Article 79p. 79

COMMERCIAL LAWS NEGOTIABLE INSTRUMENTS, CORPORATION, INSURANCE, TRANSPORTATION, BANKING

certificates to its members specifying the benefits to

which such members are entitled.

Such

certificates,

together

with

the

articles

of

incorporation of the association or its constitution and

bylaws, and all existing laws as may be pertinent shall

constitute the agreement, as of the date of its issuance,

between

the

association

and

the

member.

The

membership certificate shall be in a form previously

approved by the Commissioner.

SECTION 407. A mutual benefit association may, by

reinsurance agreement, cede in whole or in part any

individual risk or risks under certificates of insurance

issued by it, only to a life insurance company authorized

to

transact

business

or

to

a

professional

reinsurer

authorized to accept life risks in the Philippines: Provided,

That a copy of the draft of such reinsurance agreement

shall be submitted to the Commissioner for his approval.

The association may take credit for the reserves on such

ceded risks to the extent reinsured.

SECTION 408. The constitution or bylaws of a mutual

benefit association must distinctly state the purpose for

which dues and/or assessments are made and collected

and the portion thereof which may be used for expenses.

Death benefit and other relief funds shall be created

and

used

exclusively

for

paying

benefits

due

the

members

under

their

respective

membership

certificates. A general fund shall likewise be created and

used for expenses of administration of the association.

A mutual benefit association shall only maintain free

and unassigned surplus of not more than twenty percent

(20%)

of

its

total

liabilities

as

verified

by

the

Commissioner. Any amount in excess shall be returned to

the members by way of dividends, enhancing the equity

value or providing benefits in kind and other relevant

services. In addition, subject to the approval of the

Commissioner, a mutual benefit association may allocate

a

portion

for

capacity

building

and

research

and

development such as developing new products and

services, upgrading and improving operating systems

and equipment and continuing member education.

SECTION

409.

Every

outstanding

membership

certificate must have an equity value equivalent to at

least

fifty

percent

(50%)

of

the

total

contributions

collected thereon. The equity value only applies to basic

life insurance product and excludes optional products.

SECTION 410. Every mutual benefit association must

accumulate

and maintain, out of the periodic dues

collected from its members, sufficient reserves for the

payment of claims or obligations for which it shall hold

funds

in

securities satisfactory to the Commissioner

consisting of bonds of the Government of the Philippines,

or any of its political subdivisions and instrumentalities, or

in such other good securities as may be approved by the

Commissioner.

The reserve liability shall be established in accordance

with actuarial procedures and shall be approved by the

Commissioner.

The articles of incorporation or the constitution and

bylaws of a mutual benefit association must provide that

if its reserve as to all or any class of certificates becomes

impaired, its board of directors or trustees may require

that

there

shall

be

paid

by

the

members

to

the

association

the

amount

of

the

members'

equitable

proportion of such deficiency as ascertained by said

board and that if the payment be not made it shall stand

as an indebtedness against the membership certificates

of the defaulting members and draw interest not to

exceed

five

percent

(5%)

per

annum

compounded

annually.

SECTION 411. A mutual benefit association may invest

such portion of its funds as shall not be required to meet

pending claims and other obligations in any of the classes

of

investments

or

types

of

securities

in

which

life

insurance companies doing business in the Philippines

may invest.

It may also grant loans to members on the security of

a pledge or chattel mortgage of personal properties of

the borrowers, or in the absence thereof, on the security

of

the

membership

certificate

of

the

borrowing

members, in which event such loan shall become a first

lien on the proceeds thereof.

SECTION 412. The Commissioner or any of his duly

designated

representatives,

shall

have

the power of

visitation, audit and examination into the affairs, financial

condition, and methods of doing business of all mutual

benefit associations, and he shall cause such examination

to be made at least once every two (2) years or whenever

it may be deemed proper and necessary. Free access to

the books, records and documents of the association shall

be

accorded

to

the

Commissioner,

or

to

his

representatives, in such manner that the Commissioner

or his representatives may readily verify or determine the

true affairs, financial condition, and method of doing

business of such association. In the course of such

examination, the Commissioner or his duly designated

representatives shall have authority to administer oaths

and take testimony or other evidence on any matter

relating to the affairs of the association.

All minutes of the proceedings of the board of

directors or trustees of the association, and those of the

regular or special meetings of the members, shall be

taken, and a copy thereof, in English or in Pilipino, shall be

submitted

to

the

Commissioner's

representatives

or

examiners in the course of such examination.

A copy of the findings of such examination, together

with the recommendations of the Commissioner, shall be

furnished

the

association

for

its

information

and

compliance, and the same shall be taken up immediately

in the meetings of the board of directors or trustees and

of the members of the association.

SECTION 413. Every mutual benefit association shall,

annually on or before the thirtieth day of April of each

year, render to the Commissioner an annual statement in

such form and detail as may be prescribed by the

Commissioner, signed and sworn to by the president,

secretary,

treasurer,

and

actuary

of

the

association,

showing

the

exact

condition

of

its

affairs

on

the

preceding thirty-first day of December.

SECTION 414. No money, aid or benefit to be paid,

provided or tendered by any mutual benefit association,

shall be liable to attachment, garnishment, or other

process, or be seized, taken, appropriated, or applied by

any legal or equitable process to pay any debt or liability

of a member or beneficiary, or any other person who may

have a right thereunder, either before or after payment.

SECTION

415. Any member of a mutual benefit

association shall have the right at all times to change the

beneficiary or beneficiaries or add another beneficiary or

other beneficiaries in accordance with the rules and

regulations of the association unless he has expressly

waived this right in the membership certificate. Every

association may, under such rules as it may adopt, limit

the scope of beneficiaries and provide that no beneficiary

shall have or obtain any vested interest in the proceeds of

any certificate until the certificate has become due and

payable under the terms of the membership certificate.

SECTION 416. Any chapter affiliate independently

licensed as a mutual benefit association may consolidate

or merge with any other similar chapter affiliate or with

the mother association.

SECTION 417. Any mutual benefit association may be

converted into and licensed as a mutual life insurance

company by complying with the requirements of the

pertinent provisions of this Code and submitting the

specific plan for such conversion to the Commissioner for

his approval. Such plan, as approved, shall then be

submitted to the members either in the regular meeting

or in a special meeting called for the purpose for their

adoption. The affirmative vote of at least two-thirds (2/3)

of all the members shall be necessary in order to consider

such plan as adopted.

© Compiled by RGL

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