AMENDING FURTHER CERTAIN SECTIONS OF ACT NUMBERED TWO THOUSAND FOUR HUNDRED TWENTY-SEVEN, AS AMENDED, OTHERWISE KNOWN AS THE “INSURANCE ACT”

WHEREAS, it is the policy of the Government to promote and
develop a strong and stable insurance industry and to provide a
favorable climate for its integration in all phases of the country’s
economic and social development;

WHEREAS, in line with this policy, there is an urgent need
to ensure and maintain the liquidity of insurance companies doing
business in the Philippines and to coordinate their investment and
credit policies with that of the Government having due regard to the
principles adopted by both the monetary and fiscal authorities; and

WHEREAS, the recommendations contained in the report on the
financial system which have been accepted, with certain modifications,
by the monetary authorities, included among others, certain proposals
geared toward ensuring the liquidity of insurance companies doing
business in the Philippines;

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 the Armed Forces of the Philippines, and pursuant
to Proclamation No. 1081, dated September 21, 1972, and General Order
No. 1, dated September 22, 1972, as amended, and in order to effect the
desired changes and reforms in the social, economic, and political
structure of our society, do hereby order and decree the amendment of
Act No. 2427, as amended, as follows:

SECTION 1. Section one hundred eighty-four, subsection (g)
of Act Numbered Two thousand four hundred twenty-seven is hereby amended
to read as follows:

“SEC. 184 (g). A provision that after three full years’
premiums have been paid, the company at any time, while the policy is in
force, will advance, on proper assignment or pledge of the policy and
on the sole security thereof, at a specified rate of interest, a sum
equal to, or at the option of the owner of the policy less than, the
reserve at the end of the current policy year on the policy and of any
dividend additions thereto, less a sum not more than two and one-half per
centum of the amount insured by the policy and of any dividend
additions thereto; that the company will deduct from such loan value any
existing indebtedness on the policy and any unpaid balance of the
premium for the current policy year, and may collect interest in advance
on the loan to the end of the current policy year; which provision may
further provide that such loan may be deferred for not exceeding six
months after the application therefor is made, and that, whenever an
increase in the interest rate ceiling is prescribed by the Monetary
Board, the rate of interest specified in policy contracts issued after
the approval of this Act may, upon written notice to the insured, be
increased by the company to a rate not exceeding that prescribed by the
Monetary Board: Provided, That any such increase is made with
the prior approval of the Insurance Commissioner. A company may, in lieu
of the provisions hereinabove permitted for the deduction from a loan
on the policy of a sum not more than two and one-half per centum
of the amount insured by the policy, and of any dividend additions
thereto, insert in the policy a provision that one-fifth of the entire
reserve may be deducted in case of a loan under the policy, or may
provide therein that the deduction may be the said two and one-half per
centum or the one-fifth of the said entire reserve at the option
of the company: Provided, however, That nothing in this Act
shall be considered as compelling any insurance company to loan on any
policy an amount in excess of the death benefit of such policy, and
one-half of the difference between the benefit in case of death and the
benefit in case of survival of the policy holder.”

SEC. 2. Section one hundred ninety-seven of the same Act is
hereby amended to read as follows:

“SEC. 197. No insurance corporation shall loan any of its
money or deposits to any person, corporation or association, except
upon first mortgages or deeds of trust of unencumbered, improved or
unimproved real estate, in cities and centers of population of
municipalities in the Philippines when the amount of such loan is not in
excess of sixty per centum of the market value of such real
estate; or upon the security of first mortgages or deeds of trust of
actually cultivated, improved and unencumbered agricultural lands in the
Philippines when the amount of such loans is not in excess of forty per
centum of the market value of such kind; or upon the purchase of
money mortgages or like securities received by it upon the sale or
exchange of real property acquired pursuant to Section two hundred or
Section two hundred-A of this Act; or upon bonds or other evidences of
debt of the Government of the Philippines or its political subdivisions
authorized by law to issue bonds, or upon bonds or other evidences of
debt of government-owned or controlled corporations and
instrumentalities including the Central Bank; or upon obligations issued
or guaranteed by the International’ Bank for Reconstruction and
Development; or upon stocks, bonds or other evidences of debt as are
specified in Section two hundred of this Act: provided, however.
That a life insurance corporation may lend to any of its policyholders
upon the security of the value of its policy a sum not exceeding the
legal reserve which it is required to maintain thereon: Provided,
further, That no loan upon the security of real estate shall have a
maturity in excess of twenty years: And, provided, finally,
And where such loans upon the security of real estate are granted for a
period longer than five years, payments thereof shall be made in
monthly, quarterly, semi-annual or annual installments.”

SEC. 3. The same Act is further amended by adding the
following sections immediately after Section two hundred-B thereof to
read as follows:

“SEC. 200-C. Insurance companies may (1) invest in
equities of other financial institutions, and (2) engage in buying and
selling of short-term debt instruments: Provided, That any or
all of such investments shall be with the prior approval of the
Insurance Commissioner.”

“SEC. 200-D. Insurance companies may obtain from the
Development Bank of the Philippines loans with maturities not exceeding
five years, the provisions of existing law, executive orders, rules or
regulations to the contrary notwithstanding: Provided, That
such borrowings may be made only by insurance companies whose levels of
policy loans have increased to such an extent as to endanger the
liquidity of such insurance companies’ policy reserves as a result of an
increase in the interest rate ceiling.”

SEC. 4. All acts and parts of acts inconsistent with the
provisions of this Act are hereby repealed. SEC. 5. This Decree
shall take effect immediately.

Done in the City of Manila, this 29th day of January, in the year
of Our Lord, nineteen hundred and seventy-three.