AMENDING CERTAIN SECTIONS OF ACT NUMBERED TWENTY-FOUR HUNDRED AND TWENTY-SEVEN, OTHERWISE KNOWN AS THE INSURANCE ACT, AS AMENDED

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;

WHEREAS, in line with this policy, there is a
pressing need to ensure the due performance of the contracts concluded
by insurance 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;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of
the Philippines, by virtue of the powers in me vested 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, 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:

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:

“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 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.”

SEC. 2. Section One hundred seventy-one of the same
Act is further amended to read as follows:

“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 joss, 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 recognizance,
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 of 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.”

SEC. 3. Section One hundred seventy-two of the same
Act is further amended to read as follows:

“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.

“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 interests 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 ruling 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.”

SEC. 4. Section One hundred seventy-five of the same
Act is further amended to read as follows:

“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 resorted by the Insurance
Commission.

“The Insurance Commission is further authorized, after giving such
opportunity to the company to be heard as it thinks fit, to appoint an
administrator to manage the affairs and property of such company.

“The administrator so appointed shall receive from the insurance
company concerned such remuneration as the Insurance Commission may
direct and the Insurance Commission may at any time cancel the
appointment and appoint some other person as administrator.

“The administrator shall continue the management of the business of
the insurer with the greatest economy compatible with 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 policy
holders, 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 course 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.”

SEC. 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:

“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 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). Grounds 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.

“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 be 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 that 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 to the
command of a subpoena without reasonable excuse, or if a person in
attendance upon such 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 shall 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 to or degrade him 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.

“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 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 owned
by or owing to such company provided that whenever the amount
of such debt or claim owned 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 if so, what payments have been made
thereon, and that the sum claimed is justly owing from the company to
the claimant. Whenever a claim is founded upon an instrument in writing
such instrument, unless lost shall be filed with the proof of claim. If
such instrument is lost or destroyed, a statement of such fact and of
the circumstances of loss or destruction shall be filed under oath with
the claim.

“Upon the liquidation of any insurance companies which has issued
policies insuring the lives of persons, the Insurance Commission shall,
within thirty days after the last day set for filing of claims, make a
list of the persons who have not filed proofs of claims 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 the filing of claims a proof of claim for the amount set opposite
his name of said list.

“No contingent claim shall share 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 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
than 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
Commission, authorize it to declaim out of the funds remaining in its
hands after the payment of expenses one or more dividends. Such order
shall specify what claims, if any, are entitled to priority of payment
and shall direct the manner in which dividends shall be paid. Where
there has been no adjudication of insolvency, the Insurance Commission
shall pay all allowed claims in full and shall distribute the balance of
the assets remaining in his hands in accordance with the direction of
the Court.

“Dividends remaining unclaimed or unpaid in the hands of the
Insurance Commission for six months after the final order of
distribution may be deposited in one or more banks, trust companies or
savings banks authorized by the Central Bank of the Philippines to do
business in the Philippines to the credit of the Insurance Commission,
in trust for the person entitled thereto. All these deposits shall be
entitled to priority of payment in case of the insolvency or voluntary
liquidation of the depository on an equality with any other priority
given by the General 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.”

SEC. 6. Section One hundred seventy-eight of the
same Act is further amended to read as follows:

“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 or other evidences of debt of the Government of the Philippines,
its 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 (1-5%) 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.”

SEC. 7. Section One hundred seventy-eight (A) of the
same Act is further amended to read as follows:

“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
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 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.”

SEC. 8. Section One hundred and eighty of the same
Act is further amended to read as follows:

“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.”

SEC. 9. Section One hundred eighty-one of the same
Act is amended to read as follows:

“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.”

SEC. 10. Section One hundred eighty-four of the same
Act, as amended, is further amended by adding thereto paragraph (k) to
read as follows:

“* * * (k). A provision that all claims under the policy, whether
for living, death or any other benefits shall, if payable, be paid to
the insured or 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.”

SEC. 11. Section One hundred eighty-four (A) of the
same Act, as amended, is further amended to read as follows:

“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.”

SEC. 12. Section One hundred eighty-four (D) of the
same Act, as amended, is further amended to read as follows:

“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.”

SEC. 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:

“SEC. 185(A). Variable Contracts. 1.
Definitions. — When used in this Act, the term Variable contract 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
provide benefits or values incidental thereto payable in fixed or
variable amounts, or both. It shall not be deemed to be a ”security” or
”securities’ as defined in Commonwealth Act Numbered Eighty-three
(Securities Act), or in Republic Act Numbered Twenty-six hundred and
twenty-nine (Investment Company Act), nor subject to regulation under
said Acts.

“2. Qualification of Insurers. — No domestic insurance
company shall issue, deliver or use any variable contract, and no
foreign insurance company authorized to transact business in the
Philippines, shall issue, deliver or sell any variable contract in the
Philippines, unless and until such company shall have satisfied the
Insurance Commission that its financial and general condition and its
methods of operation, including the issue and sale of variable
contracts, are not and will not be hazardous to the public or to its
policy and contract owners. No foreign insurance company shall issue,
deliver or sell any variable contract in the Philippines unless
authorized to do so by the laws of its domicile. In determining the
qualifications of a company requesting authority to issue, deliver or
use variable contracts, the Insurance Commission shall always consider
the following:

“(a) the history, financial and general condition of the company:
Provided, That such company, if a domestic company must have a
paid-up capital of not less than Two Million Pesos and an unassigned
surplus of One Million Pesos, and, in case of a foreign company, must
have deposited with the Insurance Commission for the-benefit and
security of its variable contract owners in the Philippines, securities
satisfactory to the Insurance Commission consisting of bonds of the
Government of the Philippines or its instrumentalities with an actual
market value of Two Million Pesos;

“(b) the character, responsibility and fitness of the officers
and directors of the company; and

“(c) the law and regulation under which the company is authorized
in the state of domicile to issue such contracts.

“If after notice and hearing, the Insurance Commission shall find
that the company is qualified to issue, deliver and use variable
contracts in accordance with this Act and the regulations and rules
issued thereunder, the corresponding order of authorization shall be
issued. Any decision or order denying authority to issue, sell or
deliver variable contracts shall clearly and distinctly state the
reasons and grounds on which it is based.

“The decision or order of the Insurance Commission by virtue of
the provision of this Act shall be appealable to the Secretary of
Finance, whose decision shall be final.

“3. Contracts Shall Contain Certain Provisions. — (a)
Every variable contract delivered or issued for delivery in the
Philippines and every certificate evidencing variable benefits issued
pursuant to any such contracts on a group basis, shall contain a
statement of the essential features of the procedures to be followed by
the issuing company in determining the amount of variable benefits or
other contractual payments or values thereunder and shall state in clear
terms that such amounts may decrease or increase according to such
procedure. Every such contract delivered or issued for delivery in the
Philippines, and every such certificate, shall contain on its first
page, in a prominent position, a clear statement that the benefits or
other contractual payments or values thereunder are on a variable basis.

“(a) Every individual variable contract delivered or issued for
delivery shall stipulate the method of determining the variations in the
amount of variable benefits or other contractual payments or values
thereunder due to variations in investment and experience, and shall
guarantee that the expenses and mortality results shall not adversely
affect such amounts;

“(b) Every individual variable contract delivered or issued for
delivery shall contain in substance the following provisions or other
provisions more favorable or at least as favorable to the contract owner
and approved by the Insurance Commission:

“(i) That, in the event of default in the payment of any
consideration beyond the period of grace allowed by the contractor the
payment thereof, the company will make payment of the value of the
contract, as determined thereunder, in accordance with a plan provided
by the contract or agreed upon by the contract owner and the company,
such payments to commence not later than the date contractual payments
were otherwise to have commenced in accordance with the contract;

“(ii) That, upon written request of the contract owner and
surrender of the contract, the company will make payment of the value of
the contract, as determined thereunder, in accordance with a plan provided
by the contract and selected by the contract owner or agreed upon by
the contract owner and the company;

(iii) That, the company will mail to the contract owner not
less than semi-annually after the first contract year, a report in a
form approved by the Insurance Commission which shall include a
statement of the number of units of uniform value credited to such
contract and the value of each such unit as of a date not more than four
(4) months previous to the date of mailing, and a statement in a form
and as of a date approved by the Insurance Commission, of the
investments held in the segregated portfolio or portfolio of investments
or separate account or accounts designated in such contract;

”(c) Every group variable contract delivered or issued for
delivery shall stipulate the method of determining the variations in the
amount payable with respect to a unit of variable benefits purchased
thereunder due to variations in investment experience, and shall
guarantee that expense and mortality results shall not adversely affect
such amounts.

“4. Optional Fixed Benefit, and Payments. — Any insurance
company issuing variable contracts 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 of benefits.

“5. Approval Requirement. — Every variable contract form
delivered or issued for delivery m 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 conation 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 Operation 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 account 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. Expect as otherwise specifically
provided by the contract, no sale, exchange, or other 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 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.”

SEC. 14. Section One hundred ninety-two of the same
Act is further amended to read as follows:

“SEC. 192. It shall he unlawful for any person,
company, or corporation in the Philippines either to procure, receive or
forward applications for insurance in or to issue, or to 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 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.”

SEC. 15. Section One hundred ninety-five of the same
Act is further amended to read as follows:

“SEC. 195. No domestic insurance company shall, if
a stock corporation, engage in business in the Philippines unless
possessed of 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 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 laws and regulations which now are or hereafter
may be in force, alter its organization and transform itself into a
mutual insurance company.

“Whenever its paid-up capital, if it be a stock corporation, or its
reserve, if it be a mutual corporation, shall upon an examination made
pursuant to Section one hundred and seventy four of this Act be found to
be impaired, the Insurance Commission shall forthwith direct the
company to make good any such deficiency or impairment by cash, to be
contributed by all stockholders of record in proportion to their
respective interests and paid to the treasurer of the company, within
fifteen days from receipt of the order: Provided, That the
Insurance Commission, may in its discretion, extend the period to not
more than sixty days upon its being satisfied of the good faith of the
stockholders in complying with its order: And provided, further,
That the company in the interim shall not be permitted to take any new
risks of any kind or character unless and until it makes good the
deficiency or impairment.

“The amount constituting the contributed surplus fund of any
domestic insurance company, whether paid to make good any deficiency or
impairment, or as a complement of the paid-up capital stock, or for any
other purpose, shall not at any time be withdrawn and repaid in cash to
the contributing stockholders without the prior approval of the
Insurance Commission.

“Any officer, official or director of the corporation taking or
authorizing the taking of any risk for the corporation in violation of
the terms of this section shall be punished by imprisonment for not less
than one year nor more than five years and by a fine of not less than
one thousand nor more than five thousand pesos.”

SEC. 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:

“SEC. 200 (B). 1. Before investing any of its
funds in any other classes of securities or types or 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. Alter satisfying the requirements contained in the preceding
paragraph, any domestic non-life insurance company, may invest to an
amount prescribed below its funds in, or otherwise, acquire or loan
upon, only the classes of investments described in Section Two hundred
of the Insurance Act, as amended, or in securities issued by any
‘registered enterprise,’ as this term is defined in the Investment
Incentives Act: Provided, That (a) no more than twenty per
centum (20%) of such amount shall be invested in the lot and building in
which the insurance company conducts its business; and (b) the total
investment of an insurance company in any registered enterprise shall
not exceed fifteen per centum (15%) of the capital of said investor nor
twenty per centum (20%) of the capital of the registered enterprise,
unless previously authorized by the Insurance Commission: And provided,
further, That such reserve investments, including its minimum
capital investments, free from any lien or encumbrance, shall be at
least equal in amount to sixty per centum (60%) of the aggregate amount
of (a) its legal reserve, as provided in Section 186 of the
Insurance Act, and (b) its reserve fund held for reinsurers as provided
for in the pertinent treaty provision in the case of reinsurance ceded
to authorized insurers.

“3. After satisfying the requirements contained in paragraphs 1 and
2 hereof, any non-life insurance company, may invest any portion of its
funds representing earned surplus in any of the investments described
in Sections 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 the
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 Sections 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.”

SEC. 17. Section Two hundred two (B) of the same
Act, as amended, is further amended to read as follows:

“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.”

SEC. 18. Section Two hundred three of the same Act
is amended to read as follows:

“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.

“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.”

SEC. 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.

			(Sgd.) FERDINAND E. MARCOS President Republic of the Philippines
	By the President:
	(Sgd.) ALEJANDRO MELCHOR
		Executive Secretary