Insurance Commission Insurance Broker Licensure Exam (Philippines) cheat sheet

The Insurance Code (PD 612, as amended, most recently by RA 10607) governs insurers, brokers, agents, adjusters, and reinsurers in the Philippines; the Insurance Commission (IC) administers it.

Insurance business is classified as life and non-life; a single company generally may not transact both, except as expressly allowed (e.g., composite arrangements for microinsurance).

A broker is licensed by the IC and represents the insured, not the insurer; a broker's license requires a written examination, a bond, and compliance with the Code and IC circulars.

The Code requires insurers to maintain a minimum paid-up capital and net worth, with periodic increases mandated by the IC; brokers must likewise post a bond and maintain professional liability coverage.

The Insurance Code prohibits rebating and sharing of commissions with unlicensed persons; violations may result in suspension or revocation of the broker's license.

Insurance claims must be paid within 30 days after proof of loss is received, unless the claim is denied or challenged on valid grounds; failure may result in interest and damages.

The IC has rule-making and adjudicatory powers, including the power to suspend or revoke licenses for misrepresentation, fraud, or violations of the Code or IC issuances.

The Code requires that brokers act solely for the insured and disclose conflicts of interest; they may not act as agent for an insurer in the same transaction without written consent.

Risk is the uncertainty regarding loss; pure risk involves only the possibility of loss or no loss, while speculative risk involves both gain and loss and is generally not insurable.

Insurable risk characteristics: large number of homogeneous exposure units, accidental and measurable loss, determinable probability, no catastrophic concentration, and economically feasible premium.

The principle of indemnity restores the insured to the pre-loss financial position, no better; it does not apply fully in life insurance, which is a valued contract.

Risk management steps: identify exposures, measure frequency and severity, select techniques (avoidance, retention, transfer, reduction, sharing), implement, and monitor.

Law of large numbers: as the number of similar exposure units increases, actual loss experience approaches expected loss, improving predictability and reducing insurer risk.

Adverse selection occurs when those with higher-than-average risk seek insurance disproportionately; underwriting and policy design mitigate it.

Moral hazard is the increased likelihood of loss due to insured behavior; morale hazard is carelessness or indifference caused by the presence of insurance.

Risk transfer via insurance is efficient when the insured's loss exposure is large relative to premium and the insurer can pool similar risks effectively.

Term life insurance provides coverage for a specified period with no cash value; it is the purest form of death protection and is renewable or convertible per policy terms.

Whole life insurance provides lifetime coverage with guaranteed cash value and level premiums; it may be participating (with dividends) or non-participating.

Universal life insurance separates the mortality charge from the cash value component; the policyholder may adjust premiums and death benefit within policy limits.

Variable life insurance links cash value to separate-account investments; the policyholder bears investment risk, and the product requires securities registration and disclosure.

Endowment policies pay the face amount at maturity or at death, whichever occurs first; they combine protection and savings.

The incontestability clause bars the insurer from contesting the policy after two years from issue (or reinstatement) absent nonpayment of premium or certain fraud exceptions.

The suicide clause typically limits payment to return of premiums if death by suicide occurs within a stated period, commonly two years from issue.

A beneficiary designation governs proceeds; irrevocable beneficiaries cannot be changed without their consent, while revocable beneficiaries may be changed by the policyholder.

Fire insurance covers direct damage from fire, lightning, and explosion; extended coverage may include allied perils such as windstorm, flood, and earthquake, subject to deductibles.

Marine insurance covers hull and cargo risks; cargo policies may be valued or unvalued, and general average contributions are typically covered.

Motor insurance: compulsory third-party liability (CTPL) covers bodily injury or death to third parties; own damage and theft require separate comprehensive coverage.

Property insurance applies the principle of indemnity with actual cash value (replacement cost less depreciation) or replacement cost, depending on the policy.

Business interruption insurance covers loss of profits and continuing expenses during restoration; it typically requires a specified indemnity period.

Liability insurance covers sums the insured is legally obligated to pay for bodily injury or property damage to third parties, plus defense costs, subject to policy limits.

Suretyship and bonds involve three parties: principal, obligee, and surety; the surety guarantees the principal's performance or obligation.

Co-insurance and average clauses reduce recovery when the insured value is below the required percentage of actual value, penalizing underinsurance.

Insurance is a contract of utmost good faith (uberrimae fidei); the insured must disclose all material facts known, and concealment or misrepresentation may void the policy.

Insurable interest must exist at inception in property insurance and at death in life insurance; without it, the contract is void.

A contract of insurance requires offer, acceptance, consideration (premium), and lawful subject matter; the policy is the written evidence of the contract.

Warranties are statements or conditions that must be literally complied with; breach may allow the insurer to avoid liability depending on materiality and policy terms.

The principle of proximate cause determines coverage: the efficient, dominant cause of loss must be a covered peril, not merely a remote cause.

Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and pursue the third party responsible for the loss, up to the amount paid.

Contribution applies when multiple policies cover the same loss; insurers share the loss proportionally or per policy terms to prevent double recovery.

The policy period and notice requirements are conditions precedent; late notice may prejudice the claim, and the insured must cooperate in the investigation.

A broker must act in the client's best interest, disclose all commissions and remuneration, and avoid conflicts of interest in placing coverage.

The broker's fiduciary duty includes safeguarding client premiums, remitting them promptly to insurers, and maintaining accurate records of all transactions.

Brokers must not misrepresent policy terms, coverage, or insurer financial condition; misrepresentation is grounds for license suspension or revocation.

Commissions must be disclosed and agreed upon in writing; sharing commissions with unlicensed persons is prohibited under the Insurance Code.

Brokers must maintain professional liability insurance and comply with IC reporting and recordkeeping requirements, including renewal of licenses.

Confidentiality of client information is required; unauthorized disclosure may violate the Code and data privacy laws.

Brokers must verify insurer solvency and licensing before placing business; placing coverage with unauthorized insurers may expose the broker to liability.

Advertising and solicitation must be accurate and not misleading; comparative claims about insurers or products must be substantiated.

Underwriting evaluates risk acceptability and determines premium, terms, and conditions; it uses application data, medical exams, inspection reports, and loss history.

Loss ratio = incurred losses / earned premiums; expense ratio = underwriting expenses / written premiums; combined ratio = loss ratio + expense ratio.

A combined ratio below 100% indicates underwriting profit; above 100% indicates underwriting loss, which may be offset by investment income.

Claims handling steps: notice of loss, verification of coverage, investigation, proof of loss, adjustment, settlement or denial, and subrogation recovery.

Reserves include unearned premium reserves (UPR) and loss reserves (IBNR and reported claims); adequacy affects solvency and financial reporting.

Financial analysis of insurers uses liquidity, solvency, and profitability ratios, including premium-to-surplus and reserve adequacy measures.

Claims must be handled promptly and fairly; bad-faith denial or unreasonable delay may expose the insurer to damages and regulatory sanctions.

Underwriting guidelines must comply with anti-discrimination and fair-practices rules; risk classification must be based on actuarially sound factors.

Insurer operations include product development, marketing, underwriting, policy administration, claims, investment, and reinsurance.

Reinsurance transfers risk from a ceding insurer to a reinsurer; treaty reinsurance covers a class of business automatically, while facultative reinsurance is case-by-case.

Proportional reinsurance (quota share, surplus share) shares premiums and losses proportionally; non-proportional (excess of loss, stop loss) responds above a retention.

Retention is the amount of risk the ceding insurer keeps; cessions reduce net exposure and can improve solvency ratios.

Solvency margin requirements ensure insurers maintain capital and surplus above liabilities; the IC monitors solvency through periodic reporting.

Investment regulations limit asset classes and concentrations to protect policyholders; insurers must maintain adequate liquidity for claims.

Reinsurance recoverables are assets but carry credit risk; reinsurer rating and security are key considerations.

Risk-based capital frameworks link required capital to the risk profile of assets and liabilities, promoting sound financial management.

The Insurance Code (PD 612, as amended, most recently by RA 10607) governs insurers, brokers, agents, adjusters, and reinsurers in the Philippines; the Insurance Commission (IC) administers it.

Insurance business is classified as life and non-life; a single company generally may not transact both, except as expressly allowed (e.g., composite arrangements for microinsurance).

A broker is licensed by the IC and represents the insured, not the insurer; a broker's license requires a written examination, a bond, and compliance with the Code and IC circulars.

The Code requires insurers to maintain a minimum paid-up capital and net worth, with periodic increases mandated by the IC; brokers must likewise post a bond and maintain professional liability coverage.

The Insurance Code prohibits rebating and sharing of commissions with unlicensed persons; violations may result in suspension or revocation of the broker's license.

Insurance claims must be paid within 30 days after proof of loss is received, unless the claim is denied or challenged on valid grounds; failure may result in interest and damages.

The IC has rule-making and adjudicatory powers, including the power to suspend or revoke licenses for misrepresentation, fraud, or violations of the Code or IC issuances.

The Code requires that brokers act solely for the insured and disclose conflicts of interest; they may not act as agent for an insurer in the same transaction without written consent.

Risk is the uncertainty regarding loss; pure risk involves only the possibility of loss or no loss, while speculative risk involves both gain and loss and is generally not insurable.

Insurable risk characteristics: large number of homogeneous exposure units, accidental and measurable loss, determinable probability, no catastrophic concentration, and economically feasible premium.

The principle of indemnity restores the insured to the pre-loss financial position, no better; it does not apply fully in life insurance, which is a valued contract.

Risk management steps: identify exposures, measure frequency and severity, select techniques (avoidance, retention, transfer, reduction, sharing), implement, and monitor.

Law of large numbers: as the number of similar exposure units increases, actual loss experience approaches expected loss, improving predictability and reducing insurer risk.

Adverse selection occurs when those with higher-than-average risk seek insurance disproportionately; underwriting and policy design mitigate it.

Moral hazard is the increased likelihood of loss due to insured behavior; morale hazard is carelessness or indifference caused by the presence of insurance.

Risk transfer via insurance is efficient when the insured's loss exposure is large relative to premium and the insurer can pool similar risks effectively.

Term life insurance provides coverage for a specified period with no cash value; it is the purest form of death protection and is renewable or convertible per policy terms.

Whole life insurance provides lifetime coverage with guaranteed cash value and level premiums; it may be participating (with dividends) or non-participating.

Universal life insurance separates the mortality charge from the cash value component; the policyholder may adjust premiums and death benefit within policy limits.

Variable life insurance links cash value to separate-account investments; the policyholder bears investment risk, and the product requires securities registration and disclosure.

Endowment policies pay the face amount at maturity or at death, whichever occurs first; they combine protection and savings.

The incontestability clause bars the insurer from contesting the policy after two years from issue (or reinstatement) absent nonpayment of premium or certain fraud exceptions.

The suicide clause typically limits payment to return of premiums if death by suicide occurs within a stated period, commonly two years from issue.

A beneficiary designation governs proceeds; irrevocable beneficiaries cannot be changed without their consent, while revocable beneficiaries may be changed by the policyholder.

Fire insurance covers direct damage from fire, lightning, and explosion; extended coverage may include allied perils such as windstorm, flood, and earthquake, subject to deductibles.

Marine insurance covers hull and cargo risks; cargo policies may be valued or unvalued, and general average contributions are typically covered.

Motor insurance: compulsory third-party liability (CTPL) covers bodily injury or death to third parties; own damage and theft require separate comprehensive coverage.

Property insurance applies the principle of indemnity with actual cash value (replacement cost less depreciation) or replacement cost, depending on the policy.

Business interruption insurance covers loss of profits and continuing expenses during restoration; it typically requires a specified indemnity period.

Liability insurance covers sums the insured is legally obligated to pay for bodily injury or property damage to third parties, plus defense costs, subject to policy limits.

Suretyship and bonds involve three parties: principal, obligee, and surety; the surety guarantees the principal's performance or obligation.

Co-insurance and average clauses reduce recovery when the insured value is below the required percentage of actual value, penalizing underinsurance.

Insurance is a contract of utmost good faith (uberrimae fidei); the insured must disclose all material facts known, and concealment or misrepresentation may void the policy.

Insurable interest must exist at inception in property insurance and at death in life insurance; without it, the contract is void.

A contract of insurance requires offer, acceptance, consideration (premium), and lawful subject matter; the policy is the written evidence of the contract.

Warranties are statements or conditions that must be literally complied with; breach may allow the insurer to avoid liability depending on materiality and policy terms.

The principle of proximate cause determines coverage: the efficient, dominant cause of loss must be a covered peril, not merely a remote cause.

Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and pursue the third party responsible for the loss, up to the amount paid.

Contribution applies when multiple policies cover the same loss; insurers share the loss proportionally or per policy terms to prevent double recovery.

The policy period and notice requirements are conditions precedent; late notice may prejudice the claim, and the insured must cooperate in the investigation.

A broker must act in the client's best interest, disclose all commissions and remuneration, and avoid conflicts of interest in placing coverage.

The broker's fiduciary duty includes safeguarding client premiums, remitting them promptly to insurers, and maintaining accurate records of all transactions.

Brokers must not misrepresent policy terms, coverage, or insurer financial condition; misrepresentation is grounds for license suspension or revocation.

Commissions must be disclosed and agreed upon in writing; sharing commissions with unlicensed persons is prohibited under the Insurance Code.

Brokers must maintain professional liability insurance and comply with IC reporting and recordkeeping requirements, including renewal of licenses.

Confidentiality of client information is required; unauthorized disclosure may violate the Code and data privacy laws.

Brokers must verify insurer solvency and licensing before placing business; placing coverage with unauthorized insurers may expose the broker to liability.

Advertising and solicitation must be accurate and not misleading; comparative claims about insurers or products must be substantiated.

Underwriting evaluates risk acceptability and determines premium, terms, and conditions; it uses application data, medical exams, inspection reports, and loss history.

Loss ratio = incurred losses / earned premiums; expense ratio = underwriting expenses / written premiums; combined ratio = loss ratio + expense ratio.

A combined ratio below 100% indicates underwriting profit; above 100% indicates underwriting loss, which may be offset by investment income.

Claims handling steps: notice of loss, verification of coverage, investigation, proof of loss, adjustment, settlement or denial, and subrogation recovery.

Reserves include unearned premium reserves (UPR) and loss reserves (IBNR and reported claims); adequacy affects solvency and financial reporting.

Financial analysis of insurers uses liquidity, solvency, and profitability ratios, including premium-to-surplus and reserve adequacy measures.

Claims must be handled promptly and fairly; bad-faith denial or unreasonable delay may expose the insurer to damages and regulatory sanctions.

Underwriting guidelines must comply with anti-discrimination and fair-practices rules; risk classification must be based on actuarially sound factors.

Insurer operations include product development, marketing, underwriting, policy administration, claims, investment, and reinsurance.

Reinsurance transfers risk from a ceding insurer to a reinsurer; treaty reinsurance covers a class of business automatically, while facultative reinsurance is case-by-case.

Proportional reinsurance (quota share, surplus share) shares premiums and losses proportionally; non-proportional (excess of loss, stop loss) responds above a retention.

Retention is the amount of risk the ceding insurer keeps; cessions reduce net exposure and can improve solvency ratios.

Solvency margin requirements ensure insurers maintain capital and surplus above liabilities; the IC monitors solvency through periodic reporting.

Investment regulations limit asset classes and concentrations to protect policyholders; insurers must maintain adequate liquidity for claims.

Reinsurance recoverables are assets but carry credit risk; reinsurer rating and security are key considerations.

Risk-based capital frameworks link required capital to the risk profile of assets and liabilities, promoting sound financial management.

Risk is the uncertainty regarding loss; pure risk involves only the possibility of loss or no loss, while speculative risk involves both gain and loss and is generally not insurable.

Insurable risk characteristics: large number of homogeneous exposure units, accidental and measurable loss, determinable probability, no catastrophic concentration, and economically feasible premium.

The principle of indemnity restores the insured to the pre-loss financial position, no better; it does not apply fully in life insurance, which is a valued contract.

Risk management steps: identify exposures, measure frequency and severity, select techniques (avoidance, retention, transfer, reduction, sharing), implement, and monitor.

Law of large numbers: as the number of similar exposure units increases, actual loss experience approaches expected loss, improving predictability and reducing insurer risk.

Adverse selection occurs when those with higher-than-average risk seek insurance disproportionately; underwriting and policy design mitigate it.

Moral hazard is the increased likelihood of loss due to insured behavior; morale hazard is carelessness or indifference caused by the presence of insurance.

Risk transfer via insurance is efficient when the insured's loss exposure is large relative to premium and the insurer can pool similar risks effectively.

Term life insurance provides coverage for a specified period with no cash value; it is the purest form of death protection and is renewable or convertible per policy terms.

Whole life insurance provides lifetime coverage with guaranteed cash value and level premiums; it may be participating (with dividends) or non-participating.

Universal life insurance separates the mortality charge from the cash value component; the policyholder may adjust premiums and death benefit within policy limits.

Variable life insurance links cash value to separate-account investments; the policyholder bears investment risk, and the product requires securities registration and disclosure.

Endowment policies pay the face amount at maturity or at death, whichever occurs first; they combine protection and savings.

The incontestability clause bars the insurer from contesting the policy after two years from issue (or reinstatement) absent nonpayment of premium or certain fraud exceptions.

The suicide clause typically limits payment to return of premiums if death by suicide occurs within a stated period, commonly two years from issue.

A beneficiary designation governs proceeds; irrevocable beneficiaries cannot be changed without their consent, while revocable beneficiaries may be changed by the policyholder.

Fire insurance covers direct damage from fire, lightning, and explosion; extended coverage may include allied perils such as windstorm, flood, and earthquake, subject to deductibles.

Marine insurance covers hull and cargo risks; cargo policies may be valued or unvalued, and general average contributions are typically covered.

Motor insurance: compulsory third-party liability (CTPL) covers bodily injury or death to third parties; own damage and theft require separate comprehensive coverage.

Property insurance applies the principle of indemnity with actual cash value (replacement cost less depreciation) or replacement cost, depending on the policy.

Business interruption insurance covers loss of profits and continuing expenses during restoration; it typically requires a specified indemnity period.

Liability insurance covers sums the insured is legally obligated to pay for bodily injury or property damage to third parties, plus defense costs, subject to policy limits.

Suretyship and bonds involve three parties: principal, obligee, and surety; the surety guarantees the principal's performance or obligation.

Co-insurance and average clauses reduce recovery when the insured value is below the required percentage of actual value, penalizing underinsurance.

Insurance is a contract of utmost good faith (uberrimae fidei); the insured must disclose all material facts known, and concealment or misrepresentation may void the policy.

Insurable interest must exist at inception in property insurance and at death in life insurance; without it, the contract is void.

A contract of insurance requires offer, acceptance, consideration (premium), and lawful subject matter; the policy is the written evidence of the contract.

Warranties are statements or conditions that must be literally complied with; breach may allow the insurer to avoid liability depending on materiality and policy terms.

The principle of proximate cause determines coverage: the efficient, dominant cause of loss must be a covered peril, not merely a remote cause.

Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and pursue the third party responsible for the loss, up to the amount paid.

Contribution applies when multiple policies cover the same loss; insurers share the loss proportionally or per policy terms to prevent double recovery.

The policy period and notice requirements are conditions precedent; late notice may prejudice the claim, and the insured must cooperate in the investigation.

A broker must act in the client's best interest, disclose all commissions and remuneration, and avoid conflicts of interest in placing coverage.

The broker's fiduciary duty includes safeguarding client premiums, remitting them promptly to insurers, and maintaining accurate records of all transactions.

Brokers must not misrepresent policy terms, coverage, or insurer financial condition; misrepresentation is grounds for license suspension or revocation.

Commissions must be disclosed and agreed upon in writing; sharing commissions with unlicensed persons is prohibited under the Insurance Code.

Brokers must maintain professional liability insurance and comply with IC reporting and recordkeeping requirements, including renewal of licenses.

Confidentiality of client information is required; unauthorized disclosure may violate the Code and data privacy laws.

Brokers must verify insurer solvency and licensing before placing business; placing coverage with unauthorized insurers may expose the broker to liability.

Advertising and solicitation must be accurate and not misleading; comparative claims about insurers or products must be substantiated.

Underwriting evaluates risk acceptability and determines premium, terms, and conditions; it uses application data, medical exams, inspection reports, and loss history.

Loss ratio = incurred losses / earned premiums; expense ratio = underwriting expenses / written premiums; combined ratio = loss ratio + expense ratio.

A combined ratio below 100% indicates underwriting profit; above 100% indicates underwriting loss, which may be offset by investment income.

Claims handling steps: notice of loss, verification of coverage, investigation, proof of loss, adjustment, settlement or denial, and subrogation recovery.

Reserves include unearned premium reserves (UPR) and loss reserves (IBNR and reported claims); adequacy affects solvency and financial reporting.

Financial analysis of insurers uses liquidity, solvency, and profitability ratios, including premium-to-surplus and reserve adequacy measures.

Claims must be handled promptly and fairly; bad-faith denial or unreasonable delay may expose the insurer to damages and regulatory sanctions.

Underwriting guidelines must comply with anti-discrimination and fair-practices rules; risk classification must be based on actuarially sound factors.

Insurer operations include product development, marketing, underwriting, policy administration, claims, investment, and reinsurance.

Reinsurance transfers risk from a ceding insurer to a reinsurer; treaty reinsurance covers a class of business automatically, while facultative reinsurance is case-by-case.

Proportional reinsurance (quota share, surplus share) shares premiums and losses proportionally; non-proportional (excess of loss, stop loss) responds above a retention.

Retention is the amount of risk the ceding insurer keeps; cessions reduce net exposure and can improve solvency ratios.

Solvency margin requirements ensure insurers maintain capital and surplus above liabilities; the IC monitors solvency through periodic reporting.

Investment regulations limit asset classes and concentrations to protect policyholders; insurers must maintain adequate liquidity for claims.

Reinsurance recoverables are assets but carry credit risk; reinsurer rating and security are key considerations.

Risk-based capital frameworks link required capital to the risk profile of assets and liabilities, promoting sound financial management.

The Insurance Code (PD 612, as amended, most recently by RA 10607) governs insurers, brokers, agents, adjusters, and reinsurers in the Philippines; the Insurance Commission (IC) administers it.

Insurance business is classified as life and non-life; a single company generally may not transact both, except as expressly allowed (e.g., composite arrangements for microinsurance).

A broker is licensed by the IC and represents the insured, not the insurer; a broker's license requires a written examination, a bond, and compliance with the Code and IC circulars.

The Code requires insurers to maintain a minimum paid-up capital and net worth, with periodic increases mandated by the IC; brokers must likewise post a bond and maintain professional liability coverage.

The Insurance Code prohibits rebating and sharing of commissions with unlicensed persons; violations may result in suspension or revocation of the broker's license.

Insurance claims must be paid within 30 days after proof of loss is received, unless the claim is denied or challenged on valid grounds; failure may result in interest and damages.

The IC has rule-making and adjudicatory powers, including the power to suspend or revoke licenses for misrepresentation, fraud, or violations of the Code or IC issuances.

The Code requires that brokers act solely for the insured and disclose conflicts of interest; they may not act as agent for an insurer in the same transaction without written consent.

Risk is the uncertainty regarding loss; pure risk involves only the possibility of loss or no loss, while speculative risk involves both gain and loss and is generally not insurable.

Insurable risk characteristics: large number of homogeneous exposure units, accidental and measurable loss, determinable probability, no catastrophic concentration, and economically feasible premium.

The principle of indemnity restores the insured to the pre-loss financial position, no better; it does not apply fully in life insurance, which is a valued contract.

Risk management steps: identify exposures, measure frequency and severity, select techniques (avoidance, retention, transfer, reduction, sharing), implement, and monitor.

Law of large numbers: as the number of similar exposure units increases, actual loss experience approaches expected loss, improving predictability and reducing insurer risk.

Adverse selection occurs when those with higher-than-average risk seek insurance disproportionately; underwriting and policy design mitigate it.

Moral hazard is the increased likelihood of loss due to insured behavior; morale hazard is carelessness or indifference caused by the presence of insurance.

Risk transfer via insurance is efficient when the insured's loss exposure is large relative to premium and the insurer can pool similar risks effectively.

Term life insurance provides coverage for a specified period with no cash value; it is the purest form of death protection and is renewable or convertible per policy terms.

Whole life insurance provides lifetime coverage with guaranteed cash value and level premiums; it may be participating (with dividends) or non-participating.

Universal life insurance separates the mortality charge from the cash value component; the policyholder may adjust premiums and death benefit within policy limits.

Variable life insurance links cash value to separate-account investments; the policyholder bears investment risk, and the product requires securities registration and disclosure.

Endowment policies pay the face amount at maturity or at death, whichever occurs first; they combine protection and savings.

The incontestability clause bars the insurer from contesting the policy after two years from issue (or reinstatement) absent nonpayment of premium or certain fraud exceptions.

The suicide clause typically limits payment to return of premiums if death by suicide occurs within a stated period, commonly two years from issue.

A beneficiary designation governs proceeds; irrevocable beneficiaries cannot be changed without their consent, while revocable beneficiaries may be changed by the policyholder.

Fire insurance covers direct damage from fire, lightning, and explosion; extended coverage may include allied perils such as windstorm, flood, and earthquake, subject to deductibles.

Marine insurance covers hull and cargo risks; cargo policies may be valued or unvalued, and general average contributions are typically covered.

Motor insurance: compulsory third-party liability (CTPL) covers bodily injury or death to third parties; own damage and theft require separate comprehensive coverage.

Property insurance applies the principle of indemnity with actual cash value (replacement cost less depreciation) or replacement cost, depending on the policy.

Business interruption insurance covers loss of profits and continuing expenses during restoration; it typically requires a specified indemnity period.

Liability insurance covers sums the insured is legally obligated to pay for bodily injury or property damage to third parties, plus defense costs, subject to policy limits.

Suretyship and bonds involve three parties: principal, obligee, and surety; the surety guarantees the principal's performance or obligation.

Co-insurance and average clauses reduce recovery when the insured value is below the required percentage of actual value, penalizing underinsurance.

Insurance is a contract of utmost good faith (uberrimae fidei); the insured must disclose all material facts known, and concealment or misrepresentation may void the policy.

Insurable interest must exist at inception in property insurance and at death in life insurance; without it, the contract is void.

A contract of insurance requires offer, acceptance, consideration (premium), and lawful subject matter; the policy is the written evidence of the contract.

Warranties are statements or conditions that must be literally complied with; breach may allow the insurer to avoid liability depending on materiality and policy terms.

The principle of proximate cause determines coverage: the efficient, dominant cause of loss must be a covered peril, not merely a remote cause.

Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and pursue the third party responsible for the loss, up to the amount paid.

Contribution applies when multiple policies cover the same loss; insurers share the loss proportionally or per policy terms to prevent double recovery.

The policy period and notice requirements are conditions precedent; late notice may prejudice the claim, and the insured must cooperate in the investigation.

A broker must act in the client's best interest, disclose all commissions and remuneration, and avoid conflicts of interest in placing coverage.

The broker's fiduciary duty includes safeguarding client premiums, remitting them promptly to insurers, and maintaining accurate records of all transactions.

Brokers must not misrepresent policy terms, coverage, or insurer financial condition; misrepresentation is grounds for license suspension or revocation.

Commissions must be disclosed and agreed upon in writing; sharing commissions with unlicensed persons is prohibited under the Insurance Code.

Brokers must maintain professional liability insurance and comply with IC reporting and recordkeeping requirements, including renewal of licenses.

Confidentiality of client information is required; unauthorized disclosure may violate the Code and data privacy laws.

Brokers must verify insurer solvency and licensing before placing business; placing coverage with unauthorized insurers may expose the broker to liability.

Advertising and solicitation must be accurate and not misleading; comparative claims about insurers or products must be substantiated.

Underwriting evaluates risk acceptability and determines premium, terms, and conditions; it uses application data, medical exams, inspection reports, and loss history.

Loss ratio = incurred losses / earned premiums; expense ratio = underwriting expenses / written premiums; combined ratio = loss ratio + expense ratio.

A combined ratio below 100% indicates underwriting profit; above 100% indicates underwriting loss, which may be offset by investment income.

Claims handling steps: notice of loss, verification of coverage, investigation, proof of loss, adjustment, settlement or denial, and subrogation recovery.

Reserves include unearned premium reserves (UPR) and loss reserves (IBNR and reported claims); adequacy affects solvency and financial reporting.

Financial analysis of insurers uses liquidity, solvency, and profitability ratios, including premium-to-surplus and reserve adequacy measures.

Claims must be handled promptly and fairly; bad-faith denial or unreasonable delay may expose the insurer to damages and regulatory sanctions.

Underwriting guidelines must comply with anti-discrimination and fair-practices rules; risk classification must be based on actuarially sound factors.

Insurer operations include product development, marketing, underwriting, policy administration, claims, investment, and reinsurance.

Reinsurance transfers risk from a ceding insurer to a reinsurer; treaty reinsurance covers a class of business automatically, while facultative reinsurance is case-by-case.

Proportional reinsurance (quota share, surplus share) shares premiums and losses proportionally; non-proportional (excess of loss, stop loss) responds above a retention.

Retention is the amount of risk the ceding insurer keeps; cessions reduce net exposure and can improve solvency ratios.

Solvency margin requirements ensure insurers maintain capital and surplus above liabilities; the IC monitors solvency through periodic reporting.

Investment regulations limit asset classes and concentrations to protect policyholders; insurers must maintain adequate liquidity for claims.

Reinsurance recoverables are assets but carry credit risk; reinsurer rating and security are key considerations.

Risk-based capital frameworks link required capital to the risk profile of assets and liabilities, promoting sound financial management.

The Insurance Code (PD 612, as amended, most recently by RA 10607) governs insurers, brokers, agents, adjusters, and reinsurers in the Philippines; the Insurance Commission (IC) administers it.

Insurance business is classified as life and non-life; a single company generally may not transact both, except as expressly allowed (e.g., composite arrangements for microinsurance).

A broker is licensed by the IC and represents the insured, not the insurer; a broker's license requires a written examination, a bond, and compliance with the Code and IC circulars.

The Code requires insurers to maintain a minimum paid-up capital and net worth, with periodic increases mandated by the IC; brokers must likewise post a bond and maintain professional liability coverage.

The Insurance Code prohibits rebating and sharing of commissions with unlicensed persons; violations may result in suspension or revocation of the broker's license.

Insurance claims must be paid within 30 days after proof of loss is received, unless the claim is denied or challenged on valid grounds; failure may result in interest and damages.

The IC has rule-making and adjudicatory powers, including the power to suspend or revoke licenses for misrepresentation, fraud, or violations of the Code or IC issuances.

The Code requires that brokers act solely for the insured and disclose conflicts of interest; they may not act as agent for an insurer in the same transaction without written consent.

Risk is the uncertainty regarding loss; pure risk involves only the possibility of loss or no loss, while speculative risk involves both gain and loss and is generally not insurable.

Insurable risk characteristics: large number of homogeneous exposure units, accidental and measurable loss, determinable probability, no catastrophic concentration, and economically feasible premium.

The principle of indemnity restores the insured to the pre-loss financial position, no better; it does not apply fully in life insurance, which is a valued contract.

Risk management steps: identify exposures, measure frequency and severity, select techniques (avoidance, retention, transfer, reduction, sharing), implement, and monitor.

Law of large numbers: as the number of similar exposure units increases, actual loss experience approaches expected loss, improving predictability and reducing insurer risk.

Adverse selection occurs when those with higher-than-average risk seek insurance disproportionately; underwriting and policy design mitigate it.

Moral hazard is the increased likelihood of loss due to insured behavior; morale hazard is carelessness or indifference caused by the presence of insurance.

Risk transfer via insurance is efficient when the insured's loss exposure is large relative to premium and the insurer can pool similar risks effectively.