Insurance Code – Chapter V: Security Fund

CHAPTER V — SECURITY FUND

SECTION 365.       There is hereby created a fund to be known as the “Security Fund” w/c shall be used in the payment of allowed claims against an insurance company authorized to transact business in the Philippines remaining unpaid by reason of the solvency of such company. The said Fund may also be used to reinsure the policy of the insolvent insurer in any solvent insurer authorized to do business in the Philippines as provided in section two hundred forty‑nine. In the event of national emergency or calamity, the Fund may likewise be used to pay insured claims w/c otherwise would not be compensable under the provisions of the policy. No payment fr. the Security Fund shall, however, be made to any person who owns or controls ten per centum or more of the voting shares of stock of the insolvent insurer & no payment on any one claim shall exceed twenty thousand pesos.

SECTION 366.       Such Fund shall consist of all payments made to the Fund by insurance companies authorized to do business in the Philippines. Payments made by life insurance companies shall be treated separately fr. those made by non‑life insurance companies & the corresponding fund shall be called “Life Account” & “Non‑Life Account”, respectively, & shall be held & administered as such by the Commissioner in accordance w/ the provisions of this title. The “Life Account” shall be utilized exclusively for disbursements that refer to life insurance companies, while the “Non‑Life Account” shall be utilized exclusively for disbursements that refer to non‑life insurance companies.

SECTION 367.       All insurance companies doing business in the Philippines shall contribute to the Security Fund, Life or Non‑Life Account, as the case may be, on or before the fifteenth day of June, nineteen hundred & seventy‑five, the aggregate amount of five million pesos for each Account. The contributions of the life insurance companies & of the non‑life insurance companies shall be in direct proportion to the ratio between a particular life insurance company or a particular non‑life insurance company’s net worth & the aggregate net worth of all life insurance companies or all non‑life insurance companies, as the case may be, as shown in their latest financial statements approved by the Commissioner. This proportion applied to the five million pesos shall be the contribution of a particular company to the corresponding Account of the Security Fund.

The amount of five million pesos in each Account shall be in the form of a revolving trust fund. The respective contributions of the companies shall remain as admitted assets in their books & any disbursement therefr. shall be deducted proportionately fr. the contributions of each company w/c will be allowed as deductions for income tax purposes. Any earnings of the Fund shall be turned over to the contributing companies in proportion to their contributions.

In the case of disbursements of funds fr. the Fund as provided in the foregoing paragraph, the life & non‑life companies, as the case may be, shall replenish the amount disbursed in direct proportion to the individual company’s net worth & the aggregate net worth of the life or non‑life companies, as the case may be. However, in no case shall the Fund exceed the aggregate amount of ten million pesos, or five million pesos for each Account.

Should the Fund, Life of Non‑Life Account, as the case may be, be inadequate for a disbursement as provided for, then the Life or Non‑Life companies, as the case may be, shall contribute to the Fund their respective shares in the proportion previously mentioned.

SECTION 368.       The Commissioner may adopt, amend, & enforce all reasonable rules & regulations necessary for the proper administration of the Fund & of the Accounts. In the event any insurer shall fail to make any payment required by this title, or that any payment made is incorrect, he shall have full authority to examine all the books & records of the insurer for the purpose of ascertaining the facts & shall determine the correct amount to be paid & may proceed in any court of competent jurisdiction to recover for the benefit of the Fund or of the Account concerned any sum shown to be due upon such examination & determination. Any insurer w/c fails to make any payment to the Fund or to the Account concerned when due, shall thereby forfeit to said Fund or Account concerned a penalty of five per centum of the amount determined to be due as provided by this title, plus one per centum of such amount for each month of delay or fraction thereof, after the expiration of the first month of such delay, but the Commissioner, if satisfied that the delay was excusable, may remit all or any part of such penalty. The Commissioner, in his discretion, may suspend or revoke the certificate of authority to do business in the Philippines of any insurance company w/c shall fail to comply w/ this title or to pay any penalty imposed in accordance therewith.

SECTION 369.       The Accounts created by this title shall be separate & apart fr. each other & fr. any other fund. The Treasurer of the Philippines shall be the custodian of the Life Account & Non‑Life Account of the Security Fund; & all disbursements fr. any Account shall be made by the Treasurer of the Philippines upon vouchers signed by the Commissioner or his deputy, as hereinafter provided. The moneys of said Account may be invested by the Commissioner only in bonds or other evidences of debt of the government of the Philippines or its political subdivisions or instrumentalities. The Commissioner may sell any of the securities in w/c an Account is in vested, if advisable, for its proper administration or in the best interest of such Account.

SECTION 370.       Payments fr. either the Life Insurance Account or Non‑Life Account, as the case may be, shall be made by the Treasurer of the Philippines to the Commissioner, upon the authority of appropriate certificate filed w/ him by the Commissioner acting in such capacity.

SECTION 371.       The Commissioner may, in his discretion, designate or appoint a duly authorized representative or representatives to appear & defend before any court or other body or official having jurisdiction any or all actions or proceedings against principals or assureds on insurance policies or contracts issued to them where the insurer has become insolvent or unable to meet its insurance obligations. The Commissioner shall have, as of the date of insolvency of such insurer or as of the date of its inability meet its insurance obligations, only the rights w/c such insurer would have had if it had not become insolvent or unable to meet its insurance obligations. For the purpose of this title the Commissioner shall have power to employ such counsel, clerks & assistants as he may deem necessary.

SECTION 372.       The expense of administering an Account shall be paid out of the Account concerned. The Commissioner shall serve as administrator of the Fund & of the Accounts without additional compensation, but may be allowed & paid fr. the Account concerned expenses incurred in the performance of his duties in connection w/ said Account. The compensation of those persons employed payable fr. the Account concerned. The Commissioner shall include in his annual report to the Secretary of Finance a statement of the expenses of administration of the Fund & of the Life Account & Non‑Life Account for the preceding year.

 

Reference:  University of the Philippines

Advertisements

About Magz

First of all, I am not a lawyer. I'm a graduate of AB Political Science and went to the College of Law but stopped going to law school for some reasons. I'm a passionate teacher who has been teaching English to speakers of other languages and a person who likes writing and blogging. I lost some important files and software when my computer broke down so the reason I created this website is to preserve the notes, reviewers and digests I collected when I was at the law school and at the same time, I want to help out law students who do not have enough time to go and read books in the library.

Posted on July 6, 2011, in Insurance Code and tagged . Bookmark the permalink. Leave a comment.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: