Insurance and reinsurance in the Philippines are mainly regulated by laws enacted by the Philippine Congress. Decisions of the Supreme Court of the Philippines interpreting these laws have the force and effect of law. In addition to laws and Supreme Court decisions, the Philippine Insurance Commission (PIC) – a regulatory body established by law to regulate the insurance industry – is empowered to issue rules and regulations that implement and aid the interpretation of the statutes governing or affecting insurance and reinsurance.

The Civil Code of the Philippines provides: “The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by [the Civil] Code.” The principal legislation on insurance and reinsurance in the Philippines is the Insurance Code of the Philippines (Presidential Decree (PD) No 612, as amended by the Republic Act (RA) No 10607). Other special laws on insurance include the following:

• the Revised Government Service Insurance Act of 1977 (PD No 1146, as amended) (for government employees);
• the Social Security Act of 1954 (RA No 1161, as amended) (for employees of private entities);
• the Property Insurance Law (RA No 656, as amended); and
• the RA No 3591, as amended, which established the Philippine Deposit Insurance Corporation.

Insurance and reinsurance are regulated by various laws and regulations. The Insurance Code, as amended, is the main legislation that governs the insurance business. It grants the Insurance Commissioner “the duty to see that all laws relating to insurance, insurance companies and other insurance matters, mutual benefit associations, and trusts for charitable uses are faithfully executed and to perform the duties imposed upon [the Insurance Commissioner] by [the Insurance] Code”, including the “sole and exclusive authority to regulate […] variable contracts as defined by law and to provide for the licensing of persons selling such contracts, and to issue reasonable rules and regulations governing the same”. The Insurance Code states that the Insurance Commissioner is empowered to “issue such rulings, instructions, circulars, orders and decisions as may be deemed necessary to secure the enforcement of the provisions of [the Insurance] Code”; such issuances of the Insurance Commissioner are part of the regulatory scheme governing the insurance industry in the Philippines. Decisions by the Insurance Commissioner are appealable to the Secretary of Finance.

Other government agencies involved in the regulation of insurance and reinsurance in the Philippines include the Securities and Exchange Commission of the Philippines (SEC) and the Central Bank of the Philippines (Bangko Sentral ng Pilipinas, or BSP). The Anti-Money Laundering Council (AMLC) and the Philippine Competition Commission (PCC) also have regulations that are applicable to or affect the insurance industry.

Entities intending to engage in the business of insurance must submit to the jurisdiction of the SEC – the government agency tasked with regulating corporations, partnerships and associations – and obtain the licence for the appropriate structure in order to be entitled to conduct insurance and reinsurance in the Philippines. The PIC exercises primary authority over insurance companies, which are deemed special corporations under the Revised Corporation Code that governs corporations, partnerships and associations.

The BSP is the central monetary authority of the Philippines and supervises the operations and activities of banks and certain non-bank financial institutions. Certain issuances of the Monetary Board of the BSP affect the insurance industry because of the inclusion of bancassurance in the Insurance Code, for instance.

Insurance companies, pre-need companies, and all other persons supervised or regulated by the PIC are considered “covered persons” under the Anti-Money Laundering Act of 2001 and the Terrorism Financing Prevention and Suppression Act of 2012. The AMLC – of which the Insurance Commissioner is a member – is tasked with implementing these laws and may promulgate pertinent rules and regulations that will affect companies regulated by the PIC, including those engaged in insurance and reinsurance.

The PCC, created under the Philippine Competition Act (PCA), is tasked with the implementation of the PCA (including the review of proposed M&A) to the extent that the relevant transaction exceeds certain thresholds set out by law and regulations. This means that proposed M&A involving companies engaged in insurance and reinsurance may have to be submitted to the PCC for review and clearance.

The Insurance Code enumerates the entities that may pursue insurance business in the Philippines – namely, corporations, partnerships and associations. The term “insurer” or “insurance company” is deemed to include all partnerships, associations, co-operatives or corporations – including government-owned or controlled corporations or entities – engaged as principals in the insurance business, excepting mutual benefit associations. It also includes professional reinsurers.

As a condition for an insurance company to transact any insurance business in the Philippines, including reinsurance, the appropriate certificate of authority must first be obtained from the Insurance Commissioner. An insurance company must meet certain standards and requirements in order to be eligible for the issuance of a certificate of authority. One statutory requirement for a domestic insurance company organised as a stock corporation is that it must possess paid-up capital equal to at least PHP1 billion for life and non-life insurers and at least PHP2 billion for composite insurers (ie, insurers authorised to engage in both life and non-life insurance business).

If organised as a mutual company, in lieu of such net worth, an insurance company must have available total members’ equity – in an amount determined by the PIC – in excess of all liabilities for losses reported, expenses, taxes, legal reserve, and reinsurance of all outstanding risks, as well as a contributed surplus fund equal to the amounts required of stock corporations. The Insurance Commissioner may also require a minimum of PHP100 million in cash assets in addition to the paid-up capital stock. The PIC has also issued guidelines on the risk-based capital ratio and the risk-based capital requirement that must be complied with by all life and non-life insurance companies operating in the Philippines. An insurance company is not allowed to have any equity in an adjustment company, and vice versa.

An insurance company that is solely authorised to transact reinsurance business must possess a capitalisation of at least PHP3 billion paid in cash – of which, at least 50% is paid-up and the remaining portion thereof is contributed surplus, which must not be less than PHP400 million.

Domestic insurance corporations are subject to income tax on income from sources within and outside the Philippines. Foreign insurance corporations are subject to income tax only on income from Philippine sources.

Domestic corporations are subject to ordinary corporate income tax (OCIT) of 25% (effective as of 1 July 2020) on their taxable income (ie, gross income less allowable deductions) or minimum corporate income tax (MCIT) of 2% (effective as of 1 July 2023) on their gross income, whichever is higher. Foreign corporations doing business in the Philippines (ie, resident foreign corporations) are subject to the same tax, albeit only on income from Philippine sources. However, domestic corporations with net taxable income not exceeding PHP5 million and with total assets not exceeding PHP100 million – excluding land on which the corporation’s office, plant and equipment are situated during the taxable year for which the tax is imposed – will be taxed at 20%.

Premiums form part of the gross income of the insurance company for the purposes of computing the taxable income subject to the OCIT or for the purposes of computing the MCIT. They are also subject to business tax and documentary stamp tax (DST), depending on whether the premium is for life insurance or non-life insurance.

Business Tax

Premiums received by life insurance companies are subject to a 2% business tax based on the total premium collected, with the following exceptions:

• premiums refunded for any reason within six months after payment to a person insured;
• premiums for reinsurance by a company that has already paid the tax;
• premiums collected or received by any branch of a domestic company doing business outside the Philippines on account of any life insurance of a non-resident insured, if any tax is imposed on the premium by the foreign country where that branch is established;
• premiums collected on account of reinsurance if the insured, in cases of personal insurance, resides outside the Philippines and any tax is imposed on those premiums by the foreign country where the original insurance was issued; and
• such portion of premiums collected by insurance companies on variable contracts in excess of the amounts necessary to insure the lives of the variable contract owners.

Fire, marine or miscellaneous insurance agents authorised under the Insurance Code to procure insurance policies on risks located in the Philippines for companies not authorised to transact business in the Philippines must pay twice the aforementioned tax imposed. Where owners of property obtain insurance directly with foreign companies, those owners must report to the Insurance Commissioner and pay a tax of 5% on their premiums.

Cities and municipalities may also impose local business taxes on premiums received by insurance companies at rates not exceeding 0.75% and 0.50%, respectively.

VAT

Premiums received by non-life insurance companies (except on crop insurance) are subject to 12% VAT. This includes surety, fidelity, indemnity and bonding companies.

The Ease of Paying Taxes Act was signed into law on 5 January 2024 and took effect on 22 January 2024. Under said law, VAT on the sale of services will now be payable on gross sales instead of gross receipts. Gross sales mean the total amount of money representing the contract price that the purchaser pays or is obligated to pay in consideration of services already rendered. This may mean that VAT on non-life insurance products will be payable both on premiums paid and any other service fees that the insured is obligated to pay where the services have already been rendered.

Documentary Stamp Tax

Life insurance policies are subject to a one-time DST, ranging from PHP20 to PHP200, depending on the amount of insurance.

Property insurance policies are subject to a DST of PHP0.50 on each PHP4, or fraction thereof, of the amount of premium charged. Reinsurance contracts, or any other instruments by which acceptance of insurance risks under any reinsurance agreement is affected, are not subject to DST.

Fidelity bonds and other insurance policies are subject to DST of PHP0.50 on each PHP4, or fraction thereof, of the premium charged.

Overseas-based insurers or reinsurers wishing to engage in insurance or reinsurance business in the Philippines must obtain a certificate of authority to transact insurance business in the Philippines from the Insurance Commissioner. For this purpose, insurers or reinsurers must establish either a subsidiary incorporated in the Philippines or a branch office with a licence to do business in the Philippines. A foreign insurer or reinsurer must also file with the Insurance Commissioner a written power of attorney designating a resident agent in the Philippines on whom any notice – provided by law or an insurance policy – and any other legal processes may be served in all actions or legal proceedings involving the foreign insurer, as well as consenting that service upon that resident agent will be admitted and held valid as if served upon the foreign insurer at its home office.

Foreign insurers/reinsurers are also required to have unimpaired capital or assets and reserve of not less than PHP1 billion and must deposit, with the PIC, securities satisfactory to the Insurance Commissioner. A new branch office of a foreign insurance company may also be required to have an additional surplus fund in an amount determined by the PIC.

A fronting arrangement, whereby a locally licensed insurance company acts as an agent of an unlicensed foreign insurance company to sell the latter’s insurance products in the Philippines, is not allowed. However, it may be possible to structure a fronting activity as one where insurance products are sold in the Philippines by a locally licensed insurance company that reinsures the insurance risk from the products thus sold with a foreign unlicensed entity acting as reinsurer. In the Philippines, offshore reinsurance is regulated and the Insurance Code requires that no insurance company doing business in the Philippines shall cede all or part of its risks situated in the Philippines by way of reinsurance directly to any foreign insurer not authorised to do business in the Philippines, unless that foreign insurer is represented in the Philippines by a resident agent duly registered with the PIC.

In order for a local insurer to have its insurance risks reinsured by a foreign reinsurer, there is a requirement that at least 10% of the outward reinsurance placed with unauthorised foreign reinsurers must first be offered for cession to the National Reinsurance Corporation of the Philippines (NRCP). If the NRCP decides that it cannot take on more risk for reinsurance, it must issue a declination letter in accordance with the requirements issued by the PIC. This letter must be submitted by the local insurer along with the other requirements for applications for reinsurance placements abroad.

The insurance industry is imbued with public interest and thus is highly regulated. With regard to M&A relating to a domestic insurer, no person – other than an authorised insurer – is allowed to acquire control of any domestic insurer. There are also requirements to provide written notice to the domestic insurance company of the applicant’s intention to acquire control and the approval of the Insurance Commissioner must be obtained, following the submission of certain required documents.

As regards a merger or consolidation, two or more domestic insurance companies that intend to merge or consolidate into a single corporation – whether resulting in the survival of one of the constituent corporations or the formation of a new corporation – must provide written notice to the Insurance Commissioner at least 30 days prior to any board action to approve any plan for a merger or consolidation. Such a plan must include certain provisions or documents required by the Insurance Commissioner – for example, the proposed articles of merger or consolidation, or the by-laws of the surviving or acquiring company. This plan of merger/consolidation and the articles of merger/consolidation are also subject to the approval of the Insurance Commissioner, whose endorsement is necessary before these may be filed with the SEC. All proposed mergers and consolidations must be completed within 12 months from the time the Insurance Commissioner was first notified of the intent to merge or consolidate, unless written requests to extend the deadline for completion are filed within the aforementioned period and approved by the Insurance Commissioner.

In addition to these requirements and considerations, any such mergers or acquisitions may be subject to mandatory notification to the PCC, should the transaction and the parties exceed the prevailing thresholds set by the law and the PCC regulations. Even if the insurer doing business in the Philippines is not a party to the merger or acquisition but the thresholds for compulsory notification are satisfied – which includes an examination of the assets in, and gross revenues from, the Philippines of the ultimate parent entities of the parties to such a merger or acquisition – a notification must still be submitted to the PCC by the ultimate parent entities of the parties to the transaction. As of 1 March 2024, all M&A (including joint ventures) where the size of the party (as this term is defined under the PCC regulations) exceeds PHP7.8 billion and where the size of transaction (as this term is defined under the PCC regulations) exceeds PHP3.2 billion are notifiable, and parties to the transaction must wait for the PCC’s express or deemed approval before consummating the transaction.

Insurance and reinsurance products are distributed in the Philippines through:

• direct sales by insurers through their employees;
• insurance agents; and
• through insurance brokers.

Bancassurance is also recognised in this jurisdiction.

Insurance agents and brokers are required to have the appropriate licences before soliciting or procuring applications for insurance (or providing related services) and such licences are to be renewed every three years. No insurance company doing business in the Philippines, nor any agent thereof, may pay any commission or other compensation to any person for services in obtaining insurance unless that person has the appropriate licence.

Insurance Agents

Insurance agents are persons who, for compensation, either:

• solicit or obtain insurance on behalf of any insurance company;
• transmit, to a person other than themselves, applications for a policy or contract of insurance to or from that company; or
• act in the negotiating of such insurance.

An applicant to be an insurance agent or general agent must be a resident of the Philippines, must be trustworthy, and must pass the written examination for the kind of licence applied for (eg, life, non-life, accident and health, variable life). If the applicant is a partnership, association or corporation, that applicant must be domiciled in the Philippines and authorised by its constitutive documents to transact the kind of insurance business applied for. The individual to be named in the licence applied for must possess the requirements previously mentioned.

No person may be licensed to act as an insurance agent or general agent for more than one life insurance company, and/or as a general agent for more than one non-life insurance company, and as an insurance agent for more than seven other non-life insurance companies. No official or employee of an insurance brokerage or an adjustment company and no individual adjuster may be licensed to act as an insurance agent or general agent. Such a licence can be suspended or revoked upon finding violations of the above-mentioned rules and on other applicable grounds. The PIC keeps a Negative List of insurance agents in relation thereto.

Under a circular dated 16 April 2024, the PIC has required life insurance companies to establish and maintain a registry of their insurance agents. The registry must be made publicly available through the website of the insurer.

(Re)insurance Brokers

Insurance brokers are those who – for any compensation, commission, or other thing of value – act or aid in any manner in soliciting, negotiating, or procuring the making of any insurance contract or in placing risk or taking out insurance on behalf of an insured other than themselves.

A reinsurance broker is one who – for compensation and not being a duly authorised agent, employee or officer of an insurer in which any reinsurance is effected – acts or aids in any manner in negotiating contracts of reinsurance or placing risks of effecting reinsurance for any insurance company authorised to do business in the Philippines.

Any new entrant intending to do business, either as an insurance broker or reinsurance broker, must have a minimum capitalisation or paid-up capital of PHP20 million and must maintain a net worth of PHP20 million. If the new entrant intends to do business as both (ie, as an insurance broker and a reinsurance broker), it must have a minimum capitalisation or paid-up capital of PHP50 million and must maintain a net worth of at least PHP50 million.

Certain prohibitions are also applicable to insurance brokers. No person licensed as an insurance agent or general agent may be licensed as an insurance broker, nor shall a person licensed as an insurance broker be licensed as an insurance agent or general agent. No official or employee of an insurance broker may be licensed to act as an insurance agent or general agent. No broker – nor any of its stockholders and officers – may have a controlling interest in any insurance or reinsurance company, or insurance adjustment company, or vice versa. 

Bancassurance

Bancassurance refers to the presentation and sale to bank customers by an insurance company of its insurance products within the premises of the head office of a bank duly licensed by the BSP or any of its branches, under whatever rules and regulations that the Insurance Commissioner and the BSP may promulgate. To engage in a bancassurance arrangement, a bank is not required to have equity ownership of the insurance company. However, the bank and the insurance company must belong to the same financial conglomerate – or to a group of interrelated entities providing significant services in at least two different financial sectors (eg, banking, securities, and insurance) – for the cross-selling of collective investment scheme (CIS) products (ie, mutual funds, unit investment trust funds, or variable unit-linked life insurance policies) to be allowed under BSP regulations. The bank must also have secured prior BSP Monetary Board approval to engage in the aforementioned activities.

Bancassurance agreements entered into between the bank and the insurance company must also be submitted to the Insurance Commissioner for approval, and must contain certain mandatory provisions, such as provisions stating that areas within the bank premises where bancassurance activities are conducted must be distinct and clearly marked from areas where bank products are being sold. Other requirements and regulations for the public’s interest must be complied with as the parties engage in bancassurance activities.

The Insurance Code states that each party to a contract of insurance must communicate to the other – in good faith – all facts within their knowledge that are material to the contract and as to which they make no warranty, and which the other party has no means of ascertaining. A fact is material depending on its probable and reasonable influence upon the party to whom the communication is due in forming their estimate of the disadvantages of the proposed contract or in making their inquiries.

This right to be informed of material facts may, however, be waived – either by the terms of insurance or through neglect in making inquiries as to those facts where they are distinctly implied in other facts of which information is communicated. Thus, in the case of the insurer, it must proactively seek more information from the insured if the communication made by the insured implies that there are other material facts that are relevant to the insurer with regard to the negotiation of the contract.

Failure to comply with the duty to communicate might amount to concealment, which refers to negligence in communicating that which a party knows and ought to communicate, and entitles the injured party to rescind a contract of insurance. It has been held that if the insured has knowledge of a fact material to the risk – and honesty, good faith and fair dealing require that they should communicate it – but they intentionally withhold that knowledge, this is concealment and, regardless of actual intent to defraud, entitles the injured party to rescind the contract.

A representation is a statement, whether oral or written, made at the time of or before the issuance of a policy. If a representation made by a party is false in a material point, whether it is affirmative (which is a representation presumed to refer to the date on which the contract begins) or promissory (which is a representation as to the future), the injured party is entitled to rescind the contract from the time the representation becomes false.

It should be noted that – in life insurance – after a policy of life insurance made payable on the death of the insured has been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer can no longer prove that the policy is void or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or their agent.

An insurance agent acts on behalf of the insurer, whereas an insurance broker acts for the insured. Both the insurance agent and the insurance broker have certain fiduciary duties. The premium, or any portion thereof that an insurance agent or insurance broker collects from an insured and which is to be paid to an insurance company, is held by the agent or broker in a fiduciary capacity and must not be misappropriated or converted for their own use. Any insurer that delivers to an insurance agent or insurance broker a policy or contract will be deemed to have authorised that agent or broker to receive on the insurer’s behalf payment of any premium that is due on that policy or contract of insurance. Failure to abide by and comply with these fiduciary obligations is grounds for the denial, suspension or revocation of the licence of an insurance agent or insurance broker.

A policy of insurance, or the written instrument in which a contract of insurance is set forth, is required to be printed or to be in an electronic form subject to the pertinent provisions of the Electronic Commerce Act of the Philippines and regulations issued by the Insurance Commissioner. Such a policy must be in a form approved by the Insurance Commissioner.

In addition, the Insurance Code states that any contingent or unknown event – whether past or future – that may cause injury or loss to a person who has an insurable interest or may create a liability against such person may be insured against, subject to certain exceptions and conditions provided under the Insurance Code. It can be gleaned from this provision that an insurable interest is a requirement in this jurisdiction. Every person is deemed to have insurable interest in the life and health:

• of themselves and of their spouse and children;
• of any person on whom they depend, wholly or in part, for education or support or in whom they have a pecuniary interest;
• of any person under a legal obligation to them for the payment of money – or with regard to property or services – of which death or illness might delay or prevent the performance; and
• of any person upon whose life any estate or interest vested in them depends.

An insurable interest in property may consist of:

• an existing interest;
• an inchoate interest founded on an existing interest; or
• an expectation, coupled with an existing interest out of which the expectation arises.

The inclusion of the following terms in a policy of insurance is essential and required by the Insurance Code, in addition to any other provisions required by further regulations issued by the Insurance Commissioner:

• the parties to the contract;
• the amount to be insured except in the case of open or running policies;
• the premium, or a statement of the basis and rates upon which the final premium is to be paid in certain instances;
• the property or life insured;
• the interest of the insured in the property insured, if they are not the absolute owner thereof;
• the risks insured against; and
• the period during which the insurance is to continue.

Non-parties to an insurance contract may be beneficiaries, depending on the type of insurance product. The beneficiary must be specified by the insured. The disclosure rules are the same, even if there are multiple insureds or multiple potential beneficiaries under the contract.

The position is essentially the same with regard to reinsurance contracts, subject to any special regulations issued by the Insurance Commissioner – specifically, on reinsurance placement and treaties.

The authors have yet to work on alternative risk transfer (ART) transactions, such as insurance loss warranty contracts and insurance-linked securities, and are not aware as to whether any such transactions have been entered into by companies in the Philippines.

Currently, PIC regulations do not make it clear if ART transactions are to be classified as insurance (or reinsurance) transactions. Given this regulatory gap, the prudent practice is to present the contract or arrangement to the PIC. In any case, if the contract or arrangement has a risk-distribution feature, the PIC may consider it as an insurance (or reinsurance) transaction.

Furthermore, registration to the SEC may be required for insurance-linked securities. Generally, public offer and sale of securities (equity and debt instruments) in the Philippines to more than 19 persons within any 12-month period require the registration of those securities with the SEC.

As previously mentioned in 7.1 ART Transactions, the insurance regulations are not clear with regard to ART transactions.

Insurance contracts are usually interpreted using the plain and ordinary meaning of their text, much like any other contract. However, when doubt exists, courts have construed the doubtful provisions in favour of the insured and strictly against the insurer, as insurance contracts are drafted solely by the insurer. Extraneous evidence is generally not permitted in proving the proper interpretation of an insurance contract.

Warranties mentioned in the insurance policy are not required to be expressly described or denominated as such. However, warranties that are merely pasted or attached to the insurance policy are not binding on the insured unless the descriptive name or title of those warranties are written on the blank spaces provided for in the insurance policy. Similarly, any warranty issued after the original policy should be countersigned by the insured or owner, except if it is applied for by the insured or owner.

If a material warranty is breached, the innocent party is entitled to rescind the insurance policy. However, a breach of warranty without fraud releases the insurer from further liability from the time it occurs; if the breach happens before the inception of the policy, that breach prevents the policy from attaching to the risk sought to be insured against.

There are no known regulations expressly requiring conditions precedent to be described as such. However, the conditions for the insurer’s liability – such as covered and excluded risks, warranties, representations, and requirements for claims settlement – should be easily identifiable. Generally, a premium must be paid before an insurance policy becomes valid and binding. An insurer who unjustifiably refuses to settle or pay claims is liable for damages consisting of attorney’s fees and expenses incurred by the insured, plus interest.

Disputes over coverage under any kind of insurance contract may be addressed either by going to court or by filing a complaint with the Insurance Commissioner. The Insurance Code gives the Insurance Commissioner concurrent jurisdiction with the civil courts for claims and complaints involving any loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance or for which a reinsurer may be sued under any contract of reinsurance that it may have entered into, where the amount of any such loss, damage or liability – excluding interest, cost and attorney’s fees – being claimed or sued for based on any kind of insurance, bond, reinsurance contract, or membership certificate does not exceed PHP5 million in any single claim. The filing of a complaint with the Insurance Commissioner precludes the civil courts from taking cognisance of a suit involving the same subject matter.

If the parties provide a limitation period for starting proceedings in respect of an insurance claim, the period cannot be for less than one year. In the absence of such a stipulation, the Civil Code of the Philippines – which sets a ten-year limitation for causes of action based on written contracts – will apply.

Jurisdiction over the subject matter is conferred by Philippine law and by the material allegations in the complaint, regardless of whether the plaintiff is entitled to recover all or only some of the claims or reliefs sought therein. It cannot be acquired through a waiver or enlarged by the omission of the parties or conferred by the acquiescence of the court.

When there is a conflict-of-law issue, after establishing that it has jurisdiction over the subject matter, a Philippine court is obliged to consider whether it is a convenient forum to the parties, based on the facts of the case. The rule of forum non conveniens states that a Philippine court may assume jurisdiction over the case if it chooses to do so, provided that:

• the Philippine court is one to which the parties may conveniently resort;
• the Philippine court is in a position to make an intelligent decision as to the law and the facts; and
• the Philippine court has, or is likely to have, the power to enforce its decision.

As regards choice of law, the Philippine court will rely on the principles of lex loci celebrationis and lex contractus, and the state of the most significant relationship rule. Lex loci celebrationis means the law of the place of the ceremony or the law of the place where a contract is made. The doctrine of lex contractus or lex loci contractus means the law of the place where a contract is executed or to be performed. It controls the nature, construction and validity of the contract and it may pertain to the law voluntarily agreed upon by the parties or to the law intended by them either expressly or implicitly. Under the state of the most significant relationship rule, to ascertain what state law to apply to a dispute, the court should determine which state has the most substantial connection to the occurrence and the parties. In a case involving a contract, the court should consider where the contract was made, negotiated or to be performed, as well as the domicile, place of business or place of incorporation of the parties. This rule takes into account several contacts and evaluates them according to their relative importance with regard to the particular issue to be resolved. All these principles are considered together in relation to the factual circumstances of the case in order to determine the choice of law.

A civil action is initiated by the filing of a complaint by the plaintiff before a court vested with jurisdiction over the subject matter of the case. The court will then issue a summons requiring the defendant to file an answer to the complaint. After the last pleading has been filed, the case will be set for pre-trial.

As part of pre-trial, the case will be referred to mediation, whereby a mediator will help the parties attempt to reach an amicable settlement. If no settlement is reached, the case may undergo judicial dispute resolution proceedings, whereby a judge will help the parties attempt to reach an amicable settlement – albeit only if the judge of the court to which the case was originally raffled is convinced that settlement is still possible. If there is still no settlement reached, the case will proceed to pre-trial, where the parties will determine – among other things – the specific issues to be resolved in the case, the facts the parties are willing to stipulate on, and the exhibits and witnesses to be presented by the parties.

During trial, the plaintiff will present their evidence first. After presenting the plaintiff’s last witness, the plaintiff will formally offer its documentary and object evidence to the court. After the court resolves the plaintiff’s formal offer of documentary and object evidence, the defendant will then present its evidence. After presenting the defendant’s final witness, the defendant will formally offer its documentary and object evidence to the court. The court will then render a decision, which must state the facts and the law on which it is based.

The aggrieved party may question the trial court’s decision by filing a motion for reconsideration within 15 days from receipt thereof. If the motion for reconsideration is denied, the aggrieved party may file a notice of appeal with the appellate court within 15 days from receipt of the denial of the motion for reconsideration. After the appellate court renders a decision, an aggrieved party is given 15 days from receipt thereof to file a motion for reconsideration

If the motion for reconsideration is denied, the aggrieved party can file a petition for review on certiorari to the Supreme Court – which is the court of last resort – within 15 days from receipt of the denial of the motion for reconsideration. After the Supreme Court renders a decision, the aggrieved party is given 15 days from receipt thereof to file a motion for reconsideration. Failure to file an appeal or move for reconsideration in time will result in the decision becoming final and executory.

A judgment or final order of a tribunal in a foreign country that has jurisdiction to render the judgment or final order against a person is presumptive evidence of a right between the parties (and their successors in interest by a subsequent title). That judgment or final order may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.

In order to enforce a foreign judgment in the Philippines, the winning party must file a verified petition for recognition and enforcement of the foreign judgment before the Philippine courts. The proceedings in court will follow substantially the same procedure outlined in 9.3 Litigation Process, solely to determine whether or not there exist any of the grounds for repelling the foreign judgment.

Arbitration clauses in commercial insurance and reinsurance contracts can be enforced.

If a party receives an award in domestic arbitration, the award will be included in the judgment of the arbitral tribunal and enforced as per a court judgment. To confirm, correct or vacate a domestic arbitral award, any party to a domestic arbitration can petition the court that has jurisdiction over the place in which one of the parties is doing business, where any of the parties reside, or where arbitration proceedings were conducted. An arbitral award enjoys the presumption that it was made and released in due course of arbitration and is subject to confirmation by the court.

However, any party to a foreign arbitration may petition the court to recognise and enforce a foreign arbitral award at any time after the receipt of that foreign arbitral award. The recognition and enforcement of a foreign arbitral award is governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”), to which the Philippines is a party, and Rule 13 of the Special Rules of Court on Alternative Dispute Resolution. It is presumed that a foreign arbitral award was made and released in due course of arbitration and is subject to enforcement by the court. The court will recognise and enforce a foreign arbitral award unless a ground to refuse recognition or enforcement is established. The decision of the court recognising and enforcing a foreign arbitral award is immediately executory.

When court proceedings are filed with regard to any kind of insurance contract, before the case proceeds to trial, the matter will first be referred to mediation, whereby a mediator will help the plaintiff and the defendant attempt to reach an amicable settlement. If no settlement is reached, the case may undergo judicial dispute resolution proceedings, wherein a judge will help the parties attempt to reach an amicable settlement – albeit only if the judge of the court to which the case was originally raffled is convinced that settlement is still possible. Only after both modes of ADR are unsuccessful will the case proceed to trial.

Parties are also free to include an arbitration clause in their insurance contracts, such that any dispute under the insurance contract will have to be resolved through arbitration.

For micro-insurance contracts, the PIC has issued regulations to the effect that the various modes of ADR are a prerequisite to the filing of a civil action.

Insurers who unreasonably deny or withhold the payment of claims will be liable for:

• damages, consisting of attorney’s fees and other expenses incurred as a result of the unreasonable denial or withholding of payment; and
• interest, in the amount of twice the ceiling prescribed by the Monetary Board, on the amount due under the claim of the insured.

These damages and interests are in addition to the amount of the insurance claim.

Payment by the insurer to the insured operates as an equitable assignment of all the remedies that the insured may have against the third party who caused the damage. Accordingly, subrogation is not dependent upon – nor does it grow out of – any privity of contract or upon a written assignment of claim. It accrues simply upon the payment of the insurance claim by the insurer.

However, the right of subrogation is not absolute. By way of example, both the insurer and the insured are bound by any contractual stipulations entered into by the insured prior to the subrogation. Moreover, the insurer can be subrogated only to the rights the insured may have against the wrongdoer. If, by its own acts, the insured releases the wrongdoer liable for the loss or damage, the insurer loses its claim against the latter. Finally, subrogation is also not an available remedy in life insurance and in cases where the insurer pays the insured for a loss or risk not covered by the policy or where the insurer paid in excess of the amount of the loss.

Several local insurers have mobile apps through which all insurance transactions can be performed. Some develop their own platforms or collaborate with fintech companies to provide various products that may be bundled with other services.

The PIC has issued several guidelines on electronic commerce of insurance products. In 2020, the PIC issued regulations providing guidelines for a regulatory sandbox framework to promote insurtech. In 2024, the Philippine Congress passed Republic Act No 12023, imposing VAT on digital services and thereby amending certain provisions of the National Internal Revenue Code. Notably, VAT is imposed on the sale or exchange of digital services – the term “digital service” referring to any service that is supplied over the internet or other electronic network with the use of IT and where the supply of the service is essentially automated.

There is growing concern over climate change risks, such as stronger typhoons and more severe droughts. The PIC issued guidelines to adopt a regulatory sandbox framework for agriculture insurance in order to encourage local insurers to encourage non-life insurers to issue agricultural insurance products.

There is a pending bill before the House of Representatives that seeks to create a regulatory framework for free weather index-based agricultural insurance to service farmers. Its proposed name is the Free Index-Based Agriculture Insurance Act of 2020. There are also pending bills that aim to strengthen the Philippine Crop Insurance Corporation by implementing market-based reforms in agricultural insurance.

AI and financial technology (fintech) are becoming more commonly used by local insurers. The use of new or advanced technology is supported by the regulator.

In 2024, the PIC and the National Privacy Commission signed a memorandum of agreement to strengthen data privacy safeguards within the insurance industry.

In 2024, the PIC increased the minimum third-party liability coverage for all compulsory motor vehicle insurance coverage from PHP100,000 to PHP200,000 each for all types of motor vehicles. The minimum no-fault indemnity coverage has also been increased from PHP15,000 to PHP30,000.

The PIC has circulated for comments a number of draft circulars, such as:

• one that aims to revise the minimum capitalisation and financial capacity requirements of health maintenance organisations (HMOs) in the Philippines; and
• a proposed “Omnibus Guidelines on Investments”, with the objective of enhancing the investment adaptability of PIC-regulated entities.

Pending insurance legislation includes proposals to reorganise and transform the Insurance Commission into a collegial body, to establish a national unemployment insurance programme in the Philippines, and to provide mandatory insurance for line workers and journalists.