AMENDING CERTAIN SECTIONS OF PRESIDENTIAL DECREE NO. 612 OTHERWISE KNOWN AS THE INSURANCE CODE

• Number: Presidential Decree No. 1455
• Sections: 34

Preamble

WHEREAS, Presidential Decree No. 612, otherwise known as the

Insurance Code, was promulgated primarily to promote and develop a strong

national insurance industry and to provide the necessary operating conditions

for its integration in the economic and social development of the

Philippines;

WHEREAS, the prevailing economic conditions necessitate the

amendment of said Decree to further assure the solvency of insurance companies

doing business in the Philippines in the interest of the sound development of

the national economy;

WHEREAS, there is a need to amend the said Decree to further

ensure the faithful performance of insurance contracts for the protection of the

interests of the policyholders and the public;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers vested in me by the Constitution, do hereby

decree and order the amendment of Presidential Decree No. 612, otherwise known

as the Insurance Code, as follows:

Section 1

SECTION 1. Section 176 of Presidential Decree No. 612,

otherwise known as the Insurance Code is hereby amended to read as follows:

"SEC. 176. The liability of the surety or sureties shall be

joint and several with the obligor and shall be limited to the amount of the

bond. It is determined strictly by the terms or the contract of suretyship in

relation to the principal contract between the obligor and the

obligee."

Section 2

SEC. 2. Section 187 of the same Decree is hereby amended to

read as follows:

"SEC. 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 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,

notwithstanding the provisions of section one hundred eighty-eight, reasonably

assure the safety of the interests of the policyholders and the public.

In order to maintain the quality of the management of insurance companies and

afford better protection to policyholders and the public in general, any person

of good moral character, unquestioned integrity and recognized competence nay be

elected or appointed director or officer of insurance companies. The

Commissioner shall prescribe the qualifications of the 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.

Incumbent Directors and/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 from the effectivity of this Decree, whichever 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 and shall be renewed annually if the company is continuing to comply with

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 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; Provided, That the terms "life" and "non-life"

insurance shall be deemed to include health, accident and disability

insurance.

No insurance company shall have any equity in an adjustment company and

neither shall an adjustment company have any equity in an insurance company.

Insurance companies and adjustment companies presently affected by the above

provision shall have two years from the effectivity of this Decree within which

to divest of their stockholdings."

Section 3

SEC. 3. Section 188 of the same Decree is hereby amended to

read as follows:

"SEC. 188. Except as provided in section two hundred

eighty-one, no domestic insurance company shall, if 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 with a paid-up capital stock

which is less than a 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 and 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 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 Commissioner may, as 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 any

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 and

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, 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 regulations which now are or

hereafter may be in force, alter its organization and transform itself into a

mutual insurance company."

Section 4

SEC. 4. Section 194 of the same Decree is hereby amended to

read as follows:

"SEC. 194. An insurance company doing business in the

Philippines shall at all times maintain a margin of solvency which 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 and 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; and Provided,

Further, That the term "paid-up capital" shall not include contributed

surplus and capital paid in excess of par value. Such assets, liabilities and

reserves shall exclude assets, liabilities and reserves included in separate

accounts established in accordance with 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 interests, and paid to the treasurer of the

company, within fifteen days from 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 and until it make good such deficiency; Provided,

Further, That a stockholder who, aside from paying the contribution due

from him, pays the contribution due from 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."

Section 5

SEC. 5. Section 203 of the same Decree is hereby amended to

read as follows:

"SEC. 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 and entities, including the Central Bank of the Philippines;

Provided, That such investments shall at all times be maintained free

from any lien or encumbrance; and Provided, Further, That such

securities shall be deposited with and 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."

Section 6

SEC. 6. Section 204 of the same Decree is hereby amended to

read as follows:

"SEC. 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, and

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 and building

in which the insurance company conducts its business and (b) the total

investment of an insurance company in any registered enterprise shall not exceed

twenty per centum of the paid-up capital of the registered enterprise excluding

the intended investment, unless previously authorized by the Commissioner; and,

Provided, Further, That such investments, free from 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, and (b) its

reserve fund held for reinsurance as provided for in the pertinent treaty

provision in the case of reinsurance ceded to authorized

insurers."

Section 7

SEC. 7. Section 247 of the same Decree is hereby amended to

read as follows:

"SEC. 247. If the Commissioner is of the opinion upon

examination or other evidence that any domestic or foreign insurance company is

in an unsound condition, or that it has failed to comply with the provisions of

law or regulations obligatory upon it, or that its condition or methods 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 and agents, and 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 and disbursements, as well as the basis therefor, for the next

succeeding three years."

Section 8

SEC. 8. Section 249 of the same Decree is hereby amended to

read as follows:

"SEC. 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 and creditors, the Commissioner shall

forthwith order the company to cease and desist from transacting business in the

Philippines and shall designate a receiver to immediately take charge of its

assets and liabilities, as expeditiously as possible collect and gather all the

assets and administer the same for the benefit of its policyholders and

creditors and exercise all the powers necessary for these purposes including,

but not limited to, bringing suits and 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 with safety to its policyholders

and creditors and shall prescribed the conditions under which such resumption of

business shall take place as well as the time for fulfillment of such

conditions. In such case, the expenses and fees in the collection and

administration of the insurance company shall be determined by the Commissioner

and shall be paid out of the assets of such company.

If the Commissioner shall determine and confirm within the said period that

the insurance company is insolvent, as defined hereunder, or cannot resume

business with safety to its policyholders and creditors, he shall, if the public

interest requires, order its liquidation plan and implement immediately. The

Commissioner shall designate a competent and qualified person as liquidator who

shall take over the functions of the receiver previously designate and, with 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 and other parties for the purpose of settling

the liabilities or paying the debts of such company and he may, in the name of

the company, institute such actions as may be necessary in the appropriate Court

to collect and recover accounts and assets of the insurance company, and 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 and executory, and can be set

aside by the Court upon petition by the company and only if there is convincing

proof that the action is plainly arbitrary, and made in bad faith. The

Commissioner, through the Solicitor General, shall then file the corresponding

answer reciting the proceeding taken and 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 from implementing his actions

under thin Section, unless there is convincing proof that the action of the

Commissioner is plainly arbitrary and made in bad faith and the petitioner or

plaintiff files with the Clerk or Judge of the Court in which 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 is will pay the damages which the petitioner 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

issuance and dissolution of the restraining order or injunction contemplated

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

and ordinary course of business as may be shown by its failure to maintain the

margin of solvency required under Section 194 of this Code."

Section 9

SEC. 9. Section 299 of the same Decree is hereby amended to

read as follows:

"SEC. 299. 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 annually on the first day of January, or within six months 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, and countersigned 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. No such license shall be valid after the thirtieth day of June of

the year following its issuance unless it is renewed."

Section 10

SEC. 10. Section 302 of the same Decree is hereby amended to

read as follows:

"SEC. 302. 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 one hundred thousand pesos,

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 days advance written notice to both the broker and the Commissioner.

Upon approval of the application, the applicant must also file two errors and

omissions (professional liability or professional indemnity) policies issued

separately by two 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 allege to have been committed, on the part of the

applicant or any person who has been, is not 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 Insurance 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."

Section 11

SEC. 11. Section 311 of the same Decree is hereby amended to

read as follows:

"SEC. 311. Upon application and payment of the corresponding

fee hereinafter prescribed, and the filing of two errors and omissions

(professional liability or professional indemnity) policies hereinafter

described, a person may if found qualified, be issued a license to act as

reinsurance broker by the Commissioner. No such license shall be valid after the

thirtieth day of June or the year following its issuance unless it is

renewed.

The errors and omissions (professional liability or professional indemnity)

policies mentioned above shall indemnify the applicant against any claim or

claims for breach of duty as reinsurance 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 of 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 reinsurance 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 issued separately by two insurance companies authorized to do business

in the Philippines and shall be in such amounts as may be prescribed by the

insurance 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."

Section 12

SEC. 12. Section 317 of the same Decree is hereby amended to

read as follows:

"SEC. 317. No certificate of registration issued to a

resident agent shall be valid after the thirtieth day of June of the year

following its issuance unless it is renewed.

The Commissioner may, after due notice and hearing, recall or cancel the

certificate of registration issued to a resident agent for violation of any

existing laws, rule or regulation, or any provision of this

Code."

Section 13

SEC. 13. Section 322 of the same Decree is hereby amended to

read as follows:

"SEC. 322. No certificate of registration issued to an

underwriter shall be valid after the thirtieth day of June of the year following

its issuance unless it is renewed.

The Commissioner after due notice and hearing, also suspend or cancel such

certificate for violation of existing laws, rules and regulations or of any

provision of this Code."

Section 14

SEC. 14. Section 328 of the same Decree is hereby amended to

read as follows:

"SEC. 328. No adjuster's license issued hereunder shall be

valid until after the thirtieth day of June of the year following the issuance

of such license unless it is renewed."

Section 15

SEC. 15. Section 336 of the same Decree is hereby amended to

read as follows:

"SEC. 336. Any person may be officially accredited by the

Commissioner to act as any actuary in any life insurance company or in any

mutual benefit association authorized to do business in the Philippines upon

application therefor and the payment of the corresponding fee hereinafter

prescribed, Provided, That: (1) he is a fellow of good standing of the

Actuarial Society of the Philippines at the time of his appointment and remains

in such good standing during the tenure of his engagement; or (2) in the case of

one who is not a fellow of the Actuarial Society of the Philippines, he meets

all the requirements of the said Society for accreditation as a fellow of the

Society, and has been given permission by the pertinent government authorities

in the Philippines to render service in the Philippines, in the event that he is

not a citizen of the Philippines.

No certificate of registration issued under this Title shall be valid after

the thirtieth day of June of the year following its issuance unless it is

renewed."

Section 16

SEC. 16. Section 341 of the same Decree is hereby amended to

read as follows:

"SEC. 341. Corporating organizational hereafter formed shall

commence rate-making operations until it shall have obtained a license from the

Commissioner. Before obtaining such license, such rating organization shall file

with the Commissioner a notice of its intention to commence rate-making

operations, a copy of its constitution, articles of agreement or association, or

of incorporation, and its by-laws, a list of insurance companies that have

agreed to become members or subscribers, and such other information concerning

such rating organization and its operations as may be required by the

Commissioner. If the Commissioner finds that the organization has complied with

the provisions of law and that it has a sufficient number of members or

subscribers and in otherwise qualified to function as a rating organization, the

Commissioner may issue a license to such rating organization authorizing it to

make rates for the kinds of insurance or subdivisions thereof as may be

specified in such license. No license issued to a rating organization shall be

valid after the thirtieth day of June of the year following its issuance unless

it is renewed. No rating organization which exists and is not licensed pursuant

to this section shall continue rate-making operation until it shall have

obtained from the Commissioner a license which he may issue if satisfied that

such organization is complying with the provisions of this Title. Every rating

organization shall notify the Commissioner promptly of every change in (1) its

constitution, its articles of agreement or association or its certificate of

incorporation, and its by-laws rules and regulations governing the conduct of

its business, and (2) its list of members and subscribers.

A "Member" means an insurer who participates in or is entitled to participate

in the management of a rating organization.

A "subscriber" means an insurer which is furnished at its request with rates

and rating manuals by a rating organization of which it is not a

member."

Section 17

SEC. 17. Section 364 of the same Decree is hereby amended to

read as follows:

"SEC. 364. A license issued to a partnership, association or

corporation to act as an insurance agent, general agent, insurance broker,

reinsurance broker, or adjuster shall authorize only the individual named in the

license who shall qualify therefor as though an individual licensee. The

Commissioner shall charge, and the licensee shall pay, a full additional license

fee as to each respective individual so named in such license in excess of

one.

Licenses and certificates of registration issued under the provisions of this

Chapter may be renewed by the filing of notices of intention on forms to be

prescribed by the Commissioner and payment of the fees

therefor."

Section 18

SEC. 18. Section 373 of the same Decree is hereby amended to

read as follows:

"Motor Vehicle" is any vehicle as defined in section three, paragraph (a) of

Republic Act Numbered Four Thousand One Hundred Thirty-Six, Otherwise known as

the "Land Transportation and Traffic Code."

"Passenger" is any fare paying person being transported and conveyed in and

by a motor vehicle for transportation of passengers for compensation, including

persons expressly authorized by law or by the vehicles operator or his agents to

ride without fare.

"Third-party" is any person other than a passenger as defined in this

section and shall also exclude a member of the household, or a member of the

family within the second degree of consanguinity or affinity, of a motor vehicle

owner or land transportation operator, as likewise defined herein, or his

employee in respect of death, bodily injury, or damage to property arising out

of and in the course of employment.

"Owner" or "Motor vehicle owner" means the actual legal owner of a motor

vehicle, in whose name such vehicle is duly registered with the Land

Transportation Commission.

"Land transportation operator" means the owner or owners of motor vehicles

for transportation of passengers for compensation, including school buses.

"Insurance policy" or "Policy" refers to a contract of insurance against

passenger and third-party liability for death of bodily injuries and damage to

property arising from motor vehicle accidents."

Section 19

SEC. 19. Section 374 of the same Decree is hereby amended to

read as follows:

"SEC. 374. It shall be unlawful for any land transportation

operator or owner of a motor vehicle to operate the same in the public highways

unless there is in force in relation thereto a policy of insurance or guaranty

in cash or surety bond issued in accordance with the provisions of this chapter

to indemnify the death, bodily injury, and/or damage to property of a

third-party or passenger, as the case may be, arising from the use

thereof."

Section 20

SEC. 20. Section 375 of the same Decree is hereby amended to

read as follows:

"SEC. 375. The Commissioner shall furnish the Land

Transportation Commissioner with a list of insurance companies authorized to

issue the policy of insurance or surety bond required by this

chapter."

Section 21

SEC. 21. Section 376 of the same Decree is hereby amended to

read as follows:

"SEC. 376. The Land Transportation Commission shall not

allow the registration or renewal of registration of any motor vehicle without

first requiring from the land transportation operator or motor vehicle owner

concerned the presentation and filing of a substantiating documentation in a

form approved by the Commissioner evidencing that the policy of insurance or

guaranty in cash or surety bond required by this chapter is in

effect.

Section 22

SEC. 22. Section 377 of the same Decree is hereby amended to

read as follows:

"SEC. 377. Every land transportation operator and every

owner of a motor vehicle shall, before applying for the registration or renewal

of registration of any motor vehicle, at his option, either secure an insurance

policy or surety bond issued by any insurance company authorized by the

Commissioner or make a cash deposit in such amount as herein required as limit

of liability for purposes specified in Section Three Hundred Seventy-Four.

In the case of a land transportation operator the insurance or guaranty in

cash or surety bond shall cover liability for death, bodily injuries, or damage

to property of third-parties and/or passengers arising out of the use of such

vehicle in the amount not less than twelve thousand pesos per passenger or

third-party and an amount, for each of such categories, in any one accident, of

not less than that set forth in the following scale:

Motor vehicle with an authorized capacity of twenty-six or more passengers:

Fifty thousand pesos;

Motor vehicles with an authorized capacity from twelve to twenty-five

passengers: Forty thousand pesos;

Motor vehicles with an authorized capacity of from six to eleven passengers:

Thirty thousand pesos;

Motor vehicles with an authorized capacity of five or less passengers: Five

thousand pesos multiplied by the authorized capacity.

Provided, However, That such cash deposit made to, or surety bond

posted with, the Commissioner shall be resorted to by him in cases of accidents

the indemnities for which to third-parties and/or passengers are not settled

accordingly by the land transportation operator and, in that event, the said

cash deposit shall be replenished, or such surety bond shall be restored within

sixty days after impairment or expiry, as the case may be, by such land

transportation operator, otherwise, he shall secure the insurance policy

required by this chapter. The aforesaid cash deposit may be invested by the

Commissioner in readily marketable government bond and/or securities.

In the case of an owner of a motor vehicle, the insurance or guaranty in

cash and surety bond shall cover liability for death or injury to third parties

for loss or damage to property of said third-parties in an amount not less than

the set forth in the following scale in any one accident:

Private Cars

Bantam: Twelve thousand pesos;

Light: Twenty thousand pesos;

Heavy: Thirty thousand pesos.

Other Private Vehicles

Tricycles, motorcycles, and scooters: Twelve thousand pesos;

Vehicles with an unladen weight of 2,600 kilos or less: Twenty thousand

pesos;

Vehicles with an unladen weight of between 2,601 kilos and 3,930 kilos

Thirty thousand pesos;

Vehicles with an unladen weight over 3,930 kilos: Fifty thousand pesos.

Provided, That for purposes of this section, in the

event of liability both for death or bodily injury on one hand, and property

damage on the other hand, the claim for death and/or bodily injury shall have

priority over the latter type of claim in the settlement."

Section 23

SEC. 23. Section 379 of the same Decree is hereby amended to

read as follows:

"SEC. 379. No land transportation operator or owner of motor

vehicle shall be unreasonably denied the policy of insurance or surety bond

required by this chapter by the insurance companies authorized to issue the

same, otherwise the Land Transportation Commission shall require from said land

transportation operator or owner of vehicle, in lieu of a policy of insurance or

surety bond, a certificate that a cash deposit has been made with the

Commissioner in such amount required as limits of indemnity in section three

hundred seventy-seven to answer for the passengers and/or third-party liability

of such land transportation operator or owner of the vehicle.

No insurance company may issue the policy of insurance or surety bond

required under this chapter unless so authorized under existing laws and subject

to the further condition that any such risk written or assumed shall be ceded

fully to a unified pooling system to be composed of and formed by all insurance

companies authorized to engage in casualty and/or surety lines of business which

risk, in turn, shall be retroceded to and distributed equally among all such

members.

The authority to engage in the casualty and/or surety lines of business of an

insurance company that refuses to join with, or withdraws or is expelled from,

the pooling system licensed by the Commissioner to operate as such, shall be

withdrawn immediately."

Section 24

SEC. 24. Section 380 of the same Decree is hereby amended to

read as follows:

"SEC. 380. No cancellation of the policy shall be valid

unless written notice thereof is given to the land transportation operator or

owner of the vehicle and to the Land Transportation Commission at least fifteen

days prior to the intended effective date thereof.

Upon receipt of such notice, the Land Transportation Commission, unless it

receives evidence of a new valid insurance or guaranty in cash or surety bond as

prescribed in this Chapter, or an endorsement of revival of the cancelled one,

shall order the immediate confiscation of the plates of the motor vehicle

covered by such cancelled policy. The same may be re-issued only upon

presentation of a new insurance policy or that a guaranty in cash or surety bond

has been made or posted with the Commissioner and which meets the requirements

of this chapter, or an endorsement or revival of the cancelled

one."

Section 25

SEC. 25. Section 381 of the same Decree is hereby amended to

read as follows:

"SEC. 381. If the cancellation of the policy or surety bond

is contemplated by the land transportation operator or owner of the vehicle, he

shall, before the policy or surety bond ceases to be effective, secure a similar

policy of insurance or surety bond to replace the policy or surety bond to be

cancelled or make a cash deposit in sufficient amount with the Commissioner, and

without any gap, file the required documentation with the Land Transportation

Commission, and notify the insurance company concerned of the cancellation of

its policy or surety bond."

Section 26

SEC. 26. Section 385 of the same Decree is hereby amended to

read as follows:

"SEC. 385. The insurance company concerned shall forthwith

the as certain the truth and extent of the claim and make payment within five

working days after reaching an agreement. If no agreement is reached, the

insurance company shall pay only the "no fault" indemnity provided in section

three hundred seventy-eight without prejudice to the claimant from pursuing his

claim further, in which case, he shall not be required or compelled by the

insurance company to execute any suitclaim or document releasing it from

liability under the policy or insurance or surety bond issued."

Section 27

SEC. 27. Section 390 of the same Decree is hereby amended to

read as follows:

"SEC. 390. 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 as 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 28

SEC. 28. Section 392 of the same Decree is hereby amended to

read as follows:

"SEC. 392. 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 ten

thousand pesos 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 or

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, included 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 at least ten per centum of its

assets, if such assets exceed one hundred thousand pesos, but in no case shall

such increase exceed the maximum amount of capital investment required of a

domestic insurance company under section two hundred and three of this

Code."

Section 29

SEC. 29. Section 416 of the same Decree is hereby amended to

read as follows:

"SEC. 416. The Commissioner shall have the power to

adjudicate claims and complaints involving any loss, damage or liability for

which an insurer may be answerable under any kind of policy or contract of

insurance, or for which such insurer may be liable under a contract of

suretyship, or for which a reinsurer may be sued under any contract or

reinsurance it may have entered into, or for which a mutual benefit association

may be held liable under the membership certificates it has issued to its

members, where the amount of any such loss, damage or liability, excluding

interests, cost and attorney's fees, being claimed or sued upon any kind of

insurance, bond, reinsurance contract, or membership certificate does not exceed

in any single claim one hundred thousand pesos.

The insurer or surety may, in the same action file a counter-claim against

the insured or the obligee.

The insurer or surety may also file a cross-claim against a co-party for any

claim arising out of the transaction or occurrence that is the subject matter of

the original action or of counterclaim therein.

With leave of the Commissioner, an insurer or surety may file a third-party

complaint against its reinsurers for indemnification, contribution, subrogation

of any other relief, in respect of the transaction that is the subject matter of

the original action filed with the Commissioner.

The party filing an action pursuant to the provision of this section thereby

submits his person to the jurisdiction of the Commissioner. The Commissioner

shall acquire jurisdiction over the person of the impleaded party or parties in

accordance with and pursuant to the provisions of the Rules of Court.

The authority to adjudicate granted to the Commissioner under this section

shall be concurrent with that of the civil courts, but the filing of a complaint

with the Commissioner shall preclude the civil courts from taking cognizance of

a suit involving the same subject matter.

Any decision, order or ruling rendered by the Commissioner after a hearing

shall have the force and effect of a judgment. Any party may appeal from a final

order, ruling or decision of the Commissioner by filing with the Commissioner

within thirty days from receipt of copy of such order, ruling or decision a

notice of appeal and with the Supreme Court twelve printed or mimeographed

copies of a petition for certiorari or review of such order, ruling or decision,

as the case may be. A copy of the petition shall be served upon the Commissioner

and upon the adverse party, and proof of service thereof attached to the

original of the petition.

As soon as a decision, order or ruling has become final and executory, the

Commissioner shall motu propio or on motion of the interested party, issue a

writ of execution requiring the sheriff or the proper officer to whom it is

directed to execute said decision, order or award, pursuant to Rule thirty-one

of the Rules of Court.

For the purpose of any proceeding under this section, the Commissioner, or

any officer thereof designated by him, empowered to administer oaths and

affirmation, subpoena witnesses, compel their attendance, take evidence, and

require the production of any books, papers, documents, or contracts, or other

records which are relevant or material to the inquiry. In case of contumacy by,

or refusal to obey a subpoena issued to, any person, the Commissioner may invoke

the aid of any court of first instance within the jurisdiction of which such

proceeding is carried on, where such person resides or carries on his own

business, in requiring the attendance and testimony of witnesses and the

production of books, papers, documents, contracts or other records. And such

court may issue an order requiring such person to appear before the

Commissioner, or officer designated by the Commissioner, there to produce

records, if so ordered or to give testimony touching the matter in question. Any

failure to obey such order of the court may be punished by such court as a

contempt thereof.

A full and complete record shall be kept of all proceedings had before the

Commissioner, or the officers thereof designated by him, and all testimony shall

be taken down and transcribed by a stenographer appointed by the

Commissioner.

A transcribed copy of the evidence and proceeding, or any specific part

thereof, of any hearing taken by a stenographer appointed by the Commissioner,

being certified by such stenographer to be a true and correct transcript of the

testimony on this hearing of a particular witness, or of a specific proof

thereof, carefully compared by him from his original notes, and to be a correct

statement of evidence and proceeding had in such hearing so purporting to be

taken and subscribed, may be received as evidence by the Commissioner and by any

court with the same effect as if such stenographer were present and testified to

the facts so certified."

Section 30

SEC. 30. Section 417 of the same Decree is hereby amended to

read as follows:

"SEC. 417. (1) For the issuance or renewal of certificates

of authority, licenses and certificates of registration, pursuant to pertinent

provisions of this Code, the Commissioner shall collect and receive fees which

shall not be less than the following:

For each certificate of authority issued to an insurance company doing

business in the Philippines, two hundred pesos.

For each special certificate of authority issued to a servicing insurance

company, one hundred pesos.

For each license issued to a general agent of an insurance company, fifty

pesos.

For each license issued to an insurance agent, twenty-five pesos.

For each license issued to an agent of variable contract policy, twenty-five

pesos.

For each license issued to an insurance broker, one hundred pesos.

For each license issued to a reinsurance broker, one hundred pesos.

For each license issued to an insurance adjuster, one hundred pesos.

For each certificate of registration issued to an actuary, fifty pesos.

For each certificate of registration issued to a resident agent, fifty

pesos.

For each license issued to a rating organization, one hundred pesos.

For each certificate of registration issued to a non-life company

underwriter, fifty pesos.

For each license issued to a mutual benefit association, ten pesos.

For each certificate of registration issued to a trust for charitable uses,

ten pesos.

All certificates of authority and all other licenses, as well as all

certificates of registration, issued to any person, partnership, association or

corporation under the pertinent provisions of this Code for which no expiration

date has been prescribed, shall expire on the last day of June of each year and

shall be renewed annually upon application therefor and payment of the

corresponding fee, if the licensee or holder of such license or certificate is

continuing to comply with all the applicable provisions of existing laws, and of

rules, instructions, orders and decisions of the Commissioner.

(2) For the filing of the annual statement referred to in section two hundred

twenty-three, the Commissioner shall collect and receive from the insurance

company so filing a fee of five hundred pesos; Provided, That a fine of

one hundred pesos shall be imposed and collected by the Commissioner for each

week of delay, or any fraction thereof, in the filing of the annual

statement.

For the filing of annual statement referred to in section four hundred, the

Commissioner shall collect and receive from the mutual benefit association so

filing a fee of ten pesos; Provided, That a fine of ten pesos shall be

imposed and collected by the Commissioner for each week of delay, or any

fraction thereof, in the filing of the annual statement.

(3) For the examination prescribed in section two hundred forty-six, the

Commissioner shall collect and receive fees according to the amount of its total

assets, in the case of a domestic company, or of its assets in the Philippines,

in the case of a foreign company, as follows:

Two million pesos or more but less than four million pesos, Four hundred

pesos;

Four million pesos or more but less than six million pesos, Eight hundred

pesos;

Six million pesos or more but less than eight million pesos, One thousand

two hundred pesos;

Eight million pesos or more but less than two million pesos, One thousand

six hundred pesos;

Ten million pesos or more, Two thousand pesos;

Provided, That if the said examination is made in places outside the

Metropolitan Manila area, besides these fees, the Commissioner shall require of

the company examined the payment of the actual and necessary travelling and

subsistence expenses of the examiner or examiners concerned.

For the examination prescribed in section three hundred ninety-nine, the

Commissioner shall collect and receive a minimum fee of one hundred pesos from

the mutual benefit association examined: Provided, That if such

association has total assets of more than one hundred thousand pesos, an

additional fee of ten pesos for every fifty thousand pesos in excess thereof

shall be imposed; Provided, Further, That such fee shall not exceed two

thousand pesos.

(4) For the filing of an application to withdraw from the Philippines under

title eighteen, the Commissioner shall collect and receive from the foreign

company so withdrawing a fee of one thousand pesos.

(5) The Commissioner may fix and collect fees or charges for documents,

transcripts, or other materials which may be furnished by him not in excess of

reasonable costs."

Section 31

SEC. 31. All laws, decrees, rules and regulations which are

inconsistent herewith are hereby repealed or modified accordingly.

Section 32

SEC. 32. This Decree shall take effect immediately.

Done in the City of Manila, this 11th day of June in the year of Our Lord,

nineteen hundred and seventy-eight.

(Sgd.) FERDINAND E. MARCOS

President of the

Philippines

By the President:

(Sgd.) JACOBO C. CLAVE

Presidential Executive

Assistant

Section 8

SEC. 8. Section 281 of the same Decree is hereby amended to

read as follows:

"SEC. 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

which 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 and entities, including the Central

Bank of the Philippines, and deposited with the Commissioner, and the remaining

seventy-five per centum in such other securities as may be allowed and permitted

by the Commissioner, which securities shall at all times be maintained free from

any lien or encumbrance; Provided, That reinsurers already doing

business as such in the Philippines shall comply with 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."