Yaj Computers

CHAPTER III — THE BUSINESS OF INSURANCE

Title I INSURANCE COMPANIES: ORGANIZATION, CAPITALIZATION AND AUTHORIZATION

SECTION 184. For purposes of this Code, the term “insurer” or “insurance company” shall include all individuals, partnerships, associations, or corporations, including government‑owned or controlled corporations or entities, engaged as principals in the insurance business, excepting mutual benefit associations. Unless the context otherwise requires, the terms shall also include professional reinsurers defined in section two hundred eighty. “Domestic company” shall include companies formed, organized or existing under the laws of the Philippines. “Foreign company” when used without limitation shall include companies formed, organized, or existing under any laws other than those of the Philippines.

SECTION 185. Corporations formed or organized to save any person or persons or other corporations harmless fr. loss, damage, or liability arising fr. any unknown or future or contingent event, or to indemnify or to compensate any person or persons or other corporations for any such loss, damage, or liability, or to guarantee the performance of or compliance w/ contractual obligations or the payment of debt of others shall be known as “insurance corporations”.

The provisions of the Corporation Law shall apply to all insurance corporations now or hereafter engaged in business in the Philippines insofar as they do not conflict w/ the provisions of this chapter.

SECTION 186. No person, partnership, or association of persons shall transact any insurance business in the Philippines except as agent of a person or corporation authorized to do the business of insurance in the Philippines, unless possessed of the capital & assets required of an insurance corporation doing the same kind of business in the Philippines & invested in the same manner; nor unless the Commissioner shall have granted to him or them a certificate to the effect that he or they have complied w/ all the provisions of law w/c an insurance corporation doing business in the Philippines is required to observe.

Every person, partnership, or association receiving any such certificate of authority shall be subject to the insurance laws of the Philippines & to the jurisdiction & supervision of the Commissioner in the same manner as if an insurance corporation authorized by the laws of the Philippines to engage in the business of insurance specified in the certificate.

SECTION 187. No insurance company shall transact any insurance business in the Philippines until after it shall have obtained a certificate of authority for that purpose fr. the Commissioner upon application therefor & payment by the company concerned of the fees hereinafter prescribed.

The Commissioner may refuse to issue a certificate of authority to any insurance company if, in his judgment, such refusal will best promote the interest of the people of this country. No such certificate of authority shall be granted to any such company until the Commissioner shall have satisfied himself by such examination as he may make & such evidence as he may require that such company is qualified by the laws of the Philippines to transact business therein, that the grant of such authority appears to be justified in the light of economic requirements, & that the direction & administration, as well as the integrity & responsibility of the organizers & administrators, the financial organization & the amount of capital, notwithstanding the provisions of section one hundred eighty‑eight, reasonably assure the safety of the interests of the policyholders & the public.

In order to maintain the quality of the management of the insurance companies & afford better protection to policyholders & the public in general, any person of good moral character, unquestioned integrity & recognized competence may be elected or appointed director or officer of insurance companies. The Commissioner shall prescribe the qualifications of the executive officers & other key officials of insurance companies for purposes of this section.

No person shall concurrently be a director &/or officer of an insurance company & an adjustment company.

Incumbent directors &/or officers affected by the above provisions are hereby allowed to hold on to their positions until the end of their terms or two years fr. the effectivity of this decree, w/cever is shorter.

Before issuing such certificate of authority, the Commissioner must be satisfied that the name of the company is not that of any other known company transacting a similar business in the Philippines, or a name so similar as to be calculated to mislead the public.

Such certificate of authority shall expire on the last day of June of each year & shall be renewed annually if the company is continuing to comply w/ the provisions of this Code or the circulars, instructions, rulings or decisions of the Commissioner. Every company receiving any such certificates of authority shall be subject to the provisions of this Code & other related laws & to the jurisdiction & supervision of the Commissioner.

No insurance company may be authorized to transact in the Philippines the business of life & non‑life insurance concurrently unless specifically authorized to do so; Provided, That the terms “life” & “non‑life” insurance shall be deemed to include health, accident & disability insurance.

No insurance company shall have equity in an adjustment company & neither shall an adjustment company have an equity in an insurance company.

Insurance companies & adjustment companies presently affected by the above provision shall have two years fr. the effectivity of this Decree within w/c to divest of their stockholdings. (As amended by Presidential Decree No. 1455).

SECTION 188. Except as provided in section two hundred eighty‑one, no domestic insurance company shall, in a stock corporation, engage in business in the Philippines unless possessed of a paid‑up capital stock equal to at least five million pesos; Provided, That a domestic insurance company already doing business in the Philippines w/ a paid‑up capital stock w/c is less than five million pesos shall have a paid‑up capital stock of at least three million pesos by December thirty‑one, nineteen hundred seventy‑eight, four million pesos by December thirty‑one, nineteen hundred seventy‑nine & five million pesos by December thirty‑one, nineteen hundred eighty; Provided, further, that the Secretary of Finance may, upon recommendation of the Insurance Commissioner, increase such minimum paid‑up capital stock requirement, under such terms & conditions as he may impose, to an amount w/c, in his opinion, would reasonably assure the safety of the interests of the policyholders & the public.

The Commissioner may, as a pre‑licensing requirement of a new insurance company, in addition to the paid‑up capital stock, require the stockholders to pay in cash to the company in proportion to their subscription interests a contributed surplus fund of not less than one million pesos, in the case of a life insurance company, or not less than five hundred thousand pesos, in the case of an insurance company other than life. He may also require such company to submit to him a business plan showing the company’s estimated receipts & disbursements, as well as the basis therefor, for the next succeeding three years.

If organized as a mutual company, in lieu of such capital stock, it must have available cash assets of at least five million pesos above all liabilities for losses reported, expenses, taxes, legal reserve, & reinsurance of all outstanding risks, & the contributed surplus fund equal to the amounts required of stock corporations. A stock insurance company doing business in the Philippines may, subject to the pertinent law & regulations w/c now are of hereafter may be in force, alter its organization & transform itself into a mutual insurance company. (As amended by Presidential Decree No. 1455).

SECTION 189. Every company must, before engaging in the business of insurance in the Philippines, file w/ the Commissioner the following:

(a) A certified copy of the last annual statement or a verified financial statement exhibiting the condition & affairs of such company;

(b) If incorporated under the laws of the Philippines, a copy of the articles of incorporation & by‑laws, & any amendments to either, certified by the Securities & Exchange Commission to be a copy of that w/c is filed in its Office;

(c) If incorporated under any laws other than those of the Philippines, a certificate fr. the Securities & Exchange Commission showing that it is duly registered in the mercantile registry of that Commission in accordance w/ the Corporation Law. A copy of the articles of incorporation & by‑laws, & any amendments to either, if organized or formed under any law requiring such to be filed, duly certified by the officer having the custody of same, or if not so organized, a copy of the law, charter or deed of settlement under w/c the deed of organization is made, duly certified by the proper custodian thereof, or proved by affidavit to be a copy; also, a certificate under the hand & seal of the proper officer of such state or country having supervision of insurance business therein, if any there be, that such corporation or company is organized under the laws of such state or country, w/ the amount of capital stock or assets & legal reserve required by this Code;

(d) If not incorporated & of foreign domicile, aside fr. the certificate mentioned in paragraph (c) of this section, a certificate setting forth the nature & character of the business, the location of the principal office, the name of the individual or names of the persons composing the partnership or association, the amount of actual capital employed or to be employed therein & the names of all officers & persons by whom the business is or may be managed.

The certificate must be verified by the affidavit of the chief officer, secretary, agent, or manager of the company; & if there are any written articles of agreement of the company, a copy thereof must be accompany such certificate.

SECTION 190. The Commissioner must require as a condition precedent to the transaction of insurance business in the Philippines by any foreign insurance company, that such company file in his office a written power of attorney designating some person who shall be a resident of the Philippines as its general agent, on whom any notice provided by law or by any insurance policy, proof of loss, summons & other legal processes may be served in all actions or other legal proceedings against such company, & consenting that service upon such general agent shall be admitted & held as valid as if served upon the foreign company at its home office. Any such foreign company shall, as further condition precedent to the transaction of insurance business in the Philippines, make & file w/ the Commissioner an agreement or stipulation, executed by the proper authorities of said company in form & substance as follows:

“The (name of company) does hereby stipulate & agree in consideration of the permission granted by the Insurance Commissioner to transact business in the Philippines, that if at any time said company shall leave the Philippines, or cease to transact business therein, or shall be without any agent in the Philippines on whom any notice, proof of loss, summons, or legal process may be served, then in any action or proceeding arising out any business or transaction w/c occurred in the Philippines, service of any notice provided by law, or insurance policy, proof of loss, summons, or other legal process may be made upon the Insurance Commissioner shall have the same force & effect as if made upon the company.”

Whenever such service of notice, proof of loss, summons, or other legal process shall be made upon the Commission, he must, within ten days thereafter, transmit by mail, postage paid, a copy of such notice, proof of loss, summons, or other legal process to the company at its home or principal office. The sending of such copy by the Commissioner shall be a necessary part of the service of the notice, proof of loss, or other legal process.

SECTION 191. No insurance company organized or existing under the government or laws other than those of the Philippines shall engage in business in the Philippines unless possessed of paid‑up unimpaired capital or assets & reserve not less than that herein required of domestic insurance companies, nor until it shall have deposited w/ the Commissioner for the benefit & security of the policyholders & creditors of such company in the Philippines, securities satisfactory to the Commissioner consisting of good securities of the Philippines, including new issues of stock of “registered enterprises”, as this term is defined in Republic Act No. 5186, otherwise known as the Investment Incentives Act, as amended, to the actual market value of not less than the minimum paid‑up capital required of domestic insurance companies: Provided, That at least fifty per centum of such securities shall consist of bonds or other evidences of debt of the Government of the Philippines, its political subdivisions & instrumentalities, or of government‑owned or controlled corporations & entities, including the Central Bank. The total investment of a foreign insurance company in any registered enterprise shall not exceed twenty per centum of the net worth of said foreign insurance company nor twenty per centum of the capital of the registered enterprise, unless previously authorized in writing by the Commissioner.

For purposes of this Code, the net worth of a foreign insurance company shall refer only to its net worth in the Philippines.

SECTION 192. The Commissioner shall hold the securities, deposited as aforesaid, for the benefit & security of all the policyholders of the company depositing the same, but shall as long as the company is solvent, permit the company to collect the interest or dividends on the securities so deposited, &, fr. time to time, w/ his assent, to withdraw any of such securities, upon depositing w/ said Commissioner other like securities, the market value of w/c shall be equal to the market value of such as may be withdrawn. In the event of any company ceasing to do business in the Philippines the securities deposited as aforesaid shall be returned upon the company’s making application therefor & proving to the satisfaction of the Commissioner that it has no further liability under any of its policies in the Philippines.

SECTION 193. Every foreign company doing business in the Philippines shall set aside an amount corresponding to the legal reserves of the policies written in the Philippines & invest & keep the same therein in accordance w/ the provisions of this section. The legal reserve therein required to be set aside shall be invested only in the classes of the Philippine securities described in section two hundred; Provided, however, That no investment in stocks or bonds of any single entity shall, in the aggregate exceed twenty per centum of the net worth of the investing company or twenty per centum of the capital of the issuing company, w/cever is the lesser unless otherwise approved in writing by the Commissioner. The securities purchased & kept in the Philippines under this section, shall not be sent out of the territorial jurisdiction of the Philippines without the written consent of the Commissioner.

Title II MARGIN OF INSOLVENCY

SECTION 194. An insurance company doing business in the Philippines shall at all times maintain a margin of solvency w/c shall be an excess of the value of its admitted assets exclusive of its paid‑up capital, in the case of a domestic company, or an excess of the value of its admitted assets in the Philippines, exclusive of its security deposits, in the case of a foreign company, over the amount of its liabilities, unearned premium & reinsurance reserves in the Philippines of at least two per mille of the total amount of its insurance in force as of the preceding calendar year on all policies, except term insurance, in the case of a life insurance company, or of at least ten per centum of the total amount of its net premium written during the preceding calendar year, in the case of a company other than a life insurance company; Provided, That in either case, such margin shall in no event be less than five hundred thousand pesos; & Provided, further, That the term “paid‑up capital” shall not include contributed surplus & capital paid in excess of par value. Such assets, liabilities & reserves shall exclude assets, liabilities & reserves included in separate accounts established in accordance w/ section two hundred thirty‑seven. Whenever the aforementioned margin be found to be less than that herein required to be maintained, the Commissioner shall forthwith direct the company to make good any such deficiency by cash, to be contributed by all stockholders of record in proportion to their respective interest, & paid to the treasurer of the company, within fifteen days fr. receipt of the order; Provided, That the company in the interim shall not be permitted to take any new risk of any kind or character unless & until it make good any such deficiency; Provided, further, that a stockholder who aside fr. paying the contribution due fr. him, pays the contribution due fr. the another stockholder by reason of the failure or refusal of the latter to do so, shall have a lien on the certificates of stock of the insurance company concerned appearing in its books in the name of the defaulting stockholder on the date of default, as well as on any interests or dividends that have accrued or will accrue to the said certificates of stock, until the corresponding payment or reimbursement is made by the defaulting stockholder. (As amended by Presidential Decree No. 1455)

SECTION 195. No domestic insurance corporation shall declare or distribute any dividend on its outstanding stocks except fr. profits attested in a sworn statement to the Commissioner by the president or treasurer of the corporation to be remaining on hand after retaining unimpaired:

(a) The entire paid‑up capital stock;

(b) The margin of solvency required by section one hundred ninety‑four;

(c) In the case of life insurance corporation, the legal reserve fund required by section two hundred eleven;

(d) In the case of corporations other than life, the legal reserve fund required by section two hundred thirteen;

(e) A sum sufficient to pay all net losses reported, or in the course of settlement, & all liabilities for expenses & taxes.

Any dividend declared or distributed under the preceding paragraph shall be reported to the Commissioner within thirty days after such declaration or distribution.

If the Commissioner finds that any such corporation has declared or distributed any such dividend in violation of this section, he may order such corporation to cease & desist fr. doing business until the amount of such dividend or the portion thereof in excess of the amount allowed under this section has been restored to said corporation.

Title III ASSETS

SECTION 196. In any determination of the financial condition of any insurance company doing business in the Philippines, there shall be allowed & admitted as assets only such assets owned by the insurance company concerned & w/c consist of:

1. Cash in the possession of the insurance company or in transit under its control, & the true & duly verified balance of any deposit of such company in a financially sound commercial bank or trust company.

2. Investments in securities, including money market instruments, & in real property acquired or held in accordance w/ & subject to the applicable provisions of this Code & the income realized therefr. or accrued thereon.

3. Loans granted by the insurance company concerned to the extent of that portion thereof adequately secured by non‑speculative assets w/ readily realizable values in accordance w/ & subject to the limitations imposed by applicable provisions of this Code.

4. Policy loans & other policy assets & liens on policies, contracts or certificates of a life insurance company, in an amount not exceeding legal reserves & other policy liabilities carried on each individual life insurance policy, contract or certificate.

5. The net amount of uncollected & deferred premiums & annuity considerations in the case of a life insurance company w/c carries the full mean tabular reserve liability.

6. Reinsurance recoverable by the ceding insurer: (a) fr. an insurer authorized to transact business in this country, the full amount thereof; or (b) fr. an insurer not authorized in this country, in an amount not exceeding the liabilities carried by the ceding insurer for amounts withheld under a reinsurance treaty w/ such unauthorized insurer as security for the payment of obligations thereunder if such funds are held subject to withdrawal by, & under the control of, the ceding insurer. The Commissioner may prescribe the conditions under w/c a ceding insurer may be allowed credit, as an asset or as a deduction fr. loss & unearned premium reserves, for reinsurance recoverable fr. an insurer not authorized in this country but w/c presents satisfactory evidence that it meets the applicable standards of solvency required in this country.

7. Funds withheld by a ceding insurer under a reinsurance treaty, provided reserves for unpaid losses & unearned premiums are adequately provided.

8. Deposits or amounts recoverable fr. underwriting associations, syndicates & reinsurance funds, or fr. any suspended banking institution, to the extent deemed by the Commissioner to be available for the payment of losses & claims & values to be determined by him.

9. Electronic data processing machines, as may be authorized by the Commissioner to be acquired by the insurance company concerned, the acquisition cost of w/c to be amortized in equal annual amounts within a period of five years fr. the date of acquisition thereof.

10. Other assets, not inconsistent w/ the provisions of paragraphs 1 to 9 hereof, w/c are deemed by the Commissioner to be readily realizable & available for the payment of losses & claims at values to be determined by him.

SECTION 197. In addition to such assets as the Commissioner may fr. time to time determine to be non‑admitted assets of insurance companies doing business in the Philippines, the following assets shall in no case be allowed as admitted assets of an insurance company doing business in the Philippines, in any determination of its financial condition:

1. Goodwill, trade names, & other like intangible assets.

2. Prepaid or deferred charges for expenses & commissions paid by such insurance company.

3. Advances to officers (other than policy loans), w/c are not adequately secured & w/c are not previously authorized by the Commissioner, as well as advances to employees, agents, & other persons on mere personal security.

4. Shares of stock of such insurance company, owned by it, or any equity therein as well as loans secured thereby, or any proportionate interest in such shares of stock through the ownership by such insurance company of an interest in another corporation or business unit.

5. Furniture, furnishing, fixtures, safes, equipment, library, stationery, literature, & supplies.

6. Items of bank credits representing checks, drafts or notes returned unpaid after the date of statement.

7. The amount, if any, by w/c the aggregate value of investments as carried in the ledger assets of such insurance company exceeds the aggregate value thereof as determined in accordance w/ the provisions of this Code &/or the rules of the Commissioner.

All non‑admitted assets & all other assets of doubtful value or character included as ledger or non‑ledger assets in any statement submitted by an insurance company to the Commissioner, or in any insurance examiner’s report to him, shall also be reported, to the extent of the value disallowed as deductions fr. the gross assets of such insurance company, except where the Commissioner permits a reserve to be carried among the liabilities of such insurance company in lieu of any such deduction.

Title IV INVESTMENTS

SECTION 198. No insurance company shall loan any of its money or deposits to any person, corporation or association, except upon first mortgage or deeds of trust of unencumbered, improved or unimproved real estate, including condominiums, in cities & centers of population of municipalities in the Philippines when the amount of such loan is not in excess of seventy per centum of the market value of such real estate; or upon the security of first mortgages or deeds of trust of actually cultivated, improved & unencumbered agricultural lands in the Philippines when the amount of such loan is not in excess of forty per centum of the market value of such land; or upon the purchase money mortgages or like securities received by it upon the sale or exchange of real property acquired pursuant to sections two hundred & two hundred two; or upon bonds or other evidences of debt of the Government of the Philippines or its political subdivisions authorized by law to issue bonds, or upon bonds or other evidences of debt of government‑owned or controlled corporations & instrumentalities including the Central Bank or upon obligations issued or guaranteed by the International Bank for Reconstruction & Development; or upon stocks, bonds or other evidences of debt as are specified in section two hundred.

A life insurance company, however, may lend to any of its policyholders upon the security of the value of its policy such sum as may be determined pursuant to the provisions of the policy.

Loans granted upon the security of real estate for a period longer than five years shall be amortized in monthly, quarterly, semi‑annual or annual installments; Provided, That no such loans shall have a maturity in excess of twenty years.

The phrase “improved real estate” used above is hereby defined to mean land w/ permanent building or buildings erected or being erected thereon. Except as otherwise approved by the Commissioner, in case the building or buildings on land do not belong to the owner of the latter, no loan shall be granted on the security of the real estate in question unless both the owner of the building or buildings & the owner of the land sign the deed of mortgage, & unless the owner of the land is the Government of the Philippines or one of its political subdivisions, in w/c event the owner is not required to sign the deed of mortgage.

SECTION 199. No loan by any insurance company on the security of real estate shall be made unless the title to such real estate shall have first been registered in accordance w/ the existing Land Registration Act, or shall be a titulo real duly registered, or have been previously registered under the provisions of the existing Mortgage Law.

SECTION 200. (1) An insurance company may purchase, hold, own & convey such property, real & personal, as may have been mortgaged, pledged, or conveyed to it in good faith in trust for its benefit by reason of money loaned by it in pursuance of the regular business of the company, & such real or personal property as may have been purchased by it at sales under pledges, mortgages or deeds of trust for its benefit on account of money loaned by it; & such real & personal property as may have been conveyed to it by borrowers in satisfaction & discharge of loans made by the company to them: Provided, however, That any real estate purchased by an insurance company in payment or by reason of any loan made by it shall be sold by the company within twenty years after the title thereto has been vested in it.

(2) An insurance company may purchase, hold, own & convey real & personal property as follows:

(a) The lot w/ building thereon in w/c the company conducts & carries on its business.

(b) Bonds or other evidences of debt of the Government of the Philippines or its political subdivisions authorized by law to issue bonds at the reasonable market value thereof.

(c) Bonds or other evidences of debt of the government‑owned or controlled corporations & entities, including the Central Bank.

(d) Bonds, debentures or other evidences of indebtedness of any solvent corporations or institution created or existing under the laws of the Philippines; Provided, however, That the issuing, assuming or guaranteeing entity or its predecessors shall not have defaulted in the payment of interest on any of its securities & that during each of any three including the last two of the five fiscal years next preceding the date of acquisition by such insurance company of such bonds, debentures, or other evidences of indebtedness, the net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges, as hereinafter defined, shall have been not less than one & one‑quarter times the total of its fixed charges for such year; & provided, further, that no life insurance company shall invest in or loan upon the obligations of any one institution in the kinds permitted under this sub‑section an amount in excess of twenty‑five per centum of the total admitted assets of such insurer as of December thirty‑first next preceding the date of such investment.

As used in this sub‑section the term “net earnings available for fixed charges” shall mean net income after deducting operating & maintenance expenses, taxes other than income taxes, depreciation & depletion; but excluding extraordinary non‑recurring items of income or expense appearing in the regular financial statement of the issuing, assuming or guaranteeing institution. The term “fixed charges” shall include interest on funded & unfunded debt, amortization of debt discount, & rentals for leased properties.

(e) Preferred or guaranteed stocks of any solvent corporation or institution created or existing under the laws of the Philippines; Provided, however, That the issuing, assuming or guaranteeing entity or its predecessors has paid regular dividends upon its preferred or guaranteed stocks for a period of at least three years next preceding the date of investment in such preferred or guaranteed stock; Provided, further, That if the stocks are guaranteed, the amount of stocks so guaranteed is not excess of fifty per centum of the amount of the preferred or common stocks, as the case may be, of the guaranteeing corporation; And provided, finally, That no life insurance company shall invest in or loan upon obligations of any one institution in the kinds permitted under this sub‑section an amount in excess of ten per centum of the total admitted assets of such insurer as of December thirty‑first next preceding the date of such investment.

(f) Common stocks of any solvent corporation or institution created or existing under the laws of the Philippines upon w/c regular dividends shall have been paid for the three years next preceding the purchase of such stock; Provided, however, That no life insurance company shall invest in or loan upon the obligations of any one corporation or institution in the kinds permitted under this sub‑section an amount in excess of ten per centum of the total admitted assets of such insurer as of December thirty‑first next preceding the date of such investment.

(g) Certificates, notes & other obligations issued by the trustees or receivers of any institution created or existing under the laws of the Philippines w/c, or the assets of w/c, are being administered under the direction of any court having jurisdiction; Provided, however, That such certificates, notes or other obligations are adequately secured as to principal & interests.

(h) Equipment trust obligations or certificates w/c are adequately secured or other adequately secured instruments evidencing an interest in equipment wholly or in part within the Philippines; Provided, however, That there is a right to receive determined portions of rental, purchase or other fixed obligatory payments for the use or purchase of such equipment.

(i) Any obligation of any corporation or institution created or existing under the laws of the Philippines w/c is, on the date of acquisition by the insurer, adequately secured & has qualities & characteristics wherein the speculative elements are not predominant.

(j) Such other securities as may be approved by the Commissioner.

(3) Any domestic insurer w/c has outstanding insurance, annuity or reinsurance contracts in currencies other than the national currency of the Philippines may invest in, or otherwise acquire or loan upon securities & investments in such currency w/c are substantially of the same kinds, classes & investment grades as those eligible for investment under the foregoing subdivisions of this section; but the aggregate amount of such investment & of such cash in such currency w/c is at anytime held by such insurer shall not exceed one & one‑half times the amount of its reserves & other obligations under such contracts or the amount w/c such insurer is required by the law of any country or possession outside the Republic of the Philippines to be invest in such country or possession, w/cever shall be greater.

SECTION 201. An insurance company may (1) invest in equities of other financial institutions, & (2) engage in the buying & selling of short‑term debt instruments; Provided, That any or all of such investments shall be w/ the prior approval of the Commissioner.

SECTION 202. Any life insurance company may:

(a) Acquire or construct housing projects &, in connection w/ any such project, may acquire land or any interest therein by purchase, lease or otherwise, or use land acquired pursuant to any other provision of this Code. Such company may thereafter own, maintain, manage, collect or receive income fr., or sell & convey, any land or interest therein so acquired & any improvements thereon. The aggregate book value of the investments of any such company in all such projects shall not exceed at the time of such investments twenty five per centum of the total admitted assets of such company on the thirty‑first day of December next preceding;

(b) Acquire real property, other than property to be used primarily for providing housing & property for accommodation of its own business, as an investment for the production of income, or may acquire real property to be improved or developed for such investment purpose pursuant to a program therefor, subject to the condition that the cost of each parcel of real property so acquired under the authority of this paragraph (b), including the estimated cost to the company of the improvement or development thereof, when added to the book value of all other real property held by its pursuant to this paragraph (b), shall not exceed twenty‑five per centum of its admitted assets as of the thirty‑first day of December next preceding.

SECTION 203. Every domestic insurance company shall, to the extent of an amount equal in value to twenty‑five per centum of the minimum paid‑up capital required under section one hundred eighty‑eight, invest its funds only in securities, satisfactory to the Commissioner, consisting of bonds or other evidences of debt of the Government of the Philippines or its political subdivisions or instrumentalities, or of government‑owned or controlled corporations & entities, including the Central Bank of the Philippines; Provided, That such investments shall at all times be maintained free fr. any lien or encumbrance; & Provided, further, That such securities shall be deposited w/ & held by the Commissioner for the faithful performance by the depositing insurer of all its obligations under its insurance contracts. The provisions of section one hundred ninety‑two shall, so far as practicable, apply to the securities deposited under this section.

Except as otherwise provided in this Code, no judgment creditor or other claimant shall have the right to levy upon any of the securities of the insurer held on deposit under this section or held on deposit pursuant to the requirement of the Commissioner. (As amended by Presidential Decree No. 1455)

SECTION 204. After satisfying the requirements contained in the preceding section, any domestic non‑life insurance company, shall invest, to an amount prescribed below, its funds in, or otherwise, acquire or loan upon, only the classes of investments described in section two hundred, including securities issued by any “registered enterprise”, as this term is defined in Republic Act No. 5186, otherwise known as the Investment Incentives Act, & such other classes of investments as may be authorized by the Commissioner for purposes of this section; Provided, That (a) no more than twenty per centum of the net worth of such company as shown by its latest financial statement approved by the Commissioner shall be invested in the lot & building in w/c the insurance company conducts its business & (b) the total investment of an insurance company in any registered enterprise shall not exceed twenty per centum of the net worth of said insurance company as shown by its aforesaid financial statement nor twenty per centum of the paid‑up capital of the registered enterprise excluding the intended investment, unless previously authorized by the Commissioner; &, Provided, further, That such investments free fr. any lien or encumbrance, shall be at least equal in amount to the aggregate amount of (a) its legal reserve, as provided in section two hundred thirteen, & (b) its reserve fund held for reinsurance as provided for in the pertinent treaty provision in the case of reinsurance ceded to authorized insurers. (As amended by Presidential Decree No. 1455)

SECTION 205. After satisfying the requirements contained in sections one hundred ninety‑one, one hundred ninety‑three, two hundred three & two hundred four, any non‑life insurance company may invest any portion of its funds representing earned surplus in any of the investments described in sections one hundred ninety‑eight, two hundred & two hundred one, or in any securities issued by a “registered enterprise” mentioned in the preceding sections; Provided, That no investment in stocks or bonds of any single entity shall in the aggregate, exceed twenty per centum of the net worth of the insurance company as shown in its latest financial statement approved by the Commissioner or twenty per centum of the paid‑up capital of the issuing company, w/cever is lesser, unless otherwise approved by the Commissioner.

SECTION 206. After satisfying the minimum capital investment required in section two hundred three, any life insurance company may invest its legal policy reserve, as provided in section two hundred eleven or in section two hundred twelve, in any of the classes of securities or types of investments described in sections one hundred ninety‑eight, two hundred, two hundred one & two hundred two, subject to the limitations therein contained, & in any securities issued by any “registered enterprise” mentioned in section two hundred four, free fr. any lien or encumbrance, in such amounts as may be approved by the Commissioner. Such company may likewise invest any portion of its earned surplus in the aforesaid securities or investments subject to the aforesaid limitations.

SECTION 207. Any investment made in violation of the applicable provisions of this title shall be considered non‑admitted assets.

SECTION 208.

(1) All bonds or other evidences of indebtedness having a fixed term & rate of interest & held by any life insurance company authorized to do business in this country, if amply secured & if not in default as to principal or interest, shall be valued as follows: If purchased at par, at the par value; if purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity & so as to yield in the meantime the effective rate of interest at w/c the purchase was made, or in the discretion of the Commissioner, on the basis of the method of calculation commonly known as the pro‑rata method. In applying the foregoing rule the purchase price shall in no case be taken at a higher figure than the actual market value at the time of acquisition. The Commissioner shall have the power to determine the eligibility of any such investments for valuation on the basis of amortization, & may by regulation prescribe or limit the classes of securities so eligible for amortization. All bonds or other evidences of indebtedness w/c in the judgment of the Commissioner are not amply secured shall not be eligible for amortization & shall be valued in accordance w/ paragraph two. The Commissioner may, if he finds that the interest of policy holders so permit or require, by official regulation permit or require any class or classes of insurers, other than life insurance companies, authorized to do business in this country, to value their bonds or other evidences of indebtedness in accordance w/ the foregoing rule.

(2) The investments of all insurers authorized to do business in this country, except securities subject to amortization & except as otherwise provided in this chapter, shall be valued, in the discretion of the Commissioner, at their market value, or at their appraised value, or at prices determined by him as representing their fair market value. If the Commissioner finds that in view of the character of investments of any insurer authorized to do business in this country it would be prudent for such insurer to establish a special reserve for possible losses or fluctuations in the values of its investments, he may require such insurer to establish such reserve, reasonable in amount, & may require that such reserve be maintained & reported in any statement or report of the financial condition of such insurer. The Commissioner may, in connection w/ any examination or required financial statement of an authorized insurer, require such insurer to furnish him complete financial statements & audited report of the financial condition of any corporation of w/c the securities are owned wholly or partly by such insurer & may cause an examination to be made of any subsidiary or affiliate of such insurer.

(3) The stock of an insurance company shall be valued at the lesser of its market value or its book value as shown by its last approved annual statement or the last report on examination, w/cever is more recent. The book value of a share of common stock of an insurance company shall be ascertained by dividing (a) the amount of its capital & surplus less the value of all of its preferred stock, if any, outstanding, by (b) the number of shares of its common stock issued & outstanding. Notwithstanding the foregoing provisions, an insurer may, at its option, value its holdings of stock in a subsidiary insurance company in an amount not less than acquisition cost if such acquisition cost is less than the value determined as hereinbefore provided.

(4) Real estate required by foreclosure or by deed in lieu thereof, in the absence of a recent appraisal deemed by the Commissioner to be reliable, shall not be valued at an amount greater than the unpaid principal of the defaulted loan at the date of such foreclosure or deed, together w/ any taxes & expenses paid or incurred by such insurer at such time in connection w/ such acquisition, & the cost of additions or improvements thereafter paid by such insurer & any amount or amounts thereafter paid by such insurer on any assessments levied for improvements in connection w/ the property.

(5) Purchase money mortgages received on dispositions of real property held pursuant to section one hundred ninety‑eight shall be valued in an amount equivalent to ninety per centum of the value of such real property. Purchase money mortgages received on disposition of real property otherwise held shall be valued in an amount not exceeding ninety per centum of the value of such real property as determined by an appraisal made by an appraiser at or about the time of disposition of such real property.

(6) The stock of a subsidiary of an insurer shall be valued on the basis of the greater of (i) the value of only such subsidiary of the assets of such subsidiary as would constitute lawful investments for the insurer if acquired or held directly by the insurer or (ii) such other value determined pursuant to standards & cumulative limitations, contained in a regulation to be promulgated by the Commissioner.

(7) Notwithstanding any provision contained in this section or elsewhere in this chapter, if the Commissioner find that the interests of policyholders so permit or require, he may permit or require any class or classes of insurers authorized to do business in this country to value their investments or any class or classes thereof as of any date heretofore or hereafter in accordance w/ any applicable valuation or method.

SECTION 209. It shall be the duty of the officers of the insurance company to report within the first fifteen days of every month all such investments as may be made by them during the preceding month, & the Commissioner may, if such investments or any of them seem injudicious to him, require the sale or disposal of the same. The report shall also include a list of investments sold or disposed of by the company during the same period.

Title V RESERVES

SECTION 210. Every life insurance company, doing business in the Philippines, shall annually make a valuation of all policies, additions thereto, unpaid dividends, & all other obligations outstanding on the thirty‑first day of December of the preceding year. All such valuations shall be made upon the net premiums basis, according to the standard adopted by the company, w/c standard shall be stated in its annual report.

Such standard of valuation whether of the net level premium, full preliminary term, any modified preliminary term, or select & ultimate reserve basis, shall be according to a standard table of mortality w/ interest at not more than six per centum compound interest. When the preliminary term basis is used, the term insurance shall be limited to the first policy year.

The results of such valuations shall be reported to the Commissioner on or before the thirtieth day of April of each year accompanied by a sworn statement of the company’s actuary certifying to the figures & stating upon what mortality table it is based, upon what rate of interest the valuation is made, & the methods used in arriving at the result obtained.

SECTION 211. The aggregate net value so ascertained of the policies of such company shall be deemed its reserve liability, to provide for w/c it shall hold funds in secure investments equal to such net value, above all its other liabilities; & it shall be the duty of the Commissioner, after having verified, to such an extent as he may deem necessary, the valuation of all policies in force, to satisfy himself that the company has such amount in safe legal securities after all other debts & claims against it have been provided for.

The reserve liability for variable contracts defined in section two hundred thirty‑two shall be established in accordance w/ actuarial procedures that recognize the variable nature of the benefits provided, & shall be approved by the Commissioner.

SECTION 212. Every domestic life insurance company, conducted on the mutual plan or a plan in w/c policyholders are by the terms of their policies entitled to share in the profits or surplus shall, on all policies of life insurance heretofore or hereafter issued, under the conditions of w/c the distribution of surplus is deferred to a fixed or specified time & contingent upon the policy being in force & the insured living at that time, annually ascertain the amount of the surplus to w/c all such policies as separate class are entitled, & shall annually apportion to such policies as a class the amount of the surplus so ascertained, & carry the amount of such apportioned surplus, plus the actual interest earnings & accretions to such fund, as a distinct & separate liability to such class of policies on & for w/c the same was accumulated, & no company or any of its officers shall be permitted to use any part of such apportioned surplus fund for any purpose whatsoever other than for the express purpose for w/c the same was accumulated.

SECTION 213. Every insurance company, other than life, shall maintain a reserve for unearned premiums on its policies in force, w/c shall be charged as a liability in any determination of its financial condition. Such reserve shall be equal to forty per centum of the gross premiums, less returns & cancellations, received on policies or risks having not more than a year to run, & pro rata on all gross premiums received on policies or risks having more than a year to run; Provided, That for marine cargo risks the reserve shall be equal to forty per centum of the premiums written in the policies upon yearly risks, & the full amount of the premiums written during the last two months of the calendar year upon all other marine risks not terminated.

SECTION 214. In addition to its liabilities & reserves on contracts of insurance issued by it, every insurance company shall be charged w/ the estimated amount of all of its other liabilities, including taxes, expenses & other obligations due or accrued at the date of statement, & including any special reserves required by the Commissioner pursuant to the provisions of this Code.

Title VI LIMIT OF SINGLE RISK

SECTION 215. No insurance company other than life, whether foreign or domestic, shall retain any risk on any one subject of insurance in an amount exceeding twenty per centum of its net worth. For purposes of this section, the term “subject of insurance” shall include all properties or risks insured by the same insurer that customarily are considered by non‑life company underwriters to be subject to loss or damage fr. the same occurrence of any hazard insured against.

Reinsurance ceded as authorized under the succeeding title shall be deducted in determining the risk retained. As to surety risk, deduction shall also be made of the amount assumed by any other company authorized to transact surety business & the value of any security mortgage, pledged, or held subject to the surety’s control & for the surety’s protection.

Title VII REINSURANCE TRANSACTIONS

SECTION 216. An insurance company doing business in the Philippines may accept reinsurances only of such risks, & retain risk thereon within such limits, as it is otherwise authorized to insure.

SECTION 217. No insurance company doing business in the Philippines shall cede all or part of any risks situated in the Philippines by way of reinsurance directly to any foreign insurer not authorized to do business in the Philippines unless such foreign insurer or, if the services of a non‑resident broker are utilized, such non‑resident broker is represented in the Philippines by a resident agent duly registered w/ the Commissioner as required in this Code.

The resident agent of such unauthorized foreign insurer or non‑ resident broker shall immediately upon registration furnish the Commissioner w/ the annual statement of such insurer, or of such company or companies where such broker may place Philippine business as of the year preceding such registration, & annually thereafter as soon as available.

SECTION 218. All insurance companies, both life & non‑life, authorized to do business in the Philippines shall cede their excess risks to other companies similarly authorized to do business in the Philippines in such amounts & under such arrangements as would be consistent w/ sound underwriting practices before they enter into reinsurance arrangements w/ unauthorized foreign insurers.

SECTION 219. Any insurance company doing business in the Philippines desiring to cede their excess risks to foreign insurance or reinsurance companies not authorized to transact business in the Philippines may do so under the following conditions:

(1) Except in facultative reinsurance & excess of loss covers, the full amount of the reserve fund required by law shall be set up in the books of & held by the ceding company for so long as the risk concerned is in force; Provided, That in case of facultative insurance, the ceding company shall show to the satisfaction of the Commissioner that the Philippine market cannot provide the facilities sought abroad.

(2) The reserve fund withheld shall be invested in bonds or other evidences of debt of the Government of the Philippines or its political subdivisions or instrumentalities, or of government‑owned or controlled corporations & entities, including the Central Bank, &/or other securities acceptable under section two hundred.

Should any reinsurance agreement be for any reason cancelled or terminated, the ceding company concerned shall inform the Commissioner in writing of such cancellation or termination within thirty days fr. the date of such cancellation or termination or fr. the date notice or information of such cancellation or termination is received by such company as the case may be.

SECTION 220. Every insurance company authorized to do business in the Philippines shall report to the Commissioner on forms prescribed by him the particulars of reinsurance treaties as of the first day of January of the year following the approval of this Code & shall thereafter similarly report to the Commissioner particulars of any new treaties or changes in existing treaties.

SECTION 221. No credit shall be allowed as an admitted asset or as a deduction fr. liability, to any ceding insurer for reinsurance made, ceded, renewed, or otherwise becoming effective after January first, nineteen hundred seventy‑five, unless the reinsurance shall be payable by the assuming insurer on the basis of the liability of the ceding insurer under the contract or contracts reinsured without diminution because of the insolvency of the ceding insurer nor unless under the contract or contracts of reinsurance the liability for such reinsurance is assumed by the assuming insurer or insurers as of the same effective date; nor unless the reinsurance agreement provides that payments by the assuming insurer shall be made directly to the ceding insurer or to its liquidator, receiver, or statutory successor except (a) where the contract specifically provides another payee of such reinsurance in the event of the insolvency of the ceding insurer & (b) where the assuming insurer w/ the consent of the direct insured or insureds has assumed such policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under such policies & in substitution for the obligations of the ceding insurer to such payees.

SECTION 222. No life insurance company doing business in the Philippines shall reinsure its whole risk on any individual life or joint lives, or substantially all of its insurance in force, without having first obtained the written permission of the Commissioner.

Title VIII ANNUAL STATEMENT

SECTION 223. Every insurance company doing business in the Philippines shall terminate its fiscal period on the thirty‑first day of December every year, & shall annually on or before the thirtieth day of April of each year render to the Commissioner a statement signed & sworn to by the chief officer of such company showing, in such form & details as may be prescribed by the Commissioner, the exact condition of its affairs on the preceding thirty‑first day of December.

Any entry in the statement w/c is found to be false shall constitute a misdemeanor & the officer signing such statement shall be subject to the penalty provided for under section four hundred nineteen.

SECTION 224. Every insurance company authorized under title ten of this chapter to issue, deliver or use variable contracts shall annually file w/ the Commissioner separate annual statement of its separate variable accounts. Such statement shall be on a form prescribed or approved by the Commissioner & shall include details as to all of the income, disbursements, assets & liability items of & associated w/ the said separate variable accounts. Said statement shall be under oath of two officers of the company & shall be filed simultaneously w/ the annual statement required by the preceding section.

SECTION 225. Within thirty days after receipt of the annual statement approved by the Commissioner, every insurance company doing business in the Philippines shall publish in two newspapers of general circulation in the City of Manila, one published in English & one in Pilipino, a full sypnosis of its annual financial statement showing fully the conditions of its business, & setting forth its resources & liabilities.

Title IX POLICY FORMS

SECTION 226. No policy, certificate or contract of insurance shall be issued or delivered within the Philippines unless in the form previously approved by the Commissioner, & no application form shall be used w/, & no rider, clause, warranty or endorsement shall be attached to, printed or stamped upon such policy, certificate or contract unless the form of such application, rider, clause, warranty or endorsement has been approved by the Commissioner.

SECTION 227. In the case of individual life or endowment insurance, the policy shall contain in substance the following conditions:

(a) A provision that the policyholder is entitled to a grace period either of thirty days or of one month within w/c the payment of any premium after the first may be made, subject at the option of the insurer to an interest charge not in excess of six per centum per annum for the number of days of grace elapsing before the payment of the premium, during w/c period of grace the policy shall continue in full force, but in case the policy becomes a claim during the said period of grace before the overdue premium is paid, the amount of such premium w/ interest may de deducted fr. the amount payable under the policy in settlement;

(b) A provision that the policy shall be incontestable after it shall have been in force during the lifetime of the insured for a period of two years fr. its date of issue as shown in the policy, or date of approval of last reinstatement, except for non‑payment of premium & except for violation of the conditions of the policy relating to military or naval service in time of war;

(c) A provision that the policy shall constitute the entire contract between the parties, but if the company desires to make the application a part of the contract it may do so provided a copy of such application shall be indorsed upon or attached to the policy when issued, & in such case the policy shall contain a provision that the policy & the application therefor shall constitute the entire contract between the parties;

(d) A provision that if the age of the insured is considered in determining the premium & the benefits accruing under the policy, & the age of the insured has been misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age;

(e) If the policy is participating, a provision that the company shall periodically ascertain & apportion any divisible surplus accruing on the policy under conditions specified therein;

(f) A provision specifying the options to w/c the policyholder is entitled to in the event of default in a premium payment after three full annual premiums shall have been paid. Such option shall consist of:

(1) A cash surrender value payable upon surrender of the policy w/c shall not be less than the reserve on the policy, the basis of w/c shall be indicated, for the then current policy year & any dividend additions thereto, reduced by a surrender charge w/c shall not be more than one‑fifth of the entire reserve or two & one‑half per centum of the amount insured & any dividend additions thereto;

(2) One or more paid‑up benefits on a plan or plans specified in the policy of such value as may be purchased by the cash surrender value;

(g) A provision that at anytime after a cash surrender value is available under the policy & while the policy is in force, the company will advance, on proper assignment or pledge of the policy & on sole security thereof, a sum equal to, or at the option of the owner of the policy, less than the cash surrender value on the policy, at a specified rate of interest, not more than the maximum allowed by law, to be determined by the company fr. time to time, but not more often than once a year, subject to the approval of the Commissioner; & that the company will deduct fr. such loan value any existing indebtedness on the policy & any unpaid balance of the premium for the current policy year, & may collect interest in advance on the loan to the end of the current policy year, w/c provision may further provide that such loan may be deferred for not exceeding six months after the application therefor is made;

(h) A table showing in figures cash surrender values & paid‑up options available under the policy each year upon default in premium payments, during at least twenty years of the policy beginning w/ the year in w/c the values & options first become available, together w/ a provision that in the event of the failure of the policyholder to elect one of the said options within the time specified in the policy, one of said options shall automatically take effect & no policyholder shall ever forfeit his right to same by reason of his failure to so elect;

(i) In case the proceeds of a policy are payable in installments or as an annuity, a table showing the minimum amounts of the installments or annuity payments;

(j) A provision that the policyholder shall be entitled to have the policy reinstated at any time within three years fr. the date of default of premium payment unless the cash surrender value has been duly paid, or the extension period has expired, upon production of evidence of insurability satisfactory to the company & upon payment of all overdue premiums & any indebtedness to the company upon said policy, w/ interest rate not exceeding that w/c would have been applicable to said premiums & indebtedness in the policy years prior to reinstatement.

Any of the foregoing provisions or portions thereof not applicable to single premium or term policies shall to that extent not be incorporated therein; & any such policy may be issued & delivered in the Philippines w/c in the opinion of the Commissioner contains provisions on any one or more of the foregoing requirements more favorable to the policyholder than hereinbefore required.

This section shall not apply to policies of group life or industrial life insurance.

SECTION 228. No policy of group life insurance shall be issued & delivered in the Philippines unless it contains in substance the following provisions, or provisions w/c in the opinion of the Commissioner are more favorable to the persons insured, or at least as favorable to the persons insured & more favorable to the policy‑holders:

(a) A provision that the policyholder is entitled to a grace period of either thirty days or of one month for the payment of any premium due after the first, during w/c grace period the death benefit coverage shall continue in force, unless the policyholder shall have given the insurer written notice of discontinuance in advance of the date of discontinuance & in accordance w/ the terms of the policy. The policy may provide that the policyholder shall be liable for the payment of a pro rata premium for the time the policy is in force during such grace period;

(b) A provision that the validity of the policy shall not be contested, except for non‑payment of premiums after it has been in force for two years fr. its date of issue; & that no statement made by any insured under the policy relating to his insurability shall be used in contesting the validity of the insurance w/ respect to w/c such statement was made after such insurance has been in force prior to the contest for a period of two years during such person’s lifetime nor unless contained in written instrument signed by him;

(c) A provision that a copy of the application, if any, of the policyholder shall be attached to the policy when issued, that all statements made by the policyholder or by persons insured shall be deemed representations & not warranties, & that no statement made by any insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such person or to his beneficiary;

(d) A provision setting forth the conditions, if any, under w/c the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of his coverage;

(e) A provision specifying an equitable adjustment of premiums or of benefits or of both to be made in the event that the age of a person insured has been misstated, such provision to contain a clear statement of the method of adjustment to be used;

(f) A provision that any sum becoming due by reason of death of the person insured shall be payable to the beneficiary designated by the insured, subject to the provisions of the policy in the event that there is no designated beneficiary, as to all or any part of such sum, living at the death of the insured, & subject to any right reserved by the insurer in the policy & set forth in the certificate to pay at its option a part of such sum not exceeding five hundred pesos to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the person insured;

(g) A provision that the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to w/c he is entitled, to whom the insurance benefits are payable, & the rights set forth in paragraphs (h), (i) & (j) following;

(h) A provision that if the insurance, or any portion of it, on a person covered under the policy ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy, such person shall be entitled to have issued to him by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits, provided application for the individual policy & payment of the first premium to the insurer shall be made within thirty days after such termination & provided further that:

(1) the individual policy shall be on any one of the forms, except term insurance, then customarily issued by the insurer at the age & for an amount not in excess of the coverage under the group policy; &

(2) the premium on the individual policy shall be at the insurer’s then customary rate applicable to the form & amount of the individual policy, to the class of risk to w/c such person then belongs, & to his age attained on the effective date of the individual policy.

(i) A provision that if the group policy terminates or is amended so as to terminate the insurance of any class of insured persons, every person insured thereunder at the date of such termination whose insurance terminates & who has been so insured for five years prior to such termination date shall be entitled to have issued to him by the insurer an individual policy of life insurance subject to the same limitations as set forth in paragraph (h), except that the group policy may provide that the amount of such individual policy shall not exceed the smaller of (a) the amount of the person’s life insurance protection ceasing less the amount of any life insurance for what he is or becomes eligible under any group policy issued or reinstated by the same or another reinsurer within thirty days after such termination, & (b) two thousand pesos;

(j) A provision that if a person insured under the group policy dies during the thirty‑day period within w/c he would have been entitled to an individual policy issued to him in accordance w/ (h) & (i) above & before such individual policy shall have become effective, the amount of life insurance w/c he would have been entitled to have issued to him as an individual policy shall be payable as a claim under the group policy whether or not application for the individual policy or the payment of the first premium has been made;

(k) In the case of a policy issued to a creditor to insure debtors of such creditor, a provision that the insurer will furnish to the policyholder for delivery to each debtor insured under the policy a form w/c will contain a statement that the life of the debtor is insured under the policy & that any death benefit paid thereunder by reason of his death shall be applied to reduce or extinguish indebtedness.

The provisions of paragraphs (f) to (j) shall not apply to policies issued to a creditor to insure his debtors. If a group life policy is on a plan of insurance other than term, it shall contain a non‑forfeiture provision or provisions w/c in the opinion of the Commissioner is or are equitable to the insured or the policyholder; Provided, That nothing herein contained shall be so construed as to require group life policies to contain the same non‑forfeiture provisions as are required of individual life policies.

SECTION 229. The term “industrial life insurance” as used in this Code shall mean that form of life insurance under w/c the premiums are payable either monthly or oftener, if the face amount of insurance provided in any policy is not more than five hundred times that of the current statutory minimum daily wage in the City of Manila, & if the words “industrial policy” are printed upon the policy as part of the descriptive matter.

An industrial life policy shall not lapse for non‑payment of premium if such non‑payment was due to the failure of the company to send its representative or agent to the insured at the residence of the insured or at some other place indicated by him for the purpose of collecting such premium; Provided, That the provisions of this paragraph shall not apply when the premium on the policy remains unpaid for a period of three months or twelve weeks after the grace period has expired.

SECTION 230. In the case of industrial life insurance, the policy shall contain in substance the following provisions:

(a) A provision that the insured is entitled to a grace period of four weeks within w/c the payment of any premium after the first may be made, except that where premiums are payable monthly, the period of grace shall be either one month or thirty days; & that during the period of grace, the policy shall continue in full force, but if during such grace period the policy becomes a claim, then any overdue & unpaid premiums may be deducted fr. any amount payable under the policy in settlement;

(b) A provision that the policy shall be incontestable after it has been in force during the lifetime of the insured for a specified period, not more than two years fr. its date of issue, except for non‑payment of premiums & except for violation of the conditions of the policy relating to naval or military service, or services auxiliary thereto, & except as to provisions relating to benefits in the event of disability as defined in the policy, & those granting additional insurance specifically against death by accident or by accidental means, or to additional insurance against loss of, or loss of use of, specific members of the body;

(c) A provision that the policy shall constitute the entire contract between the parties, or if a copy of the application is endorsed upon & attached to the policy when issued, a provision that the policy & the application therefor shall constitute the entire contract between the parties, & in the latter case, a provision that all statements made by the insured shall, in the absence of fraud, be deemed representations & not warranties;

(d) A provision that if the age of the person insured, or the age of any person, considered in determining the premium, or the benefits accruing under the policy, has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium paid would have purchased at the correct age;

(e) A provision that if the policy is a participating policy, the company shall periodically ascertain & apportion any divisible surplus accruing on the policy under the conditions specified therein;

(f) A provision that in the event of default in premium payments after three full years’ premiums have been paid, the policy shall be converted into a stipulated form of insurance, & that in the event of default in premium payments after five full years’ premiums have been paid, a specified cash surrender value shall be available, in lieu of the stipulated form of insurance, at the option of the policyholder. The net value of such stipulated form of insurance & the amount of such cash value shall not be less than the reserve on the policy & dividend additions thereto, if any, at the end of the last completed policy year for w/c premiums shall have been paid (the policy to specify the mortality table, rate of interest & method of valuation adopted to compute such reserve), exclusive of any reserve on disability benefits & accidental death benefits, less an amount not to exceed two & one‑half per centum of the maximum amount insured by the policy & dividend additions thereto, if any, at the end of the last completed policy year for w/c premiums shall have been paid (the policy to specify the mortality table, rate of interest & method of valuation adopted to compute such reserve), exclusive of any reserve on disability benefits & accidental death benefits, less an amount not to exceed two & one‑half per centum of the maximum amount insured by the policy & dividend additions thereto, if any, when the issue age is under ten years, & less an amount not to exceed two & one‑half per centum of the current amount insured by the policy & dividend additions thereto, if any, if the issue age is ten years or older, & less any existing indebtedness to the company on or secured by the policy;

(g) A provision that the policy may be surrendered to the company at its home office within a period of not less than sixty days after the due date of a premium in default for the specified cash value, provided that the insurer may defer payment for not more than six months after the application therefor is made;

(h) A table that shows in figures the non‑forfeiture benefits available under the policy every year upon default in payment of premiums during at least the first twenty years of the policy, such table to begin w/ the year in w/c such values become available, & a provision that the company will furnish upon request an extension of such table beyond the year shown in the policy;

(i) A provision that specifies w/c one of the stipulated forms of insurance provided for under the provision of paragraph (f) of this section shall take effect in the event of the insured’s failure, within sixty days fr. the due date of the premium in default, to notify the insurer in writing as to w/c one of such forms he has selected;

(j) A provision that the policy may be reinstated at any time within two years fr. the due date of the premium in default unless the cash surrender value has been paid or the period of extended term insurance expired, upon production of evidence of insurability satisfactory to the company & payment of arrears of premiums w/ interest at a rate not exceeding six per centum per annum payable annually;

(k) A provision that when a policy shall become a claim by death of the insured, settlement shall be made upon receipt of due proof of death, or not later than two months after receipt of such proof;

(l) A title on the face & on the back of the policy correctly describing its form;

(m) A space on the front or the back of the policy for the name of the beneficiary designated by the insured w/ a reservation of the insured’s right to designate or change the beneficiary after the issuance of the policy. The policy may also provide that no designation or change of beneficiary shall be binding on the insurer until endorsed on the policy by the insurer, & that the insurer may refuse to endorse the name of any proposed beneficiary who does not appear to the insurer to have an insurable interest in the life of the insured. Such policy may also contain a provision that if the beneficiary designated in the policy does not surrender the policy w/ due proof of death within the period stated in the policy, w/c shall not be less than thirty days after the death of the insured, or if the beneficiary is the estate of the insured, or is a minor, or dies before the insured, or is not legally competent to give valid release, then the insurer may make any payment thereunder to the executor or administrator of the insured, or to any of the insured’s relatives by blood or legal adoption or connections by marriage or to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred expense for the maintenance, medical attention or burial of the insured; &

(n) A provision that when an industrial life insurance policy is issued providing for accidental or health benefits, or both, in addition to life insurance, the foregoing provisions shall apply only to the life insurance portion of the policy.

(a) Any of the foregoing provisions or portions thereof not applicable to non‑participating or term policies shall to that extent not be incorporated therein. The foregoing provisions shall not apply to policies issued or granted pursuant to the non‑forfeiture provisions prescribed in provisions of paragraphs (f) & (i) of this section, nor shall provisions of paragraphs (f), (g), (h), & (i) hereof be required in term insurance of twenty years or less but such term policies shall specify the mortality table, rate of interest, & method of computing reserves.

SECTION 231. No policy of industrial life insurance shall be issued or delivered in the Philippines if it contains any of the following provisions:

(a) A provision that gives the insurer the right to declare the policy void because the insured has had any disease or ailment, whether specified or not, or because the insured has received institutional, hospital, medical or surgical treatment or attention, except a provision w/c gives the insurer the right to declare the policy void if the insured has, within two years prior to the issuance of the policy, received institutional hospital, medical or surgical treatment or attention & if the insured or the claimant under the policy fails to show that the condition occasioning such treatment or attention was not of a serious nature or was not material to the risk;

(b) A provision that gives the insurer the right to declare the policy void because the insured has been rejected for insurance, unless such right be conditioned upon a showing by the insurer that knowledge of such rejection would have led to a refusal by the insurer to make such contract;

(c) A provision that allows the company to pay the proceeds of the policy at the death of the insured to any person other than the named beneficiary, except in accordance w/ a standard provision as specified under the provisions of paragraph (m) of the preceding section;

(d) A provision that limits the time within w/c any action at law or in equity may be commenced to less than six years after the cause of action shall accrue; &

(e) A provision that specifies any mode of settlement at maturity of less value than the amount insured by the policy plus dividend additions, if any, less any indebtedness to the company on the policy & less any premium that may by the terms of the policy be deducted, payments to be made in accordance w/ the terms of the policy.

Nothing contained in this section nor in the provision of paragraph (b) of the preceding section, relating to incontestability, shall be construed as prohibiting the life insurance company fr. placing in its industrial life policies provisions limiting its liability w/ respect to: (1) death resulting fr. aviation other than as a fare‑paying passenger on a regularly scheduled route between definitely established airports; & (2) military or naval service; Provided, That if the liability of the company is limited as herein provided, such liability shall in no event be fixed at an amount less than the reserve on the policy (excluding the reserve for any additional benefits in the event of death by accident or accidental means or for benefits in the event of any type of disability), less any indebtedness on or secured by such policy; nor shall any provision of this section apply to any provision in an industrial life insurance policy for additional benefits in the event of death by accident or accidental means.

Title X VARIABLE CONTRACTS

SECTION 232.

(1) No insurance company authorized to transact business in the Philippines shall issue, deliver, sell or use any variable contract in the Philippines, unless & until such company shall have satisfied the Commissioner that its financial & general condition & its methods of operations, including the issue & sale of variable contracts, are not & will not be hazardous to the public or to its policy & contract owners. No foreign insurance company shall be authorized to issue, deliver or sell any variable contract in the Philippines, unless it is likewise authorized to do so by the laws of its domicile.

(2) The term “variable contract” shall mean any policy or contract on either a group or on an individual basis issued by an insurance company providing for benefits or other contractual payments or values thereunder to vary so as to reflect investment results of any segregated portfolio of investments or of a designated separate account in w/c amounts received in connection w/ such contracts shall have been placed & accounted for separately & apart fr. other investments & accounts. This contract may also provide benefits or values incidental thereto payable in fixed or variable amounts, or both. It shall not be deemed to be a “security” or “securities” as defined in The Securities Act, as amended, or in the The Investment Company Act, as amended, nor subject to regulation under said Acts.

(3) In determining the qualifications of a company requesting authority to issue, deliver, sell or use variable contracts, the Commissioner shall always consider the following: (a) the history, financial & general condition of the company; Provided, That such company, if a foreign company, must have deposited w/ the Commissioner for the benefit & security of its variable contract owners in the Philippines, securities satisfactory to the Commissioner consisting of bonds of the Government of the Philippines or its instrumentalities w/ an actual market value of two million pesos; (b) the character, responsibility & fitness of the officers & directors of the company; & (c) the law & regulation under w/c the company is authorized in the state of domicile to issue such contracts.

(4) If after notice & hearing, the Commissioner shall find that the company is qualified to issue, deliver, sell or use variable contracts in accordance w/ this Code & the regulations & rules issued thereunder, the corresponding order of authorization shall be issued. Any decision or order denying authority to issue, deliver, sell or use variable contracts shall clearly & distinctly state the reasons & grounds on w/c it is based.

SECTION 233. Any insurance company issuing variable contracts pursuant to this Code may in its discretion issue contracts providing a combination of fixed amount & variable amount of benefits & for option lump‑sum payment of benefits.

SECTION 234. Every variable contract form delivered or issued for delivery in the Philippines, & every certified form evidencing variable benefits issued pursuant to any such contract on a group basis, & the application, rider & endorsement forms applicable thereto & used in connection therewith, shall be subject to the prior approval of the Commissioner.

SECTION 235. Illustration of benefits payable under any variable contract shall not include or involve projections of past investment experience into the future & shall conform w/ the rules & regulations promulgated by the Commissioner.

SECTION 236. Variable contracts may be issued on the industrial life basis, provided that the pertinent provisions of this Code & of the rules & regulations of the Commissioner governing variable contracts are complied w/ in connection w/ such contracts.

SECTION 237. Every life insurance company authorized under the provisions of this Code to issue, deliver, sell or use variable contracts shall, in connection w/ same, establish one or more separate accounts to be known as separate variable accounts. All amounts received by the company in connection w/ any such contracts w/c are required by the terms thereof, to be collected or applied to one or more designated separate variable accounts shall be placed in such designated account or accounts. The assets & liabilities of each such separate variable account shall at all times be clearly identifiable & distinguishable fr. the assets & liabilities in all other accounts of the company. Notwithstanding any provision of law to the contrary, the assets held in any such separate variable account shall not be chargeable w/ liabilities arising out of any other business the company conduct but shall be held & applied exclusively for the benefit of the owners or beneficiaries of the variable contracts applicable thereto. In the event of the insolvency of the company, the assets of each such separate variable account shall be applied to the contractual claims of the owners or beneficiaries of the variable contracts applicable thereto. Except as otherwise specifically provided by the contract, no sale, exchange or other transfer of assets may be made by a company, between any of its separate accounts or between any other investment account & one or more of its separate accounts, unless in the case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts w/ respect to the separate account to w/c the transfer is made, or in case of a transfer fr. a separate account, such transfer would not cause the remaining assets of the account to become less than the reserves & other contract liabilities w/ respect to such separate account. Such transfer, whether into or fr. a separate account, shall be made by a transfer of cash, or by a transfer of securities having a valuation w/c could be readily determined in the market place, provided that such transfer of securities is approved by the Commissioner. The Commissioner may authorize other transfers among such accounts, if, in his opinion, such transfer would not be inequitable. All amounts & assets allocated to any such separate variable account shall be owned by the company & w/ respect to same the company shall not be nor hold itself out to be a trustee. cdt

SECTION 238. Any insurance company w/c has established one or more separate variable accounts pursuant to the preceding section may invest & re‑invest all or any part of the assets allocated to any such account in the securities & investments authorized by sections one hundred ninety‑eight, two hundred, two hundred one & two hundred two for any of the funds of an insurance company in such amount or amounts as may be approved by the Commissioner. In addition thereto, such company may also invest in common stocks or other equities w/c are listed on or admitted to trading in a securities exchange located in the Philippines, or w/c are publicly held & traded in the “over‑the‑counter market” as defined by the Commissioner & as to w/c market quotations have been available; Provided, however, That no such company shall invest in excess of ten per centum of the assets of any such separate variable accounts in any one corporation issuing such common stock. The assets & investments of such separate variable accounts shall not be taken into account in applying the quantitative investment limitations applicable to other investments of the company. In the purchase of common capital stock or other equities, the insurer shall designate to the broker, or to the seller if the purchase is not made through a broker, the specific variable account for w/c the investment is made.

SECTION 239. Assets allocated to any separate variable account shall be valued at their market value on the date of any valuation, or if there is no readily available market then in accordance w/ the terms of the variable contract applicable to such assets, or if there are no such contract terms then in such manner as may be prescribed by the rules & regulations of the Commissioner.

SECTION 240. The reserve liability for variable contracts shall be established in accordance w/ actuarial procedures that recognize the variable nature of the benefits provided, & shall be approved by the Commissioner.

Title XI CLAIMS SETTLEMENT

SECTION 241.

(1) No insurance company doing business in the Philippines shall refuse, without just cause, to pay or settle claims arising under coverages provided by its policies, nor shall any such company engage in unfair claim settlement practices. Any of the following acts by an insurance company, if committed without just cause & performed w/ such frequency as to indicate a general business practice, shall constitute unfair claim settlement practices:

(a) knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverage at issue;

(b) failing to acknowledge w/ reasonable promptness pertinent communications w/ respect to claims arising under its policies;

(c) failing to adopt & implement reasonable standards for the prompt investigation of claims arising under its policies;

(d) not attempting in good faith to effectuate prompt, fair & equitable settlement of claims submitted in w/c liability has become reasonably clear; or

(e) compelling policyholders to institute suits to recover amounts due under its policies by offering without justifiable reason substantially less than the amounts ultimately recovered in suits brought by them.

2. Evidence as to numbers & types of valid & justifiable complaints to the Commissioner against an insurance company, & the Commissioner’s complaint experience w/ other insurance companies writing similar lines of insurance shall be admissible in evidence in an administrative or judicial proceeding brought under this section.

3. If it is found, after notice & an opportunity to be heard, that an insurance company has violated this section, each instance of non‑compliance w/ paragraph (1) may be treated as a separate violation of this section & shall be considered sufficient cause for the suspension or revocation of the company’s certificate of authority.

SECTION 242. The proceeds of a life insurance policy shall be paid immediately upon maturity of the policy, unless such proceeds are made payable in installments or as an annuity, in w/c case the installments, or annuities shall be paid as they become due: Provided, however, That in the case of a policy maturing by the death of the insured, the proceeds thereof shall be paid within sixty days after presentation of the claim & filing of the proof of the death of the insured. Refusal or failure to pay the claim within the time prescribed herein will entitle the beneficiary to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent.

The proceeds of the policy maturing by the death of the insured payable to the beneficiary shall include the discounted value of all premiums paid in advance of their due dates, but are not due & payable at maturity.

SECTION 243. The amount of any loss or damage for w/c an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty days after proof loss is received by the insurer & ascertainment of the loss or damage is made either by agreement between the insured & the insurer or by arbitration; but if such ascertainment is not had or made within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt. Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent.

SECTION 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; & in the affirmative case, the insurance company shall be adjudged to pay damages w/c shall consist of attorney’s fees & other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured, fr. the date following the time prescribed in section two hundred forty‑two or in section two hundred forty‑three, as the case may be, until the claim is fully satisfied; Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment.

Title XII EXAMINATION OF COMPANIES

SECTION 245. The Commissioner shall require every insurance company doing business in the Philippines to keep its books, records, accounts & vouchers in such manner that he or his authorized representatives may readily verify its annual statements & ascertain whether the company is solvent & has complied w/ the provisions of this Code or the circulars, instructions, rulings or decisions of the Commissioner.

SECTION 246. The Commissioner shall at least once a year & whenever he considers the public interest so demands, cause an examination to be made into the affairs, financial condition & method of business of every insurance company authorized to transact business in the Philippines & of any other person, firm or corporation managing the affairs &/or property of such insurance company. Such company, as well as such managing person, firm or corporation, shall submit to the examiner all such books, papers & securities as he may require & such examiner shall also have the power to examine the officers of such company under oath touching its business & financial condition, & the authority to transact business in the Philippines of any such company shall be suspended by the Commissioner if such examination is refused & such company shall not thereafter be allowed to transact further business in the Philippines until it has fully complied w/ the provisions of this section.

Government‑owned or controlled corporations or entities engaged in social private insurance shall similarly be subject to such examination by the Commissioner unless their respective charters otherwise provide.

Title XIII SUSPENSION OR REVOCATION OF AUTHORITY

SECTION 247. If the Commissioner is of the opinion upon examination of other evidence that any domestic or foreign insurance company is in an unsound condition, or that it has failed to comply w/ the provisions of law or regulations obligatory upon it, or that its condition or method of business is such as to render its proceedings hazardous to the public or to its policyholders, or that its paid‑up capital stock, in the case of a domestic stock company, or its available cash assets, in the case of a domestic mutual company, or its security deposits, in the case of a foreign company, is impaired or deficient, or that the margin of solvency required of such company is deficient, the Commissioner is authorized to suspend or revoke all certificates of authority granted to such insurance company, its officers & agents, & no new business shall thereafter be done by such company or for such company by its agent in the Philippines while such suspension, revocation or disability continues or until its authority to do business is restored by the Commissioner. Before restoring such authority, the Commissioner shall require the company concerned to submit to him a business plan showing the company’s estimated receipts & disbursements, as well as the basis therefor, for the next succeeding three years. (As amended by Presidential Decree No. 1455)

Title XIV APPOINTMENT OF CONSERVATOR

SECTION 248. If at any time before, or after, the suspension or revocation of the certificate of authority of an insurance company as provided in the preceding title, the Commissioner finds that such company is in a state of continuing inability or unwillingness to maintain a condition of solvency or liquidity deemed adequate to protect the interest of policy holders & creditors, he may appoint a conservator to take charge the assets, liabilities, & the management of such company, collect all moneys & debts due said company & exercise all powers necessary to preserve the assets of said company, reorganize the management thereof, & restore its viability. The said conservator shall have the power to overrule or revoke the actions of the previous management & board of directors of the said company, any provision of law, or of the articles of incorporation or by‑laws of the company, to the contrary notwithstanding, & such other powers as the Commissioner shall deem necessary.

The conservator may be another insurance company doing business in the Philippines, by officer or officers of such company, or any other competent & qualified person, firm or corporation. The remuneration of the conservator & other expenses attendant to the conservation shall be borne by the insurance company concerned.

The conservator shall not be subject to any action, claim or demand by, or liability to, any person in respect of anything done or omitted to be done in good faith in the exercise, or in connection w/ the exercise, of the powers conferred on the conservator.

The conservator appointed shall report & be responsible to the Commissioner until such time as the Commissioner is satisfied that the insurance company can continue to operate on its own & the conservatorship shall likewise be terminated should be Commissioner, on the basis of the report of the conservator or of his own findings, determine that the continuance in business of the insurance company would be hazardous to policy holders & creditors, in w/c case the provisions of Title 15 shall apply.

Title XV PROCEEDINGS UPON INSOLVENCY

SECTION 249. Whenever, upon examination or other evidence, it shall be disclosed that the condition of any insurance company doing business in the Philippines is one of insolvency, or that its continuance in business would be hazardous to its policyholders & creditors, the Commissioner shall forthwith order the company to cease & desist fr. transacting business in the Philippines & shall designate a receiver to immediately take charge of its assets & liabilities, as expeditiously as possible collect & gather all the assets & administer the same for the benefit of its policyholders & creditors, & exercise all the powers necessary for these purposes including, but not limited to, bringing suits & foreclosing mortgages in the name of the insurance company.

The Commissioner shall thereupon determine within thirty days whether the insurance company may be reorganized or otherwise placed in such condition so that it may be permitted to resume business w/ safety to its policyholders & creditors & shall prescribe the conditions under w/c such resumption of business shall take place as well as the time for fulfillment of such conditions. In such case, the expenses & fees in the collection & administration of the insurance company shall be determined by the Commissioner & shall be paid out of the assets of such company.

If the Commissioner shall determine & confirm within the said period that the insurance company is solvent, as defined hereunder, or cannot resume business w/ safety to its policyholders & creditors, he shall, if the public interest requires, order its liquidation, indicate the manner of its liquidation & approve a liquidation plan & implement it immediately. The Commissioner shall designate a competent & qualified person as liquidator who shall take over the functions of the receiver previously designated &, w/ all convenient speed, reinsure all its outstanding policies, convert the assets of the insurance company to cash, or sell, assign or otherwise dispose of the same to the policyholders, creditors & other parties for the purpose of settling the liabilities or paying the debts of such company & he may, in the name of the company, institute such actions as may be necessary in the appropriate Court to collect & recover accounts & assets of the insurance company, & to do such other acts as may be necessary to complete the liquidation as ordered by the Commissioner.

The provisions of any law to the contrary notwithstanding, the actions of the Commissioner under this Section shall be final & executory, & can be set aside by the Court upon petition by the company & only if there is convincing proof that the action is plainly arbitrary & made in bad faith. The Commissioner, through the Solicitor General, shall then file the corresponding answer reciting the proceeding taken & praying the assistance of the Court in the liquidation of the company. No restraining order or injunction shall be issued by the Court enjoining the Commissioner fr. implementing his actions under this Section, unless there is convincing proof that the action of the Commissioner is plainly arbitrary & made in bad faith & the petitioner or plaintiff files w/ the clerk or Judge of the Court in w/c the action is pending a bond executed in favor of the Commissioner in an amount to be fixed by the Court. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Commissioner, if he so desires, of a bond in an amount twice the amount of the bond of the petitioner or plaintiff conditioned that it will pay the damages w/c the petition or plaintiff may suffer by the refusal or the dissolution of the injunction. The provisions of Rule 58 of the New Rules of Court insofar as they are applicable shall govern the issuance & dissolution of the restraining order or injunction contemplated in this Section.

All proceedings under this Title shall be given preference in the Courts. The Commissioner shall not be required to pay any fee to any public officer for filing, recording, or in any manner authenticating any paper or instrument relating to the proceedings.

As used in this Title, the term “Insolvency” shall mean the inability of an insurance company to pay its lawful obligations as they fall due in the usual & ordinary course of business as may be shown by its failure to maintain the margin of solvency required under Section 194 of this Code. (As amended by Presidential Decree No. 1141 & further amended by Presidential Decree No. 1455)

SECTION 250. In case of liquidation of an insurance company, after payment of the cost of the proceedings, including reasonable expenses & fees incurred in the liquidation to be allowed by the Court, the Commissioner shall pay all allowed claims against such company, under order of the Court, in accordance w/ their legal priority.

SECTION 251. The receiver or the liquidator, as the case may be, designated under the provisions of this title shall not be subject to any action, claim or demand by, or liability to, any person in respect of anything done or omitted to be done in good faith in the exercise, or in connection w/ the exercise, of the powers conferred on such receiver or liquidator.

Title XVI CONSOLIDATION AND MERGER OF INSURANCE COMPANIES

SECTION 252. Upon prior notice to the Commissioner, two or more domestic insurance companies, acting through their respective boards of directors, may negotiate to merge into a single corporation w/c shall be one of the constituent corporations, or consolidate into a single corporation w/c shall be a new corporation to be formed by the consolidation. A common agreement of the proposed merger or consolidation shall be drawn up for submission to the stockholders or members of the constituent companies for adoption & approved in accordance w/ the provisions of the respective by‑laws of the constituent companies & all existing laws that may be pertinent.

SECTION 253. Such agreement shall include, aside fr. the proposed merger or consolidation, provisions relative to the manner of transfer of assets to & assumption of liabilities by the absorbing or acquiring company fr. the absorbed or dissolved company or companies; the proposed articles of merger or consolidation & by‑laws of the surviving or acquiring company; the corporate name to be adopted w/c should not be that of any other existing company transacting similar business or one so similar as to be calculated to mislead the public; the rights of the stockholders or members of the absorbed or dissolved companies; date of effectivity of the merger or consolidation; & such particulars as may be necessary to explain & make manifest the objects & purposes of the absorbing or acquiring company.

SECTION 254. Upon execution of such agreement to merge or consolidate by & between or among the boards of directors of the constituent companies, notice thereof shall be mailed immediately to their policyholders & creditors. The company or companies to be absorbed or dissolved shall discharge all its accrued liabilities; otherwise, such liabilities shall, w/ the consent of its creditors, be transferred to & assumed by the absorbing or acquiring company, or such liabilities be reinsured by the latter. In the case of such policies as are subject to cancellation by the company or companies to be absorbed or dissolved, same may be cancelled pursuant to the terms thereof in lieu of such transfer, assumption, or reinsurance.

SECTION 255. Upon approval or adoption in the meetings of the stockholders or members called for the purpose in each of the constituent companies of the agreement to merge or consolidate, all stockholders or members dissenting or objecting to merger or consolidation shall be paid the value of their shares by the company concerned in accordance w/ the by‑laws thereof.

SECTION 256. Upon the approval or adoption of the agreement to merge or consolidate by the stockholders or members of the constituent companies, the corresponding articles of merger or of consolidation shall be duly executed by the presidents & attested by the corporate secretaries & shall bear the corporate seals of the merging or consolidating companies setting forth:

(1) The plan of merger or the plan of consolidation;

(2) As to each corporation, the number of shares outstanding, or in case of mutual corporations, the number of members; &

(3) As to each corporation, the number of shares or members voted for & against such plan respectively. Thereafter, a certified copy of such articles of merger or consolidation, together w/ a certificate of approval or adoption by the stockholders or members of such articles of merger or consolidation, verified by affidavits of such officers & under the seal of the constituent companies, shall be submitted to the Commissioner, together w/ such other papers or documents w/c the Commissioner may require, for his consideration.

SECTION 257. The articles of merger or of consolidation, signed & verified as hereinabove required, shall be filed w/ the Securities & Exchange Commission for its examination & approval.

SECTION 258. Upon receipt fr. the Securities & Exchange Commission of the certificate of merger or of consolidation, the constituent companies shall surrender to the Commissioner their respective certificates of authority to transact insurance business. The absorbing or surviving company in case of merger, or the newly formed company in case of consolidation, shall immediately file w/ the commissioner the corresponding application for issuance of a new certificate of authority to transact insurance business, together w/ a certified copy of the certificate of merger or of consolidation, & of the certificate of increase of stocks, if there is any, issued by the Securities & Exchange Commission.

SECTION 259. Nothing in this title shall be construed to enlarge the powers of the absorbing or surviving company in case of merger, or the newly formed company in case of consolidation, except those conferred by the certificate of merger or of consolidation & the articles of merger of consolidation, or the amended articles of incorporation, as registered w/ the Securities & Exchange Commission.

SECTION 260. No director, officer, or stockholder of any such constituent companies shall receive any fee, commission, compensation, or other valuable consideration whatsoever, directly or indirectly, or in any manner aiding, promoting or assisting in such merger or consolidation.

SECTION 261. The merger of consolidation of companies under, this Code shall be subject to the provisions of the Corporation Law, &, in those cases specified in Republic Act No. 5455, as amended, be further subject to the provisions of said law.

Title XVII MUTUALIZATION OF STOCK LIFE INSURANCE COMPANIES

SECTION 262. Any domestic stock life insurance company doing business in the Philippines may convert itself into an incorporated mutual life insurer. To that end it may provide & carry out a plan for the acquisition of the outstanding shares of its capital stock for the benefit of its policyholders, or any class or classes of its policyholders, by complying w/ the requirements of this chapter.

SECTION 263. Such plan shall include appropriate proceedings for amending the insurer’s articles of incorporation to give effect to the acquisition, by said insurer, for the benefit of its policyholders or any class or classes thereof, of the outstanding shares of its capital stock & the conversion of the insurer fr. a stock corporation into a non‑stock corporation for the benefit of its members. The members of such non‑stock corporation shall be the policyholders fr. time to time of the class or classes for whose benefit the stock of the insurer was acquired, & the policyholders of such other class or classes as may be specified in such corporation’s articles of incorporation as they may be amended fr. time to time. Such plan shall be:

(1) Adopted by a vote of a majority of the directors;

(2) Approved by the vote of the holders of at least a majority of the outstanding shares at a special meeting of shareholders called for that purpose, or by the written consent of such sharesholders;

(3) Submitted to the Commissioner & approved by him in writing;

(4) Approved by a majority vote of all the policyholders of the class or classes for whose benefit the stock is to be acquired voting at an election by the policyholders called for that purpose, subject to the provisions of section two hundred sixty‑five. The terms “policyholder” or “policyholders” as used in this chapter shall be deemed to mean the person or persons insured under an individual policy of life insurance, or of health & accident insurance, or of any combination of life, health & accident insurance. They shall also include the person or persons to whom any annuity or pure endowment is presently or prospectively payable by the terms of an individual annuity or pure endowment contract, except where the policy or contract declares some other person to be the owner or holder thereof, in w/c case such other person shall be deemed policyholder. In any case where a policy or contract names two or more persons as joint insured, payees, owners or holders thereof, the persons so named shall be deemed collectively to be one policyholder for the purpose of this chapter. In any case where a policy or contract shall have been assigned by assignment absolute on its face to an assignee other than the insurer, & such assignment shall have been filed at the principal office of the insurer at least thirty days prior to the date of any election or meeting referred to in this chapter, then such assignee shall be deemed at such election or meeting to be the policyholder. For the purpose of this chapter the terms “policyholder” & “policyholders” include the employer to whom, or a president, secretary or other executive officer of any corporation or association to w/c a master group policy has been issued, but exclude the holders of certificates or policies issued under or in connection w/ a master group policy. Beneficiaries under unmatured contracts shall not as such be deemed to be policyholders;

(5) Filed w/ the Commissioner after having been approved as provided in this section.

SECTION 264. The Commissioner shall examine the plan submitted to him under the provisions of sub‑paragraph three of section two hundred sixty‑three. He shall not approve such plan unless in his opinion the rights & interest of the insurer, its policyholders & shareholders are protected nor unless he is satisfied that the plan will be fair & equitable in its operation.

SECTION 265. The election prescribed by sub‑paragraph four of section two hundred sixty‑three shall be called by the board of directors or the president, & every policyholder of the class or classes for whose benefit the stock is to be acquired, whose insurance shall have been in force for at least one year prior to such election shall have one vote, regardless of the number of policies or amount of insurance he holds, & regardless of whether such policies are policies of life insurance or policies of health & accident insurance or annuity contracts. Notice of such election shall be given to policyholders entitled to vote by mail fr. the principal office of such insurer at least thirty days prior to the date set for such election, in a sealed envelope, postage prepaid, addressed to each such policyholder at his last known address.

Voting shall be by one of the following methods:

(1) At a meeting of such policyholders, held pursuant to such notice, by ballot in person or by proxy.

(2) If not by the method described in the preceding sub‑paragraph, then by mail pursuant to a procedure & on forms to be prescribed by such plan.

Such election shall be conducted under the direction & supervision of three impartial & disinterested inspectors appointed by the insurer & approved by the Commissioner. In case any person appointed as inspector fails to appear at such meeting or fails or refuses to act at such election, the vacancy, if occurring in advance of the convening of the meeting or in advance of the opening of the mail vote, may be filled in the manner prescribed for the appointment of inspectors &, if occurring at the meeting or during the canvass of the mail vote, may be filled by the person acting as chairman of said meeting or designated for that purpose in such plan. The decision, act or certificate of a majority of the inspectors shall be effective in all respects as the decision, act or certificate of all. The inspectors of election shall determine the number of policyholders, the voting power of each, the policyholders represented at the meeting or voting by mail, the existence of a quorum & the authenticity, validity & effect of proxies. They shall receives votes, hear & determine all challenges & questions in any way arising in connection w/ the right to vote, count & tabulate all votes, determine the result, & do such other acts as are proper to conduct the vote w/ fairness to all policyholders. The inspectors of election shall, before commencing performance of their duties, subscribe to & file w/ the insurer & w/ the Commissioner on oath that they, & each of them, will perform their duties impartially, in good faith, to the best of their ability & as expeditiously as in practicable. On the request of the insurer, the Commissioner, a policyholder or his proxy, the inspectors shall make a report in writing of any challenge or question or matter determined by them & execute a certificate of any fact found by them. They shall also certify the result of such vote to the insurer & to the Commissioner. Any report or certificate made by them shall be prima facie evidence of facts stated therein. All necessary expenses incurred in connection w/ such election shall be paid by the insurer. For the purpose of this section, a quorum shall consist of five per centum of the policyholders of such insurer entitled to vote at such election.

SECTION 266. In carrying out any such plan, the insurer may acquire any shares of its own stock by gift, bequest or purchase. Any shares so acquired shall, unless as a result of such acquisition all of the shares of the insurer shall have been acquired, be acquired in trust for the policyholders of the class or classes for whose benefit the plan provides that the stock of the insurer shall be acquired as hereinafter provided. Such shares shall be assigned & transferred on the books of such insurer & approved by the Commissioner. Such trustees shall hold such stock in trust until all of the outstanding shares of capital stock of such insurer have been acquired, but for not longer than thirty years w/ such extensions of not more than five years each as may be granted by the Commissioner. Such extensions may be granted by the Commissioner if the plan so provides & if in his opinion the plan of acquisition of all of such stock can be completed within a reasonable period. Such trustees shall vote such stock at all corporate meetings at w/c stockholders have the right to vote. When all the outstanding shares of capital stock of such insurer have been acquired, all said shares shall be cancelled, the certificate of amendment of the insurer’s articles of incorporation giving effect thereto shall be filed in accordance w/ the provisions of the Corporation Law, & the insurer shall become a non‑stock corporation for the profit of its members & such trust shall thereupon terminate. Thereafter such corporation shall be conducted for the mutual benefit, ratably, of its policyholders of the class or classes for whose benefit the stock was acquired & shall have power to issue non‑assessable policies on a reserve basis subject to all provisions of law applicable to incorporated life insurers issuing nonassessable policies on a reserve basis. Policies so issued may be upon the basis of full or partial participation therein as agreed between the insurer & the insured.

Upon the termination of any such voting trust, either in accordance w/ its terms or as hereinabove provided, such plan of mutualization shall terminate, unless theretofore completed. Upon such termination, unless the plan of mutualization provides for the disposition of the shares acquired by the insurer under such plan or for the disposition of the proceeds thereof, the shares held by such trustees shall be disposed of in accordance w/ an order of the court of competent jurisdiction in the judicial district in w/c is located the principal office of such insurer, made upon a verified petition of the Commissioner.

SECTION 267. Any such plan of mutualization may provide for the creation of a voting trust under a trust agreement for the holding & voting by three or more trustees of any portion or all of the shares of the insurer not required upon the adoption of such plan. The voting trustees shall be named in accordance w/ such plan or, if no provision is made therein for the naming of such trustees, then by the insurer. The voting trust agreement & voting trustees shall be subject to the approval of the Commissioner. Any or all of the trustees under such voting trust agreement may be the same person or persons as any or all of the trustees referred to in section two hundred sixty‑six. Such voting trust agreement shall provide that in the event of acquisition by the insurer of any of the shares of stock held thereunder in accordance w/ the provisions of the plan, such shares so acquired together w/ the voting rights thereof shall be transferred by the trustees named under the provisions of this section to the trustees named under the provisions of section two hundred sixty‑six. Any voting trust agreement created pursuant to the provisions of this section may be made irrevocable for not longer than thirty years & thereafter until the termination of the trust provided for in section two hundred sixty‑six. The trust created pursuant to the provisions of this section shall terminate in any event upon termination of the trust provided for in section two hundred sixty‑six. Upon the termination of the trust created pursuant to the provisions of this section, any shares held in such trust shall revert to the persons entitled thereto by law.

SECTION 268. Every payment for the acquisition of any shares of the capital stock of such insurer, the purchase price of w/c is not fixed by such plan, shall be subject to the prior approval of the Commissioner. Neither such plan, nor any such payment, may be approved by the Commissioner unless he finds that the rights & interests of the insurer, its policyholders, & shareholders are protected.

SECTION 269. The trustees referred to in section two hundred sixty‑six shall file w/ such insurer & w/ the Commissioner a verified acceptance of their appointments & verified declarations that they will faithfully discharge their duties as such trustees. All dividends & other sums received by said trustees on the shares held by them, after paying the necessary expenses of executing their trust, shall be immediately repaid to such insurer for the benefit of all who are, or may become, policyholders of such insurance of the class or classes for whose benefit the stock of such insurer was acquired & entitled to participate in the profits thereof & shall be added to & become part of the assets of such insurer.

SECTION 269‑A. If, at any time within the period provided in the plan for the acquisition of the outstanding shares of stock of the insurer, ninety percent thereof has already been acquired & transferred to the trustees under the plan, the insurer by a vote of a majority of the directors may determine to make an offer, w/ the permission of the Commissioner & subject to such requirement as he may specify, to acquire by purchase all of the shares not theretofore acquired under the plan, at a specified price w/c the insurer considers to be their fair value as of the date of making such offer.

If the offer to acquire is permitted by the Commissioner, the insurer shall make a written offer by registered mail to each shareholder whose shares have not theretofore been acquired under the plan or otherwise, offering to acquire all his shares at such price if accepted in writing within thirty days after the mailing of such offer. Any shareholder accepting such offer, within the time therefor shall, within sixty days after his acceptance, transfer to the insurer the certificates representing such shares &, upon doing so, shall be paid by the insurer the amount of such offer for his shares. Any share so acquired shall be assigned & transferred to the trustees under the plan & held by them as shares acquired pursuant to the plan.

Each shareholder who does not accept such offer to acquire his shares within the time stated in such offer for acceptance thereof shall within fifteen days after the expiration of such offer apply to the Secretary of Finance for determination of the fair value of his shares as of the date of making such offer. The Secretary of Finance may himself, after due notice & hearing, determine upon the evidence received the fair value of the shares as of the date of making such offer, or appoint three impartial & disinterested persons to appraise the fair value of such shares w/ such direction as he shall deem proper & necessary to expedite the proceedings. Upon completion of the appraisal proceedings, the appraisers shall file w/ the Secretary of Finance their report in writing stating the fair value of such shares as of the date of the making of such offer & setting forth their findings in support of such statement. The appraisers shall furnish each party to the proceedings a copy of their appraisal report, & within ten days after receipt thereof any such party may signify his objection, if any, to the report or move for the approval thereof. Upon the expiration of the period of ten days referred to above, the report shall be set for hearing, after w/c the Secretary of Finance shall issue an order adopting, modifying or rejecting the report in whole or in part or he may receive further evidence or may recommit it w/ instructions. Whenever the Secretary of Finance shall determine in any manner, as aforesaid, the fair value of such shares, he may also determine the terms of payment thereof by the insurer. The expenses incidental to the proceedings including charges of the appraisers, if any, shall be paid equally by the insurer & the shareholder.

The findings of the Secretary of Finance on all questions of fact raised at the hearing of the application for determination of the fair value of such shares shall be conclusive upon all parties to the proceedings. The order of the Secretary of Finance determining the fair value of the shares & the terms of payment thereof shall have the force & effect of a judgment w/c shall be appealable on any question of law. Such order shall become final & executory fifteen days after receipt thereof by the parties to the proceedings.

Upon any such order becoming final & fr. w/c no appeal is pending, or when the time to appeal therefr. has expired, each shareholder party to the proceedings shall transfer his shares to the insurer & surrender to the said insurer the certificates representing such shares & the insurer shall make payment therefor as provided in such order. Any shares so acquired by the insurer shall be assigned & transferred to the trustees & held by them as shares acquired pursuant to the plan.

Any shareholder who does not apply to the Secretary of Finance in the manner & within the time hereinbefore prescribed shall be deemed to have accepted the offer referred to above, effective, however, upon the expiration of the time hereinabove prescribed for making such application, & such shareholder’s time for accepting such offer shall, for that purpose only, be deemed to have been extended accordingly.

Any offer to acquire shares made pursuant to this section shall, except as otherwise provided herein, be irrevocable until all proceedings upon such offer have been completed or all shares have otherwise been earlier acquired by the insurer.

Any shareholder who has expressly or impliedly accepted the plan or the offer to acquire his shares not theretofore acquired under the plan, & any shareholder who has rejected such plan or such offer & has applied, as aforesaid, to the Secretary of Finance for a determination of the fair value of his shares subsequent to w/c an agreement has been reached or a final order issued fixing such fair value but who fails to surrender his certificates for cancellation upon payment of the amount to w/c he is entitled, may be compelled to do so by an order of the Secretary of Finance for that purpose & such order may provide that upon failure of such shareholder to surrender such certificates for cancellation such order shall stand in lieu of such surrender & cancellation. (As amended by Presidential Decree No. 1280)

SECTION 270. Such insurer, after mutualization, shall be a continuation of the original insurer, & such mutualization shall not affect such insurer’s certificate of authority nor existing suits, rights or contracts except as provided in said plan for the acquisition of the outstanding shares of the capital stock of such insurer, approved as provided in this chapter. Such insurer, after mutualization, shall exercise all the rights & powers & shall perform all the duties conferred or imposed by law upon insurers writing the classes of insurance written by it, & to protect rights & contracts existing prior to mutualization, subject to the effect of said plan. The board of directors of such insurer, prior to mutualization, may adopt amendments to its by‑laws to take effect upon mutualization.

SECTION 271.

(1) An annual meeting of members shall be held at ten o’clock in the morning of the fourth Tuesday of March of each year at the principal office of the insurer, unless a different time or place be provided in the by‑laws.

(2) Special meetings of the members, for any purpose or purposes whatsoever, may be called at any time by the president, or by the board of directors, or by one or more members holding not less than one‑fifth of the voting power of such insurer, or by such other officers or persons as the by‑laws authorize.

(3) Notice of all meetings of members whether annual or special shall be given in writing to the members entitled to vote by the secretary, or an assistant secretary, or other person charged w/ that duty, or if there be no such officer, or in case of his neglect or refusal, by any director or member. At the option of the insurer such notice may be imprinted on premium notices of receipts or on both.

A notice may be given by such insurer to any member either personally, or by mail, or other means of written communication, charges prepaid, addressed to such member at his address appearing on the books of the insurer, or given by him to the insurer for the purpose of notice. If a member gives no address, notice shall be deemed to have been given him if sent by mail or other means of written communication addressed to the place where the principal office of the insurer is situated, or if published at least once in some newspaper of general circulation in the place in w/c said office is located.

Notice of any meeting of members shall be sent to each member entitled thereto not less than seven days before such meeting, unless the by‑laws provide otherwise.

Notice of any meeting of members shall specify the place, the day & the hour of the meeting & the general nature of the business to be transacted.

Notice of an annual meeting to be held at the time & place specified in sub‑paragraph one of this section shall be sufficiently given if published at least once in each of four successive weeks in a newspaper of general circulation in the place in w/c the principal office of such insurer is located, & if so published no other notice of such meeting shall be required.

(4) The presence in person or by proxy of five per centum of the members entitled to vote at any meeting shall constitute a quorum for the transaction of business, unless otherwise provided by the by‑laws.

(5) Each such member shall have one vote at any meeting of members regardless of the number of policies or the amount of insurance that such member holds & regardless of whether such policies are policies of life insurance, or of health & accident insurance, or both. Any member entitled to vote shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent & filed w/ the secretary of such insurer.

(6) The directors of the insurer in office at the time the insurer is mutualized as provided in this chapter shall continue in office until the first annual meeting of members. At the first annual meeting of members & at each annual meeting thereafter directors shall be elected by the members for the term or terms authorized by this chapter.

(7) The articles of incorporation or the bay‑laws may provide that the directors may be divided into two or more classes whose terms of office shall expire at different times, but no terms shall continue longer than six years. In the absence of such provisions, each director, except members of the board of directors at the time the insurer is mutualized, shall be elected for a term of one year. All directors shall hold office for a term for w/c they are elected & until their successors are elected & qualified. A director may, but need not be a member or policyholder of the insurer of w/c he is acting as director. Vacancies in the board of directors may be filled by a majority of the remaining directors, though less than a quorum, & each director so elected shall hold office until the next annual meeting.

(8) All insurers mutualized under the provisions of this chapter shall be subject to all other applicable provisions of this Code & of the Corporation Law.

SECTION 272. The provisions of Commonwealth Act No. 83, otherwise known as the Securities Act, as amended, shall not apply to any of the following:

(a) Shares of the capital stock of such insurer acquired as provided in section two hundred sixty‑six & assigned & transferred to the trustees as is provided in said section, & the assignment & transfer of said shares as so provided;

(b) Any certificate or other instrument issued to a policyholder of such mutualized insurer conferring or evidencing membership in such mutualized insurer or conferring or evidencing such member’s right to participate in the profits or share in the assets of such mutualized insurer by the virtue of his membership therein, & the issuance of such certificate or other instrument;

(c) The plan for the acquisition of the outstanding shares of the capital stock of such insurer authorized by the provisions of this chapter, the submission of said plan to the Commissioner & to the policyholders of such insurer as provided in this chapter, & the approval & carrying out of said plan or any part thereof in accordance w/ the provisions of this chapter.

Title XVIII WITHDRAWAL OF FOREIGN INSURANCE COMPANIES

SECTION 273. A foreign insurance company doing business in the Philippines, upon payment of the fee hereinafter prescribed & surrender to the Commissioner of its certificate of authority, may apply to withdraw fr. the Philippines. Such application shall be duly executed in writing, accompanied by evidence of due authority for such execution, properly acknowledged.

SECTION 274. The Commissioner shall publish the application for withdrawal daily for a period of one week in two newspapers of general circulation in the City of Manila, one in English & the other in Pilipino. The expenses of such publication shall be paid by the insurance company filing such application.

SECTION 275. Every foreign insurance company desiring to withdraw fr. the Philippines shall, prior to such withdrawal, discharge its liabilities to policyholders & creditors in this country. In case of its policies insuring residents of the Philippines, it shall cause the primary liabilities under such policies to be reinsured & assumed by another insurance company authorized to transact business in the Philippines. In the case of such policies as are subject to cancellation by the withdrawing company, it may cancel such policies pursuant to the terms thereof in lieu of such reinsurance & assumption of liabilities.

SECTION 276. The Commissioner shall make an examination of the books & records of the withdrawing company, & if, upon such examination, the Commissioner finds that the insurer has no outstanding liabilities to residents of the Philippines, it shall cancel the withdrawing company’s certificate of authority, if unexpired, & shall permit the insurer to withdraw. The cost & expenses of all such examination shall be paid as prescribed in section four hundred seventeen.

SECTION 277. Upon the failure of such withdrawing insurance company or its agents in the Philippines to pay the expenses of such publication within thirty days after the presentation of the bill therefor, the Commissioner shall collect such fee fr. the deposit furnished in accordance w/ the provisions of section one hundred ninety‑one.

SECTION 278. A foreign life insurance company that withdraws fr. the Philippines shall be considered a “servicing insurance company” if its business transactions are confined to accepting periodic premium payments fr., or granting policy loans & paying cash surrender values of outstanding policies to, or reviving lapsed policies of, Philippine policyholders, & such other related services.

SECTION 279. No company shall act as a servicing insurance company until after it shall have obtained a special certification of authority to act as such fr. the Commissioner upon application therefor & payment by the company of the fees hereinafter prescribed. Such certificate shall expire on the last day of June of each year & shall be renewed annually, while the company continues to service its policyholders, & to comply w/ all the applicable provisions of law & regulations.

Title XIX PROFESSIONAL REINSURERS

SECTION 280. Except as otherwise provided in this Code, no person, partnership, association or corporation shall transact any business in the Philippines as a professional reinsurer until it shall have obtained a certificate of authority for that purpose fr. the Commissioner upon the application therefor & payment by such person, partnership, association or corporation of the fees hereinafter prescribed. As used in this Code, the term “professional reinsurer” shall mean any person, partnership, association or corporation that transacts solely & exclusively reinsurance business in the Philippines.

The Commissioner may refuse to issue a certificate of authority to any such person, partnership, association or corporation if, in his judgment, such refusal will best promote public interest. No such certificate of authority shall be granted to any such person, partnership, association or corporation unless & until the Commissioner shall have satisfied himself by such examination as he may make & such evidence as he may require that such person, partnership, association or corporation is qualified by the laws of the Philippines to transact business therein as a professional reinsurer.

Before issuing such certificate of authority of the Commissioner must be satisfied that the name of the applicant is not that of any other known company transacting insurance or reinsurance business in the Philippines, or a name so similar as to be calculated to mislead the public.

Such certificate of authority shall expire on the last day of June of each year & shall be renewed annually if such person, partnership, association, or corporation is continuing to comply w/ provisions of this Code, or the circulars, instructions, rulings, or decisions of the Commissioner & such other pertinent law, rules & regulations.

Every such person, partnership, association, or corporation receiving such certificate of authority shall be subject to the provisions of this Code & other related laws, & to the jurisdiction & supervision of the Commissioner.

SECTION 281. Any person, partnership, association, or corporation authorized to transact solely reinsurance business must have a paid‑up capital stock of at least ten million pesos, twenty‑five per centum of w/c must be invested in securities satisfactory to the Commissioner, consisting of bonds or other evidences of debt of the Government of the Philippines or its political subdivisions or instrumentalities, or of government‑owned or controlled corporations & entities, including the Central Bank of the Philippines, & deposited w/ the Commissioner, & the remaining seventy‑five per centum in such other securities as may be allowed & permitted by the Commissioner, w/c securities shall at all times be maintained free fr. any lien or encumbrance; Provided, That reinsurers already doing business as such in the Philippines shall comply w/ the requirement of this section by increasing their respective capital as herein provided not later than December thirty‑one, nineteen hundred eighty; Provided, Further, That the provisions of this chapter applicable to insurance companies shall so far as practicable be likewise applicable to professional reinsurers. (As amended by Presidential Decree No. 1455).

Title XX HOLDING COMPANIES

SECTION 282. As used in this title, the following terms shall have the respective meanings hereinafter set forth unless the context shall otherwise require:

(a) “Person” means an individual, partnership, firm, association, corporation, trust, any similar entity or any combination of the foregoing acting in concert;

(b) “Control”, including the terms “controlling”, “controlled by” & “under common control w/”, means the possession directly or indirectly of the power to direct or cause the direction of the management & policies of a person, whether through the ownership of voting securities by a contract other than a commercial contract for goods or non‑management services or otherwise. Subject to section two hundred eight‑four, control shall be presumed to exist if any person directly or indirectly owns, controls or holds w/ the power to vote forty per centum or more of the voting securities of any other person; Provided, That no person shall be deemed to control another person solely by reason of his being an officer or director of such other person;

(c) “Holding company” means any person who directly or indirectly controls any authorized insurer;

(d) “Controlled insurer” means an authorized insurer controlled directly or indirectly by a holding company;

(e) “Controlled person” means any person, other than a controlled insurer, who is controlled directly or indirectly by a holding company;

(f) “Holding company system” means a holding company together w/ its controlled insurers & controlled persons.

SECTION 283. Notwithstanding paragraph (b) of section two hundred eighty‑two, the Commissioner may determine after notice & opportunity to be heard, that a person exercises directly or indirectly either alone or pursuant to an agreement w/ one or more other persons such a controlling influence over the management or policies of an authorized insurer as to make it necessary or appropriate in the public interest or for the protection of policyholders or stockholders of the insurer that the person be deemed to control the insurer.

SECTION 284. The Commissioner may determine upon application that any person, either alone or pursuant to agreement w/ one or more other persons, does not or will not upon the taking of some proposed action control another person. The filing of an application hereunder in good faith by any person shall relieve the applicant fr. any obligation or liability imposed by this title w/ respect to the subject of the application, except as contained in section two hundred ninety‑four, until the Commissioner has acted upon the application. Within thirty days or such further period as he may prescribe, the Commissioner may prospectively revoke or modify his determination, after notice & opportunity to be heard, whenever in his judgment revocation or modification is consistent w/ his title.

SECTION 285. Notwithstanding any other provisions of this title, the following shall not be deemed holding companies:

(a) authorized insurers or reinsurers or their subsidiaries;

(b) the Government of the Philippines, or any political subdivision, agency or instrumentality thereof, or any corporation w/c is wholly owned directly or indirectly by one or more of the foregoing.

The Commissioner may conditionally or unconditionally exempt any specified person or class of persons fr. any of the obligations or liabilities imposed under this title, if & to the extent he finds the exemption necessary to appropriate in the public interest or not adverse to the interests of policyholders or stockholders & consistent w/ the purposes of this title.

SECTION 286.

(1) Every person who on the date this Code takes effect is a controlled insurer & every person who thereafter becomes a controlled insurer, shall, within sixty days thereafter, or within thirty days after becoming a controlled insurer, w/cever is later, register w/ the Commissioner. Such registration shall be amended within thirty days following any change in the identity of its holding company. The Commissioner may grant one or more reasonable extensions of the time to register.

(2) Every registrant shall furnish the Commissioner w/ the following information concerning its holding company: (a) a copy of its charter or articles of incorporation & its by‑laws, (b) the identities of its principal shareholders, officers, directors & controlled persons, & (c) information as to its capital structure & financial condition, & a description of its principal business activities.

SECTION 287. Every controlled insurer shall file w/ the Commissioner such reports or material as he may direct for the purpose of disclosing information concerning the operations of persons within the holding company system w/c may materially affect the operations, management or financial condition of the insurer.

SECTION 288. Every holding company & every controlled person within a holding company system shall be subject to examination by order of the Commissioner if he has cause to believe that the operations of such persons may materially affect the operations, management or financial condition of any controlled insurer w/ the system & that he is unable to obtain relevant information fr. such controlled insurer. The grounds relied upon by the Commissioner for such examination shall be stated in his order, w/c order shall be subject to judicial review only at the instance of the person sought to be examined. Such examination shall be confined to matters specified in the order. The cost of such examination shall be assessed against the person examined & no portion thereof shall thereafter be reimbursed to it directly or indirectly by the controlled insurer.

SECTION 289. The Commissioner shall keep the contents of each report made pursuant to this title & any information obtained by him in connection therewith confidential & shall not make the same public without the prior written consent of the controlled insurer to w/c it pertains unless the Commissioner after notice & an opportunity to be heard shall determine that the interests of policyholders, stockholders or the public will be served by the publication thereof. In any action or proceeding by the Commissioner against the person examined or any other person within the same holding company system a report of such examination published by him shall be admissible as evidence of the facts stated therein.

SECTION 290. Transactions within a holding company system to w/c a controlled insurer is a party shall be subject to the following:

(a) The terms shall be fair & equitable;

(b) charges or fees for services performed shall be reasonable;

(c) expenses incurred & payments received shall be allocated to the insurer on an equitable basis in conformity w/ customary insurance accounting practices consistently applied.

The books, accounts & records of each party to all such transactions shall be maintained as to clearly & accurately disclose the nature & details of the transactions including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties.

SECTION 291. The prior written approval of the Commissioner shall be required for the following transactions between a controlled insurer & any person in its holding company system: sales, purchases, exchanges, loans or extensions of credit, or investments, involving five per centum or more of the insurer’s admitted assets as of the thirty‑first day of December next preceding.

SECTION 292. The following transactions between a controlled insurer & any person in its holding company system may not be entered into unless the insurer has notified the Commissioner in writing of its intention to enter into any such transaction at least thirty days prior thereto, or such shorter period as he may permit, & he has not disapproved it within such period:

(a) sales, purchases, exchanges, loans or extensions of credit, or investments, involving more than one‑half of one per centum but less than five per centum of the insurer’s admitted assets as of the thirty‑first day of December next preceding;

(b) reinsurance treaties or agreements;

(c) rendering of services on a regular or systematic basis; or

(d) any material transaction, specified by regulation, w/c the Commissioner determines may adversely affect the interest of the insurer’s policyholders or stockholders or of the public.

Nothing herein contained shall be deemed to authorize or permit any transaction w/c, in the case of a non‑controlled insurer, would be otherwise contrary to law.

SECTION 293. The Commissioner, in reviewing transactions pursuant to sections two hundred ninety‑one & two hundred ninety‑two, shall consider whether the transactions comply w/ the standard set forth in section two hundred ninety & whether they may adversely affect the interests of policyholders. This section shall not apply to transactions subject to other sections of this Code w/c impose notice or approval requirements greater than those prescribed by this title.

SECTION 294.

(1) No person, other than an authorized insurer, shall acquire control of any domestic insurer, whether by purchase of its securities or otherwise, except (a) after twenty days written notice to its insurer or such shorter period as the Commissioner may permit, of its intention to acquire control, & (b) w/ the prior written approval of the Commissioner.

(2) The Commissioner shall disapprove the acquisition of control of a domestic insurer if he determines, after notice & an opportunity to be heard, that such action is reasonably necessary to protect the interest of the people of this country. The following shall be the only factors to be considered by him in reaching the foregoing determination: (a) the financial condition of the acquiring person or & the insurer; (b) the trustworthiness of the acquiring person or any of its officers or directors; (c) a plan for the proper & effective conduct of the insurer’s operations; (d) the source of the funds or assets for the acquisition; (e) the fairness of any exchange of stock, assets, cash or other consideration for the stock or assets to be received; (f) whether the effect of the acquisition may be substantially to lessen competition in any line of commerce in insurance or to tend to create a monopoly therein; & (g) whether the acquisition is likely to be hazardous or prejudicial to the insurer’s policyholders or stockholders.

(3) The following conditions affecting any controlled insurer, regardless of when such control has been acquired, are violations of this title: (a) the controlling person or any of its officers or directors have demonstrated untrustworthiness; & (b) the effect of retention of control may be substantially to lessen competition in any line of commerce in insurance in this country or to tend to create a monopoly therein. If, after notice & an opportunity to be heard, the Commissioner determines that any of the foregoing violations exists, he shall reduce his findings to writing & shall issue an order based thereon & cause the same to be served upon the insurer & upon all persons affected thereby directing any person found to be in violation thereof to take appropriate action to cure such violation. Upon the failure of any such person to comply w/ such order, section two hundred ninety‑eight shall become applicable.

(4) The Commissioner may require the submission of such information as he deems necessary to determine whether any acquisition or retention of control complies w/ this title & may require, as a condition of approval of such acquisition or retention of control, that all or any portion of such information be disclosed to the insurer’s stockholders.

(5) Unless subject to registration under section two hundred eighty‑six or unless acquisition of its control is subject to paragraphs one & two hereof, every authorized insurer shall, on or before the first day of July, nineteen hundred seventy‑five, or within thirty days after any event requiring notice hereunder, w/cever is later, notify the Commissioner in writing of the identity of any person whom the insurer then knows or has reason to believe controls or has taken any action, other than preliminary negotiations or discussion, to acquire control of the insurer.

SECTION 295.

(1) Notwithstanding the control of an authorized insurer by any person, the officers & directors of the insurer shall not thereby be relieved of any obligation or liability to w/c they would otherwise be subject by law, & the insurer shall be managed so as to assure its separate operating identity consistent w/ this title.

(2) Nothing herein shall preclude an authorized insurer fr. having or sharing a common management or cooperative or joint use of personnel, property or services w/ one or more other persons under arrangements meeting the standards of section two hundred ninety.

SECTION 296. To the extent that any information or material is set forth in forms or other matter on file w/ any government agency or in a registration form filed w/ the Commissioner by another person within the same holding company system, the controlled insurer may comply w/ the registration or reporting requirements of this title by referring in its registration form or report to such other filed matter & attaching a copy thereof certified by the insurer as a true & complete copy, to such registration form or report or, if such other filed matter is on file w/ the Commissioner, incorporating such matter by reference.

SECTION 297. No holding company or controlled person shall directly or indirectly or through another person do or cause to be done for or in behalf of the controlled insurer any act intended to affect the insurance operations of the insurer w/c, if done by the insurer, would violate any provision of this Code.

SECTION 298. In addition to any other penalty provided by law, the Commissioner may, upon the willful failure of any person within a holding company system to comply w/ this title or any regulation or order promulgated hereunder:

(a) proceed under title fourteen or title fifteen, Chapter III, of this Code w/ respect to insurer within the holding company system; or

(b) revoke or refuse to renew the authority to do business in this country of an insurer within the holding company system or refuse to issue such authority to any other insurer in the system; or

direct that, in addition to any other penalty provided by law, such person forfeit to the people of this country a sum not exceeding five hundred pesos for a first violation & two thousand five hundred pesos for any subsequent violation. An additional sum not exceeding two thousand five hundred pesos shall be imposed for each month during w/c any such violation shall continue.

CHAPTER II — CLASSES OF INSURANCE

Title I MARINE INSURANCE

Sub‑Title 1‑ A DEFINITION

SECTION 99. Marine Insurance includes:

(1) Insurance against loss of or damage to:

(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, securities, choses in action, evidences of debts, valuable papers, bottomry, & respondentia interests & all other kinds of property & interests therein, in respect to, appertaining to or in connection w/ any & all risks or perils of navigation, transit or transportation, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting shipment, or during any delays, storage, transhipment, or reshipment incident thereto, including war risks, marine builder’s risks, & all personal property floater risks;

(b) Person or property in connection w/ or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection w/ the construction, repair, operation, maintenance or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to any person arising out of ownership, maintenance, or use of automobiles);

(c) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise;

(d) Bridges, tunnels & other instrumentalities of transportation & communication (excluding buildings, their furniture & furnishings, fixed contents & supplies held in storage); piers, wharves, docks & slips, & other aids to navigation & transportation, including dry docks & marine railways, dams & appurtenant facilities for the control of waterways.

(2) “Marine protection & indemnity insurance,” meaning insurance against, or against legal liability of the insured for loss, damage, or expense incident to ownership, operation, chartering, maintenance, use, repair, or construction of any vessel, craft or instrumentality in use of ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person.

Sub‑Title 1‑B INSURABLE INTEREST

SECTION 100. The owner of a ship has in all cases an insurable interest in it, even when it has been chartered by one who covenants to pay him its value in case of loss: Provided, That in this case the insurer shall be liable for only that part of the loss w/c the insured cannot recover fr. the charterer.

SECTION 101. The insurable interest of the owner of the ship hypothecated by bottomry is only the excess of its value over the amount secured by bottomry.

SECTION 102. Freightage, in the sense of a policy of marine insurance, signifies all the benefits derived by the owner, either fr. the chartering of the ship or its employment for the carriage of his own goods or those of others.

SECTION 103. The owner of a ship has an insurable interest in expected freightage w/c according to the ordinary & probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage.

SECTION 104. The interest mentioned in the last section exists, in case of a charter party, when the ship has broken ground on the chartered voyage. If a price is to be paid for the carriage of goods it exists when they are actually on board, or there is some contract for putting them on board, & both ship & goods are ready for the specified voyage.

SECTION 105. One who has an interest in the thing fr. w/c profits are expected to proceed has an insurable interest in the profits.

SECTION 106. The charterer of a ship has an insurable interest in it, to the extent that he is liable to be damnified by its loss.

Sub‑Title 1‑C CONCEALMENT

SECTION 107. In marine insurance each party is bound to communicate, in addition to what is required by section twenty‑eight, all the information w/c he possesses, material to the risk, except such as is mentioned in Section thirty, & to state the exact & whole truth in relation to all matters that he represents, or upon inquiry discloses or assumes to disclose.

SECTION 108. In marine insurance, information of the belief or expectation of a third person, in reference to a material fact, is material.

SECTION 109. A person insured by a contract of marine insurance is presumed to have knowledge, at the time of insuring, of a prior loss, if the information might possibly have reached him in the usual mode of transmission & at the usual rate of communication.

SECTION 110. A concealment in a marine insurance, in respect to any of the following matters, does not vitiate the entire contract, but merely exonerates the insurer fr. a loss resulting fr. the risk concealed:

(a) The national character of the insured;

(b) The liability of the thing insured to capture & detention;

(c) The liability to seizure fr. breach of foreign laws of trade;

(d) The want of necessary documents;

(e) The use of false & simulated papers.

Sub‑Title 1‑D REPRESENTATION

SECTION 111. If a representation by a person insured by a contract of marine insurance, is intentionally false in any material respect, or in respect of any fact on w/c the character & nature of the risk depends, the insurer may rescind the entire contract.

SECTION 112. The eventual falsity of a representation as to expectation does not, in the absence of fraud, avoid a contract of marine insurance.

Sub‑Title 1‑E IMPLIED WARRANTIES

SECTION 113. In every marine insurance upon a ship or freight, or freightage, or upon any thing w/c is the subject of marine insurance, a warranty is implied that the ship is seaworthy.

SECTION 114. A ship is seaworthy when reasonably fit to perform the service & to encounter the ordinary perils of the voyage contemplated by the parties to the policy.

SECTION 115. An implied warranty of seaworthiness is complied w/ if the ship be seaworthy at the time of the of commencement of the risk, except in the following cases:

(a) When the insurance is made for a specified length of time, the implied warranty is not complied w/ unless the ship be seaworthy at the commencement of every voyage it undertakes during that time;

(b) When the insurance is upon the cargo w/c, by the terms of the policy, description of the voyage, or established custom of the trade, is to be transhipped at an intermediate port, the implied warranty is not complied w/ unless each vessel upon w/c the cargo is shipped, or transhipped, be seaworthy at the commencement of each particular voyage.

SECTION 116. A warranty of seaworthiness extends not only to the condition of the structure of the ship itself, but requires that it be properly laden, & provided w/ a competent master, a sufficient number of competent officers & seamen, & the requisite appurtenances & equipment, such as ballasts, cables & anchors, cordage & sails, food, water, fuel & lights, & other necessary or proper stores & implements for the voyage.

SECTION 117. Where different portions of the voyage contemplated by a policy differ in respect to the things requisite to make the ship seaworthy therefor, a warranty of seaworthiness is complied w/ if, at the commencement of each portion, the ship is seaworthy w/ reference to that portion.

SECTION 118. When the ship becomes unseaworthy during the voyage to w/c an insurance relates, an unreasonable delay in repairing the defect exonerates the insurer on ship or shipowner’s interest fr. liability fr. any loss arising therefr..

SECTION 119. A ship w/c is seaworthy for the purpose of an insurance upon the ship may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for the purpose of the insurance upon the cargo.

SECTION 120. Where the nationality or neutrality of a ship or cargo is expressly warranted, it is implied that the ship will carry the requisite documents to show such nationality or neutrality & that it will not carry any documents w/c cast reasonable suspicion thereon.





Sub‑Title 1‑F THE VOYAGE AND DEVIATION

SECTION 121. When the voyage contemplated by a marine insurance policy is described by the places of beginning & ending, the voyage insured in one w/c conforms to the course of sailing fixed by mercantile usage between those places.

SECTION 122. If the course of sailing is not fixed by mercantile usage, the voyage insured by a marine insurance policy is that way between the places specified, w/c to a master of ordinary skill & discretion, would mean the most natural, direct & advantageous.

SECTION 123. Deviation is a departure fr. the course of the voyage insured, mentioned in the last two sections, or an unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage.

SECTION 124. A deviation is proper:

(a) When caused by circumstances over w/c neither the master nor the owner of the ship has any control;

(b) When necessary to comply w/ a warranty, or to avoid a peril, whether or not the peril is insured against;

(c) When made in good faith, & upon reasonable grounds of belief in its necessity to avoid a peril; or

(d) When made in good faith, for the purpose of saving human life or relieving another vessel in distress.

SECTION 125. Every deviation not specified in the last section is improper.

SECTION 126. An insurer is not liable for any loss happening to the thing insured subsequent to an improper deviation.

Sub‑Title 1‑G LOSS

SECTION 127. A loss may be either total or partial.

SECTION 128. Every loss w/c is not total is partial.

SECTION 129. A total loss may be either actual or constructive.

SECTION 130. An actual total loss is cause by:

(a) A total destruction of the thing insured;

(b) The irretrievable loss of the thing by sinking, or by being broken up;

(c) Any damage to the thing w/c renders it valueless to the owner for the purpose for w/c he held it; or

(d) Any other event w/c effectively deprives the owner of the possession, at the port of destination, of the thing insured.

SECTION 131. A constructive total loss is one w/c gives to a person insured a right to abandon, under Section one hundred thirty‑nine.

SECTION 132. An actual loss may be presumed fr. the continued absence of a ship without being heard of. The length of time w/c is sufficient to raise this presumption depends on the circumstances of the case.

SECTION 133. When a ship is prevented, at an intermediate port, fr. completing the voyage, by the perils insured against, the liability of a marine insurer on the cargo continues after they are thus reshipped.

Nothing in this section shall prevent an insurer fr. requiring an additional premium if the hazard be increased by this extension of liability.

SECTION 134. In addition to the liability mentioned in the last section, a marine insurer is bound for damages, expenses of discharging, storage, reshipment, extra freightage, & all other expenses incurred in saving cargo reshipped pursuant to the last section, up to the amount insured.

Nothing in this or in the preceding section shall render a marine insurer liable for any amount in excess of the insured value or, if there be none, of the insurable value.

SECTION 135. Upon an actual total loss, a person insured is entitled to payment without notice of abandonment.

SECTION 136. Where it has been agreed that an insurance upon a particular thing, or class of things, shall be free fr. particular average, a marine insurer is not liable for any particular average loss not depriving the insured of the possession, at the port of destination, of the whole of such thing, or class of things, even though it becomes entirely worthless; but such insurer is liable for his proportion of all general average loss assessed upon the thing insured.

SECTION 137. An insurance confined in terms to an actual loss does not cover a constructive total loss, but covers any loss, w/c necessarily results in depriving the insured of the possession, at the port of destination, of the entire thing insured.

Sub‑Title 1‑H ABANDONMENT

SECTION 138. Abandonment, in marine insurance, is the act of the insured by w/c, after a constructive total loss, he declares the relinquishment to the insurer of his interest in the thing insured.

SECTION 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular portion thereof separately valued by the policy, or otherwise separately insured, & recover for a total loss thereof, when the cause of the loss is a peril insured against:

(a) If more than three‑fourths thereof in value is actually lost, or would have to be expended to recover it fr. the peril;

(b) If it is injured to such an extent as to reduce its value more than three‑fourths;

(c) If the thing insured is a ship, & the contemplated voyage cannot be lawfully performed without incurring either an expense to the insured of more than three‑fourths the value of the thing abandoned or a risk w/c a prudent man would not take under the circumstances; or

(d) If the thing insured, being cargo or freightage, & the voyage cannot be performed, nor another ship procured by the master, within a reasonable time & w/ reasonable diligence, to forward the cargo, without incurring the like expense or risk mentioned in the preceding sub‑paragraph. But freightage cannot in any case be abandoned unless the ship is also abandoned.

SECTION 140. An abandonment must be neither partial nor conditional.

SECTION 141. An abandonment must be made within a reasonable time after receipt of reliable information of the loss, but where the information is of a doubtful character, the insured is entitled to a reasonable time to make inquiry.

SECTION 142. Where the information upon w/c an abandonment has been made proves incorrect, or the thing insured was so far restored when the abandonment was made that there was then in fact no total loss, the abandonment becomes ineffectual.

SECTION 143. Abandonment is made by giving notice thereof to the insurer, w/c may be done orally, or in writing; Provided, That if the notice be done orally, a written notice of such abandonment shall be submitted within seven days fr. such oral notice.

SECTION 144. A notice of abandonment must be explicit, & must specify the particular cause of the abandonment, but need state only enough to show that there is probable cause therefor, & need not be accompanied w/ proof of interest or of loss.

SECTION 145. An abandonment can be sustained only upon the cause specified in the notice thereof.

SECTION 146. An abandonment is equivalent to a transfer by the insured of his interest to the insurer, w/ all the chances of recovery & indemnity.

SECTION 147. If a marine insurer pays for a loss as if it were an actual total loss, he is entitled to whatever may remain of the thing insured, or its proceeds or salvage, as if there had been a formal abandonment.

SECTION 148. Upon an abandonment, acts done in good faith by those who were agents of the insured in respect to the thing insured, subsequent to the loss, are at the risk of the insurer & for his benefit.

SECTION 149. Where notice of abandonment is properly given, the rights of the insured are not prejudiced by the fact that the insurer refuses to accept the abandonment.

SECTION 150. The acceptance of an abandonment may be either express or implied fr. the conduct of the insurer. The mere silence of the insurer for an unreasonable length of time after notice shall be construed as an acceptance.

SECTION 151. The acceptance of an abandonment, whether express or implied, is conclusive upon the parties, & admits the loss & the sufficiency of the abandonment.

SECTION 152. An abandonment once made & accepted is irrevocable, unless the ground upon w/c it was made proves to be unfounded.

SECTION 153. On an accepted abandonment of a ship, freightage earned previous to the loss belongs to the insurer of said freightage; but freightage subsequently earned belongs to the insurer of the ship.

SECTION 154. If an insurer refuses to accept a valid abandonment, he is liable as upon actual total loss, deducting fr. the amount any proceeds of the thing insured w/c may have come to the hands of the insured.

SECTION 155. If a person insured omits to abandon, he may nevertheless recover his actual loss.

Sub‑Title 1‑I MEASURE OF INDEMNITY

SECTION 156. A valuation in a policy of marine insurance in conclusive between the parties thereto in the adjustment of either a partial or total loss, if the insured has some interest at risk, & there is no fraud on his part; except that when a thing has been hypothecated by bottomry or respondentia, before its insurance, & without the knowledge of the person actually procuring the insurance, he may show the real value. But a valuation fraudulent in fact, entitles the insurer to rescind the contract.

SECTION 157. A marine insurer is liable upon a partial loss, only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured.

SECTION 158. Where profits are separately insured in a contract of marine insurance, the insured is entitled to recover, in case of loss, a proportion of such profits equivalent to the proportion w/c the value of the property lost bears to the value of the whole.

SECTION 159. In case of a valued policy of marine insurance on freightage or cargo, if a part only of the subject is exposed to the risk, the evaluation applies only in proportion to such part.

SECTION 160. When profits are valued & insured by a contract of marine insurance, a loss of them is conclusively presumed fr. a loss of the property out of w/c they are expected to arise, & the valuation fixes their amount.

SECTION 161. In estimating a loss under an open policy of marine insurance the following rules are to be observed:

(a) The value of a ship is its value at the beginning of the risk, including all articles or charges w/c add to its permanent value or w/c are necessary to prepare it for the voyage insured;

(b) The value of the cargo is its actual cost to the insured, when laden on board, or where the cost cannot be ascertained, its market value at the time & place of lading, adding the charges incurred in purchasing & placing it on board, but without reference to any loss incurred in raising money for its purchase, or to any drawback on its exportation, or to the fluctuation of the market at the port of destination, or to expenses incurred on the way or on arrival;

(c) The value of freightage is the gross freightage, exclusive of primage, without reference to the cost of earning it; &

(d) The cost of insurance is in each case to be added to the value thus estimated.

SECTION 162. If cargo insured against partial loss arrives at the port of destination in a damaged condition, the loss of the insured is deemed to be the same proportion of the value w/c the market price at that port, of the thing so damaged, bears to the market price it would have brought if sound.

SECTION 163. A marine insurer is liable for all the expenses attendant upon a loss w/c forces the ship into port to be repaired; & where it is stipulated in the policy that the insured shall labor for the recovery of the property, the insurer is liable for the expense incurred thereby, such expense, in either case, being in addition to a total loss, if that afterwards occurs.

SECTION 164. A marine insurer is liable for a loss falling upon the insured, through a contribution in respect to the thing insured, required to be made by him towards a general average loss called for by a peril insured against; provided, that the liability of the insurer shall be limited to the proportion of contribution attaching to his policy value where this is less than the contributing value of the thing insured.

SECTION 165. When a person insured by a contract of marine insurance has a demand against others for contribution, he may claim the whole loss fr. the insurer, subrogating him to his own right to contribution. But no such claim can be made upon the insurer after the separation of the interests liable to the contribution, nor when the insured, having the right & opportunity to enforce the contribution fr. others, has neglected or waived the exercise of that right.

SECTION 166. In the case of a partial loss of ship or its equipment, the old materials are to be applied towards payment for the new. Unless otherwise stipulated in the policy, a marine insurer is liable for only two‑thirds of the remaining cost of repairs after such deduction, except that anchors must be paid in full.

Title II FIRE INSURANCE

SECTION 167. As used in this Code, the term “fire insurance” shall include insurance against loss by fire, lightning, windstorm, tornado or earthquake & other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies.

SECTION 168. An alteration in the use or condition of a thing insured fr. that to w/c it is limited by the policy made without the consent of the insurer, by means within the control of the insured, & increasing the risks, entitles an insurer to rescind a contract of fire insurance.

SECTION 169. An alteration in the use or condition of a thing insured fr. that to w/c it is limited by the policy, w/c does not increase the risk, does not affect a contract of fire insurance.

SECTION 170. A contract of fire insurance is not affected by any act of the insured subsequent to the execution of the policy, w/c does not violate its provisions, even though it increases the risk & is the cause of the loss.

SECTION 171. If there is no valuation in the policy, the measure of indemnity in an insurance against fire is the expense it would be to the insured at the time of the commencement of the fire to replace the thing lost or injured in the condition in w/c at the time of the injury; but if there is a valuation in a policy of fire insurance, the effect shall be the same as in a policy of marine insurance.

SECTION 172. Whenever the insured desires to have a valuation named in his policy, insuring any building or structure against fire, he may require such building or structure to be examined by an independent appraiser & the value of the insured’s interest therein may then be fixed as between the insurer & the insured. The cost of such examination shall be paid for by the insured. A clause shall be inserted in such policy stating substantially that the value of the insured’s interest in such building or structure has been thus fixed. In the absence of any change increasing the risk without the consent of the insurer or of fraud on the part of the insured, then in case of a total loss under such policy, the whole amount so insured upon the insured’s interest in such building or structure, as stated in the policy upon w/c the insurers have received a premium, shall be paid, & in case of a partial loss the full amount of the partial loss shall be so paid, & in case there are two or more policies covering the insured’s interest therein, each policy shall contribute pro rata to the payment of such whole or partial loss. But in no case shall the insurer be required to pay more than the amount thus stated in such policy. This section shall not prevent the parties fr. stipulating in such policies concerning the repairing, rebuilding or replacing of buildings or structures wholly or partially damaged or destroyed.

SECTION 173. No policy of fire insurance shall be pledged, hypothecated, or transferred to any person, firm or company who acts as agent for or otherwise represents the issuing company, & any such pledge, hypothecation, or transfer hereafter made shall be void & of no effect insofar as it may affect other creditors of the insured.

Title III CASUALTY INSURANCE

SECTION 174. Casualty insurance is insurance covering loss or liability arising fr. accident or mishap, excluding certain types of loss w/c by law or custom are considered as falling exclusively within the scope of other types of insurance such as fire or marine. It includes, but is not limited to, employer’s liability insurance, motor vehicle liability insurance, plate glassinsurance, burglary & theft insurance, personal accident & health insurance as written by non‑life insurance companies, & other substantially similar kinds of insurance.

Title IV SURETYSHIP

SECTION 175. A contract of suretyship is an agreement whereby a party called the surety guarantees the performance by another party called the principal or obligor of an obligation or undertaking in favor of a third party called the obligee. It includes official recognizances, stipulations, bonds or undertakings issued by any company by virtue of & under the provisions of Act No. 536, as amended by Act No. 2206.

SECTION 176. The liability of the surety or sureties shall be joint & several w/ the obligor & shall be limited to the amount of the bond. It is determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor & the obligee. (As amended by Presidential Decree No. 1455)

SECTION 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected & delivered to the obligor. No contract of suretyship or bonding shall be valid & binding unless & until the premium therefor has been paid, except where the obligee has accepted the bond, in w/c case the bond becomes valid & enforceable irrespective of whether or not the premium has been paid by the obligor to the surety; Provided, That if the contract of suretyship or bond is not accepted by, or filed w/ the obligee, the surety shall collect only reasonable amount, not exceeding fifty per centum of the premium due thereon as service fee plus the cost of stamps or other taxes imposed for the issuance of the contract or bond; Provided, however, That if the non‑acceptance of the bond be due to the fault or negligence of the surety, no such service fee, stamps or taxes shall be collected.

In the case of a continuing bond, the obligor shall pay the subsequent annual premium as it falls due until the contract of suretyship is cancelled by the obligee or by the Commissioner or by a court of competent jurisdiction, as the case may be.

SECTION 178. Pertinent provisions of the Civil Code of the Philippines shall be applied in a suppletory character whenever necessary in interpreting the provisions of a contract of suretyship.

Title V LIFE INSURANCE

SECTION 179. Life insurance is insurance on human lives & insurance appertaining thereto or connected therewith.

SECTION 180. An insurance upon life may be made payable on the death of the person, or on his surviving a specified period, or otherwise contingently on the continuance or cessation of life.

Every contract or pledge for the payment of endowments or annuities shall be considered a life insurance contract for purpose of this Code

In the absence of a judicial guardian, the father, or in the latter’s absence or incapacity, the mother, or any minor, who is an insured or a beneficiary under a contract of life, health or accident insurance, may exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such right may include, but shall not be limited to, obtaining a policy loan, surrendering the policy, receiving the proceeds of the policy, & giving the minor’s consent to any transaction on the policy.

SECTION 180‑A. The insurer in a life insurance contract shall be liable in case of suicides only when it is committed after the policy has been in force for a period of two years fr. the date of its issue or of its last reinstatement, unless the policy provides a shorter period: Provided, however, That suicide committed in the state of insanity shall be compensable regardless of the date of commission. (As amended by Batasang Pambansa Blg. 874)

SECTION 181. A policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, & such person may recover upon it whatever the insured might have recovered.

SECTION 182. Notice to an insurer of a transfer or bequest thereof is not necessary to preserve the validity of a policy of insurance upon life or health, unless thereby expressly required.

SECTION 183. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy.

The Insurance Code

CHAPTER I



PRESIDENTIAL DECREE NO. 612

ORDAINING AND INSTITUTING AN INSURANCE CODE OF THE PHILIPPINES

I, Ferdinand E. Marcos, President of the Philippines, by virtue of the powers in me vested by the Constitution, do hereby decree & order the following:

GENERAL PROVISIONS

SECTION 1. This Decree shall be known as “The Insurance Code”.

SECTION 2. Whenever used in this Code, the following terms shall have the respective meanings hereinafter set forth or indicated, unless the context otherwise requires:

(1) A “contract of insurance” is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising fr. an unknown or contingent event.

A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only if made by a surety who or w/c, as such, is doing an insurance business as hereinafter provided.

(2) The term “doing an insurance business” or “transacting an insurance business”, within the meaning of this Code, shall include (a) making or proposing to make, as insurer, any insurance contract; (b) making or proposing to make, as surety, any contract of suretyship as a vocation & not as merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

In the application of the provisions of this Code the fact that no profit is derived fr. the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business.

(3) As used in this code, the term “Commissioner” means the “Insurance Commissioner”. acd

CHAPTER I — THE CONTRACT OF INSURANCE

Title I WHAT MAY BE INSURED

SECTION 3. Any contingent or unknown event, whether past or future, w/c may damnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter.

The consent of the husband is not necessary for the validity of an insurance policy taken out by a married woman on her life or that of her children.

Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract for life, health & accident insurance, w/ any insurance company duly authorized to do business in the Philippines, provided the insurance is taken on his own life & the beneficiary appointed is the minor’s estate or the minor’s father, mother, husband, wife, child, brother or sister.

The married woman or the minor herein allowed to take out an insurance policy may exercise all the rights & privileges of an owner under a policy.

All rights, title & interest in the policy of insurance taken out by an original owner on the life or health of a minor shall automatically vest in the minor upon the death of the original owner, unless otherwise provided for in the policy.

SECTION 4. The preceding section does not authorize an insurance for or against the drawing of any lottery, or for or against any chance or ticket in a lottery drawing a prize.

SECTION 5. All kinds of insurance are subject to the provisions of this chapter so far as the provisions can apply.

Title II PARTIES TO THE CONTRACT

SECTION 6. Every person, partnership, association, or corporation duly authorized to transact insurance business as elsewhere provided in this code, may be an insurer.

SECTION 7. Anyone except a public enemy may be insured.

SECTION 8. Unless the policy otherwise provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, & any act of his, prior to the loss, w/c would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act w/c, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, w/ the same effect as if it had been performed by the mortgagor.

SECTION 9. If an insurer assents to the transfer of an insurance fr. a mortgagor to a mortgagee, &, at the time of his assent, imposes further obligation on the assignee, making a new contract w/ him, the act of the mortgagor cannot affect the rights of said assignee.

Title III INSURABLE INTEREST

SECTION 10. Every person has an insurable interest in the life & health:

(a) Of himself, of his spouse & of his children;

(b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;

(c) Of any person under a legal obligation to him for the payment of money, or respecting property or services, of w/c death or illness might delay or prevent the performance; &

(d) Of any person upon whose life any estate or interest vested in him depends.

SECTION 11. The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right in said policy.

SECTION 12. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal, accomplice, or accessory in willfully bringing about the death of the insured; in w/c event, the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified.

SECTION 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured, is an insurable interest.

SECTION 14. An insurable interest in property may consist in:

(a) An existing interest;

(b) An inchoate interest founded on an existing interest; or

(c) An expectancy, coupled w/ an existing interest in that out of w/c the expectancy arises.

SECTION 15. A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof.

SECTION 16. A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon any valid contract for it, is not insurable.

SECTION 17. The measure of an insurable interest in property is the extent to w/c the insured might be damnified by loss or injury thereof.

SECTION 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured.

SECTION 19. An interest in property insured must exist when the insurance takes effect, & when the loss occurs, but not exist in the meantime; & interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.

SECTION 20. Except in the cases specified in the next four sections, & in the cases of life, accident, & health insurance, a change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing & the interest in the insurance are vested in the same person.

SECTION 21. A change in interest in a thing insured, after the occurrence of an injury w/c results in a loss, does not affect the right of the insured to indemnity for the loss.

SECTION 22. A change of interest in one or more several distinct things, separately insured by one policy, does not avoid the insurance as to the others.

SECTION 23. A change on interest, by will or succession, on the death of the insured, does not avoid an insurance; & his interest in the insurance passes to the person taking his interest in the thing insured.

SECTION 24. A transfer of interest by one of several partners, joint owners, or owners in common, who are jointly insured, to the others, does not avoid an insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured.

SECTION 25. Every stipulation in a policy of insurance for the payment of loss whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, & every policy executed by way of gaming or wagering, is void.

Title IV CONCEALMENT

SECTION 26. A neglect to communicate that w/c a party knows & ought to communicate, is called a concealment.

SECTION 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. (As amended by Batasang Pambansa Blg. 874)

SECTION 28. Each party to a contract of insurance must communicated to the other, in good faith, all facts within his knowledge w/c are material to the contract & as to w/c he makes no warranty, & w/c the other has not the means of ascertaining.

SECTION 29. An intentional & fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind.

SECTION 30. Neither party to a contract of insurance is bound to communicate information of the matters following, except in answer to the inquiries of the other:

(a) Those w/c the other knows;

(b) Those w/c, in the exercise of ordinary care, the other ought to know, & of w/c the former has no reason to suppose him ignorant;

(c) Those of w/c the other waives communication;

(d) Those w/c prove or tend to prove the existence of a risk excluded by a warranty, & w/c are not otherwise material; &

(e) Those w/c relate to a risk excepted fr. the policy & w/c are not otherwise material.

SECTION 31. Materiality is to be determined not by the event, but solely by the probable & reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries.

SECTION 32. Each party to a contract of insurance is bound to know all the general causes w/c are open to his inquiry, equally w/ that of the other, & w/c may affect the political or material perils contemplated; & all general usages of trade.

SECTION 33. The right to information of material facts may be waived, either by the terms of the insurance or by neglect to make inquiry as to such facts, where they are distinctly implied in other facts of w/c information is communicated.

SECTION 34. Information of the nature or amount of the interest of one insured need not be communicated unless in answer to an inquiry, except as prescribed by section fifty‑one.

SECTION 35. Neither party to a contract of insurance is bound to communicate, even upon inquiry, information of his own judgment upon the matters in question.

Title V REPRESENTATION

SECTION 36. A representation may be oral or written.

SECTION 37. A representation may be made at the time of, or before, issuance of the policy.

SECTION 38. The language of a representation is to be interpreted by the same rules as the language of contracts in general.

SECTION 39. A representation as to the future is to be deemed a promise, unless it appears that it was merely a statement of belief or expectation.

SECTION 40. A representation cannot qualify an express provision in a contract of insurance, but it may qualify an implied warranty.

SECTION 41. A representation may be altered or withdrawn before the insurance is effected, but not afterwards.

SECTION 42. A representation must be presumed to refer to the date on w/c the contract goes into effect.

SECTION 43. When a person insured has no personal knowledge of a fact, he may nevertheless repeat information w/c he has upon the subject, & w/c he believes to be true, w/ the explanation that he does so on the information of others; or he may submit the information, in its whole extent, to the insurer; & in neither case is he responsible for its truth, unless it proceeds fr. an agent of the insured, whose duty it is to give the information.

SECTION 44. A representation is to be deemed false when the facts fail to correspond w/ its assertions or stipulations.

SECTION 45. If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract fr. the time when the representation becomes false. The right to rescind granted by this Code to the insurer is waived by the acceptance of premium payments despite knowledge of the ground for rescission. (As amended by Batasang Pambansa Blg. 874)

SECTION 46. The materiality of a representation is determined by the same rules as the materiality of a concealment.

SECTION 47. The provisions of this chapter apply as well to a modification of a contract of insurance as to its original formation.

SECTION 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract.

After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years fr. the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent.

Title VI THE POLICY

SECTION 49. The written instrument in w/c a contract of insurance is set forth, is called a policy of insurance.

SECTION 50. The policy shall be in printed form w/c may contain blank spaces; & any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spaces provided therein.

Any rider, clause, warranty or endorsement purporting to be part of the contract of insurance & w/c is pasted or attached to said policy is not binding on the insured, unless the descriptive title or name of the rider, clause, warranty or endorsement is also mentioned & written on the blank spaces provided in the policy.

Unless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, w/c countersignature shall be taken as his agreement to the contents of such rider, clause, warranty or endorsement.

Group insurance & group annuity policies, however, may be typewritten & need not be in printed form.

SECTION 51. A policy of insurance must specify:

(a) The parties between whom the contract is made;

(b) The amount to be insured except in the cases of open or running policies;

(c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis & rates upon w/c the final premium is to be determined;

(d) The property or life insured;

(e) The interest of the insured in property insured, if he is not the absolute owner thereof;

(f) The risks insured against; &

(g) The period during w/c the insurance is to continue.

SECTION 52. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. Within sixty days after the issue of the cover note, a policy shall be issued in lieu thereof, including within its terms the identical insurance bound under the cover note & the premium therefor.

Cover notes may be extended or renewed beyond such sixty days w/ the written approval of the Commissioner if he determines that such extension is not contrary to & is not for the purpose of violating any provisions of this Code. The Commissioner may promulgate rules & regulations governing such extensions for the purpose of preventing such violations & may by such rules & regulations dispense w/ the requirement of written approval by him in the case of extension in compliance w/ such rules & regulations.

SECTION 53. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy.

SECTION 54. When an insurance contract is executed w/ an agent or trustee as the insured, the fact that his principal or beneficiary is the real party in interest may be indicated by describing the insured as agent or trustee, or by other general words in the policy.

SECTION 55. To render an insurance effected by one partner or part‑owner, applicable to the interest of his co‑partners or other part‑owners, it is necessary that the terms of the policy should be such as are applicable to the joint or common interest.

SECTION 56. When the description of the insured in a policy is so general that it may comprehend any person or any class of persons, only he who can show that it was intended to include him can claim the benefit of the policy.

SECTION 57. A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured.

SECTION 58. The mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy & the thing insured.

SECTION 59. A policy is either open, valued or running.

SECTION 60. An open policy is one in w/c the value of the thing insured is not agreed upon, but is left to be ascertained in case of loss.

SECTION 61. A valued policy is one w/c expresses on its face an agreement that the thing insured shall be valued at a specific sum.

SECTION 62. A running policy is one w/c contemplates successive insurances, & w/c provides that the object of the policy may be fr. time to time defined, especially as to the subjects of insurance, by additional statements or indorsements.

SECTION 63. A condition, stipulation, or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year fr. the time when the cause of action accrues, is void.

SECTION 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, & no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:

(a) non‑payment of premium;

(b) conviction of a crime arising out of acts increasing the hazard insured against;

(c) discovery of fraud or material misrepresentation;

(d) discovery of willful or reckless acts or omissions increasing the hazard insured against;

(e) physical changes in the property insured w/c result in the property becoming uninsurable; or

(f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code.

SECTION 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy, & shall state (a) w/c of the grounds set forth in section sixty‑four is relied upon & (b) that, upon written request of the named insured, the insurer will furnish the facts on w/c the cancellation is based.

SECTION 66. In case of insurance other than life, unless the insurer at least forty‑five days in advance of the end of the policy period mails or delivers to the named insured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages, the named insured shall be entitled to renew the policy upon payment of the premium due on the effective date of the renewal. Any policy written for a term of less than one year shall be considered as if written for a term of one year. Any policy written for a term longer than one year or any policy w/ no fixed expiration date shall be considered as if written for successive policy periods or terms of one year.

Title VII WARRANTIES

SECTION 67. A warranty is either expressed or implied.

SECTION 68. A warranty may relate to the past, the present, the future, or to any or all of these.

SECTION 69. No particular form of words is necessary to create a warranty.

SECTION 70. Without prejudice to section fifty‑one, every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured & referred to in the policy as making a part of it.

SECTION 71. A statement in a policy of matter relating to the person or thing insured, or to the risk, as a fact, is an express warranty thereof.

SECTION 72. A statement in a policy w/c imparts that it is intended to do or not to do a thing w/c materially affects the risk, is a warranty that such act or omission shall take place.

SECTION 73. When, before the time arrives for the performance of a warranty relating to the future, a loss insured against happens, or performance becomes unlawful at the place of the contract, or impossible, the omission to fulfill the warranty does not avoid the policy.

SECTION 74. The violation of a material warranty, or other material provision of a policy, on the part of either party thereto, entitles the other to rescind.

SECTION 75. A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy.

SECTION 76. A breach of warranty without fraud merely exonerates an insurer fr. the time that it occurs, or where it is broken in its inception, prevents the policy fr. attaching to the risk.

Title VIII PREMIUM

SECTION 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid & binding unless & until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.

SECTION 78. An acknowledgment in a policy or contract of insurance or the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid.

SECTION 79. A person insured is entitled to a return of premium, as follows:

(a) To the whole premium if no part of his interest in the thing insured be exposed to any of the perils insured against;

(b) Where the insurance is made for a definite period of time & the insured surrenders his policy, to such portion of the premium as corresponds w/ the unexpired time, at a pro rata rate, unless a short period rate has been agreed upon & appears on the face of the policy, after deducting fr. the whole premium any claim for loss or damage under the policy w/c has previously accrued; Provided, That no holder of a life insurance policy may avail himself of the privileges of this paragraph without sufficient cause as otherwise provided by law.

SECTION 80. If a peril insured against has existed, & the insurer has been liable for any period, however short, the insured is not entitled to return of premiums, so far as that particular risk is concerned.

SECTION 81. A person insured is entitled to return of the premium when the contract is voidable, on account of fraud or misrepresentation of the insurer, or of his agent, or on account of facts, the existence of w/c the insured was ignorant without his fault; or when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy.

SECTION 82. In case of an over‑insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by w/c the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk.

Title IX LOSS

SECTION 83. An agreement not to transfer the claim of the insured against the insurer after the loss has happened, is void if made before the loss except as otherwise provided in the case of life insurance.

SECTION 84. Unless otherwise provided by the policy, an insurer is liable for a loss of w/c a peril insured against was the proximate cause, although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss w/c the peril insured against was only a remote cause.

SECTION 85. An insurer is liable where the thing insured is rescued fr. a peril insured against that would otherwise have caused a loss, if, in the course of such rescue, the thing is exposed to a peril not insured against, w/c permanently deprives the insured of its possession, in whole or in part; or where a loss is caused by efforts to rescue the thing insured fr. a peril insured against.

SECTION 86. Where a peril is especially excepted in a contract of insurance, a loss, w/c would not have occurred but for such peril, is thereby excepted although the immediate cause of the loss was a peril w/c was not excepted.

SECTION 87. An insurer is not liable for a loss caused by the willful act or through the connivance of the insured; but he is not exonerated by the negligence of the insured, or of the insurance agents or others.

Title X NOTICE OF LOSS

SECTION 88. In case of loss upon an insurance against fire, an insurer is exonerated, if notice thereof be not given to him by an insured, or some person entitled to the benefit of the insurance, without unnecessary delay.

SECTION 89. When a preliminary proof of loss is required by a policy, the insured is not bound to give such proof as would be necessary in a court of justice; but it is sufficient for him to give the best evidence w/c he has in his power at the time.

SECTION 90. All defects in a notice of loss, or in preliminary proof thereof, w/c the insured might remedy, & w/c the insurer omits to specify to him, without unnecessary delay, as grounds of objection, are waived.

SECTION 91. Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of him, or if he omits to take objection promptly & specifically upon that ground.

SECTION 92. If the policy requires, by way of preliminary proof of loss, the certificate or testimony of a person other than the insured, it is sufficient for the insured to use reasonable diligence to procure it, & in case of the refusal of such person to give it, then to furnish reasonable evidence to the insurer that such refusal was not induced by any just grounds of disbelief in the facts necessary to be certified or testified.

Title XI DOUBLE INSURANCE

SECTION 93. A double insurance exists where the same person is insured by several insurers separately in respect to the same subject & interest.

SECTION 94. Where the insured is overinsured by double insurance:

(a) The insured, unless the policy otherwise provides, may claim payment fr. the insurers in such order as he may select, up to the amount for w/c the insurers are severally liable under their respective contracts;

(b) Where the policy under w/c the insured claims is a valued policy, the insured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the subject matter insured;

(c) Where the policy under w/c the insured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any policy;

(d) Where the insured receives any sum in excess of the valuation in the case of valued policies, or of the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves;

(e) Each insurer is bound, as between himself & the other insurers, to contribute ratably to the loss in proportion to the amount for w/c he is liable under his contract.

Title XII REINSURANCE

SECTION 95. A contract of reinsurance is one by w/c an insurer procures a third person to insure him against loss or liability by reason of such original insurance.

SECTION 96. Where an insurer obtains reinsurance, except under automatic reinsurance treaties, he must communicate all the representations of the original insured, & also all the knowledge & information he possesses, whether previously or subsequently acquired, w/c are material to the risk.

SECTION 97. A reinsurance is presumed to be a contract of indemnity against liability, & not merely against damage.

SECTION 98. The original insured has no interest in a contract of reinsurance.