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Chan Robles Virtual Law Library
PRESIDENTIAL DECREE NO. 63
PRESIDENTIAL DECREE NO. 63 -
AMENDING CERTAIN Sections OF ACT NUMBERED TWENTY-FOUR HUNDRED AND
TWENTY-SEVEN, OTHERWISE KNOWN AS THE INSURANCE ACT, AS AMENDED
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chanroblesvirtualawlibrary
WHEREAS, it is the policy of the government
to promote and develop a strong national insurance industry and to
provide the necessary operating conditions for its integration in the
economic and social development of the Philippines; chanroblesvirtualawlibrary
WHEREAS, in line with this policy, there is a pressing need to ensure
companies doing business in the Philippines; to maintain the liquidity
and solvency of such insurance companies; to prevent or minimize the
outflow of foreign exchange by insuring a balance of external trade;
and to coordinate insurance company policy with the investment policy
of the government, having regard to the principles adopted in the
monetary, credit and fiscal fields;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, as
amended, do hereby amend certain sections or provisions of Act Numbered
Twenty-four hundred and twenty-seven, otherwise known as the Insurance
Act, as amended, to wit:cralaw:red
Section 1. Section Forty-eight of Act Numbered
twenty-four hundred and twenty-seven, otherwise known as "The Insurance
Act", is amended to read as follows:cralaw:red
"Sec. 48. A written instrument, in which a contract
of insurance is set forth, is called a policy of insurance.
"The policy shall be in the printed form which may contain blank
spaces, and any word, phrase or clause necessary to complete a
particular contract of insurance shall be typewritten on the blank
spaces provided therein.
"Any rider, clause, warranty or endorsement purporting to be part of
the contract of insurance and which is pasted or attached to said
policy is hereby declared not binding on the insured, unless the
descriptive title or name of the rider, clause, warranty, or
endorsement is also mentioned and typewritten on the blank spaces
provided in the policy.
"The Insurance Commission shall promulgate complimentary rules and
regulations as will govern the requirements and procedures to be
followed in the event policy alterations and amendments are necessary
during the currency of an insurance policy." chanroblesvirtualawlibrary
Section 2. Section One hundred seventy-one of the
same Act is further amended to read as follows:cralaw:red
"Sec. 171. It shall be the duty of the Insurance
Commission to see that all laws relating to insurance and insurance
companies are faithfully executed and to perform the duties imposed
upon it by this Act.
"It may issue such rulings, instructions and orders as it may deem
necessary to secure the enforcement of the provisions of this Act,
subject to the approval of the Secretary of Finance.
"Any decision made by the Insurance Commission by virtue of the powers
conferred upon it by this Act shall be appealable, unless otherwise
specified, to the Secretary of Finance, whose decision shall be final.
"Sec. 171-(A) The Insurance Commission shall have the
power to adjudicate claims and complaints involving any loss, damage or
liability for which an insurer may be answerable under any kind of
policy or contract of insurance or for which such insurer may be liable
under any contract of guaranty or surety ship, including official
recognizances, stipulations, bonds and undertakings issued under
authority granted pursuant to Act No. 536, as amended by Act No. 2206,
where the amount of any such loss, damage or liability being claimed or
sued upon any kind of insurance or bond contract does not exceed in any
single claim one hundred thousand pesos (P100,000.00), and any
decision, order or ruling rendered by the Insurance Commission after a
hearing shall have the force and effect of a judgment.
"The aggrieved party may, within thirty (30) days from receipt, appeal
from such decision, order or ruling to the Supreme Court.
"The provisions of Rule 43 of the Rules of Court shall insofar as
practicable apply to appeals from the Insurance Commission to the
Supreme Court."
Section 3. Section One hundred seventy-two of the
same Act is further amended to read as follows:cralaw:red
"Sec. 172. After the becoming effective of this Act,
no foreign or domestic insurance company shall transact any insurance
business in the Philippines until after it shall have obtained a
certificate of authority for that purpose from the Insurance Commission
upon application therefor and payment by the company concerned of the
fees hereinafter prescribed. chanroblesvirtualawlibrary
"The Insurance Commission may refuse to issue a certificate of
authority to any insurance company if, in its judgment, such refusal
will best promote the interest of the people of this country. No such
certificate of authority shall be granted to any such company until the
Insurance Commission shall have satisfied itself by such examination as
it may make and such evidence as it may require that such company is
qualified by the laws of the Philippines to transact therein the kind
or kinds of business applied for. Such certificate of authority shall
expire on the last day of June of each year and shall be renewed
annually if the company is continuing to comply with all the provisions
of this chapter or the circulars, instructions or rulings of the
Insurance Commission. Before issuing such certificate of authority, the
Insurance Commission must be satisfied that the name of the company is
not that of any other known company transacting a similar business, or
a name so similar as to be calculated to mislead the public. Every
company receiving any such certificate of authority shall be subject to
the insurance laws of the Philippines and to the jurisdiction and
supervision of the Insurance Commission.
"No insurance company may be authorized to transact in the Philippines
the business of life insurance and non-life insurance concurrently;
provided that an insurance company may accept by way of reinsurance the
kind or kinds of business specified in its certificate of authority.
"All properties located in the Philippines shall be insured only with
insurance companies duly authorized to do business in the Philippines.
Violation of this provision shall subject the assured and/or the
officers of the assured corporation to a fine of ten thousand pesos
(P10,000.00) and imprisonment of six (6) months."
Section 4. Section One hundred seventy-five of the
same Act is further amended to read as follows:cralaw:red
"Sec. 175. If the Insurance Commission is of the
opinion upon examination or other evidence that any foreign or domestic
insurance company is in an unsound condition, or that it has failed to
comply with any provision of law or regulations obligatory upon it, or
that in the opinion of the Insurance Commission, its condition or
method of business is such as to render its proceedings hazardous to
the public or to its policy holder or that its actual assets exclusive
of its capital are less than its liabilities, unearned premiums and
reinsurance reserve, the Insurance Commission is authorized to revoke
or suspend all certificates of authority granted to such insurance
company, its officers or agents, and no new business shall thereafter
be done by such company or for such company by its agents in the
Philippines while such revocation, suspension or disability continues
or until its authority to do business is restored by the Insurance
Commission.
"The Insurance Commission is further authorized, after giving such
opportunity to the company to be heard as it thinks fit, to appoint an
administrator to manage the affairs and property of such company. chanroblesvirtualawlibrary
"The administrator so appointed shall receive from the insurance
company concerned such remuneration as the Insurance Commission may
direct and the Insurance Commission may at any time cancel the
appointment and appoint some other person as administrator.
"The Administrator shall continue the management of the business of the
insurer with the greatest economy compatible with the efficiency and
shall, as soon as possible, file with the Insurance Commission a report
stating which of the following courses of action is under the
circumstances most advantageous to the general interest of the
policyholders, namely: (a) the transfer of the business of the
insurance company to another insurance company; (b) the continuance of
the business by the insurance company; (c) the liquidation of the
insurance company; or (d) such other courses of action as it deems
advisable.
"On the filing of the report with the Insurance Commission, the
Insurance Commission may take such action as it thinks fit for
promoting the interest of the policyholders in general.
"The administrator may be another insurance company doing business in
the Philippines, any officer of such company, or any other competent
and qualified person or persons.
"The administrator shall not be subject to any action, claim or demand
by, or liability to, any person in respect of anything done or omitted
to be done in good faith in the exercise, or in connection with the
exercise, of the powers conferred on the administrator.
"Any order issued by the Insurance Commission under this section shall
be binding on all persons concerned, and shall have effect
notwithstanding any provision in the Articles of Incorporation or
By-Laws of the Insurance company.
"Subject to the provisions of existing law and regulations on the
matter, any domestic insurance company may, with the approval of the
Insurance Commission consolidate or merge with any other domestic
insurance company."
Section 5. Section One hundred seventy-five (A) to
Section One hundred seventy-five (U), of the same Act, is further
amended to read as follows:cralaw:red
"Sec. 175(A). Grounds for Liquidation. — The
Insurance Commission shall apply under this Act for an order directing
it to liquidate any domestic insurance company or a Philippine branch
of a foreign insurance company having security deposits or trusted
assets in the country, whenever it finds that the company cannot be
permitted to resume business with safety to its policyholders, or to
its creditors, or to the public, or, upon the ground that the company
has consented to such proceeding through a majority of its directors,
stockholders, or members.
"Sec. 175(B). Order of Liquidation: Rights and
Liabilities. — An order to liquidate the business of an insurance
company shall direct the Insurance Commission to continue in
possession, as the case may be, of the property of the company and to
liquidate the business of the same and to deal with the property and
business of the company in the name of the Insurance Commission or in
the name of the company as the court may direct, and to give notice to
all creditors who may have claims against the company to present their
claims.
"The Commission shall be vested by operation of law with the title to
all of the property, contracts, rights of action, and all of the books
and records of the insurance company as of the date of the entry of the
order so directing them to liquidate. The filing or recording of such
order in any office where the instruments affecting title to property
are required to be filed or recorded shall impart the same notice that
a deed, contract of sale or other evidence of title duly filed or
recorded would have imparted. The rights and liabilities of the company
and of its creditors, policyholders, stockholders, members and all
other persons interested in its estate shall, unless otherwise directed
by the court, be fixed as of the date of the entry of the order
directing the liquidation of such insurance company in the office of
the clerk of court where the company had its principal office for the
transaction of business upon the date of the institution of proceedings
under this Act. The right of claimants holding contingent claims on
said date to share in an insolvent estate shall be determined by this
Act.
"The Insurance Commission shall reinsure all the policy obligations of
the company in any solvent insurance company authorized to do business,
if the unearned premium reserve of such company is sufficient to effect
such reinsurance. If such unearned premium reserve is insufficient for
the purpose, the Insurance Commission shall reinsure a percentage of
each policy of such company outstanding to the extent that its unearned
premium reserve may be sufficient for the purpose. No contract of
reinsurance shall be entered into by the Insurance Commission except in
the pursuance of an order of the court directing the reinsurance and
establishing the general form of the contract for the same.
"Sec. 175(C). Ground for Dissolution of Domestic
Insurance Company. — The Insurance Commission may apply under this Act
for an order dissolving the corporate existence of a domestic insurance
company at any time after an order of liquidation has been granted, or
at any time upon the grounds specified in this Act.
"Sec. 175(D). Commencement of a Proceeding. — The
Insurance Commission may, the Solicitor-General representing it,
commence any proceeding under this Act by an application to the Court
of competent jurisdiction, in the Judicial District in which the
principal office of the insurance company involved is located, for an
order directing such company to show cause why, the Insurance
Commission should not have the relief prayed for. On the return of such
order to show cause, and after a full hearing, which shall be held by
the court without delay such court or judge shall either deny the
application or grant the same together with such other relief as the
nature of the case and the interest of policyholders, creditors,
stockholders, members, and the public may require. All proceedings
under this Act shall be given preference in the courts. chanroblesvirtualawlibrary
"Sec. 175(E). Service of Order to Show Cause. — The
order to show cause and the papers upon which the same is made in any
proceedings under this Act shall to served upon the insurance company
named in such order by delivering them to the president or other head
of the corporation, the secretary or clerk to the corporation, the
cashier, the treasurer or a director or managing agent; if it be a
voluntary, unincorporated or a joint stock association, order or
society, by delivering them to the President, Vice-President,
Treasurer, Director, Trustee or other officer or a member with
managerial powers.
"Sec. 175(F). Injunctions. — Upon application by the
Insurance Commission for an order to show cause under this Act, or at
any time thereafter, the Court in which such order is made, or any
judge thereof may without notice, issue an injunction restraining the
company named in the order, its officers, directors, stockholders,
members, trustees, agents, servants, employees, policyholders,
attorneys, managers and all other persons from the transaction of its
business or the waste or disposition of its property until further
order of the court.
"Such court or judge may at any time during a proceeding under this Act
issue such other injunctions or orders as may be deemed necessary to
prevent interference with the Insurance Commission or the preceding, or
waste of the assets of the company, or the prosecution of any action,
or the obtaining of preferences, judgments, attachment or other liens,
or the making of any levy against the corporation or against its assets
or any part thereof.
"Sec. 175(G). Annual Report. — The Insurance
Commission shall transmit to the Secretary of Finance in its annual
report, the names of all insurance companies proceeded against under
this article together with such facts as shall acquaint the
policyholders, creditors, stockholders, and the public with all
proceedings. To the end the officer in charge of any such company shall
file annually with the Insurance Commission a report of the affairs of
such company.
"Sec. 175(H). Appointment of Deputies: Employment of
Assistants: Payment of Salaries and Expenses. — For the purpose of this
Act, the Insurance Commission shall have the power to appoint under its
hand and official seal, one or more officers-in-charge, as its agent or
agents, and to employ such counsel, clerks and assistants as may be
deemed necessary, and to give these persons such powers as may be
considered wise.
"The compensation of such officers-in-charge, counsels, clerks and
assistants, and all expenses of conducting any proceeding under this
Act shall be fixed by the Insurance Commission, subject to the approval
of the court, and may, on certificate of the Insurance Commission, be
paid out of the funds or assets of such company.
"Sec. 175(I). Examinations: Immunity: Action upon
Refusal to be Examined. — At any time during the progress of any
proceeding taken under this Act, the Insurance Commission shall have
the powers, either by itself or by its duly authorized representatives
to subpoena witnesses to compel their attendance, to administer oaths,
and to examine any person under oath, and in connection therewith to
require the production of any books or papers relevant to the inquiry.
If a person subpoenaed to attend such inquiry fails to obey the command
of a subpoena without reasonable excuse, or if a person in attendance
upon inquiry, shall, without reasonable cause, refuse to be sworn, or
to be examined, or to answer a question, or to produce a book or papers
when ordered to do so by the officer duly conducting such inquiry, or
if a corporation, association, partnership, or individual fails to
perform any act required hereunder to be performed, he shall be
required by the court to comply with the order of the officer duly
conducting such inquiry.
"If any person ask to be excused from testifying or producing any book
or paper or other document before the Insurance Commission or before
any person duly designated by it to conduct any such investigation upon
the ground or for the reason that the testimony or evidence,
documentary or otherwise, required of him may tend to incriminate him
or degrade him or to subject him to a penalty or forfeiture, and shall
notwithstanding be directed by the Insurance Commission or by the
person duly designated by the Insurance Commission to conduct any such
inquiry to testify or to produce any book, paper or document, he must
nonetheless comply with such direction but in such event he shall not
thereafter be prosecuted or subjected to any penalty or forfeiture for
or on account of any transaction, matter or thing concerning which he
may testify or produce, documentary or otherwise, pursuant thereto and
no testimony so given or produced shall be received against him upon
any criminal action, suit or proceeding, investigation or inquiry. No
person testifying shall be exempt from prosecution or punishment for
any perjury or other false statement committed or made by him in his
testimony given as herein provided for.
"Sec. 175(J). Exemption from Filing Fees. — The Insurance
Commission shall not be required to pay fee to any public officer for
filing, recording, or in any manner authenticating any paper or
instrument relating to any proceeding under this Act.
"Sec. 175(K). Deposit of Monies Collected:
Preference. — The monies collected by the Commission in a proceeding
under this Act, shall be, from time to time, deposited in one or more
banks, savings banks, or trust companies authorized by the Central Bank
of the Philippines to do business in the Philippines.
"Sec. 175(L). Voidable Transfer. — Any transfer of,
or lien upon, the property of an insurance company made or created
within four months prior to the granting of an order to show cause
under this Act, with the intent of giving to any creditor or of
enabling him to obtain greater percentage of his debt than any other
creditor of the same class which is accepted by such creditor having
reasonable cause to believe that such preference will occur, shall be
voidable.
"The Insurance Commission as liquidator may avoid any transfer or lien
upon the property of an insurance company which any creditor,
stockholder or member of the company might have avoided and may recover
the property so transferred or its value from the person to whom it was
transferred unless he was a bona fide holder for value prior to the
date of the entry of the order of liquidation. The property may be
recovered or its value collected from whomever may have received it
except a bona fide holder for value.
"Sec. 175(M). Priority of Claims for Wages. — All
wages actually owing to clerical employees of the insurance company
against whom a proceeding under this Act is commenced, for services
rendered within three months prior to the commencement of such
proceedings, not exceeding one thousand five hundred pesos to each
employee, shall be paid prior to the payment of every other debt or
claim, and in the discretion of the Insurance Commission may be paid as
soon as possible after the proceeding has been commenced. At all times,
sufficient funds shall be reserved for the expenses of
administration. chanroblesvirtualawlibrary
"Sec. 175(N). Offset. — In all cases of mutual debts
or mutual credits between the insurance company and another person,
such credits and debts shall be offset and the balance only shall be
allowed or paid.
"No offset shall be allowed in favor of any such person, however, where
(a) the obligation of the company to such person would not then entitle
him to share as a claimant in the assets of such insurance company, or
(b) the obligation of the company to such person was purchased by or
transferred to such person with a view of its being used as an offset,
or (c) the obligation of such person is to pay an assessment levied
against the members of a mutual insurance company or to pay a balance
upon a subscription to the capital stock of a stock insurance
corporation.
"Sec. 175(O). Sale or Other Disposition of Assets and
Compromise of Claims. — The Insurance Commission may, subject to the
approval of the Court, (a) sell or otherwise dispose of the real and
personal property, or any part thereof, of the insurance company
against whom a proceeding has been brought under this Act and (b) sell
or compound all doubtful or uncollectible debts or claim owed by or
owing to such company provided that whenever the amount of such debt or
claim owed by or owing to such company does not exceed one thousand
pesos, the Insurance Commission may compromise or compound the same
upon such terms as it may deem for the best interest of said company
without obtaining the approval of the Court.
"Sec. 175(P). Borrowing on the Pledge of Assets. —
For the purpose of facilitating the liquidation provided for by this
Act the Insurance Commission may, subject to the approval of the Court,
borrow money and execute, acknowledge and deliver notes or other
evidence of indebtedness therefor and secure the repayments of same by
the mortgage, pledge, assignment, transfer in trust, or hypothecation
of any or all of the property, whether real, personal or mixed, of the
company against whom a proceeding has been brought under this Act and
the Insurance Commission, subject to the approval of the Court, shall
have power to take any and all other action necessary and proper to
consummate any such loans and to provide for the repayment thereof.
"Sec. 175(Q). Time to File Claims Against Insolvent
Insurance Company. — Upon the granting of an order for the liquidation
of an insurance company, the Court shall after such notice and hearing,
as it deems proper, make an order declaring such company to be
insolvent. Thereupon, regardless of any prior notice which may have
been given to creditors, the Insurance Commission shall notify all
persons who may have claims against such company and who have not filed
proper proofs thereof, to present the same to him at a place specified
in such notice within four months or some longer time in the discretion
of the Court, if the Insurance Commission shall certify that it is
necessary, and not otherwise, from the date of the entry of such order.
The last day for the filing of proofs of claim shall be specified in
the notice. The notice shall be given in a manner determined by the
Court.
"Proofs of claim may be filed subsequent to the date specified but, no
such claim shall share in the distribution of the assets until all
allowed claims, proofs of which have been filed before said date, have
been paid in full with interest.
"Sec. 175(R). Proof and Allowance of Claims. — A
proof of claim shall consist of a statement under oath, in writing,
signed by the claimant, setting forth the claim, the consideration
thereof, and whether any, and is so, what payments have been made
thereon, and that the sum claimed is justly owing from the company to
the claimant. Whenever a claim is founded upon an instrument in
writing, such instrument, unless lost shall be filed with the proof of
claim. If such instrument is lost or destroyed, a statement of such
fact and of the circumstances of loss or destruction shall be filed
under oath with the claim. chanroblesvirtualawlibrary
"Upon the liquidation of any insurance companies which has issued
policies insuring the lives of persons, the Insurance Commission shall,
within thirty days after the last day set for filing of claims, make a
list of the persons who have not filed proofs of claim with the
Insurance Commission, to whom it appears to its entire satisfaction
from the books of the company, there are owing amounts on such policies
and the Insurance Commission shall set opposite the name of each person
the amount so owing to such person. Each person whose name shall appear
upon the list shall be deemed to have duly filed prior to the last day
set for filing of claims a proof of claim for the amount set opposite
his name of said list.
"No contingent claim shall have in a distribution of the assets of the
company which has been adjudicated to be insolvent except that such
claims shall be considered, if properly presented, and may be allowed
to share where (1) such claim becomes absolute against the company on
or before the last day fixed for the filing of proofs of claim against
the assets of such company, or (2) there is a surplus and the
liquidation is thereafter conducted upon the basis that such company is
solvent.
"Where an insurance company has been adjudicated to be insolvent, any
person who has a cause of action against an assured of such company,
which is the subject of indemnity under a liability policy issued by
such company, shall have the right to file a claim in the liquidation
proceeding, regardless of the fact that such claim may be contingent,
and such claim may be allowed; provided (1) that it may be reasonably
inferred from the proof presented upon such claim that such person
would be able to obtain a judgment upon such cause of action against
such company; (2) that such person shall furnish suitable proof that no
further valid claims against such company arising out of his cause of
action other than those already presented can be made unless for good
cause shown the Court in which the proceeding is pending shall
otherwise direct; (3) that the total liability of such company to all
claimants arising out of the same act of its assured shall be no
greater that the total liability would be were it not in liquidation;
(4) that no judgment taken by default or by collusion, against such an
assured shall be considered as evidence in the liquidation proceeding
either of the liability of such assured to such person upon such cause
of action or of the amount of damages to which such person is therein
entitled.
"No claim of any secured claimant shall be allowed at a sum greater
than the difference between the value of the security and the amount
for which the claim is allowed, unless the claimant shall surrender his
security to the Insurance Commission in which event the claim shall be
allowed in the full amount for which it is valued.
"Sec. 175(S). Distribution of Assets; Priorities;
Unclaimed Dividends. — At any time after the last day fixed for filing
of proofs of claim in the liquidation of an insurance company, the
Court may, upon the application of the Insurance funds remaining in its
hand after the payment of expenses one or more dividends. Such order
shall specify what claims, if any, are entitled to priority of payment
and shall direct the manner in which dividends shall be paid. Where
there has been no adjudication of insolvency, the Insurance Commission
shall pay all allowed claims in full and shall distribute the balance
of the assets remaining in his hands in accordance with the direction
of the Court. chanroblesvirtualawlibrary
"Dividends remaining unclaimed or unpaid in the hands of the Insurance
Commission for six months after the final order of distribution may be
deposited in one or more banks, trust companies or savings banks
authorized by the Central Bank of the Philippines to do business in the
Philippines to the credit of the Insurance Commission, in trust for the
person entitled thereto. All these deposits shall be entitled to
priority of payment in case of the insolvency or voluntary liquidation
of the depository on an equality with any other priority given by the
Central Banking Act.
"Sec. 175(T). The Insurance Commission or its
representative duly designated or appointed under this Act shall not be
subject to any action, claim or demand by, or liability to, any person
in respect of anything done or omitted to be done in good faith in the
exercise, or in connection with the exercise, of the powers conferred
on the Insurance Commission or its aforesaid representative.
Section 6. Section One hundred seventy-eight of the
same Act is further amended to read as follows:cralaw:red
"Sec. 178. No foreign insurance company shall engage
in business in the Philippines unless possessed of paid up unimpaired
capital or assets and reserve not less than that herein required of
domestic insurance companies; and no insurance company organized or
existing under the government or laws other than those of the
Philippines shall engage in business in the Philippines until it shall
have deposited with the Insurance Commission for the benefit and
security of its policyholders and creditors in the Philippines,
securities satisfactory to the Insurance Commission consisting of good
securities of the Philippines, including new issues of stock of
registered enterprises as this term is defined in The Investment
Incentives Act, to the actual market value of not less than the minimum
paid-up capital required of domestic insurance companies: Provided,
That at least fifty per centum of such securities shall consist of
bonds of other evidences of debt of the Government of the Philippines,
it political subdivisions and instrumentalities, or of government-owned
or controlled corporations and entities, including the Central Bank.
The total investment of a foreign insurance company in any registered
enterprise shall not exceed fifteen per centum (15%) of the capital of
said investor nor twenty per centum (20%) of the capital of the
registered enterprise, unless previously authorized in writing by the
Insurance Commission. Foreign insurance companies already doing
business in the Philippines on the date this Amendatory Act becomes
effective shall comply with the requirement increasing their respective
deposits as provided in this Act not later than June thirty, nineteen
hundred and seventy-three."
Section 7. Section One hundred seventy-eight (A) of
the same Act is further amended to read as follows:cralaw:red
"Sec. 178(A). Every foreign company doing business in
the Philippines shall set aside at least sixty per centum of the legal
reserves of the policies written in the Philippines and invest and keep
the same therein in accordance with the provisions of this Section.
Foreign insurance companies doing business in the Philippines shall
comply with this requirement not later than June thirty, nineteen
hundred and seventy-three. The legal reserve herein required to be set
aside shall be invested only in the classes of the Philippine
securities described in Section Two Hundred of the Insurance Act, as
amended: Provided, however, That no investment in stocks or bonds of
any single entity shall in the aggregate exceed fifteen per centum of
the capital of the investing company or twenty per centum of the
capital of the issuing company, whichever is the lesser, unless
otherwise approved in writing by the Insurance Commission: Provided,
further, That in determining the amount to be invested and kept in the
Philippines under this section, a company shall be given credit for the
amount of securities deposited by such company under this section one
hundred and seventy-eight of this Act, as amended. The securities
purchased and kept in the Philippines under this section, shall not be
sent out of the territorial jurisdiction of the Philippines without the
written consent of the Insurance Commission." chanroblesvirtualawlibrary
Section 8. Section One hundred and eighty of the same
Act is further amended to read as follows:cralaw:red
"Sec. 180. Every insurance company doing business in
the Philippines shall terminate its fiscal period on the thirty-first
day of December every year and shall annually on or before the
thirtieth day of April of its year render to the Insurance Commission a
statement signed and sworn to by the chief officer of such company
showing, in such form and detail as may be prescribed by the Insurance
Commission, the exact condition of its affair on the preceding
thirty-first day of December.
"For the filing of the annual statement, the Insurance Commission shall
collect and receive from all insurance companies doing business in the
Philippines a fee of twenty five pesos: Provided, That a fine of one
hundred pesos shall be imposed and collected by the Insurance
Commission for each week of delay, or any fraction thereof, in the
filing of the annual statement."
Section 9. Section One Hundred eighty-one of the same
Act is amended to read as follows:cralaw:red
"Sec. 181. Immediately upon approval of the annual
statements by the Insurance Commission, every insurance company doing
business in the Philippines shall publish in two newspapers of general
circulation in the City of Manila, one published in English and one in
Pilipino, a full synopsis of its annual financial statements showing
fully the condition of its business, and setting forth its resources
and liabilities."
Section 10. Section One hundred eighty-four of the
same Act, as amended, is further amended by adding thereto paragraph
(k) to read as follows:cralaw:red
".. (k). A provision that all claims under the
policy, whether for living, death or any other benefits, shall, if
payable, be paid to the insured for the beneficiary, as the case may
be, provided that should the beneficiary be a minor irrevocably
designated, a judicial guardian for such minor need not be appointed if
the amount of the policy does not exceed twenty thousand pesos."
Section 11. Section One hundred eighty-four (A) of
the same Act, as amended, is further amended to read as follows:cralaw:red
"Sec. 184(A). The term 'Industrial life insurance' as
used in this Act shall mean that form of life insurance either (a)
under which the premiums are payable weekly or (b) under which the
premiums are payable monthly or oftener, but less often than weekly, if
the face amount of insurance provided in any policy is three thousand
pesos or less and if the words "industrial policy" are printed upon the
policy as part of the descriptive matter."
Section 12. Section One hundred eighty-four (D) of
the same Act, as amended, is further amended to read as follows:cralaw:red
"Sec. 184(D). Variable contract may be issued on the
industrial life basis, provided that the pertinent provisions of this
Act governing variable contracts are complied with in connection with
such contracts."
Section 13. Section One hundred eighty-five of the
same Act is further amended by adding a new section to be known as
Section One hundred eighty-five (A) to read as follows:cralaw:red
"Sec. 185(A). Variable Contracts. — 1. Definitions.
When used in this Act, the term "variable" shall mean any policy or
contract on either a group or on an individual basis issued by an
insurance company providing for benefits or other contractual payments
or values thereunder to vary so as to reflect investment results of any
segregated portfolio of investments or of a designated separate account
in which amounts received in connection with such contracts shall have
been placed and accounted for separately and apart from other
investments and accounts. This contract may also be provide benefits or
values incidental thereto payable in fixed or variable amounts, or
both. It shall not be deemed to a "security" or "securities" as defined
in Commonwealth Act Numbered Eighty-three (Securities Act), or Republic
Act Numbered Twenty-six hundred and twenty-nine (Investment Company
Act), nor subject to regulation under said Acts.
"2. Qualification of Insurers. — No domestic
insurance company shall issue, deliver or use any variable contract,
and no foreign insurance company authorized to transact business in the
Philippines, shall issue, deliver or sell any variable contract in the
Philippines, unless and until such company shall have satisfied the
Insurance Commission that its financial and general condition and its
methods of operation, including the issue and sale of variable
contracts, are not and will not be hazardous to the public or to its
policy and contract owners. No foreign insurance company shall issue,
deliver or sell any variable contract in the Philippines unless
authorized to do so by the laws of its domicile. In determining the
qualifications of a company requesting authority to issue, deliver or
use variable contracts, the Insurance Commission shall always consider
the following:cralaw:red
"(a) the history, financial and general condition of
the company; provided that such company, if a domestic company must
have a paid-up capital, of not less than Two Million Pesos and an
unassigned surplus of One Million Pesos, and, in case of a foreign
company, must have deposited with the Insurance Commission for the
benefit and security of its variable contract owners in the
Philippines, securities satisfactory to the Insurance Commission
consisting of bonds of the Government of the Philippines or its
instrumentalities with an actual market value of Two Million Pesos;chanroblesvirtualawlibrary
"(b) the character, responsibility and fitness of the
officers and directors of the company; and
"(c) the law and regulation under which the company
is authorized in the state of domicile to issue such contracts.
"If after notice and hearing, the Insurance Commission shall find that
the company is qualified to issue, deliver and use variable contracts
in accordance with this Act and the regulations and rules issued
thereunder, the corresponding order of authorization shall be issued.
Any decision or order denying authority to issue, sell or deliver
variable contracts shall clearly and distinctly state the reasons and
ground on which it is based. chanroblesvirtualawlibrary
"The decision or order of the Insurance Commission by virtue of the
provision of this Act shall be appealable to the Secretary of Finance,
whose decision shall be final.
"3. Contracts Shall Contain Certain Provisions. — (a)
Every variable contract delivered or issued for delivery in the
Philippines and every certificate evidencing variable benefits issued
pursuant to any such contract on a group basis, shall contain a
statement of the essential features of the procedures to be followed by
the issuing company in determining the amount of variable benefits or
other contractual payments or values thereunder and shall state in
clear terms that such amounts may decrease or increase according to
such procedure. Every such contract delivered or issued for delivery in
the Philippines, and every such certificate, shall contain on its first
page, in a prominent position, a clear statement that the benefits or
other contractual payments or values thereunder are on a variable basis.
"(a) Every individual variable contract delivered or
issued for delivery shall stipulate the method of determining the
variations in the amount of variable benefits or other contractual
payments or values thereunder due to variations in investment and
experience, and shall guarantee that the expenses and mortality results
shall not adversely affect such amounts;chanroblesvirtualawlibrary
"(b) Every individual variable contract delivered or
issued for delivery shall contain in substance the following provisions
or other provisions more favorable or at least as favorable to the
contract owner and approved by the Insurance Commission:cralaw:red
"(i) That, in the event of default in the payment of
any consideration beyond the period of grace allowed by the contract
for the payment thereof, the company will make payment of the value of
the contract, as determined thereunder, in accordance with a plan
provided by the contract or agreed upon by the contract owner and the
company, such payments to commence not later than the date contractual
payments were otherwise to have commenced in accordance with the
contract;chanroblesvirtualawlibrary
"(ii) That, upon written request of the contract
owner and surrender of the contract, the company will
make payment of the value of the contract, as determined thereunder, in
accordance with a plan provided by the contract and selected by the
contract owner or as agreed upon by the contract owner and the company;chanroblesvirtualawlibrary
"(iii) That, the company will mail to the contract
owner not less than semi-annually after the first contract year, a
report in a form approved by the Insurance Commission which shall
include a statement of the number of units of uniform value credited to
such contract and the value of each such unit as of a date not more
than four (4) months previous to the date approved by the Insurance
Commission, of the investments held in the segregated portfolio of
investments or separate account or accounts designated in such contract;chanroblesvirtualawlibrary
"(c) Every group variable contract delivered or
issued for delivery shall stipulate the method of determining the
variations in the amount payable with respect to a unit of variable
benefits purchased thereunder due to variations in investment
experience, and shall guarantee that expense and mortality results
shall not adversely affect such amounts.
"4. Optional Fixed Benefits and Payments. — Any
insurance company issuing variable contract pursuant to this Act may in
its discretion issue contracts providing a combination of fixed amount
and variable amount of benefits and for optional lump-sum payment of
benefits.
"5. Approval Requirements. — Every variable contract
form delivered or issued for delivery in the Philippines, and every
certificate form evidencing variable benefits issued pursuant to any
such contract on a group basis, and the application, rider and
endorsement forms applicable thereto and used in connection therewith,
shall be and are hereby expressly made subject to the approval
requirements of Section One hundred eighty-four of this Act.
"6. Certain Illustrations Prohibited. — Illustration
of benefits payable under any variable contract shall not include or
involve projections of past investment experience into the future and
shall conform with the rules and regulations promulgated by the
Insurance Commission.
"7. Separate Accounts and Operations of Same. — Every
insurance company authorized pursuant to this section to issue, deliver
or use variable contracts shall, in connection with same, establish one
or more separate accounts to be known as separate variable accounts.
All amounts received by the company in connection with any such
contract which are required by the terms thereof, to be allocated or
applied to one or more designated separate variable accounts shall be
placed in such designated account or accounts. The assets and
liabilities of each such separate variable accounts shall at all times
be clearly identifiable and distinguishable from the assets and
liabilities in all other accounts of the company. Notwithstanding any
provision of law to the contrary, the assets held in any such separate
variable account shall not be chargeable with liabilities arising out
of any other business the company may conduct but shall be held and
applied exclusively for the benefit of the owners or beneficiaries of
the variable contracts applicable thereto. In the event of the
insolvency of the company, the assets of each such separate variable
account shall be applied to the contractual claims of the owners or
beneficiaries of the variable contracts applicable thereto. Except as
otherwise specifically provided by the contract, no sale, ex-exchange,
or the transfer of assets may be made by a company, between any of its
separate accounts or between any other investment account and one or
more of its separate accounts, unless, in the case of a transfer into a
separate account, such transfer is made solely to establish the account
or to support the operation of the contracts with respect to the
separate account to which the transfer is made, or in case of a
transfer from a separate account, such transfer would not cause the
remaining assets of the account to become less than the reserves and
other contract liabilities with respect to such separate account. Such
transfer, whether into or from a separate account, shall be made by a
transfer of cash, or by a transfer of securities having a valuation
which could be readily determined in the market place, provided that
such transfer of securities is approved by the Insurance Commission.
The Insurance Commission may authorize other transfers among such
accounts, if, in its opinion, such transfers would not be inequitable.
All amounts and assets allocated to any such separate variable account
shall be owned by the company and with respect to same the company
shall not be nor hold itself out to be a trustee.
"8. Investment of Separate Account Funds. — Any
insurance company which has established one or more separate variable
accounts pursuant to this Act may invest and reinvest all or any part
of the assets allocated to any such account in the securities and
investments authorized by Section 197, Section 200 and Section 200 (A)
of this Act for any of the funds of an insurance company, free and
clear of any and all limitations and restrictions in such sections. In
addition thereto such company may also invest in common capital stocks
or other equities which are listed on or admitted to trading in a
securities exchange located in the Philippines, or which are publicly
held and traded in the "over-the-counter market" as defined by the
Insurance Commission and as to which market quotations have been
available, provided, however, that no such company shall invest in
excess of ten per centum of the assets of any such separate variable
account in any one corporation issuing such common capital stock. The
assets and investments of such separate variable accounts shall not be
taken into account in applying the quantitative investment limitations
applicable to other investments of the company. In the purchase of
common capital stock or other equities, the insurer shall designate to
the broker, or to the seller if the purchase is not made through a
broker, the specific variable account for which the investment is made.
"9. Valuation of Assets. — Assets allocated to any
separate variable account shall be valued at their market value on the
date of any valuation, or if there is no readily available market then
in accordance with the terms of the variable contract applicable to
such assets, or if there are no such contract terms then in such manner
as may be prescribed by the rules and regulations of the Insurance
Commission.
"10. Reserve Liability. — The reserve liability for
variable contracts shall be established in accordance with actuarial
procedures that recognize the variable nature of the benefits provided
and shall be approved by the Insurance Commission.
"11. Separate Annual Statements. — Every insurance
company authorized pursuant to this section to issue, deliver or use
variable contracts shall annually file with the Insurance Commission
separate annual statement of its separate variable accounts. Such
statement shall be on a form prescribed or approved by the Insurance
Commission and shall include details as to all of the income,
disbursements, assets and liability items of and associated with the
said separate variable accounts. Said statement shall be under oath of
two officers of the company and shall be filed simultaneously with the
annual statement required by section one hundred eighty of this Act.
"12. Variable Contract Agents' Licenses. — Any
provision of existing laws to the contrary notwithstanding, no person
shall, within the Philippines, sell or offer for sale a variable
contract or do or perform any act or thing in the sale, negotiation,
making or consummating of any variable contract other than for himself
unless such person shall have a valid and current certificate from the
Insurance Commission authorizing such person to act as a variable
contract agent. No such certificate shall be issued unless and until
the said Commission is satisfied, after examination that such person is
by training, knowledge, ability and character qualified to act as such
agent. Any such certificate may be withdrawn and cancelled by said
Commission after notice and hearing, if it shall find that the holder
thereof does not then have the qualifications required for the issuance
of such certificate.
"13. Rules and Regulations. — Any existing laws to
the contrary notwithstanding, the Insurance Commission shall have sole
and exclusive authority to regulate the issuance and sale of contracts
on a variable basis and to provide for licensing of persons selling
such contracts, and to issue such reasonable rules and regulations as
may be appropriate to carry out the provisions of this Act."
Section 14. Section One hundred ninety-two of the
same Act is further amended to read as follows:cralaw:red
"Sec. 192. It shall be unlawful for any person,
company, or corporation in the Philippines either to procure, receive,
or forward application for insurance in or to issue, or the deliver or
accept policies of or for any company or companies not having been
legally authorized to transact business in the Philippines, as provided
in this Chapter; and any such person, company, or corporation violating
the provisions of this section shall be deemed guilty of a penal
offense, and upon conviction thereof, shall for each such offense, be
punished by a fine of ten thousand pesos (P10,000.00) and imprisonment
of six (6) months: Provided, That the provisions of this section shall
not apply to reinsurance: And provided, further, That every insurance
company doing business in the Philippines shall reinsure with insurance
or reinsurance companies likewise doing business in the Philippines
such percentage of the sum assured on its policy as may be specified by
the Insurance Commission in a circular duly approved by the Secretary
of Finance. The circular shall specify the percentage of the sum
assured on each policy to be reinsured: Provided, That different
percentage may be specified for different classes of business: And
provided, further, That the proportions in which the percentage shall
be allocated among the assuming insurance or reinsurance companies may
also be specified in said circular."
Section 15. Section One hundred ninety-five of the
same Act is further amended to read as follows:cralaw:red
"Sec. 195. No domestic insurance company shall, if a
stock corporation, engage in business in the Philippines unless
possessed a paid-up capital stock equal to at least two million pesos:
Provided, however, That the Secretary of Finance may, upon
recommendation of the Insurance Commission, increase such minimum
paid-up capital stock, under such terms and conditions as he may
impose, to an amount which, in his opinion would be sufficient to
reasonably assure the solvency of the company and the safety of the
interests of the people of this country: Provided, That, a domestic
insurance company already doing business in the Philippines with a
paid-up capital which is less than that herein prescribed shall comply
with the requirement increasing its paid-up capital not later than
December thirty-one, nineteen hundred and seventy-three: Provided,
further, That the Secretary of Finance, upon recommendation of the
Insurance Commission, may, in addition to the paid-up capital stock,
require the stockholders to pay in cash to the company in proportion to
their subscription interests a contributed surplus fund of not less
than one million pesos, in the case of a life insurance company, or not
less than five hundred thousand pesos, in the case of an insurance
company other than life. If organized as a mutual company, in lieu of
such capital stock, it must have available cash assets of at least one
million pesos above all liabilities for losses reported, expenses,
taxes, legal reserve, and reinsurance of all outstanding risks, and the
contributed surplus fund equal to the amounts required of stock
corporations: Provided, That a stock insurance company doing business
in the Philippines may, subject to the pertinent law and regulations
which now are or hereafter may be in force, alter its organization and
transform itself into a mutual insurance company. chanroblesvirtualawlibrary
"Whenever its paid-up capital, if it be a stock corporation, or its
reserve, if it be a mutual corporation, shall upon an examination made
pursuant to section one hundred and seventy-four of this Act be found
to be impaired, the Insurance Commission shall forthwith direct the
company to make good any such deficiency or impairment by cash, to be
contributed by all stockholders of record in proportion to their
respective interests and paid to the treasurer of the company, within
fifteen days from receipt of the order: Provided, That the Insurance
Commission, may in its discretion, extend the period to not more than
sixty days upon its being satisfied of the good faith of the
stockholders in complying with its order: And Provided, further, That
the company in the interim shall not be permitted to take any new risks
of any kind or character unless and until it makes good the deficiency
or impairment.
"The amount constituting the contributed surplus fund of any domestic
insurance company, whether paid to make good any deficiency or
impairment, or as a complement of the paid-up capital stock, or for any
other purpose, shall not at any time be withdrawn and repaid in cash to
the contributing stockholders without the prior approval of the
Insurance Commission.
"Any officer, official or director of the corporation taking or
authorizing the taking of any risk for the corporation in violation of
the terms of this section shall be punished by imprisonment for not
less than one year nor more than five years and by a fine of not less
than one thousand nor more than five thousand pesos."
Section 16. Section Two hundred (A) of the same Act
is further amended by adding a new section to be known as Section two
hundred (B) to read as follows:cralaw:red
"Sec. 200(B). 1. Before investing any of its funds,
in any other classes of securities or types of investments, every
domestic insurance company shall, to the extent of an amount equal in
value to fifty per centum (50%) of the minimum paid-up capital required
under Section one hundred ninety-five of this Act, invest its funds
only in bonds or other evidences of debt of the Government of the
Philippines or its political subdivisions or instrumentalities, or of
government-owned or controlled corporations and entities, including the
Central Bank of the Philippines.
"2. After satisfying the requirements contained in
the preceding paragraph, any domestic non-life insurance company, may
invest to an amount prescribed below its funds in, or otherwise,
acquire or loan upon, only the classes of investments described in
Section Two hundred of the Insurance Act, as amended, or in securities
issued by any "registered enterprise," as this term is defined in the
Investment Incentives Act, provided that (a) no more than twenty per
centum (20%) of such amount shall be invested in the lot and building
in which the insurance company conducts its business; and (b) the total
investment of an insurance company in any registered enterprise shall
not exceed fifteen per centum (15%) of the capital of said investor nor
twenty per centum (20%) of the capital of the registered enterprise,
unless previously authorized by the Insurance Commission: And provided,
further, That such reserve investments, including its minimum capital
investments, free from any lien or encumbrance, shall be at least equal
in amount to sixty per centum (60%) of the aggregate amount of (a) its
legal reserve, as provided in Section 186 of the Insurance Act, and (b)
its reserve fund held for reinsurers as provided for in the pertinent
treaty provision in the case of reinsurance ceded to authorized
insurers. chanroblesvirtualawlibrary
"3. After satisfying the requirements contained in
paragraphs 1 and 2 hereof, any non-life insurance company, may invest
any portion of its funds representing earned surplus in any of the
investments described in Section 197, 198 and 200 of the Insurance Act,
as amended, or in any securities issued by any "registered enterprise"
aforementioned, provided, that no investment in stocks or bonds of any
single entity shall in the aggregate, exceed fifteen per centum (15%)
of the capital of the investing company or twenty per centum (20%) of
the capital of issuing company, whichever is the lesser, unless
otherwise approved by the Insurance Commission.
"4. After satisfying the minimum capital investment
required in paragraph 1 hereof, any life insurance company may invest
its legal policy reserve, as provided in Section 183 of the Insurance
Act, as well as any portion of its earned surplus, in any of the
classes of securities or types of investments described in Section 197,
198, 200 and 200-A, of the Insurance Act, as amended, subject only to
the limitations therein contained, and in any securities issued by any
"registered enterprise" aforementioned, in such amounts as may be
approved by the Insurance Commission."
Section 17. Section Two hundred two (B) of the same
Act, as amended, is further amended to read as follows:cralaw:red
"Sec. 202(B). The Insurance Commission shall publish
the application for withdrawal daily for a period of one (1) week in
the newspapers of general circulation in the City of Manila, one in
English and the other in Pilipino. The expenses of publication shall be
paid by the insurance company filing such application."
Section 18. Section Two hundred three of the same Act
is amended to read as follows:cralaw:red
"Sec. 203. Any person, company or corporation who
violates any provision of this Chapter, for which no penalty is
provided, shall be deemed guilty of a penal offense, and upon
conviction be punished by a fine not exceeding ten thousand pesos
(P10,000.00) or imprisonment of six (6) months or both such fine and
imprisonment in the discretion of the Court. chanroblesvirtualawlibrary
"If the offense is committed by a company or corporation, the officers,
directors or other persons responsible for its operations, unless it
can be proved that they have taken no part in the commission of the
offense, shall likewise be guilty of a penal offense, and upon
conviction be punished by a fine not exceeding ten thousand pesos or
imprisonment of six (6) months or both such fine and imprisonment in
the discretion of the Court."
Section 19. This Decree is hereby made part of the
law of the land and shall take effect immediately.
Done in the City of Manila,
this 20th day of November, in the year of Our Lord, nineteen hundred
and seventy-two.
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