CREATING THE “PHILIPPINE CROP INSURANCE CORPORATION” PRESCRIBING ITS POWERS AND ACTIVITIES, PROVIDING FOR ITS CAPITALIZATION AND FOR THE REQUIRED GOVERNMENT PREMIUM SUBSIDY, AND…

WHEREAS, while the achievements of the on-going supervised
rice production credit program has been substantial, the financial burden on the
part of the farmers and the lending institutions in terms of uncompensated
losses arising from destruction of standing crops wrought by floods, typhoons,
heavy rains, drought and other natural calamities has not only tended to keep
the farmers in perpetual indebtedness but has also considerably constricted the
loaning capabilities of lending institutions and their willingness to extend
loans to rice farmers;

WHEREAS, as a result of the recurrent natural disasters our
farmers suffer heavy losses due to the destruction of their standing crops
resulting in loss of income and the consequent loss of their credit standing
through no fault of their own, which in turn seriously affects the finances of
lending institutions participating in the supervised credit program;

WHEREAS, implementing a crop insurance scheme can serve to
provide relief to out rice producers from the heavy burdens and loss caused by
such disasters as well as to stabilize the finances of lending institutions;

WHEREAS, crop insurance can serve as a strong incentive to
the intensification of the Government food production program as well as
minimize the erosion of the financial capability, and the willingness of lending
institutions to provide financial support to rice production program;

WHEREAS, a study conducted by an Inter-Agency Committee
sponsored by the Land Bank of the Philippines (LBP) disclosed the feasibility of
providing crop insurance protection to rice farmers covered by the supervised
credit program, as well as to self-financed farmers who place themselves under
the supervision of duly accredited technicians;

WHEREAS, because of its important role, the crop insurance
scheme requires inter-agency operational linkages and support to insure the
successful and economical attainment of its laudable objectives;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Republic of the Philippines, by virtue of the powers vested in me by the
Constitution, do hereby decree and order:

SECTION 1. Creation of the Philippine Crop Insurance
Corporation.—There is hereby created a body corporate to be known as the
“Philippine Crop Insurance Corporation” (PCIC and herein called the Corporation)
which shall provide insurance protection to farmers against losses arising from
natural disasters as well as plant diseases and fest infestation, initially to
palay crops and later on to other crops. Such insurance protection, however,
shall exclude losses arising from avoidable risks emanating from or due to
neglect, malfeasance or fraud by the insured or any member of his immediate farm
household or employee or the failure of the insured to follow proven farm
practices, and that the indemnity for such losses shall not exceed at all times
the cost born by the insured farmer in the production of the crop.

SEC. 2. Place of Business and Term of Existence.
—

2.l The Corporation shall have its principal place of business in Metro
Manila;

2.2 The term of legal existence of Corporation shall be fifty (50) years from
and after the date of the approval of this Decree.

SEC. 3. Powers.—The Corporation shall have the
following powers:

3.1 To prescribe, repeal and alter its own by-laws; to determine its
operating policies and to issue such rules and regulations as may be necessary
to implement the crop insurance scheme;

3.2 To adopt and use a corporate seal;

3.3 To sue and to be sued;

3.4 To have continuous succession until dissolved by law;

3.5 To insure the rice production of farmers against loss, damage and
destruction caused by natural calamities such as typhoons, floods, drought,
earthquake, volcanic eruptions, rodents, vermins, disease, insects and other
pests; and to carry on any business necessary, related to, and expedient for the
above purpose;

3.6 To insure in the Philippine or abroad all or any risks of the
Corporation;

3.7 To purchase or otherwise acquire ownership and manage any and all parts
of the business, property and liabilities of any person or company carrying on
any business which the Corporation is authorized to carry on or possess;

3.8 To acquire by purchase or otherwise acquire ownership of and to invest
in, hold, sell, or otherwise dispose of stocks or bonds or any interest in
either, or any obligation or evidence of indebtedness of any corporation,
domestic or foreign, or the bonds or other obligations or evidence of
indebtedness, of any person, firm or corporation; and as owner of such stocks,
bonds or interest therein, or other obligations or evidence of indebtedness, to
exercise the rights, powers and privileges of ownership, including the right to
vote thereon or consent in respect thereto for any and all lawful purposes;

3.9 To purchase, or otherwise acquire, sell, lease, convey, mortgage,
encumber, and otherwise deal with any property, real or personal, or any
interest therein; extend credit on the security of real estate or movable
property; exorcise easement right or privilege over or in respect to any
property, real or personal, as may be permitted by law and as may be reasonable
necessary to carry out the purposes for which the corporation is formed or as
may or hereafter be permitted by law;

3.10 To establish branches whenever it may be expedient and necessary;

3.11 To do and perform acts and things, and to exercise all the general
powers conferred by law upon Corporations, as are incidental or conducive to the
attainment of the objectives of the Corporation.

SEC. 4. Who shall be Insured.—Participation in the
palay crop insurance shall be compulsory upon all farmers obtaining production
loans for palay under the supervised credit program, and optional on the part of
self-financed farmers provided they agree to place themselves under the
supervision of agricultural production technicians. The term “supervised credit
program” as used in this Decree shall mean the production credit program wherein
the farmer who obtained production loans for palay agree in writing that he will
apply proven farm practices necessary to conserve the land, improve its
fertility and increase its production, and abide by the approved farm plan and
budget jointly prepared by him and the duly accredited supervised credit
technician. The term “supervision of agricultural production technician” shall
mean the supervision undertaken by agricultural production technicians who are
duly accredited by the appropriate government agencies concerned, as required
under the supervised credit system.

SEC. 5. Rate of Premium and Its Sharing.—The rate
of premium, as well as the allocated sharing thereof by the farmers, the lending
institutions, the Government of the Republic of the Philippines (herein called
the Government) and other parties, shall be determined by the Board of Directors
of the Corporation subject to approval by the President of the Philippines.

SEC. 6. Premium Subsidy. —

6.1 For the first year of the operation of the Corporation, the required
Government premium subsidy, as determined by the Board and approved by the
President of the Philippines, shall be deemed appropriated from the funds of the
National Treasury not otherwise appropriated, and shall be drawn, on a
month-to-month or other periodic basis, depending upon the actual amount of
insurance underwritten by the Corporation. For this purpose, the Corporation
shall bill the Government the sum of money corresponding to the computed amount
of subsidy;

6.2 For subsequent years, yearly projections of the premium subsidy shall be
submitted by the Corporation to the President of the Philippines, and upon his
approval shall be included in the government budgetary
appropriations.

SEC. 7. Transfer of the Agricultural Guarantee Funds to
the Corporation and Abolition of the Agricultural Guarantee Fund Board.—The
assets, liabilities and administration of the agricultural Guarantee Fund at
present being administered by the Land Bank of the Philippines to guarantee rice
production loans under the supervised production credit program as well as the
Agricultural Guarantee Fund created under Section 13 of Republic Act 6390, as
amended, are hereby transferred to the Corporation as part of the contribution
of the government to the capital of the Corporation as provided in Section 8
hereof: Provided, That the termination or cessation of the guarantee
operations under both funds shall be left to the discretion of the Board of
Directors of the Corporation. The agricultural Guarantee Fund Board, created
under Section 13 of Republic Act 6390, as amended, is hereby abolished.

SEC. 8. Capital Stock. —

8.1 The authorized capital stock of the Corporation is SEVEN HUNDRED FIFTY
MILLION PESOS (P750,000,000.00) divided into FIVE MILLION (5,000,000) common
shares with a par value of ONE HUNDRED PESOS (P100.00) each share, which shall
be fully subscribed by the Government; and TWO MILLION FIVE HUNDRED THOUSAND
(2,500,000) preferred shares with a par value of ONE HUNDRED PESOS (P100.00) per
share which shall have the features as provided in Section 8.4 hereof and shall
be issued in accordance with the provisions of Section 8.5 hereof.

8.2 The paid-in capital of the Corporation upon its organization shall be TWO
HUNDRED FIFTY MILLION PESOS (P250,000,000.00), and shall be appropriated and
paid in as follows:

8.2.1 ONE HUNDRED FIFTY MILLION PESOS (P150,000,000) to be subscribed and
paid in by the Government out of the net assets transferred from the
agricultural Guarantee Funds as provided in Section 7 hereof; Provided,
That the amount by which the net assets exceed ONE HUNDRED FIFTY MILLION PESOS
(P150,000,000) shall be considered contributed surplus and treated as such on
the books of the Corporation;

8.2.2 An additional ONE HUNDRED MILLION PESOS (P100,000,000) to be likewise
subscribed and paid in by the Government out of funds of the National Treasury
not otherwise appropriated.

8.3 The remaining common capital stock of TWO HUNDRED FIFTY MILLION PESOS
(P250,000,000) shall be fully subscribed by the Government and the necessary
funds shall be appropriated, programmed, and paid by the proper office, entity
or agency of the government as the financial needs of the Corporation shall
require and until the authorized capital stock is fully paid up.

8.4 The preferred shares shall be entitled to a preference over common shares
in any declaration of dividends. They shall also be given priority in the
distribution of assets in the event of liquidation of the Corporation. They
shall have the following specific features:

8.4.1 Preferred as to dividends at a minimum of six per cent (6%);

8.4.2 Cumulative;

8.4.3 Participating;

8.4.4. Non-voting;

8.4.5 Dividends thereon shall be exempt from income tax;

8.4.6 Redeemable at the option of the Corporation at the prevailing book
value but in no case less than par after five (5) years from issuance
thereof;

8.4.7 Transferable.

8.5 The preferred shares may be available for sale or to subscription by the
general public.

SEC. 9. Board of Directors. —

9.1 The power of the Corporation shall be vested in and exercised by a Board
of Directors composed of nine (9) members and made up of the following: the
Secretary of Finance, the Secretary of Agriculture, the President of the Land
Bank of the Philippines, the Secretary of Agrarian Reform, the Secretary of
Labor, the Secretary of National Defense, the Budget Commission, and the
President of the Corporation; and in addition, a nominee of the Secretary of
Finance, preferably representing the private insurance industry. The Chairman of
the Board of Directors shall be appointed by the President of the Philippines
from among the members of the Board of Directors; and that the President of the
Corporation shall be ex-officio Vice Chairman who, as such, shall assist the
Chairman and act in his stead in case of absence or incapacity. In case of
absence or incapacity of both the Chairman and the Vice-Chairman, the Board of
Directors shall designate a temporary Chairman from among its members.

9.2 The members of the Board shall have their respective alternates who shall
attend the meetings, and act as members of the Board in the absence or
incapacity of the regular members;

9.3 The Board of Directors shall meet regularly at least twice a month and as
often as the exigencies of the Corporations affairs demand. The presence of at
least five (5) members shall constitute a quorum which shall be necessary for
the transaction of any business. The Board may be convoked either by the
Chairman or in his absence by the Vice Chairman;

9.4 The Chairman and the members of the Board shall each receive a per diem
of THREE HUNDRED PESOS (P300.00) for each session of the Board attended, but in
no case to exceed THREE THOUSAND (P3,000.00) a month.

SEC. 10. Powers and Functions of the Board of
Directors.—The Board shall, without limiting the generality of the
foregoing, have the following powers and functions:

10.1 To implement the provisions and purposes of this Decree;

10.2 To formulate and adopt policies and plans, and to promulgate rules and
regulations for the management, operation and conduct of the affairs and
business of the Corporation and for this purpose may limit or refuse insurance
in any area or on any farmer because of the risk involved or may expand the
subject of insurance coverage to crops other than palay, provided such coverage
on other crops shall be approved by the President of the Philippines;

10.3 To borrow funds from local and international financing sources or
institutions for the purpose of financing the programs and projects deemed vital
for the attainment of the Corporation’s goal and objectives;

10.4 To enter into, make and execute contracts of any kind or nature as may
be necessary, or incidental to the accomplishment of the purposes of the
Corporation.

10.5 To approve the budget of the Corporation and to fix the reasonable
compensation of its personnel; Provided, That the Board of Directors
shall have exclusive and final authority to promote, transfer, assign or
re-assign personnel of the Corporation and these personnel actions are deemed
made in the interest of the service and not disciplinary, any provision of
existing law to the contrary notwithstanding;

10.6 To establish policies and guidelines for employment on the basis of
merit, technical competence and moral character, and approve a staffing pattern
of personnel defining their powers and duties;

10.7 To exercise the general powers mentioned in the Corporation Law in sofar
as they are not inconsistent or incompatible with the provisions of this
Decree.

SEC. 11. Management.—The management of the
Corporation shall be vested in the President of the Corporation who shall be a
person of know integrity, competence in technical and executive fields related
to the purposes of this Decree. He shall be appointed by the Board and shall not
be removed except for cause. He may have such Vice President(s) as the Board of
Directors may decide, to be appointed by the latter. He shall have the following
powers and duties:

11.1 To execute and administer the policies, plans and programs and the rules
and regulations approved or promulgated by the Board;

11.2 To submit for the consideration of the Board such policies, plans and
programs as he deems necessary to carry out the provisions and purposes of this
Decree;

11.3 To direct and supervise the operations and internal administration of
the Corporation and for this purpose, to delegate some or any of his powers and
duties to subordinate officials;

11.4 To recommend to the Board the appointment, promotion, transfer,
assignment, re-assignment, demotion, dismissal and compensation of
personnel;

11.5 To exercise such other powers and perform such other duties as may be
directed by the Board of Directors.

SEC. 12. Commission on Audit.—The Commission on
Audit shall be the ex-officio auditor of the Corporation.

SEC. 13. Legal Counsel.—The Corporation shall have
its own Legal Department, the Chief and members of which shall be appointed by
the Board of Directors.

SEC. 14. Inter-Agency Linkages.—To support and
promote the operations of the Corporation, all government departments, bureaus,
officers, agencies and instrumentalities, national or local, all lending
institutions, government or private, now or hereafter engaged in the supervised
credit program, namely: Department of Finance, Department of Local Government
and Community Development, Department of Agriculture, Department of Agrarian
Reform, Department of Labor, Department of National Defense, National Economic
and Development Authority, Armed Forces of the Philippines, Philippine
Constabulary, Bureau of Cooperative Development, National Food and Agriculture
Council, Bureau of Agricultural Extension, National Irrigation Administration,
Bureau of Soils, Bureau of Plant Industry, Bureau of Animal Industry, Central
Bank of the Philippines, Department of Rural Banks and Savings and Loans
Associations, Land Bank of the Philippines, Agricultural Credit Administration,
Philippine National Bank, Development Bank of the Philippines, All Rural Banks,
Cooperative Rural Banks and Development Banks, all Barangay Associations and
Samahang Nayon organizations, and such other public or private entities as may
be called upon by the Corporation, shall act as cooperating agencies to the
Corporation, and for this purpose, are hereby directed to design their policies,
programs, rules and regulations so as to attune and synchronize them with the
objectives of the Corporation.

SEC. 15. Utilization of Profits.—The profits of the
Corporation shall be determined on the calendar year basis and the manner of its
distribution shall be determined by the Board of Directors.

SEC. 16. Exemption from Taxes.—In furtherance of
the effective achievement of the purpose of this Decree, the Corporation shall
be exempt to the extent allowed by national policy from all national,
provincial, municipal and city taxes and assessments now enforced,
Provided, That said exemption shall apply only to such taxes and
assessments for which the Corporation itself would otherwise be liable and shall
not apply to taxes and assessments payable by persons or other entities doing
business with the Corporation.

SEC. 17. Repealing and Separability Clause.—All
laws, decrees, charters, executive orders, administrative orders, proclamations,
rules and regulations, or parts thereof in conflict with this Decree are hereby
repealed or modified accordingly. If any provision, part or parts of this Decree
is or are declared unconstitutional, such declaration shall not invalidate the
other provisions hereof.

SEC. 18. Applicability of P.D. No. 612.—The
provisions of the Insurance Code insofar as they are not in conflict or
inconsistent with or repugnant to the provisions of this Decree shall apply to
the Corporation.

SEC. 19. Effectivity.—This Decree shall take effect
upon approval. The Corporation shall commence business not later than six (6)
months from the appointment of the Chairman of its Board of Directors and
payment of the initial capital contributions of the Government as herein
prescribed.

Done in the City of Manila, this 11th day of June in the year of Our Lord,
nineteen hundred and seventy-eight.

			(Sgd.) FERDINAND E. MARCOS President of the Philippines
	By the President:
	(Sgd.) JACOBO C. CLAVE
		Presidential Executive Assistant