PD 10607 Revised Insurance Code

8/13/2019 PD 10607 Revised Insurance Code

1/94

Republic of the Philippines

CONGRESS OF THE PHILIPPINESMetro Manila

Fifteenth CongressThird Regular Session

Begun and held in Metro Manila, on Monday, the twenty-third day of

July, two thousand twelve.

REPUBLIC ACT NO !"#"$

AN ACT STRENGTHENING THE INSURANCE IN%USTR&'

FURTHER A(EN%ING PRESI%ENTIAL %ECREE NO #!)'

OTHER*ISE +NO*N AS ,THE INSURANCE CO%E,' ASA(EN%E% B& PRESI%ENTIAL %ECREE NOS !!-!' !)."' !-//'

!-#"' !.!- AN% !0.!' AN% BATAS PA(BANSA BLG .$-' AN%

FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of thePhilippines in ongress asse!bled"

Se1tion !Presidential Decree No. 612, as amended, is hereby furtheramended to read as follows:

!"N"R#$ PR%&'('%N(

(ection 1. )his Decree shall be *nown as +)he 'nsurance ode-.

(ection 2. hene/er used in this ode, the followin0 terms shall ha/ethe respecti/e meanin0s hereinafter set forth or indicated, unless thecontet otherwise reuires:

3a4 # contract of insuranceis an a0reement whereby one

underta*es for a consideration to indemnify another a0ainst loss,dama0e or liability arisin0 from an un*nown or contin0ent e/ent.

# contract of suretyship shall be deemed to be an insurancecontract, within the meanin0 of this ode, only if made by asurety who or which, as such, is doin0 an insurance business ashereinafter pro/ided.

3b4 )he term doing an insurance businessor transacting aninsurance business, within the meanin0 of this ode, shallinclude:

314 Ma*in0 or proposin0 to ma*e, as insurer, anyinsurance contract5

324 Ma*in0 or proposin0 to ma*e, as surety, any contractof suretyship as a /ocation and not as merely incidental to

any other le0itimate business or acti/ity of the surety5

34 Doin0 any *ind of business, includin0 a reinsurancebusiness, specifically reco0ni7ed as constitutin0 the doin0of an insurance business within the meanin0 of this ode5

384 Doin0 or proposin0 to do any business in substanceeui/alent to any of the fore0oin0 in a manner desi0nedto e/ade the pro/isions of this ode.

'n the application of the pro/isions of this ode, the factthat no profit is deri/ed from the ma*in0 of insurancecontracts, a0reements or transactions or that no separateor direct consideration is recei/ed therefor, shall not bedeemed conclusi/e to show that the ma*in0 thereof doesnot constitute the doin0 or transactin0 of an insurancebusiness.

3c4 #s used in this ode, the term o!!issionermeans the#nsurance o!!issioner.


2/94

9#P)"R ')9" %N)R#) % 'N(;R#N"

)')$" 1

9#) M#< =" 'N(;R"D

(ection . #ny contin0ent or un*nown e/ent, whether past or future,which may damnify a person ha/in0 an insurable interest, or create aliability a0ainst him, may be insured a0ainst, sub>ect to the pro/isions ofthis chapter.

)he consent of the spouse is not necessary for the /alidity of aninsurance policy ta*en out by a married person on his or her life or thatof his or her children.

#ll ri0hts, title and interest in the policy of insurance ta*en out by anori0inal owner on the life or health of the person insured shallautomatically /est in the latter upon the death of the ori0inal owner,unless otherwise pro/ided for in the policy.

(ection 8. )he precedin0 section does not authori7e an insurance for ora0ainst the drawin0 of any lottery, or for or a0ainst any chance or tic*etin a lottery drawin0 a pri7e.

(ection ?. #ll *inds of insurance are sub>ect to the pro/isions of thischapter so far as the pro/isions can apply.

)')$" 2P#R)'"( )% )9" %N)R#)

(ection 6. "/ery corporation, partnership, or association, dulyauthori7ed to transact insurance business as elsewhere pro/ided in thisode, may be an insurer.

(ection @. #nyone ecept a public enemy may be insured.

(ection A. ;nless the policy otherwise pro/ides, where a mort0a0or ofproperty effects insurance in his own name pro/idin0 that the loss shallbe payable to the mort0a0ee, or assi0ns a policy of insurance to amort0a0ee, the insurance is deemed to be upon the interest of the

mort0a0or, who does not cease to be a party to the ori0inal contract, andany act of his, prior to the loss, which would otherwise a/oid theinsurance, will ha/e the same effect, althou0h the property is in thehands of the mort0a0ee, but any act which, under the contract ofinsurance, is to be performed by the mort0a0or, may be performed bythe mort0a0ee therein named, with the same effect as if it had beenperformed by the mort0a0or.

(ection B. 'f an insurer assents to the transfer of an insurance from amort0a0or to a mort0a0ee, and, at the time of his assent, imposes further

obli0ations on the assi0nee, ma*in0 a new contract with him, the acts ofthe mort0a0or cannot affect the ri0hts of said assi0nee.

)')$" 'N(;R#=$" 'N)"R"()

(ection 1C. "/ery person has an insurable interest in the life and health:

3a4 %f himself, of his spouse and of his children5

3b4 %f any person on whom he depends wholly or in part foreducation or support, or in whom he has a pecuniary interest5

3c4 %f any person under a le0al obli0ation to him for thepayment of money, or respectin0 property or ser/ices, of whichdeath or illness mi0ht delay or pre/ent the performance5 and

3d4 %f any person upon whose life any estate or interest /estedin him depends.

(ection 11. )he insured shall ha/e the ri0ht to chan0e the beneficiaryhe desi0nated in the policy, unless he has epressly wai/ed this ri0ht in


3/94

said policy. Notwithstandin0 the fore0oin0, in the e/ent the insured doesnot chan0e the beneficiary durin0 his lifetime, the desi0nation shall bedeemed irre/ocable.

(ection 12. )he interest of a beneficiary in a life insurance policy shallbe forfeited when the beneficiary is the principal, accomplice, oraccessory in willfully brin0in0 about the death of the insured. 'n such acase, the share forfeited shall pass on to the other beneficiaries, unlessotherwise disualified. 'n the absence of other beneficiaries, theproceeds shall be paid in accordance with the policy contract. 'f thepolicy contract is silent, the proceeds shall be paid to the estate of theinsured.

(ection 1. "/ery interest in property, whether real or personal, or any

relation thereto, or liability in respect thereof, of such nature that acontemplated peril mi0ht directly damnify the insured, is an insurableinterest.

(ection 18. #n insurable interest in property may consist in:

3a4 #n eistin0 interest5

3b4 #n inchoate interest founded on an eistin0 interest5 or

3c4 #n epectancy, coupled with an eistin0 interest in that outof which the epectancy arises.

(ection 1?. # carrier or depository of any *ind has an insurable interestin a thin0 held by him as such, to the etent of his liability but not toeceed the /alue thereof.

(ection 16. # mere contin0ent or epectant interest in any thin0, notfounded on an actual ri0ht to the thin0, nor upon any /alid contract for it,is not insurable.

(ection 1@. )he measure of an insurable interest in property is theetent to which the insured mi0ht be damnified by loss or in>ury thereof.

(ection 1A. No contract or policy of insurance on property shall be

enforceable ecept for the benefit of some person ha/in0 an insurableinterest in the property insured.

(ection 1B. #n interest in property insured must eist when theinsurance ta*es effect, and when the loss occurs, but need not eist in themeantime5 and interest in the life or health of a person insured must eistwhen the insurance ta*es effect, but need not eist thereafter or when theloss occurs.

(ection 2C. "cept in the cases specified in the net four sections, and

in the cases of life, accident, and health insurance, a chan0e of interest inany part of a thin0 insured unaccompanied by a correspondin0 chan0e ofinterest in the insurance, suspends the insurance to an eui/alent etent,until the interest in the thin0 and the interest in the insurance are /estedin the same person.

(ection 21. # chan0e of interest in a thin0 insured, after the occurrenceof an in>ury which results in a loss, does not affect the ri0ht of theinsured to indemnity for the loss.

(ection 22. # chan0e of interest in one or more of se/eral distinctthin0s, separately insured by one policy, does not a/oid the insurance asto the others.

(ection 2. # chan0e of interest, by will or succession, on the death ofthe insured, does not a/oid an insurance5 and his interest in the insurancepasses to the person ta*in0 his interest in the thin0 insured.

(ection 28. # transfer of interest by one of se/eral partners, >ointowners, or owners in common, who are >ointly insured, to the others,does not a/oid an insurance e/en thou0h it has been a0reed that theinsurance shall cease upon an alienation of the thin0 insured.


4/94

(ection 2?. "/ery stipulation in a policy of insurance for the paymentof loss whether the person insured has or has not any interest in theproperty insured, or that the policy shall be recei/ed as proof of suchinterest, and e/ery policy eecuted by way of 0amin0 or wa0erin0, is

/oid.

)')$" 8%N"#$M"N)

(ection 26. # ne0lect to communicate that which a party *nows andou0ht to communicate, is called a concealment.

(ection 2@. # concealment whether intentional or unintentional entitlesthe in>ured party to rescind a contract of insurance.

(ection 2A. "ach party to a contract of insurance must communicate tothe other, in 0ood faith, all facts within his *nowled0e which arematerial to the contract and as to which he ma*es no warranty, andwhich the other has not the means of ascertainin0.

(ection 2B. #n intentional and fraudulent omission, on the part of oneinsured, to communicate information of matters pro/in0 or tendin0 topro/e the falsity of a warranty, entitles the insurer to rescind.

(ection C. Neither party to a contract of insurance is bound tocommunicate information of the matters followin0, ecept in answer tothe inuiries of the other:

3a4 )hose which the other *nows5

3b4 )hose which, in the eercise of ordinary care, the otherou0ht to *now, and of which the former has no reason to supposehim i0norant5

3c4 )hose of which the other wai/es communication5

3d4 )hose which pro/e or tend to pro/e the eistence of a ris*ecluded by a warranty, and which are not otherwise material5and

3e4 )hose which relate to a ris* ecepted from the policy andwhich are not otherwise material.

(ection 1. Materiality is to be determined not by the e/ent, but solelyby the probable and reasonable influence of the facts upon the party towhom the communication is due, in formin0 his estimate of thedisad/anta0es of the proposed contract, or in ma*in0 his inuiries.

(ection 2. "ach party to a contract of insurance is bound to *now allthe 0eneral causes which are open to his inuiry, eually with that of the

other, and which may affect the political or material perils contemplated5and all 0eneral usa0es of trade.

(ection . )he ri0ht to information of material facts may be wai/ed,either by the terms of insurance or by ne0lect to ma*e inuiry as to suchfacts, where they are distinctly implied in other facts of whichinformation is communicated.

(ection 8. 'nformation of the nature or amount of the interest of oneinsured need not be communicated unless in answer to an inuiry, ecept

as prescribed by (ection ?1.

(ection ?. Neither party to a contract of insurance is bound tocommunicate, e/en upon inuiry, information of his own >ud0ment uponthe matters in uestion.

)')$" ?R"PR"("N)#)'%N

(ection 6. # representation may be oral or written.


5/94

(ection @. # representation may be made at the time of, or before,issuance of the policy.

(ection A. )he lan0ua0e of a representation is to be interpreted by the

same rules as the lan0ua0e of contracts in 0eneral.

(ection B. # representation as to the future is to be deemed a promise,unless it appears that it was merely a statement of belief or epectation.

(ection 8C. # representation cannot ualify an epress pro/ision in acontract of insurance, but it may ualify an implied warranty.

(ection 81. # representation may be altered or withdrawn before theinsurance is effected, but not afterwards.

(ection 82. # representation must be presumed to refer to the date onwhich the contract 0oes into effect.

(ection 8. hen a person insured has no personal *nowled0e of a fact,he may ne/ertheless repeat information which he has upon the sub>ect,and which he belie/es to be true, with the eplanation that he does so onthe information of others5 or he may submit the information, in its wholeetent, to the insurer5 and in neither case is he responsible for its truth,unless it proceeds from an a0ent of the insured, whose duty it is to 0i/e

the information.

(ection 88. # representation is to be deemed false when the facts fail tocorrespond with its assertions or stipulations.

(ection 8?. 'f a representation is false in a material point, whetheraffirmati/e or promissory, the in>ured party is entitled to rescind thecontract from the time when the representation becomes false.

(ection 86. )he materiality of a representation is determined by thesame rules as the materiality of a concealment.

(ection 8@. )he pro/isions of this chapter apply as well to amodification of a contract of insurance as to its ori0inal formation.

(ection 8A. hene/er a ri0ht to rescind a contract of insurance is 0i/en

to the insurer by any pro/ision of this chapter, such ri0ht must beeercised pre/ious to the commencement of an action on the contract.

#fter a policy of life insurance made payable on the death of theinsured shall ha/e been in force durin0 the lifetime of the insured for aperiod of two 324 years from the date of its issue or of its lastreinstatement, the insurer cannot pro/e that the policy is /oid ab initiooris rescindable by reason of the fraudulent concealment ormisrepresentation of the insured or his a0ent.

)')$" 6)9" P%$'ect to the pertinent pro/isions of Republic #ct No. A@B2, otherwise*nown as the +"lectronic ommerce #ct- and to such rules andre0ulations as may be prescribed by the ommissioner.

(ection ?1. # policy of insurance must specify:

3a4 )he parties between whom the contract is made5

3b4 )he amount to be insured ecept in the cases of open orrunnin0 policies5

3c4 )he premium, or if the insurance is of a character where theeact premium is only determinable upon the termination of the

contract, a statement of the basis and rates upon which the finalpremium is to be determined5

3d4 )he property or life insured5

3e4 )he interest of the insured in property insured, if he is notthe absolute owner thereof5

3f4 )he ris*s insured a0ainst5 and

304 )he period durin0 which the insurance is to continue.

(ection ?2. o/er notes may be issued to bind insurance temporarilypendin0 the issuance of the policy. ithin sity 36C4 days after issue of aco/er note, a policy shall be issued in lieu thereof, includin0 within itsterms the identical insurance bound under the co/er note and thepremium therefor.

o/er notes may be etended or renewed beyond such sity 36C4 dayswith the written appro/al of the ommissioner if he determines that suchetension is not contrary to and is not for the purpose of /iolatin0 anypro/isions of this ode. )he ommissioner may promul0ate rules and

re0ulations 0o/ernin0 such etensions for the purpose of pre/entin0 such/iolations and may by such rules and re0ulations dispense with thereuirement of written appro/al by him in the case of etension incompliance with such rules and re0ulations.

(ection ?. )he insurance proceeds shall be applied eclusi/ely to theproper interest of the person in whose name or for whose benefit it ismade unless otherwise specified in the policy.

(ection ?8. hen an insurance contract is eecuted with an a0ent ortrustee as the insured, the fact that his principal or beneficiary is the realparty in interest may be indicated by describin0 the insured as a0ent ortrustee, or by other 0eneral words in the policy.

(ection ??. )o render an insurance effected by one partner or partowner, applicable to the interest of his copartners or other partowners,it is necessary that the terms of the policy should be such as areapplicable to the >oint or common interest.

(ection ?6. hen the description of the insured in a policy is so 0eneralthat it may comprehend any person or any class of persons, only he whocan show that it was intended to include him, can claim the benefit of thepolicy.

(ection ?@. # policy may be so framed that it will inure to the benefit ofwhomsoe/er, durin0 the continuance of the ris*, may become the ownerof the interest insured.

(ection ?A. )he mere transfer of a thin0 insured does not transfer thepolicy, but suspends it until the same person becomes the owner of boththe policy and the thin0 insured.

(ection ?B. # policy is either open, /alued or runnin0.

(ection 6C. #n open policy is one in which the /alue of the thin0insured is not a0reed upon, and the amount of the insurance merely


7/94

represents the insurer-s maimum liability. )he /alue of such thin0insured shall be ascertained at the time of the loss.

(ection 61. # /alued policy is one which epresses on its face an

a0reement that the thin0 insured shall be /alued at a specific sum.

(ection 62. # runnin0 policy is one which contemplates successi/einsurances, and which pro/ides that the ob>ect of the policy may be fromtime to time defined, especially as to the sub>ects of insurance, byadditional statements or indorsements.$%wphi$

(ection 6. # condition, stipulation, or a0reement in any policy ofinsurance, limitin0 the time for commencin0 an action thereunder to aperiod of less than one 314 year from the time when the cause of action

accrues, is /oid.

(ection 68. No policy of insurance other than life shall be cancelled bythe insurer ecept upon prior notice thereof to the insured, and no noticeof cancellation shall be effecti/e unless it is based on the occurrence,after the effecti/e date of the policy, of one or more of the followin0:

3a4 Nonpayment of premium5

3b4 on/iction of a crime arisin0 out of acts increasin0 the

ha7ard insured a0ainst5

3c4 Disco/ery of fraud or material misrepresentation5

3d4 Disco/ery of willful or rec*less acts or omissions increasin0the ha7ard insured a0ainst5

3e4 Physical chan0es in the property insured which result in theproperty becomin0 uninsurable5

3f4 Disco/ery of other insurance co/era0e that ma*es the totalinsurance in ecess of the /alue of the property insured5 or

304 # determination by the ommissioner that the continuationof the policy would /iolate or would place the insurer in /iolationof this ode.

(ection 6?. #ll notices of cancellation mentioned in the precedin0section shall be in writin0, mailed or deli/ered to the named insured atthe address shown in the policy, or to his bro*er pro/ided the bro*er isauthori7ed in writin0 by the policy owner to recei/e the notice ofcancellation on his behalf, and shall state:

3a4 hich of the 0rounds set forth in (ection 68 is relied upon5and

3b4 )hat, upon written reuest of the named insured, the insurer

will furnish the facts on which the cancellation is based.

(ection 66. 'n case of insurance other than life, unless the insurer atleast fortyfi/e 38?4 days in ad/ance of the end of the policy period mailsor deli/ers to the named insured at the address shown in the policynotice of its intention not to renew the policy or to condition its renewalupon reduction of limits or elimination of co/era0es, the named insuredshall be entitled to renew the policy upon payment of the premium dueon the effecti/e date of the renewal. #ny policy written for a term of lessthan one 314 year shall be considered as if written for a term of one 314year. #ny policy written for a term lon0er than one 314 year or anypolicy with no fied epiration date shall be considered as if written forsuccessi/e policy periods or terms of one 314 year.

)')$" @#RR#N)'"(

(ection 6@. # warranty is either epressed or implied.

(ection 6A. # warranty may relate to the past, the present, the future, orto any or all of these.


8/94


9/94

rate, unless a short period rate has been a0reed upon and appearson the face of the policy, after deductin0 from the wholepremium any claim for loss or dama0e under the policy whichhas pre/iously accrued:Provided, )hat no holder of a life

insurance policy may a/ail himself of the pri/ile0es of thispara0raph without sufficient cause as otherwise pro/ided by law.

(ection A1. 'f a peril insured a0ainst has eisted, and the insurer hasbeen liable for any period, howe/er short, the insured is not entitled toreturn of premiums, so far as that particular ris* is concerned.

(ection A2. # person insured is entitled to a return of the premiumwhen the contract is /oidable, and subseuently annulled under thepro/isions of the i/il ode5 or on account of the fraud or

misrepresentation of the insurer, or of his a0ent, or on account of facts,or the eistence of which the insured was i0norant of without his fault5or when by any default of the insured other than actual fraud, the insurerne/er incurred any liability under the policy.

# person insured is not entitled to a return of premium if the policy isannulled, rescinded or if a claim is denied by reason of fraud.

(ection A. 'n case of an o/er insurance by se/eral insurers other thanlife, the insured is entitled to a ratable return of the premium,proportioned to the amount by which the a00re0ate sum insured in allthe policies eceeds the insurable /alue of the thin0 at ris*.

(ection A8. #n insurer may contract and accept payments, in addition tore0ular premium, for the purpose of payin0 future premiums on thepolicy or to increase the benefits thereof.

)')$" B$%((

(ection A?. #n a0reement not to transfer the claim of the insureda0ainst the insurer after the loss has happened, is /oid if made before theloss ecept as otherwise pro/ided in the case of life insurance.

(ection A6. ;nless otherwise pro/ided by the policy, an insurer is liablefor a loss of which a peril insured a0ainst was the proimate cause,althou0h a peril not contemplated by the contract may ha/e been aremote cause of the loss5 but he is not liable for a loss of which the perilinsured a0ainst was only a remote cause.

(ection A@. #n insurer is liable where the thin0 insured is rescued froma peril insured a0ainst that would otherwise ha/e caused a loss, if, in thecourse of such rescue, the thin0 is eposed to a peril not insured a0ainst,which permanently depri/es the insured of its possession, in whole or in

part5 or where a loss is caused by efforts to rescue the thin0 insured froma peril insured a0ainst.

(ection AA. here a peril is especially ecepted in a contract ofinsurance, a loss, which would not ha/e occurred but for such peril, isthereby ecepted althou0h the immediate cause of the loss was a perilwhich was not ecepted.

(ection AB. #n insurer is not liable for a loss caused by the willful actor throu0h the conni/ance of the insured5 but he is not eonerated by thene0li0ence of the insured, or of the insurance a0ents or others.

)')$" 1CN%)'" % $%((

(ection BC. 'n case of loss upon an insurance a0ainst fire, an insurer iseonerated, if written notice thereof be not 0i/en to him by an insured,or some person entitled to the benefit of the insurance, withoutunnecessary delay. or other nonlife insurance, the ommissioner mayspecify the period for the submission of the notice of loss.


10/94

(ection B1. hen a preliminary proof of loss is reuired by a policy,the insured is not bound to 0i/e such proof as would be necessary in acourt of >ustice5 but it is sufficient for him to 0i/e the best e/idencewhich he has in his power at the time.

(ection B2. #ll defects in a notice of loss, or in preliminary proofthereof, which the insured mi0ht remedy, and which the insurer omits tospecify to him, without unnecessary delay, as 0rounds of ob>ection, arewai/ed.

(ection B. Delay in the presentation to an insurer of notice or proof ofloss is wai/ed if caused by any act of him, or if he omits to ta*eob>ection promptly and specifically upon that 0round.

(ection B8. 'f the policy reuires, by way of preliminary proof of loss,the certificate or testimony of a person other than the insured, it issufficient for the insured to use reasonable dili0ence to procure it, and incase of the refusal of such person to 0i/e it, then to furnish reasonablee/idence to the insurer that such refusal was not induced by any >ust0rounds of disbelief in the facts necessary to be certified or testified.

)')$" 11D%;=$" 'N(;R#N"

(ection B?. # double insurance eists where the same person is insuredby se/eral insurers separately in respect to the same sub>ect and interest.

(ection B6. here the insured in a policy other than life is o/er insuredby double insurance:

3a4 )he insured, unless the policy otherwise pro/ides, may claimpayment from the insurers in such order as he may select, up tothe amount for which the insurers are se/erally liable under theirrespecti/e contracts5

3b4 here the policy under which the insured claims is a /aluedpolicy, any sum recei/ed by him under any other policy shall bededucted from the /alue of the policy without re0ard to the actual/alue of the sub>ect matter insured5

3c4 here the policy under which the insured claims is anun/alued policy, any sum recei/ed by him under any policy shallbe deducted a0ainst the full insurable /alue, for any sum recei/edby him under any policy5

3d4 here the insured recei/es any sum in ecess of the/aluation in the case of /alued policies, or of the insurable /aluein the case of un/alued policies, he must hold such sum in trustfor the insurers, accordin0 to their ri0ht of contribution amon0themsel/es5

3e4 "ach insurer is bound, as between himself and the otherinsurers, to contribute ratably to the loss in proportion to theamount for which he is liable under his contract.

)')$" 12R"'N(;R#N"

(ection B@. # contract of reinsurance is one by which an insurerprocures a third person to insure him a0ainst loss or liability by reason ofsuch ori0inal insurance.

(ection BA. here an insurer obtains reinsurance, ecept underautomatic reinsurance treaties, he must communicate all therepresentations of the ori0inal insured, and also all the *nowled0e andinformation he possesses, whether pre/iously or subseuently acuired,which are material to the ris*.

(ection BB. # reinsurance is presumed to be a contract of indemnitya0ainst liability, and not merely a0ainst dama0e.


11/94

(ection 1CC. )he ori0inal insured has no interest in a contract ofreinsurance.

9#P)"R ''

$#(("( % 'N(;R#N"

)')$" 'M#R'N" 'N(;R#N"

(;=)')$" 1#

D"'N')'%N

(ection 1C1. Marine 'nsurance includes:

3a4 'nsurance a0ainst loss of or dama0e to:

314 &essels, craft, aircraft, /ehicles, 0oods, frei0hts,car0oes, merchandise, effects, disbursements, profits,moneys, securities, choses in action, instruments of debts,/aluable papers, bottomry, and respondentia interests andall other *inds of property and interests therein, in respectto, appertainin0 to or in connection with any and all ris*sor perils of na/i0ation, transit or transportation, or whilebein0 assembled, pac*ed, crated, baled, compressed orsimilarly prepared for shipment or while awaitin0shipment, or durin0 any delays, stora0e, transhipment, orreshipment incident thereto, includin0 war ris*s, marinebuilder-s ris*s, and all personal property floater ris*s5

324 Person or property in connection with or appertainin0to a marine, inland marine, transit or transportationinsurance, includin0 liability for loss of or dama0e arisin0out of or in connection with the construction, repair,operation, maintenance or use of the sub>ect matter ofsuch insurance 3but not includin0 life insurance or surety

bonds nor insurance a0ainst loss by reason of bodilyin>ury to any person arisin0 out of ownership,maintenance, or use of automobiles45

34 Precious stones, >ewels, >ewelry, precious metals,whether in course of transportation or otherwise5 and

384 =rid0es, tunnels and other instrumentalities oftransportation and communication 3ecludin0 buildin0s,their furniture and furnishin0s, fied contents andsupplies held in stora0e45 piers, whar/es, doc*s and slips,and other aids to na/i0ation and transportation, includin0dry doc*s and marine railways, dams and appurtenantfacilities for the control of waterways.

3b4Marine protection and inde!nity insurance, meanin0insurance a0ainst, or a0ainst le0al liability of the insured for loss,dama0e, or epense incident to ownership, operation, charterin0,maintenance, use, repair, or construction of any /essel, craft orinstrumentality in use of ocean or inland waterways, includin0liability of the insured for personal in>ury, illness or death or forloss of or dama0e to the property of another person.

(;=)')$" 1='N(;R#=$" 'N)"R"()

(ection 1C2. )he owner of a ship has in all cases an insurable interest init, e/en when it has been chartered by one who co/enants to pay him its/alue in case of loss:Provided, )hat in this case the insurer shall beliable for only that part of the loss which the insured cannot reco/er fromthe charterer.

(ection 1C. )he insurable interest of the owner of the shiphypothecated by bottomry is only the ecess of its /alue o/er the amountsecured by bottomry.


12/94

(ection 1C8. rei0hta0e, in the sense of a policy of marine insurance,si0nifies all the benefits deri/ed by the owner, either from the charterin0of the ship or its employment for the carria0e of his own 0oods or thoseof others.

(ection 1C?. )he owner of a ship has an insurable interest in epectedfrei0hta0e which accordin0 to the ordinary and probable course of thin0she would ha/e earned but for the inter/ention of a peril insured a0ainstor other peril incident to the /oya0e.

(ection 1C6. )he interest mentioned in the last section eists, in case ofa charter party, when the ship has bro*en 0round on the chartered/oya0e. 'f a price is to be paid for the carria0e of 0oods it eists whenthey are actually on board, or there is some contract for puttin0 them onboard, and both ship and 0oods are ready for the specified /oya0e.

(ection 1C@. %ne who has an interest in the thin0 from which profits areepected to proceed has an insurable interest in the profits.

(ection 1CA. )he charterer of a ship has an insurable interest in it, to theetent that he is liable to be damnified by its loss.

(;=)')$" 1%N"#$M"N)

(ection 1CB. 'n marine insurance, each party is bound to communicate,in addition to what is reuired by (ection 2A, all the information whichhe possesses, material to the ris*, ecept such as is mentioned in (ectionC, and to state the eact and whole truth in relation to all matters that herepresents, or upon inuiry discloses or assumes to disclose.

(ection 11C. 'n marine insurance, information of the belief orepectation of a third person, in reference to a material fact, is material.

(ection 111. # person insured by a contract of marine insurance ispresumed to ha/e *nowled0e, at the time of insurin0, of a prior loss, if

the information mi0ht possibly ha/e reached him in the usual mode oftransmission and at the usual rate of communication.

(ection 112. # concealment in a marine insurance, in respect to any of

the followin0 matters, does not /itiate the entire contract, but merelyeonerates the insurer from a loss resultin0 from the ris* concealed:

3a4 )he national character of the insured5

3b4 )he liability of the thin0 insured to capture and detention5

3c4 )he liability to sei7ure from breach of forei0n laws of trade5

3d4 )he want of necessary documents5 and

3e4 )he use of false and simulated papers.

(;=)')$" 1DR"PR"("N)#)'%N

(ection 11. 'f a representation by a person insured by a contract ofmarine insurance, is intentionally false in any material respect, or inrespect of any fact on which the character and nature of the ris* depends,the insurer may rescind the entire contract.

(ection 118. )he e/entual falsity of a representation as to epectationdoes not, in the absence of fraud, a/oid a contract of marine insurance.

(;=)')$" 1"'MP$'"D #RR#N)'"(

(ection 11?. 'n e/ery marine insurance upon a ship or frei0ht, orfrei0hta0e, or upon any thin0 which is the sub>ect of marine insurance, awarranty is implied that the ship is seaworthy.


13/94

(ection 116. # ship is seaworthy when reasonably fit to perform theser/ice and to encounter the ordinary perils of the /oya0e contemplatedby the parties to the policy.

(ection 11@. #n implied warranty of seaworthiness is complied with ifthe ship be seaworthy at the time of the commencement of the ris*,ecept in the followin0 cases:

3a4 hen the insurance is made for a specified len0th of time,the implied warranty is not complied with unless the ship beseaworthy at the commencement of e/ery /oya0e it underta*esdurin0 that time5

3b4 hen the insurance is upon the car0o which, by the terms ofthe policy, description of the /oya0e, or established custom ofthe trade, is to be transhipped at an intermediate port, the impliedwarranty is not complied with unless each /essel upon which thecar0o is shipped, or transhipped, be seaworthy at thecommencement of each particular /oya0e.

(ection 11A. # warranty of seaworthiness etends not only to thecondition of the structure of the ship itself, but reuires that it beproperly laden, and pro/ided with a competent master, a sufficientnumber of competent officers and seamen, and the reuisiteappurtenances and euipment, such as ballasts, cables and anchors,corda0e and sails, food, water, fuel and li0hts, and other necessary orproper stores and implements for the /oya0e.

(ection 11B. here different portions of the /oya0e contemplated by apolicy differ in respect to the thin0s reuisite to ma*e the ship seaworthytherefor, a warranty of seaworthiness is complied with if, at thecommencement of each portion, the ship is seaworthy with reference tothat portion.

(ection 12C. hen the ship becomes unseaworthy durin0 the /oya0e towhich an insurance relates, an unreasonable delay in repairin0 the defect

eonerates the insurer on ship or shipowner-s interest from liability fromany loss arisin0 therefrom.

(ection 121. # ship which is seaworthy for the purpose of an insurance

upon the ship may, ne/ertheless, by reason of bein0 unfitted to recei/ethe car0o, be unseaworthy for the purpose of insurance upon the car0o.

(ection 122. here the nationality or neutrality of a ship or car0o isepressly warranted, it is implied that the ship will carry the reuisitedocuments to show such nationality or neutrality and that it will notcarry any documents which cast reasonable suspicion thereon.

(;=)')$" 1)9" &%


14/94

3b4 hen necessary to comply with a warranty, or to a/oid aperil, whether or not the peril is insured a0ainst5

3c4 hen made in 0ood faith, and upon reasonable 0rounds of

belief in its necessity to a/oid a peril5 or

3d4 hen made in 0ood faith, for the purpose of sa/in0 humanlife or relie/in0 another /essel in distress.

(ection 12@. "/ery de/iation not specified in the last section isimproper.

(ection 12A. #n insurer is not liable for any loss happenin0 to the thin0insured subseuent to an improper de/iation.

(;=)')$" 1!$%((

(ection 12B. # loss may be either total or partial.

(ection 1C. "/ery loss which is not total is partial.

(ection 11. # total loss may be either actual or constructi/e.

(ection 12. #n actual total loss is caused by:

3a4 # total destruction of the thin0 insured5

3b4 )he irretrie/able loss of the thin0 by sin*in0, or by bein0bro*en up5

3c4 #ny dama0e to the thin0 which renders it /alueless to theowner for the purpose for which he held it5 or

3d4 #ny other e/ent which effecti/ely depri/es the owner of thepossession, at the port of destination, of the thin0 insured.

(ection 1. # constructi/e total loss is one which 0i/es to a personinsured a ri0ht to abandon, under (ection 181.

(ection 18. #n actual loss may be presumed from the continued

absence of a ship without bein0 heard of. )he len0th of time which issufficient to raise this presumption depends on the circumstances of thecase.

(ection 1?. hen a ship is pre/ented, at an intermediate port, fromcompletin0 the /oya0e, by the perils insured a0ainst, the liability of amarine insurer on the car0o continues after they are thus reshipped.

Nothin0 in this section shall pre/ent an insurer from reuirin0 anadditional premium if the ha7ard be increased by this etension ofliability.

(ection 16. 'n addition to the liability mentioned in the last section, amarine insurer is bound for dama0es, epenses of dischar0in0, stora0e,reshipment, etra frei0hta0e, and all other epenses incurred in sa/in0car0o reshipped pursuant to the last section, up to the amount insured.

Nothin0 in this or in the precedin0 section shall render a marine insurerliable for any amount in ecess of the insured /alue or, if there be none,of the insurable /alue.

(ection 1@. ;pon an actual total loss, a person insured is entitled topayment without notice of abandonment.

(ection 1A. here it has been a0reed that an insurance upon aparticular thin0, or class of thin0s, shall be free from particular a/era0e,a marine insurer is not liable for any particular a/era0e loss notdepri/in0 the insured of the possession, at the port of destination, of thewhole of such thin0, or class of thin0s, e/en thou0h it becomes entirelyworthless5 but such insurer is liable for his proportion of all 0enerala/era0e loss assessed upon the thin0 insured.


15/94

(ection 1B. #n insurance confined in terms to an actual loss does notco/er a constructi/e total loss, but co/ers any loss, which necessarilyresults in depri/in0 the insured of the possession, at the port ofdestination, of the entire thin0 insured.

(;=)')$" 19#=#ND%NM"N)

(ection 18C. #bandonment, in marine insurance, is the act of theinsured by which, after a constructi/e total loss, he declares therelinuishment to the insurer of his interest in the thin0 insured.

(ection 181. # person insured by a contract of marine insurance mayabandon the thin0 insured, or any particular portion thereof separately/alued by the policy, or otherwise separately insured, and reco/er for atotal loss thereof, when the cause of the loss is a peril insured a0ainst:

3a4 'f more than threefourths 3E4 thereof in /alue is actuallylost, or would ha/e to be epended to reco/er it from the peril5

3b4 'f it is in>ured to such an etent as to reduce its /alue morethan threefourths 3E45

3c4 'f the thin0 insured is a ship, and the contemplated /oya0ecannot be lawfully performed without incurrin0 either an epenseto the insured of more than threefourths 3E4 the /alue of thethin0 abandoned or a ris* which a prudent man would not ta*eunder the circumstances5 or

3d4 'f the thin0 insured, bein0 car0o or frei0hta0e, and the/oya0e cannot be performed, nor another ship procured by themaster, within a reasonable time and with reasonable dili0ence,to forward the car0o, without incurrin0 the li*e epense or ris*mentioned in the precedin0 subpara0raph. =ut frei0hta0e cannotin any case be abandoned unless the ship is also abandoned.

(ection 182. #n abandonment must be neither partial nor conditional.

(ection 18. #n abandonment must be made within a reasonable timeafter receipt of reliable information of the loss, but where theinformation is of a doubtful character, the insured is entitled to areasonable time to ma*e inuiry.

(ection 188. here the information upon which an abandonment hasbeen made pro/es incorrect, or the thin0 insured was so far restoredwhen the abandonment was made that there was then in fact no totalloss, the abandonment becomes ineffectual.

(ection 18?. #bandonment is made by 0i/in0 notice thereof to theinsurer, which may be done orally, or in writin0:Provided, )hat if thenotice be done orally, a written notice of such abandonment shall besubmitted within se/en 3@4 days from such oral notice.

(ection 186. # notice of abandonment must be eplicit, and mustspecify the particular cause of the abandonment, but need state onlyenou0h to show that there is probable cause therefor, and need not beaccompanied with proof of interest or of loss.

(ection 18@. #n abandonment can be sustained only upon the causespecified in the notice thereof.

(ection 18A. #n abandonment is eui/alent to a transfer by the insuredof his interest to the insurer, with all the chances of reco/ery andindemnity.

(ection 18B. 'f a marine insurer pays for a loss as if it were an actualtotal loss, he is entitled to whate/er may remain of the thin0 insured, orits proceeds or sal/a0e, as if there had been a formal abandonment.

(ection 1?C. ;pon an abandonment, acts done in 0ood faith by thosewho were a0ents of the insured in respect to the thin0 insured,subseuent to the loss, are at the ris* of the insurer, and for his benefit.


16/94

(ection 1?1. here notice of abandonment is properly 0i/en, the ri0htsof the insured are not pre>udiced by the fact that the insurer refuses toaccept the abandonment.

(ection 1?2. )he acceptance of an abandonment may be either epressor implied from the conduct of the insurer. )he mere silence of theinsurer for an unreasonable len0th of time after notice shall be construedas an acceptance.

(ection 1?. )he acceptance of an abandonment, whether epress orimplied, is conclusi/e upon the parties, and admits the loss and thesufficiency of the abandonment.

(ection 1?8. #n abandonment once made and accepted is irre/ocable,unless the 0round upon which it was made pro/es to be unfounded.

(ection 1??. %n an accepted abandonment of a ship, frei0hta0e earnedpre/ious to the loss belon0s to the insurer of said frei0hta0e5 butfrei0hta0e subseuently earned belon0s to the insurer of the ship.

(ection 1?6. 'f an insurer refuses to accept a /alid abandonment, he isliable as upon an actual total loss, deductin0 from the amount anyproceeds of the thin0 insured which may ha/e come to the hands of theinsured.

(ection 1?@. 'f a person insured omits to abandon, he may ne/erthelessreco/er his actual loss.

(;=)')$" 1'M"#(;R" % 'ND"MN')ustment of either a partial or totalloss, if the insured has some interest at ris*, and there is no fraud on hispart5 ecept that when a thin0 has been hypothecated by bottomry orrespondentia, before its insurance, and without the *nowled0e of the

person actually procurin0 the insurance, he may show the real /alue. =uta /aluation fraudulent in fact, entitles the insurer to rescind the contract.

(ection 1?B. # marine insurer is liable upon a partial loss, only for suchproportion of the amount insured by him as the loss bears to the /alue ofthe whole interest of the insured in the property insured.

(ection 16C. here profits are separately insured in a contract ofmarine insurance, the insured is entitled to reco/er, in case of loss, aproportion of such profits eui/alent to the proportion which the /alue ofthe property lost bears to the /alue of the whole.

(ection 161. 'n case of a /alued policy of marine insurance onfrei0hta0e or car0o, if a part only of the sub>ect is eposed to ris*, the/aluation applies only in proportion to such part.

(ection 162. hen profits are /alued and insured by a contract ofmarine insurance, a loss of them is conclusi/ely presumed from a loss ofthe property out of which they are epected to arise, and the /aluationfies their amount.

(ection 16. 'n estimatin0 a loss under an open policy of marineinsurance the followin0 rules are to be obser/ed:

3a4 )he /alue of a ship is its /alue at the be0innin0 of the ris*,includin0 all articles or char0es which add to its permanent /alueor which are necessary to prepare it for the /oya0e insured5

3b4 )he /alue of the car0o is its actual cost to the insured, whenladen on board, or where the cost cannot be ascertained, itsmar*et /alue at the time and place of ladin0, addin0 the char0esincurred in purchasin0 and placin0 it on board, but withoutreference to any loss incurred in raisin0 money for its purchase,or to any drawbac* on its eportation, or to the fluctuation of themar*et at the port of destination, or to epenses incurred on theway or on arri/al5


17/94

3c4 )he /alue of frei0hta0e is the 0ross frei0hta0e, eclusi/e ofprima0e, without reference to the cost of earnin0 it5 and

3d4 )he cost of insurance is in each case to be added to the /aluethus estimated.

(ection 168. 'f car0o insured a0ainst partial loss arri/es at theport of destination in a dama0ed condition, the loss of the insuredis deemed to be the same proportion of the /alue which themar*et price at that port, of the thin0 so dama0ed, bears to themar*et price it would ha/e brou0ht if sound.

(ection 16?. # marine insurer is liable for all the epenses attendantupon a loss which forces the ship into port to be repaired5 and where it isstipulated in the policy that the insured shall labor for the reco/ery of theproperty, the insurer is liable for the epense incurred thereby, suchepense, in either case, bein0 in addition to a total loss, if that afterwardsoccurs.

(ection 166. # marine insurer is liable for a loss fallin0 upon theinsured, throu0h a contribution in respect to the thin0 insured, reuiredto be made by him towards a 0eneral a/era0e loss called for by a perilinsured a0ainst:Provided, )hat the liability of the insurer shall belimited to the proportion of contribution attachin0 to his policy /aluewhere this is less than the contributin0 /alue of the thin0 insured.

(ection 16@. hen a person insured by a contract of marine insurancehas a demand a0ainst others for contribution, he may claim the wholeloss from the insurer, subro0atin0 him to his own ri0ht to contribution.=ut no such claim can be made upon the insurer after the separation ofthe interests liable to contribution, nor when the insured, ha/in0 the ri0htand opportunity to enforce contribution from others, has ne0lected orwai/ed the eercise of that ri0ht.

(ection 16A. 'n the case of a partial loss of ship or its euipment, theold materials are to be applied towards payment for the new. ;nless

otherwise stipulated in the policy, a marine insurer is liable for only twothirds 32F4 of the remainin0 cost of repairs after such deduction, eceptthat anchors must be paid in full.

)')$" 2'R" 'N(;R#N"

(ection 16B. #s used in this ode, the termfire insuranceshall includeinsurance a0ainst loss by fire, li0htnin0, windstorm, tornado orearthua*e and other allied ris*s, when such ris*s are co/ered byetension to fire insurance policies or under separate policies.

(ection 1@C. #n alteration in the use or condition of a thin0 insuredfrom that to which it is limited by the policy made without the consent ofthe insurer, by means within the control of the insured, and increasin0the ris*s, entitles an insurer to rescind a contract of fire insurance.

(ection 1@1. #n alteration in the use or condition of a thin0 insuredfrom that to which it is limited by the policy, which does not increase theris*, does not affect a contract of fire insurance.

(ection 1@2. # contract of fire insurance is not affected by any act ofthe insured subseuent to the eecution of the policy, which does not/iolate its pro/isions, e/en thou0h it increases the ris* and is the causeof the loss.

(ection 1@. 'f there is no /aluation in the policy, the measure ofindemnity in an insurance a0ainst fire is the epense it would be to theinsured at the time of the commencement of the fire to replace the thin0lost or in>ured in the condition in which it was at the time of the in>ury5but if there is a /aluation in a policy of fire insurance, the effect shall bethe same as in a policy of marine insurance.

(ection 1@8. hene/er the insured desires to ha/e a /aluation named inhis policy, insurin0 any buildin0 or structure a0ainst fire, he may reuiresuch buildin0 or structure to be eamined by an independent appraiser


18/94

and the /alue of the insured-s interest therein may then be fied asbetween the insurer and the insured. )he cost of such eamination shallbe paid for by the insured. # clause shall be inserted in such policystatin0 substantially that the /alue of the insured-s interest in suchbuildin0 or structure has been thus fied. 'n the absence of any chan0eincreasin0 the ris* without the consent of the insurer or of fraud on thepart of the insured, then in case of a total loss under such policy, thewhole amount so insured upon the insured-s interest in such buildin0 orstructure, as stated in the policy upon which the insurers ha/e recei/ed apremium, shall be paid, and in case of a partial loss the full amount ofthe partial loss shall be so paid, and in case there are two 324 or morepolicies co/erin0 the insured-s interest therein, each policy shallcontributepro ratato the payment of such whole or partial loss. =ut inno case shall the insurer be reuired to pay more than the amount thusstated in such policy. )his section shall not pre/ent the parties fromstipulatin0 in such policies concernin0 the repairin0, rebuildin0 orreplacin0 of buildin0s or structures wholly or partially dama0ed ordestroyed.

(ection 1@?. No policy of fire insurance shall be pled0ed, hypothecated,or transferred to any person, firm or company who acts as a0ent for orotherwise represents the issuin0 company, and any such pled0e,hypothecation, or transfer hereafter made shall be /oid and of no effectinsofar as it may affect other creditors of the insured.

)')$" #(;#$)< 'N(;R#N"

(ection 1@6. asualty insurance is insurance co/erin0 loss or liabilityarisin0 from accident or mishap, ecludin0 certain types of loss whichby law or custom are considered as fallin0 eclusi/ely within the scopeof other types of insurance such as fire or marine. 't includes, but is notlimited to, employer-s liability insurance, motor /ehicle liabilityinsurance, plate 0lass insurance, bur0lary and theft insurance, personalaccident and health insurance as written by nonlife insurance

companies, and other substantially similar *inds of insurance.

)')$" 8(;R")oint andse/eral with the obli0or and shall be limited to the amount of the bond. 'tis determined strictly by the terms of the contract of suretyship inrelation to the principal contract between the obli0or and the obli0ee.

(ection 1@B. )he surety is entitled to payment of the premium as soonas the contract of suretyship or bond is perfected and deli/ered to theobli0or. No contract of suretyship or bondin0 shall be /alid and bindin0unless and until the premium therefor has been paid, ecept where theobli0ee has accepted the bond, in which case the bond becomes /alidand enforceable irrespecti/e of whether or not the premium has beenpaid by the obli0or to the surety:Provided, )hat if the contract ofsuretyship or bond is not accepted by, or filed with the obli0ee, thesurety shall collect only a reasonable amount, not eceedin0 fifty percent3?CG4 of the premium due thereon as ser/ice fee plus the cost of stampsor other taes imposed for the issuance of the contract or bond:Provided, however, )hat if the nonacceptance of the bond be due to thefault or ne0li0ence of the surety, no such ser/ice fee, stamps or taesshall be collected.

'n the case of a continuin0 bond, the obli0or shall pay the subseuentannual premium as it falls due until the contract of suretyship iscancelled by the obli0ee or by the ommissioner or by a court ofcompetent >urisdiction, as the case may be.


19/94

(ection 1AC. Pertinent pro/isions of the i/il ode of the Philippinesshall be applied in a suppletory character whene/er necessary ininterpretin0 the pro/isions of a contract of suretyship.

)')$" ?$'" 'N(;R#N"

(ection 1A1. $ife insurance is insurance on human li/es and insuranceappertainin0 thereto or connected therewith.

"/ery contract or underta*in0 for the payment of annuities includin0contracts for the payment of lump sums under a retirement pro0ramwhere a life insurance company mana0es or acts as a trustee for suchretirement pro0ram shall be considered a life insurance contract forpurposes of this ode.

(ection 1A2. #n insurance upon life may be made payable on the deathof the person, or on his sur/i/in0 a specified period, or otherwisecontin0ently on the continuance or cessation of life.

"/ery contract or pled0e for the payment of endowments or annuitiesshall be considered a life insurance contract for purposes of this ode.

'n the absence of a >udicial 0uardian, the father, or in the latter-sabsence or incapacity, the mother, of any minor, who is an insured or abeneficiary under a contract of life, health, or accident insurance, mayeercise, in behalf of said minor, any ri0ht under the policy, withoutnecessity of court authority or the 0i/in0 of a bond, where the interest ofthe minor in the particular act in/ol/ed does not eceed i/e hundredthousand pesos 3P?CC,CCC.CC4 or in such reasonable amount as may bedetermined by the ommissioner. (uch ri0ht may include, but shall notbe limited to, obtainin0 a policy loan, surrenderin0 the policy, recei/in0the proceeds of the Policy, and 0i/in0 the minor-s consent to anytransaction on the policy.

'n the absence or in case of the incapacity of the father or mother, the0randparent, the eldest brother or sister at least ei0hteen 31A4 years ofa0e, or any relati/e who has actual custody of the minor insured orbeneficiary, shall act as a 0uardian without need of a court order or>udicial appointment as such 0uardian, as lon0 as such person is nototherwise disualified or incapacitated. Payment made by the insurerpursuant to this section shall relie/e such insurer of any liability underthe contract.

(ection 1A. )he insurer in a life insurance contract shall be liable incase of suicide only when it is committed after the policy has been inforce for a period of two 324 years from the date of its issue or of its lastreinstatement, unless the policy pro/ides a shorter period:Provided,however, )hat suicide committed in the state of insanity shall becompensable re0ardless of the date of commission.

(ection 1A8. # policy of insurance upon life or health may pass bytransfer, will or succession to any person, whether he has an insurableinterest or not, and such person may reco/er upon it whate/er theinsured mi0ht ha/e reco/ered.

(ection 1A?. Notice to an insurer of a transfer or beuest thereof is notnecessary to preser/e the /alidity of a policy of insurance upon life orhealth, unless thereby epressly reuired.

(ection 1A6. ;nless the interest of a person insured is susceptible ofeact pecuniary measurement, the measure of indemnity under a policyof insurance upon life or health is the sum fied in the policy.

)')$" 6M'R%'N(;R#N"

(ection 1A@. Microinsurance is a financial product or ser/ice that meetsthe ris* protection needs of the poor where:


20/94

3a4 )he amount of contributions, premiums, fees or char0es,computed on a daily basis, does not eceed se/en and a halfpercent 3@.?G4 of the current daily minimum wa0e rate fornona0ricultural wor*ers in Metro Manila5 and

3b4 )he maimum sum of 0uaranteed benefits is not more thanone thousand 31,CCC4 times of the current daily minimum wa0erate for nona0ricultural wor*ers in Metro Manila.

(ection 1AA. No insurance company or mutual benefit association shallen0a0e in the business of microinsurance unless it possesses all thereuirements as may be prescribed by the ommissioner. )heommissioner shall issue such rules and re0ulations 0o/ernin0microinsurance.

9#P)"R ''#'N#N'#$ R"P%R)'N! R#M"%RH

(ection 1AB. #ll companies re0ulated by the ommission, unlessotherwise reuired by law, should comply with the financial reportin0framewor*s adopted by the ommission for purposes of creatin0 thestatutory financial reports and the annual statements to be submitted tothe ommission. inancial reportin0 framewor* means a set ofaccountin0 and reportin0 principles, standards, interpretations andpronouncements that must be adopted in the preparation and submissionof the statutory financial statements and reports reuired by theommission. )his financial reportin0 framewor* is not the same as thefinancial reportin0 framewor* used to prepare the financial statementsthat the (ecurities and "chan0e ommission may reuire. )he mainpurpose of the statutory statements is to present important informationabout the le/el of ris* and sol/ency situation of insurers. 'n prescribin0the applicable statutory financial reportin0 framewor*, theommissioner shall ta*e into account international standards concernin0sol/ency and insurance company reportin0 as well as 0enerally acceptedactuarial principles concernin0 financial reportin0 promul0ated by the

#ctuarial (ociety of the Philippines.

)he assets and in/estments discussed in (ections 2C8 to 21? shall beaccounted for in accordance with this section.

)he /aluation of reser/es shall be accounted for in accordance with)itle ? of this ode.

9#P)"R ''')9" =;('N"(( % 'N(;R#N"

)')$" 1'N(;R#N" %MP#N'"(, %R!#N'I#)'%N,

#P')#$'I#)'%N #ND #;)9%R'I#)'%N

(ection 1BC. or purposes of this ode, the term insureror insuranceco!panyshall include all partnerships, associations, cooperati/es orcorporations, includin0 0o/ernmentowned or controlled corporationsor entities, en0a0ed as principals in the insurance business, eceptin0mutual benefit associations. ;nless the contet otherwise reuires, theterm shall also include professional reinsurers defined in (ection 2AA.&o!estic co!panyshall include companies formed, or0ani7ed oreistin0 under the laws of the Philippines.'oreign co!panywhen usedwithout limitation shall include companies formed, or0ani7ed, oreistin0 under any laws other than those of the Philippines.

(ection 1B1. )he pro/isions of the orporation ode, as amended, shallapply to all insurance corporations now or hereafter en0a0ed in businessin the Philippines insofar as they do not conflict with the pro/isions ofthis chapter.

(ection 1B2. No corporation, partnership, or association of persons shalltransact any insurance business in the Philippines ecept as a0ent of acorporation, partnership or association authori7ed to do the business ofinsurance in the Philippines, unless possessed of the capital and assetsreuired of an insurance corporation doin0 the same *ind of business inthe Philippines and in/ested in the same manner5 unless the


21/94

ommissioner shall ha/e 0ranted it a certificate to the effect that it hascomplied with all the pro/isions of this ode.

"/ery entity recei/in0 any such certificate of authority shall be sub>ectto the insurance and other applicable laws of the Philippines and to the>urisdiction and super/ision of the ommissioner.

(ection 1B. No insurance company shall transact any insurancebusiness in the Philippines until after it shall ha/e obtained a certificateof authority for that purpose from the ommissioner upon applicationtherefor and payment by the company concerned of the fees hereinafterprescribed.

)he ommissioner may refuse to issue a certificate of authority to anyinsurance company if, in his >ud0ment, such refusal will best promotethe interest of the people of this country. No such certificate of authorityshall be 0ranted to any such company until the ommissioner shall ha/esatisfied himself by such eamination as he may ma*e and suche/idence as he may reuire that such company is ualified by the laws ofthe Philippines to transact business therein, that the 0rant of suchauthority appears to be >ustified in the li0ht of local economicreuirements, and that the direction and administration, as well as theinte0rity and responsibility of the or0ani7ers and administrators, thefinancial or0ani7ation and the amount of capital, reasonably assure thesafety of the interests of the policyholders and the public.

'n order to maintain the uality of the mana0ement of the insurancecompanies and afford better protection to policyholders and the public in0eneral, any person of 0ood moral character, unuestioned inte0rity andreco0ni7ed competence may be elected or appointed director or officerof insurance companies in accordance with the pertinent pro/isionscontained in the corporate 0o/ernance circulars prescribed by theommissioner. 'n addition hereto, the ommissioner shall prescribe theualifications of directors, eecuti/e officers and other *ey officials ofinsurance companies for purposes of this section.

No person shall concurrently be a Director andFor %fficer of aninsurance company and an ad>ustment company.

=efore issuin0 such certificate of authority, the ommissioner must besatisfied that the name of the company is not that of any other *nowncompany transactin0 a similar business in the Philippines, or a name sosimilar as to be calculated to mislead the public. )he ommissioner mayissue rules and re0ulations on the use of names of insurance companiesand other super/ised persons or entities.

)he certificate of authority issued by the ommissioner shall epire onthe last day of December, three 34 years followin0 its date of issuance,and shall be renewable e/ery three 34 years thereafter, sub>ect to thecompany-s continuin0 compliance with the pro/isions of this ode,circulars, instructions, rulin0s or decisions of the ommission.

"/ery company recei/in0 any such certificates of authority shall besub>ect to the pro/isions of this ode and other related laws and to the>urisdiction and super/ision of the ommissioner.

No insurance company may be authori7ed to transact in the Philippinesthe business of life and nonlife insurance concurrently, unlessspecifically authori7ed to do so by the ommissioner:Provided, )hat theterms lifeand nonlifeinsurance shall be deemed to include health,accident and disability insurance.

No insurance company shall ha/e euity in an ad>ustment company andneither shall an ad>ustment company ha/e euity in an insurancecompany.

No insurance company issued with a /alid certificate of authority totransact insurance business anywhere in the Philippines by the 'nsuranceommissioner, shall be barred, pre/ented, or disenfranchised fromissuin0 any insurance policy or from transactin0 any insurance businesswithin the scope or co/era0e of its certificate of authority, anywhere in

the Philippines, by any local 0o/ernment unit or authority, for whate/er


22/94

0uise or reason whatsoe/er, includin0 under any *ind of ordinance,accreditation system, or scheme. #ny local ordinance or local0o/ernment unit re0ulatory issuance imposin0 such restriction ordisenfranchisement on any insurance company shall be deemed null and/oid ab initio.

(ection 1B8. "cept as pro/ided in (ection 2AB, no new domestic life ornonlife insurance company shall, in a stoc* corporation, en0a0e inbusiness in the Philippines unless possessed of a paidup capital eual toat least %ne billion pesos 3P1,CCC,CCC,CCC.CC4:Provided, )hat adomestic insurance company already doin0 business in the Philippinesshall ha/e a net worth by June C, 2C1 of )wo hundred fifty millionpesos 3P2?C,CCC,CCC.CC4. urthermore, said company must ha/e byDecember 1, 2C16, an additional )hree hundred million pesos3PCC,CCC,CCC.CC4 in net worth5 by December 1, 2C1B, an additional)hree hundred fifty million pesos 3P?C,CCC,CCC.CC4 in net worth5 andby December 1, 2C22, an additional our hundred million pesos3P8CC,CCC,CCC.CC4 in net worth.

)he ommissioner may, as a prelicensin0 reuirement of a newinsurance company, in addition to the paidup capital stoc*, reuire thestoc*holders to pay in cash to the company in proportion to theirsubscription interests a contributed surplus fund of not less than %nehundred million pesos 3P1CC,CCC,CCC.CC4. 9e may also reuire suchcompany to submit to him a business plan showin0 the company-s

estimated receipts and disbursements, as well as the basis therefor, forthe net succeedin0 three 34 years.

'f or0ani7ed as a mutual company, in lieu of such net worth, it mustha/e a/ailable total members euity in an amount to be determined bythe 'nsurance ommission abo/e all liabilities for losses reported5epenses, taes, le0al reser/e, and reinsurance of all outstandin0 ris*s,and the contributed surplus fund eual to the amounts reuired of stoc*corporations. # stoc* insurance company doin0 business in thePhilippines may, sub>ect to the pertinent law and re0ulation which now

or hereafter may be in force, alter its or0ani7ation and transform itselfinto a mutual insurance company.

)he (ecretary of inance may, upon recommendation of theommissioner, increase such minimum paidup capital stoc* or cashassets reuirement under such terms and conditions as he may impose, toan amount which, in his opinion, would reasonably assure the safety ofthe interests of the policyholders and the public. )he minimum paidupcapital and net worth reuirement must remain unimpaired for thecontinuance of the license. )he ommissioner may reuire the adoptionof the ris*based capital approach and other internationally acceptedforms of capital framewor*.

or the purpose of this section, net worth shall consist of:

3a4 Paidup capital5

3b4 Retained earnin0s5

3c4 ;nimpaired surplus5 and

3d4 Re/aluation of assets as may be appro/ed by theommissioner.

)he ommission may adopt for purposes of compliance with capitalbuild up reuirement under this ode the reco0nition as part of thecapital account, capital notes or debentures which are subordinate to allcredits and senior only to common capital stoc*s.

)he President of the Philippines may order a periodic re/iew e/ery two324 years the capital structure set out abo/e to determine the capitaladeuacy of the local insurance industry from and after the inte0rationand liberali7ation of the financial ser/ices, includin0 insurance, in the#("#N Re0ion. or this purpose, a re/iew committee consistin0 ofrepresentati/es from the Department of inance 3D%4, the 'nsurance

ommission 3'4, the National "conomic and De/elopment #uthority


23/94

3N"D#4, the (ecurities and "chan0e ommission 3("4 and othera0encies which the President may desi0nate shall conduct the re/iew andmay recommend to the President to adopt for implementation thenecessary capital ad>ustment.

(ection 1B?. "/ery company must, before en0a0in0 in the business ofinsurance in the Philippines, file with the ommissioner the followin0:

3a4 # certified copy of the last annual statement or a /erifiedfinancial statement ehibitin0 the condition and affairs of suchcompany5

3b4 'f incorporated under the laws of the Philippines, a copy ofthe articles of incorporation and bylaws, and any amendments toeither, certified by the (ecurities and "chan0e ommission tobe a copy of that which is filed in its %ffice5

3c4 'f incorporated under any laws other than those of thePhilippines, a certificate from the (ecurities and "chan0eommission showin0 that it is duly re0istered in the mercantilere0istry of that ommission in accordance with the orporationode. # copy of the articles of incorporation and bylaws, andany amendments to either, if or0ani7ed or formed under any lawreuirin0 such to be filed, duly certified by the officer ha/in0 thecustody of same, or if not so or0ani7ed, a copy of the law, charter

or deed of settlement under which the deed of or0ani7ation ismade, duly certified by the proper custodian thereof, or pro/edby affida/it to be a copy5 also, a certificate under the hand andseal of the proper officer of such state or country ha/in0super/ision of insurance business therein, if any there be, thatsuch corporation or company is or0ani7ed under the laws of suchstate or country, with the amount of capital stoc* or assets andle0al reser/e reuired by this ode5

3d4 'f not incorporated and of forei0n domicile, aside from the

certificate mentioned in para0raph 3c4 of this section, a certificate

settin0 forth the nature and character of the business, the locationof the principal office, the name of the indi/idual or names of thepersons composin0 the partnership or association, the amount ofactual capital employed or to be employed therein, and the namesof all officers and persons by whom the business is or may bemana0ed.

)he certificate must be /erified by the affida/it of the chief officer,secretary, a0ent, or mana0er of the company5 and if there are any writtenarticles of a0reement of the company, a copy thereof must accompanysuch certificate.

(ection 1B6. )he ommissioner must reuire as a condition precedentto the transaction of insurance business in the Philippines by any forei0ninsurance company, that such company file in his office a written powerof attorney desi0natin0 some person who shall be a resident of thePhilippines as its 0eneral a0ent, on whom any notice pro/ided by law orby any insurance policy, proof of loss, summons and other le0alprocesses may be ser/ed in all actions or other le0al proceedin0s a0ainstsuch company, and consentin0 that ser/ice upon such 0eneral a0ent shallbe admitted and held as /alid as if ser/ed upon the forei0n company atits home office. #ny such forei0n company shall, as further conditionprecedent to the transaction of insurance business in the Philippines,ma*e and file with the ommissioner an a0reement or stipulation,eecuted by the proper authorities of said company in form and

substance as follows:

)he 3name of company4 does hereby stipulate and a0ree inconsideration of the permission 0ranted by the 'nsurance ommissionerto transact business in the Philippines, that if at any time said companyshall lea/e the Philippines, or cease to transact business therein, or shallbe without any a0ent in the Philippines on whom any notice, proof ofloss, summons, or le0al process may be ser/ed, then in any action orproceedin0 arisin0 out of any business or transaction which occurred inthe Philippines, ser/ice of any notice pro/ided by law, or insurance

policy, proof of loss, summons, or other le0al process may be made upon


24/94

the 'nsurance ommissioner, and that such ser/ice upon the 'nsuranceommissioner shall ha/e the same force and effect as if made upon thecompany.

hene/er such ser/ice of notice, proof of loss, summons, or other le0alprocess shall be made upon the ommissioner, he must, within ten 31C4days thereafter, transmit by mail, posta0e paid, a copy of such notice,proof of loss, summons, or other le0al process to the company at itshome or principal office. )he sendin0 of such copy by the ommissionershall be a necessary part of the ser/ice of the notice, proof of loss, orother le0al process.

(ection 1B@. No insurance company or0ani7ed or eistin0 under the0o/ernment or laws other than those of the Philippines shall en0a0e inbusiness in the Philippines unless possessed of unimpaired capital orassets and reser/e of not less than %ne billion pesos3P1,CCC,CCC,CCC.CC4, nor until it shall ha/e deposited with theommissioner for the benefit and security of the policyholders andcreditors of such company in the Philippines, securities satisfactory tothe ommissioner consistin0 of 0ood securities of the Philippines,includin0 new issues of stoc* of re0istered enterprises, as this term isdefined in "ecuti/e %rder No. 226 of 1BA@, as amended, to the actualmar*et /alue of not less than the amount herein reuired: Provided, )hatat least fifty percent 3?CG4 of such securities shall consist of bonds orother instruments of debt of the !o/ernment of the Philippines, its

political subdi/isions and instrumentalities, or of 0o/ernmentowned orcontrolled corporations and entities, includin0 the =an0*o (entral n0Pilipinas:Provided,further, )hat the total in/estment of a forei0ninsurance company in any re0istered enterprise shall not eceed twentypercent 32CG4 of the net worth of said forei0n insurance company nortwenty percent 32CG4 of the capital of the re0istered enterprise, unlesspre/iously authori7ed in writin0 by the ommissioner.

)he ommissioner may, as a prelicensin0 reuirement of a new branchoffice of a forei0n insurance company, in addition to the reuired asset

or net worth, reuire the company to ha/e an additional surplus fund inan amount to be determined by the 'nsurance ommission.

or purposes of this ode, the net worth of a forei0n insurancecompany shall refer only to its net worth in the Philippines.

(ection 1BA. )he ommissioner shall hold the securities, deposited asreuired in the immediately precedin0 section, for the benefit andsecurity of all the policyholders and creditors of the company depositin0the same:Provided, )hat the ommissioner may as lon0 as the companyis sol/ent, permit the company to collect the interest or di/idends on thesecurities so deposited, and, from time to time, with his assent, towithdraw any of such securities, upon depositin0 with saidommissioner other li*e securities, the mar*et /alue of which shall beeual to the mar*et /alue of such as may be withdrawn. 'n the e/ent ofany company ceasin0 to do business in the Philippines, the securitiesdeposited as aforesaid shall be returned to the company upon theommissioner-s written appro/al and only after the company has dulypro/en in its application therefor that it has no further liabilitywhatsoe/er under any of its policies nor to any of its creditors in thePhilippines.

(ection 1BB. "/ery forei0n company doin0 business in the Philippinesshall set aside an amount correspondin0 to the le0al reser/es of thepolicies written in the Philippines and in/est and *eep the same therein

in accordance with the pro/isions of this section. )he le0al reser/etherein reuired to be set aside shall be in/ested only in the classes ofPhilippine securities described in (ection 2C6:Provided, however, )hatno in/estment in stoc*s or bonds of any sin0le entity shall, in thea00re0ate eceed twenty percent 32CG4 of the net worth of the in/estin0company or twenty percent 32CG4 of the capital of the issuin0 company,whiche/er is the lesser, unless otherwise appro/ed in writin0 by theommissioner. )he securities purchased and *ept in the Philippinesunder this section, shall not be sent out of the territorial >urisdiction ofthe Philippines without the written consent of the ommissioner.


25/94

)')$" 2(%$&"Nect to the applicable pro/isions of this ode and theincome reali7ed therefrom or accrued thereon.

3c4 $oans 0ranted by the insurance company concerned to theetent of that portion thereof adeuately secured by nonspeculati/e assets with readily reali7able /alues in accordancewith and sub>ect to the limitations imposed by applicablepro/isions of this ode.

3d4 Policy loans and other policy assets and liens on policies,contracts or certificates of a life insurance company, in anamount not eceedin0 le0al reser/es and other policy liabilitiescarried on each indi/idual life insurance policy, contract orcertificate.

3e4 )he net amount of uncollected and deferred premiums andannuity considerations in the case of a life insurance companywhich carries the full mean tabular reser/e liability.

3f4 Reinsurance reco/erable by the cedin0 insurer:

314 rom an insurer authori7ed to transact business inthis country, the full amount thereof5 or

324 rom an insurer not authori7ed in this country, in anamount not eceedin0 the liabilities carried by the cedin0insurer for amounts withheld under a reinsurance treatywith such unauthori7ed insurer as security for thepayment of obli0ations thereunder if such funds are heldsub>ect to withdrawal by, and under the control of, the

cedin0 insurer. )he ommissioner may prescribe the

conditions under which a cedin0 insurer may be allowedcredit, as an asset or as a deduction from loss andunearned premium reser/es, for reinsurance reco/erablefrom an insurer not authori7ed in this country but whichpresents satisfactory e/idence that it meets the applicablestandards of sol/ency reuired in this country.

304 unds withheld by a cedin0 insurer under a reinsurancetreaty, pro/ided reser/es for unpaid losses and unearnedpremiums are adeuately pro/ided.

3h4 Deposits or amounts reco/erable from underwritin0associations, syndicates and reinsurance funds, or from anysuspended ban*in0 institution, to the etent deemed by theommissioner to be a/ailable for the payment of losses and

claims and /alues to be determined by him.

3i4 "lectronic data processin0 machines, as may be authori7edby the ommissioner to be acuired by the insurance companyconcerned, the acuisition cost of which to be amorti7ed in eualannual amounts within a period of fi/e 3?4 years from the date ofacuisition thereof.

3>4 'n/estments in mutual funds, real estate in/estment trusts,salary loans, unit in/estment trust funds and special deposit

accounts, sub>ect to the conditions as may be pro/ided for by theommissioner.

3*4 %ther assets, not inconsistent with the pro/isions ofpara0raphs 3a4 to 3>4 hereof, which are deemed by theommissioner to be readily reali7able and a/ailable for thepayment of losses and claims at /alues to be determined by himin a circular, rule or re0ulation.

(ection 2C. 'n addition to such assets as the ommissioner may from

time to time determine to be nonadmitted assets of insurance companies


27/94

doin0 business in the Philippines, the followin0 assets shall in no case beallowed as admitted assets of an insurance company doin0 business inthe Philippines, in any determination of its financial condition:

3a4 !oodwill, trade names, and other li*e intan0ible assets.

3b4 Prepaid or deferred char0es for epenses and commissionspaid by such insurance company.

3c4 #d/ances to officers 3other than policy loans4, which are notadeuately secured and which are not pre/iously authori7ed bythe ommissioner, as well as ad/ances to employees, a0ents, andother persons on mere personal security.

3d4 (hares of stoc* of such insurance company, owned by it, orany euity therein as well as loans secured thereby, or anyproportionate interest in such shares of stoc* throu0h theownership by such insurance company of an interest in anothercorporation or business unit.

3e4 urniture, furnishin0, fitures, safes, euipment, library,stationery, literature, and supplies.

3f4 'tems of ban* credits representin0 chec*s, drafts or notesreturned unpaid after the date of statement.

304 )he amount, if any, by which the a00re0ate /alue ofin/estments as carried in the led0er assets of such insurancecompany eceeds the a00re0ate /alue thereof as determined inaccordance with the pro/isions of this ode andFor the rules ofthe ommissioner.

#ll nonadmitted assets and all other assets of doubtful /alue orcharacter included as led0er or nonled0er assets in any statementsubmitted by an insurance company to the ommissioner, or in any

insurance eaminer-s report to him, shall also be reported, to the etent

of the /alue disallowed as deductions from the 0ross assets of suchinsurance company, ecept where the ommissioner permits a reser/e tobe carried amon0 the liabilities of such insurance company in lieu of anysuch deduction.

)')$" 8'N&"()M"N)(

(ection 2C8. # life insurance company may lend to any of itspolicyholders upon the security of the /alue of its policy such sum asmay be determined pursuant to the pro/isions of the policy.

No insurance company shall loan any of its money or deposits to anyperson, corporation or association, ecept upon the security of any of thefollowin0:

3a4 irst mort0a0e or deeds of trust of re0istered, unencumbered,impro/ed or unimpro/ed real estate, includin0 condominiums5

3b4 irst mort0a0es or deeds of trust of actually culti/ated,impro/ed and unencumbered a0ricultural lands in thePhilippines5

3c4 Purchase money mort0a0es, lease purchase a0reements orsimilar securities eecuted or recei/ed by it on account of the

sale or echan0e of real property acuired pursuant to (ections2C6 and 2CA5

3d4 =onds or other instruments of indebtedness issued or0uaranteed by the !o/ernment of the Philippines or its politicalsubdi/isions authori7ed by law to incur such obli0ations or issuesuch 0uarantees or of 0o/ernmentowned or controlledcorporations and instrumentalities includin0 the =an0*o (entraln0 Pilipinas5 or


28/94

3e4 %bli0ations issued or 0uaranteed by uni/ersal ban*s,commercial ban*s, offshore ban*in0 units, in/estment houses orother financial intermediaries duly re0istered with the =an0*o(entral n0 Pilipinas5 or

3f4 %bli0ations issued or 0uaranteed by forei0n ban*s orcorporations, each of which shall ha/e total net worth of at least%ne hundred fifty million ;( dollars 3K;(1?C,CCC,CCC.CC4 orsuch other hi0her net worth as may be prescribed by the'nsurance ommission, as shown in their financial statements asof the immediately precedin0 fiscal year5 or

304 #ssi0nments of monetary instruments such as cash deposits,deposit certificates or other similar instruments of uni/ersalban*s, commercial ban*s, in/estment houses or other financial

intermediaries duly re0istered with the =an0*o (entral n0Pilipinas5 or

3h4 Pled0es of shares of stoc*, bonds or other instruments ofindebtedness specified in (ection 2CB5 or

3i4 hattel mort0a0es o/er euipment not more than three 34years old5 and

3>4 (uch other security as may be appro/ed by the

ommissioner.

)he loans pro/ided in the precedin0 subsection shall be sub>ect to thefollowin0 conditions:

314 )he amount of loan secured by real estate mort0a0e o/er anona0ricultural land shall not eceed se/enty percent 3@CG4 ofits appraised /alue, and in the case of a loan secured by a realestate mort0a0e o/er an a0ricultural land, the amount of loanshall not eceed forty percent 38CG4 of its mar*et /alue:

Provided, )hat, in no case shall such loan ha/e a maturity periodin ecess of twentyfi/e 32?4 years5

324 ;nless appro/ed by the ommissioner, no loan may be0ranted upon the security of a mort0a0e on impro/ed real estateif the impro/ements thereon do not belon0 to the owner of theland, and the owner of the impro/ements does not si0n the deedof mort0a0e. 9owe/er, if the owner of the land is the!o/ernment of the Philippines or any of its political subdi/isionsand a lon0term lease has been eecuted in fa/or of the owner ofthe impro/ements, the owner of the land need not be a party tothe deed of mort0a0e. )he epiration date of the lease shall not,howe/er, precede the maturity of the loan. )he phrase +impro/edreal estate- as used herein shall mean land with permanentbuildin0 or buildin0s erected thereon5

34 $easea0reements or similar securities recei/ed on the saleof real estate property shall not eceed one hundred percent31CCG4 of the sellin0 price of said property, or one hundredpercent 31CCG4 of its mar*et /alue at the time of its disposition,whiche/er amount is lower. 9owe/er, in no case shall sucha0reement ha/e a maturity period not eceedin0 thirty 3C4 years5

384 $oans secured by shares of stoc* of sol/ent corporations orinstitutions shall not eceed fifty percent 3?CG4 of:

3i4 )he wei0hted a/era0e mar*et price for the onehundred ei0hty 31AC4 days precedin0 the appro/al of theloan for shares listed in the stoc* echan0e5 and

3ii4 or unlisted shares, the ad>usted boo* /alue of suchshares.

3?4 $oans secured by the chattel mort0a0es o/er euipment shallnot eceed se/enty percent 3@CG4 of the mar*et /alue of said

euipment.


29/94

(ection 2C?. No loan by any insurance company on the security of realestate shall be made unless the title to such real estate shall ha/e firstbeen re0istered in accordance with the eistin0 $and Re0istration #ct, orshall ha/e been pre/iously re0istered under the pro/isions of the eistin0Mort0a0e $aw and the lien or interest of the insurance company asmort0a0ee has been re0istered.

(ection 2C6. 3a4 #n insurance company may purchase, hold, own andcon/ey such property, real and personal, as may ha/e been mort0a0ed,pled0ed, or con/eyed to it in 0ood faith in trust for its benefit by reasonof money loaned by it in pursuance of the re0ular business of thecompany, and such real or personal property as may ha/e beenpurchased by it at sales under pled0es, mort0a0es or deeds of trust for itsbenefit on account of money loaned by it5 and such real and personalproperty as may ha/e been con/eyed to it by borrowers in satisfaction

and dischar0e of loans made by the company in payment or by reason ofany loan made by the company in payment or by reason of any loanmade by it shall be sold by the company within twenty 32C4 years afterthe title thereto has been /ested in it.

3b4 #n insurance company may purchase, hold, and own the followin0:

314 Real properties which ser/e as its main place of businessandFor branch offices:Provided, )hat such in/estment shall notin the o/erall eceed twenty percent 32CG4 of its net worth as

shown by its latest financial statement appro/ed by theommissioner.

324 =onds or other instruments of indebtedness of the!o/ernment of the Philippines or its political subdi/isionsauthori7ed by law to issue bonds at the reasonable mar*et /aluethereof.

34 =onds or other instruments of debt of 0o/ernmentowned orcontrolled corporations and entities, includin0 the =an0*o

(entral n0 Pilipinas.

384 =onds, debentures or other instruments of indebtedness ofany sol/ent corporation or institution created or eistin0 underthe laws of the Philippines:

Provided, however, )hat the issuin0, assumin0 or0uaranteein0 entity or its predecessors shall not ha/edefaulted in the payment of interest on any of itssecurities and that durin0 each of any three 34 includin0the last two 324 of the fi/e 3?4 fiscal years net precedin0the date of acuisition by such insurance company ofsuch bonds, debentures, or other instruments ofindebtedness, the net earnin0s of the issuin0, assumin0 or0uaranteein0 institution a/ailable for its fied char0es, ashereinafter defined, shall ha/e been not less than one andoneuarter 31L4 times the total of its fied char0es for

such year:Provided, further, )hat no life insurancecompany shall in/est in or loan upon the obli0ations ofany one institution in the *inds permitted under thissubsection an amount in ecess of twentyfi/e percent32?G4 of the total admitted assets of such insurer as ofDecember thirtyfirst net precedin0 the date of suchin/estment.

#s used in this subsection the term net earnings available forfi)ed chargesshall mean net income after deductin0 operatin0

and maintenance epenses, taes other

Documents

PD 10607 Revised Insurance Code