CREATING THE "PHILIPPINE CROP INSURANCE CORPORATION" PRESCRIBING ITS POWERS AND ACTIVITIES, PROVIDING FOR ITS CAPITALIZATION AND FOR THE REQUIRED GOVERNMENT PREMIUM SUBSIDY, AND FOR OTHER PURPOSES

• Number: Presidential Decree No. 1467
• Sections: 20

Preamble

WHEREAS, while the achievements of the on-going supervised

rice production credit program has been substantial, the financial burden on the

part of the farmers and the lending institutions in terms of uncompensated

losses arising from destruction of standing crops wrought by floods, typhoons,

heavy rains, drought and other natural calamities has not only tended to keep

the farmers in perpetual indebtedness but has also considerably constricted the

loaning capabilities of lending institutions and their willingness to extend

loans to rice farmers;

WHEREAS, as a result of the recurrent natural disasters our

farmers suffer heavy losses due to the destruction of their standing crops

resulting in loss of income and the consequent loss of their credit standing

through no fault of their own, which in turn seriously affects the finances of

lending institutions participating in the supervised credit program;

WHEREAS, implementing a crop insurance scheme can serve to

provide relief to out rice producers from the heavy burdens and loss caused by

such disasters as well as to stabilize the finances of lending institutions;

WHEREAS, crop insurance can serve as a strong incentive to

the intensification of the Government food production program as well as

minimize the erosion of the financial capability, and the willingness of lending

institutions to provide financial support to rice production program;

WHEREAS, a study conducted by an Inter-Agency Committee

sponsored by the Land Bank of the Philippines (LBP) disclosed the feasibility of

providing crop insurance protection to rice farmers covered by the supervised

credit program, as well as to self-financed farmers who place themselves under

the supervision of duly accredited technicians;

WHEREAS, because of its important role, the crop insurance

scheme requires inter-agency operational linkages and support to insure the

successful and economical attainment of its laudable objectives;

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

Republic of the Philippines, by virtue of the powers vested in me by the

Constitution, do hereby decree and order:

Section 1 Creation of the Philippine Crop Insurance Corporation.

SECTION 1. Creation of the Philippine Crop Insurance

Corporation.—There is hereby created a body corporate to be known as the

"Philippine Crop Insurance Corporation" (PCIC and herein called the Corporation)

which shall provide insurance protection to farmers against losses arising from

natural disasters as well as plant diseases and fest infestation, initially to

palay crops and later on to other crops. Such insurance protection, however,

shall exclude losses arising from avoidable risks emanating from or due to

neglect, malfeasance or fraud by the insured or any member of his immediate farm

household or employee or the failure of the insured to follow proven farm

practices, and that the indemnity for such losses shall not exceed at all times

the cost born by the insured farmer in the production of the crop.

Section 2 Place of Business and Term of Existence.

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

—

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

Manila;

2.2 The term of legal existence of Corporation shall be fifty (50) years from

and after the date of the approval of this Decree.

Section 3 Powers.

SEC. 3. Powers.—The Corporation shall have the

following powers:

3.1 To prescribe, repeal and alter its own by-laws; to determine its

operating policies and to issue such rules and regulations as may be necessary

to implement the crop insurance scheme;

3.2 To adopt and use a corporate seal;

3.3 To sue and to be sued;

3.4 To have continuous succession until dissolved by law;

3.5 To insure the rice production of farmers against loss, damage and

destruction caused by natural calamities such as typhoons, floods, drought,

earthquake, volcanic eruptions, rodents, vermins, disease, insects and other

pests; and to carry on any business necessary, related to, and expedient for the

above purpose;

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

Corporation;

3.7 To purchase or otherwise acquire ownership and manage any and all parts

of the business, property and liabilities of any person or company carrying on

any business which the Corporation is authorized to carry on or possess;

3.8 To acquire by purchase or otherwise acquire ownership of and to invest

in, hold, sell, or otherwise dispose of stocks or bonds or any interest in

either, or any obligation or evidence of indebtedness of any corporation,

domestic or foreign, or the bonds or other obligations or evidence of

indebtedness, of any person, firm or corporation; and as owner of such stocks,

bonds or interest therein, or other obligations or evidence of indebtedness, to

exercise the rights, powers and privileges of ownership, including the right to

vote thereon or consent in respect thereto for any and all lawful purposes;

3.9 To purchase, or otherwise acquire, sell, lease, convey, mortgage,

encumber, and otherwise deal with any property, real or personal, or any

interest therein; extend credit on the security of real estate or movable

property; exorcise easement right or privilege over or in respect to any

property, real or personal, as may be permitted by law and as may be reasonable

necessary to carry out the purposes for which the corporation is formed or as

may or hereafter be permitted by law;

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

3.11 To do and perform acts and things, and to exercise all the general

powers conferred by law upon Corporations, as are incidental or conducive to the

attainment of the objectives of the Corporation.

Section 4 Who shall be Insured.

SEC. 4. Who shall be Insured.—Participation in the

palay crop insurance shall be compulsory upon all farmers obtaining production

loans for palay under the supervised credit program, and optional on the part of

self-financed farmers provided they agree to place themselves under the

supervision of agricultural production technicians. The term "supervised credit

program" as used in this Decree shall mean the production credit program wherein

the farmer who obtained production loans for palay agree in writing that he will

apply proven farm practices necessary to conserve the land, improve its

fertility and increase its production, and abide by the approved farm plan and

budget jointly prepared by him and the duly accredited supervised credit

technician. The term "supervision of agricultural production technician" shall

mean the supervision undertaken by agricultural production technicians who are

duly accredited by the appropriate government agencies concerned, as required

under the supervised credit system.

Section 5 Rate of Premium and Its Sharing.

SEC. 5. Rate of Premium and Its Sharing.—The rate

of premium, as well as the allocated sharing thereof by the farmers, the lending

institutions, the Government of the Republic of the Philippines (herein called

the Government) and other parties, shall be determined by the Board of Directors

of the Corporation subject to approval by the President of the Philippines.

Section 6 Premium Subsidy.

SEC. 6. Premium Subsidy. —

6.1 For the first year of the operation of the Corporation, the required

Government premium subsidy, as determined by the Board and approved by the

President of the Philippines, shall be deemed appropriated from the funds of the

National Treasury not otherwise appropriated, and shall be drawn, on a

month-to-month or other periodic basis, depending upon the actual amount of

insurance underwritten by the Corporation. For this purpose, the Corporation

shall bill the Government the sum of money corresponding to the computed amount

of subsidy;

6.2 For subsequent years, yearly projections of the premium subsidy shall be

submitted by the Corporation to the President of the Philippines, and upon his

approval shall be included in the government budgetary

appropriations.

Section 7

SEC. 7. Transfer of the Agricultural Guarantee Funds to

the Corporation and Abolition of the Agricultural Guarantee Fund Board.—The

assets, liabilities and administration of the agricultural Guarantee Fund at

present being administered by the Land Bank of the Philippines to guarantee rice

production loans under the supervised production credit program as well as the

Agricultural Guarantee Fund created under Section 13 of Republic Act 6390, as

amended, are hereby transferred to the Corporation as part of the contribution

of the government to the capital of the Corporation as provided in Section 8

hereof: Provided, That the termination or cessation of the guarantee

operations under both funds shall be left to the discretion of the Board of

Directors of the Corporation. The agricultural Guarantee Fund Board, created

under Section 13 of Republic Act 6390, as amended, is hereby abolished.

Section 8 Capital Stock.

SEC. 8. Capital Stock. —

8.1 The authorized capital stock of the Corporation is SEVEN HUNDRED FIFTY

MILLION PESOS (P750,000,000.00) divided into FIVE MILLION (5,000,000) common

shares with a par value of ONE HUNDRED PESOS (P100.00) each share, which shall

be fully subscribed by the Government; and TWO MILLION FIVE HUNDRED THOUSAND

(2,500,000) preferred shares with a par value of ONE HUNDRED PESOS (P100.00) per

share which shall have the features as provided in Section 8.4 hereof and shall

be issued in accordance with the provisions of Section 8.5 hereof.

8.2 The paid-in capital of the Corporation upon its organization shall be TWO

HUNDRED FIFTY MILLION PESOS (P250,000,000.00), and shall be appropriated and

paid in as follows:

8.2.1 ONE HUNDRED FIFTY MILLION PESOS (P150,000,000) to be subscribed and

paid in by the Government out of the net assets transferred from the

agricultural Guarantee Funds as provided in Section 7 hereof; Provided,

That the amount by which the net assets exceed ONE HUNDRED FIFTY MILLION PESOS

(P150,000,000) shall be considered contributed surplus and treated as such on

the books of the Corporation;

8.2.2 An additional ONE HUNDRED MILLION PESOS (P100,000,000) to be likewise

subscribed and paid in by the Government out of funds of the National Treasury

not otherwise appropriated.

8.3 The remaining common capital stock of TWO HUNDRED FIFTY MILLION PESOS

(P250,000,000) shall be fully subscribed by the Government and the necessary

funds shall be appropriated, programmed, and paid by the proper office, entity

or agency of the government as the financial needs of the Corporation shall

require and until the authorized capital stock is fully paid up.

8.4 The preferred shares shall be entitled to a preference over common shares

in any declaration of dividends. They shall also be given priority in the

distribution of assets in the event of liquidation of the Corporation. They

shall have the following specific features:

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

8.4.2 Cumulative;

8.4.3 Participating;

8.4.4. Non-voting;

8.4.5 Dividends thereon shall be exempt from income tax;

8.4.6 Redeemable at the option of the Corporation at the prevailing book

value but in no case less than par after five (5) years from issuance

thereof;

8.4.7 Transferable.

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

general public.

Section 9 Board of Directors.

SEC. 9. Board of Directors. —

9.1 The power of the Corporation shall be vested in and exercised by a Board

of Directors composed of nine (9) members and made up of the following: the

Secretary of Finance, the Secretary of Agriculture, the President of the Land

Bank of the Philippines, the Secretary of Agrarian Reform, the Secretary of

Labor, the Secretary of National Defense, the Budget Commission, and the

President of the Corporation; and in addition, a nominee of the Secretary of

Finance, preferably representing the private insurance industry. The Chairman of

the Board of Directors shall be appointed by the President of the Philippines

from among the members of the Board of Directors; and that the President of the

Corporation shall be ex-officio Vice Chairman who, as such, shall assist the

Chairman and act in his stead in case of absence or incapacity. In case of

absence or incapacity of both the Chairman and the Vice-Chairman, the Board of

Directors shall designate a temporary Chairman from among its members.

9.2 The members of the Board shall have their respective alternates who shall

attend the meetings, and act as members of the Board in the absence or

incapacity of the regular members;

9.3 The Board of Directors shall meet regularly at least twice a month and as

often as the exigencies of the Corporations affairs demand. The presence of at

least five (5) members shall constitute a quorum which shall be necessary for

the transaction of any business. The Board may be convoked either by the

Chairman or in his absence by the Vice Chairman;

9.4 The Chairman and the members of the Board shall each receive a per diem

of THREE HUNDRED PESOS (P300.00) for each session of the Board attended, but in

no case to exceed THREE THOUSAND (P3,000.00) a month.

Section 10 Powers and Functions of the Board of Directors.

SEC. 10. Powers and Functions of the Board of

Directors.—The Board shall, without limiting the generality of the

foregoing, have the following powers and functions:

10.1 To implement the provisions and purposes of this Decree;

10.2 To formulate and adopt policies and plans, and to promulgate rules and

regulations for the management, operation and conduct of the affairs and

business of the Corporation and for this purpose may limit or refuse insurance

in any area or on any farmer because of the risk involved or may expand the

subject of insurance coverage to crops other than palay, provided such coverage

on other crops shall be approved by the President of the Philippines;

10.3 To borrow funds from local and international financing sources or

institutions for the purpose of financing the programs and projects deemed vital

for the attainment of the Corporation's goal and objectives;

10.4 To enter into, make and execute contracts of any kind or nature as may

be necessary, or incidental to the accomplishment of the purposes of the

Corporation.

10.5 To approve the budget of the Corporation and to fix the reasonable

compensation of its personnel; Provided, That the Board of Directors

shall have exclusive and final authority to promote, transfer, assign or

re-assign personnel of the Corporation and these personnel actions are deemed

made in the interest of the service and not disciplinary, any provision of

existing law to the contrary notwithstanding;

10.6 To establish policies and guidelines for employment on the basis of

merit, technical competence and moral character, and approve a staffing pattern

of personnel defining their powers and duties;

10.7 To exercise the general powers mentioned in the Corporation Law in sofar

as they are not inconsistent or incompatible with the provisions of this

Decree.

Section 11 Management.

SEC. 11. Management.—The management of the

Corporation shall be vested in the President of the Corporation who shall be a

person of know integrity, competence in technical and executive fields related

to the purposes of this Decree. He shall be appointed by the Board and shall not

be removed except for cause. He may have such Vice President(s) as the Board of

Directors may decide, to be appointed by the latter. He shall have the following

powers and duties:

11.1 To execute and administer the policies, plans and programs and the rules

and regulations approved or promulgated by the Board;

11.2 To submit for the consideration of the Board such policies, plans and

programs as he deems necessary to carry out the provisions and purposes of this

Decree;

11.3 To direct and supervise the operations and internal administration of

the Corporation and for this purpose, to delegate some or any of his powers and

duties to subordinate officials;

11.4 To recommend to the Board the appointment, promotion, transfer,

assignment, re-assignment, demotion, dismissal and compensation of

personnel;

11.5 To exercise such other powers and perform such other duties as may be

directed by the Board of Directors.

Section 12 Commission on Audit.

SEC. 12. Commission on Audit.—The Commission on

Audit shall be the ex-officio auditor of the Corporation.

Section 13 Legal Counsel.

SEC. 13. Legal Counsel.—The Corporation shall have

its own Legal Department, the Chief and members of which shall be appointed by

the Board of Directors.

Section 14 Inter-Agency Linkages.

SEC. 14. Inter-Agency Linkages.—To support and

promote the operations of the Corporation, all government departments, bureaus,

officers, agencies and instrumentalities, national or local, all lending

institutions, government or private, now or hereafter engaged in the supervised

credit program, namely: Department of Finance, Department of Local Government

and Community Development, Department of Agriculture, Department of Agrarian

Reform, Department of Labor, Department of National Defense, National Economic

and Development Authority, Armed Forces of the Philippines, Philippine

Constabulary, Bureau of Cooperative Development, National Food and Agriculture

Council, Bureau of Agricultural Extension, National Irrigation Administration,

Bureau of Soils, Bureau of Plant Industry, Bureau of Animal Industry, Central

Bank of the Philippines, Department of Rural Banks and Savings and Loans

Associations, Land Bank of the Philippines, Agricultural Credit Administration,

Philippine National Bank, Development Bank of the Philippines, All Rural Banks,

Cooperative Rural Banks and Development Banks, all Barangay Associations and

Samahang Nayon organizations, and such other public or private entities as may

be called upon by the Corporation, shall act as cooperating agencies to the

Corporation, and for this purpose, are hereby directed to design their policies,

programs, rules and regulations so as to attune and synchronize them with the

objectives of the Corporation.

Section 15 Utilization of Profits.

SEC. 15. Utilization of Profits.—The profits of the

Corporation shall be determined on the calendar year basis and the manner of its

distribution shall be determined by the Board of Directors.

Section 16 Exemption from Taxes.

SEC. 16. Exemption from Taxes.—In furtherance of

the effective achievement of the purpose of this Decree, the Corporation shall

be exempt to the extent allowed by national policy from all national,

provincial, municipal and city taxes and assessments now enforced,

Provided, That said exemption shall apply only to such taxes and

assessments for which the Corporation itself would otherwise be liable and shall

not apply to taxes and assessments payable by persons or other entities doing

business with the Corporation.

Section 17 Repealing and Separability Clause.

SEC. 17. Repealing and Separability Clause.—All

laws, decrees, charters, executive orders, administrative orders, proclamations,

rules and regulations, or parts thereof in conflict with this Decree are hereby

repealed or modified accordingly. If any provision, part or parts of this Decree

is or are declared unconstitutional, such declaration shall not invalidate the

other provisions hereof.

Section 18 Applicability of P.D. No. 612.

SEC. 18. Applicability of P.D. No. 612.—The

provisions of the Insurance Code insofar as they are not in conflict or

inconsistent with or repugnant to the provisions of this Decree shall apply to

the Corporation.

Section 19 Effectivity.

SEC. 19. Effectivity.—This Decree shall take effect

upon approval. The Corporation shall commence business not later than six (6)

months from the appointment of the Chairman of its Board of Directors and

payment of the initial capital contributions of the Government as herein

prescribed.

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

nineteen hundred and seventy-eight.

(Sgd.) FERDINAND E. MARCOS

President of the

Philippines

By the President:

(Sgd.) JACOBO C. CLAVE

Presidential Executive

Assistant