WHEREAS, Section 256 (3) of Republic Act No. 10607, otherwise known as the Amended Insurance Code of the Philippines, provides that a duly appointed Liquidator of an insurance company or MBA placed under liquidation œshall x x x reinsure all its outstanding policies ;

WHEREAS, this Commission recognizes that the duly appointed Conservators and Receivers of insurance companies or MBAs under conservatorship or receivership may likewise reinsure said companies ™ outstanding policies as part of a rehabilitation strategy to restore said companies to financial viability, in accordance with Sections 255 and 256 (1) of the same Code;

WHEREAS, œoutstanding policies,  as used in this Circular Letter, refer to policies  with  unexpired  policy  periods,  and/or  policies  with  outstanding  or potential liabilities, as of the date the concerned company is placed under conservatorship, receivership, or liquidation;

WHEREAS, there is a need to adopt a mechanism for the reinsurance of outstanding policies of companies under conservatorship, receivership, or liquidation;

NOW THEREFORE, by virtue of the powers vested in the undersigned in accordance with Section 437 of the same Code, the following rules and regulations as regards reinsurance of outstanding policies of companies under conservatorship, receivership, or liquidation are hereby prescribed and adopted, viz;

1.    In  cases  of  Conservatorship  or  Receivership.  -  The  duly  appointed Conservators and Receivers may opt to reinsure or increase the reinsurance coverage of  the outstanding policies issued by the respective insurance companies ™ respective financial positions and/or strategic considerations.

Said Conservators and Receivers shall include the proposal to reinsure or increase said reinsurance coverage in their respective Rehabilitation Plans to be submitted for consideration and approval by the Insurance Commissioner.

2. In  cases  of  Liquidation. -  All  duly  appointed  Liquidators  of  insurance companies or MBAs under liquidation are required to reinsure or increase the reinsurance coverage of the companies ™ outstanding policies; provided, that, the respective financial circumstances of said companies permit said reinsurance or increase of reinsurance coverage.

Said Liquidators shall include the proposal to reinsure or increase said reinsurance coverage in their respective Liquidation Plans to be submitted for consideration and approval by the Insurance Commissioner.

3. Assumption Reinsurance Agreements. - In the alternative, Conservators, Receivers and Liquidators, representing the companies under conservatorship, receivership, or liquidation, may enter into Assumption Reinsurance Agreements (ARAs) or similar contracts, with reinsurer/s.

Said Conservators, Receivers, or Liquidators shall include the proposal to enter into ARAs or similar contracts in their respective Rehabilitation or Liquidation Plans to be submitted for consideration and approval by the Insurance Commissioner.

No ARA or similar contract shall bind the Conservator, Receiver, or Liquidator; the company under conservatorship, receivership or liquidation and its policyholders; and/or the reinsurers, unless said ARA or similar contract is duly approved by the Insurance Commissioner.

4. Supplemental Guidelines. -  This  Commission shall  issue  supplemental guidelines to explain or complement the provisions of this Circular Letter, if later found to be necessary under the circumstances and upon industry consultation.

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

For guidance and strict compliance of concerned parties.