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PRESIDENTIAL DECREE NO. 123
PRESIDENTIAL DECREE NO. 123 -
AMENDING FURTHER CERTAIN Sections OF ACT NUMBERED TWO THOUSAND FOUR
HUNDRED TWENTY-SEVEN, AS AMENDED, OTHERWISE KNOWN AS THE "INSURANCE ACT"
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WHEREAS, it is the policy of the government
to promote and develop a strong and stable insurance industry and to
provide a favorable climate for its integration in all phases of the
country's economic and social development; chanroblesvirtualawlibrary
WHEREAS, in line with this policy, there is an urgent need to ensure
and maintain the liquidity of insurance companies doing business in the
Philippines and to coordinate their investment and credit policies with
that of the government having due regard to the principles adopted by
both the monetary and fiscal authorities;chanroblesvirtualawlibrary
WHEREAS, the recommendations contained in the report on the financial
system which have been accepted, with certain modifications, by the
monetary authorities, included among others, certain proposals geared
toward ensuring the liquidity of insurance companies doing business in
the Philippines;chanroblesvirtualawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution as
Commander-in-Chief of all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1972, and
General Order No. 1, dated September 22, 1972, as amended, and in order
to effect the desired changes and reforms in the social, economic, and
political structure of our society, do hereby order and decree the
amendment of Act No. 2427, as amended, as follows: chanroblesvirtualawlibrary
Section 1. Section one hundred eighty-four,
subsection (g) of Act Numbered Two thousand four hundred twenty-seven
is hereby amended to read as follows:cralaw:red
"Sec. 184 (g). A provision that after three full
years' premiums have been paid, the company at any time, while the
policy is in force, will advance, on proper assignment or pledge of the
policy and on the sole security thereof, at a specified rate of
interest, a sum equal to, or at the option of the owner of the policy
less than, the reserve at the end of the current policy year on the
policy and of any dividend additions thereto, less a sum not more than
two and one-half per centum of the amount insured by the policy and of
any dividend additions thereto; that the company will deduct from such
loan value any existing indebtedness on the policy and any unpaid
balance of the premium for the current policy year, and may collect
interest in advance on the loan to the end of the current policy year;
which provision may further provide that such loan may be deferred for
not exceeding six months after the application therefor is made, and
that, whenever an increase in the interest rate ceiling is prescribed
by the Monetary Board, the rate of interest specified in policy
contracts issued after the approval of this Act may, upon written
notice to the insured, be increased by the company to a rate not
exceeding that prescribed by the Monetary Board: Provided, That any
such increase is made with the prior approval of the Insurance
Commissioner. A company may, in lieu of the provisions hereinabove
permitted for the deduction from a loan on the policy of a sum not more
than two and one-half per centum of the amount insured by the policy,
and of any dividend additions thereto, insert in the policy a provision
that one-fifth of the entire reserve may be deducted in case of a loan
under the policy, or may provide therein that the deduction may be the
said two and two and one-half per centum or the one-fifth of the said
entire reserve at the option of the company: Provided, however, That
nothing in this Act shall be considered as compelling any insurance
company to loan on any policy an amount in excess of the death benefit
of such policy, and one-half of the difference between the benefit in
case of death and the benefit in case of survival of the policyholder."
Section 2. Section one hundred ninety-seven of the
same Act is hereby amended to read as follows: chanroblesvirtualawlibrary
"Sec. 197. No insurance corporation shall loan any of
its money or deposits to any person, corporation or association, except
upon first mortgages or deeds of trust of unencumbered, improved or
unimproved real estate, in cities and centers of population of
municipalities in the Philippines when the amount of such loan is not
in excess of sixty 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 loans is not in excess of forty per
centum of the market value of such land; or upon the purchase of money
mortgages or like securities received by it upon the sale or exchange
of real property acquired pursuant to section two hundred or section
two hundred-A of this Act; 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
debts 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 of this Act: Provided, however, That a
life insurance corporation may lend to any of its policyholders upon
the security of the value of its policy a sum not exceeding the legal
reserve which it is required to maintain thereon: Provided, further,
That no loan upon the security of real estate shall have a maturity in
excess of twenty years: And provided, finally, That where such loans
upon the security of real estate are granted for a period longer than
five years, payments thereof shall be made in monthly, quarterly, or
semi-annual or annual installments."
Section 3. The same Act is further amended by adding
the following sections immediately after section two hundred-B thereof
to read as follows:cralaw:red
"Sec. 200-C. Insurance companies may (1) invest in
equities of other financial institutions, and (2) engage in the buying
and selling of short-term debt instruments: Provided, That any or all
of such investments shall be with the prior approval of the Insurance
Commissioner."
"Sec. 200-D. Insurance companies may obtain from the
Development Bank of the Philippines loans with maturities not exceeding
five years, the provisions of existing law, executive orders, rules or
regulations to the contrary notwithstanding: Provided, That such
borrowings may be made only by insurance companies whose levels of
policy loan have increased to such an extent as to endanger the
liquidity of such insurance companies' policy reserves as a result of
an increased in the interest rate ceiling."
Section 4. All Acts and parts of Acts inconsistent
with the provisions of this Act are hereby repealed.
Section 5. This Decree shall take effect immediately.
Done in the City of Manila,
this 29th day of January, in the year of Our Lord, nineteen hundred and
seventy-three.
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