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AN ACT STRENGTHENING THE INSURANCE INDUSTRY,

FURTHER AMENDING PRESIDENTIAL DECREE NO. 612,


OTHERWISE KNOWN AS “THE INSURANCE CODE”, AS
AMENDED BY PRESIDENTIAL DECREE NOS. 1141, 1280,
1455, 1460, 1814 AND 1981, AND BATAS PAMBANSA
BLG. 874, AND FOR OTHER PURPOSES
Sec. 3 Any contingent Section 3. Any
or unknown event, contingent or unknown
whether past or future, event, whether past or
which may damnify a future, which may
person having an damnify a person
insurable interest, or having an insurable
create a liability against interest, or create a
him, may be insured liability against him,
against, subject to the may be insured against,
provisions of this subject to the
chapter. provisions of this
chapter.
The consent of the The consent of the
husband is not spouse is not
necessary for the necessary for the
validity of an validity of an
insurance policy insurance policy
taken out by a taken out by a
married woman on married person on
her life or that of his or her life or that
her children of his or her
children.
All rights, title and All rights, title and
interest in the policy interest in the policy
of insurance taken of insurance taken
out by an original out by an original
owner on the life or owner on the life or
health of a minor health of the person
shall automatically insured shall
vest in the minor automatically vest in
upon the death of the the latter upon the
original owner, death of the original
unless otherwise owner, unless
provided for in the otherwise provided
policy. for in the policy.
Title 2
Parties to the Contract
Section 6. Every SEC. 6. Every
person, partnership, corporation,
association, or partnership, or
corporation duly association, duly
authorized to authorized to
transact insurance transact insurance
business as business as
elsewhere provided elsewhere provided
in this code, may be in this Code, may be
an insurer. an insurer.
Title 3
Insurable Interest
Section 11. The insured shall SEC. 11. The insured shall have
have the right to change the the right to change the
beneficiary he designated in the beneficiary he designated in the
policy, unless he has expressly policy, unless he has expressly
waived this right in said policy. waived this right in said policy.
Notwithstanding the foregoing,
in the event the insured does not
change the beneficiary during
his lifetime, the designation shall
be deemed irrevocable.
 Section 12. The interest of  SEC. 12. The interest of a
a beneficiary in a life beneficiary in a life
insurance policy shall be insurance policy shall be
forfeited when the forfeited when the
beneficiary is the beneficiary is the
principal, accomplice, or principal, accomplice, or
accessory in willfully accessory in willfully
bringing about the death bringing about the death
of the insured; in which of the insured. In such a
event, the nearest relative case, the share forfeited
of the insured shall shall pass on to the other
receive the proceeds of beneficiaries, unless
said insurance if not otherwise disqualified. In
otherwise disqualified. the absence of other
beneficiaries, the
proceeds shall be paid in
accordance with the policy
contract. If the policy
contract is silent, the
proceeds shall be paid to
the estate of the insured.
Title 6
The Policy
 SEC. 50. The policy shall be in printed form which may contain
blank spaces; and any word, phrase, clause, mark, sign, symbol,
signature, number, or word necessary to complete the contract of
insurance shall be written 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 not binding on the insured, unless the descriptive
title or name of the rider, clause, warranty or endorsement is also
mentioned and written on the blank spaces provided in the policy.
 Unless applied for by the insured or owner, any rider, clause,
warranty or endorsement issued after the original policy shall be
countersigned by the insured or owner, which countersignature
shall be taken as his agreement to the contents of such rider,
clause, warranty or endorsement.
 Notwithstanding the foregoing, the
policy may be in electronic form
subject to the pertinent provisions of
Republic Act No. 8792, otherwise
known as the ‘Electronic Commerce
Act’ and to such rules and regulations
as may be prescribed by the
Commissioner.
 Group insurance and group annuity
policies, however, may be typewritten
and need not be in printed form.
Section 60. An open SEC. 60. An open
policy is one in which policy is one in which
the value of the thing the value of the thing
insured is not agreed insured is not agreed
upon, but is left to be upon, and the amount
ascertained in case of of the insurance
loss. merely represents the
insurer’s maximum
liability. The value of
such thing insured
shall be ascertained at
the time of the loss.
 SEC. 64. No policy of insurance other than life
shall be cancelled by the insurer except upon prior
notice thereof to the insured, and no notice of
cancellation shall be effective unless it is based on
the occurrence, after the effective date of the
policy, of one or more of the following:
 “(a) Nonpayment of premium;
 “(b) Conviction of a crime arising out of acts
increasing the hazard insured against;
 “(c) Discovery of fraud or material
misrepresentation;
 “(d) Discovery of willful or reckless acts or
omissions increasing the hazard insured against;
 (e) Physical changes in the property
insured which result in the property
becoming uninsurable;
 ADDED:
 (f) Discovery of other insurance coverage
that makes the total insurance in excess
of the value of the property insured; or
 (g) A determination by the Commissioner
that the continuation of the policy would
violate or would place the insurer in
violation of this Code.
Section 65. All notices of SEC. 65. All notices of
cancellation mentioned in the cancellation mentioned in the
preceding section shall be in preceding section shall be in
writing, mailed or delivered to writing, mailed or delivered to
the named insured at the
the named insured at the address shown in the policy, or
address shown in the policy, to his broker provided the
and shall state (a) which of the broker is authorized in writing
grounds set forth in section by the policy owner to receive
sixty-four is relied upon and (b) the notice of cancellation on his
that, upon written request of the behalf, and shall state:
named insured, the insurer will “(a) Which of the grounds set
furnish the facts on which the forth in Section 64 is relied
cancellation is based. upon; and
“(b) That, upon written request
of the named insured, the
insurer will furnish the facts on
which the cancellation is based.
Title 8
Premium
Section 77. An insurer is entitled to SEC. 77. An insurer is entitled to payment
payment of the premium as soon as the of the premium as soon as the thing
thing insured is exposed to the peril insured is exposed to the peril insured
insured against. Notwithstanding any against. Notwithstanding any agreement
agreement to the contrary, no policy or to the contrary, no policy or contract of
contract of insurance issued by an insurance issued by an insurance
insurance company is valid and binding company is valid and binding unless and
unless and until the premium thereof has until the premium thereof has been paid,
been paid, except in the case of a life or except in the case of a life or an industrial
an industrial life policy whenever the life policy whenever the grace period
grace period provision applies. provision applies, or whenever under the
broker and agency agreements with duly
licensed intermediaries, a ninety (90)-day
credit extension is given. No credit
extension to a duly licensed intermediary
should exceed ninety (90) days from date
of issuance of the policy.
NEW
SEC. 78. Employees of the Republic of the
Philippines, including its political subdivisions and
instrumentalities, and government-owned or -
controlled corporations, may pay their insurance
premiums and loan obligations through salary
deduction: Provided, That the treasurer, cashier,
paymaster or official of the entity employing the
government employee is authorized,
notwithstanding the provisions of any existing law,
rules and regulations to the contrary, to make
deductions from the salary, wage or income of the
latter pursuant to the agreement between the
insurer and the government employee and to
remit such deductions to the insurer concerned,
and collect such reasonable fee for its services.
Section 81. A person insured is SEC. 82. A person insured is
entitled to return of the premium entitled to a return of the
when the contract is voidable, on premium when the contract is
account of fraud or voidable, and subsequently
annulled under the provisions of
misrepresentation of the insurer, the Civil Code; or on account of
or of his agent, or on account of the fraud or misrepresentation of
facts, the existence of which the the insurer, or of his agent, or on
insured was ignorant without his account of facts, or the existence
fault; or when by any default of of which the insured was
the insured other than actual ignorant of without his fault; or
fraud, the insurer never incurred when by any default of the
any liability under the policy. insured other than actual fraud,
the insurer never incurred any
liability under the policy.
A person insured is not entitled
to a return of premium if the
policy is annulled, rescinded or if
a claim is denied by reason of
fraud.
Section 82. In case of an over- SEC. 83. In case of an over insurance
insurance by several insurers, the by several insurers other than life,
insured is entitled to a ratable return the insured is entitled to a ratable
of the premium, proportioned to the return of the premium, proportioned
amount by which the aggregate sum to the amount by which the
insured in all the policies exceeds aggregate sum insured in all the
the insurable value of the thing at policies exceeds the insurable value
risk. of the thing at risk.
 NEW

 SEC. 84. An insurer may contract


and accept payments, in addition to
regular premium, for the purpose of
paying future premiums on the policy
or to increase the benefits thereof.
Title 10
Notice of Loss
Section 88. In case of loss SEC. 90. In case of loss upon
upon an insurance against an insurance against fire, an
fire, an insurer is exonerated, insurer is exonerated, if
if written notice thereof be not written notice thereof be not
given to him by an insured, or given to him by an insured, or
some person entitled to the some person entitled to the
benefit of the insurance, benefit of the insurance,
without unnecessary delay. without unnecessary delay.
For other non-life insurance,
the Commissioner may
specify the period for the
submission of the notice of
loss.
Title 5
Life Insurance
Section 179. Life insurance SEC. 181. Life insurance is
is insurance on human lives insurance on human lives
and insurance appertaining and insurance appertaining
thereto or connected thereto or connected
therewith. therewith.
“Every contract or
undertaking for the payment
of annuities including
contracts for the payment of
lump sums under a
retirement program where a
life insurance company
manages or acts as a
trustee for such retirement
program shall be
considered a life insurance
contract for purposes of this
Code. NEW
SEC. 180. An insurance upon life SEC. 182. An insurance upon life
may be made payable on the death may be made payable on the death
of the person, or on his surviving a
specified period, or otherwise of the person, or on his surviving a
contingently on the continuance or specified period, or otherwise
cessation of life. contingently on the continuance or
“Every contract or pledge for the cessation of life.
payment of endowments or annuities
shall be considered a life insurance “Every contract or pledge for the
contract for purposes of this Code. payment of endowments or annuities
“In the absence of a judicial shall be considered a life insurance
guardian, the father, or in the latter’s contract for purposes of this Code.
absence or incapacity, the mother, of
any minor, who is an insured or a “In the absence of a judicial
beneficiary under a contract of life, guardian, the father, or in the latter’s
health, or accident insurance, may absence or incapacity, the mother, of
exercise, in behalf of said minor, any any minor, who is an insured or a
right under the policy, without
necessity of court authority beneficiary under a contract of life,
health, or accident insurance, may
exercise, in behalf of said minor, any
right under the policy, without
necessity of court authority
or the giving of a bond, where the or the giving of a bond, where the
interest of the minor in the particular interest of the minor in the particular
act involved does not exceed twenty act involved does not exceed Five
thousand pesos. Such right may hundred thousand pesos
include, but shall not be limited to, (P500,000.00) or in such reasonable
obtaining a policy loan, surrendering amount as may be determined by the
the policy, receiving the proceeds of Commissioner. Such right may
the Policy, and giving the minor’s include, but shall not be limited to,
consent to any transaction on the obtaining a policy loan, surrendering
policy the policy, receiving the proceeds of
the Policy, and giving the minor’s
consent to any transaction on the
policy.
 In the absence or in case of the
incapacity of the father or mother, the
grandparent, the eldest brother or sister
at least eighteen (18) years of age, or
any relative who has actual custody of
the minor insured or beneficiary, shall act
as a guardian without need of a court
order or judicial appointment as such
guardian, as long as such person is not
otherwise disqualified or incapacitated.
Payment made by the insurer pursuant to
this section shall relieve such insurer of
any liability under the contract. NEW
 SEC. 183. The insurer in a life insurance
contract shall be liable in case of suicide
only when it is committed after the policy
has been in force for a period of two (2)
years from the date of its issue or of its
last reinstatement, unless the policy
provides a shorter period: Provided,
however, That suicide committed in the
state of insanity shall be compensable
regardless of the date of commission.
NEW
Title 6
MicroInsurance
 SEC. 187. Microinsurance is a financial
product or service that meets the risk
protection needs of the poor where:
 (a) The amount of contributions, premiums,
fees or charges, computed on a daily basis,
does not exceed seven and a half percent
(7.5%) of the current daily minimum wage
rate for nonagricultural workers in Metro
Manila; and
 (b) The maximum sum of guaranteed benefits
is not more than one thousand (1,000) times
of the current daily minimum wage rate for
nonagricultural workers in Metro Manila.
 “SEC. 188. No insurance company or
mutual benefit association shall engage in
the business of microinsurance unless it
possesses all the requirements as may be
prescribed by the Commissioner. The
Commissioner shall issue such rules and
regulations governing microinsurance.
Chapter II-A
Financial Reporting Framework
 SEC. 189. All companies regulated by the
Commission, unless otherwise required by law,
should comply with the financial reporting
frameworks adopted by the Commission for
purposes of creating the statutory financial reports
and the annual statements to be submitted to the
Commission. Financial reporting framework means a
set of accounting and reporting principles, standards,
interpretations and pronouncements that must be
adopted in the preparation and submission of the
statutory financial statements and reports required by
the Commission. This financial reporting framework
is not the same as the financial reporting framework
used to prepare the financial statements that the
Securities and Exchange Commission may require.
The main purpose of the statutory
 statements is to present important information
about the level of risk and solvency situation
of insurers. In prescribing the applicable
statutory financial reporting framework, the
Commissioner shall take into account
international standards concerning solvency
and insurance company reporting as well as
generally accepted actuarial principles
concerning financial reporting promulgated by
the Actuarial Society of the Philippines.
 The assets and investments discussed in
Sections 204 to 215 shall be accounted for in
accordance with this section.
 The valuation of reserves shall be accounted
for in accordance with Title 5 of this Code.
Title 1
Insurance Companies, Organization, Capitalization and Authorization

Section 185. Corporations formed or SEC. 191. The provisions of the


organized to save any person or Corporation Code, as amended, shall
persons or other corporations
harmless from loss, damage, or apply to all insurance corporations
liability arising from any unknown or now or hereafter engaged in
future or contingent event, or to business in the Philippines insofar
indemnify or to compensate any as they do not conflict with the
person or persons or other
corporations for any such loss, provisions of this chapter.
damage, or liability, or to guarantee
the performance of or compliance
with contractual obligations or the
payment of debt of others shall be
known as "insurance corporations".
The provisions of the Corporation
Law shall apply to all insurance
corporations now or hereafter
engaged in business in the
Philippines insofar as they do not
conflict with the provisions of this
chapter.
Section 186. No person, SEC. 192. No corporation,
partnership, or association of partnership, or association of
persons shall transact any persons shall transact any
insurance business in the insurance business in the
Philippines except as agent of a Philippines except as agent of a
person or corporation authorized corporation, partnership or
to do the business of insurance association authorized to do the
in the Philippines, unless business of insurance in the
possessed of the capital and Philippines, unless possessed of
assets required of an insurance the capital and assets required of
corporation doing the same kind an insurance corporation doing
of business in the Philippines the same kind of business in the
and invested in the same Philippines and invested in the
manner; nor unless the same manner; unless the
Commissioner shall have Commissioner shall have
granted to him or them a granted it a certificate to the
certificate to the effect that he or effect that it has complied with
they have complied with all the all the provisions of this Code.
provisions of law which an
insurance corporation doing
business in the Philippines is
required to observe.
Every person, partnership, or Every entity receiving any
association receiving any such certificate of authority
such certificate of authority shall be subject to the
shall be subject to the insurance and other
insurance laws of the applicable laws of the
Philippines and to the Philippines and to the
jurisdiction and supervision jurisdiction and supervision
of the Commissioner in the of the Commissioner.
same manner as if an
insurance corporation
authorized by the laws of the
Philippines to engage in the
business of insurance
specified in the certificate.
Section 187. No insurance SEC. 193. No insurance company
company shall transact any shall transact any insurance
insurance business in the business in the Philippines until
Philippines until after it shall after it shall have obtained a
have obtained a certificate of certificate of authority for that
authority for that purpose from purpose from the Commissioner
the Commissioner upon upon application therefor and
application therefor and payment payment by the company
by the company concerned of concerned of the fees hereinafter
the fees hereinafter prescribed. prescribed.
The Commissioner may refuse to issue a The Commissioner may refuse to issue a
certificate of authority to any insurance certificate of authority to any insurance
company if, in his judgment, such refusal company if, in his judgment, such refusal
will best promote the interest of the will best promote the interest of the
people of this country. No such certificate people of this country. No such certificate
of authority shall be granted to any such of authority shall be granted to any such
company until the Commissioner shall company until the Commissioner shall
have satisfied himself by such have satisfied himself by such
examination as he may make and such examination as he may make and such
evidence as he may require that such evidence as he may require that such
company is qualified by the laws of the company is qualified by the laws of the
Philippines to transact business therein, Philippines to transact business therein,
that the grant of such authority appears that the grant of such authority appears
to be justified in the light of economic to be justified in the light of local
requirements, and that the direction and economic requirements, and that the
administration, as well as the integrity direction and administration, as well as
and responsibility of the organizers and the integrity and responsibility of the
administrators, the financial organization organizers and administrators, the
and the amount of capital, financial organization and the amount of
notwithstanding the provisions of section capital, reasonably assure the safety of
one hundred eighty-eight, reasonably the interests of the policyholders and the
assure the safety of the interests of the public.
policyholders and the public.
 In order to maintain the quality of the In order to maintain the quality of the
management of the insurance management of the insurance companies
companies and afford better and afford better protection to
protection to policyholders and the policyholders and the public in general,
public in general, any person of good any person of good moral character,
moral character, unquestioned unquestioned integrity and recognized
integrity and recognized competence competence may be elected or appointed
may be elected or appointed director director or officer of insurance companies
or officer of insurance companies. in accordance with the pertinent
The Commissioner shall prescribe the provisions contained in the corporate
qualifications of the executive officers governance circulars prescribed by the
and other key officials of insurance Commissioner. In addition hereto, the
companies for purposes of this Commissioner shall prescribe the
section. qualifications of directors, executive
 No person shall concurrently be a officers and other key officials of
director and/or officer of an insurance insurance companies for purposes of this
company and an adjustment section.
company. “No person shall concurrently be a
 Incumbent directors and/or officers Director and/or Officer of an insurance
affected by the above provisions are company and an adjustment company.
hereby allowed to hold on to their
positions until the end of their terms
or two years from the effectivity of
this decree, whichever is shorter.
Before issuing such certificate of “Before issuing such certificate
authority, the Commissioner of authority, the Commissioner
must be satisfied that the name must be satisfied that the name
of the company is not that of any of the company is not that of any
other known company other known company
transacting a similar business in transacting a similar business in
the Philippines, or a name so the Philippines, or a name so
similar as to be calculated to similar as to be calculated to
mislead the public. mislead the public. The
Commissioner may issue rules
and regulations on the use of
names of insurance companies
and other supervised persons or
entities.
Such certificate of authority The certificate of authority
shall expire on the last day of issued by the Commissioner
shall expire on the last day of
June of each year and shall be December, three (3) years
renewed annually if the following its date of issuance,
company is continuing to and shall be renewable every
comply with the provisions of three (3) years thereafter,
subject to the company’s
this Code or the circulars, continuing compliance with
instructions, rulings or the provisions of this Code,
decisions of the circulars, instructions, rulings
Commissioner. Every or decisions of the
Commission.
company receiving any such Every company receiving any
certificates of authority shall such certificates of authority
be subject to the provisions of shall be subject to the
this Code and other related provisions of this Code and
other related laws and to the
laws and to the jurisdiction jurisdiction and supervision of
and supervision of the the Commissioner.
Commissioner.
No insurance company may be Every company receiving any
authorized to transact in the such certificates of authority
shall be subject to the provisions
Philippines the business of life of this Code and other related
and non-life insurance laws and to the jurisdiction and
concurrently unless specifically supervision of the
authorized to do so; Provided, Commissioner.
That the terms "life" and "non- No insurance company may be
life" insurance shall be deemed authorized to transact in the
to include health, accident and Philippines the business of life
disability insurance. and non-life insurance
concurrently, unless specifically
authorized to do so by the
No insurance company shall Commissioner: Provided, That
have equity in an adjustment the terms life and non-life
company and neither shall an insurance shall be deemed to
include health, accident and
adjustment company have an disability insurance.
equity in an insurance company.
No insurance company shall
have equity in an adjustment
company and neither shall an
adjustment company have equity
in an insurance company.
Insurance companies and adjustment “No insurance company issued with a
companies presently affected by the valid certificate of authority to
above provision shall have two years transact insurance business
from the effectivity of this Decree anywhere in the Philippines by the
within which to divest of their Insurance Commissioner, shall be
stockholdings. (As amended by barred, prevented, or disenfranchised
Presidential Decree No. 1455). from issuing any insurance policy or
from transacting any insurance
business within the scope or
coverage of its certificate of authority,
anywhere in the Philippines, by any
local government unit or authority, for
whatever guise or reason whatsoever,
including under any kind of
ordinance, accreditation system, or
scheme. Any local ordinance or local
government unit regulatory issuance
imposing such restriction or
disenfranchisement on any insurance
company shall be deemed null and
void ab initio.
Section 188. Except as provided in section SEC. 194. Except as provided in Section
two hundred eighty-one, no domestic 289, no new domestic life or non-life
insurance company shall, in a stock insurance company shall, in a stock
corporation, engage in business in the corporation, engage in business in the
Philippines unless possessed of a paid-up Philippines unless possessed of a paid-up
capital stock equal to at least five million capital equal to at least One billion pesos
pesos; Provided, That a domestic (P1,000,000,000.00): Provided, That a
insurance company already doing business domestic insurance company already doing
in the Philippines with a paid-up capital business in the Philippines shall have a net
stock which is less than five million pesos worth by June 30, 2013 of Two hundred fifty
shall have a paid-up capital stock of at least million pesos (P250,000,000.00).
three million pesos by December thirty-one, Furthermore, said company must have by
nineteen hundred seventy-eight, four December 31, 2016, an additional Three
million pesos by December thirty-one, hundred million pesos (P300,000,000.00) in
nineteen hundred seventy-nine and five net worth; by December 31, 2019, an
million pesos by December thirty-one, additional Three hundred fifty million pesos
nineteen hundred eighty; Provided, further, (P350,000,000.00) in net worth; and by
that the Secretary of Finance may, upon December 31, 2022, an additional Four
recommendation of the Insurance hundred million pesos (P400,000,000.00) in
Commissioner, increase such minimum net worth.
paid-up capital stock requirement, under
such terms and conditions as he may
impose, to an amount which, in his opinion,
would reasonably assure the safety of the
interests of the policyholders and the
public.
The Commissioner may, as a pre- “The Commissioner may, as a
licensing requirement of a new pre-licensing requirement of a
new insurance company, in
insurance company, in addition addition to the paid-up capital
to the paid-up capital stock, stock, require the stockholders
require the stockholders to pay to pay in cash to the company in
in cash to the company in proportion to their subscription
interests a contributed surplus
proportion to their subscription fund of not less than One
interests a contributed surplus hundred million pesos
fund of not less than one million (P100,000,000.00). He may also
pesos, in the case of a life require such company to submit
to him a business plan showing
insurance company, or not less the company’s estimated
than five hundred thousand receipts and disbursements, as
pesos, in the case of an well as the basis therefor, for the
insurance company other than next succeeding three (3) years.
life. He may also require such
company to submit to him a
business plan showing the
company's estimated receipts
and disbursements, as well as
the basis therefor, for the next
succeeding three years.
If organized as a mutual If organized as a mutual
company, in lieu of such capital company, in lieu of such net
stock, it must have available worth, it must have available
cash assets of at least five total members equity in an
million pesos above all liabilities amount to be determined by the
for losses reported, expenses, Insurance Commission above all
taxes, legal reserve, and liabilities for losses reported;
reinsurance of all outstanding expenses, taxes, legal reserve,
risks, and the contributed and reinsurance of all
surplus fund equal to the outstanding risks, and the
amounts required of stock contributed surplus fund equal
corporations. A stock insurance to the amounts required of stock
company doing business in the corporations. A stock insurance
Philippines may, subject to the company doing business in the
pertinent law and regulations Philippines may, subject to the
which now are of hereafter may pertinent law and regulation
be in force, alter its organization which now or hereafter may be in
and transform itself into a mutual force, alter its organization and
insurance company. (As transform itself into a mutual
amended by Presidential Decree insurance company.
No. 1455).
 The Secretary of Finance may, upon recommendation of
the Commissioner, increase such minimum paid-up
capital stock or cash assets requirement under such
terms and conditions as he may impose, to an amount
which, in his opinion, would reasonably assure the safety
of the interests of the policyholders and the public. The
minimum paid-up capital and net worth requirement must
remain unimpaired for the continuance of the license.
The Commissioner may require the adoption of the risk-
based capital approach and other internationally
accepted forms of capital framework.
 For the purpose of this section, net worth shall consist of:
 (a) Paid-up capital;
 (b) Retained earnings;
 (c) Unimpaired surplus; and
 (d) Revaluation of assets as may be approved by the
Commissioner.
 The Commission may adopt for purposes of compliance
with capital build up requirement under this Code the
recognition as part of the capital account, capital notes or
debentures which are subordinate to all credits and senior
only to common capital stocks.
 The President of the Philippines may order a periodic
review every two (2) years the capital structure set out
above to determine the capital adequacy of the local
insurance industry from and after the integration and
liberalization of the financial services, including insurance,
in the ASEAN Region. For this purpose, a review
committee consisting of representatives from the
Department of Finance (DOF), the Insurance Commission
(IC), the National Economic and Development Authority
(NEDA), the Securities and Exchange Commission (SEC)
and other agencies which the President may designate
shall conduct the review and may recommend to the
President to adopt for implementation the necessary
capital adjustment.
Section 191. No insurance company SEC. 197. No insurance company
organized or existing under the organized or existing under the
government or laws other than those of government or laws other than those of
the Philippines shall engage in the Philippines shall engage in
business in the Philippines unless business in the Philippines unless
possessed of paid-up unimpaired possessed of unimpaired capital or
capital or assets and reserve not less assets and reserve of not less than One
than that herein required of domestic billion pesos (P1,000,000,000.00), nor
insurance companies, nor until it shall until it shall have deposited with the
have deposited with the Commissioner Commissioner for the benefit and
for the benefit and security of the security of the policyholders and
policyholders and creditors of such creditors of such company in the
company in the Philippines, securities Philippines, securities satisfactory to
satisfactory to the Commissioner the Commissioner consisting of good
consisting of good securities of the securities of the Philippines, including
Philippines, including new issues of new issues of stock of registered
stock of "registered enterprises", as enterprises, as this term is defined in
this term is defined in Republic Act No. Executive Order No. 226 of 1987, as
5186, otherwise known as the amended, to the actual market value of
Investment Incentives Act, as amended, not less than the amount herein
to the actual market value of not less required:
than the minimum paid-up capital
required of domestic insurance
companies:
Provided, That at least fifty per Provided, That at least fifty
centum of such securities shall percent (50%) of such securities
consist of bonds or other shall consist of bonds or other
evidences of debt of the instruments of debt of the
Government of the Philippines, Government of the Philippines,
its political subdivisions and its political subdivisions and
instrumentalities, or of instrumentalities, or of
government-owned or controlled government-owned or -
corporations and entities, controlled corporations and
including the Central Bank. The entities, including the Bangko
total investment of a foreign Sentral ng
insurance company in any Pilipinas: Provided, further, That
registered enterprise shall not the total investment of a foreign
exceed twenty per centum of the insurance company in any
net worth of said foreign registered enterprise shall not
insurance company nor twenty exceed twenty percent (20%) of
per centum of the capital of the the net worth of said foreign
registered enterprise, unless insurance company nor twenty
previously authorized in writing percent (20%) of the capital of
by the Commissioner. the registered enterprise, unless
previously authorized in writing
by the Commissioner.
 The Commissioner may, as a pre-licensing
requirement of a new branch office of a
foreign insurance company, in addition to
the required asset or net worth, require the
company to have an additional surplus fund
in an amount to be determined by the
Insurance Commission.
 “For purposes of this Code, the net worth of
a foreign insurance company shall refer
only to its net worth in the Philippines.
Section 192. The Commissioner shall SEC. 198. The Commissioner shall hold
hold the securities, deposited as the securities, deposited as required in
the immediately preceding section, for
aforesaid, for the benefit and security of the benefit and security of all the
all the policyholders of the company policyholders and creditors of the
depositing the same, but shall as long company depositing the
as the company is solvent, permit the same: Provided, That the
Commissioner may as long as the
company to collect the interest or company is solvent, permit the
dividends on the securities so company to collect the interest or
deposited, and, from time to time, with dividends on the securities so
his assent, to withdraw any of such deposited, and, from time to time, with
his assent, to withdraw any of such
securities, upon depositing with said securities, upon depositing with said
Commissioner other like securities, the Commissioner other like securities, the
market value of which shall be equal to market value of which shall be equal to
the market value of such as may be the market value of such as may be
withdrawn. In the event of any company
withdrawn. In the event of any company ceasing to do business in the
ceasing to do business in the Philippines, the securities deposited as
Philippines the securities deposited as aforesaid shall be returned to the
aforesaid shall be returned upon the company upon the Commissioner’s
written approval and only after the
company's making application therefor company has duly proven in its
and proving to the satisfaction of the application therefor that it has no
Commissioner that it has no further further liability whatsoever under any of
liability under any of its policies in the its policies nor to any of its creditors in
the Philippines.
Philippines.
Section 193. Every foreign company doing SEC. 199. Every foreign company doing
business in the Philippines shall set aside business in the Philippines shall set aside
an amount corresponding to the legal an amount corresponding to the legal
reserves of the policies written in the reserves of the policies written in the
Philippines and invest and keep the same Philippines and invest and keep the same
therein in accordance with the provisions therein in accordance with the provisions
of this section. The legal reserve therein of this section. The legal reserve therein
required to be set aside shall be invested required to be set aside shall be invested
only in the classes of the Philippine only in the classes of Philippine securities
securities described in section two described in Section 206: Provided,
hundred; Provided, however, That no however, That no investment in stocks or
investment in stocks or bonds of any bonds of any single entity shall, in the
single entity shall, in the aggregate exceed aggregate exceed twenty percent (20%) of
twenty per centum of the net worth of the the net worth of the investing company or
investing company or twenty per centum twenty percent (20%) of the capital of the
of the capital of the issuing company, issuing company, whichever is the lesser,
whichever is the lesser unless otherwise unless otherwise approved in writing by
approved in writing by the Commissioner. the Commissioner. The securities
The securities purchased and kept in the purchased and kept in the Philippines
Philippines under this section, shall not be under this section, shall not be sent out of
sent out of the territorial jurisdiction of the the territorial jurisdiction of the
Philippines without the written consent of Philippines without the written consent of
the Commissioner. the Commissioner.
Title 2
Solvency
Section 194. An insurance company SEC. 200. An insurance company
doing business in the Philippines doing business in the Philippines
shall at all times maintain a margin of shall at all times maintain the
solvency which shall be an excess of minimum paid-up capital, and net
the value of its admitted assets worth requirements as prescribed by
exclusive of its paid-up capital, in the the Commissioner. Such solvency
case of a domestic company, or an requirements shall be based on
excess of the value of its admitted internationally accepted solvency
assets in the Philippines, exclusive of frameworks and adopted only after
its security deposits, in the case of a due consultation with the insurance
foreign company, over the amount of industry associations
its liabilities, unearned premium and
reinsurance reserves in the
Philippines of at least two per mille of
the total amount of its insurance in
force as of the preceding calendar
year on all policies,
except term insurance, in the case of a life Whenever the aforementioned requirement be
insurance company, or of at least ten per found to be less than that herein required to
centum of the total amount of its net premium be maintained, the Commissioner shall
written during the preceding calendar year, in forthwith direct the company to make good
the case of a company other than a life any such deficiency by cash, to be
insurance company; Provided, That in either contributed by all stockholders of record in
case, such margin shall in no event be less proportion to their respective interests, and
than five hundred thousand pesos; and paid to the treasurer of the company, within
Provided, further, That the term "paid-up fifteen (15) days from receipt of the
capital" shall not include contributed surplus order: Provided, That the company in the
and capital paid in excess of par value. Such interim shall not be permitted to take any new
assets, liabilities and reserves shall exclude risk of any kind or character unless and until it
assets, liabilities and reserves included in make good any such deficiency:
separate accounts established in accordance
with section two hundred thirty-seven.
Whenever the aforementioned margin be
found to be less than that herein required to
be maintained, the Commissioner shall
forthwith direct the company to make good
any such deficiency by cash, to be
contributed by all stockholders of record in
proportion to their respective interest, and
paid to the treasurer of the company, within
fifteen days from receipt of the order;
Provided, That the company in the interim
shall not be permitted to take any new risk of
any kind or character unless and until it make
good any such deficiency;
Provided, further, that a stockholder Provided; further, That a stockholder
who aside from paying the who aside from paying the
contribution due from him, pays the
contribution due from the another contribution due from him, pays the
stockholder by reason of the failure contribution due from another
or refusal of the latter to do so, shall stockholder by reason of the failure
have a lien on the certificates of stock or refusal of the latter to do so, shall
of the insurance company concerned
appearing in its books in the name of have a lien on the certificates of stock
the defaulting stockholder on the of the insurance company concerned
date of default, as well as on any appearing in its books in the name of
interests or dividends that have the defaulting stockholder on the
accrued or will accrue to the said
certificates of stock, until the date of default, as well as on any
corresponding payment or interests or dividends that have
reimbursement is made by the accrued or will accrue to the said
defaulting stockholder. (As amended certificates of stock, until the
by Presidential Decree No. 1455)
corresponding payment or
reimbursement is made by the
defaulting stockholder.
 SEC. 201. No domestic insurance corporation shall declare or distribute
any dividend on its outstanding stocks unless it has met the minimum
paid-up capital and net worth requirements under Section 194 and
except from profits attested in a sworn statement to the Commissioner
by the president or treasurer of the corporation to be remaining on hand
after retaining unimpaired:
 (a) The entire paid-up capital stock;
 (b) The solvency requirements defined by Section 200;
 (c) In the case of life insurance corporations, the legal reserve fund
required by Section 217;
 (d) In the case of corporations other than life, the legal reserve fund
required by Section 219; and
 (e) A sum sufficient to pay all net losses reported, or in the course of
settlement, and all liabilities for expenses and taxes.
 Any dividend declared or distributed under the preceding paragraph
shall be reported to the Commissioner within thirty (30) days after such
declaration or distribution.
 If the Commissioner finds that any such corporation has declared or
distributed any such dividend in violation of this section, he may order
such corporation to cease and desist from doing business until the
amount of such dividend or the portion thereof in excess of the amount
allowed under this section has been restored to said corporation.
 The Commissioner shall prescribe solvency requirements for branches
of foreign insurance companies operating in the Philippines.
Title 3
Assets
 SEC. 202. In any determination of the financial condition of any
insurance company doing business in the Philippines, there shall
be allowed and admitted as assets only such assets legally or
beneficially owned by the insurance company concerned as
determined by the Commissioner which consist of:
 “(a) Cash in the possession of the insurance company or in
transit under its control, and the true and duly verified balance of
any deposit of such company in a financially sound bank or trust
company duly authorized by the Bangko Sentral ng Pilipinas.
 “(b) Investments in securities, including money market
instruments, and in real property acquired or held in accordance
with and subject to the applicable provisions of this Code and the
income realized therefrom or accrued thereon.
 (c) Loans granted by the insurance company
concerned to the extent of that portion thereof
adequately secured by non-speculative assets
with readily realizable values in accordance with
and subject to the limitations imposed by
applicable provisions of this Code.
 (d) Policy loans and other policy assets and liens
on policies, contracts or certificates of a life
insurance company, in an amount not exceeding
legal reserves and other policy liabilities carried
on each individual life insurance policy, contract
or certificate.
 “(e) The net amount of uncollected and deferred
premiums and annuity considerations in the case
of a life insurance company which carries the full
mean tabular reserve liability.
 “(f) Reinsurance recoverable by the ceding insurer:
 “(1) From an insurer authorized to transact business in this
country, the full amount thereof; or
 “(2) From an insurer not authorized in this country, in an amount
not exceeding the liabilities carried by the ceding insurer for
amounts withheld under a reinsurance treaty with such
unauthorized insurer as security for the payment of obligations
thereunder if such funds are held subject to withdrawal by, and
under the control of, the ceding insurer. The Commissioner may
prescribe the conditions under which a ceding insurer may be
allowed credit, as an asset or as a deduction from loss and
unearned premium reserves, for reinsurance recoverable from an
insurer not authorized in this country but which presents
satisfactory evidence that it meets the applicable standards of
solvency required in this country.
 “(g) Funds withheld by a ceding insurer under a reinsurance
treaty, provided reserves for unpaid losses and unearned
premiums are adequately provided.
 “(h) Deposits or amounts recoverable
from underwriting associations,
syndicates and reinsurance funds, or
from any suspended banking institution,
to the extent deemed by the
Commissioner to be available for the
payment of losses and claims and
values to be determined by him.
 “(i) Electronic data processing machines,
as may be authorized by the
Commissioner to be acquired by the
insurance company concerned, the
acquisition cost of which to be amortized in
equal annual amounts within a period of
five (5) years from the date of acquisition
 “(j) Investments in mutual funds, real estate
investment trusts, salary loans, unit
investment trust funds and special deposit
accounts, subject to the conditions as may
be provided for by the Commissioner.
 “(k) Other assets, not inconsistent with the
provisions of paragraphs (a) to (j) hereof,
which are deemed by the Commissioner to
be readily realizable and available for the
payment of losses and claims at values to
be determined by him in a circular, rule or
regulation.
Title 4
Investments
 Section 198. No insurance company shall loan any of its money
or deposits to any person, corporation or association, except
upon first mortgage or deeds of trust of unencumbered, improved
or unimproved real estate, including condominiums, in cities and
centers of population of municipalities in the Philippines when the
amount of such loan is not in excess of seventy per centum of the
market value of such real estate; or upon the security of first
mortgages or deeds of trust of actually cultivated, improved and
unencumbered agricultural lands in the Philippines when the
amount of such loan is not in excess of forty per centum of the
market value of such land; or upon the purchase money
mortgages or like securities received by it upon the sale or
exchange of real property acquired pursuant to sections two
hundred and two hundred two; or upon bonds or other evidences
of debt of the Government of the Philippines or its political
subdivisions authorized by law to issue bonds, or upon bonds or
other evidences of debt of government-owned or controlled
corporations and instrumentalities including the Central Bank or
upon obligations issued or guaranteed by the International Bank
for Reconstruction and Development; or upon stocks, bonds or
other evidences of debt as are specified in section two hundred.
A life insurance company, however, SEC. 204. A life insurance company
may lend to any of its policyholders may lend to any of its policyholders
upon the security of the value of its
policy such sum as may be upon the security of the value of its
determined pursuant to the policy such sum as may be
provisions of the policy. determined pursuant to the
Loans granted upon the security of provisions of the policy.
real estate for a period longer than
five years shall be amortized in “No insurance company shall loan
monthly, quarterly, semi-annual or any of its money or deposits to any
annual installments; Provided, That person, corporation or association,
no such loans shall have a maturity
in excess of twenty years. except upon the security of any of
the following:
The phrase "improved real estate" “(a) First mortgage or deeds of trust
used above is hereby defined to of registered, unencumbered,
improved or unimproved real estate,
mean land with permanent building including condominiums;
or buildings erected or being erected “(b) First mortgages or deeds of
thereon. Except as otherwise trust of actually cultivated, improved
approved by the Commissioner, in and unencumbered agricultural
lands in the Philippines;
case the building or buildings on “(c) Purchase money mortgages,
land do not belong to the owner of lease purchase agreements or
the latter, no loan shall be granted similar securities executed or
on the security of the real estate in received by it on account of the sale
or exchange of real property
question unless both the owner of acquired pursuant to Sections 206
the building or buildings and the and 208;
owner of the land sign the deed of “(d) Bonds or other instruments of
mortgage, and unless the owner of indebtedness issued or guaranteed
by the Government of the
the land is the Government of the Philippines or its political
Philippines or one of its political subdivisions authorized by law to
subdivisions, in which event the incur such obligations or issue such
owner is not required to sign the guarantees or of government-owned
or -controlled corporations and
deed of mortgage. instrumentalities including the
Bangko Sentral ng Pilipinas; or
(e) Obligations issued or guaranteed
by universal banks, commercial
banks, offshore banking units,
investment houses or other financial
intermediaries duly registered with
the Bangko Sentral ng Pilipinas; or
(f) Obligations issued or guaranteed
by foreign banks or corporations,
each of which shall have total net
worth of at least One hundred fifty
million US dollars
($US150,000,000.00) or such other
higher net worth as may be
prescribed by the Insurance
Commission, as shown in their
financial statements as of the
immediately preceding fiscal year; or
“(g) Assignments of monetary
instruments such as cash deposits,
deposit certificates or other similar
instruments of universal banks,
commercial banks, investment
houses or other financial
intermediaries duly registered with
the Bangko Sentral ng Pilipinas; or
“(h) Pledges of shares of stock,
bonds or other instruments of
indebtedness specified in Section
“(h) Pledges of shares of stock,
bonds or other instruments of
indebtedness specified in Section
209; or
“(i) Chattel mortgages over
equipment not more than three (3)
years old; and
“(j) Such other security as may be
approved by the Commissioner.
“The loans provided in the
preceding subsection shall be
subject to the following conditions:
“(1) The amount of loan secured by
real estate mortgage over a non-
agricultural land shall not exceed
seventy percent (70%) of its
appraised value, and in the case of a
loan secured by a real estate
mortgage over an agricultural land,
the amount of loan shall not exceed
forty percent (40%) of its market
value: Provided, That, in no case
shall such loan have a maturity
period in excess of twenty-five (25)
years;
(2) Unless approved by the
Commissioner, no loan may be
granted upon the security of a
mortgage on improved real estate if
the improvements thereon do not
belong to the owner of the land, and
the owner of the improvements does
not sign the deed of mortgage.
However, if the owner of the land is
the Government of the Philippines
or any of its political subdivisions
and a long-term lease has been
executed in favor of the owner of the
improvements, the owner of the land
need not be a party to the deed of
mortgage. The expiration date of the
lease shall not, however, precede
the maturity of the loan. The phrase
‘improved real estate’ as used herein
shall mean land with permanent
building or buildings erected
thereon;
 “(3) Lease-agreements or similar securities received
on the sale of real estate property shall not exceed
one hundred percent (100%) of the selling price of
said property, or one hundred percent (100%) of its
market value at the time of its disposition, whichever
amount is lower. However, in no case shall such
agreement have a maturity period not exceeding thirty
(30) years;
 “(4) Loans secured by shares of stock of solvent
corporations or institutions shall not exceed fifty
percent (50%) of:
 “(i) The weighted average market price for the one
hundred eighty (180) days preceding the approval of
the loan for shares listed in the stock exchange; and
 “(ii) For unlisted shares, the adjusted book value of
such shares.
 “(5) Loans secured by the chattel mortgages over
equipment shall not exceed seventy percent (70%) of
the market value of said equipment.
 “(b) The total investment of an insurance company
in any registered enterprise shall not exceed twenty
percent (20%) of the net worth of said insurance
company as shown by its aforesaid financial
statement nor twenty percent (20%) of the paid-up
capital of the registered enterprise excluding the
intended investment, unless previously authorized
by the Commissioner: Provided, further, That such
investments, free from any lien or encumbrance,
shall be at least equal in amount to the aggregate
amount of: (1) its legal reserve, as provided in
Section 219, and (2) its reserve fund held for
reinsurance as provided for in the pertinent treaty
provision in the case of reinsurance ceded to
authorized insurers.
Section 199. No loan by any “SEC. 205. No loan by any
insurance company on the insurance company on the
security of real estate shall be security of real estate shall be
made unless the title to such real made unless the title to such real
estate shall have first been estate shall have first been
registered in accordance with the registered in accordance with the
existing Land Registration Act, existing Land Registration Act,
or shall be a titulo real duly or shall have been previously
registered, or have been registered under the provisions
previously registered under the of the existing Mortgage Law and
provisions of the existing the lien or interest of the
Mortgage Law. insurance company as
mortgagee has been registered.
Section 200. (1) An insurance “SEC. 206. (a) An insurance company may
company may purchase, hold, own purchase, hold, own and convey such
and convey such property, real and property, real and personal, as may have
personal, as may have been been mortgaged, pledged, or conveyed to
mortgaged, pledged, or conveyed to it it in good faith in trust for its benefit by
in good faith in trust for its benefit by reason of money loaned by it in
reason of money loaned by it in pursuance of the regular business of the
pursuance of the regular business of company, and such real or personal
the company, and such real or property as may have been purchased by
personal property as may have been it at sales under pledges, mortgages or
purchased by it at sales under deeds of trust for its benefit on account of
pledges, mortgages or deeds of trust money loaned by it; and such real and
for its benefit on account of money personal property as may have been
loaned by it; and such real and conveyed to it by borrowers in
personal property as may have been satisfaction and discharge of loans made
conveyed to it by borrowers in by the company in payment or by reason
satisfaction and discharge of loans of any loan made by the company in
made by the company to them: payment or by reason of any loan made
Provided, however, That any real by it shall be sold by the company within
estate purchased by an insurance twenty (20) years after the title thereto has
company in payment or by reason of been vested in it.
any loan made by it shall be sold by
the company within twenty years after
the title thereto has been vested in it.
(2) An insurance company may “(b) An insurance company may
purchase, hold, own and convey purchase, hold, and own the
real and personal property as following:
follows: “(1) Real properties which serve
(a) The lot with building thereon as its main place of business
and/or branch offices: Provided,
in which the company conducts That such investment shall not in
and carries on its business. the overall exceed twenty
(b) Bonds or other evidences of percent (20%) of its net worth as
debt of the Government of the shown by its latest financial
statement approved by the
Philippines or its political Commissioner.
subdivisions authorized by law “(2) Bonds or other instruments
to issue bonds at the reasonable of indebtedness of the
market value thereof. Government of the Philippines or
its political subdivisions
(c) Bonds or other evidences of authorized by law to issue bonds
debt of the government-owned or at the reasonable market value
controlled corporations and thereof.
entities, including the Central “(3) Bonds or other instruments
of debt of government-owned or
Bank. -controlled corporations and
entities, including the Bangko
Sentral ng Pilipinas.
(d) Bonds, debentures or other “(4) Bonds, debentures or other
evidences of indebtedness of any instruments of indebtedness of any
solvent corporations or institution solvent corporation or institution
created or existing under the laws of created or existing under the laws of
the Philippines; Provided, however, the Philippines: Provided, however,
That the issuing, assuming or That the issuing, assuming or
guaranteeing entity or its guaranteeing entity or its
predecessors shall not have predecessors shall not have
defaulted in the payment of interest defaulted in the payment of interest
on any of its securities and that on any of its securities and that
during each of any three including during each of any three (3) including
the last two of the five fiscal years the last two (2) of the five
next preceding the date of acquisition (5) fiscal years next preceding the
by such insurance company of such date of acquisition by such insurance
bonds, debentures, or other company of such bonds, debentures,
evidences of indebtedness, the net or other instruments of indebtedness,
earnings of the issuing, assuming or the net earnings of the issuing,
guaranteeing institution available for assuming or guaranteeing institution
its fixed charges, as hereinafter available for its fixed charges, as
defined, shall have been not less than hereinafter defined, shall have been
one and one-quarter times the total of not less than one and one-quarter
its fixed charges for such year; and (1¼) times the total of its fixed
charges for such year:
provided, further, that no life insurance Provided, further, That no life insurance
company shall invest in or loan upon company shall invest in or loan upon
the obligations of any one institution in
the kinds permitted under this sub- the obligations of any one institution in
section an amount in excess of twenty- the kinds permitted under this
five per centum of the total admitted subsection an amount in excess of
assets of such insurer as of December twenty-five percent (25%) of the total
thirty-first next preceding the date of
such investment. admitted assets of such insurer as of
December thirty-first next preceding the
As used in this sub-section the term date of such investment.
"net earnings available for fixed
charges" shall mean net income after
deducting operating and maintenance “As used in this subsection the term net
expenses, taxes other than income earnings available for fixed
taxes, depreciation and depletion; but charges shall mean net income after
excluding extraordinary non-recurring deducting operating and maintenance
items of income or expense appearing
in the regular financial statement of the expenses, taxes other than income
issuing, assuming or guaranteeing taxes, depreciation and depletion; but
institution. The term "fixed charges" excluding extraordinary nonrecurring
shall include interest on funded and items of income or expense appearing
unfunded debt, amortization of debt
discount, and rentals for leased in the regular financial statement of the
properties. issuing, assuming or guaranteeing
institution. The term fixed charges shall
include interest on funded and
unfunded debt, amortization of debt
discount, and rentals for leased
properties.
(e) Preferred or guaranteed stocks of any “(5) Preferred or guaranteed stocks of any
solvent corporation or institution created solvent corporation or institution created
or existing under the laws of the or existing under the laws of the
Philippines; Provided, however, That the Philippines: Provided, That if the stocks
issuing, assuming or guaranteeing entity are guaranteed, the amount of stocks so
or its predecessors has paid regular guaranteed is not in excess of fifty percent
dividends upon its preferred or (50%) of the amount of the preferred or
guaranteed stocks for a period of at least common stocks, as the case may be, of
three years next preceding the date of the guaranteeing corporation:Provided,
investment in such preferred or finally, That no life insurance company
guaranteed stock; Provided, further, That shall invest in or loan upon obligations of
if the stocks are guaranteed, the amount any one institution in the kinds permitted
of stocks so guaranteed is not excess of under this subsection an amount in
fifty per centum of the amount of the excess of ten percent (10%) of the total
preferred or common stocks, as the case admitted assets of such insurer as of
may be, of the guaranteeing corporation; December thirty-first next preceding the
And provided, finally, That no life date of such investment.
insurance company shall invest in or loan
upon obligations of any one institution in
the kinds permitted under this sub-section
an amount in excess of ten per centum of
the total admitted assets of such insurer
as of December thirty-first next preceding
the date of such investment.
(f) Common stocks of any solvent “(6) Common stocks of any solvent
corporation or institution created or corporation or institution created or
existing under the laws of the existing under the laws of the
Philippines upon which regular Philippines:Provided, however, That
dividends shall have been paid for no life insurance company shall
the three years next preceding the invest in or loan upon the obligations
purchase of such stock; Provided, of any one corporation or institution
however, That no life insurance in the kinds permitted under this
company shall invest in or loan upon subsection an amount in excess of
the obligations of any one ten percent (10%) of the total
corporation or institution in the kinds admitted assets of such insurer as of
permitted under this sub-section an December thirty-first next preceding
amount in excess of ten per centum the date of such investment.
of the total admitted assets of such “(7) Securities issued by a registered
insurer as of December thirty-first enterprise, as this term is defined in
next preceding the date of such Executive Order No. 226, otherwise
investment. known as the Omnibus Investments
(g) Certificates, notes and other Code of 1987, as amended: Provided,
obligations issued by the trustees or That the total investment of a
receivers of any institution created or domestic non-life insurance company
existing under the laws of the in any registered enterprise shall not
Philippines which, or the assets of exceed twenty percent (20%) of the
which, are being administered under net worth of said insurance company
the direction of any court having as shown by its aforesaid financial
jurisdiction; Provided, however, That statement unless previously
such certificates, notes or other authorized by the Commissioner.
obligations are adequately secured
as to principal and interests.
(h) Equipment trust obligations or “(8) Certificates, notes and other
certificates which are adequately obligations issued by the trustees or
secured or other adequately secured receivers of any institution created or
instruments evidencing an interest in existing under the laws of the
equipment wholly or in part within the Philippines which, or the assets of
Philippines; Provided, however, That which, are being administered under
there is a right to receive determined the direction of any court having
portions of rental, purchase or other jurisdiction: Provided, however, That
fixed obligatory payments for the use such certificates, notes or other
or purchase of such equipment. obligations are adequately secured as
(i) Any obligation of any corporation to principal and interests.
or institution created or existing “(9) Equipment trust obligations or
under the laws of the Philippines certificates which are adequately
which is, on the date of acquisition by secured or other adequately secured
the insurer, adequately secured and instruments evidencing an interest in
has qualities and characteristics equipment wholly or in part within the
wherein the speculative elements are Philippines: Provided, however, That
not predominant. there is a right to receive determined
portions of rental, purchase or other
fixed obligatory payments for the use
or purchase of such equipment.
(j) Such other securities as may be approved by “(10) Any obligation of any corporation or
the Commissioner. institution created or existing under the laws of
(3) Any domestic insurer which has outstanding the Philippines which is, on the date of
insurance, annuity or reinsurance contracts in acquisition by the insurer, adequately secured
currencies other than the national currency of and has qualities and characteristics wherein
the Philippines may invest in, or otherwise the speculative elements are not predominant.
acquire or loan upon securities and investments “(11) Such other securities as may be approved
in such currency which are substantially of the by the Commissioner.
same kinds, classes and investment grades as “(c) Any domestic insurer which has
those eligible for investment under the outstanding insurance, annuity or reinsurance
foregoing subdivisions of this section; but the
aggregate amount of such investment and of contracts in currencies other than the national
such cash in such currency which is at anytime currency of the Philippines may invest in, or
held by such insurer shall not exceed one and otherwise acquire or loan upon securities and
one-half times the amount of its reserves and investments in such currency which are
other obligations under such contracts or the
amount which such insurer is required by the substantially of the same kinds, classes and
law of any country or possession outside the investment grades as those eligible for
Republic of the Philippines to be invest in such investment under the foregoing subdivisions of
country or possession, whichever shall be this section; but the aggregate amount of such
greater.
investments and of such cash in such currency
which is at any time held by such insurer shall
not exceed one and one-half (1½) times the
amount of its reserves and other obligations
under such contracts or the amount which such
insurer is required by the law of any country or
possession outside the Republic of the
Philippines to be invested in such country or
possession, whichever shall be greater.
Section 201. An insurance “SEC. 207. An insurance
company may (1) invest in company may:
equities of other financial “(1) Invest in equities of other
institutions, and (2) engage in financial institutions; and
the buying and selling of “(2) Engage in the buying and
short-term debt instruments; selling of long-term debt
Provided, That any or all of instruments: Provided, That
such investments shall be any or all of such investments
with the prior approval of the shall be with the prior
Commissioner. approval of the
Commissioner. Insurance
companies may, however,
invest in listed equities of
other financial institutions
without need of prior approval
by the Commissioner.
Section 202. Any life insurance “SEC. 208. Any life insurance
company may: company may:
“(a) Acquire or construct housing
(a) Acquire or construct housing projects and, in connection with any
projects and, in connection with any such project, may acquire land or any
such project, may acquire land or any interest therein by purchase, lease or
interest therein by purchase, lease or otherwise, or use land acquired
pursuant to any other provision of
otherwise, or use land acquired this Code. Such company may
pursuant to any other provision of thereafter own, maintain, manage,
this Code. Such company may collect or receive income from, or sell
thereafter own, maintain, manage, and convey, any land or interest
therein so acquired and any
collect or receive income from, or sell improvements thereon. The
and convey, any land or interest aggregate book value of the
therein so acquired and any investments of any such company in
improvements thereon. The all such projects shall not exceed at
the time of such investments twenty-
aggregate book value of the five percent (25%) of the total
investments of any such company in admitted assets of such company on
all such projects shall not exceed at the thirty-first day of December next
the time of such investments twenty preceding: Provided, That the funds
of the company for the payment of
five per centum of the total admitted pending claims and obligations shall
assets of such company on the thirty- not be used for such investments.
first day of December next preceding;
(b) Acquire real property, other than “(b) Acquire real property, other than
property to be used primarily for property to be used primarily for
providing housing and property for providing housing and property for
accommodation of its own business, accommodation of its own business,
as an investment for the production as an investment for the production
of income, or may acquire real of income, or may acquire real
property to be improved or developed property to be improved or developed
for such investment purpose for such investment purpose
pursuant to a program therefor, pursuant to a program therefor,
subject to the condition that the cost subject to the condition that the cost
of each parcel of real property so of each parcel of real property so
acquired under the authority of this acquired under the authority of this
paragraph (b), including the paragraph (b), including the
estimated cost to the company of the estimated cost to the company of the
improvement or development thereof, improvement or development thereof,
when added to the book value of all when added to the book value of all
other real property held by its other real property held by it
pursuant to this paragraph (b), shall pursuant to this paragraph (b), shall
not exceed twenty-five per centum of not exceed twenty-five percent (25%)
its admitted assets as of the thirty- of its admitted assets as of the thirty-
first day of December next preceding. first day of December next preceding
Section 203. Every domestic “SEC. 209. Every domestic
insurance company shall, to the insurance company shall, to the
extent of an amount equal in extent of an amount equal in
value to twenty-five per centum of value to twenty-five percent (25%)
the minimum paid-up capital of the minimum net worth
required under section one required under Section 194,
hundred eighty-eight, invest its invest its funds only in securities,
funds only in securities, satisfactory to the Commissioner,
satisfactory to the Commissioner, consisting of bonds or other
consisting of bonds or other instruments of debt of the
evidences of debt of the Government of the Philippines or
Government of the Philippines or its political subdivisions or
its political subdivisions or instrumentalities, or of
instrumentalities, or of government-owned or -controlled
government-owned or controlled corporations and entities,
corporations and entities, including the Bangko Sentral ng
including the Central Bank of the Pilipinas:
Philippines;
Provided, That such investments Provided, That such investments
shall at all times be maintained free shall at all times be maintained free
from any lien or encumbrance; and
Provided, further, That such from any lien or
securities shall be deposited with encumbrance: Provided, further,
and held by the Commissioner for That such securities shall be
the faithful performance by the deposited with and held by the
depositing insurer of all its
obligations under its insurance Commissioner for the faithful
contracts. The provisions of section performance by the depositing
one hundred ninety-two shall, so far insurer of all its obligations under its
as practicable, apply to the insurance contracts. The provisions
securities deposited under this
section. of Section 198 shall, so far as
Except as otherwise provided in this practicable, apply to the securities
Code, no judgment creditor or other deposited under this section.
claimant shall have the right to levy “Except as otherwise provided in
upon any of the securities of the
insurer held on deposit under this this Code, no judgment creditor or
section or held on deposit pursuant other claimant shall have the right to
to the requirement of the levy upon any of the securities of the
Commissioner. (As amended by insurer held on deposit under this
Presidential Decree No. 1455)
section or held on deposit pursuant
to the requirement of the
Commissioner.
Section 204. After satisfying the “SEC. 210. After satisfying the
requirements contained in the requirements contained in the
preceding section, any domestic non- preceding section, any domestic non-
life insurance company, shall invest, life insurance company, shall invest,
to an amount prescribed below, its to an amount prescribed below, its
funds in, or otherwise, acquire or funds in, or otherwise, acquire or
loan upon, only the classes of loan upon, only the classes of
investments described in section two investments described in Section
hundred, including securities issued 206, including securities issued by
by any "registered enterprise", as this any registered enterprise, as this
term is defined in Republic Act No. term is defined in Executive Order
5186, otherwise known as the No. 226, otherwise known as ‘The
Investment Incentives Act, and such Omnibus Investments Code of 1987′
other classes of investments as may and such other classes of
be authorized by the Commissioner investments as may be authorized by
for purposes of this section; the Commissioner for purposes of
this section:
Provided, That (a) no more than twenty per Provided, That:
centum of the net worth of such company “(a) No more than twenty percent (20%) of
as shown by its latest financial statement the net worth of such company as shown by
approved by the Commissioner shall be its latest financial statement approved by
the Commissioner shall be invested in the
invested in the lot and building in which the lot and building in which the insurance
insurance company conducts its business company conducts its business; and “(b)
and (b) the total investment of an insurance The total investment of an insurance
company in any registered enterprise shall company in any registered enterprise shall
not exceed twenty per centum of the net not exceed twenty percent (20%) of the net
worth of said insurance company as shown worth of said insurance company as shown
by its aforesaid financial statement nor by its aforesaid financial statement nor
twenty per centum of the paid-up capital of twenty percent (20%) of the paid-up capital
the registered enterprise excluding the of the registered enterprise excluding the
intended investment, unless previously
intended investment, unless previously authorized by the Commissioner: Provided,
authorized by the Commissioner; and, further, That such investments, free from
Provided, further, That such investments any lien or encumbrance, shall be at least
free from any lien or encumbrance, shall be equal in amount to the aggregate amount
at least equal in amount to the aggregate of: (1) its legal reserve, as provided in
amount of (a) its legal reserve, as provided Section 219, and (2) its reserve fund held for
in section two hundred thirteen, and (b) its reinsurance as provided for in the pertinent
reserve fund held for reinsurance as treaty provision in the case of reinsurance
provided for in the pertinent treaty provision ceded to authorized insurers.
in the case of reinsurance ceded to
authorized insurers. (As amended by
Presidential Decree No.1455)
Section 205. After satisfying the SEC. 211. After satisfying the
requirements contained in sections requirements contained in Sections
one hundred ninety-one, one hundred 197, 199, 209 and 210, any non-life
ninety-three, two hundred three and insurance company may invest any
two hundred four, any non-life portion of its funds representing
insurance company may invest any earned surplus in any of the
portion of its funds representing investments described in Sections
earned surplus in any of the 204, 206 and 207, or in any securities
investments described in sections issued by a registered enterprise
one hundred ninety-eight, two mentioned in the preceding sections:
hundred and two hundred one, or in
any securities issued by a "registered
enterprise" mentioned in the
preceding sections;
Provided, That no investment in Provided, That no investment in
stocks or bonds of any single entity stocks or bonds of any single entity
shall in the aggregate, exceed shall in the aggregate, exceed
twenty per centum of the net worth twenty percent (20%) of the net
of the insurance company as shown worth of the insurance company as
in its latest financial statement shown in its latest financial
approved by the Commissioner or statement approved by the
twenty per centum of the paid-up Commissioner or twenty percent
capital of the issuing company, (20%) of the paid-up capital of the
whichever is lesser, unless issuing company, whichever is
otherwise approved by the lesser, unless otherwise approved
Commissioner. by the Commissioner.
Section 206. After satisfying the SEC. 212. After satisfying the
minimum capital investment required minimum capital investment required
in section two hundred three, any life in Section 209, any life insurance
insurance company may invest its company may invest its legal policy
legal policy reserve, as provided in reserve, as provided in Section 217
section two hundred eleven or in or in Section 218, in any of the
section two hundred twelve, in any of classes of securities or types of
the classes of securities or types of investments described in Sections
investments described in sections 204, 206, 207 and 208, subject to the
one hundred ninety-eight, two limitations therein contained, and in
hundred, two hundred one and two any securities issued by any
hundred two, subject to the registered enterprise mentioned in
limitations therein contained, and in Section 210, free from any lien or
any securities issued by any encumbrance, in such amounts as
"registered enterprise" mentioned in may be approved by the
section two hundred four, free from Commissioner. Such company may
any lien or encumbrance, in such likewise invest any portion of its
amounts as may be approved by the earned surplus in the aforesaid
Commissioner. Such company may securities or investments subject to
likewise invest any portion of its the aforesaid limitations.
earned surplus in the aforesaid
securities or investments subject to
the aforesaid limitations.
Section 207. Any investment made in SEC. 213. Any investment made in
violation of the applicable provisions violation of the applicable provisions
of this title shall be considered non- of this title shall be considered non-
admitted assets. admitted assets.
Section 208. (1) All bonds or other
evidences of indebtedness having a SEC. 214. (a) All bonds or other
fixed term and rate of interest and instruments of indebtedness having
held by any life insurance company a fixed term and rate of interest and
authorized to do business in this held by any life insurance company
country, if amply secured and if not authorized to do business in this
in default as to principal or interest, country, if amply secured and if not
shall be valued as follows: If in default as to principal or interest,
purchased at par, at the par value; if shall be valued based on their
purchased above or below par, on amortized cost using effective
the basis of the purchase price interest method less impairment and
adjusted so as to bring the value to unrecoverable amount based on
par at maturity and so as to yield in appropriate measurement methods
the meantime the effective rate of which are generally accepted in the
interest at which the purchase was industry and accepted by the
made, or in the discretion of the Commissioner.
Commissioner, on the basis of the
method of calculation commonly
known as the pro-rata method. In
applying the foregoing rule the
purchase price shall in no case be
taken at a higher figure than the
actual market value at the time of
acquisition.
The Commissioner shall have the The Commissioner shall have the
power to determine the eligibility of power to determine the eligibility of
any such investments for valuation any such investments for valuation
on the basis of amortization, and may on the basis of amortization, and may
by regulation prescribe or limit the by regulation prescribe or limit the
classes of securities so eligible for classes of securities so eligible for
amortization. All bonds or other amortization. All bonds or other
evidences of indebtedness which in instruments of indebtedness which in
the judgment of the Commissioner the judgment of the Commissioner
are not amply secured shall not be are not amply secured shall not be
eligible for amortization and shall be eligible for amortization and shall be
valued in accordance with paragraph valued in accordance with paragraph
two. The Commissioner may, if he two. The Commissioner may, if he
finds that the interest of policy finds that the interest of
holders so permit or require, by policyholders so permit or require, by
official regulation permit or require official regulation permit or require
any class or classes of insurers, any class or classes of insurers,
other than life insurance companies, other than life insurance companies
authorized to do business in this authorized to do business in this
country, to value their bonds or other country, to value their bonds or other
evidences of indebtedness in instruments of indebtedness in
accordance with the foregoing rule. accordance with the foregoing rule.
(2) The investments of all insurers (b) The investments of all insurers
authorized to do business in this authorized to do business in this
country, except securities subject to country, except securities subject to
amortization and except as otherwise amortization and except as otherwise
provided in this chapter, shall be provided in this chapter, shall be
valued, in the discretion of the valued, in the discretion of the
Commissioner, at their market value, Commissioner, at their amortized
or at their appraised value, or at cost using effective interest method
prices determined by him as less impairment and unrecoverable
representing their fair market value. If amount or at valuation representing
the Commissioner finds that in view their fair market value. If the
of the character of investments of any Commissioner finds that in view of
insurer authorized to do business in the character of investments of any
this country it would be prudent for insurer authorized to do business in
such insurer to establish a special this country it would be prudent for
reserve for possible losses or such insurer to establish a special
fluctuations in the values of its reserve for possible losses or
investments, he may require such fluctuations in the values of its
insurer to establish such reserve, investments, he may require such
reasonable in amount, and may insurer to establish such reserve,
require that such reserve be reasonable in amount, and include a
maintained and reported in any report thereon in any statement or
statement or report of the financial report of the financial condition of
condition of such insurer. such insurer. The Commissioner may,
The Commissioner may, in The Commissioner may, in
connection with any examination or connection with any examination or
required financial statement of an required financial statement of an
authorized insurer, require such authorized insurer, require such
insurer to furnish him complete insurer to furnish him complete
financial statements and audited financial statements and audited
report of the financial condition of report of the financial condition of
any corporation of which the any corporation of which the
securities are owned wholly or partly securities are owned wholly or partly
by such insurer and may cause an by such insurer and may cause an
examination to be made of any examination to be made of any
subsidiary or affiliate of such insurer. subsidiary or affiliate of such insurer
as appropriate to specific
investments as provided in
appropriate circulars issued by the
Commissioner.
(c) Investments in equity of an
insurance company shall be valued
as follows:
“(1) Listed stocks shall be valued at
market value and periodically
adjusted to reflect market changes
through a special valuation account
to reflect their realizable value when
sold;
“(2) Unlisted stocks shall be valued
at adjusted book value based on the
latest unqualified audited financial
statements of the company which
issued such stocks; and
“(3) Stocks of a corporation under
the control of the insurer shall be
valued using the equity method
which is the cost plus or minus the
share of the controlling company in
the earnings or losses of the
controlled company after acquisition
of such stocks.
(3) The stock of an insurance (d) The stock of an insurance
company shall be valued at the company shall be valued at the
lesser of its market value or its book
lesser of its market value or its book value as shown by its last approved
value as shown by its last approved audited financial statement or the
annual statement or the last report last report on examination,
on examination, whichever is more whichever is more recent. The book
value of a share of common stock of
recent. The book value of a share of an insurance company shall be
common stock of an insurance ascertained by dividing (1) the
company shall be ascertained by amount of its capital and surplus
dividing (a) the amount of its capital less the value of all of its preferred
stock, if any, outstanding, by (2) the
and surplus less the value of all of its number of shares of its common
preferred stock, if any, outstanding, stock issued and outstanding.
by (b) the number of shares of its
common stock issued and Notwithstanding the foregoing
outstanding. Notwithstanding the provisions, an insurer may, at its
foregoing provisions, an insurer may, option, value its holdings of stock in
at its option, value its holdings of a subsidiary insurance company in
stock in a subsidiary insurance an amount not less than acquisition
company in an amount not less than cost if such acquisition cost is less
acquisition cost if such acquisition than the value determined as
cost is less than the value hereinbefore provided.
determined as hereinbefore
provided.
(4) Real estate required by (e) Real estate acquired by
foreclosure or by deed in lieu foreclosure or by deed in lieu
thereof, in the absence of a recent thereof, in the absence of a recent
appraisal deemed by the appraisal deemed by the
Commissioner to be reliable, shall Commissioner to be reliable, shall
not be valued at an amount greater not be valued at an amount greater
than the unpaid principal of the than the unpaid principal of the
defaulted loan at the date of such defaulted loan at the date of such
foreclosure or deed, together with foreclosure or deed, together with
any taxes and expenses paid or any taxes and expenses paid or
incurred by such insurer at such incurred by such insurer at such
time in connection with such time in connection with such
acquisition, and the cost of additions acquisition, and the cost of additions
or improvements thereafter paid by or improvements thereafter paid by
such insurer and any amount or such insurer and any amount or
amounts thereafter paid by such amounts thereafter paid by such
insurer on any assessments levied insurer or any assessments levied
for improvements in connection with for improvements in connection with
the property. the property.
(5) Purchase money mortgages (f) Purchase money mortgages
received on dispositions of real received on dispositions of real
property held pursuant to section property held pursuant to Section
one hundred ninety-eight shall be 208 shall be valued in an amount
valued in an amount equivalent to equivalent to ninety percent (90%) of
ninety per centum of the value of the value of such real property.
such real property. Purchase money Purchase money mortgages received
mortgages received on disposition of on disposition of real property
real property otherwise held shall be otherwise held shall be valued in an
valued in an amount not exceeding amount not exceeding ninety percent
ninety per centum of the value of (90%) of the value of such real
such real property as determined by property as determined by an
an appraisal made by an appraiser at appraisal made by an appraiser at or
or about the time of disposition of about the time of disposition of such
such real property. real property.
(6) The stock of a subsidiary of an “(g) The stock of a subsidiary of an
insurer shall be valued on the basis insurer shall be valued on the basis
of the greater of:
of the greater of
•the value of only such subsidiary of “(1) The value of only such of the
the assets of such subsidiary as assets of such subsidiary as would
would constitute lawful investments constitute lawful investments for the
insurer if acquired or held directly
for the insurer if acquired or held by the insurer; or
directly by the insurer or “(2) Such other value determined
•such other value determined pursuant to standards and
pursuant to standards and cumulative limitations, contained in
a regulation to be promulgated by
cumulative limitations, contained in the Commissioner.
a regulation to be promulgated by
the Commissioner.
(7) Notwithstanding any provision “(h) Notwithstanding any provision
contained in this section or contained in this section or
elsewhere in this chapter, if the
Commissioner find that the interests elsewhere in this chapter, if the
of policyholders so permit or require, Commissioner finds that the
he may permit or require any class or interests of policyholders so permit
classes of insurers authorized to do or require, he may permit or require
business in this country to value
their investments or any class or any class or classes of insurers
classes thereof as of any date authorized to do business in this
heretofore or hereafter in accordance country to value their investments or
with any applicable valuation or any class or classes thereof as of
method.
any date heretofore or hereafter in
accordance with any applicable
valuation or method.
Section 209. It shall be the duty of the “SEC. 215. It shall be the duty of the
officers of the insurance company to officers of the insurance company to
report within the first fifteen days of report within the first fifteen (15) days
every month all such investments as of every month all such investments
may be made by them during the as may be made by them during the
preceding month, and the preceding month, and the
Commissioner may, if such Commissioner may, if such
investments or any of them seem investments or any of them seem
injudicious to him, require the sale or injudicious to him, require the sale or
disposal of the same. The report disposal of the same. The report
shall also include a list of shall also include a list of
investments sold or disposed of by investments sold or disposed of by
the company during the same period. the company during the same period.
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