Law Summary

Overview

This memorandum circular outlines the government’s policy on informal insurance activities and establishes requirements for entities engaged in insurance activities in the Philippines.

Certificate of Authority Requirement

• Legal Principle: Entities undertaking insurance activities must obtain a Certificate of Authority from the Insurance Commission prior to engaging in insurance business.
• Key Definitions:
  • Insurance Activity: Defined as activities where:
    • Contributions/premiums are collected regularly before a contingent event occurs.
    • Guaranteed benefits are provided upon such events.
  • Exclusion: Risk pooling practices (e.g., adamayana or aabuloya) are not considered insurance activities as they do not involve pre-determined benefits.
• Requirements:
  • All entities engaging in insurance, including microinsurance, must secure a Certificate of Authority.

Transition Period for Informal Insurance Providers

• Legal Principle: Informal insurance providers (including cooperatives and NGOs) must cease unauthorized insurance activities.
• Important Requirements:
  • Informal insurance providers must terminate their operations within one (1) year from the Circular's effectivity.
  • They may partner with authorized insurance providers to continue coverage during this transition.
• Options for Transition:
  • Partner with commercial insurers for approved products.
  • Have members join authorized cooperative insurance providers or mutual benefit associations.

Organization into Authorized Entities

• Legal Principle: Informal insurance providers wishing to continue operations must formalize their status.
• Requirements:
  • Within two (2) years from the Circular's effectivity, those continuing to operate must either:
    • Organize as a life or non-life insurance company.
    • Organize as a cooperative insurance provider.
    • Organize as a mutual benefit association.

Collaboration and Enforcement

• Legal Principle: The Insurance Commission, Securities and Exchange Commission, and Cooperative Development Authority must cooperate.
• Key Actions:
  • Regular information exchange and implementation of cease and desist orders, following due process, against non-compliant providers.

Repeal of Inconsistent Regulations

• Legal Principle: All conflicting issuances, circulars, and regulations are repealed.
• Effectivity: This circular takes effect fifteen (15) days after publication in a newspaper of general circulation.

Key Takeaways

• Entities engaged in insurance must secure a Certificate of Authority to operate legally.
• Informal insurance providers have a one-year period to cease operations or formalize their status.
• Continued operation requires organization into recognized insurance entities within two years.
• Regulatory bodies will collaborate to ensure compliance and enforce the provisions of this circular.