Republic of the Philippines

Department of Finance
!NSURANCE COMMISSION
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1 071 United Nations Avenue @
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Manila Certificate Number: AJA18-0159

Circular Letter (CL) No 2020-73

Date: 14 June 2O2O
Amends / Supplements: NONE

CIRCULAR LETTER

TO AII LIFE AND NON.LIFE INSURANCE COMPANIES, MUTUAL

BENEFIT ASSOCIATIONS AND LICENSED INSURANCE
OR AGGREGATORS BY THE
INTERMEDIARIES INSURANCE
COMMISSION

SUBJECT GUIDELINES ON THE ADOPTION OF A REGULATORY SANDBOX

FRAMEWORK FOR INSURANCE TECHNOLOGY (tnsurTech)
INNOVATIONS

WHEREAS, technological innovations have provided various modes of

communication and novel means of conducting business throughout the years and
across nations leading to the advent of lnsurance Technology (lnsurTech);

WHEREAS, the utilization of these technological innovations, as applied in the

conduct of insurance business, can further be improved or enhanced without completely
disregarding any existing and applicable laws, rules, or regulations;

WHEREAS, this Commission recognizes the immense benefit that can be

derived from further developing such technological innovations (lnsurTech) through
experimentation, testing, and learning, which can be achieved without necessarily
compromising the protection of the interests of the insuring public;

NOW, THEREFORE, in view of the foregoing and in accordance with the

statutory powers vested in the undersigned by Section 437 of the lnsurance Code of the
Philippines, as amended by Republic Act No. 10607, the following Guidelines on the
Adoption of a Regulatory Sandbox Framework for lnsurance Technotogy (lnsurTech)
lnnovations are hereby adopted and promulgated, to wit:

Section 1. Definition of Regulatory Sandbox. - For the purposes of this

Circular Letter, the term "Regulatory Sandbox" means a controlled environment with a
system set up by a licensed insurance provider in collaboration with another person,
natural or juridical, licensed or not by this Commission, that allows a smalt scale and live
testing of technical innovations operating under special circumstance/s, allowance/s,
and/or other limited and time-bound supervision.

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Head Office, PO. Box 3589 Manila I Facsimile No. (02) 522-1434 | Telephone Nos. (02) 523-8461 to 70 | www.insurance.gov.ph
 Section 2. Prior Approval Required. - No Regulatory Sandbox that involves the
doing an insurance business, as defined in Section 2 (b) of the lnsurance Code of the
Philippines, as amended by Republic Act No. 10607, or the performance of any act that
will require licensing and/or regulation by this Commission shall be adopted and
implemented unless approved by this Commission.

Section 3. Participation by Non-Regulated Entities. - ln the case of persons,

natural or juridica!, \ fio intend to participate in a Regulatory Sardbox but whose
businesses are not regulated by this Commission and wfrose collaboration will require
the performance of acts that will result in business or transactions that will require
licensing, regutation or approval by this Commission, I.e. Fintech stiart-ups, etc., the
same must first comply with existing regulations issued by this Commission, insofar as
applicable, before submitting any application for participation in a Regulatory Sandbox.

Section 4. Experimentation Gycle. - A Regulatory Sandbox shal! be operated

in Experimentation Cycle/s that will be implemented one at a time and subsequently
evaluated and finalized first before commencing any subsequent Experimentation
Cycle/s.

Section 5. Duration of Experimental Gycle. - The Experimental Cycle, if

approved by this Commission, shall last for a maximum period not exceeding one (1)
year. Said Experimental Cycle can be extended for a period not exceeding six (6)
months; Provided, that, the Applicant shall submit a written iustification.

Section 6. Documentary Requirements; Formal Proposal. - Any person/s

intending to apply for participation in a Regulatory Sandbox shall submit a formal
proposal and shall submit the following documents to this Commission's Regulation,
Enforcement, and Prosecution Division ("REPD"), wtrether in hard copy, flash drive or
compact discl:

a. Certified copy of DTI or SEC registration documents, if applicable;

b. Certified true copy of the signed contract or agreement between the parties
intending to develop any tectrnological innovations wtthin this Frameurcrk, if
applicable;

c. Cerffied true copy/ies of signed agreemenUs that signify/ies the consent of

the test subjecUs;

d. The Applicants' by-laws and constitution, if applicable;

e. Outline of business model for the product, solution or service which shall
include, at least, the following:

(i) Definition and explanation of the proposed innovation with justifications

of the idea to the market;

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ln case the submission of documents is by flash drive or compact disc, the documents must be in PDF format
and accompanied by two (2) copies of documents showing who and when it was received by the lnsurance
Commission.

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 (ii) The potential benefits of the proposed product, solution or service for
consumers and financial markets;

(iii) The necessity of resorting to a Regulatory Sandbox test with its

perceived outcomes and objectives;

(iv) A clear testing methodology, limitation of scale and relevant controls;

(v) The potential and perceived risks resulting from the Regulatory
Sandbox test;

(vi) The proposed safeguards and risk mitigation strategies for avoiding
potential harm to consumers or the market participants and their likely
effectiveness against cyberhacks, data breach, etc.; and

(vii) The phases of the Experimentation Cycle, if applicable, and the

duration of time that will be needed.

f. A written projected plan and clear strategy for exit ("Exit Plan") from the
Regulatory Sandbox, which shall include:

(i) A clear methodology to scale-up the technological solution in order to

access a larger market;

(ii) PIan for the clients of the proposed innovation in case the same is
ordered discontinued or in case the insurance provirler @ases its
operations voluntarily or upon this Commission's orders, which shall
include scenarios for transitioning and/or compensating said clients,
among others; and

(iii) The amount that will be specifically earmarked for the implementation
of the technological solution that shall be intended as payment for any
claims arising from said implementation or adoption thereof, whk$ shall
be unimpaired at all times.

Section 7. Application Screening Parameterc. ln the screening of

applications, the following parameters shall be considered based on the documents
submitted:

a. lnnovative idea/s;

b. lnsurance inclusion, indicative that the proposed technological solution can

promote or provide equal opportunity to access insurance services and will
increase insurance literacY;

c. Consumer benefit and protection;

d. Readiness for testing indicative of the adequate resources to support the

testing and clear methodology and control, among others; and

e. Soundness of the Exit Plan.

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 Section 8. lmplementing Division. - The REPD shall receive any and all
applications under this Circular Letter and determine whether or not the required
documentation is complete and whether the applications exhibit the parameters outlined
in Section 7 of this Circular Letter. The REPD may require additional information or
documents from the Applicants for clarfficatory matters only, if needed. ln evaluating the
applications, the REPD is authorized to coordinate with other concemed divisions of this
Commission.

Afier determining that the required documentation of an application is complete

and that the same exhibits said parameters outlined in Section 7 of this Circular Letter,
the REPD shall submit its recommendation to the lnsurance Commissioner for approval.

Section 9. Approval. - lf the lnsurance Commissioner is satisfied with the

recommendations of the REPD that the required documentation is complete and that the
same exhibits said parameters outlined in Section 7 of this Circular Letter, the latter shall
issue a letter of approval ("Approval") to the successful Applicants. The successful
Applicant will be allowed to operate and proceed wtth live testing or experiments within
the period contained in Section 6 (i) (vii), in relation to Section 5, of this Circular Letter'

Section 10. Mandatory Reporting. - The sucecssful Applicants shall

mandatorily submit a monthly written report to this Commission, through the REPD- The
monthly report shall contain, among others: (1) Proof of the Fogress or regress of lhe
pr.rrn"t"r" in Section 7 of this Circular Letter; (2) Percentage of completion of or
phase/s completed in the Experimentation Cycle; and (3) Other @noerns,f rny, that the
successful Applicants need to bring to the attention of this Commission. The lnsurance
Commission may also require the successful Applicants to submit additional documents,
if needed, to clarify matters.

lf any concern brought to the attention of this Commission requires the

modification, improvement, or enhancement of the plans or experiments contained in the
application, as ao@mpanied by relevant proof, such modification, improvement, or
enhancement may onty be adopled and/or implemented by the Applicants upon request
and subsequent approval of this Commission.

The period to file the monthly reports shall commence from the date of the receipt
of the Approval by the successfulApplicants.

Section 11. Penalties for Violation. - The Applicant's/s' failure to comply with
any of provisions of this Circular Letter shal! warrant the immediate denial of the
application. ln case an Approval has already been issued to the ApplicanUs, the
epprovat shall be immediately revoked. This Commission may also revoke or suspend
the Approval at any phase oistage of the Experimentation Cycle if it finds, during such
phase or stage, tnit ttre technical solution or experiment does not progress or fails to
meet any of the parameters mentioned in Section 7 of this Circular Letter.

Section 12. Comptetion. - At the end of the Experimentation Cycle, ot q Ut"

successful Applicants achieve the results desired earlier than the end of the
Experimentation Cycle, the successful Applicant shatl submit a written Comple[ion
Report to the REPti. The Completion Report shall, at least, include the following, to wit:

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 a. The overall results and statistics of the testing;

b. An objective assessment of the potential impact of the technological solution to

be scaled out, vvhich shall, at least, include:

i. A comparison of results with the objectives defined during the inception

of the experiment;

ii. The scope of scaling out to a larger audience, in case of success;

iii. How the Applicants will fully comply with relevant legal and regulatory
requirements if the technological solution is scaled out;

c. Proof that the sum required per Section 6 (i) (iii) of this Circular Lefter had
already been deposited and earmarked for the purpose. To ensure that the
earmarked amount cannot be withdrawn for any purpose other than that for which
the same was originally intended, the Applicants shall designate the lnsurance
Commissioner or his duly authorized representative/s or altemate/s as c,o-
signatory/ies to the pertinent accounUs.

Section 13. lnformation as Trade Secrets. - Any information in the custody of

or within the knowledge of this Commission pertaining to the Applicants' participation in
a Regulatory Sandbox, including its successful launching, shall be considered as trade
secrets in accordance with applicable intellectual property laws of the Philippines.
Accordingly, any and all requests or inquiries pertaining to the disclosure of any of the
details of such participation shall be requested directly from the Applicants.

Section 14. lntegration with Product Approval and Distribution Policies. -

For the purposes of integrating and harmonizing existing regulations pertaining to
application for product approvals and the manner of distribution thereof through
technology in order for the industry to be encouraged to further develop or enhance
technological innovations, the following rules shall apply:

a. For the purposes of this Circular Letter, the provisions of Section 1 of Circular
Letter No. 201969 dated 22 November 2019 on "Changes in the Approved Life
lnsurance Policy Form{ shalt also apply to the approved products of non-life
insurance companies and mutual benefit associations that intend to use any of its
approved products in live testing or experimentiation.

b. lnsurance providers that intend to apply for a new product, or amend matters in
its existing producUs that are not othenrvise covered by the abovementoned
paragraph, are stil! required to comply with the requirements set forth in other
existing Circular Letters previously issued by this Commission. The filing of said
applicalion for new producUs or amendment of its existing producUs may be done
simultaneously or prior to the insurance provider'si/s' application for participation
in a Regulatory Sandbox. ln the case of the latter, it shall be the duty of the
insurance provider to inform this Commission in writing.

c. There shall be no separate approval needed in accordance with Circular Letter

No. 201447 dated 21 November 2014 on the "Guidelines on Electronic

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 Commerce of lnsurance Products", and its subsequent amendments, if the
application for Regulatory Sandbox has been approved.

Section 15. Separability Clause. - lf any provision of this Circular Letter shall
be held unconstitutional or invalid, the other provisions not otherwise affected shall
remain in fullforce and effect.

Section 16. Effectivity.- This Circular shall take effect immediately.

D B. FUNA
ce Commissioner

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