Philamlife vs.

Auditor General is merely an agreement between two insurance

GR. 19255 January 18, 1968 companies whereby one agrees to surrender and
the other to accept reinsurance business pursuant
to provisions specified in the treaty. Treaties are
Facts: On January 1950, Philippine American Life contracts for insurance; reinsurance policies or
Insurance Co. (PHILAM) and, foreign corporation, cessions are contracts of insurance.
American International Reinsurance Co.(AIRCO)
entered into a reinsurance treaty where PHILAM
agreed to reinsure with AIRCO the excess of life
insurance on the lives of persons written by
PHILAM. In their agreement it is also stipulated
that even though PHILAM is already on a risk for
its maximum retention under policies previously
issued, when new policies are applied for and
issued they can cede automatically any amount,
within the limits specified.

No question ever arose with respect to the

remittances made by Philamlife to Airco before July
16, 1959, the date of approval of the Margin Law.

Subsequently, the Central Bank of the Philippines

collected the sum of P268,747.48 as foreign
exchange margin on Philamlife remittances to
Airco made subsequent to July 16, 1959.

PHILAM then filed with the CB a claim for refund

for the same amount arguing that the reinsurance
premiums remitted were paid on January 1950 and
is therefore exempt from the 25% foreign exchange
margin fee. The Acting legal counsel of the
Monetary board resolved that reinsurance
contracts entered into and approved by the Central
Bank before July 17, 1959 are exempt from the
payment of the 25% foreign exchange margin,
even if remittances thereof are made after July 17,
1959.

Still the Auditor of the CB denied PHILAM’s claim

for refund and reconsideration was denied, hence
the petition.

Issue: Whether PHILAM’s claim was covered by

the exemption

Held: The Court held in the negative stating that for

an exemption to come into play, there must be a
reinsurance policy or, as in the reinsurance treaty
provided, a “reinsurance cession” which may be
automatic or facultative.

To distinguish, a reinsurance policy is a contract of

indemnity one insurer makes with another to
protect the first insurer from a risk it has already
assumed. On the other hand, a reinsurance treaty