BusinessMirror The development of insurance law in the Philippines

The development of insurance law

in the Philippines
Category: Opinion 23 Dec 2014
Written by Dennis B. Funa

THE first insurance law in the country was

incorporated in the Spanish Code of Commerce
(Codigo de Comercio), or the Royal Decree of
August 22, 1885 (Real Decreto de 22 de Agosto
de 1885), which was then extended to the
Philippines by the Royal Decree of 1888.
The provisions in the Spanish Code of
Commerce concerning insurance can be found
in Title VIII (On insurance contracts) (repealed by the Spanish Act 50/1980,
dated October 8) of Book II and Section III (On maritime insurance) of Title III
(On special maritime commerce contracts) of Book III. However, all these
provisions pertained solely to maritime insurance. In addition, while Chapters II
and IV of Title XII of Book IV of the Spanish Civil Code of 1889 related to life
annuities, they did not relate directly to insurance.
During the Philippine Commonwealth period, the legislature enacted Act 1459, or
the Corporation law, on March 1, 1906. Sections 147 to 153 thereof pertained to
Domestic insurance corporations. This law allowed the creation of life and
nonlife insurance companies. These provisions were expressly repealed by Act
2427, or the Insurance Act, on December 11, 1914. This act took effect on July 1,
1915, and also repealed the provisions of the Spanish Code of Commerce on
insurance.
Under the Insurance Act, the insular treasurer, in addition to his official title, was
designated as the insurance commissioner ex-officio. This made then-Insular
Treasurer Jeremiah L. Manning the first insurance commissioner, albeit in an exofficio capacity, until he retired on June 11, 1916. The government agency that
supervised insurance business in the country was the Insurance Division of the
Bureau of the Treasury (BTr). By 1918 60 insurance companies were doing
business in the Philippines. Of this number, nine were local companies, 12 were
American and the rest were from other nations, mainly the United Kingdom. Most
of the coverages were fire, marine and life. Typhoon and earthquake coverage
were provided by the British Traders Insurance Co. and the Union Insurance Co.

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BusinessMirror The development of insurance law in the Philippines

of Canton, both based in Hong Kong. The only Philippine company offering these
coverages was the Fidelity and Surety Co. of the Philippines. On March 10, 1917
Act 2711 (Chapter 15) amended the Administrative Code to provide for the
provisions on Public Bonding law.
In 1939 the Union Insurance Society of Canton appointed Russel & Surgis as its
agent in Manila, transacting business limited to nonlife insurance.
During the Second World War, the Insurance Division was separated from the
BTr and attached to the Bureau of Banking. After the war, the division was
returned to the treasury bureau. In 1947 the Insurance Division was merged with
the banking bureau.
On January 3, 1949, along with the formal opening of the Central Bank of the
Philippines, the banking bureau was renamed as the Office of the Insurance
Commissioner, by virtue of Republic Act (RA) 275. Likewise, the bank
commissioner and assistant bank commissioner were renamed as insurance
commissioner and assistant insurance commissioner, respectively.
On December 18, 1974, Presidential Decree (PD) 612 was promulgated,
ordaining and instituting the Insurance Code of the Philippines, thereby repealing
Act 2427. PD 63, 123 and 317 were issued, amending PD 612. Among other
things, PD 63 provided that the Office of the Insurance Commissioner be
renamed as the Insurance Commission (IC). Finally, on June 11, 1976, PD 1460
took effect and consolidated all insurance laws into a single code, resulting in
what we know now as the Insurance Code of 1978.
Due to the series of failures in the preneed industry, there was a need to provide
a stricter regulatory framework. On July 27, 2009, RA 9829, or the Preneed Code
of the Philippines, was enacted. By virtue of this code, the regulation and
supervision of all preneed companies conducting business in the country was
vested in the IC.
On August 15, 2013, RA 10607, or the Amended Insurance Code, was signed by
President Aquino. One of the amendments included in this law is the progressive
increase of capital requirements for life and nonlife insurance companies every
three years until 2022.
The revisions embodied in the Amended Insurance Code are intended to
reinforce the provisions of the previous code, so as to further strengthen the
insurance industry and ensure the economic viability and financial stability of
companies operating in the country, to the end that each and every Filipino is
amply protected and secured.

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BusinessMirror The development of insurance law in the Philippines

Dennis B. Funa is the Insurance Commissions deputy commissioner for legal

services. Send comments to dennisfuna@yahoo.com.

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