“TITLE 10

“VARIABLE CONTRACTS

“SEC. 238. (a) No insurance company authorized to transact business in the

Philippines shall issue, deliver, sell or use any variable contract in the Philippines,
unless and until such company shall have satisfied the Commissioner that its financial
and general condition and its methods of operations, including the issue and sale of
variable contracts, are not and will not be hazardous to the public or to its policy and
contract owners. No foreign insurance company shall be authorized to issue, deliver or
sell any variable contract in the Philippines, unless it is likewise authorized to do so
by the laws of its domicile.

“(b) The term variable contract shall mean any policy or contract on either a group or
on an individual basis issued by an insurance company providing for benefits or other
contractual payments or values thereunder to vary so as to reflect investment results of
any segregated portfolio of investments or of a designated separate account in which
amounts received in connection with such contracts shall have been placed and
accounted for separately and apart from other investments and accounts. This contract
may also provide benefits or values incidental thereto payable in fixed or variable
amounts, or both. It shall not be deemed to be a security or securities as defined in
The Securities Act, as amended, or in the Investment Company Act, as amended, nor
subject to regulations under said Acts.

“(c) In determining the qualifications of a company requesting authority to issue,

deliver, sell or use variable contracts, the Commissioner shall always consider the
following:

“(1) The history, financial and general condition of the company: Provided, That such
company, if a foreign company, must have deposited with the Commissioner for the
benefit and security of its variable contract owners in the Philippines, securities
satisfactory to the Commissioner consisting of bonds of the Government of the
Philippines or its instrumentalities with an actual market value of Two million pesos
(P2,000,000.00);

“(2) The character, responsibility and fitness of the officers and directors of the
company; and

“(3) The law and regulation under which the company is authorized in the state of
domicile to issue such contracts.
“(d) If after notice and hearing, the Commissioner shall find that the company is
qualified to issue, deliver, sell or use variable contracts in accordance with this Code
and the regulations and rules issued thereunder, the corresponding order of
authorization shall be issued. Any decision or order denying authority to issue,
deliver, sell or use variable contracts shall clearly and distinctly state the reasons and
grounds on which it is based.

“SEC. 239. Any insurance company issuing variable contracts pursuant to this Code
may in its discretion issue contracts providing a combination of fixed amount and
variable amount of benefits and for option lump-sum payment of benefits.

“SEC. 240. Every variable contract form delivered or issued for delivery in the
Philippines, and every certified form evidencing variable benefits issued pursuant to
any such contract on a group basis, and the application, rider and endorsement forms
applicable thereto and used in connection therewith, shall be subject to the prior
approval of the Commissioner.

“SEC. 241. Illustration of benefits payable under any variable contract shall not
include or involve projections of past investment experience into the future and shall
conform with the rules and regulations promulgated by the Commissioner.

“SEC. 242. Variable contracts may be issued on the industrial life basis, provided that
the pertinent provisions of this Code and of the rules and regulations of the
Commissioner governing variable contracts are complied with in connection with
such contracts.

“SEC. 243. Every life insurance company authorized under the provisions of this
Code to issue, deliver, sell or use variable contracts shall, in connection with the same,
establish one or more separate accounts to be known as separate variable accounts. All
amounts received by the company in connection with any such contracts which are
required by the terms thereof, to be allocated or applied to one or more designated
separate variable accounts shall be placed in such designated account or accounts. The
assets and liabilities of each such separate variable account shall at all times be clearly
identifiable and distinguishable from the assets and liabilities in all other accounts of
the company. Notwithstanding any provision of law to the contrary, the assets held in
any such separate variable account shall not be chargeable with liabilities arising out
of any other business the company may conduct but shall be held and applied
exclusively for the benefit of the owners or beneficiaries of the variable contracts
applicable thereto. In the event of the insolvency of the company, the assets of each
such separate variable account shall be applied to the contractual claims of the owners
or beneficiaries of the variable contracts applicable thereto. Except as otherwise
specifically provided by the contract, no sale, exchange or other transfer of assets may
be made by a company, between any of its separate accounts or between any other
investment account and one or more of its separate accounts, unless in the case of a
transfer into a separate account, such transfer is made solely to establish the account
or to support the operation of the contracts with respect to the separate account to
which the transfer is made, or in case of a transfer from a separate account, such
transfer would not cause the remaining assets of the account to become less than the
reserves and other contract liabilities with respect to such separate account. Such
transfer, whether into or from a separate account, shall be made by a transfer of cash,
or by a transfer of securities having a valuation which could be readily determined in
the market place: Provided, That such transfer of securities is approved by the
Commissioner. The Commissioner may authorize other transfers among such
accounts, if, in his opinion, such transfers would not be inequitable. All amounts and
assets allocated to any such separate variable account shall be owned by the company
and with respect to the same the company shall not be nor hold itself out to be a
trustee.

“SEC. 244. Any insurance company which has established one or more separate
variable accounts pursuant to the preceding section may invest and reinvest all or any
part of the assets allocated to any such account in the securities and investments
authorized by Sections 204, 206, 207 and 208 for any of the funds of an insurance
company in such amount or amounts as may be approved by the Commissioner. In
addition thereto, such company may also invest in common stocks or other equities
which are listed on or admitted to trading in a securities exchange located in the
Philippines, or which are publicly held and traded in the over-the-counter market as
defined by the Commissioner and as to which market quotations have been
available: Provided, however, That no such company shall invest in excess of ten
percent (10%) of the assets of any such separate variable accounts in any one
corporation issuing such common stock. The assets and investments of such separate
variable accounts shall not be taken into account in applying the quantitative
investment limitations applicable to other investments of the company. In the
purchase of common capital stock or other equities, the insurer shall designate to the
broker, or to the seller if the purchase is not made through a broker, the specific
variable account for which the investment is made.

“SEC. 245. Assets allocated to any separate variable account shall be valued at their
market value on the date of any valuation, or if there is no readily available market
value then in accordance with the terms of the variable contract applicable to such
assets, or if there are no such contract terms then in such manner as may be prescribed
by the rules and regulations of the Commissioner.
“SEC. 246. The reserve liability for variable contracts shall be established in
accordance with actuarial procedures that recognize the variable nature of the benefits
provided, and shall be approved by the Commissioner.

“TITLE 11

“CLAIMS SETTLEMENT

“SEC. 247. (a) No insurance company doing business in the Philippines shall refuse,
without just cause, to pay or settle claims arising under coverages provided by its
policies, nor shall any such company engage in unfair claim settlement practices. Any
of the following acts by an insurance company, if committed without just cause and
performed with such frequency as to indicate a general business practice, shall
constitute unfair claim settlement practices:

“(1) Knowingly misrepresenting to claimants pertinent facts or policy provisions

relating to coverage at issue;

“(2) Failing to acknowledge with reasonable promptness pertinent communications

with respect to claims arising under its policies;

“(3) Failing to adopt and implement reasonable standards for the prompt investigation
of claims arising under its policies;

“(4) Not attempting in good faith to effectuate prompt, fair and equitable settlement of
claims submitted in which liability has become reasonably clear; or

“(5) Compelling policyholders to institute suits to recover amounts due under its
policies by offering without justifiable reason substantially less than the amounts
ultimately recovered in suits brought by them.

“(b) Evidence as to numbers and types of valid and justifiable complaints to the
Commissioner against an insurance company, and the Commissioner’s complaint
experience with other insurance companies writing similar lines of insurance shall be
admissible in evidence in an administrative or judicial proceeding brought under this
section.

“(c) If it is found, after notice and an opportunity to be heard, that an insurance

company has violated this section, each instance of noncompliance with paragraph (a)
may be treated as a separate violation of this section and shall be considered sufficient
cause for the suspension or revocation of the company’s certificate of authority.
“SEC. 248. The proceeds of a life insurance policy shall be paid immediately upon
maturity of the policy, unless such proceeds are made payable in installments or as an
annuity, in which case the installments, or annuities shall be paid as they become
due: Provided, however, That in the case of a policy maturing by the death of the
insured, the proceeds thereof shall be paid within sixty (60) days after presentation of
the claim and filing of the proof of death of the insured. Refusal or failure to pay the
claim within the time prescribed herein will entitle the beneficiary to collect interest
on the proceeds of the policy for the duration of the delay at the rate of twice the
ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is
based on the ground that the claim is fraudulent.

“The proceeds of the policy maturing by the death of the insured payable to the
beneficiary shall include the discounted value of all premiums paid in advance of their
due dates, but are not due and payable at maturity.

“SEC. 249. The amount of any loss or damage for which an insurer may be liable,
under any policy other than life insurance policy, shall be paid within thirty (30) days
after proof of loss is received by the insurer and ascertainment of the loss or damage is
made either by agreement between the insured and the insurer or by arbitration; but if
such ascertainment is not had or made within sixty (60) days after such receipt by the
insurer of the proof of loss, then the loss or damage shall be paid within ninety (90)
days after such receipt. Refusal or failure to pay the loss or damage within the time
prescribed herein will entitle the assured to collect interest on the proceeds of the
policy for the duration of the delay at the rate of twice the ceiling prescribed by the
Monetary Board, unless such failure or refusal to pay is based on the ground that the
claim is fraudulent.

“SEC. 250. In case of any litigation for the enforcement of any policy or contract of
insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to
make a finding as to whether the payment of the claim of the insured has been
unreasonably denied or withheld; and in the affirmative case, the insurance company
shall be adjudged to pay damages which shall consist of attorney’s fees and other
expenses incurred by the insured person by reason of such unreasonable denial or
withholding of payment plus interest of twice the ceiling prescribed by the Monetary
Board of the amount of the claim due the insured, from the date following the time
prescribed in Section 248 or in Section 249, as the case may be, until the claim is fully
satisfied: Provided, That failure to pay any such claim within the time prescribed in
said sections shall be considered prima facie evidence of unreasonable delay in
payment.

“SEC. 251. It is unlawful to:

“(a) Present or cause to be presented any fraudulent claim for the payment of a loss
under a contract of insurance; and

“(b) Fraudulently prepare, make or subscribe any writing with intent to present or use
the same, or to allow it to be presented in support of any such claim. Any person who
violates this section shall be punished by a fine not exceeding twice the amount
claimed or imprisonment of two (2) years, or both, at the discretion of the court.

“TITLE 12

“EXAMINATION OF COMPANIES

“SEC. 252. The Commissioner shall require every insurance company doing business
in the Philippines to keep its books, records, accounts and vouchers in such manner
that he or his authorized representatives may readily verify its annual statements and
ascertain whether the company is solvent and has complied with the provisions of this
Code or the circulars, instructions, rulings or decisions of the Commissioner.

“SEC. 253. The Commissioner shall at least once a year and whenever he considers
the public interest so demands, cause an examination to be made into the affairs,
financial condition and method of business of every insurance company authorized to
transact business in the Philippines and of any other person, firm or corporation
managing the affairs and/or property of such insurance company. Such company, as
well as such managing person, firm or corporation, shall submit to the examiner all
such books, papers and securities as he may require and such examiner shall also have
the power to examine the officers of such company under oath touching its business
and financial condition, and the authority to transact business in the Philippines of any
such company shall be suspended by the Commissioner if such examination is refused
and such company shall not thereafter be allowed to transact further business in the
Philippines until it has fully complied with the provisions of this section.

“Government-owned or -controlled corporations or entities engaged in social or

private insurance shall similarly be subject to such examination by the Commissioner
unless their respective charters otherwise provide.

“TITLE 13

“SUSPENSION OR REVOCATION OF AUTHORITY

“SEC. 254. If the Commissioner is of the opinion upon examination of 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 method of business is such as to render its proceedings hazardous
to the public or to its policyholders, or that its net worth requirement, 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 (3) years.

“TITLE 14

“APPOINTMENT OF CONSERVATOR

“SEC. 255. If at any time before, or after, the suspension or revocation of the
certificate of authority of an insurance company as provided in the preceding title, the
Commissioner finds that such company is in a state of continuing inability or
unwillingness to maintain a condition of solvency or liquidity deemed adequate to
protect the interest of policyholders and creditors, he may appoint a conservator to
take charge of the assets, liabilities, and the management of such company, collect all
moneys and debts due to said company and exercise all powers necessary to preserve
the assets of said company, reorganize the management thereof, and restore its
viability. The said conservator shall have the power to overrule or revoke the actions
of the previous management and board of directors of the said company, any
provision of law, or of the articles of incorporation or bylaws of the company, to the
contrary notwithstanding, and such other powers as the Commissioner shall deem
necessary.

“The conservator may be another insurance company doing business in the

Philippines, any officer or officers of such company, or any other competent and
qualified person, firm or corporation. The remuneration of the conservator and other
expenses attendant to the conservation shall be borne by the insurance company
concerned.

“The conservator shall not be subject to any action, claim or demand by, or liability
to, any person in respect of anything done or omitted to be done in good faith in the
exercise, or in connection with the exercise, of the powers conferred on the
conservator.
“The conservator appointed shall report and be responsible to the Commissioner until
such time as the Commissioner is satisfied that the insurance company can continue to
operate on its own and the conservatorship shall likewise be terminated should the
Commissioner, on the basis of the report of the conservator or of his own findings,
determine that the continuance in business of the insurance company would be
hazardous to policyholders and creditors, in which case the provisions of Title 15 shall
apply.

“No insurance company, life or non-life, or any professional reinsurer, ordered to be

liquidated by the Commissioner under the provisions hereunder may be rehabilitated
or authorized to transact anew, insurance or reinsurance business, as the case may be.

“TITLE 15

“PROCEEDINGS UPON INSOLVENCY

“SEC. 256. 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 ninety (90) 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 prescribe 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, indicate the manner of its liquidation and approve a liquidation plan
and implement it immediately. The Commissioner shall designate a competent and
qualified person as liquidator who shall take over the functions of the receiver
previously designated 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 this 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 it will pay the damages which the petition 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 the issuance and dissolution
of the restraining order or injunction contemplated in 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 solvency requirements
under Section 200 of this Code.

“SEC. 257. The receiver or the liquidator, as the case may be, designated under the
provisions of this title, shall not be subject to any action, claim or demand by, or
liability to, any person in respect of anything done or omitted to be done in good faith
in the exercise, or in connection with the exercise, of the powers conferred on such
receiver or liquidator.
 “TITLE 16

“CONSOLIDATION AND MERGER OF

INSURANCE COMPANIES

“SEC. 258. Upon prior notice to the Commissioner, two (2) or more domestic
insurance companies, acting through their respective boards of directors, may
negotiate to merge into a single corporation which shall be one of the constituent
corporations, or consolidate into a single corporation which shall be a new corporation
to be formed by the consolidation. A common agreement of the proposed merger or
consolidation shall be drawn up for submission to the stockholders or members of the
constituent companies for adoption and approval in accordance with the provisions of
the respective bylaws of the constituent companies and all existing laws that may be
pertinent.

“SEC. 259. Such agreement shall include, aside from the proposed merger or
consolidation, provisions relative to the manner of transfer of assets to and assumption
of liabilities by the absorbing or acquiring company from the absorbed or dissolved
company or companies; the proposed articles of merger or consolidation and bylaws
of the surviving or acquiring company; the corporate name to be adopted which
should not be that of any other existing company transacting similar business or one
so similar as to be calculated to mislead the public; the rights of the stockholders or
members of the absorbed or dissolved companies; date of effectivity of the merger or
consolidation; and such particulars as may be necessary to explain and make manifest
the objects and purposes of the absorbing or acquiring company.

“SEC. 260. Upon execution of such agreement to merge or consolidate by and

between or among the boards of directors of the constituent companies, notice thereof
shall be mailed immediately to their policyholders and creditors. The company or
companies to be absorbed or dissolved shall discharge all its accrued liabilities;
otherwise, such liabilities shall, with the consent of its creditors, be transferred to and
assumed by the absorbing or acquiring company, or such liabilities be reinsured by the
latter. In the case of such policies as are subject to cancellation by the company or
companies to be absorbed or dissolved, same may be cancelled pursuant to the terms
thereof in lieu of such transfer, assumption, or reinsurance.

“SEC. 261. Upon approval or adoption in the meetings of the stockholders or

members called for the purpose in each of the constituent companies of the agreement
to merge or consolidate, all stockholders or members dissenting or objecting to the
merger or consolidation shall be paid the value of their shares by the company
concerned in accordance with the bylaws thereof.
“SEC. 262. Upon approval or adoption of the agreement to merge or consolidate by
the stockholders or members of the constituent companies, the corresponding articles
of merger or of consolidation shall be duly executed by the presidents and attested by
the corporate secretaries and shall bear the corporate seals of the merging or
consolidating companies setting forth:

“(a) The plan of merger or the plan of consolidation;

“(b) As to each corporation, the number of shares outstanding, or in case of mutual

corporations, the number of members; and

“(c) As to each corporation, the number of shares or members voted for and against
such plan, respectively. Thereafter, a certified copy of such articles of merger or
consolidation, together with a certificate of approval or adoption by the stockholders
or members of such articles of merger or consolidation, verified by affidavits of such
officers and under the seal of the constituent companies, shall be submitted to the
Commissioner, together with such other papers or documents which the
Commissioner may require, for his consideration.

“SEC. 263. The articles of merger or of consolidation, signed and verified as

hereinabove required, shall be filed with the Securities and Exchange Commission for
its examination and approval.

“SEC. 264. Upon receipt from the Securities and Exchange Commission of the
certificate of merger or of consolidation, the constituent companies shall surrender to
the Commissioner their respective certificates of authority to transact insurance
business. The absorbing or surviving company in case of merger, or the newly formed
company in case of consolidation, shall immediately file with the Commissioner the
corresponding application for issuance of a new certificate of authority to transact
insurance business, together with a certified copy of the certificate of merger or of
consolidation, and of the certificate of increase of stocks, if there is any, issued by the
Securities and Exchange Commission.

“SEC. 265. Nothing in this title shall be construed to enlarge the powers of the
absorbing or surviving company in case of merger, or the newly formed company in
case of consolidation, except those conferred by the certificate of merger or of
consolidation and the articles of merger or of consolidation, or the amended articles of
incorporation, as registered with the Securities and Exchange Commission.

“SEC. 266. No director, officer, or stockholder of any such constituent companies

shall receive any fee, commission, compensation, or other valuable consideration
whatsoever, directly or indirectly, or in any manner aiding, promoting or assisting in
such merger or consolidation.

“SEC. 267. The merger or consolidation of companies under this Code shall be
subject to the provisions of the Corporation Code, and, in those cases specified in
Republic Act No. 5455, as amended, be further subject to the provisions of said law.