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WHEREAS, all domestic life or non-life insurance companies are required to comply  with  the  minimum  statutory  paid-up  capital  or  net  worth  requirements under Section 194 of Republic Act No. 10607, otherwise known as the Amended Insurance Code of the Philippines, before the same can engage in insurance business;

WHEREAS,  the Insurance  Commissioner  is authorized  under  Section  437 (m) and (k), respectively,  of the same Code to “[inquire]  into the solvency  and liquidity of the institutions under its supervision and enforce prompt corrective action,” and “[conduct] an examination to determine compliance with laws and regulations  if the circumstances  so warrant as determined  by appropriate  rules and regulations;”

WHEREAS,   relative   to  the  determination   of  the  financial   condition   of insurance companies, Section 202 of the same Code provides that:

“Section 202. In any determination of the financial condition of any insurance company doing business in the Philippines, there shall be allowed and admitted as assets only such assets legally or beneficially owned by the insurance company concerned as determined by the Commissioner which consist of:

x x x

(b)  Investments  in securities,  including  money  market  instruments,  and  in real property acquired or held in accordance with and subject to the applicable provisions of this Code and the income realized therefrom or accrued thereon.

x x x

(k)  Other assets, not inconsistent with the provisions of paragraphs (a) to (j) hereof, which are deemed by the Commissioner to be readily realizable and available for the payment of losses and claims at values to be determined by him in a circular, rule or regulation.” [Emphasis supplied.]

NOW, THEREFORE,  pursuant to the power of the Insurance Commissioner under Section 437 (d) of the same Code to “x x x issue such rulings, instructions, circulars, orders and decisions as may be deemed necessary to secure the enforcement  of the provisions of this Code, to ensure the efficient regulation of the insurance industry in accordance with global best practices and to protect the insuring public,” the following rules and regulations in the infusion of real estate assets to cover capital impairment and net worth deficiencies of insurance companies doing business in the Philippines are hereby promulgated:

1.     Priority of Cash Infusion. - Whenever the paid-up capital or net worth of an insurance company doing business in the Philippines is found to be less than required by the Amended Insurance Code to be maintained, and before said company  shall exercise  its option to cover its deficiency/ies  in the form of non-cash  contributions,  said  company’s  President  must  first  certify  under oath that all efforts to infuse cash, or cause the infusion of cash, by the stockholders  in accordance  with the provisions  of Section 200 of the same Code  have  been  exhausted  and  consequently  failed;  and  that  non-cash infusion was only resorted to as a result of such exhaustion and failure.

2. Guidelines  for Infusion  of Real  Property.  - Real  property  shall  only  be allowed for the purpose of purchasing equity of an insurance company if:

a.  The real property infused by the life or non-life insurance company in exchange for equity shall be utilized in accordance with Section 206 (b) (1) of the Amended Insurance Code; or

b.   lf the infused real property is or shall be used for housing projects and/or as an investment for the production of income:

i.     For life insurance companies: The infusion shall be governed by the provisions of Section 208 (a) and (b) of the same Code, whereby the aggregate book value of said class of investment shall not exceed twenty-five   percent   (25%)   of  the  total  admitted   assets   of  the concerned life insurance company as shown in the latest financial statement approved by the Insurance Commissioner; or

ii.     For non-life insurance companies: The infusion shall be governed by this  Commission’s  Circular  Letter  No.  2017-43  dated  22  August 2017, except that the concerned company shall not be required to comply  with the condition  under Section  1 thereof.  The aggregate book  value  of  said  class  of  investment  shall  not  exceed  twenty percent (20%) of the net worth of the concerned non-life insurance company as shown in the latest financial statement approved by the Insurance Commissioner.

However, in the event that said infusion shall adversely affect the liquidity of the company,  the real property infused shall be disposed  of in accordance with Section 5 of this Circular Letter.

3.     Required   Documentation.   -  Together   with  documents   evidencing   the infusion, the company shall also submit the following documents to this Commission:

a.   Appraisal  Report/s  by an appraisal  company  that is duly accredited  by the Securities and Exchange Commission (SEC);
b.   Photocopy/ies  of the Transfer Certificate/s  of Title and/or Condominium
Certificate/s of Title covering the subject property;
c.   A copy of the duly notarized Deed of Assignment executed between the concerned  shareholder  and  the  insurance  company,  if the  title  of  the subject property is not in the name of the insurance company; and
d.  Copies of the Board Resolution and Secretary’s Certificate allowing the infusion of the subject real property.

4.     Quarterly  Reports.  -  In  cases  where  real  property  is  invested  for  the production   of  income,   the  concerned   insurance   company   shall  submit quarterly   reports   to   the   Investment   Services   Division   (ISD)   of   this Commission  as regards the income generated  by said real property, which reports shall be duly certified by the company's internal auditor

5.     Disposal  of Infused  Income-Generating  Real  Property.  - Real  property infused  within  the  purview  of  the  guidelines  under  Section  2  (b)  of  this Circular Letter may be provisionally admitted; Provided, that: The concerned company infusing said real property shall liquidate the property within one (1) year from the time the same was provisionally admitted as an asset.

The  president  of  the  insurance  company,  who  shall  be  authorized  by  the company’s  board of directors,  shall execute  an Affidavit  of Undertaking  to this effect.

This Circular Letter shall take effect immediately.

For the guidance and strict compliance of concerned parties.