The Insurance and Pre-need Codes

Section 3

Any contingent or unknown event, whether past or future, which 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 spouse is not necessary for the validity of an insurance policy taken out by a married person on his or her life or that of his or her children. All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of the person insured shall automatically vest in the latter 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.

Section 101

Marine Insurance includes: (a) Insurance against loss of or damage to: (1) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, securities, choses in action, instruments of debts, valuable papers, bottomry, and respondentia interests and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any and 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, and all personal property floater risks; (2) Person or property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection with 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); (3) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise; and (4) Bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage); piers, wharves, docks and slips, and other aids to navigation and transportation, including dry docks and marine railways, dams and appurtenant facilities for the control of waterways. (b) Marine protection and 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 102

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 to case of loss: Provided, That in this case the insurer shall be liable for only that part of the loss which the insured cannot recover from the charterer.

Section 103

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 104

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

Section 105

The owner of a ship has an insurable interest in expected freightage which according to the ordinary and 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 106

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, and both ship and goods are ready for the specified voyage.

Section 107

One who has an interest in the thing from which profits are expected to proceed has an insurable interest in the profits.

Section 108

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 109

In marine insurance, each party is bound to communicate, in addition to what is required by Section 28, all the information which he possesses, material to the risk, except such as is mentioned in Section 30, and to state the exact and whole truth in relation to all matters that he represents, or upon inquiry discloses or assumes to disclose.

Section 110

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

Section 111

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 and at the usual rate of communication.

Section 112

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 from a loss resulting from the risk concealed: (a) The national character of the insured; (b) The liability of the thing insured to capture and detention; (c) The liability to seizure from breach of foreign laws of trade; (d) The want of necessary documents; and (e) The use of false and simulated papers. SUB-TITLE 1-D Representation

Section 113

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 which the character and nature of the risk depends, the insurer may rescind the entire contract.

Section 114

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 116

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

Section 117

An implied warranty of seaworthiness is complied with if the ship be seaworthy at the time of the 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 with unless the ship be seaworthy at the commencement of every voyage it undertakes during that time; (b) When the insurance is upon the cargo which, 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 with unless each vessel upon which the cargo is shipped, or transhipped, be seaworthy at the commencement of each particular voyage.

Section 118

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

Section 119

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 with if, at the commencement of each portion, the ship is seaworthy with reference to that portion.

Section 120

When the ship becomes unseaworthy during the voyage to which an insurance relates, an unreasonable delay in repairing the defect exonerates the insurer on ship or shipowner's interest from liability from any loss arising therefrom.

Section 121

A ship which 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 insurance upon the cargo.

Section 122

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 and that it will not carry any documents which cast reasonable suspicion thereon. SUB-TITLE 1-F The Voyage and Deviation

Section 123

When the voyage contemplated by a marine insurance policy is described by the places of beginning and ending, the voyage insured is one which conforms to the course of sailing fixed by mercantile usage between those places.

Section 124

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, which to a master of ordinary skill and discretion, would mean the most natural, direct and advantageous.

Section 125

Deviation is a departure from the course of the voyage insured, mentioned in the last two (2) sections, or an unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage.

Section 126

A deviation is proper: (a) When caused by circumstances over which neither the master nor the owner of the ship has any control; (b) When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured against; (c) When made in good faith, and 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 127

Every deviation not specified in the last section is improper.

Section 128

An insurer is not liable for any loss happening to the thing insured subsequent to an improper deviation. SUB-TITLE 1-G Loss

Section 129

A loss may be either total or partial.

Section 130

Every loss which is not total is partial.

Section 131

A total loss may be either actual or constructive.

Section 132

An actual total loss is caused by: (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 which renders it valueless to the owner for the purpose for which he held it; or (d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured.

Section 133

A constructive total loss is one which gives to a person insured a right to abandon, under Section 141.

Section 134

An actual loss may be presumed from the continued absence of a ship without being heard of. The length of time which is sufficient to raise this presumption depends on the circumstances of the case.

Section 135

When a ship is prevented, at an intermediate port, from 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 from requiring an additional premium if the hazard be increased by this extension of liability.

Section 136

In addition to the liability mentioned in the last section, a marine insurer is bound for damages, expenses of discharging, storage, reshipment, extra freightage, and 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 137

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

Section 138

Where it has been agreed that an insurance upon a particular thing, or class of things, shall be free from 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 139

An insurance confined in terms to an actual loss does not cover a constructive total loss, but covers any loss, which 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 140

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

Section 141

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, and recover for a total loss thereof, when the cause of the loss is a peril insured against: (a) If more than three-fourths (3/4) thereof in value is actually lost, or would have to be expended to recover it from the peril; (b) If it is injured to such an extent as to reduce its value more than three-fourths (3/4); (c) If the thing insured is a ship, and the contemplated voyage cannot be lawfully performed without incurring either an expense to the insured of more than three-fourths (3/4) the value of the thing abandoned or a risk which a prudent man would not take under the circumstances; or (d) If the thing insured, being cargo or freightage, and the voyage cannot be performed, nor another ship procured by the master, within a reasonable time and with reasonable diligence, to forward the cargo, without incurring the like expense or risk mentioned in the preceding subparagraph. But freightage cannot in any case be abandoned unless the ship is also abandoned.

Section 142

An abandonment must be neither partial nor conditional.

Section 143

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 144

Where the information upon which 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 145

Abandonment is made by giving notice thereof to the insurer, which 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 (7) days from such oral notice.

Section 146

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

Section 147

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

Section 148

An abandonment is equivalent to a transfer by the insured of his interest to the insurer, with all the chances of recovery and indemnity.

Section 149

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 150

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, and for his benefit.

Section 151

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 152

The acceptance of an abandonment may be either express or implied from 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 153

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

Section 154

An abandonment once made and accepted is irrevocable, unless the ground upon which it was made proves to be unfounded.

Section 155

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 156

If an insurer refuses to accept a valid abandonment, he is liable as upon an actual total loss, deducting from the amount any proceeds of the thing insured which may have come to the hands of the insured.

Section 157

If a person insured omits to abandon, he may nevertheless recover his actual loss. SUB-TITLE 1-I Measure of Indemnity

Section 158

A valuation in a policy of marine insurance is conclusive between the parties thereto in the adjustment of either a partial or total loss, if the insured has some interest at risk, and there is no fraud on his part; except that when a thing has been hypothecated by bottomry or respondentia, before its insurance, and 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 159

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 160

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 which the value of the property lost bears to the value of the whole.

Section 161

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

Section 162

When profits are valued and insured by a contract of marine insurance, a loss of them is conclusively presumed from a loss of the property out of which they are expected to arise, and the valuation fixes their amount.

Section 163

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 which add to its permanent value or which 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 and place of lading, adding the charges incurred in purchasing and 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; and (d) The cost of insurance is in each case to be added to the value thus estimated.

Section 164

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 which the market price at that port, of the thing so damaged, bears to the market price it would have brought if sound.

Section 165

A marine insurer is liable for all the expenses attendant upon a loss which forces the ship into port to be repaired; and 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 166

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 167

When a person insured by a contract of marine insurance has a demand against others for contribution, he may claim the whole loss from 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 contribution, nor when the insured, having the right and opportunity to enforce contribution from others, has neglected or waived the exercise of that right.

Section 168

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 (2/3) of the remaining cost of repairs after such deduction, except that anchors must be paid in full.

Section 190

For purposes of this Code, the term insurer or insurance company shall include all partnerships, associations, cooperatives 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 term shall also include professional reinsurers defined in Section 288. 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 191

The provisions of the Corporation Code, as amended, shall apply to all insurance corporations now or hereafter engaged in business in the Philippines insofar as they do not conflict with the provisions of this chapter.

Section 192

No corporation, partnership, or association of persons shall transact any insurance business in the Philippines except as agent of a corporation, partnership or association authorized to do the business of insurance in the Philippines, unless possessed of the capital and assets required of an insurance corporation doing the same kind of business in the Philippines and invested in the same manner; unless the Commissioner shall have granted it a certificate to the effect that it has complied with all the provisions of this Code. Every entity receiving any such certificate of authority shall be subject to the insurance and other applicable laws of the Philippines and to the jurisdiction and supervision of the Commissioner.

Section 193

No insurance company shall transact any insurance business in the Philippines until after it shall have obtained a certificate of authority for that purpose from the Commissioner upon application therefor and 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 and 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 local economic requirements, and that the direction and administration, as well as the integrity and responsibility of the organizers and administrators, the financial organization and the amount of capital, reasonably assure the safety of the interests of the policyholders and the public. In order to maintain the quality of the management of the insurance companies and afford better protection to policyholders and the public in general, any person of good moral character, unquestioned integrity and recognized competence may be elected or appointed director or officer of insurance companies in accordance with the pertinent provisions contained in the corporate governance circulars prescribed by the Commissioner. In addition hereto, the Commissioner shall prescribe the qualifications of directors, executive officers and other key officials of insurance companies for purposes of this section. No person shall concurrently be a Director and/or Officer of an insurance company and an adjustment company. 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. The Commissioner may issue rules and regulations on the use of names of insurance companies and other supervised persons or entities. The certificate of authority issued by the Commissioner shall expire on the last day of December, three (3) years following its date of issuance, and shall be renewable every three (3) years thereafter, subject to the company's continuing compliance with the provisions of this Code, circulars, instructions, rulings or decisions of the Commission. Every company receiving any such certificates of authority shall be subject to the provisions of this Code and other related laws and to the jurisdiction and supervision of the Commissioner. No insurance company may be authorized to transact in the Philippines the business of life and non-life insurance concurrently, unless specifically authorized to do so by the Commissioner: Provided, That the terms life and non-life insurance shall be deemed to include health, accident and disability insurance. No insurance company shall have equity in an adjustment company and neither shall an adjustment company have equity in an insurance company. No insurance company issued with a valid certificate of authority to transact insurance business anywhere in the Philippines by the Insurance Commissioner, shall be barred, prevented, or disenfranchised from issuing any insurance policy or from transacting any insurance business within the scope or coverage of its certificate of authority, anywhere in the Philippines, by any local government unit or authority, for whatever guise or reason whatsoever, including under any kind of ordinance, accreditation system, or scheme. Any local ordinance or local government unit regulatory issuance imposing such restriction or disenfranchisement on any insurance company shall be deemed null and void ab initio.

Section 194

Except as provided in Section 289, no new domestic life or non-life insurance company shall, in a stock corporation, engage in business in the Philippines unless possessed of a paid-up capital equal to at least One billion pesos (P1,000,000,000.00): Provided, That a domestic insurance company already doing business in the Philippines shall have a net worth by June 30, 2013 of Two hundred fifty million pesos (P250,000,000.00). Furthermore, said company must have by December 31, 2016, an additional Three hundred million pesos (P300,000,000.00) in net worth; by December 31, 2019, an additional Three hundred fifty million pesos (P350,000,000.00) in net worth; and by December 31, 2022, an additional Four hundred million pesos (P400,000,000.00) in net worth. 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 hundred million pesos (P100,000,000.00). He may also require such company to submit to him a business plan showing the company's estimated receipts and disbursements, as well as the basis therefor, for the next succeeding three (3) years. If organized as a mutual company, in lieu of such net worth, it must have available total members equity in an amount to be determined by the Insurance Commission above all liabilities for losses reported; expenses, taxes, legal reserve, and reinsurance of all outstanding risks, and 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 and regulation which now or hereafter may be in force, alter its organization and transform itself into a mutual insurance company. The Secretary of Finance may, upon recommendation of the Commissioner, increase such minimum paid-up capital stock or cash assets requirement under such terms and conditions as he may impose, to an amount which, in his opinion, would reasonably assure the safety of the interests of the policyholders and the public. The minimum paid-up capital and net worth requirement must remain unimpaired for the continuance of the license. The Commissioner may require the adoption of the risk-based capital approach and other internationally accepted forms of capital framework. For the purpose of this section, net worth shall consist of: (a) Paid-up capital; (b) Retained earnings; (c) Unimpaired surplus; and (d) Revaluation of assets as may be approved by the Commissioner. The Commission may adopt for purposes of compliance with capital build up requirement under this Code the recognition as part of the capital account, capital notes or debentures which are subordinate to all credits and senior only to common capital stocks. The President of the Philippines may order a periodic review every two (2) years the capital structure set out above to determine the capital adequacy of the local insurance industry from and after the integration and liberalization of the financial services, including insurance, in the ASEAN Region. For this purpose, a review committee consisting of representatives from the Department of Finance (DOF), the Insurance Commission (IC), the National Economic and Development Authority (NEDA), the Securities and Exchange Commission (SEC) and other agencies which the President may designate shall conduct the review and may recommend to the President to adopt for implementation the necessary capital adjustment.

Section 195

Every company must, before engaging in the business of insurance in the Philippines, file with the Commissioner the following: (a) A certified copy of the last annual statement or a verified financial statement exhibiting the condition and affairs of such company; (b) If incorporated under the laws of the Philippines, a copy of the articles of incorporation and bylaws, and any amendments to either, certified by the Securities and Exchange Commission to be a copy of that which is filed in its Office; (c) If incorporated under any laws other than those of the Philippines, a certificate from the Securities and Exchange Commission showing that it is duly registered in the mercantile registry of that Commission in accordance with the Corporation Code. A copy of the articles of incorporation and bylaws, and 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 which 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 and 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, with the amount of capital stock or assets and legal reserve required by this Code; (d) If not incorporated and of foreign domicile, aside from the certificate mentioned in paragraph (c) of this section, a certificate setting forth the nature and 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, and the names of all officers and 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; and if there are any written articles of agreement of the company, a copy thereof must accompany such certificate.

Section 196

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 and other legal processes may be served in all actions or other legal proceedings against such company, and consenting that service upon such general agent shall be admitted and 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 and file with the Commissioner an agreement or stipulation, executed by the proper authorities of said company in form and substance as follows: The (name of company) does hereby stipulate and 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 of any business or transaction which 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, and that such service upon the Insurance Commissioner shall have the same force and 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 Commissioner, he must, within ten (10) 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 197

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 unimpaired capital or assets and reserve of not less than One billion pesos (P1,000,000,000.00), nor until it shall have deposited with the Commissioner for the benefit and security of the policyholders and 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 Executive Order No. 226 of 1987, as amended, to the actual market value of not less than the amount herein required: Provided, That at least fifty percent (50%) of such securities shall consist of bonds or other instruments of debt of the Government of the Philippines, its political subdivisions and instrumentalities, or of government-owned or -controlled corporations and entities, including the Bangko Sentral ng Pilipinas: Provided, further, That the total investment of a foreign insurance company in any registered enterprise shall not exceed twenty percent (20%) of the net worth of said foreign insurance company nor twenty percent (20%) of the capital of the registered enterprise, unless previously authorized in writing by the Commissioner. The Commissioner may, as a pre-licensing requirement of a new branch office of a foreign insurance company, in addition to the required asset or net worth, require the company to have an additional surplus fund in an amount to be determined by the Insurance Commission. For purposes of this Code, the net worth of a foreign insurance company shall refer only to its net worth in the Philippines.

Section 198

The Commissioner shall hold the securities, deposited as required in the immediately preceding section, for the benefit and security of all the policyholders and creditors of the company depositing the same: Provided, That the Commissioner may as long as the company is solvent, permit the company to collect the interest or dividends on the securities so deposited, and, from time to time, with his assent, to withdraw any of such securities, upon depositing with said Commissioner other like securities, the market value of which 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 to the company upon the Commissioner's written approval and only after the company has duly proven in its application therefor that it has no further liability whatsoever under any of its policies nor to any of its creditors in the Philippines.

Section 199

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 and invest and keep the same therein in accordance with the provisions of this section. The legal reserve therein required to be set aside shall be invested only in the classes of Philippine securities described in Section 206: Provided, however, That no investment in stocks or bonds of any single entity shall, in the aggregate exceed twenty percent (20%) of the net worth of the investing company or twenty percent (20%) of the capital of the issuing company, whichever is the lesser, unless otherwise approved in writing by the Commissioner. The securities purchased and 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.

Section 307

No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission or other compensation to any person for services in obtaining insurance, unless such person shall have first procured from the Commissioner a license to act as an insurance agent of such company or as an insurance broker as hereinafter provided. No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company doing business in the Philippines, or any agent thereof, without first procuring a license so to act from the Commissioner, which must be renewed every three (3) years thereafter. Such license shall be issued by the Commissioner only upon the written application of the person desiring it, such application if for a license to act as insurance agent, being approved or endorsed by the company such person desires to represent, and shall be upon a form prescribed by the Commissioner giving such information as he may require, and upon payment of the corresponding fee hereinafter prescribed. The Commissioner shall satisfy himself as to the competence and trustworthiness of the applicant and shall have the right to refuse to issue or renew and to suspend or revoke any such license in his discretion. The license shall expire after the thirty-first day of December of the third year following the date of issuance unless it is renewed. Licenses may be renewed in the case of the company represented by such agents, and in the case of insurance brokers, upon the application of the said brokers, themselves.

Section 308

The provisions of Sections 307 and 309 shall apply to an employee who shall be engaged to sell insurance products by an insurance company.

Section 309

Any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits for a person other than himself an application for a policy or contract of insurance to or from such company or offers or assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this section and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance agent is subject. An insurance agent is an independent contractor and not an employee of the company represented. 'Insurance agent' includes an agency leader, agency manager, or their equivalent. Since the insurance industry is imbued with public interest, the insurance companies upon approval of the Commissioner may exercise wide latitude in supervising the activities of their insurance agents to ensure the protection of the insuring public.

Section 310

Any person who for any compensation, commission or other thing of value acts or aids in any manner in soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance, on behalf of an insured other than himself, shall be an insurance broker within the intent of this Code, and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance broker is subject.

Section 311

Every applicant for an insurance broker's license shall file with the application and shall thereafter maintain in force while so licensed, a bond in favor of the people of the Republic of the Philippines executed by a company authorized to become surety upon official recognizances, stipulations, bonds and undertakings. The bond shall be in such amount as may be fixed by the Commissioner, but in no case less than Five hundred thousand pesos (P500,000.00), and shall be conditioned upon full accounting and due payment to the person entitled thereto of funds coming into the broker's possession through insurance transactions under license. The bond shall remain in force until released by the Commissioner, or until cancelled by the surety. Without prejudice to any liability previously incurred thereunder, the surety may cancel the bond on thirty (30) days advance written notice to both the broker and the Commissioner. Upon approval of the application, the applicant must also file two (2) errors and omissions (professional liability or professional indemnity) policies issued separately by two (2) insurance companies authorized to do business in the Philippines, satisfactory to the Commissioner to indemnify the applicant against any claim or claims for breach of duty as insurance broker which may be made against him by reason of any negligent act, error or omission, whenever or wherever committed or alleged to have been committed, on the part of the applicant or any person who has been, is now, or may hereafter during the subsistence of the policies be employed by the said applicant in his capacity as insurance broker: Provided, That the filing of any claim or claims under one of such policies shall preclude the filing of the said claim or claims under the other policy. The said policies shall be in such amounts as may be prescribed by the Commissioner, depending upon the size or amount of the broking business of the applicant, but in no case shall the amount of each of such policies be less than Five hundred thousand pesos (P500,000.00).

Section 312

The Commissioner shall, in order to determine the competence of every applicant to have the kind of license applied for, require such applicant to submit to a written examination and to pass the same to the satisfaction of the Commissioner. The Commissioner may delegate or authorize the administration of the examination to an independent organization, subject to such conditions that the Commissioner may provide.

Section 313

An applicant for the written examination mentioned in the preceding section must be of good moral character and must not have been convicted of any crime involving moral turpitude. He must satisfactorily show to the Commissioner that he has been trained in the kind of insurance contemplated in the license applied for. Such examination may be waived if it is shown to the satisfaction of the Commissioner that the applicant has undergone extensive education and/or training in insurance.

Section 314

An application for the issuance or renewal of a license to act as an insurance agent or insurance broker may be refused, or such license, if already issued or renewed, shall be suspended or revoked if the Commissioner finds that the applicant for, or holder of, such license: (a) Has willfully violated any provision of this Code; or (b) Has intentionally made a material misstatement in the application to qualify for such license; or (c) Has obtained or attempted to obtain a license by fraud or misrepresentation; or (d) Has been guilty of fraudulent or dishonest practices; or (e) Has misappropriated or converted to his own use or illegally withheld moneys required to be held in a fiduciary capacity; or (f) Has not demonstrated trustworthiness and competence to transact business as an insurance agent or insurance broker in such manner as to safeguard the public; or (g) Has materially misrepresented the terms and conditions of policies or contracts of insurance which he seeks to sell or has sold; or (h) Has failed to pass the written examination prescribed, if not otherwise exempt from taking the same. In addition to the foregoing causes, no license to act as insurance agent or insurance broker shall be renewed if the holder thereof has not been actively engaged as such agent or broker in accordance with such rules as the Commissioner may prescribe.

Section 315

The premium, or any portion thereof, which an insurance agent or insurance broker collects from an insured and which is to be paid to an insurance company because of the assumption of liability through the issuance of policies or contracts of insurance, shall be held by the agent or broker in a fiduciary capacity and shall not be misappropriated or converted to his own use or illegally withheld by the agent or broker. Any insurance company which delivers to an insurance agent or insurance broker a policy or contract of insurance shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon. In order to ensure faithful performance by the insurance agent or insurance broker of these fiduciary responsibilities, the Insurance Commissioner shall prescribe the minimum terms and conditions on such matters in the standard agency or brokers agreement between the agents and/or the broker with the insurance companies.

Section 316

Any provision of existing laws to the contrary notwithstanding, no person shall, within the Philippines, sell or offer for sale a variable contract or do or perform any act or thing in the sale, negotiation, making or consummating of any variable contract other than for himself unless such person shall have a valid and current license from the Commissioner authorizing such person to act as a variable contract agent. No such license shall be issued unless and until the Commissioner is satisfied, after examination that such person is by training, knowledge, ability and character qualified to act as such agent. Any such license may be withdrawn and cancelled by the Commissioner after notice and hearing, if he shall find that the holder thereof does not then have the qualifications required for the issuance of such license.

Section 317

It shall be unlawful for any person, company or corporation in the Philippines to act as general agent of any insurance company unless he is empowered by a written power of attorney duly executed by such insurance company, and registered with the Commissioner to receive notices, summons and legal processes for and in behalf of the insurance company concerned in connection with actions or other legal proceedings against said insurance company. It shall be the duty of said general agent to notify the Commissioner of his post office address in the Philippines, or any change thereof. Notices, summons, or processes of any kind sent by registered mail to the last registered address of such general agent of the company concerned or to the Commissioner shall be sufficient service and deemed as if served on the insurance company itself.

Section 318

Except as otherwise provided by law or treaty, it shall be unlawful for any person, partnership, association or corporation in the Philippines, for himself or itself, or for some other person, partnership, association or corporation, either to procure, receive or forward applications of insurance in, or to issue or to deliver or accept policies or contracts of insurance of or for, any insurance company or companies not authorized to transact business in the Philippines, covering risks, life or non-life, situated in the Philippines; and any such person, partnership, association or corporation violating the provisions of this section shall be deemed guilty of a penal offense, and upon conviction thereof, shall for each such offense be punished by a fine of Two hundred fifty thousand pesos (P250,000.00), or imprisonment of six (6) months, or both, at the discretion of the court: Provided, That the provisions of this section shall not apply to reinsurance.

Section 403

Any society, association or corporation, without capital stock, formed or organized not for profit but mainly for the purpose of paying sick benefits to members, or of furnishing financial support to members while out of employment, or of paying to relatives of deceased members of fixed or any sum of money, irrespective of whether such aim or purpose is carried out by means of fixed dues or assessments collected regularly from the members, or of providing, by the issuance of certificates of insurance, payment of its members of accident or life insurance benefits out of such fixed and regular dues or assessments, but in no case shall include any society, association, or corporation with such mutual benefit features and which shall be carried out purely from voluntary contributions collected not regularly and/or no fixed amount from whomsoever may contribute, shall be known as a mutual benefit association within the intent of this Code. Any society, association, or corporation principally organized as a labor union shall be governed by the Labor Code notwithstanding any mutual benefit feature provisions in its charter as incident to its organization. In no case shall a mutual benefit association be organized and authorized to transact business as a charitable or benevolent organization, and whenever it has this feature as incident to its existence, the corresponding charter provision shall be revised to conform with the provision of this section. Mutual benefit association, already licensed to transact business as such on the date this Code becomes effective, having charitable or benevolent feature shall abandon such incidental purpose upon effectivity of this Code if they desire to continue operating as such mutual benefit associations.

Section 404

A mutual benefit association, before it may transact as such, must first secure a license from the Commissioner. The application for such license shall be filed with the Commissioner together with certified true copies of the articles of incorporation or the constitution and bylaws of the association, and all amendments thereto, and such other documents or testimonies as the Commissioner may require. No license shall be granted to a mutual benefit association until the Commissioner shall have been satisfied by such examination as he may make and such evidence as he may require that the association is qualified under existing laws to operate and transact business as such. The Commissioner may refuse to issue a license to any mutual benefit association if, in his judgment, such refusal will best promote the interest of the members of such association and of the people of this country. Any license issued shall expire on the last day of December of the third year following its issuance and, upon proper application, may be renewed if the association is continuing to comply with existing laws, rules and regulations, orders, instructions, rulings and decisions of the Commissioner. Every association receiving any such license shall be subject to the supervision of the Commissioner: Provided, That no such license shall be granted to any such association if such association has no actuary.

Section 405

No mutual benefit association shall be issued a license to operate as such unless it has constituted and established a Guaranty Fund by depositing with the Commissioner an initial minimum amount of Five million pesos (P5,000,000.00) in cash, or in government securities with a total value equal to such amount, to answer for any valid benefit claim of any of its members. All moneys received by the Commissioner for this purpose must be deposited by him in interest-bearing deposits with any bank or banks authorized to transact business in the Philippines for the account of the particular association constituting the Guaranty Fund. Any accrual to such fund, be it interest earned or dividend additions on moneys or securities so deposited, may, with the prior approval of the Commissioner, be withdrawn by the association if there is no pending benefit claim against it, including interest thereon or dividend additions thereto. The Commissioner, prior to or after licensing a mutual benefit association, may require such association to increase its Guaranty Fund from the initial minimum amount required to an amount equal to the capital investment required of an existing domestic insurance company under Section 209 of this Code.

Section 406

Every mutual benefit association licensed to do business as such shall issue membership certificates to its members specifying the benefits to which such members are entitled. Such certificates, together with the articles of incorporation of the association or its constitution and bylaws, and all existing laws as may be pertinent shall constitute the agreement, as of the date of its issuance, between the association and the member. The membership certificate shall be in a form previously approved by the Commissioner.

Section 407

A mutual benefit association may, by reinsurance agreement, cede in whole or in part any individual risk or risks under certificates of insurance issued by it, only to a life insurance company authorized to transact business or to a professional reinsurer authorized to accept life risks in the Philippines: Provided, That a copy of the draft of such reinsurance agreement shall be submitted to the Commissioner for his approval. The association may take credit for the reserves on such ceded risks to the extent reinsured.

Section 408

The constitution or bylaws of a mutual benefit association must distinctly state the purpose for which dues and/or assessments are made and collected and the portion thereof which may be used for expenses. Death benefit and other relief funds shall be created and used exclusively for paying benefits due the members under their respective membership certificates. A general fund shall likewise be created and used for expenses of administration of the association. A mutual benefit association shall only maintain free and unassigned surplus of not more than twenty percent (20%) of its total liabilities as verified by the Commissioner. Any amount in excess shall be returned to the members by way of dividends, enhancing the equity value or providing benefits in kind and other relevant services. In addition, subject to the approval of the Commissioner, a mutual benefit association may allocate a portion for capacity building and research and development such as developing new products and services, upgrading and improving operating systems and equipment and continuing member education.

Section 409

Every outstanding membership certificate must have an equity value equivalent to at least fifty percent (50%) of the total contributions collected thereon. The equity value only applies to basic life insurance product and excludes optional products.

Section 410

Every mutual benefit association must accumulate and maintain, out of the periodic dues collected from its members, sufficient reserves for the payment of claims or obligations for which it shall hold funds in securities satisfactory to the Commissioner consisting of bonds of the Government of the Philippines, or any of its political subdivisions and instrumentalities, or in such other good securities as may be approved by the Commissioner. The reserve liability shall be established in accordance with actuarial procedures and shall be approved by the Commissioner. The articles of incorporation or the constitution and bylaws of a mutual benefit association must provide that if its reserve as to all or any class of certificates becomes impaired, its board of directors or trustees may require that there shall be paid by the members to the association the amount of the members' equitable proportion of such deficiency as ascertained by said board and that if the payment be not made it shall stand as an indebtedness against the membership certificates of the defaulting members and draw interest not to exceed five percent (5%) per annum compounded annually.

Section 411

A mutual benefit association may invest such portion of its funds as shall not be required to meet pending claims and other obligations in any of the classes of investments or types of securities in which life insurance companies doing business in the Philippines may invest. It may also grant loans to members on the security of a pledge or chattel mortgage of personal properties of the borrowers, or in the absence thereof, on the security of the membership certificate of the borrowing members, in which event such loan shall become a first lien on the proceeds thereof.

Section 412

The Commissioner or any of his duly designated representatives, shall have the power of visitation, audit and examination into the affairs, financial condition, and methods of doing business of all mutual benefit associations, and he shall cause such examination to be made at least once every two (2) years or whenever it may be deemed proper and necessary. Free access to the books, records and documents of the association shall be accorded to the Commissioner, or to his representatives, in such manner that the Commissioner or his representatives may readily verify or determine the true affairs, financial condition, and method of doing business of such association. In the course of such examination, the Commissioner or his duly designated representatives shall have authority to administer oaths and take testimony or other evidence on any matter relating to the affairs of the association. All minutes of the proceedings of the board of directors or trustees of the association, and those of the regular or special meetings of the members, shall be taken, and a copy thereof, in English or in Pilipino, shall be submitted to the Commissioner's representatives or examiners in the course of such examination. A copy of the findings of such examination, together with the recommendations of the Commissioner, shall be furnished the association for its information and compliance, and the same shall be taken up immediately in the meetings of the board of directors or trustees and of the members of the association.

Section 413

Every mutual benefit association shall, annually on or before the thirtieth day of April of each year, render to the Commissioner an annual statement in such form and detail as may be prescribed by the Commissioner, signed and sworn to by the president, secretary, treasurer, and actuary of the association, showing the exact condition of its affairs on the preceding thirty-first day of December.

Section 414

No money, aid or benefit to be paid, provided or tendered by any mutual benefit association, shall be liable to attachment, garnishment, or other process, or be seized, taken, appropriated, or applied by any legal or equitable process to pay any debt or liability of a member or beneficiary, or any other person who may have a right thereunder, either before or after payment.

Section 415

Any member of a mutual benefit association shall have the right at all times to change the beneficiary or beneficiaries or add another beneficiary or other beneficiaries in accordance with the rules and regulations of the association unless he has expressly waived this right in the membership certificate. Every association may, under such rules as it may adopt, limit the scope of beneficiaries and provide that no beneficiary shall have or obtain any vested interest in the proceeds of any certificate until the certificate has become due and payable under the terms of the membership certificate.

Section 416

Any chapter affiliate independently licensed as a mutual benefit association may consolidate or merge with any other similar chapter affiliate or with the mother association.

Section 417

Any mutual benefit association may be converted into and licensed as a mutual life insurance company by complying with the requirements of the pertinent provisions of this Code and submitting the specific plan for such conversion to the Commissioner for his approval. Such plan, as approved, shall then be submitted to the members either in the regular meeting or in a special meeting called for the purpose for their adoption. The affirmative vote of at least two-thirds (2/3) of all the members shall be necessary in order to consider such plan as adopted. No such conversion shall take effect unless and until approved by the Commissioner.

Section 418

No mutual benefit association shall be dissolved without first notifying the Commissioner and furnishing him with a certified copy of the resolution authorizing the dissolution, duly adopted by the affirmative vote of two-thirds (2/3) of the members at a meeting called for that purpose, the financial statements as of the date of the resolution, and such other papers or documents as may be required by the Commissioner. No dissolution shall proceed until and unless approved by the Commissioner and all proceedings in connection therewith shall be witnessed and attested by his duly designated representative. No mutual benefit association shall be officially declared as dissolved until after the Commissioner so certifies that all outstanding claims against the association have been duly settled and liquidated.

Section 419

The Commissioner shall, after notice and hearing, have the power either to suspend or revoke the license issued to a mutual benefit association if he finds that the association has: (a) Failed to comply with any provision of this Code; (b) Failed to comply with any other law or regulation obligatory upon it; (c) Failed to comply with any order, ruling, instruction, requirement or recommendation of the Commissioner; (d) Exceeded its power to the prejudice of its members; (e) Conducted its business fraudulently or hazardously; (f) Rendered its affairs and condition to one of insolvency; or (g) Failed to carry out its aims and purposes for which it was organized due to any cause. After receipt of the order from the Commissioner suspending or revoking the license, the association must immediately exert efforts to remove such cause or causes which brought about the order and, upon proper showing, may apply with the Commissioner for the lifting of the order and restoration or revival of the license so revoked or suspended.

Section 420

For failure to remove such cause or causes which brought about the suspension or revocation of the license of a mutual benefit association, the Commissioner shall apply under this Code for an order from the proper court to liquidate such association. The provisions of Titles 14 and 15, Chapter III, pertaining to the appointment of a conservator and proceedings upon insolvency of an insurance company shall, insofar as practicable, apply to mutual benefit associations.

Section 421

To secure the enforcement of any provision under this title, the Commissioner may issue such rules, rulings, instructions, orders and circulars.

Section 422

The violation of any provision of this title shall subject the person violating or the officer of the association responsible therefor to a fine of not less than Ten thousand pesos (P10,000.00), or imprisonment of not exceeding three (3) years, or both such fine and imprisonment, at the discretion of the court.

Section 423

All provisions of this Code governing life insurance companies and such other provisions whenever practicable and necessary, shall be applicable to mutual benefit associations.