Section 13. Section One hundred eighty-five of the same Act is further amended by adding a new section to be known as Section One hundred eighty-five (A) to read as follows:

"Sec. 185(A). Variable Contracts. 1. Definitions. When used in this Act, the term "variable" shall mean any policy or contract on either a group or on an individual basis issued by an insurance company providing for benefits or other contractual payments or values thereunder to vary so as to reflect investment results of any segregated portfolio of investments or of a designated separate account in which amounts received in connection with such contracts shall have been placed and accounted for separately and apart from other investments and accounts. This contract may also be provide benefits or values incidental thereto payable in fixed or variable amounts, or both. It shall not be deemed to a "security" or "securities" as defined in Commonwealth Act Numbered Eighty-three (Securities Act), or Republic Act Numbered Twenty-six hundred and twenty-nine (Investment Company Act), nor subject to regulation under said Acts.

"2. Qualification of Insurers. No domestic insurance company shall issue, deliver or use any variable contract, and no foreign insurance company authorized to transact business in the Philippines, shall issue, deliver or sell any variable contract in the Philippines, unless and until such company shall have satisfied the Insurance Commission that its financial and general condition and its methods of operation, including the issue and sale of variable contracts, are not and will not be hazardous to the public or to its policy and contract owners. No foreign insurance company shall issue, deliver or sell any variable contract in the Philippines unless authorized to do so by the laws of its domicile. In determining the qualifications of a company requesting authority to issue, deliver or use variable contracts, the Insurance Commission shall always consider the following:

"(a) the history, financial and general condition of the company; provided that such company, if a domestic company must have a paid-up capital, of not less than Two Million Pesos and an unassigned surplus of One Million Pesos, and, in case of a foreign company, must have deposited with the Insurance Commission for the benefit and security of its variable contract owners in the Philippines, securities satisfactory to the Insurance Commission consisting of bonds of the Government of the Philippines or its instrumentalities with an actual market value of Two Million Pesos;

"(b) the character, responsibility and fitness of the officers and directors of the company; and

"(c) the law and regulation under which the company is authorized in the state of domicile to issue such contracts.

"If after notice and hearing, the Insurance Commission shall find that the company is qualified to issue, deliver and use variable contracts in accordance with this Act and the regulations and rules issued thereunder, the corresponding order of authorization shall be issued. Any decision or order denying authority to issue, sell or deliver variable contracts shall clearly and distinctly state the reasons and ground on which it is based.

"The decision or order of the Insurance Commission by virtue of the provision of this Act shall be appealable to the Secretary of Finance, whose decision shall be final.

"3. Contracts Shall Contain Certain Provisions. (a) Every variable contract delivered or issued for delivery in the Philippines and every certificate evidencing variable benefits issued pursuant to any such contract on a group basis, shall contain a statement of the essential features of the procedures to be followed by the issuing company in determining the amount of variable benefits or other contractual payments or values thereunder and shall state in clear terms that such amounts may decrease or increase according to such procedure. Every such contract delivered or issued for delivery in the Philippines, and every such certificate, shall contain on its first page, in a prominent position, a clear statement that the benefits or other contractual payments or values thereunder are on a variable basis.

"(a) Every individual variable contract delivered or issued for delivery shall stipulate the method of determining the variations in the amount of variable benefits or other contractual payments or values thereunder due to variations in investment and experience, and shall guarantee that the expenses and mortality results shall not adversely affect such amounts;

"(b) Every individual variable contract delivered or issued for delivery shall contain in substance the following provisions or other provisions more favorable or at least as favorable to the contract owner and approved by the Insurance Commission:

"(i) That, in the event of default in the payment of any consideration beyond the period of grace allowed by the contract for the payment thereof, the company will make payment of the value of the contract, as determined thereunder, in accordance with a plan provided by the contract or agreed upon by the contract owner and the company, such payments to commence not later than the date contractual payments were otherwise to have commenced in accordance with the contract;

"(ii) That, upon written request of the contract owner and surrender of the contract, the company will make payment of the value of the contract, as determined thereunder, in accordance with a plan provided by the contract and selected by the contract owner or as agreed upon by the contract owner and the company;

"(iii) That, the company will mail to the contract owner not less than semi-annually after the first contract year, a report in a form approved by the Insurance Commission which shall include a statement of the number of units of uniform value credited to such contract and the value of each such unit as of a date not more than four (4) months previous to the date approved by the Insurance Commission, of the investments held in the segregated portfolio of investments or separate account or accounts designated in such contract;

"(c) Every group variable contract delivered or issued for delivery shall stipulate the method of determining the variations in the amount payable with respect to a unit of variable benefits purchased thereunder due to variations in investment experience, and shall guarantee that expense and mortality results shall not adversely affect such amounts.

"4. Optional Fixed Benefits and Payments. Any insurance company issuing variable contract pursuant to this Act may in its discretion issue contracts providing a combination of fixed amount and variable amount of benefits and for optional lump-sum payment of benefits.

"5. Approval Requirements. Every variable contract form delivered or issued for delivery in the Philippines, and every certificate form evidencing variable benefits issued pursuant to any such contract on a group basis, and the application, rider and endorsement forms applicable thereto and used in connection therewith, shall be and are hereby expressly made subject to the approval requirements of Section One hundred eighty-four of this Act.

"6. Certain Illustrations Prohibited. Illustration of benefits payable under any variable contract shall not include or involve projections of past investment experience into the future and shall conform with the rules and regulations promulgated by the Insurance Commission.

"7. Separate Accounts and Operations of Same. Every insurance company authorized pursuant to this section to issue, deliver or use variable contracts shall, in connection with same, establish one or more separate accounts to be known as separate variable accounts. All amounts received by the company in connection with any such contract which are required by the terms thereof, to be allocated or applied to one or more designated separate variable accounts shall be placed in such designated account or accounts. The assets and liabilities of each such separate variable accounts shall at all times be clearly identifiable and distinguishable from the assets and liabilities in all other accounts of the company. Notwithstanding any provision of law to the contrary, the assets held in any such separate variable account shall not be chargeable with liabilities arising out of any other business the company may conduct but shall be held and applied exclusively for the benefit of the owners or beneficiaries of the variable contracts applicable thereto. In the event of the insolvency of the company, the assets of each such separate variable account shall be applied to the contractual claims of the owners or beneficiaries of the variable contracts applicable thereto. Except as otherwise specifically provided by the contract, no sale, ex-exchange, or the transfer of assets may be made by a company, between any of its separate accounts or between any other investment account and one or more of its separate accounts, unless, in the case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made, or in case of a transfer from a separate account, such transfer would not cause the remaining assets of the account to become less than the reserves and other contract liabilities with respect to such separate account. Such transfer, whether into or from a separate account, shall be made by a transfer of cash, or by a transfer of securities having a valuation which could be readily determined in the market place, provided that such transfer of securities is approved by the Insurance Commission. The Insurance Commission may authorize other transfers among such accounts, if, in its opinion, such transfers would not be inequitable. All amounts and assets allocated to any such separate variable account shall be owned by the company and with respect to same the company shall not be nor hold itself out to be a trustee.

"8. Investment of Separate Account Funds. Any insurance company which has established one or more separate variable accounts pursuant to this Act may invest and reinvest all or any part of the assets allocated to any such account in the securities and investments authorized by Section 197, Section 200 and Section 200 (A) of this Act for any of the funds of an insurance company, free and clear of any and all limitations and restrictions in such sections. In addition thereto such company may also invest in common capital stocks or other equities which are listed on or admitted to trading in a securities exchange located in the Philippines, or which are publicly held and traded in the "over-the-counter market" as defined by the Insurance Commission and as to which market quotations have been available, provided, however, that no such company shall invest in excess of ten per centum of the assets of any such separate variable account in any one corporation issuing such common capital stock. The assets and investments of such separate variable accounts shall not be taken into account in applying the quantitative investment limitations applicable to other investments of the company. In the purchase of common capital stock or other equities, the insurer shall designate to the broker, or to the seller if the purchase is not made through a broker, the specific variable account for which the investment is made.

"9. Valuation of Assets. Assets allocated to any separate variable account shall be valued at their market value on the date of any valuation, or if there is no readily available market then in accordance with the terms of the variable contract applicable to such assets, or if there are no such contract terms then in such manner as may be prescribed by the rules and regulations of the Insurance Commission.

"10. Reserve Liability. The reserve liability for variable contracts shall be established in accordance with actuarial procedures that recognize the variable nature of the benefits provided and shall be approved by the Insurance Commission.

"11. Separate Annual Statements. Every insurance company authorized pursuant to this section to issue, deliver or use variable contracts shall annually file with the Insurance Commission separate annual statement of its separate variable accounts. Such statement shall be on a form prescribed or approved by the Insurance Commission and shall include details as to all of the income, disbursements, assets and liability items of and associated with the said separate variable accounts. Said statement shall be under oath of two officers of the company and shall be filed simultaneously with the annual statement required by section one hundred eighty of this Act.

"12. Variable Contract Agents' Licenses. Any provision of existing laws to the contrary notwithstanding, no person shall, within the Philippines, sell or offer for sale a variable contract or do or perform any act or thing in the sale, negotiation, making or consummating of any variable contract other than for himself unless such person shall have a valid and current certificate from the Insurance Commission authorizing such person to act as a variable contract agent. No such certificate shall be issued unless and until the said Commission is satisfied, after examination that such person is by training, knowledge, ability and character qualified to act as such agent. Any such certificate may be withdrawn and cancelled by said Commission after notice and hearing, if it shall find that the holder thereof does not then have the qualifications required for the issuance of such certificate.

"13. Rules and Regulations. Any existing laws to the contrary notwithstanding, the Insurance Commission shall have sole and exclusive authority to regulate the issuance and sale of contracts on a variable basis and to provide for licensing of persons selling such contracts, and to issue such reasonable rules and regulations as may be appropriate to carry out the provisions of this Act."