EXAMINATION/ VERIFICATION RULES AND PROCEDURES ON PAID-UP CAPITAL AND NETWORTH COMPLIANCE

To complement the enforcement of the Insurance Code particularly
Section 246,IMC No. 1-2004 items 3, 4 and 5, IMC No. 1-2006, for
statutory reporting purposes and to further clarify the audit procedures
by the Insurance Commission, the following rules and procedures shall
apply:

1. Financial statements of insurance and reinsurance brokers
authorized to transact business in the Philippines shall be subject to
yearly examination/verification. All concerned entities shall submit
present all books of accounts, securities, brokers’ agreement,
information on policies, details on cessions or retrocessions, rates of
commissions and premiums as may be required by the examiner.

Such examiner shall also have the power to examine the officers of
such company under oath touching its business and financial condition
and the authority to transact business in the Philippines of any such
entity shall be suspended by the Commissioner if such examination is
refused and such entity shall not thereafter be allowed to transact
further business in the Philippines until it has fully complied with all
the requirements.

Offsetting of receivables and payables shall be permitted in
accordance with the requirements of Philippine Accounting Standards
Principles No. 32 (PAS 32), thus, all types of trade receivables and
payables (direct and reinsurance) shall be taken up at gross.

2. All monies collected or received as premium payment shall be
immediately remitted to the insurance or reinsurance company concerned,
unless a period has been agreed upon which in no case shall exceed
ninety (90) days from inception of the policy. Reinsurance balances
shall also be subjected to confirmation from the concerned principal and
any discrepancy shall immediately be reconciled, otherwise, differences will also be subjected to the setting up of non-ledger
liabilities.

Likewise, premium receivable/recoverable over ninety (90) days
shall also be disallowed unless proof of collection shall be submitted.

3. Proof of investments in bonds, treasury bills, stocks, real
estate, loans receivable, cash on hand and in bank shall also be
presented/submitted to the examiner and shall be subjected to
disallowances if supporting documents are inadequate.

4. All other accounts, such as deferred and prepaid taxes, property
and equipment, other assets, other receivables taxes payable, long and
short term liabilities shall also be subjected to disallowance as well
as setting up of non-ledger liabilities upon proper
determination/examination or verification by the examiner.

5. If upon examination into the financial condition of these
entities, it is found that the paid-up capital stock is impaired and/or
the networth is less than that required under IMC 1-2006, the same shall
be fully covered up in cash to be contributed proportionately by the
stockholders on record within fifteen (15) days from receipt of the
advice from the Insurance Commission.

Any cash infusion by the stockholders shall also be subject to
examination and verification in accordance with the provision of
Anti-Money Laundering Act of 2001 (Republic Act No. 9160, as amended by
Republic Act No. 9194) and Circular Letter No. 24-2005B dated September
2, 2005.

Likewise, when the fund is sourced from a parent company, either
locally or abroad, the concerned entity shall submit a certified true
copy of the board resolution authorizing the cash infusion from the
parent company duly authenticated by the Philippine Consul, if
applicable.

All previous rulings and policies inconsistent herewith are hereby revoked. This Circular shall take effect immediately.

Adopted: 06 March 2009

 

(SGD.) EDUARDO T. MALINIS
Insurance Commissioner