G.R. No. L-19255 – THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, petitioner, vs. THE AUDITOR GENERAL, respondent.
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SANCHEZ, J.
Rule Synopsis
Reinsurance treaties are mere contracts for insurance, rather than contracts of insurance. The former does not establish a fixed obligation to remit reinsurance premiums until the execution of a reinsurance cession.
Facts
Philippine American Life Insurance Company (Philamlife; domestic corp.) and American International Reinsurance Company (Airco; foreign corp) entered into a reinsurance treaty on January 1, 1950. Under the treaty, the former will reinsure with the latter certain life insurance policies issued, for which it will pay reinsurance premiums. As the foreign exchange margin on Philamlife remittances of premium to Airco, the Central Bank collected P268k. Subsequently, Philamlife claimed a refund of the said amount seeking an exception under Sec. 3 of the Margin Law which exempts from the payment of foreign exchange margin, “contractual obligations calling for payment of foreign exchange issued, approved and outstanding as of the date this Act takes effect.” The law took effect on July 16, 1959. It contended that since the reinsurance treaty was already in effect 9 years before the passage of the Margin Law, reinsurance premiums paid under the treaty were beyond the ambit of said law.
Issue
Was Philamlife entitled to a refund of the forex margins previously collected?
Ruling and Discussion
No. Philamlife was not entitled to a refund of the forex margins previously collected.
The Supreme Court ruled that Philamlife is not entitled to a refund of the forex margins previously collected. It held that the reinsurance treaty did not establish the obligation of Philamlife to remit to Airco a fixed, certain, and obligatory sum by way of reinsurance premiums. Under the said treaty, Philamlife merely “agrees to reinsure.” In this case, Philamlife’s obligation to remit reinsurance premiums becomes fixed and definite upon the execution of the reinsurance cession. The SC also distinguished reinsurance policies and reinsurance treaties in this wise: the former were contracts of insurance; the latter, contracts for insurance.
Dispositive
Petition denied. Ruling affirmed.