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Date Filed: 04 September 2018
WHEREAS, the statutory objectives of the conservatorship and receivership processes under Sections 255 & 256 of Republic Act No. 10607, otherwise known as the Amended Insurance Code of the Philippines, Sections 49 & 50 of Republic  Act  No.  9829,  otherwise  known  as  the  Pre-Need  Code  of  the Philippines, and Section 4 (i) of Executive Order No. 192, s. 2015 are to: (1) restore distressed regulated companies to financial viability; and (2) preserve and administer  the  assets  of  the  same  for  the  benefit  of  said  companies’ policyholders, planholders, members, and creditors;

WHEREAS, this Commission has, on various occasions, issued Stay Orders in the interest of achieving the objective/s of the rehabilitation of concerned companies under conservatorship or receivership and/or preserving the assets of the same under for the benefit of said companies’ policyholders, planholders, members, and creditors;

WHEREAS, to facilitate the conservatorship and receivership processes, this Commission deems it necessary and beneficial to issue uniform guidelines as regards the issuance of Stay Orders;

WHEREAS, in relation to the foregoing, corporate rehabilitation courts are empowered to issue Stay or Suspension Orders under Section 16 of Republic Act No. 10142, otherwise known as the Financial Rehabilitation and Insolvency Act (FRIA);

WHEREAS, this Commission is of the position that, by analogy, it is likewise statutorily empowered to issue Stay Orders as it essentially acts as a specialized “rehabilitation court” for the subject regulated entities;

NOW, THEREFORE, pursuant to the statutory powers of the Insurance Commissioner to prepare and approve rules, regulations and orders concerning the insurance, pre-need, and HMO industries under Section 437 of the Amended Insurance Code of the Philippines, Section 6 of the Pre-Need Code of the Philippines, and Section 4 of Executive Order No. 192, s. 2015, the following uniform  guidelines  on  the  issuance  of  Stay  Orders  are  hereby  issued  and promulgated, viz:

1.    When Issued. - In cases of conservatorship, a Stay Order may be issued by  this  Commission  upon  the  favorable  recommendation  of  the  duly appointed conservator and/or this Commission’s Conservatorship, Receivership and Liquidation (CRL) Division. The recommendation for the issuance  of  a  Stay  Order  shall  be  substantiated  by  finding/s  that  the issuance of the Stay Order is necessary to:

a.  Achieve the objectives of the financial rehabilitation of the concerned company; and/or

b.  Preserve the assets of the company for the benefit of its policyholders, planholders, members, and/or creditors.

In cases of receivership, a Stay Order shall be issued simultaneously with the order placing the concerned company under receivership.

2.    Provisions of Stay Order. - All Stay Orders issued pursuant to this Circular Letter shall provide that:

a.  All actions or proceedings, in court or otherwise, for the enforcement of claims against the concerned company under conservatorship or receivership shall be suspended; Provided, that, all such claims shall be referred or endorsed to the concerned conservator or receiver for appropriate action;

b.  All actions to enforce any judgment, attachment or other provisional remedies against the concerned company shall likewise be suspended; Provided, that, any final and executory judgment of any court, tribunal, office, or agency of competent jurisdiction shall be treated by the conservator or receiver as a non-disputed claim;

c.   Said company shall be prohibited from selling, encumbering, transferring or disposing in any manner any of its properties, except in the ordinary course of business and/or as may be approved by the Insurance Commissioner upon the favorable recommendation by the appointed conservator, receiver, and/or this Commission’s CRL Division; and

d.  Said  company  shall  be  prohibited  from  making  any  payment  of  its liabilities as of the date of the issuance of the Stay Order, except for approved administrative expenses and/or those approved by the Insurance Commissioner upon the favorable recommendation by the appointed conservator, receiver, and/or this Commission’s CRL Division.

3.    Only Right to Enforce Claim Suspended. - The issuance of the Stay Order shall not be deemed, in any way, to diminish or impair the right/s of the policyholders, planholders, members, and/or creditors to their respective claims; except that their right to enforce said claims shall be suspended during the term of the Stay Order.

4.    Exceptions to the Stay Order. - The Stay Order shall not apply:

a.   To cases already pending appeal in the Honorable Supreme Court at the time of the issuance of the Stay Order; Provided, that, any final and executor judgment arising from such appeal shall be referred to the conservator or receiver for appropriate action;

b. To any criminal or administrative action against individual owner/s, partner/s, director/s, or officer/s of the company under conservatorship or receivership; or

c. To cases specifically ordered excluded by the Insurance Commissioner upon the favorable recommendation of the conservator, receiver, and/or this Commission’s CRL Division. The recommendation for the exclusion of such cases from the coverage of the Stay Order shall be substantiated by  findings  that  such  exclusion  is  necessary  to:  (1)  Achieve  the objectives  of  the  financial  rehabilitation  of  the  concerned  company; and/or (2) Preserve the assets of the company for the benefit of its policyholders, planholders, members, and/or creditors.

5.    Exclusivity of Rehabilitation Proceedings and Contempt. - Attempts by policyholders, members, planholders, and/or creditors to seek legal or other recourse against the distressed company outside conservatorship or receivership  proceedings  shall  constitute  indirect  contempt  of  this Commission punishable in accordance with the provisions of Section 437 (g) of the Amended Insurance Code or Section 6 (f) of the Pre-Need Code of the Philippines.

6.    Publication of Stay Order. - A copy of the Stay Order including its annexes, if any, shall be posted at the entrance or at a conspicuous place at the main office and branches of the concerned company under conservatorship or receivership.

The conservator or receiver shall likewise cause the publication of the Stay Order in a newspaper of general circulation in the Philippines once a week for three (3) consecutive weeks. The first publication shall be made within ten (10) days from the issuance of the Stay Order. The concerned conservator or receiver is enjoined to strictly observe the provisions of Circular Letter No. 2016-34 dated 21 June 2016 in the publication of the Stay Order.

In addition, the Stay Order shall be published in the Insurance Commission’s website.

7.    Effectivity. - This Circular Letter shall take effect immediately.

(SGD) DENNIS B. FUNA
Insurance Commissioner