Law Summary

Overview

This Circular Letter, issued by the Insurance Commission on May 29, 1991, outlines the criteria for admitting net life insurance premiums due and uncollected as assets for life insurance companies operating in the Philippines, in accordance with Section 196 (5) of the Insurance Code.

Admitted Assets Criteria

The Commission allows the following net life insurance premiums as admitted assets:

A. Premiums from October 1 to December 31

• Explanation: This provision covers net life insurance premiums due during the last quarter of the calendar/valuation year.

• Key Definitions:

  • Net Life Insurance Premiums: Premiums due for insurance policies that are considered premium-paying.
  • Valuation Records: Official records maintained by the insurance company regarding policies and their respective payments.

• Important Requirements:

  • Initial premium payments must be received by the company.
  • Corresponding reserves must be established by the company.

• Timeframes:

  • Applies to premiums due from October 1 to December 31, not recorded as paid by December 31.

• Important Details: • Only applies to policies classified as premium-paying. • Premiums must be paid regularly (annual, semi-annual, quarterly, monthly).

B. Premiums from July 1 to December 31

• Explanation: This provision pertains to premiums due for policies that are paid through a monthly salary deduction scheme.

• Key Definitions:

  • Monthly Salary Deduction Scheme: A payment method where premiums are deducted from the policyholder's monthly salary.

• Important Requirements:

  • Initial premium payments must be received by the company.
  • Corresponding reserves must be established by the company.
  • No notice of cancellation or withdrawal from the policyholder.

• Timeframes:

  • Applies to premiums due from July 1 to December 31, not recorded as paid by December 31.

• Important Details: • Only applies to policies classified as premium-paying. • Must comply with the stipulated conditions for reserve and initial payments.

Validity of Insurance Contracts

• Explanation: As per Section 77 of the Insurance Code, an insurance policy is valid and binding only when the premium has been paid or if the grace period provision is applicable.

• Key Details: • Validity of the contract is contingent upon premium payment.

Supersession and Effectivity

• Explanation: This Circular Letter supersedes Circular Letter No. 1 dated November 20, 1981.
• Timeframes:
  • Effective for the calendar/valuation year beginning 1991.

Adoption

• Adopted By: Signed by Eduardo T. Malinis, Deputy Insurance Commissioner, Officer-in-Charge on May 29, 1991.

Key Takeaways

• The Circular Letter outlines specific criteria for admitting uncollected life insurance premiums as assets.
• Distinctions are made between premiums due in the last quarter and those due in the second half of the year, with specific requirements for each.
• The validity of insurance contracts is linked to premium payment compliance.
• This Circular updates previous guidance and is applicable from the year 1991 onwards.