Financial Reporting Framework

Section 189 of the Amended Insurance Code defines Financial Reporting Framework as “a set of accounting and reporting principles, standards, interpretations and pronouncements that must be adopted in the preparation and submission of the statutory financial statements and reports required by the commission”. The framework gives the commissioner the authority to adopt internationally accepted accounting standards in the reporting of the financial condition of insurers. Financial reporting, on the other hand, is defined as the “recording and presentation of financial statements, such as the Annual Statement, by the insurance company. Financial reporting statements are use by the State Insurance Commissioner in regulating the adequacy of company reserves for benefit liabilities, assets availability and worth.”

With the enactment of the Amended Insurance Code, there was a need to clarify certain provisions with respect to financial reporting, capitalization, reserving (liabilities) and solvency requirements. The Insurance Commission formed various technical working committees to draft the circulars on these concerns.

Nature of the framework

The resulting circular with respect to financial reporting (Section 189) was Circular Letter (CL) 2015-29, dated June 10, 2015. This resulted from the Regulatory Alignment Project undertaken from 2014 to 2016 with the participation of the PLIA and PIRA. Surveys and consultations were conducted. The principal task was to identify the differences or gaps between the accounting standards, i.e. the Philippine Financial Reporting
Standards (PFRS), and the Amended Insurance Code, and to align the differences. For example, with respect to Exchange Traded Funds (ETFs), under Section 214 (c,1) of the Amended Insurance Code and CL 2014-30, they shall be valued at market value and periodically adjusted to reflect market changes through a special valuation account to reflect their realizable value when sold. However, under accounting practices, they are valued at fair value. With respect to purchase money mortgage, under Section 214 (f) of the Code, they shall be valued in an amount equivalent to 90 percent of the value of such real property. Under accounting practices, they are measured at amortized cost.

This circular expressly provides that “this financial reporting framework is not the same as the financial reporting framework used for general purpose financial statements for the public and filed [with] other regulators” specifically the Securities and Exchange Commission. In other words, the financial reporting framework for insurance companies is entirely distinct. The “statutory financial statements and reports referred to are the quarterly and annual reporting.” Moreover, “the financial reporting framework includes the economic valuation of assets and liabilities based on internationally accepted accounting, actuarial and insurance core principles.”

CL 2015-29 would eventually be superseded by CL 2016-65, dated December 28, 2016.

Accounting standards

There are three standards setting and interpretation organizations in the Philippines that recommend the standards, rules and interpretative pronouncements on accountancy and auditing.  These three organizations are: a) the Financial Reporting Standards Council; b) the Auditing and Assurance Standards Council; and c) the Philippine Interpretations Committee. These three are mandated under the accountancy law and the implementing rules to recommend to the Board of Accountancy the standards and interpretations, for BOA approval. As of 2018, the chairmen of the councils are Roberto G. Manabat for the AASC, David L. Balangue for the FRSC and Wilson P. Tan for the PIC.



Dennis B. Funa is the current insurance commissioner. Funa was appointed by President Duterte as the new insurance commissioner in December 2016. E-mail:





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