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The development of insurance lawin the PhilippinesCategory: Opinion  23 Dec 2014 Written by Dennis B. Funa

THE first insurance law in the country wasincorporated in the Spanish Code of Commerce(Codigo de Comercio), or the Royal Decree of

 August 22, 1885 (Real Decreto de 22 de Agostode 1885 ), which was then extended to the

Philippines by the Royal Decree of 1888.

The provisions in the Spanish Code ofCommerce concerning insurance can be found

in Title VIII (“On insurance contracts”) (repealed by the Spanish Act 50/1980,dated October 8) of Book II and Section III (“On maritime insurance”) of Title III(“On special maritime commerce contracts”) of Book III. However, all theseprovisions pertained solely to maritime insurance. In addition, while Chapters IIand IV of Title XII of Book IV of the Spanish Civil Code of 1889 related to lifeannuities, they did not relate directly to insurance.

During the Philippine Commonwealth period, the legislature enacted Act 1459, orthe Corporation law, on March 1, 1906. Sections 147 to 153 thereof pertained to“Domestic insurance corporations”. This law allowed the creation of life andnonlife insurance companies. These provisions were expressly repealed by Act2427, or the Insurance Act, on December 11, 1914. This act took effect on July 1,1915, and also repealed the provisions of the Spanish Code of Commerce oninsurance.

Under the Insurance Act, the insular treasurer, in addition to his official title, wasdesignated as the insurance commissionerex-officio. This made then-InsularTreasurer Jeremiah L. Manning the first insurance commissioner, albeit in anex-

officio capacity, until he retired on June 11, 1916. The government agency thatsupervised insurance business in the country was the Insurance Division of theBureau of the Treasury (BTr). By 1918 60 insurance companies were doingbusiness in the Philippines. Of this number, nine were local companies, 12 were

 American and the rest were from other nations, mainly the United Kingdom. Mostof the coverages were fire, marine and life. Typhoon and earthquake coverage

 were provided by the British Traders Insurance Co. and the Union Insurance Co.

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of Canton, both based in Hong Kong. The only Philippine company offering thesecoverages was the Fidelity and Surety Co. of the Philippines. On March 10, 1917

 Act 2711 (Chapter 15) amended the Administrative Code to provide for theprovisions on Public Bonding law.

In 1939 the Union Insurance Society of Canton appointed Russel & Surgis as itsagent in Manila, transacting business limited to nonlife insurance.

During the Second World War, the Insurance Division was separated from theBTr and attached to the Bureau of Banking. After the war, the division wasreturned to the treasury bureau. In 1947 the Insurance Division was merged withthe banking bureau.

On January 3, 1949, along with the formal opening of the Central Bank of thePhilippines, the banking bureau was renamed as the Office of the Insurance

Commissioner, by virtue of Republic Act (RA) 275. Likewise, the bankcommissioner and assistant bank commissioner were renamed as insurancecommissioner and assistant insurance commissioner, respectively.

On December 18, 1974, Presidential Decree (PD) 612 was promulgated,ordaining and instituting the Insurance Code of the Philippines, thereby repealing

 Act 2427. PD 63, 123 and 317 were issued, amending PD 612. Among otherthings, PD 63 provided that the Office of the Insurance Commissioner berenamed as the Insurance Commission (IC). Finally, on June 11, 1976, PD 1460took effect and consolidated all insurance laws into a single code, resulting in

 what we know now as the Insurance Code of 1978.Due to the series of failures in the preneed industry, there was a need to providea stricter regulatory framework. On July 27, 2009, RA 9829, or the Preneed Codeof the Philippines, was enacted. By virtue of this code, the regulation andsupervision of all preneed companies conducting business in the country wasvested in the IC.

On August 15, 2013, RA 10607, or the Amended Insurance Code, was signed byPresident Aquino. One of the amendments included in this law is the progressiveincrease of capital requirements for life and nonlife insurance companies every

three years until 2022.The revisions embodied in the Amended Insurance Code are intended toreinforce the provisions of the previous code, so as to further strengthen theinsurance industry and ensure the economic viability and financial stability ofcompanies operating in the country, to the end that each and every Filipino isamply protected and secured.

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Dennis B. Funa is the Insurance Commission’s deputy commissioner for legalservices. Send comments to dennisfuna@yahoo.com.