INVESTMENTS

The Insurance Code provides for limitations on:

(1) Loans and the security therefor – Sections 204-206

(2) Purchase or owner of assets – Section 206

(3) Purchase or ownership of securities, including bonds – Section

207 and 217

Reportorial Requirements

Section 215 of the Insurance Code provides:

 It shall be the duty of the officers of the insurance

company to report within the first 15 days of every
month all such investment as may be made by them
during the preceding month

 And that, the Commissioner may, if such investements

or any of them seem injudicious to him, require the sale
or disposal of the same

 List of investments sold or disposed of during the same

period shall also be included in the report

RESERVES

Reserve is the amount that, together with future premiums,

interests and benefit of survivorship, will be sufficient, according to
valuation assumptions, to pay future claims.

Section 216 provides that all such valuations shall be made

according to the standard adopted by the company, as prescribed by the
Commissioner in accordance with internationally accepted actuarial
standards, which standard shall be stated in its annual report.

EXAMINATION AND REPORTS

Section 245 provides that insurance companies are required to keep

its books, records, accounts and vouchers in such manner that they may
be readily examined by the Insurance Commissioner or his agent to
determine the solvency of the insurance companies.

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 Section 246 provides that the examination shall be done at least
once a year and whenever the Insurance Commissioner considers the
public interest demands and examination of the affairs, financial condition
and method of business of the insurance company.

LIMIT OF SINGLE RISK

Section 221 provides that “no insurance company other than life,
whether foreign or domestic, shall retain any risk on anyone subject of
insurance in an amount exceeding twenty percent of its net worth.

Subject of Insurance in this section shall include all properties or

risks insured by the same insurer that customarily are considered by non-
life company underwriters to be subject to loss or damage from the same
occurrence of any hazard insured against.

SECURITY DEPOSIT

The SECURITY DEPOSIT shall be:

 Answerable for all the obligations of the depositing

insurer under its insurance contracts,
 At all times free from any liens or encumbrance, and

 Exempt from levy by any claimant

REGULATION OF PERSONS INVOLVED IN THE BUSINESS

 Reinsurers  Resident Agents

 Mutual Life
Insurers  Non-Life Insurance
Underwriter
 Holding Companies
 Adjusters
 Foreign companies
 Actuaries
 Insurance Agents
and Brokers  Rating
Organizations
 Reinsurance
Brokers

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  Self-Regulatory
Organizations

1. Reinsurance Business

Section 224 provides that all insurance companies, both life

and non-life, authorized to do business in the Philippines, shall cede
their excess risks to other companies similarly authorized to do
business in the Philippines in such amounts and under such
arrangements as would be consistent with sound underwriting
practices before they enter into reinsurance arrangements with
unauthorized foreign insurers.

2. Holding Companies

Section 290 (c ) provides that holding companies means any

person who directly or indirectly controls any authorized insurer.

Section 298. Transactions within a holding company

system to which a controlled insurer is a party shall be
subject to the following:

(a) The terms shall be fair and equitable;

(b) Charges or fees for services performed shall be

reasonable;

(c) Expenses incurred and payments received shall be

allocated to the insurer on an equitable basis in
conformity with customary insurance accounting
practices consistently applied.

The books, accounts and records of each party to all

such transactions shall be maintained as to clearly and
accurately disclose the nature and details of the transactions
including such accounting information as is necessary to
support the reasonableness of the charges or fees to the
respective parties.

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 Section 299. The prior written approval of the
Commissioner shall be required for the following transactions
between a controlled insurer and any person in its holding
company system: sales, purchases, exchanges, loans or
extensions of credit, or investments, involving five percent
(5%) or more of the insurer’s admitted assets as of the thirty-
first day of December next preceding.

3. Self-Regulatory Organizations

Section 430. The Commissioner shall have the power to

register as a self-regulatory organization, or otherwise grant
licenses, and to regulate, supervise, examine, suspend or
otherwise discontinue, as a condition for the operation of
organizations whose operations are related to or connected
with the insurance market such as, but not limited to,
associations of insurance companies, whether life or non-life,
reinsurers, actuaries, agents, brokers, dealers, mutual benefit
associations, trusts, rating agencies, and other persons
regulated by the Commissioner, which are engaged in the
business regulated by this Code.

The Commissioner may prescribe rules and regulations

which are necessary or appropriate in the public interest or
for the protection of investors to govern self-regulatory
organizations and other organizations licensed or regulated
pursuant to the authority granted hereunder including, but
not limited to, the requirement of cooperation within and
among all participants in the insurance market to ensure
transparency and facilitate exchange of information.

An association cannot be registered as a self-

regulatory organization unless the Commissioner
determines that:

The association is so organized and has the

capacity to be able to carry out the purposes of
this Code and to comply with, and to enforce
compliance by its members and persons
associated with its members, with the provisions
of this Code, the rules and regulations thereunder,
and the rules of the association.

4. Other persons subject to regulation

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a. Reinsurance Broker – Section 319 provides it is one who,
for compensation, not being a duly authorized agent,
employee or officer of an insurer in which any reinsurance is
effected, acts or aids in any manner in negotiating contracts
of reinsurance, or placing risks of effecting reinsurance, for
any insurance company authorized to do business in the
Philippines.
b. Non-life Company Underwriter – Section 327 provides
that it is person whose duty and responsibility it shall be to
select, evaluate and accept risks for, and to determine the
terms and conditions, including those pertaining to amounts
of retentions, under which such risks are to be accepted by
the company, unless such underwriter is registered as such
with the Commissioner.

c. Adjuster – Section 333 provides that an adjuster may be

an independent adjuster or a public adjuster.

The term independent adjuster means any person,

partnership, association or corporation which, for money,
commission or any other thing of value, acts for or on behalf
of an insurer in the adjusting of claims arising under
insurance contracts or policies issued by such insurer.

The term public adjuster means any person,

partnership, association or corporation which, for money,
commission or any other thing of value, acts on behalf of an
insured in negotiating for, or effecting, the settlement of a
claim or claims of the said insured arising under insurance
contracts or policies, or which advertises for or solicits
employment as an adjuster of such claims.

d. Actuary – the person who makes financial calculations for

the life insurance company and who will certify the
documents such as reserves and net due and deferred
premium, valuation of annuity funds or retirement plans,
financial projections and the like.

Functions of an actuary, calculation of the following:

1. Premium rates
2. Gains and losses from insurance operations

3. Non-forfeiture benefits on lapse or surrender

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 4. Dividends on participating contracts, and

5. Value of contract liabilities

e. Rate Organization - Section 348 provides that every

organization which now exists or which may hereafter be
formed for the purpose of making rates to be used by more
than one insurance company authorized to do business in
the Philippines shall be known as a rating organization.