdiction and supervision of the Insurance

    Commission.

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

    of life insurance and non-life insurance concurrently; provided that an insurance

    company may accept by way of reinsurance the kind or kinds of business specified

    in its certificate of authority.

  • All properties located in the Philippines shall be insured only with insurance

    companies duly authorized to do business in the Philippines. Violation of this

    provision shall subject the assured and/or the officers of the assured corporation

    to a fine of ten thousand pesos (P10,000.00) and imprisonment of six (6) months."'

Section One hundred seventy-five of the same Act is further amended to

read as follows:

• Section 175

  If the Insurance Commission is of the opinion upon examination or

  other evidence that any foreign or domestic insurance company is in an unsound

  condition, or that it has failed to comply with any provision of law or regulations

  obligatory upon it, or that in the opinion of the Insurance Commission, its condition

  or method of business is such as to render its proceedings hazardous to the public

  or to its policy holder or that its actual assets exclusive of its capital are

  less than its liabilities, unearned premiums and reinsurance reserve, the Insurance

  Commission is authorized to revoke or suspend all certificates of authority granted

  to such insurance company, its officers or agents, and no new business shall thereafter

  be done by such company or for such company by its agents in the Philippines while

  such revocation, suspension or disability continues or until its authority to

  do business is restored by the Insurance Commission.

  • The Insurance Commission is further authorized, after giving such opportunity

    to the company to be heard as it thinks fit, to appoint an administrator to manage

    the affairs and property of such company.

  • The administrator so appointed shall receive from the insurance company concerned

    such remuneration as the Insurance Commission may direct and the Insurance Commission

    may at any time cancel the appointment and appoint some other person as administrator.

  • The Administrator shall continue the management of the business of the insurer

    with the greatest economy compatible with the efficiency and shall, as soon as

    possible, file with the Insurance Commission a report stating which of the following

    courses of action is under the circumstances most advantageous to the general

    interest of the policyholders, namely: (a) the transfer of the business of the

    insurance company to another insurance company; (b) the continuance of the business

    by the insurance company; (c) the liquidation of the insurance company; or (d)

    such other courses of action as it deems advisable.

  • On the filing of the report with the Insurance Commission, the Insurance Commission

    may take such action as it thinks fit for promoting the interest of the policyholders

    in general.

  • The administrator may be another insurance company doing business in the Philippines,

    any officer of such company, or any other competent and qualified person or persons.

  • The administrator shall not be subject to any action, claim or demand by, or

    liability to, any person in respect of anything done or omitted to be done in

    good faith in the exercise, or in connection with the exercise, of the powers

    conferred on the administrator.

  • Any order issued by the Insurance Commission under this section shall be binding

    on all persons concerned, and shall have effect notwithstanding any provision

    in the Articles of Incorporation or By-Laws of the Insurance company.

  • Subject to the provisions of existing law and regulations on the matter, any

    domestic insurance company may, with the approval of the Insurance Commission

    consolidate or merge with any other domestic insurance company."'

Section One hundred seventy-five (A) to Section One hundred seventy-five

(U), of the same Act, is further amended to read as follows:

• Section 175(A)  Grounds for Liquidation.

  The Insurance Commission shall apply under

  this Act for an order directing it to liquidate any domestic insurance company

  or a Philippine branch of a foreign insurance company having security deposits

  or trusted assets in the country, whenever it finds that the company cannot be

  permitted to resume business with safety to its policyholders, or to its creditors,

  or to the public, or, upon the ground that the company has consented to such proceeding

  through a majority of its directors, stockholders, or members.

• Section 175(B)  Order of Liquidation: Rights and Liabilities.

  An order to liquidate

  the business of an insurance company shall direct the Insurance Commission to

  continue in possession, as the case may be, of the property of the company and

  to liquidate the business of the same and to deal with the property and business

  of the company in the name of the Insurance Commission or in the name of the company

  as the court may direct, and to give notice to all creditors who may have claims

  against the company to present their claims.

  • The Commission shall be vested by operation of law with the title to all of

    the property, contracts, rights of action, and all of the books and records of

    the insurance company as of the date of the entry of the order so directing them

    to liquidate. The filing or recording of such order in any office where the instruments

    affecting title to property are required to be filed or recorded shall impart

    the same notice that a deed, contract of sale or other evidence of title duly

    filed or recorded would have imparted. The rights and liabilities of the company

    and of its creditors, policyholders, stockholders, members and all other persons

    interested in its estate shall, unless otherwise directed by the court, be fixed

    as of the date of the entry of the order directing the liquidation of such insurance

    company in the office of the clerk of court where the company had its principal

    office for the transaction of business upon the date of the institution of proceedings

    under this Act. The right of claimants holding contingent claims on said date

    to share in an insolvent estate shall be determined by this Act.

  • The Insurance Commission shall reinsure all the policy obligations of the company

    in any solvent insurance company authorized to do business, if the unearned premium

    reserve of such company is sufficient to effect such reinsurance. If such unearned

    premium reserve is insufficient for the purpose, the Insurance Commission shall

    reinsure a percentage of each policy of such company outstanding to the extent

    that its unearned premium reserve may be sufficient for the purpose. No contract

    of reinsurance shall be entered into by the Insurance Commission except in the

    pursuance of an order of the court directing the reinsurance and establishing

    the general form of the contract for the same.

• Section 175(C)  Ground for Dissolution of Domestic Insurance Company.

  The Insurance Commission may apply under this Act for an order dissolving the corporate existence

  of a domestic insurance company at any time after an order of liquidation has

  been granted, or at any time upon the grounds specified in this Act.

• Section 175(D)  Commencement of a Proceeding.

  The Insurance Commission may, the

  Solicitor-General representing it, commence any proceeding under this Act by an

  application to the Court of competent jurisdiction, in the Judicial District in

  which the principal office of the insurance company involved is located, for an

  order directing such company to show cause why, the Insurance Commission should

  not have the relief prayed for. On the return of such order to show cause, and

  after a full hearing, which shall be held by the court without delay such court

  or judge shall either deny the application or grant the same together with such

  other relief as the nature of the case and the interest of policyholders, creditors,

  stockholders, members, and the public may require. All proceedings under this

  Act shall be given preference in the courts.

• Section 175(E)  Service of Order to Show Cause.

  The order to show cause and the

  papers upon which the same is made in any proceedings under this Act shall to

  served upon the insurance company named in such order by delivering them to the

  president or other head of the corporation, the secretary or clerk to the corporation,

  the cashier, the treasurer or a director or managing agent; if it be a voluntary,

  unincorporated or a joint stock association, order or society, by delivering them

  to the President, Vice-President, Treasurer, Director, Trustee or other officer

  or a member with managerial powers.

• Section 175(F)  Injunctions.

  Upon application by the Insurance Commission for an

  order to show cause under this Act, or at any time thereafter, the Court in which

  such order is made, or any judge thereof may without notice, issue an injunction

  restraining the company named in the order, its officers, directors, stockholders,

  members, trustees, agents, servants, employees, policyholders, attorneys, managers

  and all other persons from the transaction of its business or the waste or disposition

  of its property until further order of the court.

  • Such court or judge mat at any time during a proceeding under this Act issue

    such other injunctions or orders as may be deemed necessary to prevent interference

    with the Insurance Commission or the preceding, or waste of the assets of the

    company, or the prosecution of any action, or the obtaining of preferences, judgments,

    attachment or other liens, or the making of any levy against the corporation or

    against its assets or any part thereof.

• Section 175(G)  Annual Report.

  The Insurance Commission shall transmit to the Secretary

  of Finance in its annual report, the names of all insurance companies proceeded

  against under this article together with such facts as shall acquaint the policyholders,

  creditors, stockholders, and the public with all proceedings. To the end the officer

  in charge of any such company shall file annually with the Insurance Commission

  a report of the affairs of such company.

• Section 175(H)  Appointment of Deputies: Employment of Assistants: Payment of Salaries and Expenses.

  For the purpose of this Act, the Insurance Commission shall have

  the power to appoint under its hand and official seal, one or more officers-in-charge,

  as its agent or agents, and to employ such counsel, clerks and assistants as may

  be deemed necessary, and to give these persons such powers as may be considered

  wise.

  • The compensation of such officers-in-charge, counsels, clerks and assistants,

    and all expenses of conducting any proceeding under this Act shall be fixed by

    the Insurance Commission, subject to the approval of the court, and may, on certificate

    of the Insurance Commission, be paid out of the funds or assets of such company.

• Section 175(I)  Examinations: Immunity: Action upon Refusal to be Examined.

  At any time during the progress of any proceeding taken under this Act, the Insurance

  Commission shall have the powers, either by itself or by its duly authorized representatives

  to subpoena witnesses to compel their attendance, to administer oaths, and to

  examine any person under oath, and in connection therewith to require the production

  of any books or papers relevant to the inquiry. If a person subpoenaed to attend

  such inquiry fails to obey the command of a subpoena without reasonable excuse,

  or if a person in attendance upon inquiry, shall, without reasonable cause, refuse

  to be sworn, or to be examined, or to answer a question, or to produce a book

  or papers when ordered to do so by the officer duly conducting such inquiry, or

  if a corporation, association, partnership, or individual fails to perform any

  act required hereunder to be performed, he shall be required by the court to comply

  with the order of the officer duly conducting such inquiry.

  • If any person ask to be excused from testifying or producing any book or paper

    or other document before the Insurance Commission or before any person duly designated

    by it to conduct any such investigation upon the ground or for the reason that

    the testimony or evidence, documentary or otherwise, required of him may tend

    to incriminate him or degrade him or to subject him to a penalty or forfeiture,

    and shall notwithstanding be directed by the Insurance Commission or by the person

    duly designated by the Insurance Commission to conduct any such inquiry to testify

    or to produce any book, paper or document, he must nonetheless comply with such

    direction but in such event he shall not thereafter be prosecuted or subjected

    to any penalty or forfeiture for or on account of any transaction, matter or thing

    concerning which he may testify or produce, documentary or otherwise, pursuant

    thereto and no testimony so given or produced shall be received against him upon

    any criminal action, suit or proceeding, investigation or inquiry. No person testifying

    shall be exempt from prosecution or punishment for any perjury or other false

    statement committed or made by him in his testimony given as herein provided for.

• Section 175(J)  Exemption from Filing Fees.

  The Insurance Commission shall not

  be required to pay fee to any public officer for filing, recording, or in any

  manner authenticating any paper or instrument relating to any proceeding under

  this Act.

• Section 175(K)  Deposit of Monies Collected: Preference.

  The monies collected by

  the Commission in a proceeding under this Act, shall be, from time to time, deposited

  in one or more banks, savings banks, or trust companies authorized by the Central

  Bank of the Philippines to do business in the Philippines.

• Section 175(L)  Voidable Transfer.

  Any transfer of, or lien upon, the property

  of an insurance company made or created within four months prior to the granting

  of an order to show cause under this Act, with the intent of giving to any creditor

  or of enabling him to obtain greater percentage of his debt than any other creditor

  of the same class which is accepted by such creditor having reasonable cause to

  believe that such preference will occur, shall be voidable.

  • The Insurance Commission as liquidator may avoid any transfer or lien upon the

    property of an insurance company which any creditor, stockholder or member of

    the company might have avoided and may recover the property so transferred or

    its value from the person to whom it was transferred unless he was a bona fide

    holder for value prior to the date of the entry of the order of liquidation. The

    property may be recovered or its value collected from whomever may have received

    it except a bona fide holder for value.

• Section 175(M)  Priority of Claims for Wages.

  All wages actually owing to clerical

  employees of the insurance company against whom a proceeding under this Act is

  commenced, for services rendered within three months prior to the commencement

  of such proceedings, not exceeding one thousand five hundred pesos to each employee,

  shall be paid prior to the payment of every other debt or claim, and in the discretion

  of the Insurance Commission may be paid as soon as possible after the proceeding

  has been commenced. At all times, sufficient funds shall be reserved for the expenses

  of administration.

• Section 175(N)  Offset.

  In all cases of mutual debts or mutual credits between

  the insurance company and another person, such credits and debts shall be offset

  and the balance only shall be allowed or paid.

  • No offset shall be allowed in favor of any such person, however, where (a) the

    obligation of the company to such person would not then entitle him to share as

    a claimant in the assets of such insurance company, or (b) the obligation of the

    company to such person was purchased by or transferred to such person with a view

    of its being used as an offset, or (c) the obligation of such person is to pay

    an assessment levied against the members of a mutual insurance company or to pay

    a balance upon a subscription to the capital stock of a stock insurance corporation.

• Section 175(O)  Sale or Other Disposition of Assets and Compromise of Claims.

  The Insurance Commission may, subject to the approval of the Court, (a) sell or otherwise

  dispose of the real and personal property, or any part thereof, of the insurance

  company against whom a proceeding has been brought under this Act and (b) sell

  or compound all doubtful or uncollectible debts or claim owed by or owing to such

  company provided that whenever the amount of such debt or claim owed by or owing

  to such company does not exceed one thousand pesos, the Insurance Commission may

  compromise or compound the same upon such terms as it may deem for the best interest

  of said company without obtaining the approval of the Court.

• Section 175(P)  Borrowing on the Pledge of Assets.

  For the purpose of facilitating

  the liquidation provided for by this Act the Insurance Commission may, subject

  to the approval of the Court, borrow money and execute, acknowledge and deliver

  notes or other evidence of indebtedness therefor and secure the repayments of

  same by the mortgage, pledge, assignment, transfer in trust, or hypothecation

  of any or all of the property, whether real, personal or mixed, of the company

  against whom a proceeding has been brought under this Act and the Insurance Commission,

  subject to the approval of the Court, shall have power to take any and all other

  action necessary and proper to consummate any such loans and to provide for the

  repayment thereof.

• Section 175(Q)  Time to File Claims Against Insolvent Insurance Company.

  Upon the granting of an order for the liquidation of an insurance company, the Court shall

  after such notice and hearing, as it deems proper, make an order declaring such

  company to be insolvent. Thereupon, regardless of any prior notice which may have

  been given to creditors, the Insurance Commission shall notify all persons who

  may have claims against such company and who have not filed proper proofs thereof,

  to present the same to him at a place specified in such notice within four months

  or some longer time in the discretion of the Court, if the Insurance Commission

  shall certify that it is necessary, and not otherwise, from the date of the entry

  of such order. The last day for the filing of proofs of claim shall be specified

  in the notice. The notice shall be given in a manner determined by the Court.

  • Proofs of claim may be filed subsequent to the date specified but, no such claim

    shall share in the distribution of the assets until all allowed claims, proofs

    of which have been filed before said date, have been paid in full with interest.

• Section 175(R)  Proof and Allowance of Claims.

  A proof of claim shall consist of

  a statement under oath, in writing, signed by the claimant, setting forth the

  claim, the consideration thereof, and whether any, and is so, what payments have

  been made thereon, and that the sum claimed is justly owing from the company to

  the claimant. Whenever a claim is founded upon an instrument in writing, such

  instrument, unless lost shall be filed with the proof of claim. If such instrument

  is lost or destroyed, a statement of such fact and of the circumstances of loss

  or destruction shall be filed under oath with the claim.

  • Upon the liquidation of any insurance companies which has issued policies insuring

    the lives of persons, the Insurance Commission shall, within thirty days after

    the last day set for filing of claims, make a list of the persons who have not

    filed proofs of claim with the Insurance Commission, to whom it appears to its

    entire satisfaction from the books of the company, there are owing amounts on

    such policies and the Insurance Commission shall set opposite the name of each

    person the amount so owing to such person. Each person whose name shall appear

    upon the list shall be deemed to have duly filed prior to the last day set for

    filing of claims a proof of claim for the amount set opposite his name of said

    list.

  • No contingent claim shall have in a distribution of the assets of the company

    which has been adjudicated to be insolvent except that such claims shall be considered,

    if properly presented, and may be allowed to share where (1) such claim becomes

    absolute against the company on or before the last day fixed for the filing of

    proofs of claim against the assets of such company, or (2) there is a surplus

    and the liquidation is thereafter conducted upon the basis that such company is

    solvent.

  • Where an insurance company has been adjudicated to be insolvent, any person

    who has a cause of action against an assured of such company, which is the subject

    of indemnity under a liability policy issued by such company, shall have the right

    to file a claim in the liquidation proceeding, regardless of the fact that such

    claim may be contingent, and such claim may be allowed; provided (1) that it may

    be reasonably inferred from the proof presented upon such claim that such person

    would be able to obtain a judgment upon such cause of action against such company;

    (2) that such person shall furnish suitable proof that no further valid claims

    against such company arising out of his cause of action other than those already

    presented can be made unless for good cause shown the Court in which the proceeding

    is pending shall otherwise direct; (3) that the total liability of such company

    to all claimants arising out of the same act of its assured shall be no greater

    that the total liability would be were it not in liquidation; (4) that no judgment

    taken by default or by collusion, against such an assured shall be considered

    as evidence in the liquidation proceeding either of the liability of such assured

    to such person upon such cause of action or of the amount of damages to which

    such person is therein entitled.

  • No claim of any secured claimant shall be allowed at a sum greater than the

    difference between the value of the security and the amount for which the claim

    is allowed, unless the claimant shall surrender his security to the Insurance

    Commission in which event the claim shall be allowed in the full amount for which

    it is valued.

• Section 175(S)  Distribution of Assets; Priorities; Unclaimed Dividends.

  At any time after the last day fixed for filing of proofs of claim in the liquidation

  of an insurance company, the Court may, upon the application of the Insurance

  funds remaining in its hand after the payment of expenses one or more dividends.

  Such order shall specify what claims, if any, are entitled to priority of payment

  and shall direct the manner in which dividends shall be paid. Where there has

  been no adjudication of insolvency, the Insurance Commission shall pay all allowed

  claims in full and shall distribute the balance of the assets remaining in his

  hands in accordance with the direction of the Court.

  • Dividends remaining unclaimed or unpaid in the hands of the Insurance Commission

    for six months after the final order of distribution may be deposited in one or

    more banks, trust companies or savings banks authorized by the Central Bank of

    the Philippines to do business in the Philippines to the credit of the Insurance

    Commission, in trust for the person entitled thereto. All these deposits shall

    be entitled to priority of payment in case of the insolvency or voluntary liquidation

    of the depository on an equality with any other priority given by the Central

    Banking Act.

• Section 175(T)

  The Insurance Commission or its representative duly designated

  or appointed under this Act shall not be subject to any action, claim or demand

  by, or liability to, any person in respect of anything done or omitted to be done

  in good faith in the exercise, or in connection with the exercise, of the powers

  conferred on the Insurance Commission or its aforesaid representative.'

Section One hundred seventy-eight of the same Act is further amended to

read as follows:

• Section 178

  No foreign insurance company shall engage in business in the Philippines

  unless possessed of paid up unimpaired capital or assets and reserve not less

  than that herein required of domestic insurance companies; and no insurance company

  organized or existing under the government or laws other than those of the Philippines

  shall engage in business in the Philippines until it shall have deposited with

  the Insurance Commission for the benefit and security of its policyholders and

  creditors in the Philippines, securities satisfactory to the Insurance Commission

  consisting of good securities of the Philippines, including new issues of stock

  of registered enterprises as this term is defined in The Investment Incentives

  Act, to the actual market value of not less than the minimum paid-up capital required

  of domestic insurance companies: Provided, That at least fifty per centum of such

  securities shall consist of bonds of other evidences of debt of the Government

  of the Philippines, it political subdivisions and instrumentalities, or of government-owned

  or controlled corporations and entities, including the Central Bank. The total

  investment of a foreign insurance company in any registered enterprise shall not

  exceed fifteen per centum (15%) of the capital of said investor nor twenty per

  centum (20%) of the capital of the registered enterprise, unless previously authorized

  in writing by the Insurance Commission. Foreign insurance companies already doing

  business in the Philippines on the date this Amendatory Act becomes effective

  shall comply with the requirement increasing their respective deposits as provided

  in this Act not later than June thirty, nineteen hundred and seventy-three."'

Section One hundred seventy-eight (A) of the same Act is further amended

to read as follows:

• Section 178-A

  Every foreign company doing business in the Philippines shall set

  aside at least sixty per centum of the legal reserves of the policies written

  in the Philippines and invest and keep the same therein in accordance with the

  provisions of this Section. Foreign insurance companies doing business in the

  Philippines shall comply with this requirement not later than June thirty, nineteen

  hundred and seventy-three. The legal reserve herein required to be set aside shall

  be invested only in the classes of the Philippine securities described in Section

  Two Hundred of the Insurance Act, as amended: Provided, however, That no investment

  in stocks or bonds of any single entity shall in the aggregate exceed fifteen

  per centum of the capital of the investing company or twenty per centum of the

  capital of the issuing company, whichever is the lesser, unless otherwise approved

  in writing by the Insurance Commission: Provided, further, That in determining

  the amount to be invested and kept in the Philippines under this section, a company

  shall be given credit for the amount of securities deposited by such company under

  this section one hundred and seventy-eight of this Act, as amended. The securities

  purchased and kept in the Philippines under this section, shall not be sent out

  of the territorial jurisdiction of the Philippines without the written consent

  of the Insurance Commission.

Section One hundred and eighty of the same Act is further amended to read

as follows:

• Section 180

  Every insurance company doing business in the Philippines shall terminate

  its fiscal period on the thirty-first day of December every year and shall annually

  on or before the thirtieth day of April of its year render to the Insurance Commission

  a statement signed and sworn to by the chief officer of such company showing,

  in such form and detail as may be prescribed by the Insurance Commission, the

  exact condition of its affair on the preceding thirty-first day of December.

  • For the filing of the annual statement, the Insurance Commission shall collect

    and receive from all insurance companies doing business in the Philippines a fee

    of twenty five pesos: Provided, That a fine of one hundred pesos shall be imposed

    and collected by the Insurance Commission for each week of delay, or any fraction

    thereof, in the filing of the annual statement.

Section One Hundred eighty-one of the same Act is amended to read as follows:

• Section 181

  Immediately upon approval of the annual statements by the Insurance

  Commission, every insurance company doing business in the Philippines shall publish

  in two newspapers of general circulation in the City of Manila, one published

  in English and one in Pilipino, a full synopsis of its annual financial statements

  showing fully the condition of its business, and setting forth its resources and

  liabilities.

Section One hundred eighty-four of the same Act, as amended, is further

amended by adding thereto paragraph (k) to read as follows:

• k

  A provision that all claims under the policy, whether for living,

  death or any other benefits, shall, if payable, be paid to the insured for the

  beneficiary, as the case may be, provided that should the beneficiary be a minor

  irrevocably designated, a judicial guardian for such minor need not be appointed

  if the amount of the policy does not exceed twenty thousand pesos.

Section One hundred eighty-four (A) of the same Act, as amended, is further

amended to read as follows:

• Section 184(A)

  The term "Industrial life insurance" as used in this Act shall

  mean that form of life insurance either (a) under which the premiums are payable

  weekly or (b) under which the premiums are payable monthly or oftener, but less

  often than weekly, if the face amount of insurance provided in any policy is three

  thousand pesos or less and if the words "industrial policy" are printed upon the

  policy as part of the descriptive matter.

Section One hundred eighty-four (D) of the same Act, as amended, is further

amended to read as follows:

• Section 184(D)

  Variable contract may be issued on the industrial life basis, provided

  that the pertinent provisions of this Act governing variable contracts are complied

  with in connection with such contracts.

Section One hundred eighty-five of the same Act is further amended by

adding a new section to be known as Section One hundred eighty-five (A) to read

as follows:

• Section 185(A)  Variable Contracts.
  • 1  Definitions.

    When used in this Act, the

    term "variable" shall mean any policy or contract on either a group or on an individual

    basis issued by an insurance company providing for benefits or other contractual

    payments or values thereunder to vary so as to reflect investment results of any

    segregated portfolio of investments or of a designated separate account in which

    amounts received in connection with such contracts shall have been placed and

    accounted for separately and apart from other investments and accounts. This contract

    may also be provide benefits or values incidental thereto payable in fixed or

    variable amounts, or both. It shall not be deemed to a "security" or "securities"

    as defined in Commonwealth Act Numbered Eighty-three (Securities Act), or Republic

    Act Numbered Twenty-six hundred and twenty-nine (Investment Company Act), nor

    subject to regulation under said Acts.

  • 2  Qualification of Insurers.

    No domestic insurance company shall issue, deliver

    or use any variable contract, and no foreign insurance company authorized to transact

    business in the Philippines, shall issue, deliver or sell any variable contract

    in the Philippines, unless and until such company shall have satisfied the Insurance

    Commission that its financial and general condition and its methods of operation,

    including the issue and sale of variable contracts, are not and will not be hazardous

    to the public or to its policy and contract owners. No foreign insurance company

    shall issue, deliver or sell any variable contract in the Philippines unless authorized

    to do so by the laws of its domicile. In determining the qualifications of a company

    requesting authority to issue, deliver or use variable contracts, the Insurance

    Commission shall always consider the following:

    • a

      the history, financial and general condition of the company; provided that

      such company, if a domestic company must have a paid-up capital, of not less than

      Two Million Pesos and an unassigned surplus of One Million Pesos, and, in case

      of a foreign company, must have deposited with the Insurance Commission for the

      benefit and security of its variable contract owners in the Philippines, securities

      satisfactory to the Insurance Commission consisting of bonds of the Government

      of the Philippines or its instrumentalities with an actual market value of Two

      Million Pesos;

    • b

      the character, responsibility and fitness of the officers and directors

      of the company; and

    • c

      the law and regulation under which the company is authorized in the state

      of domicile to issue such contracts.

    • If after notice and hearing, the Insurance Commission shall find that the company

      is qualified to issue, deliver and use variable contracts in accordance with this

      Act and the regulations and rules issued thereunder, the corresponding order of

      authorization shall be issued. Any decision or order denying authority to issue,

      sell or deliver variable contracts shall clearly and distinctly state the reasons

      and ground on which it is based.

    • The decision or order of the Insurance Commission by virtue of the provision

      of this Act shall be appealable to the Secretary of Finance, whose decision shall

      be final.

  • 3  Contracts Shall Contain Certain Provisions.
    • a

      Every variable contract delivered

      or issued for delivery in the Philippines and every certificate evidencing variable

      benefits issued pursuant to any such contract on a group basis, shall contain

      a statement of the essential features of the procedures to be followed by the

      issuing company in determining the amount of variable benefits or other contractual

      payments or values thereunder and shall state in clear terms that such amounts

      may decrease or increase according to such procedure. Every such contract delivered

      or issued for delivery in the Philippines, and every such certificate, shall contain

      on its first page, in a prominent position, a clear statement that the benefits

      or other contractual payments or values thereunder are on a variable basis.

    • a

      Every individual variable contract delivered or issued for delivery shall

      stipulate the method of determining the variations in the amount of variable benefits

      or other contractual payments or values thereunder due to variations in investment

      and experience, and shall guarantee that the expenses and mortality results shall

      not adversely affect such amounts;

    • b

      Every individual variable contract delivered or issued for delivery shall

      contain in substance the following provisions or other provisions more favorable

      or at least as favorable to the contract owner and approved by the Insurance Commission:

      • i

        That, in the event of default in the payment of any consideration beyond

        the period of grace allowed by the contract for the payment thereof, the company

        will make payment of the value of the contract, as determined thereunder, in accordance

        with a plan provided by the contract or agreed upon by the contract owner and

        the company, such payments to commence not later than the date contractual payments

        were otherwise to have commenced in accordance with the contract;

      • ii

        That, upon written request of the contract owner and surrender of the contract,

        the company will make payment of the value of the contract, as determined thereunder,

        in accordance with a plan provided by the contract and selected by the contract

        owner or as agreed upon by the contract owner and the company;

      • iii

        That, the company will mail to the contract owner not less than semi-annually

        after the first contract year, a report in a form approved by the Insurance Commission

        which shall include a statement of the number of units of uniform value credited

        to such contract and the value of each such unit as of a date not more than four

        (4) months previous to the date approved by the Insurance Commission, of the investments

        held in the segregated portfolio of investments or separate account or accounts

        designated in such contract;

    • c

      Every group variable contract delivered or issued for delivery shall stipulate

      the method of determining the variations in the amount payable with respect to

      a unit of variable benefits purchased thereunder due to variations in investment

      experience, and shall guarantee that expense and mortality results shall not adversely

      affect such amounts.

  • 3  Optional Fixed Benefits and Payments.

    Any insurance company issuing variable

    contract pursuant to this Act may in its discretion issue contracts providing

    a combination of fixed amount and variable amount of benefits and for optional

    lump-sum payment of benefits.

  • 5  Approval Requirements.

    Every variable contract form delivered or issued for

    delivery in the Philippines, and every certificate form evidencing variable benefits

    issued pursuant to any such contract on a group basis, and the application, rider

    and endorsement forms applicable thereto and used in connection therewith, shall

    be and are hereby expressly made subject to the approval requirements of Section

    One hundred eighty-four of this Act.

  • 6  Certain Illustrations Prohibited.

    Illustration of benefits payable under

    any variable contract shall not include or involve projections of past investment

    experience into the future and shall conform with the rules and regulations promulgated

    by the Insurance Commission.

  • 7  Separate Accounts and Operations of Same.

    Every insurance company authorized

    pursuant to this section to issue, deliver or use variable contracts shall, in

    connection with same, establish one or more separate accounts to be known as separate

    variable accounts. All amounts received by the company in connection with any

    such contract which are required by the terms thereof, to be allocated or applied

    to one or more designated separate variable accounts shall be placed in such designated

    account or accounts. The assets and liabilities of each such separate variable

    accounts shall at all times be clearly identifiable and distinguishable from the

    assets and liabilities in all other accounts of the company. Notwithstanding any

    provision of law to the contrary, the assets held in any such separate variable

    account shall not be chargeable with liabilities arising out of any other business

    the company may conduct but shall be held and applied exclusively for the benefit

    of the owners or beneficiaries of the variable contracts applicable thereto. In

    the event of the insolvency of the company, the assets of each such separate variable

    account shall be applied to the contractual claims of the owners or beneficiaries

    of the variable contracts applicable thereto. Except as otherwise specifically

    provided by the contract, no sale, ex-exchange, or the transfer of assets may

    be made by a company, between any of its separate accounts or between any other

    investment account and one or more of its separate accounts, unless, in the case

    of a transfer into a separate account, such transfer is made solely to establish

    the account or to support the operation of the contracts with respect to the separate

    account to which the transfer is made, or in case of a transfer from a separate

    account, such transfer would not cause the remaining assets of the account to

    become less than the reserves and other contract liabilities with respect to such

    separate account. Such transfer, whether into or from a separate account, shall

    be made by a transfer of cash, or by a transfer of securities having a valuation

    which could be readily determined in the market place, provided that such transfer

    of securities is approved by the Insurance Commission. The Insurance Commission

    may authorize other transfers among such accounts, if, in its opinion, such transfers

    would not be inequitable. All amounts and assets allocated to any such separate

    variable account shall be owned by the company and with respect to same the company

    shall not be nor hold itself out to be a trustee.

  • 8  Investment of Separate Account Funds.

    Any insurance company which has established

    one or more separate variable accounts pursuant to this Act may invest and reinvest

    all or any part of the assets allocated to any such account in the securities

    and investments authorized by Section 197, Section 200 and Section 200 (A) of

    this Act for any of the funds of an insurance company, free and clear of any and

    all limitations and restrictions in such sections. In addition thereto such company

    may also invest in common capital stocks or other equities which are listed on

    or admitted to trading in a securities exchange located in the Philippines, or

    which are publicly held and traded in the "over-the-counter market" as defined

    by the Insurance Commission and as to which market quotations have been available,

    provided, however, that no such company shall invest in excess of ten per centum

    of the assets of any such separate variable account in any one corporation issuing

    such common capital stock. The assets and investments of such separate variable

    accounts shall not be taken into account in applying the quantitative investment

    limitations applicable to other investments of the company. In the purchase of

    common capital stock or other equities, the insurer shall designate to the broker,

    or to the seller if the purchase is not made through a broker, the specific variable

    account for which the investment is made.

  • 9  Valuation of Assets.

    Assets allocated to any separate variable account shall

    be valued at their market value on the date of any valuation, or if there is no

    readily available market then in accordance with the terms of the variable contract

    applicable to such assets, or if there are no such contract terms then in such

    manner as may be prescribed by the rules and regulations of the Insurance Commission.

  • 10  Reserve Liability.

    The reserve liability for variable contracts shall be

    established in accordance with actuarial procedures that recognize the variable

    nature of the benefits provided and shall be approved by the Insurance Commission.

  • 11  Separate Annual Statements.

    Every insurance company authorized pursuant

    to this section to issue, deliver or use variable contracts shall annually file

    with the Insurance Commission separate annual statement of its separate variable

    accounts. Such statement shall be on a form prescribed or approved by the Insurance

    Commission and shall include details as to all of the income, disbursements, assets

    and liability items of and associated with the said separate variable accounts.

    Said statement shall be under oath of two officers of the company and shall be

    filed simultaneously with the annual statement required by section one hundred

    eighty of this Act.

  • 12  Variable Contract Agents' Licenses.

    Any provision of existing laws to the

    contrary notwithstanding, no person shall, within the Philippines, sell or offer

    for sale a variable contract or do or perform any act or thing in the sale, negotiation,

    making or consummating of any variable contract other than for himself unless

    such person shall have a valid and current certificate from the Insurance Commission

    authorizing such person to act as a variable contract agent. No such certificate

    shall be issued unless and until the said Commission is satisfied, after examination

    that such person is by training, knowledge, ability and character qualified to

    act as such agent. Any such certificate may be withdrawn and cancelled by said

    Commission after notice and hearing, if it shall find that the holder thereof

    does not then have the qualifications required for the issuance of such certificate.

  • 13  Rules and Regulations.

    Any existing laws to the contrary notwithstanding,

    the Insurance Commission shall have sole and exclusive authority to regulate the

    issuance and sale of contracts on a variable basis and to provide for licensing

    of persons selling such contracts, and to issue such reasonable rules and regulations

    as may be appropriate to carry out the provisions of this Act.

Section One hundred ninety-two of the same Act is further amended to read

as follows:

• Section 192

  It shall be unlawful for any person, company, or corporation in the

  Philippines either to procure, receive, or forward application for insurance in

  or to issue, or the deliver or accept policies of or for any company or companies

  not having been legally authorized to transact business in the Philippines, as

  provided in this Chapter; and any such person, company, or corporation violating

  the provisions of this section shall be deemed guilty of a penal offense, and

  upon conviction thereof, shall for each such offense, be punished by a fine of

  ten thousand pesos (P10,000.00) and imprisonment of six (6) months: Provided,

  That the provisions of this section shall not apply to reinsurance: And provided,

  further, That every insurance company doing business in the Philippines shall

  reinsure with insurance or reinsurance companies likewise doing business in the

  Philippines such percentage of the sum assured on its policy as may be specified

  by the Insurance Commission in a circular duly approved by the Secretary of Finance.

  The circular shall specify the percentage of the sum assured on each policy to

  be reinsured: Provided, That different percentage may be specified for different

  classes of business: And provided, further, That the proportions in which the

  percentage shall be allocated among the assuming insurance or reinsurance companies

  may also be specified in said circular.

Section One hundred ninety-five of the same Act is further amended to

read as follows:

• Section 195

  No domestic insurance company shall, if a stock corporation, engage

  in business in the Philippines unless possessed a paid-up capital stock equal

  to at least two million pesos: Provided, however, That the Secretary of Finance

  may, upon recommendation of the Insurance Commission, increase such minimum paid-up

  capital stock, under such terms and conditions as he may impose, to an amount

  which, in his opinion would be sufficient to reasonably assure the solvency of

  the company and the safety of the interests of the people of this country: Provided,

  That, a domestic insurance company already doing business in the Philippines with

  a paid-up capital which is less than that herein prescribed shall comply with

  the requirement increasing its paid-up capital not later than December thirty-one,

  nineteen hundred and seventy-three: Provided, further, That the Secretary of Finance,

  upon recommendation of the Insurance Commission, may, in addition to the paid-up

  capital stock, require the stockholders to pay in cash to the company in proportion

  to their subscription interests a contributed surplus fund of not less than one

  million pesos, in the case of a life insurance company, or not less than five

  hundred thousand pesos, in the case of an insurance company other than life. If

  organized as a mutual company, in lieu of such capital stock, it must have available

  cash assets of at least one million pesos above all liabilities for losses reported,

  expenses, taxes, legal reserve, and reinsurance of all outstanding risks, and

  the contributed surplus fund equal to the amounts required of stock corporations:

  Provided, That a stock insurance company doing business in the Philippines may,

  subject to the pertinent law and regulations which now are or hereafter may be

  in force, alter its organization and transform itself into a mutual insurance

  company.

  • Whenever its paid-up capital, if it be a stock corporation, or its reserve,

    if it be a mutual corporation, shall upon an examination made pursuant to section

    one hundred and seventy-four of this Act be found to be impaired, the Insurance

    Commission shall forthwith direct the company to make good any such deficiency

    or impairment by cash, to be contributed by all stockholders of record in proportion

    to their respective interests and paid to the treasurer of the company, within

    fifteen days from receipt of the order: Provided, That the Insurance Commission,

    may in its discretion, extend the period to not more than sixty days upon its

    being satisfied of the good faith of the stockholders in complying with its order:

    And Provided, further, That the company in the interim shall not be permitted

    to take any new risks of any kind or character unless and until it makes good

    the deficiency or impairment.

  • The amount constituting the contributed surplus fund of any domestic insurance

    company, whether paid to make good any deficiency or impairment, or as a complement

    of the paid-up capital stock, or for any other purpose, shall not at any time

    be withdrawn and repaid in cash to the contributing stockholders without the prior

    approval of the Insurance Commission.

  • Any officer, official or director of the corporation taking or authorizing the

    taking of any risk for the corporation in violation of the terms of this section

    shall be punished by imprisonment for not less than one year nor more than five

    years and by a fine of not less than one thousand nor more than five thousand

    pesos.

Section Two hundred (A) of the same Act is further amended by adding a

new section to be known as Section two hundred (B) to read as follows:

• Section 200(B)
  • 1

    Before investing any of its funds, in any other classes of securities

    or types of investments, every domestic insurance company shall, to the extent

    of an amount equal in value to fifty per centum (50%) of the minimum paid-up capital

    required under Section one hundred ninety-five of this Act, invest its funds only

    in bonds or other evidences of debt of the Government of the Philippines or its

    political subdivisions or instrumentalities, or of government-owned or controlled

    corporations and entities, including the Central Bank of the Philippines.

  • 2

    After satisfying the requirements contained in the preceding paragraph, any

    domestic non-life insurance company, may invest to an amount prescribed below

    its funds in, or otherwise, acquire or loan upon, only the classes of investments

    described in Section Two hundred of the Insurance Act, as amended, or in securities

    issued by any "registered enterprise," as this term is defined in the Investment

    Incentives Act, provided that (a) no more than twenty per centum (20%) of such

    amount shall be invested in the lot and building in which the insurance company

    conducts its business; and (b) the total investment of an insurance company in

    any registered enterprise shall not exceed fifteen per centum (15%) of the capital

    of said investor nor twenty per centum (20%) of the capital of the registered

    enterprise, unless previously authorized by the Insurance Commission: And provided,

    further, That such reserve investments, including its minimum capital investments,

    free from any lien or encumbrance, shall be at least equal in amount to sixty

    per centum (60%) of the aggregate amount of (a) its legal reserve, as provided

    in Section 186 of the Insurance Act, and (b) its reserve fund held for reinsurers

    as provided for in the pertinent treaty provision in the case of reinsurance ceded

    to authorized insurers.

  • 3

    After satisfying the requirements contained in paragraphs 1 and 2 hereof,

    any non-life insurance company, may invest any portion of its funds representing

    earned surplus in any of the investments described in Section 197, 198 and 200

    of the Insurance Act, as amended, or in any securities issued by any "registered

    enterprise" aforementioned, provided, that no investment in stocks or bonds of

    any single entity shall in the aggregate, exceed fifteen per centum (15%) of the

    capital of the investing company or twenty per centum (20%) of the capital of

    issuing company, whichever is the lesser, unless otherwise approved by the Insurance

    Commission.

  • 4

    After satisfying the minimum capital investment required in paragraph 1 hereof,

    any life insurance company may invest its legal policy reserve, as provided in

    Section 183 of the Insurance Act, as well as any portion of its earned surplus,

    in any of the classes of securities or types of investments described in Section

    197, 198, 200 and 200-A, of the Insurance Act, as amended, subject only to the

    limitations therein contained, and in any securities issued by any "registered

    enterprise" aforementioned, in such amounts as may be approved by the Insurance

    Commission.

Section Two hundred two (B) of the same Act, as amended, is further amended

to read as follows:

• Section 202(B)

  The Insurance Commission shall publish the application for withdrawal

  daily for a period of one (1) week in the newspapers of general circulation in

  the City of Manila, one in English and the other in Pilipino. The expenses of

  publication shall be paid by the insurance company filing such application.

Section Two hundred three of the same Act is amended to read as follows:

• Section 203

  Any person, company or corporation who violates any provision of this

  Chapter, 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 (P10,000.00)

  or imprisonment of six (6) months or both such fine and imprisonment in the discretion

  of the Court.

  • If the offense is committed by a company or corporation, the officers, directors

    or other persons responsible for its operations, 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 (6) months or both such fine and imprisonment

    in the discretion of the Court.

This Decree is hereby made part of the law of the land and shall take effect immediately.