[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1290 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 1290

  To ensure the financial soundness and solvency of insurers, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 10, 1993

 Mr. Dingell introduced the following bill; which was referred to the 
                    Committee on Energy and Commerce

_______________________________________________________________________

                           November 22, 1993

    Additional sponsors: Ms. Margolies-Mezvinsky, Mr. de Lugo, Mr. 
Hastings, Mr. Coleman, Mr. Romero-Barcelo, and Miss Collins of Michigan

                                 A BILL


 
  To ensure the financial soundness and solvency of insurers, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Federal Insurance 
Solvency Act of 1993''.
    (b) Table of Contents.--

    TITLE I--ESTABLISHMENT OF FEDERAL INSURANCE SOLVENCY COMMISSION

Sec. 101. Establishment.
Sec. 102. Duties of Commission.
Sec. 103. Membership.
Sec. 104. Staff of Commission; experts and consultants.
Sec. 105. Offices and place of meeting.
Sec. 106. Powers of commission.
Sec. 107. Evaluations of insolvent insurers and reinsurers.
Sec. 108. Referral to enforcement authorities; data base on violations.
Sec. 109. Reports.
Sec. 110. Federal Insurance Regulation Advisory Committee.
Sec. 111. Fees.
Sec. 112. Authorization of appropriations.
Sec. 113. Budget Act compliance.
TITLE II--NATIONAL STANDARDS FOR THE FINANCIAL CONDITION OF INSURERS IN 
 INTERSTATE COMMERCE AND FEDERAL CERTIFICATES OF SOLVENCY FOR INSURERS

Sec. 201. National standards for the financial soundness and solvency 
                            of insurers in interstate commerce.
Sec. 202. Authority to issue Federal certificates of solvency.
Sec. 203. Criteria for the national standards for financial soundness 
                            and solvency.
Sec. 204. Surplus lines approval for federally certified insurers.-
Sec. 205. Membership in National Insurance Protection Corporation.
Sec. 206. Suspension and revocation of Federal certificate of solvency 
                            or State insurance license.
Sec. 207. Relationship of federally certified insurers to State 
                            insurance regulation.
         TITLE III--FEDERAL CERTIFICATES TO PROVIDE REINSURANCE

Sec. 301. Federal Insurance Solvency Commission authority to certify 
                            providers of reinsurance.
Sec. 302. Certification of professional reinsurers.
Sec. 303. Certificate for other providers of reinsurance.
Sec. 304. Suspension and revocation of Federal certificate to provide 
                            reinsurance.
Sec. 305. Credit for reinsurance.
Sec. 306. Relationship to State law.
Sec. 307. Construction.
                    TITLE IV--REGULATORY ENFORCEMENT

Sec. 401. Authority to conduct financial examinations of insurers and 
                            reinsurers.
Sec. 402. Procedures for financial examination of insurers and 
                            reinsurers.
Sec. 403. Accounting standards and independent accountants.
Sec. 404. Actuaries.
Sec. 405. Registration of insurers and reinsurers in holding companies.
Sec. 406. Acquisition of control of or merger with insurer or 
                            reinsurer.
Sec. 407. Special circumstances as to the acquisition of a federally 
                            certified insurer or reinsurer.
Sec. 408. Transactions within a holding company system that includes an 
                            insurer or reinsurer.
Sec. 409. Penalties and enforcement.
Sec. 410. Federal insurer and reinsurer employee protection remedy.
           TITLE V--NATIONAL INSURANCE PROTECTION CORPORATION

Sec. 501. National Insurance Protection Corporation.
Sec. 502. Purpose.
Sec. 503. Relationship to the Federal Government.
Sec. 504. Membership.
Sec. 505. Corporate powers.
Sec. 506. Board of directors.
Sec. 507. Chairperson and vice chairperson.
Sec. 508. Officers.
Sec. 509. Meetings of Board.
Sec. 510. Bylaws and rules.
Sec. 511. Consultation with the Federal Insurance Solvency Commission.
Sec. 512. NIPC fund.
Sec. 513. Scope of guaranty.
Sec. 514. Assessments.
Sec. 515. Borrowing authority.
Sec. 516. Functions of the Federal Insurance Solvency Commission.
Sec. 517. Notice to Commission of changes in conditions in insurance 
                            markets.
Sec. 518. Liability of the member insurers.
Sec. 519. Liability of NIPC and its directors, officers, and employees.
Sec. 520. Advertising.
Sec. 521. Improvement of insolvency prevention and detection.
Sec. 522. Guarantee obligation of NIPC.
Sec. 523. Effect of paid claims.
Sec. 524. Nonduplication of payment of claims.
Sec. 525. Reports on payment of claims.
Sec. 526. Stay of proceedings.
Sec. 527. Judicial review.
    TITLE VI--NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS

Sec. 601. National association of registered agents and brokers.
Sec. 602. Purpose. 
Sec. 603. Relationship to the Federal Government.
Sec. 604. Membership. 
Sec. 605. Corporate powers. 
Sec. 606. Board of directors. 
Sec. 607. Chairperson and vice chairperson. 
Sec. 608. Officers. 
Sec. 609. Meetings of Board. 
Sec. 610. Bylaws, rules, and disciplinary action. 
Sec. 611. Consultation with the Federal Insurance Solvency Commission. 
Sec. 612. Borrowing authority. 
Sec. 613. Assessments. 
Sec. 614. Functions of the Federal Insurance Solvency Commission. 
Sec. 615. Liability of narab and its directors, officers, and 
                            employees. 
Sec. 616. Relationship to State law.
Sec. 617. Coordination with other regulators.
Sec. 618. Judicial review. 
               TITLE VII--REHABILITATION AND LIQUIDATION

Sec. 701. Jurisdiction.
Sec. 702. Petition for appointment.
Sec. 703. Order appointing commission receiver.
Sec. 704. Effect of order.
Sec. 705. Applicability of receivership to foreign insurers and 
                            reinsurers.
Sec. 706. Injunctions and orders.
Sec. 707. Actions by and against the receiver.
Sec. 708. Jurisdiction over actions by and against receiver; transfer.
Sec. 709. Expenses of establishing receivership.
Sec. 710. Proceedings against culpable persons.
Sec. 711. Special deposits.
Sec. 712. Audits.
Sec. 713. Standing of guaranty associations.
Sec. 714. Prohibited and voidable transfers prior to petition for 
                            receivership.
Sec. 715. Voidable preferences to culpable officers.
Sec. 716. Fraudulent transfer after petition for receivership.
Sec. 717. Claims of holders of voidable transfers.
Sec. 718. Cooperation of an insurer's or reinsurer's officers, owners, 
                            and employees.
Sec. 719. Administrative seizure.
Sec. 720. Grounds for rehabilitation.
Sec. 721. Rehabilitation orders.
Sec. 722. Powers and duties of the receiver in rehabilitation.
Sec. 723. Termination of rehabilitation.
Sec. 724. Grounds for liquidation.
Sec. 725. Liquidation orders.
Sec. 726. Continuance of coverage.
Sec. 727. Dissolution of an insurer or reinsurer.
Sec. 728. Powers of the liquidator.
Sec. 729. Notice to creditors and others.
Sec. 730. Duties of agents.
Sec. 731. Setoffs.
Sec. 732. Obligation of a reinsurer.
Sec. 733. Reinsurer's liability.
Sec. 734. Recovery of premiums owed.
Sec. 735. Receiver's proposal to distribute assets.
Sec. 736. Filing of claims.
Sec. 737. Proof of claim.
Sec. 738. Contingent and immature claims.
Sec. 739. Valuation of claims.
Sec. 740. Disputed claims.
Sec. 741. Claims of surety.
Sec. 742. Secured creditors' claims.
Sec. 743. Priority of distribution.
Sec. 744. Receiver's recommendations to the court.
Sec. 745. Distribution of assets.
Sec. 746. Unclaimed and withheld funds.
Sec. 747. Termination of proceedings.
Sec. 748. Disposition of records during and after termination of 
                            receivership.
Sec. 749. Transition period.
                        TITLE VIII--DEFINITIONS

Sec. 801. Definitions.
             TITLE IX--TECHNICAL AND CONFORMING AMENDMENTS

Sec. 901. Executive schedule technical and conforming amendments.

    TITLE I--ESTABLISHMENT OF FEDERAL INSURANCE SOLVENCY COMMISSION

SEC. 101. ESTABLISHMENT.

    There is established an independent regulatory agency to be known 
as the ``Federal Insurance Solvency Commission'' (hereinafter in this 
Act referred to as the ``Commission'').

SEC. 102. DUTIES OF COMMISSION.

    The Commission shall--
            (1) establish national, preemptive standards to ensure the 
        financial soundness and solvency of all insurers in interstate 
        commerce;
            (2) regulate insurers that obtain federal solvency 
        certificates for compliance with the national standards for 
        financial soundness and solvency established under paragraph 
        (1) and transmit to each State such standards so that each 
        State will apply such standards to each insurer that is under 
        its regulatory jurisdiction that is in interstate commerce and 
        that is not federally certified;
            (3) establish procedures for financially sound insurers to 
        apply to the Commission for a Federal certificate of solvency 
        to engage in the business of insurance;
            (4) consider the applications for, and issue and renew on 
        an annual basis, Federal certificates of solvency to each 
        qualified insurer in interstate commerce that meets the 
        financial soundness and solvency standards established by the 
        Commission;
            (5) establish standards to ensure the financial soundness 
        and solvency of federally certified reinsurers and the 
        collectibility of reinsurance recoverables by United States 
        ceding reinsurers with due consideration to the public interest 
        in providing secure capacity to the United States insurance 
        marketplace;
            (6) establish procedures for reinsurers to apply to the 
        Commission for a Federal certificate of solvency to provide 
        reinsurance for insurance on risks written in the United 
        States;
            (7) consider the applications for, and issue and renew on 
        an annual basis, a Federal certificate to a reinsurer that meet 
        the standards established by the Commission;
            (8) determine whether State laws, rules, regulations, 
        orders, or actions are preempted by this Act;
            (9) establish procedures for monitoring the financial 
        condition and solvency of insurers and reinsurers under this 
        Act, and for determining if such insurers and reinsurers may be 
        financially impaired or insolvent;
            (10) establish standards and procedures to intervene in the 
        conduct of affairs of an insurer or reinsurer under this Act if 
        such insurer or reinsurer becomes such that further transaction 
        of business will be hazardous to United States policyholders or 
        creditors or to the public and transmit such standards to each 
        State for the State to follows as to insurers subject to State 
        regulation for financial condition;
            (11) take appropriate steps to address the financial 
        impairment of any insurer or reinsurer federally certified 
        under this Act and act as the receiver in the event such 
        insurer or reinsurer requires either rehabilitation or 
        liquidation;
            (12) oversee the activities of the National Insurance 
        Protection Corporation, including review of the Corporation's 
        bylaws and rules and consultation with the Corporation 
        concerning appropriate financial soundness and solvency 
        standards and the implementation of such standards;
            (13) oversee the activities of the National Association of 
        Registered Agents and Brokers, including review of the 
        Association's bylaws and rules; and
            (14) conduct, on an ongoing basis, studies and research on 
        any matter that may affect the financial condition and solvency 
        of the insurance industry in the United States.

SEC. 103. MEMBERSHIP.

    (a) Number and Appointment.--The Commission shall be composed of 5 
members appointed by the President by and with the advise and consent 
of the Senate.
    (b) Political Affiliation.--Not more than 3 members appointed under 
subsection (a) may be of the same political party.
    (c) Restriction on Other Employment.--A Commissioner shall not 
engage in any business, vocation, or employment other than serving as a 
Commissioner.
    (d) Terms.--
            (1) In general.--Each member shall be appointed for a term 
        of 6 years except as provided in paragraphs (2) and (3).
            (2) Terms of initial appointees.--As designated by the 
        President at the time of appointment, members first appointed 
        shall be appointed as follows:
                    (A) 1 shall be appointed for a term of 2 years.
                    (B) 2 shall be appointed for a term of 4 years.
                    (C) 2 shall be appointed for a term of 6 years.
            (3) Vacancies.--Any member appointed to fill a vacancy 
        occurring before the expiration of the term for which the 
        member's predecessor was appointed shall be appointed only for 
        the remainder of that term. A member may serve after the 
        expiration of that member's term until a successor has taken 
        office.
    (e) Quorum.--A majority of the members of the Commission shall 
constitute a quorum but a lesser number may hold hearings.
    (f) Chairperson; Vice Chairperson.--The Chairperson and Vice 
Chairperson of the Commission shall be designated by the President at 
the time of the appointment or from among the sitting members of the 
Commission at such time as the post becomes vacant. The Chairperson 
shall have executive authority within the Commission, including the 
authority to employ and direct the personnel of the Commission, other 
than personnel employed regularly and full time in the immediate 
offices of commissioners other than the chairperson.
    (g) Applicability of the Administrative Procedure Act.--The 
Commission shall be an agency of the United States for purposes of 
subchapter II of chapter 5 and chapter 7 of title 5, United States 
Code.

SEC. 104. STAFF OF COMMISSION; EXPERTS AND CONSULTANTS.

    (a) Staff.--The Commission is authorized to appoint and fix the 
compensation of such officers, attorneys, examiners, and other experts 
as may be necessary for carrying out its functions under this chapter, 
and the Commission may, subject to the civil service laws, appoint such 
other officers and employees as are necessary in the execution of its 
functions and fix their salaries without regard to chapter 51 and 
subchapter III of chapter 53 of title 5, United States Code.
    (b) Experts and Consultants.--Subject to rules prescribed by the 
Commission, the Commission may procure temporary and intermittent 
services under section 3109(b) of title 5, United States Code.

SEC. 105. OFFICES AND PLACE OF MEETING.

    The principal office of the Commission shall be in the city of 
Washington, District of Columbia, but it may meet and exercise its 
powers in any other place.

SEC. 106. POWERS OF COMMISSION.

    (a) In General.--The Commission shall have the power to carry out 
all duties and authority specifically granted by this Act, and such 
incidental powers as shall be necessary to carry out the powers so 
granted.
    (b) Rules and Regulations.--The Commission shall promulgate rules 
and regulations under chapter 5 of title 5, United States Code, 
necessary to carry out its responsibilities under this Act. The 
Commission is encouraged to follow the procedures of subchapter III of 
chapter 5 of title 5, United States Code (5 U.S.C. 561 et seq.), where 
appropriate.
    (c) Hearings and Proceedings.--The Commission may, for the purpose 
of carrying out this Act, hold hearings, sit and act at times and 
places, take testimony, and receive evidence as the Commission 
considers appropriate. The Commission may administer oaths or 
affirmations to witnesses appearing before it. Proceedings regarding 
certificates and penalties shall be conducted pursuant to section 554 
of chapter 5 of title 5, United States Code. The Commission is 
encouraged to follow the procedures of subchapter IV of title 5, United 
States Code (5 U.S.C. 571 et seq.), where appropriate.
    (d) Delegation of Functions by Commission.--(1) In addition to its 
existing authority, the Commission shall have the authority to 
delegate, by published order or rule, any of its functions to a 
division of the Commission, an individual Commissioner, an 
administrative law judge, or an employee or employee board, including 
functions with respect to hearing, determining, ordering, certifying, 
reporting, or otherwise acting as to any work, business, or matter. 
Nothing in this subsection shall be deemed to supersede section 556(b) 
of title 5 or to authorize the delegation of the function of rulemaking 
as defined in subchapter II of chapter 5 of title 5, United States 
Code, with reference to general rules as distinguished from rules of 
particular applicability or of the making of any rule pursuant to title 
V or VI of this Act.
    (2) With respect to the delegation of any of its functions, as 
provided in paragraph (1) of this subsection, the Commission shall 
retain a discretionary right to review the action of any such division 
of the Commission, individual Commissioner, administrative law judge, 
employee, or employee board, upon its own initiative or upon petition 
of a party to or an intervenor in such action, within such time and in 
such manner as the Commission by rule shall prescribe. The vote of 1 
member of the Commission shall be sufficient to bring any such action 
before the Commission for review. A person or party shall be entitled 
to review by the Commission if such person or party is adversely 
affected by action at a delegated level which imposes a penalty or 
removes or refuses to grant a certificate.
    (3) If the right to exercise such review is declined, or if no such 
review is sought within the time stated in the rules promulgated by the 
Commission, then the action of any such division of the Commission, 
individual Commissioner, administrative law judge, employee, or 
employee board, shall, for all purposes, including appeal or review 
thereof, be deemed the action of the Commission.
    (e) Subpoena Power.--
            (1) In general.--The Commission may issue subpoenas 
        requiring the attendance and testimony of witnesses and the 
        production of any evidence relating to any matter under 
        investigation by the Commission. The attendance of witnesses 
        and the production of evidence may be required from any place 
        within the United States at any designated place of hearing 
        within the United States. The Commission may not delegate this 
        authority.
            (2) Enforcement of a subpoena.--A subpoena issued by the 
        Commission shall be subject to enforcement pursuant to section 
        555 of title 5, United States Code.
            (3) Service of subpoenas.--The subpoenas of the Commission 
        shall be served in the manner provided for subpoenas issued by 
        a United States district court under the Federal Rules of Civil 
        Procedure for the United States district courts.
            (4) Service of process.--All process of any court to which 
        application is made under paragraph (2) may be served in the 
        judicial district in which the person required to be served 
        resides or may be found.
    (f) Judicial Review of Commission Actions.--
            (1) Rules and regulations promulgated by the Commission 
        shall be subject to judicial review in the Court of Appeals for 
        the District of Columbia Circuit.
            (2) Orders issued by the Commission shall be subject to 
        judicial review in the appropriate circuit court of appeals or 
        in the circuit court of appeals in which the petitioner resides 
        or has its principal place of business.
            (3) Judicial review of both regulations and orders, 
        including the scope of review, shall otherwise be governed by 
        chapter 7 of title 5 and by title 28, United States Code.
    (g) Seal.--The Commission shall have an official seal which shall 
be judicially noticed.

SEC. 107. EVALUATIONS OF INSOLVENT INSURERS AND REINSURERS.

    The Commission shall investigate each insolvent insurer or 
reinsurer which holds a Federal certificate of solvency to determine 
the causes of the insolvency. The Commission may also investigate the 
insolvencies of any other insurers if such are relevant to establishing 
standards for sound financial condition and solvency by the Commission 
or if they are relevant to the financial condition of the insurance 
industry in the United States. These investigations shall include a 
review of the insurer's or reinsurer's records, as well as interviews 
with persons having knowledge of the operations of the insurer or 
reinsurer. The Corporation shall issue a report on the causes of 
insolvencies at such times that it determines to be appropriate.

SEC. 108. REFERRAL TO ENFORCEMENT AUTHORITIES; DATA BASE ON VIOLATIONS.

    (a) Referrals.--The Commission shall refer to the Department of 
Justice or to the appropriate State enforcement authorities any 
information or matters which it determines warrant investigation for 
possible civil or criminal enforcement action.
    (b) Data Base.--The Commission shall establish, by regulation, 
procedures and standards for creating a data base for information 
regarding persons who have been convicted of a crime or 
administratively disciplined for insurance related activity, or who 
have been senior officers or directors of insolvent insurers or 
reinsurers. The Commission shall maintain and regularly update this 
data base. Information contained in this system shall be shared with 
appropriate State and Federal regulators and law enforcement officials. 
Each federally certified insurer and reinsurer shall, as a condition of 
continued certification, fully cooperate with the Commission's 
implementation of the data base. Each insurer regulated for financial 
condition by a State shall, as a condition of obtaining a State 
insurance license, similarly cooperate with the Commission.

SEC. 109. REPORTS.

    (a) Annual and Other Reports.--The Commission shall submit to the 
President and the Congress an annual report and such additional reports 
and recommendations as the Commission considers appropriate.
    (b) Budget Estimates and Requests.--Whenever the Commission submits 
any budget estimate or request to the President or the Office of 
Management and Budget, it shall concurrently transmit a copy of that 
estimate or request to Congress.
    (c) Legislative Matters.--Whenever the Commission submits any 
legislative recommendations, or testimony or comments on legislation to 
the President or the Office of Management and Budget, it shall 
concurrently transmit a copy thereof to the Congress. No officer or 
agency of the United States shall have any authority to require the 
Commission to submit its legislative recommendations, or testimony or 
comments on legislation to any officer or agency of the United States 
for approval, comments, or review prior to the submission of such 
recommendations, testimony, or comments to the Congress.

SEC. 110. FEDERAL INSURANCE REGULATION ADVISORY COMMITTEE.

    (a) Establishment.--There is established the Federal Insurance 
Regulation Advisory Committee (hereinafter referred to in this section 
as the ``Committee'').
    (b) Membership.--The Committee shall consist of 25 members 
appointed by the Commission. The Commission shall select those who can 
best represent the various segments of the insurance industry and the 
interests of the public and consumers so that the committee will 
provide a range of information and perspectives that will be helpful to 
the Commission in carrying out its responsibilities. Such members shall 
be appointed by the Commission as follows:
            (1) 5 members who are fairly representative of the various 
        types and sizes of certified insurers and who adequately 
        represent the significant segments of the marketplace;
            (2) 5 members who are fairly representative of the types 
        and sizes of certified reinsurers and who adequately represent 
        the significant segments of the marketplace;
            (3) 5 members who are fairly representative of the types 
        and sizes of insurance agents and brokers and who adequately 
        represent significant segments of the marketplace;
            (4) 5 members from among the State insurance regulators; 
        and
            (5) 5 members from among individuals who shall represent 
        the public interest.
    (c) Vacancies.--Any vacancy on the Committee shall be filled in the 
same manner in which the original appointment was made.
    (d) Pay and Expenses.--Members of the Committee shall serve without 
pay, but each member shall be reimbursed, in such manner as the 
Commission shall prescribe by regulation, for expenses incurred in 
connection with attendance of such members at meetings of the 
Committee.
    (e) Terms.--Members shall be appointed for terms of 3 years.
    (f) Authority of the Committee.--The Committee may select its 
Chairperson, Vice Chairperson, and Secretary, and adopt methods of 
procedure, and shall have power--
            (1) to confer with the Commission on general and special 
        business conditions and regulatory and other matters affecting 
        insurance and reinsurance, and
            (2) to request information, and to make recommendations, 
        with respect to matters within the jurisdiction of the 
        Commission.
    (g) Meetings.--The Committee shall meet 2 times each year, and more 
frequently if requested by the Commission.
    (h) Reports.--The Committee shall submit an annual written report 
to the Commission and to the Committee on Energy and Commerce of the 
House and the Committee on     of the Senate. Such report shall 
describe the activities of the Committee for such annual period and 
contain such recommendations as the Committee considers appropriate. 
The Committee may submit such other reports as it determines necessary.
    (i) Provision of Staff and Other Resources.--The Commission shall 
provide the Committee with the use of such resources, including staff, 
as the Committee reasonably shall require to carry out its duties, 
including the preparation and submission of reports to Congress, under 
this section.
    (j) Federal Advisory Committee Act.--The Federal Advisory Committee 
Act shall apply to the Committee.

SEC. 111. FEES.

    (a) General Authority.--(1) The Commission, in accordance with this 
section, shall assess and collect an annual fee to be paid by 
applicants for certificates issued by the Commission and by holders of 
such certificates to recover the costs of such certification activities 
of the Commission. It shall also assess and collect fees to cover the 
costs of any specific other services and activities it provides to such 
applicants and to other persons.
    (2) The total fees charged to a federally certified insurer or 
reinsurer or applicant for a Federal solvency certificate shall not 
exceed, on an annual basis--
            (A) for insurers, \1/4\ of one percent of the sum of the 
        net direct written premiums; or
            (B) for reinsurers, \1/8\ of one percent of net reinsurance 
        premium.
    (3) Prior to establishing the fees described in paragraph (1), the 
Commission shall obtain the views of federally certified insurers and 
reinsurers concerning the proposed formula or method for calculating 
fees, the proposed amount, and the proposed timing or schedule for 
assessment.
    (4) The commission shall ensure that the schedule for fees allows 
small, financially sound insurers and reinsurers to apply for and 
maintain Federal certificates of solvency.
    (b) Fees Contingent on Appropriations.--The fees described in 
subsection (a) shall be collected only if, and only in the total 
amounts provided in appropriation Acts.
    (c) Establishment and Adjustment of Fees.--The fees assessed under 
subsection (a) shall be established, in accordance with subsection 
(a)(2), at amounts that will result in collection, during each fiscal 
year following the first 2 years of operation of the Commission, of an 
amount equal to the amount appropriated for such fiscal year for the 
performance of the activities described in subsection (a).
    (d) Notice to Congress.--The Commission shall annually transmit to 
Congress a notification of the fees assessed pursuant to subsection (a) 
not later than 90 days before the effective date of such fees. This 
notification shall include an explanation of the estimates and 
calculation upon which the fees are based and the management plan of 
the Commission which shows that the fees will produce sufficient 
revenue to support the cost of the activities for which they are 
assessed.
    (e) Penalties for Late Payment.--
            (1) In general.--The Commission shall assess as a penalty 
        for late payment of fees required by subsection (a) 25 percent 
        of the amount of the charge which was not paid in a timely 
        manner.
            (2) Dismissal of applications or filings.--The Commission 
        may dismiss any application or other filing for failure to pay 
        in a timely manner any fee or penalty assessed by the 
        Commission.
            (3) Revocations.--The Commission may revoke any certificate 
        held by any insurer or reinsurer that has failed to make 
        payment of a fee or penalty assessed pursuant to this section. 
        Such revocation action may be taken by the Commission after 
        notice of the Commission's intent to take such action is sent 
        to the holder of the certificate by registered mail, return 
        receipt requested, at the insurer's or reinsurer's last known 
        address. The notice will provide the entity at least 30 days to 
        either pay the fee or penalty or show cause why the fee or 
        penalty does not apply or should otherwise be waived or payment 
        deferred. The opportunity for a hearing on the record is not 
        required under this paragraph unless the response presents a 
        substantial and material question of fact. Unless the insurer 
        or reinsurer substantially prevails in the hearing, the 
        Commission may assess a fee for the costs of such hearing. Any 
        Commission order adopted pursuant to this subsection shall 
        determine the amount due, if any, and provide the insurer or 
        reinsurer with at least 30 days to pay that amount or have its 
        authorization revoked. No order of revocation under this 
        subsection shall become final until the insurer or reinsurer 
        has exhausted its right to judicial review of such order under 
        chapter 7 of title 5, United States Code.
    (f) Collection of Delinquent Fees and Penalties.--
            (1) In general.--The Commission may recover the amount of 
        any unpaid fee or penalty lawfully payable to the Commission.
            (2) Statute of limitations.--No action or proceeding shall 
        be brought for the recovery of any fee or penalty due to the 
        Commission, or for the recovery of any amount paid to the 
        Commission, in excess of the amount due to it, unless such 
        action or proceeding shall have been brought within 5 years 
        after the right accrued for which the claim is made.
    (g) Waiver and Deferment.--The Commission may waive or defer 
payment of a fee in any specific instance for good cause shown, where 
such action would promote the public interest.
    (h) Deposit of Collections.--Moneys received from fees established 
under this section shall be deposited as an offsetting collection in, 
and credited to, the account providing appropriations for the 
Commission, and shall remain available until expended. No fees may be 
so deposited for any fiscal year unless funds are authorized to be 
appropriated for such fiscal year pursuant to this Act.
    (i) Regulations.--
            (1) In general.--The Commission shall prescribe appropriate 
        regulations to carry out this section.
            (2) Time for payment.--Such regulations shall require the 
        payment of fees at the beginning of the fiscal year for which 
        such fees are in effect or at such other time during the fiscal 
        year as the Commission may determine in accordance with the 
        efficient operation of the Commission. Such regulations shall 
        permit payment by installments in the case of fees in large 
        amounts.
            (3) Multiple-year payments.--If the Commission determines 
        that, because of the small amount of fee involved relative to 
        the cost of annual collection, it would be inefficient to 
        collect any fee each year, such regulations may also require 
        the payment of the fee in advance for a number of years.
    (j) Limitation on Judicial Review.--The fees established by the 
Commission under this section shall not be subject to judicial review.

SEC. 112. AUTHORIZATION OF APPROPRIATIONS.

    (a) In General.--There is authorized to be appropriated for the 
operations and expenses of the Commission for each of fiscal years 1994 
through 1999 the sum of $300,000,000 to carry out this Act.
    (b) Rehabilitation and Liquidation Expenses.--In addition to the 
sums authorized to be appropriated by subsection (a), there are 
authorized to be appropriated such sums as may be necessary to carry 
out the Commission's responsibilities as receiver in rehabilitations 
and liquidations under this Act. These sums shall be repaid to the 
Commission from the estate of the insurer or reinsurer as provided in 
this Act.

SEC. 113. BUDGET ACT COMPLIANCE.

    Any spending authority (as defined in subparagraphs (A) and (C) of 
section 401(c)(2) of the Congressional Budget Act of 1974 (2 U.S.C. 
651(c)(2)(A) and (C))) authorized by this Act shall be effective only 
to such extent and in such amounts as are provided in appropriation 
Acts.

TITLE II--NATIONAL STANDARDS FOR THE FINANCIAL CONDITION OF INSURERS IN 
 INTERSTATE COMMERCE AND FEDERAL CERTIFICATES OF SOLVENCY FOR INSURERS

SEC. 201. NATIONAL STANDARDS FOR THE FINANCIAL SOUNDNESS AND SOLVENCY 
              OF INSURERS IN INTERSTATE COMMERCE.

    (a) Authority.--The Commission shall establish national standards 
for the financial soundness and solvency of all insurers in interstate 
commerce in accordance with the criteria set forth in section 203.
    (b) Enforcement.--
            (1) In general.--The Commission shall regulate the 
        financial condition of insurers in interstate commerce that 
        obtain a Federal certificate of solvency under the standards 
        established under subsection (a). No State insurance regulatory 
        agency may regulate the financial condition of such an insurer.
            (2) State enforcement.--The State regulatory agency shall 
        regulate the financial condition of each insurer in interstate 
        commerce that holds an insurance license in the State of such 
        agency if the insurer does not obtain a Federal certificate of 
        solvency. Such agency shall apply the standards established 
        under subsection (a) in regulating such insurers and may not 
        impose additional or different standards on such insurers. In 
        enforcing such standards, the State regulatory agency shall 
        follow the interpretative and enforcement guidelines 
        established by the Commission for such standards.

SEC. 202. AUTHORITY TO ISSUE FEDERAL CERTIFICATES OF SOLVENCY.

    The Commission is authorized to issue a Federal certificate of 
solvency to an insurer pursuant to the financial standards and 
procedures adopted by the Commission if the Commission determines that 
the insurer meets such standards. This authority is intended to 
establish strong and effective financial standards for federally 
certified insurers; to ensure that such insurers are closely monitored 
by the Commission for compliance with these standards; and to enable 
the Commission to identify financial problems at the earliest possible 
stage and intervene to prevent harm to policyholders and the public.

SEC. 203. CRITERIA FOR THE NATIONAL STANDARDS FOR FINANCIAL SOUNDNESS 
              AND SOLVENCY.

    (a) Criteria for National Standards for Domestic Insurers.--
            (1) In general.--The Commission shall establish, by 
        regulation, the criteria for the national standards for 
        financial soundness and solvency which are to be established 
        under section 201 and which are to be met by domestic insurers, 
        including the United States branches of foreign insurers. Such 
        criteria shall include--
                    (A) net worth requirements and other financial 
                standards based on financial analysis appropriate to 
                maintaining reasonable net worth for the various types 
                of insurers and the different types of risks;
                    (B) appropriate criteria for accounting and 
                valuation of investments, reserves, and other assets 
                and liabilities relating to net worth;
                    (C) limitations and controls on the use of 
                reinsurance, and standards for ceding, reporting on, 
                and credit for such reinsurance;
                    (D) requirements governing the activities of and 
                transactions with managing general agents and 
                reinsurance intermediaries to the extent that such 
                transactions affect the financial conditions of 
                insurers;
                    (E) limitations on the amount of risk that may be 
                retained on a single risk where such limits are 
                appropriate;
                    (F) accounting standards and actuarial standards 
                for the valuation of reserves for losses and expenses 
                that will promote the strong and appropriate financial 
                monitoring of insurers;
                    (G) bonding, trust fund, and liquidity requirements 
                appropriate to the various kinds of insurance 
                operations;
                    (H) requirements for audits by independent 
                accountants of the annual financial statements 
                reporting the financial position and the financial 
                activities of insurers;
                    (I) requirements for annual opinions by appointed 
                actuaries on the reasonableness of reserves, of reports 
                of findings that support such opinions, and of any 
                internal management reports the Commission determines 
                necessary for promoting financial soundness and 
                solvency;
                    (J) regulation of financial transactions within 
                holding company systems;
                    (K) procedures for initial and special examinations 
                of insurers, and for the annual financial review of 
                such insurers;
                    (L) procedures for ongoing monitoring and 
                enforcement of the compliance of insurers with 
                Commission standards;
                    (M) criteria as to the minimum qualifications of 
                the management of insurers;
                    (N) criteria governing the fiduciary duties of 
                officers and directors of insurers;
                    (O) criteria for determining when insurers are 
                financially impaired, in a financially hazardous 
                condition, or insolvent;
                    (P) disclosure requirements, in addition to those 
                enumerated above, for information to be provided to the 
                Commission or the State insurance regulator and the 
                public; and
                    (Q) such other criteria as the Commission 
                determines to be necessary to evaluate and maintain the 
                sound financial condition of insurers.
            (2) Guidelines for establishing net worth requirements for 
        domestic insurers under paragraph (1).--
                    (A) In general.--The Commission, in establishing 
                net worth requirements for domestic insurers under 
                paragraph (1), shall--
                            (i) establish requirements that recognize 
                        differences in reserve, pricing, credit, asset, 
                        and business risk among categories of insurers 
                        in different lines of business;
                            (ii) address, to the extent appropriate, 
                        factors that may substantially modify an 
                        insurer's capital requirements, including size, 
                        growth rate, and age of the insurer, degree of 
                        asset and liability mismatching, degree of 
                        concentration of assets, overall level of risk 
                        retention, and limitations on various 
                        categories of investments; and
                            (iii) consider a range of methodologies, 
                        including one that incorporates risk-based 
                        capital schemes, fixed dollar minimums, and 
                        actuarial assessments.
                    (B) Small insurers.--To ensure that financially 
                sound small insurers may meet the national standards 
                established under paragraph (1), the Commission shall 
                not establish net worth requirements that would 
                automatically exclude any insurer the net worth of 
                which equals at least $500,000.
                    (C) Adjustments.--The Commission shall adjust, for 
                inflation, the dollar values established under 
                subparagraphs (A) and (B). This adjustment shall be 
                made every fifth year unless for good cause the 
                Commission determines that it should be adjusted more 
                frequently.
    (b) Criteria for National Standards for Foreign Insurers.--The 
Commission shall establish, by regulation, criteria for the national 
standards for financial soundness and solvency which are to be 
established under section 201 and which are to be met by foreign 
insurers. Such criteria shall include the following:
            (1) Authorization by domiciliary jurisdiction.--The insurer 
        must be authorized by the laws of its domiciliary jurisdiction 
        to write insurance.
            (2) Integrity and management expenses.--The criteria shall 
        require information that demonstrates that the insurer has 
        sufficient financial integrity and management experience to 
        safeguard the public interest.
            (3) Trust fund.--The insurer shall maintain a trust fund 
        meeting the requirements of paragraph (2) for the payment of 
        the valid claims of, and other contractual obligations owed to, 
        its United States policyholders or their beneficiaries, 
        assigns, and successors in interest under such policies which 
        trust fund shall be in an amount not less than the reserves for 
        claims and unearned premiums and other actuarial reserves and 
        liabilities of the insurer's United States policyholders plus 
        an amount equal to the net worth required for an insurer under 
        paragraph (1)(A) of subsection (a). The trust fund required by 
        this paragraph shall meet the following requirements:
                    (A) The trust fund shall be exclusively for the 
                purpose of securing the payment of valid claims of, and 
                other contractual obligations owed to, the insurer's 
                United States policyholders and the claimants and their 
                assigns, beneficiaries, and successors in interest 
                under such policies.
                    (B) Assets may be held in trust by a qualified 
                financial institution the principal place of business 
                of which is outside the United States if the insurer 
                demonstrates that a beneficiary of the trust can obtain 
                immediate payment from a United States branch, 
                subsidiary, or representative office of the 
                institution. The Commission shall establish, by 
                regulation, appropriate criteria for a qualified 
                financial institution to act as a trustee. Foreign 
                banks with a United States presence may apply for 
                acceptance.
                    (C) The trust fund shall be established in a 
                qualified financial institution that satisfies criteria 
                established by the Commission. The Commission shall 
                establish acceptable criteria for assets held in trust, 
                which shall include cash; securities; bonds; commercial 
                paper; clean, irrevocable, unconditional, and 
                automatically renewable letters of credit issued by a 
                qualified financial institution; or any other 
                appropriate assets, whether United States or non-United 
                States which provide the stability necessary for 
                adequate protection of the trust beneficiaries.
                    (D) The trust instrument shall provide for the 
                circumstances under which claims and other contractual 
                obligations shall be paid as provided under the 
                policies of the insurer. The insurer may freely 
                substitute and withdraw assets in the trust so long as 
                the value of the assets maintained in the trust equals 
                or exceeds the amount set forth in paragraph (1).
                    (E) No later than the date set by the Commission by 
                regulation, the trustees of the trust shall report 
                annually to the Commission or the State insurance 
                regulator in writing, setting forth the balance of the 
                trust, listing the trust's investments at the preceding 
                year's end, and certifying the date of termination of 
                the trust as to new business, if so planned, or 
                certifying that the trust shall not expire prior to the 
                next following December 31. The trust shall be subject 
                to examination by the Commission or the State insurance 
                regulator and shall remain in effect as long as the 
                insurer has outstanding obligations under the 
                agreements to which the trust pertains.
                    (F) The trust instrument shall provide that, in the 
                event the insurer is placed in supervision, 
                rehabilitation, or liquidation, or its equivalent by 
                its State or country of domicile, or if the Commission 
                or State insurance regulator determines, pursuant to 
                regulations adopted by the Commission, that the 
                condition of the insurer is such that further 
                transaction of business will be hazardous to United 
                States policyholders, creditors, or to the public, the 
                Commission or State insurance regulator shall be 
                authorized to take control of the trust in the manner 
                described in this Act.
            (4) Other requirements.--Any foreign insurer shall also--
                    (A) have been doing business in its country or 
                jurisdiction of domicile for at least 3 years, or be an 
                affiliate of an insurer which has been doing business 
                in a state, country, or jurisdiction of domicile for at 
                least 3 years, unless the Commission or State insurance 
                regulator, for good cause shown, waives this 3-year 
                operating requirement;
                    (B) file an annual financial statement with its 
                domiciliary regulator and have established satisfactory 
                evidence of good repute and financial integrity;
                    (C) file with the Commission or State insurance 
                regulator--
                            (i) a list identifying its officers and 
                        directors (or similar principals) along with a 
                        biographical sketch for each, including a 
                        description of their role in any financial 
                        entity that was the subject of a bankruptcy or 
                        receivership proceeding during their employment 
                        or within one year of the termination of such 
                        employment and a description of any criminal 
                        proceeding involving financial misconduct to 
                        which they have been subject;
                            (ii) a certification that such persons have 
                        not been convicted of a felony involving 
                        financial misconduct; and
                            (iii) an annual update of the information 
                        described in clauses (i) and (ii);
                    (D) file with the Commission or State insurance 
                regulator, on an annual basis, a copy of the financial 
                statement filed with its domiciliary regulator (which 
                the Commission or State insurance regulator may require 
                to be translated from its original language) and a 
                report showing the volume of written premiums with 
                regard to United States policyholders in the past year;
                    (E) agree to allow the Commission or State 
                insurance regulator to examine its books and records 
                and to waive any protection it has under any secrecy 
                laws of its domiciliary jurisdiction, except that such 
                examinations will only take place upon the Commission's 
                or State insurance regulator's showing of good cause 
                for concern about the financial condition of the 
                subject insurer;
                    (F) appoint an agent in the United States upon whom 
                may be served any lawful process in any action, suit, 
                or proceeding instituted by or on behalf of any U.S. 
                person, and agree that, in the event such process may 
                not be served upon the appointed agent, process may be 
                served upon the Commission or State insurance 
                regulator;
                    (G) submit to the jurisdiction of any United States 
                court or State court of competent jurisdiction for the 
                resolution of any dispute arising out of an insurance 
                policy or to respond to any allegations or charges made 
                against it by any United States Government official or 
                agency or State insurance regulator, except that such 
                requirement does not override any contractual agreement 
                of the parties to a contract to resolve disputes 
                between them pursuant to other procedures;
                    (H) provide the Commission, on an annual basis, 
                with--
                            (i) a statement from the appointed actuary 
                        that the reserves and liabilities referred to 
                        in paragraph (1)(B) of this subsection are 
                        reasonable to meet United States contractual 
                        obligations and related expenses and that, 
                        where appropriate, the anticipated cash flows 
                        from the trust fund are reasonable to meet 
                        obligations as they come due, and
                            (ii) an accompanying statement from the 
                        independent accountant that the trust contains 
                        the assets referred to in such actuarial 
                        statement and such other assets as are required 
                        to meet the Commission's standards.
                    (I) comply with the credit for reinsurance 
                requirements of section 305 and the single risk limits 
                of subsection (a)(1)(E); and
                    (J) respond to any disclosure requests from the 
                Commission or State insurance regulator, in addition to 
                those required in subparagraphs (C), (D), and (H).
    (c) Operational and Investment Requirements.--In establishing the 
criteria for national standards pursuant to subsections (a) and (b), 
the Commission shall differentiate, as appropriate, to accommodate the 
different operational and investment requirements of property and 
casualty insurers and life and health insurers.
    (d) Procedures for Obtaining a Federal Certificate of Solvency.--
The Commission shall establish, by regulation, procedures by which an 
insurer in interstate commerce that has met the standards adopted 
pursuant to subsection (a) or (b) may obtain a Federal certificate of 
solvency for compliance with these standards. The Commission shall 
grant such a certificate only if it has determined that an insurer has 
met the national standards for financial soundness and solvency adopted 
pursuant to subsection (a) or (b).
    (e) Additional Requirements for Foreign Insurers.--A foreign 
insurer may transact the business of insurance in the United States 
(subject to any applicable Federal or State law, including this Act) 
only if such insurer has a Federal solvency certificate or is 
authorized to write insurance pursuant to applicable State law. Any 
foreign insurer that does not comply with the requirement of this 
subsection shall be subject to penalties under this Act in addition to 
any other penalties that may be imposed under any State or Federal law. 
The Commission or the State insurance regulator in any State in which 
the transaction allegedly occurred may bring an action for the 
imposition of such penalties.
    (f) Issuance of Federal Certificate of Solvency.--Upon submission 
of an application in the form prescribed by the Commission, the 
Commission shall examine the information submitted and may conduct such 
further examination and investigation, as it finds necessary, to 
determine whether the applicant satisfies the national standards for 
financial soundness and solvency established under subsection (a) or 
(b). Upon conclusion of its examination and investigation, the 
Commission shall publish its findings and determination. Upon a 
determination that the applicant for a Federal certificate of solvency 
has satisfied such requirements, the Commission shall issue such 
certificate.
    (g) Form and Content of Submissions by Insurers and Reinsurers.--
The Commission shall establish, by regulation, the form and contents of 
the submissions by insurers and reinsurers pursuant to this Act, 
including--
            (1) the initial and annual reports that shall be submitted 
        by each insurer to the Commission or State insurance regulator, 
        which shall provide a complete report on the financial 
        condition of the insurer;
            (2) the quarterly filing of the update of significant 
        financial factors and ratios that will provide an early 
        indication of any significant change in the financial condition 
        of such insurer; and
            (3) any other submission the Commission determines to be 
        necessary for the appropriate monitoring of the financial 
        condition of insurers and reinsurers.

SEC. 204. SURPLUS LINES APPROVAL FOR FEDERALLY CERTIFIED INSURERS.-

    (a) Federal Surplus Lines Approval.--
            ((1) The Commission may approve any domestic or foreign 
        insurer holding a Federal solvency certificate to write surplus 
        lines insurance if such domestic or foreign insurer meets the 
        additional requirements of this section. The Commission shall 
        establish, by regulation, the standards for issuing such 
        approvals.
            (2) Among the additional standards to be established by the 
        Commission for domestic insurers pursuant to paragraph (1) 
        shall be a requirement that the insurer have a net worth of not 
        less than $15,000,000. The net worth requirement set forth in 
        this paragraph shall be subject to periodic adjustment for 
        inflation pursuant to section 202(c)(2).
            (3) A foreign insurer may obtain approval to write surplus 
        lines insurance in the same manner as a domestic insurer or it 
        may obtain this approval if it meets all of the requirements 
        for a certificate of solvency under section 202, except that 
        the trust fund required of such insurer under section 202 shall 
        be satisfied if it consists of no less than $15,000,000. The 
        Commission may, in its discretion, require an amount higher 
        than $15,000,000 if it determines a higher amount is necessary 
        to adequately protect United States policy holders. In 
        determining what amount is adequate, the Commission shall 
        consider such factors as the types and amounts of coverage 
        which the insurer writes in the United States and the assets 
        which comprise the trust and their valuation. The trust fund 
        established pursuant to this paragraph shall comply with the 
        establishment, management, and examination requirements of 
        section 202(d)(2).
            (4) An insurance exchange established under the laws of a 
        State may obtain approval to write surplus lines insurance if 
        it is federally certified. Such exchange must maintain a net 
        worth of not less than $50,000,000 in the aggregate. In 
        addition, each individual syndicate of such exchange seeking to 
        accept placement of surplus lines insurance must meet either of 
        the following requirements:
                    (A) For an insurance exchange which maintains funds 
                in the amount of at least $12,000,000 for the 
                protection of all exchange policyholders, the syndicate 
                shall maintain a minimum net worth of not less than 
                $3,000,000.
                    (B) For an insurance exchange that does not 
                maintain funds in the amount of at least $12,000,000 
                for the protection of all exchange policyholders, the 
                syndicate shall meet the minimum net worth requirements 
                set by the Commission for qualification as a surplus 
                lines insurer.
            (5) Upon submission of an application for approval in the 
        form prescribed by the Commission, the Commission shall examine 
        the information submitted and shall conduct such further 
        examinations and investigations, as it finds necessary, to 
        determine whether the applicant satisfies the requirements of 
        this section. Upon the conclusion of its examination and 
        investigation, the Commission shall publish its findings and 
        determination and, if the applicant has met such requirements, 
        the Commission shall issue the surplus lines approval.
            (6) The Commission may revoke or suspend its approval of a 
        surplus lines insurer in accordance with section 206. The 
        Commission may, in its discretion, suspend or revoke only the 
        insurer's approval as a surplus lines insurer or both such 
        approval and the insurer's certificate of solvency.
            (7) A nonadmitted insurer holding a surplus lines approval 
        issued by the Commission shall be an eligible surplus lines 
        insurer under the laws of all States but shall remain subject 
        to applicable State law on a nondiscriminatory basis as to the 
        types of insurance that may be provided in a surplus line's 
        market and as to the procedures to be followed in selling in 
        this market.
    (b) Standards for Surplus Lines Licensees.--
            (1) Any person licensed as a surplus lines licensee in the 
        State where the insured or risk is located may procure coverage 
        for the insured or risk from any nonadmitted insurer holding a 
        Federal surplus lines approval, notwithstanding any contrary 
        provisions in State laws.
            (2) Any surplus lines licensee making a placement with a 
        federally certified insurer approved under this section shall 
        comply with all requirements imposed upon such licensees under 
        State law to the same extent that such laws apply to the 
        transaction of surplus lines insurance placed with insurers 
        eligible or approved under State law except to the extent that 
        such requirements are expressly preempted by this Act.
    (c) Miscellaneous Provisions.--
            (1) Federally certified insurers approved pursuant to this 
        section to write insurance shall not participate in any 
        residual market mechanism or any market assistance plan on the 
        basis of insurance provided under a Federal surplus lines 
        approval.
            (2) Coverages written by insurers approved pursuant to this 
        section shall not be subject to restrictions or requirements 
        imposed upon policy forms or rates under State law.
            (3) No insurance consumer in the United States shall be 
        required to seek coverage in any residual market mechanism as a 
        precondition to seeking coverage from an insurer approved 
        pursuant to this section.
            (4) This section does not limit or in any way restrict the 
        ability of insurance consumers in the United States to access 
        surplus lines insurers pursuant to alternative, established 
        means recognized by the United States Constitution and the law 
        of the several States. Without limiting the generality of the 
        foregoing, this section should not be construed as limiting the 
        ability of insurance consumers in the United States to procure 
        insurance from the surplus lines insurer of the consumer's 
        choice pursuant to any--
                    (A) industrial insured provision;
                    (B) aviation insurance exemption;
                    (C) railroad insurance exemption;
                    (D) wet marine and transportation insurance 
                exemption;
                    (E) direct placement provision; or
                    (F) any other similar exemption recognized by the 
                law of the State in which the risk is located.

SEC. 205. MEMBERSHIP IN NATIONAL INSURANCE PROTECTION CORPORATION.

    Each federally certified insurer shall be a member of the National 
Insurance Protection Corporation which is established by section 501. 
These insurers shall be subject to assessments by the Corporation. 
Federally certified insurers that are approved surplus lines insurers 
as provided in section 204 shall not participate in the National 
Insurance Protection Corporation for the purpose of business written as 
a nonadmitted insurer pursuant to the surplus lines law of any State.

SEC. 206. SUSPENSION AND REVOCATION OF FEDERAL CERTIFICATE OF SOLVENCY 
              OR STATE INSURANCE LICENSE.

    (a) Suspension or Revocation of Certificate of Solvency by the 
Commission.--
            (1) Certificate of solvency.--The Commission shall suspend 
        or revoke a Federal certificate of solvency at any time the 
        Commission determines the standards for holding a certificate 
        are no longer being satisfied. The Commission shall provide the 
        opportunity for a hearing on the record before making a 
        determination to suspend or revoke such certification.
            (2) Effect of Suspension or Revocation.--If the Commission 
        suspends or revokes a Federal certificate of solvency, an 
        insurer will no longer be a member of NIPC and will be 
        prohibited from selling insurance in the United States or its 
        territories.
            (3) Notice of Suspension or Revocation.--The Commission 
        shall notify the State or country of domicile of a federally 
        certified insurer of the suspension or revocation of that 
        insurer's certificate of solvency. This notification shall be 
        made at the earliest possible date.
    (b) Suspension or Revocation of State Insurance License by State 
Insurance Regulator.--The State insurance regulator shall suspend or 
revoke the State insurance license of any insurer subject to regulation 
for financial condition and solvency by the regulator's State if such 
regulator determines the national standards established by the 
Commission under section 201 are no longer being satisfied by the 
insurer. The State insurance regulator shall follow the procedures of 
applicable State law in suspending or revoking such license.

SEC. 207. RELATIONSHIP OF FEDERALLY CERTIFIED INSURERS TO STATE 
              INSURANCE REGULATION.

    (a) Permissible State Regulation.--Except as otherwise provided in 
this Act, every federally certified insurer shall be subject to State 
laws, rules, regulations, orders, or actions which regulate insurers, 
including the following:
            (1) Regulation of rates and policy forms.
            (2) Regulation of unfair insurance trade practices and 
        unfair claims settlement practices.
            (3) Participation in an assigned risk plan, joint 
        underwriting association, or any similar mechanism designed to 
        make insurance available to those unable to obtain it in the 
        voluntary market.
            (4) Filing of copies of financial statements with State 
        insurance regulators. Each federally certified insurer shall 
        file with each State in which it transacts the business of 
        insurance a copy of the annual and quarterly statements its 
        files with the Commission. Such filings shall only be for 
        information purposes and shall not be used by any State for the 
        purpose of financial or solvency regulation.
            (5) Liability for State taxes. No tax shall be applied to 
        federally certified insurers on a basis that discriminates 
        between such insurers and insurers regulated solely by a State. 
        Assessments imposed on federally certified insurers pursuant to 
        title V shall be credited against any State taxes levied 
        against such insurers, or shall be subject to recoupment 
        through rate filings, to the same extent that assessments by 
        State guaranty funds on insurers regulated solely by a State 
        are credited against State taxes or recouped in rate filings.
            (6) Regulation of insurance company incorporation, 
        organization, corporate governance, voting rights, and related 
        matters by the insurer's State of domicile, including 
        regulation pursuant to State corporation laws of general 
        applicability, except that such regulation shall not include 
        regulation of financial condition or solvency.
            (7) Registration with and designation of the State 
        insurance regulator as its agent solely for or the purpose of 
        receiving service of legal documents or process.
            (8) Requirements that insurers that it licenses shall 
        obtain a Federal certificate of solvency.
            (9) Regulation of insurance producers, as that term is 
        defined by the National Association of Registered Agents and 
        Brokers, except as provided by title VI.
    (b) Preemption of State Laws.--The following shall apply with 
respect to State laws, rules, regulations, orders, or actions 
purporting to regulate federally certified insurers:
            (1) No State shall apply its laws, rules, regulations, 
        orders, or actions to a federally certified insurer or an 
        applicant for a Federal certificate, or an affiliate of either, 
        on any basis different from that applied to insurers regulated 
        solely at the State level.
            (2) No State shall apply any law, rule, regulation, order, 
        or action to any insurer or insurance producer or any other 
        intermediary procuring insurance from or placing insurance with 
        any federally certified insurer, any applicant for a Federal 
        certificate, or any affiliate of either, on a basis different 
        from that applied to insurers, insurance producers, or 
        intermediaries procuring insurance from or placing insurance 
        with insurers that are regulated solely at the State level.
            (3) Federally certified insurers shall not be subject to 
        any State regulation which pertains to solvency or financial 
        condition, including such regulation exercised through the 
        power to issue, suspend, or revoke a license.
            (4) Federally certified insurers shall remain subject to 
        State guaranty fund laws and assessments to the extent provided 
        by section 518(b).
            (5) No State shall prevent or impede any federally 
        certified insurer from withdrawing from any line or subline of 
        insurance, or from any market or territory, or from the entire 
        State by threatening forfeiture of licenses, certificates of 
        authority, or other authorizations to do business; limiting the 
        circumstances under which withdrawal is permitted; placing 
        conditions on withdrawal; or otherwise; except that where a 
        State law, rule, regulation, order, or action is preempted 
        because it places conditions on withdrawal intended to prevent 
        undue disruption of the applicable insurance market, the 
        Commission shall determine before the withdrawal occurs whether 
        withdrawal actually would cause undue disruption and, if so, 
        may impose reasonable conditions on withdrawal, such as a 
        transition period for the winding down of an insurer's 
        business, so as to avoid such undue disruption while permitting 
        withdrawal within a reasonable time frame.
            (6) No State shall regulate any federally certified insurer 
        in a manner which would place that insurer's business in such 
        State in the applicable line or subline of insurance in an 
        unsafe or unsound financial condition or require that insurer 
        to engage in a practice relating to the applicable line or 
        subline of insurance that would be financially unsafe or 
        unsound.
            (7) A federally certified insurer applying for a State 
        license shall not be required to demonstrate that it previously 
        has been licensed or has done business for any minimum period 
        of time.
    (c) Preemption Authority of the Commission.--
            (1) The Commission shall have authority, by regulation or 
        order, to specify the State laws, rules, regulations, orders, 
        and actions that are preempted by this Act. Any federally 
        certified insurer may petition the Commission for the issuance 
        of such a regulation or order. The Commission shall also have 
        the authority to stay the enforcement of any State law, rule, 
        regulation, order, or action until the Commission can determine 
        whether there was a preemption under this Act. Judicial review 
        of any regulation, order, or enforcement under this paragraph 
        shall be in the Court of Appeals for the District of Columbia 
        Circuit.
            (2) When a State applies or threatens to apply any law, 
        rule, regulation, or order to a federally certified insurer, an 
        applicant for a Federal certificate, or any affiliate of either 
        on any basis different than that applied to insurers that are 
        not so regulated, or takes any action contrary to paragraphs 
        (1) and (2) of subsection (b), the Commission may stay the 
        application of that law, rule, regulation, order, or action if 
        the Commission determines that a federally certified insurer is 
        thereby subject to discrimination by such State. Any federally 
        certified insurer affected by the application of such rule, 
        regulation, order, or action may petition the Commission for a 
        stay or statement of preemption therefrom. Judicial review of 
        any Commission determination or stay under this paragraph shall 
        be in the Court of Appeals for the District of Columbia 
        Circuit.
    (d) Highly Capitalized Commercial Insurers.--
            (1) Notwithstanding the authority of States to require 
        federally certified insurers to comply with those laws and 
        regulations specified in subsection (a), a federally certified 
        insurer that is designated as highly capitalized by the 
        Commission may provide commercial insurance coverage to a large 
        insurance buyer, and in such circumstance, shall be exempt as 
        to that coverage from any State law or regulation specified in 
        paragraphs (1) and (2) of subsection (a).
            (2) The Commission shall be responsible for the 
        establishment, by regulation, of the standards applicable to 
        highly capitalized insurers in the issuance of an insurance 
        policy to a large insurance buyer and the settlement of any 
        claims related thereto.
            (3) The Commission shall be the only Federal Government 
        agency with jurisdiction over complaints related to the conduct 
        of highly capitalized insurers as to the issuance of an 
        insurance policy to a large insurance buyer and the settlement 
        of any claims related hereto. Each such policy must state, in a 
        format approved by the Commission, that complaints regarding 
        the insurer are to be directed to the Commission.

         TITLE III--FEDERAL CERTIFICATES TO PROVIDE REINSURANCE

SEC. 301. FEDERAL INSURANCE SOLVENCY COMMISSION AUTHORITY TO CERTIFY 
              PROVIDERS OF REINSURANCE.

    (a) In General.--The Commission shall have the authority to 
establish, by regulation, the standards and procedures for granting 
certificates for professional reinsurers under section 302 and 
certificates to provide reinsurance for other reinsurers and insurers 
under section 303.
    (b) Commission Determination.--Upon submission of an application, 
the Commission shall examine the information submitted and conduct such 
further examination and investigation, as it finds necessary, to 
determine whether the applicant satisfies the requirements for a 
professional reinsurer certificate under section 302 or a certificate 
to provide reinsurance under section 303. Upon conclusion of its 
examination and investigation, the Commission shall publish its 
findings and determination. Upon a determination that the applicant has 
satisfied the applicable requirements of section 302 or 303, the 
Commission shall issue the appropriate certificate.
    (c) Annual Reports.--The Commission shall require each holder of a 
certificate to submit an annual report of its financial condition and 
an annual report on the condition of any trust fund regulated under 
section 303(c).
    (d) Qualified Financial Institution.--The Commission shall 
establish, by regulation, appropriate criteria for becoming a qualified 
financial institution for purposes of the establishment of a trust fund 
under section 303(c). Foreign banks with a United States presence may 
apply for acceptance.

SEC. 302. CERTIFICATION OF PROFESSIONAL REINSURERS.

    (a) In General.--The Commission is authorized to certify and 
otherwise regulate professional reinsurers. A professional reinsurer 
shall be subject to regulation solely by the Commission as to the 
business of reinsurance in the United States.
    (b) Establishment of Standards.--The Commission shall, by 
regulation, establish standards and procedures for the certification 
and regulation of professional reinsurers. Such standards shall give 
due consideration to the public interest in providing secure 
reinsurance capacity in the United States and to the need for promptly 
collectible reinsurance recoverables.
    (c) Standards.--Certification standards for professional reinsurers 
promulgated by the Commission under subsection (b) shall include the 
following:
            (1) Minimum net worth requirements, risk-based or 
        otherwise, appropriate to the nature of the reinsurance written 
        by the different types and sizes of reinsurers, except that the 
        Commission shall set the minimum at an amount not less than 
        $50,000,000 and shall establish additional net worth 
        requirements for appropriate categories of professional 
        reinsurers based upon their operations, including such factors 
        as premium volume, volatility, and loss development 
        characteristics of the types of reinsurance provided by such 
        reinsurers. The Commission shall adjust such minimum for 
        inflation every fifth year unless for good cause the Commission 
        determines that it should be adjusted more frequently.
            (2) Appropriate standards for investments, reserves, and 
        asset valuations relating to minimum net worth, including 
        percentage limitations for various categories of investments; 
        except that investments in excess of minimum net worth and 
        reserves shall be subject to the prudent person standard.
            (3) Limitations on the net amount of exposure that may be 
        retained on a single risk, based on the amount of net worth.
            (4) Accounting standards and standards for reserve 
        valuation that will promote strong and appropriate financial 
        monitoring.
            (5) Liquidity requirements appropriate to the nature of the 
        reinsurance written.
            (6) Requirements for annual reports by independent 
        accountants of financial statements reporting financial 
        condition and financial activities.
            (7) Limitations and controls on the use of reinsurance, and 
        standards for ceding, reporting on, and credit for such 
        reinsurance.
            (8) Requirements for certification of loss reserves by 
        actuaries and reports of such certification.
            (9) Disclosure of all subsidiary and affiliate 
        relationships and the identity of all persons which control the 
        professional reinsurer.
            (10) Regulation of financial transactions within holding 
        company systems.
            (11) Procedures for initial and special examinations and 
        for the annual financial review of financial statements.
            (12) Regulations under which a foreign insurer or reinsurer 
        may establish a United States branch which may become a 
        certified professional reinsurer.
            (13) Minimum security deposit requirements for United 
        States branches of foreign insurers or reinsurers that apply to 
        become professional reinsurers.
            (14) Appointment of an agent in the United States upon whom 
        may be served any lawful process in any action, suit, or 
        proceeding instituted by or on behalf of any U.S. person and 
        agreement that, in the event such process may not be served 
        upon the appointed agent, process may be served upon the 
        Commission.
            (15) Agreement, by a foreign professional reinsurer, to 
        submit to the jurisdiction and be bound by the final order or 
        judgment of any court of competent jurisdiction in the United 
        States.
            (16) Procedures for ongoing monitoring and enforcement of 
        compliance with Commission standards.
            (17) Minimum standards as to the qualifications of the 
        management of professional reinsurers.
            (18) Minimum standards governing the fiduciary duties of 
        officers and directors of professional reinsurers.
            (19) Submission of an outline of current and projected 
        operations in the United States demonstrating that the methods 
        of operation are reasonable, prudent, and do not present an 
        undue risk to the public.
            (20) Demonstration of sufficient data processing capability 
        and capacity to meet all data collection and reporting 
        requirements of the Commission.
            (21) Submission of biographical information, which shall be 
        updated annually, demonstrating that all directors and senior 
        officers possess sufficient experience and good character to 
        manage business affairs in a competent and trustworthy manner.
            (22) Disclosure requirements, in addition to those 
        enumerated above, for information to be provided to the 
        Commission and the public.
            (23) Such other standards as the Commission determines to 
        be necessary to evaluate and maintain the sound financial 
        condition of federally certified professional reinsurers.

SEC. 303. CERTIFICATE FOR OTHER PROVIDERS OF REINSURANCE.

    (a) In General.--The Commission is authorized to issue a 
reinsurance certificate to insurers and to any reinsurer that does not 
seek certification as a professional reinsurer under section 302.
    (b) Establishment of Qualifications.--The Commission shall 
establish, by regulation, standards and procedures for certification 
under this section.
    (c) Qualifications for Certificate.--To qualify for a reinsurance 
certificate, an insurer or reinsurer must meet one of the following 3 
standards:
            (1) The insurer or reinsurer shall have met the national 
        standards established under section 201 and have a State 
        license to transact the business of insurance or have a 
        certificate of solvency issued by the Commission under title 
        II; and either--
                    (A) maintain a net worth which is not less than a 
                minimum set by the Commission which--
                            (i) shall be no less than $5,000,000;
                            (ii) shall establish additional net worth 
                        requirements for appropriate categories of 
                        reinsurers based upon their operations, 
                        including such factors as premium volume, 
                        volatility, and loss development 
                        characteristics of the types of reinsurance 
                        provided by such reinsurers; and
                            (iii) shall ensure that reinsurance 
                        obligations will be met; or
                    (B) in the case of a financially sound applicant 
                that does not meet the net worth dollar standard of 
                subparagraph (A), obtain a waiver of this minimum 
                dollar standard if the Commission concludes that the 
                applicant is sufficiently financially sound, is able to 
                pay its reinsurance obligations, and has sufficient 
                expertise to provide the type of reinsurance that it 
                intends to offer.
        An applicant with a State license must have been doing business 
        in its State of domicile for at least 3 years unless the 
        Commission for good cause shown waives such 3-year operating 
        requirement. The Commission shall adjust for inflation the 
        minimum established in subparagraph (A) every fifth year unless 
        the Commission determines for good cause that it should be 
        adjusted more frequently.
            (2) The insurer or reinsurer shall be authorized by the law 
        of its domiciliary jurisdiction to assume reinsurance; 
        demonstrate to the Commission that it has sufficient assets and 
        management experience so that it can operate safely in the 
        United States reinsurance market in a way that will protect the 
        public interest; and maintain a trust fund in a qualified 
        financial institution which includes a trusteed surplus for the 
        protection of United States ceding insurers and which is--
                    (A) for a single company, an amount not less than 
                its United States reinsurance liabilities arising from 
                reinsurance contracts entered into after the date of 
                enactment of this Act plus $20,000,000;
                    (B) for an established group of individual 
                unincorporated underwriters regulated as a group by its 
                State or country of domicile, an amount not less than 
                the group's United States reinsurance liabilities 
                arising from reinsurance contracts entered into after 
                the date of enactment of this Act plus $100,000,000; or
                    (C) for a group of incorporated insurers under 
                common administration, and which has continuously 
                transacted an insurance or reinsurance business outside 
                the United States for at least 10 years, in an amount 
                not less than the group's United States reinsurance 
                liabilities arising from reinsurance contracts entered 
                into after the date of enactment of this Act plus 
                $100,000,000.
        The Commission shall require additional amounts to be held in a 
        trust established under this paragraph as a condition for 
        initial or continued certification if the Commission determines 
        that such additional amounts are required for the protection of 
        United States ceding insurers.
            (3) The insurer or reinsurer shall be authorized by the 
        laws of its domiciliary jurisdiction to assume reinsurance and 
        demonstrate to the Commission that it has sufficient assets and 
        management experience so that it will operate safely in the 
        United States reinsurance market in a way that will protect the 
        public interest and in addition complies with the following:
                    (A) Holders of certificates will be required to 
                fund their obligations to United States ceding insurers 
                pursuant to subsection (e) for such ceding insurers to 
                be able to count such reinsurance as an asset or 
                deduction from liabilities on the ceding insurer's 
                financial statements.
                    (B) In the event the Commission determines that the 
                funding required by subsection (e) is inadequate to 
                protect United States ceding insurers, the Commission 
                may require, as a condition for initial or continued 
                certification, additional security requirements, 
                including the establishment of a United States trust 
                fund for the exclusive protection of United States 
                ceding insurers. The Commission may require such trust 
                fund to be in any amount that the Commission determines 
                to be appropriate to protect United States ceding 
                insurers.
    (d) Requirements for A Trust Fund Under Subsection (c).--A trust 
fund required by paragraphs (2) and (3) of subsection (c) shall be in a 
form approved by the Commission and shall meet the following 
requirements for all new reinsurance provided after the date the 
certificate to provide reinsurance was granted:
            (1) The trust fund shall be exclusively for the purpose of 
        securing the payment of valid claims of United States ceding 
        insurers and their assigns and successors in interest.
            (2) The trust fund shall be established in a qualified 
        financial institution in a form approved by the Commission. The 
        Commission shall establish acceptable criteria for assets held 
        in trust, which shall include cash, securities, bonds, 
        commercial paper, clean, irrevocable, unconditional, and 
        automatically renewable letters of credit issued by a qualified 
        financial institution, or any other appropriate assets, whether 
        United States or non-United States, the fair market value of 
        which can be readily ascertained and which provide the 
        stability necessary for adequate protection of the trust 
        beneficiaries.
            (3) Assets may be held in trust by a qualified financial 
        institution the principal place of business of which is outside 
        the United States if the holder of the certificate demonstrates 
        that a beneficiary of the trust can obtain immediate payment 
        from a United States branch, subsidiary, or representative 
        office of the institution.
            (4) The trust instrument shall provide that claims shall be 
        paid with the concurrence of the holder of the certificate or 
        upon final order of any court of competent jurisdiction in the 
        United States. The holder of the certificate may freely 
        substitute and withdraw assets in the trust so long as the 
        value of the assets maintained in the trust equals or exceeds 
        the amount set forth in paragraph (2) or (3) of subsection (c).
            (5) The trustees of the trust shall report annually to the 
        Commission and to the insurance commissioner of each ceding 
        insurer's State of domicile, in writing, setting forth the 
        balance of the trust, providing an actuary's opinion as to the 
        reasonableness of the trust reserves, listing the trust's 
        investments at the preceding year end, and certifying the date 
        of termination of the trust if so planned, or certifying that 
        the trust shall not expire as to new business prior to the next 
        following December 31. The trust shall remain in effect as long 
        as there are outstanding obligations under the reinsurance 
        agreements to which the trust pertains.
            (6) The trust instrument shall provide that, in the event 
        the holder of the certificate is placed in supervision, 
        rehabilitation, or liquidation, or its equivalent by its State 
        or country of domicile, or if the Commission determines, 
        pursuant to regulations adopted by the Commission, that the 
        condition of the holder is such that further transaction of 
        business will be hazardous to United States creditors or to the 
        public, the Commission may take control of the trust in the 
        manner described in title VII.
            (7) The trust shall be subject to annual review and initial 
        and special examination by the Commission in the same manner as 
        the Commission may examine certified reinsurers.
    (e) Requirements for the Form of Funding Under Subsection (c).--The 
funds required by subsection (c)(3) may be in the form of--
            (1) cash under the control of the ceding insurer;
            (2) a clean, irrevocable, unconditional, and automatically 
        renewable letter of credit issued by a qualified financial 
        institution and held by the ceding insurer; or
            (3) other funding acceptable to the Commission.
    (f) Previous Reinsurance Obligations.--As a pre-condition for 
obtaining a certificate to provide reinsurance on the basis of meeting 
the requirements of paragraph (2) or (3) of subsection (c), the 
applicant shall be required to demonstrate to the Commission that it 
has adequately secured its reinsurance liabilities in existence at the 
time of certification. The adequacy of the funding of such previous 
reinsurance liabilities shall be subject to the requirements of 
sections 402, 403, and 404 and shall be reviewed by the Commission in 
determining the financial condition of the reinsurer in each annual 
review.
    (g) Additional Requirements for a Foreign Applicant.--Any foreign 
insurer or reinsurer applying under this section for a reinsurance 
certificate shall meet the following additional requirements:
            (1) Have been doing business in its country of domicile for 
        at least 3 years, or be an affiliate of an insurer or reinsurer 
        which has been doing business in its country of domicile for at 
        least 3 years, unless the Commission, for good cause shown, 
        waives this 3-year operating requirement.
            (2) File an annual financial statement with its domiciliary 
        regulator and have established satisfactory evidence of good 
        repute and financial integrity.
            (3) File annually with the Commission a copy of the 
        financial statement provided to its domiciliary regulator (if 
        appropriate, translated from its original language) and a 
        report showing the volume of written premiums assumed from 
        United States insurers in the past year and such other 
        information as the Commission, in its sole discretion, 
        requires.
            (4) File with the Commission a list identifying its 
        officers and directors (or similar principals) along with 
        biographical information for each, and provide an annual update 
        of this information.
            (5) Agree to allow the Commission to examine its books and 
        records and to waive any protection it has under any secrecy 
        laws of its domiciliary jurisdiction, except that such 
        examinations will only take place upon the Commission's showing 
        of good cause for concern about the financial soundness or 
        solvency of the subject entity.
            (6) Appoint an agent in the United States upon whom may be 
        served any lawful process in any action, suit, or proceeding 
        instituted by or on behalf of a domestic ceding insurer, and 
        agree that, in the event such process may not be served upon 
        the appointed agent, process may be served upon the Commission.
            (7) Submit to the jurisdiction of any United States court 
        of competent jurisdiction for the resolution of any dispute 
        arising out of a reinsurance agreement with a domestic ceding 
        insurer or to respond to any allegations or charges made 
        against it by any United States Government official or agency 
        except that this paragraph does not override any contractual 
        agreement of the parties to resolve disputes between them 
        pursuant to other procedures.

SEC. 304. SUSPENSION AND REVOCATION OF FEDERAL CERTIFICATE TO PROVIDE 
              REINSURANCE.

    (a) In General.--The Commission shall suspend or revoke the 
certificate of a professional reinsurer issued under section 302 or a 
reinsurance certificate issued under section 303 at any time the 
Commission determines the standards for holding such certificate are no 
longer satisfied. The Commission shall provide the opportunity for a 
hearing on the record before making a determination to suspend or 
revoke such certificate.
    (b) Notice of Suspension or Revocation.--
            (1) The Commission shall notify the State or country of 
        domicile of a certified professional reinsurer or holder of a 
        reinsurance certificate that the certificate has been suspended 
        or revoked. Such notification shall be made at the earliest 
        possible date.
            (2) The holder of a certificate that is suspended or 
        revoked under subsection (a) shall immediately notify all 
        insurers and reinsurers from which it has accepted cessions of 
        such suspension or revocation.

SEC. 305. CREDIT FOR REINSURANCE.

    (a) In General.--Notwithstanding any provision of State law to the 
contrary, any insurer certified by the Commission or regulated for 
financial condition by a State may count reinsurance as an asset or a 
deduction from its liabilities on its annual financial statement only 
if the provider of reinsurance, at the time such statement is filed--
            (1) holds a Federal certificate as a professional reinsurer 
        under section 302;
            (2) holds a State insurance license or a Federal 
        certificate of solvency and is certified pursuant to section 
        303(c)(1);
            (3) maintains a United States trust fund and is certified 
        pursuant to section 303(c)(2); or
            (4) is certified pursuant to section 303(c)(3) and funds 
        its obligations to ceding insurers and reinsurers as required 
        in section 303(e).
    (b) Limitation on Credit.--With regard to a reinsurer certified 
pursuant to section 303(c)(3), a ceding insurer may count as an asset 
or deduction from liabilities only that portion of the reinsurance 
which meets the standards for funding under section 303(e). Such ceding 
insurer may also not count as such an asset or deduction any 
reinsurance secured by letters of credit, trust funds, or other 
collateral if such sources of security are not transferred to it when 
due.
    (c) Credit Pending Certification.--A United States insurer may take 
credit for reinsurance from a reinsurer that does not hold a 
professional reinsurer certificate issued pursuant to section 302 or a 
reinsurance certificate issued pursuant to section 303 only if--
            (1) the reinsurer submits to the Commission a complete 
        application for a certificate within 30 days of the coverage 
        being placed;
            (2) the reinsurer places all premiums in trust in a 
        qualified financial institution pending consideration of its 
        application, and provides evidence to the Commission that all 
        premiums from United States ceding insurers have been placed in 
        such trust;
            (3) the reinsurer funds any liabilities pursuant to 
        reinsurance assumed in a manner consistent with the 
        requirements of section 303(e) and submits to the Commission 
        proof of such funding;
            (4) the reinsurance agreement expressly provides that it 
        may be canceled from inception or at any subsequent time at the 
        request of the Commission if the provider's application for a 
        certificate is denied;
            (5) the reinsurer is authorized in its State or country of 
        domicile to do an insurance business and either has been doing 
        business in its State or country of domicile for at least 3 
        years or is an affiliate of an insurer which has been doing 
        business in its State or country of domicile for at least 3 
        years, except that this 3 year operating requirement may be 
        waived by the Commission for good cause; and
            (6) the ceding insurer has not, within the previous 3 
        years, taken a credit for reinsurance ceded to the reinsurer 
        pursuant to this subsection.
    (d) Preemption.--No State shall regulate credit for reinsurance 
whether purchased by federally certified insurers or insurers regulated 
for financial condition by a State. The Commission shall have exclusive 
jurisdiction to regulate such credit.
    (e) Exceptions.--Notwithstanding any other provision of this 
section, a ceding insurer may count as an asset or deduction from 
liabilities--
            (1) reinsurance of risks located in jurisdictions within or 
        without the United States where such reinsurance is required by 
        applicable law of that jurisdiction;
            (2) reinsurance ceded to a reinsurer which is licensed by 
        one or more States and which is ceded to--
                    (A) a member of the same holding company system as 
                the ceding insurer; or
                    (B) an underwriting pool of which the ceding 
                insurer is a member;
            (3) risks ceded to a pool authorized or permitted by a 
        statute, regulation, or policy of the United States or under an 
        arrangement approved by the Federal or a State government;
            (4) risks of a parent or affiliate ceded to a pure or group 
        captive insurer or reinsurer where the captive's obligations 
        are funded or collateralized as provided in subsection (d) or 
        (e) of section 303; or
            (5) risks ceded to a risk retention group authorized by and 
        operating pursuant to the Liability Risk Retention Act of 1986 
        (15 U.S.C. 3901 et seq.) if the risk retention group's 
        obligations are funded or collateralized as provided in 
        subsection (d) or (e) of section 303.
    (f) Effect of Loss of Certification.--In the event that the 
Commission suspends or revokes a certificate issued pursuant to this 
title or such certificate is lost for any other reason, a ceding 
insurer may not count reinsurance as an asset or a deduction from its 
liabilities on its annual financial statement for any cessions made 
after the date the certification ceases. For those cessions before the 
loss of certification under this Act--
            (1) a ceding insurer may continue to count as an asset or 
        deduction any funds withheld from such reinsurer; and
            (2) a ceding insurer may also continue to count as an asset 
        or deduction any unfunded reinsurance for 90 days or such 
        longer period as approved by the Commission.
A ceding insurer affected by the suspension or revocation of a 
certificate issued pursuant to this title shall immediately notify the 
Commission of this fact.
    (g) Effective Date of This Section.--This section shall apply to 
cessions which take place 2 years after the date of enactment of this 
Act.

SEC. 306. RELATIONSHIP TO STATE LAW.

    (a) Preemption.--
            (1) A professional reinsurer certified pursuant to section 
        302 shall be exempt from the application of any State law or 
        regulation pertaining to the licensing or regulation of 
        reinsurers or reinsurance transactions.
            (2) An insurer or reinsurer with a reinsurance certificate 
        issued pursuant to section 303 shall be subject to insurance 
        regulation by a State unless that insurer or reinsurer has a 
        Federal certificate of solvency, in which case the application 
        of State law shall be only as that provided for federally 
        certified insurers under title II.
            (3) Any insurer or reinsurer described in paragraph (1) or 
        (2) that maintains its corporate existence pursuant to State 
        law shall be subject to applicable State tax and corporate 
        governance laws.
    (b) Nondiscrimination.--
            (1) With respect to any State law requiring evidence of 
        insurance or of financial responsibility, reinsurance contracts 
        made by a professional reinsurer certified pursuant to section 
        302 or by the holder of a reinsurance certificate issued 
        pursuant to section 303 shall be accorded the same treatment as 
        is accorded to such contracts issued by insurers subject to 
        regulation for financial condition by that State.
            (2) No State shall revoke, suspend, refuse to issue, or 
        refuse to renew any license, privilege, charter, certificate, 
        franchise, or any other right conferred, guaranteed, or 
        protected by law because an insurer or reinsurer obtains or 
        maintains a certificate to provide reinsurance from the 
        Commission. No tax, fee, or assessment of any kind may be 
        imposed on an insurer or reinsurer certified by the Commission 
        in any manner or on any basis different from that applied to 
        other insurers by that State. No corporate charter or franchise 
        issued to an insurer or reinsurer certified by the Commission 
        shall be rendered invalid or subject to revocation, lapse, or 
        forfeiture merely by reason of the failure of an insurer or 
        reinsurer certified by the Commission to obtain a license or 
        certificate of authority issued by a State in addition to the 
        certificate issued by the Commission.

SEC. 307. CONSTRUCTION.

    Nothing in this title shall be construed to conflict with or 
override the agreement of the parties to a reinsurance agreement to 
arbitrate their disputes if such obligation is created in the 
reinsurance agreement and would not impair the financial soundness of 
the holder of a reinsurance certificate issued under this title.

                    TITLE IV--REGULATORY ENFORCEMENT

SEC. 401. AUTHORITY TO CONDUCT FINANCIAL EXAMINATIONS OF INSURERS AND 
              REINSURERS

    (a) Federally Certified Insurers and Reinsurers.--The Commission 
shall conduct examinations of federally certified insurers and 
reinsurers. In the case of a certification or surplus lines approval 
granted on the basis of a trust fund or funding, the examination shall 
be of such trust fund or funding.
    (b) Insurers Regulated for Financial Condition by a State.--The 
State insurance regulator shall conduct the examination of insurers 
subject to State regulation for financial condition.

SEC. 402. PROCEDURES FOR FINANCIAL EXAMINATION OF INSURERS AND 
              REINSURERS

    (a) Commission Establishment of Procedures for Financial 
Examinations.--The Commission shall establish, by regulation, 
procedures for an effective system of examining the activities, 
operations, financial condition, and affairs of insurers and 
reinsurers. The Commission shall follow such procedures for federally 
certified insurers and reinsurers and the State insurance regulator 
shall follow such procedures for the examination of insurers under the 
regulator's responsibility.
    (b) Initial Application and Examination.--The Commission or State 
insurance regulator shall conduct an initial examination of every 
insurer or reinsurer that applies for a Federal certificate of solvency 
or State insurance license to determine if the applicant satisfies the 
national standards established under section 201.
    (c) Mandatory Review of Financial Statement and Quarterly Update.--
The Commission or State insurance regulator shall conduct a review of 
the annual financial statement of each insurer or reinsurer to 
determine if the insurer or reinsurer continues to meet the national 
standards established under section 201 or if there is reason to 
conduct a special examination under subsection (d). On a quarterly 
basis, each such insurer and reinsurer shall file an abbreviated update 
of the information contained in its annual financial statement. Such 
quarterly update shall be in the form established by the Commission. 
The Commission shall require such information to be included in the 
quarterly filing as will allow the Commission or State insurance 
regulator to detect any significant changes in the financial condition 
of the insurer or reinsurer.
    (d) Special Examinations.--In addition to the mandatory review of 
the financial statement and quarterly updates under subsection (c), the 
Commission or State insurance regulatory shall conduct a special 
examination of an insurer or reinsurer whenever the Commission or State 
insurance regulator, in its sole discretion, determines that the 
insurer or reinsurer may be financially impaired, in a financially 
hazardous condition, or for any other reason. In determining the need 
for such examination, the Commission or State insurance regulator shall 
consider--
            (1) whether the insurers' or reinsurers' capital has fallen 
        by a material amount;
            (2) whether the results of the annual review or a review of 
        the quarterly filings under this Act show that financial 
        problems exist, such as reasonableness of reserves and changes 
        in rates of growth;
            (3) whether the asset portfolio is of sufficient value or 
        liquidity to assure the insurer's or reinsurer's ability to 
        meet its outstanding obligations as they mature;
            (4) whether a material affiliate, subsidiary, or reinsurer 
        is financially impaired or in a financially hazardous 
        condition;
            (5) whether there are material amounts of overdue 
        reinsurance recoverables;
            (6) whether management has knowingly failed to respond to 
        inquiries relative to the condition of the insurer or has 
        knowingly furnished inadequate, false, or misleading 
        information;
            (7) a significant increase in net premiums written or in 
        the ratio of net premiums to net worth; and
            (8) any other matters that the Commission has determined to 
        be relevant.
    (e) Scope of Examinations.--
            (1)(A) The initial and special examinations provided for 
        under subsection (c) and (d) shall be conducted in accordance 
        with procedures and standards established by the Commission by 
        regulation and shall include an on site examination when, in 
        the Commission's or State insurance regulator's sole 
        discretion, necessary to assure proper review. These 
        regulations shall provide for a review of all the financial 
        records of the insurer or reinsurer that are relevant to 
        determining the financial condition of the insurer or reinsurer 
        after the Federal certificate or State insurance license has 
        been obtained.
            (B) In order to most efficiently conduct initial 
        examinations on applications for a Federal certificate of 
        solvency, the Commission shall provide for an expedited 
        examination process if applicants show strong financial 
        condition based on the following considerations:
                    (i) The financial history of applicants and, if 
                relevant, their holding companies, including historical 
                ability to sustain unforeseen losses.
                    (ii) The current financial ratings of applicants, 
                and, if relevant, their holding companies.
                    (iii) The level of capitalization and reserves of 
                applicants and, if relevant, their holding companies.
                    (iv) Such other factors as the Commission 
                determines to be relevant.
            (2) The annual review required under subsection (c) shall 
        consist of a focused review of basic financial information to 
        ensure continuing compliance with the national standards 
        established under section 201 and to ensure that the insurer or 
        reinsurer remains in good financial condition. The annual 
        review shall include--
                    (A) a review of the insurer's or reinsurer's 
                audited financial statements, actuarial reports of 
                reserves, and management discussion and analysis 
                statement;
                    (B) an analysis of unusual variations in annual 
                results or unusual financial ratios in documents 
                described in subparagraph (A); and
                    (C) a review of management's explanation of 
                questions concerning the documents described in 
                subparagraph (A) and of the unusual variations of 
                ratios described in subparagraph (B).
        The annual review shall be completed within 3 months of the 
        filing of the insurer's or reinsurer's annual report, or, if 
        the Commission or State insurance regulator has requested the 
        management to provide an explanation under subparagraph (C), 
        within one month after the additional explanation is provided. 
        The Commission or State insurance regulator may extend these 
        dates for good cause shown.
    (f) Cooperation With Examinations.--
            (1) In the course of an examination, each insurer, 
        reinsurer, its holding company or affiliate from which 
        information is sought, and its officers and directors must 
        provide to the Commission or State insurance regulator timely 
        access to all books, records, accounts, papers, documents, and 
        any or all computer or other recordings relating to the 
        property, assets, liabilities, business, and operations of the 
        insurer or reinsurer being examined. The refusal to submit to 
        such examination or to provide such information shall be 
        grounds for revocation or nonrenewal of the Federal certificate 
        or State license involved. Any Commission proceedings for 
        revocation or nonrenewal of a certificate shall include the 
        opportunity for a hearing on the record. A State insurance 
        regulator shall follow the appropriate procedures of State law 
        for revocation and non-renewal.
            (2) After an examination is completed, the Commission or 
        State insurance regulator shall have the authority to use and, 
        if appropriate, to make public any examination, report on the 
        examination, or any other information discovered or developed 
        during the course of any examination in the furtherance of any 
        legal or regulatory action which the Commission or State 
        insurance regulator may, in its sole discretion, determine to 
        be appropriate. Nothing in this Act shall limit any protection 
        from disclosure of proprietary information consistent with 
        Federal or State law.
    (g) Examination Reports.--
            (1) No later than 30 days following completion of an 
        examination under subsection (d) or (e) or the annual review 
        under subsection (c), the Commission or State insurance 
        regulator shall transmit a report on the results to the insurer 
        or reinsurer, together with a notice which shall afford the 
        insurer or reinsurer a reasonable opportunity of not more than 
        30 days to make a written submission or rebuttal with respect 
        to any matters contained in the report.
            (2) Within 30 days of the end of the period allowed for the 
        receipt of written submissions or rebuttals, the Commission or 
        State insurance regulator shall fully consider the report, 
        together with any written submissions or rebuttals and any 
        relevant portions of the examiner's workpapers, and adopt the 
        report as filed or with modifications.
            (3) The insurer or reinsurer shall take any action required 
        by the Commission or State insurance regulator to meet the 
        requirements of this section and to correct material 
        deficiencies identified in the examination report.

SEC. 403. ACCOUNTING STANDARDS AND INDEPENDENT ACCOUNTANTS.

    (a) Accounting Standards.--The financial statements of insurers and 
reinsurers shall be prepared in conformity with generally accepted 
accounting principles. Insurers and reinsurers that obtain and maintain 
certificates of solvency or State insurance license on the basis of 
trust fund or funding mechanisms shall prepare the financial statements 
as to such trust funds or mechanisms in conformity with these 
principles. The Commission may establish, by regulation, additional 
disclosure requirements applicable to reports required to be filed with 
it.
    (b) Independent Accountants.--Every insurer and reinsurer shall 
retain an independent certified public accountant or, in the case of a 
foreign certified insurer or reinsurer, another independent person who 
is qualified, as determined by the Commission under subsection (k), to 
audit the financial statements of such insurer or reinsurer in 
accordance with generally accepted auditing standards.
    (c) Corporate Financial Records and Access of Independent 
Accountants.--Every insurer and reinsurer shall keep its financial 
records pursuant to rules and regulations adopted by the Commission 
under this section. The insurer or reinsurer shall provide the 
independent accountant full access to all books, records, and accounts 
that are relevant to preparing and auditing financial statements and 
reports the insurer or reinsurer submits to the Commission or the State 
insurance regulator.
    (d) Obligations of the Accountant.--If, in the course of conducting 
any audit pursuant to this title, the independent accountant detects or 
otherwise becomes aware of information that the financial statements of 
the insurer or reinsurer--
            (1) are materially affected by irregularities;
            (2) reveal an illegal act (whether or not perceived to have 
        a material effect on the insurer's or reinsurer's financial 
        statements or condition) has been committed; or
            (3) show that there is substantial doubt of the insurer's 
        or reinsurer's ability to continue to operate as a going 
        concern over the ensuing fiscal year;
the accountant shall comply with subsection (e).
    (e) Report to Corporate Officers.--If the independent accountant 
detects or becomes aware of information described in subsection (d), 
the accountant shall, as soon as practicable, inform the appropriate 
level of the insurer's or reinsurer's management and assure that the 
insurer's or reinsurer's audit committee or board of directors in the 
absence of such a committee, is adequately informed with respect to any 
condition described in subsection (d) that has been detected or 
otherwise come to the attention of such accountant in the course of the 
audit, unless the condition is clearly inconsequential.
    (f) Response to Failure to Take Remedial Action.--If, after 45 
days, having first assured itself that the audit committee or the board 
(in the absence of an audit committee) is adequately informed with 
respect to the condition described in subsection (d), the independent 
accountant concludes that--
            (1) any such condition has a material effect on the 
        financial statements of the insurer or reinsurer,
            (2) senior management has not taken, and the board of 
        directors has not caused senior management to take, timely and 
        appropriate remedial actions with respect to such condition, 
        and
            (3) the failure to take remedial action is reasonably 
        expected to warrant departure from a standard auditor's report, 
        when made, or warrant resignation from the audit engagement,
the independent accountant shall as soon as practicable report its 
conclusions directly to the board of directors.
    (g) Notice to Commission; Response to Failure to Notify.--An 
insurer or reinsurer the board of directors of which has received a 
report pursuant to subsection (f) shall inform the Commission or the 
State insurance regulator by notice within 5 business days of receipt 
of such report and shall furnish the independent accountant making such 
report with a copy of the notice furnished the Commission or the State 
insurance regulator. If the accountant making such report shall fail to 
receive a copy of such notice within the required 5-business-day 
period, the accountant shall--
            (1) resign from the engagement; or
            (2) furnish to the Commission or the State insurance 
        regulator a copy of its report (or the documentation of any 
        oral report given) within the 5 business days following such 
        failure to receive notice.
    (h) Report After Resignation.--An independent accountant electing 
resignation shall, within the 10 business days following a failure by 
an insurer or reinsurer to notify the Commission or the State insurance 
regulator under subsection (g), furnish to the Commission or the State 
insurance regulator a copy of the accountant's report (or the 
documentation of any oral report given).
    (i) Relief From Civil Liability.--No independent accountant shall 
be liable in a private action for any finding, conclusion, or statement 
expressed in a report made pursuant to subsection (g) or (h), including 
any rules promulgated by the Commission pursuant thereto.
    (j) Civil Penalties in Cease-and-Desist Proceedings.--If the 
Commission finds, after notice and opportunity for a hearing, that an 
independent accountant has willfully violated subsection (g) or (h), 
the Commission may impose a civil penalty against the accountant and 
any other person that the Commission finds was a cause of such 
violation. The State insurance regulator may take such action as is 
authorized by State law.
    (k) Regulations and Standards.--
            (1) The Commission shall establish, by regulation, 
        procedures to be followed by independent accountants in 
        complying with subsections (g) and (h).
            (2) The Commission shall establish by regulation, the 
        standards and procedures by which a person who is not a 
        certified public accountant in the United States may become 
        qualified to act as an independent accountant for a foreign 
        insurer or reinsurer under subsections (g) and (h). Such 
        standards shall be substantially similar or equivalent to those 
        for certified public accountants in the United States.
            (3) Foreign insurers and reinsurers applying for or holding 
        a Federal certificate on the basis of the trust fund or funding 
        mechanisms of paragraphs (2) and (3) of section 303(c), 
        respectively, shall not generally be required to reconstruct 
        the financial statements filed with their domestic regulators 
        to conform to generally accepted accounting principles in the 
        United States, although the Commission may generally require 
        explanations of the accounting practices of foreign 
        domiciliaries.
    (l) Definitions.--As used in this section, the term ``illegal act'' 
means any action or omission to act that might have an adverse material 
effect on the financial condition of an insurer or reinsurer and that 
violates any law or any rule or regulation having the force of law.

SEC. 404. ACTUARIES.

    (a) Requirement To Use Qualified Actuaries.--The Board of Directors 
of each insurer and reinsurer shall appoint an actuary who is qualified 
to issue an opinion on the reasonableness of the reserves of such 
insurer or reinsurer. A qualified actuary is a person who is a member 
in good standing of the American Academy of Actuaries or someone who is 
otherwise qualified as determined by the Commission. The Board of 
Directors of the certified insurer or reinsurer shall notify the 
Commission or the State in  surance regulator of the name of the 
appointed actuary at the time of the appointment and shall notify the 
Commission or such regulator within 10 days when an appointed actuary 
is dismissed, resigns, or otherwise leaves the position.
    (b) Standards for Reserve Assessment.--Every insurer and reinsurer 
shall have its actuarial liabilities analyzed and its reserves, as 
defined by the Commission, evaluated pursuant to rules and regulations 
adopted by the Commission and shall file with its annual financial 
statements a report describing the conclusions of the analysis. Such 
evaluation shall be done and such report of conclusions shall be 
written by the appointed actuary pursuant to guidelines, standards, 
procedures, and forms to be adopted by the Commission through its 
rulemaking process. For an insurer or reinsurer certified or licensed 
on the basis of a trust fund or funding mechanism, the actuary's report 
shall cover only those liabilities required to be held within the trust 
funds or for the funding.
    (c) Access to Corporate Documents.--Every insurer or reinsurer 
shall provide its appointed actuary with full access to all financial 
data of the insurer or reinsurer that is relevant to evaluating 
reserves. The actuary shall provide annually to the Board of Directors 
of the insurer or reinsurer a written report of the actuarial analysis 
and findings on which the evaluation of the reasonableness of reserves 
was based. Such written report shall conform to standards promulgated 
by the Actuarial Standards Board and such other requirements as may be 
adopted through rules of the Commission.
    (d) Report to Corporate Officers.--If at any time, in the opinion 
of the appointed actuary, reserves fall below the range of reasonable 
estimates, then the actuary shall, within 10 days, notify in writing 
the chief executive officer and the Chairman or the Board of Directors 
of this opinion.
    (e) Report by the Corporation.--If the chief executive officer and 
chairman of the Board of Directors of an insurer or reinsurer receive a 
notice from the appointed actuary under subsection (d), such officer 
and chairman shall, within 90 days, either correct the deficiency or 
obtain an assessment from an independent qualified actuary of the 
reasonableness of the appointed actuary's opinion. If the opinion of 
the independent actuary is that the reserves are deficient, the insurer 
or reinsurer, within 45 days after receipt of such assessments, shall 
implement a plan to correct the reserve deficiency. The appointed 
actuary and the independent actuary shall be provided with written 
notice of the corrective actions taken. If a remedial plan is not 
implemented within such 45 days, the chief executive officer and 
chairman of the Board of Directors shall immediately notify the 
Commission or the State insurance regulator in writing of the 
deficiency and shall furnish to the Commission or such regulator in 
writing true and complete copies of all actuarial reports, opinions, 
and assessments received by the insurer or reinsurer since the last 
filed annual financial statement.
    (f) Report by the Actuary.--If the chief executive officer and 
chairman of the Board of Directors do not provide evidence to each 
actuary consulted that the remedial plan has been implemented within 
the 135 days provided in subsection (e), each such actuary shall 
immediately notify the Commission or the State insurance regulator in 
writing of the actuary's opinion provided to the Board that the 
reserves may be deficient.
    (g) Relief From Civil Liability.--An actuary who in good faith 
complies with the reporting requirements of subsection (f) shall not be 
liable in any civil action for damages attributable to such reporting.
    (h) Regulations.--The Commission shall issue regulations to be 
followed by property and casualty and life and health insurers and 
reinsurers and by appointed actuaries in complying with this title.

SEC. 405. REGISTRATION OF INSURERS AND REINSURERS IN HOLDING COMPANIES.

    (a) Registration of Holding Company Status.--Each insurer or 
reinsurer that is incorporated or, in the case of a United States 
branch of a foreign insurer or reinsurer, established pursuant to the 
laws of the United States or any State thereof, and is part of a 
holding company system shall file with the Commission, if the insurer 
or reinsurer is federally certified, or the State insurance regulator, 
if the insurer or reinsurer is regulated for financial condition by a 
State, information as to the structure and members of such system as 
provided by this section. The Commission shall establish, by 
regulation, the form and contents of the filings of such information.
    (b) Alternative Registration for Foreign Insurers or Reinsurers.--
Each foreign insurer or reinsurer that is subject to holding company 
registration requirements and standards adopted by statute or 
regulation in the jurisdiction of its domicile which are substantially 
similar to those established under this section shall file with the 
Commission or State insurance regulator a copy of its domiciliary 
registration. The Commission or State insurance regulator shall 
determine if the foreign registration requirements and standards of the 
jurisdiction of domicile are substantially similar to those established 
under subsection (a). If the Commission or State insurance regulator 
determines that such filing is not substantially similar, the foreign 
insurer or reinsurer shall file information as required by subsection 
(a).
    (c) Time of Registration.--Any insurer or reinsurer that is subject 
to registration under this section shall register within 15 days after 
it becomes subject to registration, and shall update this registration 
annually thereafter at the time it files its annual statement with the 
Commission or the State insurance regulator. The Commission or the 
State insurance regulator for good cause may extend the time for 
registration.

SEC. 406. ACQUISITION OF CONTROL OF OR MERGER WITH AN INSURER OR 
              REINSURER.

    (a) Federally Certified Insurers and Reinsurers.--The Commission 
shall review any acquisition of control over or merger with a federally 
certified insurer or reinsurer. No such acquisition or merger shall be 
consummated without first obtaining the approval of the Commission. Any 
such acquisition or merger shall be disapproved if it would threaten 
the financial stability, soundness, or solvency of such insurer or 
reinsurer. In the event of a change of control of a foreign insurer or 
reinsurer certified on the basis of a trust fund or funding mechanism, 
the existing certification shall become contingent upon the review of 
the impact of the transaction upon the ability of such insurer or 
reinsurer to continue to meet the standards for certification.
    (b) Insurers Regulated for Financial Condition by a State.--The 
State insurance regulator shall review any acquisition of control over 
or merger with an insurer or reinsurer subject to State regulation for 
financial condition. No such acquisition or merger shall be consummated 
without first obtaining the approval of the State insurance regulator. 
Any such acquisition or merger shall be disapproved if it would 
threaten the financial stability, soundness, and solvency of the 
insurer or reinsurer. In the event of a change of control of a foreign 
insurer or reinsurer licensed on the basis of a trust fund or funding 
mechanism, the existing license shall become contingent upon the review 
of the impact of the transaction upon the ability of such insurer or 
reinsurer to continue to meet the standards for licensing
    (c) Procedures for Review of Acquisition and Merger.--
            (1) In general.--The Commission shall establish, by 
        regulation, the procedures and information that must be 
        provided to the Commission or the State insurance regulator so 
        that it may make a decision as to the appropriateness of any 
        acquisition or merger. This information shall be provided to 
        the Commission or the State insurance regulator under oath or 
        affirmation.
            (2) Disapproval.--In making a determination to disapprove 
        an acquisition or merger, the Commission or the State insurance 
        regulator shall consider--
                    (A) the financial condition of the acquiring 
                person;
                    (B) the trustworthiness of the acquiring person or 
                any of its officers or directors;
                    (C) a plan for the proper and effective conduct of 
                the insurer's or reinsurer's operations;
                    (D) the source of the funds or asset for the 
                acquisition;
                    (E) the fairness of any exchange of shares, assets, 
                cash, or other consideration for the shares or assets 
                to be received; and
                    (F) whether the acquisition is likely to be 
                hazardous or prejudicial to the insurer's policyholders 
                or the insurer's or reinsurer's shareholders.
    (d) Notice to Affected Insurer or Reinsurer.--If a person intends 
to make an offer or enter into an agreement to acquire control of or 
merge with an insurer or reinsurer, such person shall provide to the 
affected insurer or reinsurer, at the same time it files with the 
Commission or the State insurance regulator under this section, a copy 
of such filing.
    (e) Filing Requirements.--Any person, other than the issuer, that 
--
            (1)(A) makes a tender offer for or a request or invitation 
        for tenders or a solicitation of proxies of as to an insurer or 
        reinsurer; or
            (B) enters into any agreement to exchange securities or, 
        seeks to acquire, or acquires, in the open market or otherwise, 
        or solicits proxies for any voting security of an insurer or 
        reinsurer when, after the consummation thereof, such person 
        would, directly or indirectly (or by conversion or by exercise 
        of any right to acquire) be in control of such insurer or 
        reinsurer; and
            (2) intends to enter into an agreement to merge with or 
        otherwise to acquire control of an insurer or reinsurer or any 
        person with control thereof,
shall, at the time any such offer, request, or invitation is made or 
any such agreement or merger is entered into, or prior to the 
acquisition of such securities if no offer or agreement is involved, 
file with the Commission or the State insurance regulator the 
information required under this section.
    (f) Approval of Acquisition or Merger.--After reviewing the 
information provided under this section, the Commission or the State 
insurance regulator shall disapprove any acquisition or merger unless 
it finds, after providing the opportunity for a hearing on the record, 
that the acquisition or merger would not threaten the financial 
stability, financial soundness, or solvency of any affected federally 
certified insurer or reinsurer, or substantially lessen competition in 
any line of insurance. The State insurance regulator shall follow the 
procedures of applicable State law in issuing a disapproval under this 
section.
    (g) Control Determination.--The Commission or the State insurance 
regulator may determine upon application that any person does not or 
will not upon the taking of some proposed action control an insurer or 
reinsurer. Such determination shall be made within 30 days or such 
further period as the Commission may prescribe by regulation. The good 
faith filing of the application by any person shall relieve the 
applicant of complying with the requirements to obtain approval until 
the Commission or the State insurance regulator has acted upon the 
application. The Commission may prospectively revoke or modify the 
determination, after notice and opportunity for a hearing on the 
record, whenever a revocation or modification is necessary to protect 
the financial condition of a federally certified insurer or reinsurer. 
The State insurance regulator may revoke or modify such a determination 
in accordance with the procedure of applicable State law.

SEC. 407. SPECIAL PROCEDURES AS TO THE ACQUISITION OF A FEDERALLY 
              CERTIFIED INSURER OR REINSURER.

    (a) In General.--Federally certified insurers or reinsurers may be 
affiliated with insurers or reinsurers that are not federally 
certified.
    (b) Exclusive Jurisdiction of the Commission.--Acquisitions, 
mergers, and similar transactions that involve only federally certified 
insurers or reinsurers shall be subject to the approval of the 
acquisition, merger, or similar transaction solely by the Commission.
    (c) Jurisdiction of the Commission and State Insurance 
Regulators.--The Commission or State insurance regulator may prohibit, 
refuse to approve, or approve, subject to any conditions the Commission 
sets, any acquisition, merger, or similar transaction if such 
transaction involves both a federally certified insurer or reinsurer 
and an insurer subject to regulation of financial condition by a State.

SEC. 408. TRANSACTIONS WITHIN A HOLDING COMPANY SYSTEM THAT INCLUDES AN 
              INSURER OR REINSURER.

    (a) Transactions Within a Holding Company System.-- Transactions 
within a holding company system which includes an insurer or reinsurer 
and with respect to such insurer or reinsurer shall be subject to the 
following standards:
            (1) The terms shall be fair and reasonable.
            (2) Charges or fees for services performed shall be 
        reasonable.
            (3) Expenses incurred and payment received shall be 
        allocated to the insurer or reinsurer in conformity with 
        customary insurance accounting practices consistently applied.
            (4) The books, accounts, and records of each party to all 
        such transactions shall be so maintained as to clearly and 
        accurately disclose the nature and details of the transactions 
        including such accounting information as is necessary to 
        support the reasonableness of the charges or fees to the 
        respective parties.
            (5) The insurer's or reinsurer's net worth following any 
        dividends or distributions to shareholder affiliates shall be 
        reasonable in relation to its outstanding liabilities and 
        adequate to its financial needs.
    (b) Prior Approval.--The Commission's or the State insurance 
regulator's prior approval shall be required for the following 
transactions between an insurer or reinsurer and any affiliate within a 
holding company system if they involve 5 percent or more of the assets 
of the federally certified insurer or reinsurer at the end of the 
preceding year:
            (1) Sales.
            (2) Purchases.
            (3) Exchanges.
            (4) Loans or extensions of credit.
            (5) Investments.
    (c) Prior Notification.--The following transactions between an 
insurer or reinsurer and any affiliate within a holding company system 
may not be entered into unless such insurer or reinsurer has notified 
the Commission or the State insurance regulator at least 30 days prior 
thereto, or such shorter period as the Commission or the State 
insurance regulator may permit, and if the Commission or the State 
insurance regulator has not disapproved such transaction within this 
period:
            (1) Sales, purchases, loans, or extensions of credit 
        involving more than one-half of 1 percent but less than 5 
        percent of the insurer's or reinsurer's assets at last year-
        end.
            (2) Reinsurance treaties or agreements in which the 
        reinsurance premium exceeds 5 percent of the insured's net 
        worth at the end of the preceding year.
            (3) Rendering services on a regular or systematic basis.
            (4) Any material transaction specified by regulation of the 
        Commission that may adversely affect the interests of the 
        insurer's policyholders or shareholders.
This subsection shall not be construed to authorize any transaction 
which would otherwise be contrary to law.

SEC. 409. ENFORCEMENT AND PENALTIES.

    (a) Authority of the Commission and State Insurance Regulators.--
            (1) Enforcement and penalty authority of the commission.--
        The Commission shall have enforcement and penalty authority as 
        to federally certified insurers and reinsurers for violations 
        of this Act.
            (2) Enforcement and penalty authority of the state 
        insurance regulator.-- The appropriate State insurance 
        regulator shall have enforcement and penalty authority as to 
        violations of this Act and as to the insurers licensed in the 
        State that do not hold a Federal certificate of solvency. The 
        State insurance regulator shall continue to have any other 
        enforcement and penalty powers authorized under State law as to 
        such insurers.
            (3) Judicial actions.--Judicial actions to enforce this Act 
        shall be before the appropriate Federal court unless the action 
        involves the enforcement by a State insurance regulator, in 
        which case the action shall be brought in the appropriate State 
        court.
    (b) Civil Fine.--The Commission may suspend or revoke, after an 
opportunity for a hearing on the record, the certificate of any 
federally certified insurer or reinsurer which knowingly fails to 
comply with this Act. In addition to, or in lieu of suspension or 
revocation, any certified insurer or reinsurer which knowingly violated 
this Act or any foreign insurer that transacts the business of 
insurance in violation of section 203(e) may be fined by the Commission 
in an amount not to exceed $10,000 for each violation. The State 
insurance regulator shall follow the procedure of applicable State law 
in suspending or revoking an insurance license or seeking to impose a 
fine on an insurer subject to State regulation for financial condition 
for failure to comply with this Act.
    (c) Early Administrative Intervention by the Commission or State 
Insurance Regulator.--Whenever it appears that any insurer or reinsurer 
may become insolvent or financially impaired, or does not meet 
applicable standards governing net worth or reserves or is otherwise 
not in compliance with the requirements of this Act, the Commission or 
State insurance regulator may issue an order requiring the insurer or 
reinsurer to take prompt corrective action or imposing restrictions on 
the insurer's or reinsurer's operations or management. Such orders may 
require the insurer or reinsurer to increase its net worth or reserves, 
stop writing new business, limit growth in premiums, limit dividend 
payments, require the election of new directors, or require the filing 
of a plan demonstrating how the insurer or reinsurer will come into 
compliance with the requirements of this Act.
    (d) Cease and Desist Orders.--Whenever it appears that any insurer 
or reinsurer or any director, officer, employee, or other person has 
committed or is about to commit a violation of the requirements of this 
Act as to a federally certified insurer or reinsurer, the Commission 
may, after providing the opportunity for a hearing on the record, issue 
an order that such insurer or reinsurer not take such action. The State 
insurance regulator may take such action as to an insurer subject to 
State regulation of financial condition under the procedures of 
applicable State law.
    (e) Prohibitions Against Voting of Securities.--A security which is 
the subject of any agreement or arrangement regarding acquisition, or 
which is acquired or to be acquired, in contravention of this Act may 
not be voted at any shareholder's meeting, and may not be counted for 
quorum purposes. Any action of shareholders requiring the affirmative 
vote of a percentage of shares may be taken as though such a security 
was not issued and outstanding. Any action taken at any such meeting 
shall not be invalidated by the voting of such security unless the 
action would materially affect control of the insurer or reinsurer or 
unless a court has so ordered.
    (f) Sequestration of Voting Securities.--In any case where a person 
has acquired or is proposing to acquire any voting securities in 
violation of the national standards established under section 201, a 
court may, on such notice as the court determines to be appropriate, 
and, upon the application of the insurer or reinsurer or the Commission 
or the State insurance regulator, seize or sequester any voting 
securities of the insurer or reinsurer owned directly or indirectly by 
such person, and issue such order with respect thereto as may be 
appropriate.
    (g) Penalties for Violations of Registration Requirements.--After 
providing the opportunity for a hearing on the record, the Commission 
may impose on any federally certified insurer or reinsurer that fails, 
without just cause, to file any registration statement as required in 
this Act a civil fine of up to $10,000 for each day's delay. In 
determining the amount of the fine, the Commission shall take into 
account the appropriateness of the civil fine with respect to the 
gravity of the violation, the history of previous violations, and such 
other matters as justice may require. The State insurance regulator 
shall follow the applicable State procedure to impose any such fine on 
an insurer subject to State regulation for financial condition.
    (h) Penalties for Prohibited Transactions.--After providing the 
opportunity for a hearing on the record, the Commission may impose on a 
director or officer of a holding company system that involves a 
federally certified insurer or reinsurer which knowingly violates this 
Act, participates in, or assents to, such violation or who knowingly 
permits any officer or other person--
            (1) to engage in transactions having an adverse material 
        effect on the financial condition of a federally certified 
        insurer or reinsurer; or
            (2) to make investments which have not been properly 
        reported to the Commission; not been approved by the 
        Commission, if such approval is required; or are otherwise not 
        in compliance with this title,
a civil fine of not more than $5,000 per violation. In determining the 
amount of the civil fine, the Commission shall take into account the 
appropriateness of the forfeiture with respect to the gravity of the 
violation, the history of previous violations, and such other matters 
as justice may require. The State insurance regulator shall follow the 
applicable State procedure to impose any such fine on an insurer 
subject to State regulation for financial condition.

SEC. 410. FEDERAL INSURER AND REINSURER EMPLOYEE PROTECTION REMEDY.

    (a) Prohibition Against Discrimination Against Employees.--No 
insurer or reinsurer may discharge or otherwise discriminate against 
any employee with respect to compensation, terms, conditions, or 
privileges of employment because the employee (or any person acting 
pursuant to the request of the employee) provided information to the 
Commission, to the Attorney General, or to a State insurance regulator 
regarding a possible violation of any law or regulation by the insurer 
or reinsurer or any of its officers, directors, or employees.
    (b) Enforcement.--Any employee or former employee who believes that 
the employee has been discharged or discriminated against in violation 
of subsection (a) may file a civil action in the appropriate United 
States district court before the close of the 2-year period beginning 
on the date of such discharge or discrimination. The complainant shall 
also file a copy of the complaint initiating such action with the 
Commission or the State insurance regulator.
    (c) Remedies.--If the district court determines that a violation of 
subsection (a) has occurred, it may order the insurer which committed 
the violation--
            (1) to reinstate the employee to the employee's former 
        position, including any promotion withheld,
            (2) to provide back pay,
            (3) to pay compensation for any costs or losses incurred 
        because of a violation of subsection (a), including attorneys' 
        fees, or
            (4) take other appropriate actions, other than general and 
        punitive damages, to remedy any past discrimination.
    (d) Limitation.--The protections of this section shall not apply to 
any employee who--
            (1) deliberately causes or participates in the alleged 
        violation of law or regulation, or
            (2) knowingly or recklessly provides substantially false 
        information.
    (e) False Accusation.--Any insurer or reinsurer as to which a false 
accusation is made under this section may bring an action against any 
employee who knowingly or recklessly made such accusation. In such 
action, the insurer or reinsurer may recover the costs incurred in 
defending against such accusation. The insurer or reinsurer may also 
take appropriate action against the employee involved with respect to 
the compensation, terms, conditions, and privileges of employment, 
including termination, if its action is successful.

           TITLE V--NATIONAL INSURANCE PROTECTION CORPORATION

SEC. 501. NATIONAL INSURANCE PROTECTION CORPORATION.

    There is established a body corporate to be known as the National 
Insurance Protection Corporation. NIPC shall be a nonprofit corporation 
and shall have succession until dissolved by an Act of Congress. NIPC 
shall--
            (1) not be an agency or establishment of the United States 
        Government; and
            (2) except as otherwise provided in this Act, be subject 
        to, and have all the powers conferred upon a nonprofit 
        corporation by, the District of Columbia Nonprofit Corporation 
        Act (D.C. Code, sec. 29-1001 et seq.).

SEC. 502. PURPOSE.

    The purpose of NIPC is to provide timely payment and protection 
against losses due to, and, in appropriate circumstances as set forth 
in this Act, provide continuation of coverage in the event of, the 
financial impairment or insolvency of insurers which hold Federal 
certificates of solvency by providing prompt fulfillment of insurance 
benefits to the extent of NIPC's obligation under this Act.

SEC. 503. RELATIONSHIP TO THE FEDERAL GOVERNMENT.

    (a) Role of the Federal Insurance Solvency Commission.--NIPC shall 
be subject to the supervision and oversight of the Commission.
    (b) NIPC Not Covered by Full Faith and Credit of U.S. or in United 
States Budget.--
            (1) The obligations of NIPC shall not be backed, directly 
        or indirectly, by the full faith and credit of the United 
        States. NIPC shall receive no financial assistance from or have 
        any authority to borrow from the United States.
            (2) Funds held by or due to NIPC shall not be included in 
        the budget of the United States, nor may the United States 
        borrow or pledge such funds.

SEC. 504. MEMBERSHIP.

    (a) In General.--Each insurer holding a certificate of solvency 
issued by the Commission under title II that provides insurance subject 
to coverage under this title shall be a member of NIPC so long as such 
certificate has not been revoked or suspended by the Commission.
    (b) Effect of Suspension or Revocation.--NIPC's obligation to pay 
the covered claims of a federally certified insurer shall apply to 
claims under policies or contracts effective prior to the revocation or 
suspension of the insurer's certificate of solvency. A member insurer 
shall be subject to assessments based on financial impairments or 
insolvencies on which the Commission takes action when it is a member 
of NIPC.
    (c) Exceptions.--
            (1) Risk retention groups and captive insurers that have 
        certificates of solvency shall not be members of NIPC.
            (2) A federally certified insurer that obtains approval to 
        provide surplus lines insurance under section 203 shall not 
        participate in NIPC for the purpose of business written under 
        that approval.

SEC. 505. CORPORATE POWERS.

    NIPC shall have the power--
            (1) to sue and be sued, in its corporate name and through 
        its own counsel;
            (2) to adopt, alter, and use a corporate seal, which shall 
        be judicially noticed;
            (3) to adopt, amend, and repeal, by its Board of Directors, 
        such bylaws and rules as may be necessary or appropriate to 
        carry out the purposes of this Act, including bylaws relating 
        to--
                    (A) the conduct of its business; and
                    (B) the indemnity of its directors, officers, and 
                employees for liabilities and expenses actually and 
                reasonably incurred by any such person in connection 
                with the defense or settlement of an action or suit if 
                such person acted in good faith and in a manner 
                reasonably believed to be consistent with the purposes 
                of this title;
            (4) to adopt, amend, and repeal, by its Board of Directors 
        such rules as may be necessary or appropriate to carry out the 
        purposes of this title, including rules relating to--
                    (A) the definition of terms used in this title, 
                other than those terms for which a definition is 
                provided herein;
                    (B) the procedures for payment of losses, loss 
                adjustment expenses, and other obligations of NIPC; and
                    (C) the exercise of all other rights and powers 
                granted to it by this Act;
            (5) to conduct its business (including the carrying on of 
        operations and the maintenance of offices) and to exercise all 
        other rights and powers granted to it by this Act in any State 
        or other jurisdiction without regard to any qualification, 
        licensing, or other statutory requirement in such State or 
        other jurisdiction;
            (6) to lease, purchase, accept gifts or donations of or 
        otherwise acquire, to own, hold, improve, use, or otherwise 
        deal in or with, and to sell, convey, mortgage, pledge, lease, 
        exchange or otherwise dispose of any property, real, personal 
        or mixed, or any interest therein, wherever situated;
            (7) to elect or appoint such officers, attorneys, 
        employees, and agents as may be required, to determine their 
        qualifications, to define their duties, to fix their salaries, 
        require bonds for them, and fix the penalty thereof;
            (8) to enter into contracts, to execute instruments, to 
        incur liabilities, and to do any and all other acts and things 
        as may be necessary or incidental to the conduct of its 
        business and the exercise of all other rights and powers 
        granted to NIPC by this Act;
            (9) to provide continued coverage for other than property 
        and casualty insurance and to pay benefits and claims owed by 
        member insurers declared by the Commission to be impaired or 
        insolvent to the extent and in the manner provided in this Act;
            (10) to investigate, adjust, and settle claims covered by 
        this title, and to challenge judicial decisions and settlements 
        affecting such claims;
            (11) to levy and collect assessments upon its members, in 
        the manner and to the extent provided elsewhere in this Act, to 
        cover the administrative expenses of NIPC, and to provide the 
        funds necessary to discharge the obligations of NIPC imposed by 
        this Act;
            (12) to sue members for unpaid assessments plus interest at 
        a rate to be set forth in the bylaws;
            (13) to manage and maintain the financial integrity of the 
        funds established by this Act, including the investment of 
        assessments paid by members and borrowing as necessary to 
        fulfill NIPC's guaranty obligations; and
            (14) to provide advice and recommendations to Congress, the 
        courts and the Commission on matters pertaining to insurer 
        financial conditions, insolvency, or otherwise addressed by 
        this Act.

SEC. 506. BOARD OF DIRECTORS.

    (a) Powers.--The Board of Directors shall be the governing body of 
NIPC and shall be vested with all powers necessary for the management 
and administration of the affairs of the Corporation and the promotion 
of its purposes as authorized by this Act. The Board's authority shall 
be specified in the bylaws of NIPC.
    (b) Composition.--The Board shall be composed of 7 members or such 
higher number as determined by the Board and as approved by the 
Commission. All directors shall be elected by the membership of NIPC 
and approved by the Commission. The bylaws of NIPC shall require that 
directors be selected in a manner fairly representing the various types 
of insurers and lines of insurance as to which NIPC has guaranty 
obligations.
    (c) Terms.--The term of each director shall, after the first 
election, be for three years, with one-third of the directors to stand 
for election each year. Directors may be elected to serve for any 
number of terms.
    (d) Vacancies.--A vacancy in the Board shall be filled in the same 
manner as the original appointment.
    (e) Compensation.--All matters relating to compensation of 
directors shall be as provided in the bylaws of NIPC.
    (f) Initial Appointments.--The Commission shall appoint an initial 
Board to carry out the establishment of the bylaws and the first 
elections of NIPC.

SEC. 507. CHAIRPERSON AND VICE CHAIRPERSON.

    (a) Election.--The member insurers of NIPC shall select the 
chairperson and vice chairperson from among those candidates for the 
Board.
    (b) Initial Appointments.--The Commission shall select the initial 
chairperson and vice chairperson from among the initial appointments to 
the Board under section 506. The persons so selected shall carry out 
the authorities of office until the first election by the member 
insurers. They shall act to ensure that such election is scheduled at 
the earliest appropriate time.

SEC. 508. OFFICERS.

    The officers of NIPC shall consist of a chairman, a vice chairman, 
a president, a secretary, and a treasurer, and may include one or more 
vice presidents and such other officers and assistant officers as may 
be deemed necessary, each of whom shall be elected or appointed at such 
time and in such manner and for such terms not exceeding three years as 
may be prescribed by bylaw. In the absence of any such provision, all 
officers shall be elected or appointed annually by the Board of 
Directors.

SEC. 509. MEETINGS OF BOARD.

    The Board of Directors shall meet at the call of its Chairman, or 
as otherwise provided by the bylaws of NIPC.

SEC. 510. BYLAWS AND RULES.

    (a) Adoption and Amendment of Bylaws.--The Board of Directors of 
NIPC shall file with the Commission a copy of the proposed bylaws or 
any proposed amendment to the bylaws, accompanied by a concise general 
statement of the basis and purpose of such proposal. The proposed 
bylaws and each proposed amendment shall take effect 30 days after the 
date of the filing of a copy thereof with the Commission, or upon such 
later date as NIPC may designate or such earlier date as the Commission 
may determine, unless--
            (1) the Commission, by notice to NIPC setting forth the 
        reasons therefore, disapproves such proposal as being contrary 
        to the public interest or contrary to the purposes of this 
        title; or
            (2) the Commission finds that such proposal involves a 
        matter of such significant public interest that public comment 
        should be obtained, in which case it may, after notifying NIPC 
        in writing of such finding, require that the procedures set 
        forth in subsection (b) be followed with respect to such 
        proposal, in the same manner as if such proposed bylaw change 
        were a proposed rule change within the meaning of such 
        paragraph.
    (b) Adoption and Amendment of Rules.--
            (1) The Board of Directors of NIPC shall file with the 
        Commission, in accordance with its regulations, a copy of any 
        proposed rule or any proposed amendment to a rule of NIPC 
        accompanied by a concise general statement of the basis and 
        purpose of such proposal. The Commission shall, upon the filing 
        of any proposal, publish notice thereof, together with the 
        terms of substance of such proposal or a description of the 
        subjects and issues involved. The Commission shall give 
        interested persons an opportunity to submit written views, and 
        arguments with respect to such proposal. No proposed rule or 
        amendment shall take effect unless approved by the Commission 
        or otherwise permitted in accordance with this paragraph.
            (2) Within 35 days after the date of publication of notice 
        of the filing of a proposal, or within such longer period as 
        the Commission may designate of not more than 90 days after 
        such date if it finds such longer period to be appropriate and 
        publishes its reasons for so finding, or as to which NIPC 
        consents, the Commission shall--
                    (A) by order approve such proposed rule or 
                amendment; or
                    (B) institute proceedings to determine whether such 
                proposed rule or amendment should be modified or 
                disapproved.
            (3) Proceedings instituted with respect to a proposed rule 
        or amendment pursuant to paragraph (2)(B) shall include notice 
        of the grounds for disapproval under consideration and 
        opportunity for hearing, and shall be concluded within 180 days 
        after the date of publication of notice of the filing of such 
        proposed rule or amendment. At the conclusion of such 
        proceedings, the Commission shall, by order, approve or 
        disapprove such proposed rule or amendment. The Commission may 
        extend the time for conclusion of such proceedings for not more 
        than 60 days if it finds good cause for such extension and 
        publishes its reasons for so finding, or for such longer period 
        as to which NIPC consents.
            (4) The Commission shall approve a proposed rule or 
        amendment if it finds that it is in the public interest and is 
        consistent with the purposes of this title, and any proposed 
        rule or amendment so approved shall be given force and effect 
        as if promulgated by the Commission. The Commission shall 
        disapprove a proposed rule or amendment if it does not make the 
        finding referred to in the preceding sentence. The Commission 
        shall not approve any proposed rule change prior to 30 days 
        after the date of publication of notice of the filing thereof, 
        unless the Commission finds good cause for so doing and 
        publishes its reasons for so finding.
            (5) Notwithstanding any other provision of this subsection, 
        a proposed rule or amendment may take effect--
                    (A) upon the date of filing with the Commission, if 
                such proposed rule or amendment, is designated by NIPC 
                as relating solely to matters which the Commission, 
                consistent with the public interest and the purposes of 
                this subsection, determines by rule do not require the 
                procedures set forth in this paragraph; or
                    (B) upon such date as the Commission shall for good 
                cause determine, except that any proposed rule or 
                amendment which takes effect under this subparagraph 
                shall be filed promptly thereafter and reviewed in 
                accordance with paragraph (1).
        At any time within 60 days after the date of filing of any 
        proposed rule or amendment under subparagraph (A) or (B), the 
        Commission may summarily abrogate such rule or amendment and 
        require that it be refiled and reviewed in accordance with this 
        paragraph, if the Commission finds that such action is 
        necessary or appropriate in the public interest, for the 
        protection of insurers or policyholders, or otherwise in 
        furtherance of the purposes of this title. Any action of the 
        Commission pursuant to the preceding sentence shall not affect 
        the validity or force of a rule change during the period it was 
        in effect and shall not be subject to judicial review or be 
        considered to be final agency action.
    (c) Action Required by the Commission.--The Commission may, by such 
rules as it determines to be necessary or appropriate to the public 
interest or to carry out the purposes of this title, require NIPC to 
adopt, amend, or repeal any NIPC bylaw or rule, whenever adopted.
    (d) Legal Effect of Bylaws and Rules.--The bylaws and rules adopted 
pursuant to this section shall be subject to judicial review in the 
same manner as the regulations of the Commission.

SEC. 511. CONSULTATION WITH THE FEDERAL INSURANCE SOLVENCY COMMISSION.

    The Commission may, as appropriate, consult with NIPC concerning 
the development of standards for regulating the financial soundness and 
solvency of federally certified insurers, the implementation of those 
standards, the detection and prevention of insurer insolvencies, the 
commencement of rehabilitation and liquidation proceedings, and 
resolution of those proceedings. The purpose of this consultation shall 
be to provide the Commission the benefit of the expert views of NIPC on 
matters pertaining to financial regulation of its member insurers and 
to assure that the Commission implements this Act in a manner that does 
not impair the financial integrity of NIPC guaranty funds.

SEC. 512. NIPC FUND.

    (a) Establishment.--There is established a fund to be known as the 
NIPC Fund (hereinafter referred to as the ``Fund''). The Fund shall 
consist of all payments made by members pursuant to assessments (other 
than amounts paid directly to any lender pursuant to any pledge 
securing a borrowing by NIPC), interest received on bank accounts or 
investments, amounts borrowed by NIPC pursuant to section 515 and 
amounts recovered in litigation. Moneys in the Fund shall be invested 
only in obligations of the United States, in obligations guaranteed as 
to principal and interest by the United States, and such other items as 
are provided in the bylaws.
    (b) Uses.--The Fund shall be used to pay the administrative 
expenses of NIPC and to pay covered claims. The Fund may not be used or 
loaned for other purposes.

SEC. 513. SCOPE OF GUARANTY.

    (a) Property and Casualty Insurance Claims Coverage.--Commercial 
and personal lines of property and casualty insurance contracts written 
by member insurers shall be guaranteed under this title and paid 
through the property and casualty claims division established in 
section 514, except the following:
            (1) Mortgage guaranty, financial guaranty, or other forms 
        of insurance offering protection against investment risks.
            (2) Fidelity or surety bonds, or any other bonding 
        obligations.
            (3) Insurance of warranties or service contracts.
            (4) Title insurance.
            (5) Ocean marine insurance.
            (6) Any insurance written or transacted on a surplus lines 
        basis.
            (7) Insurance provided by captive insurers.
            (8) Insurance provided by risk retention groups established 
        pursuant to the Liability Risk Retention Act of 1986 (15 U.S.C. 
        3901 et seq.).
            (9) Reinsurance, whether provided by a professional 
        reinsurer having a Federal certificate under section 302, a 
        provider of reinsurance having a certificate under section 303, 
        or any other provider.
            (10) Any policies that were written or issued on any risks 
        that are located outside of the United States and its 
        territories.
            (11) Credit insurance, vendor's single interest insurance, 
        collateral protection insurance, or any similar insurance 
        protecting the interests of a creditor arising out of a 
        creditor-debtor transaction.
            (12) Any policy of commercial insurance issued by a highly 
        capitalized insurer to a large insurance buyer as provided by 
        this Act, except for third party claims against such large 
        business buyer which is in reorganization or liquidation 
        proceedings pursuant to title 11, United States Code.
            (13) Any policy issued by an insurer during a period in 
        which the insurer's certificate of solvency was revoked or 
        suspended.
    (b) Life and Health Insurance and Annuity Claims Coverage.--Life 
and health insurance contracts and annuity contracts written by member 
insurers shall be covered by NIPC and paid through the life and health 
claims division established in section 514, except the following:
            (1) Any portion of a policy or contract not guaranteed by 
        the insurer, or under which the risk is borne by the policy or 
        contract holder.
            (2) Any portion of a policy or contract to the extent that 
        the rate of interest on which it is based--
                    (A) averaged over the period of 4 years prior to 
                the date on which NIPC becomes obligated with respect 
                to such policy or contract, exceeds a rate of interest 
                determined by subtracting two percentage points from 
                Moody's Corporate Bond Yield Average for that same four 
                year period or for such lesser period if the policy or 
                contract was issued less than 4 years before NIPC 
                became obligated; and
                    (B) on and after the date on which NIPC becomes 
                obligated with respect to such policy or contract, 
                exceeds the rate of interest determined by subtracting 
                three percentage points from Moody's Corporate Bond 
                Yield Averages most recently available.
            (3) Any plan or program of an employer, association, or 
        similar entity to provide life, health, or annuity benefits to 
        its employees or members to the extent that such plan or 
        programs is self-funded or uninsured, including but not limited 
        to benefits payable by an employer, association, or similar 
        entity under--
                    (A) a Multiple Employer Welfare Arrangement as 
                defined in section 514 of the Employment Retirement 
                Income Security Act of 1974, as amended;
                    (B) a minimum premium group insurance plan;
                    (C) a stop-loss insurance plan; or
                    (D) an administrative services only contract.
            (4) Any portion of a policy or contract to the extent that 
        it provides dividends or experience rating credits, or provides 
        that any fees or allowances be paid to any person, including 
        the policy or contract holder, in connection with the service 
        to or administration of such policy or contract.
            (5) Any unallocated annuity contract issued to an ongoing 
        employee benefit plan protected under the Pension Benefit 
        Guaranty Corporation.
            (6) Any portion of any unallocated annuity contract which 
        is not issued to or in connection with a specific employee, 
        union, or association of natural persons benefit plan or a 
        government lottery.
            (7) Any policy issued by an insurer during a period in 
        which the insurer's certificate of solvency was revoked or 
        suspended.

SEC. 514. ASSESSMENTS.

    (a) In General.--All member insurers of NIPC shall be subject to 
assessments as provided in this section.
    (b) Assessments To Create the Fund.--
            (1) Initial assessments to create the fund shall be made on 
        an insurer at the time of certification, on a pro rata basis 
        both for the portion of the year covered by the certificate and 
        annually each year thereafter until the funds meet the level 
        established by NIPC in its bylaws.
            (2) NIPC shall assess an insurer, during the first 4 years 
        after it becomes a member of NIPC, an annual assessment 
        sufficient to assure that all NIPC members proportionately 
        share the burden of accumulating sufficient funds during the 
        first 10 years for NIPC's administrative expenses under 
        subsection (c) during such 10 years.
    (c) Assessments for Administrative Expenses.--
            (1) After the organization of NIPC, the Board of Directors 
        shall estimate the amount reasonably necessary to establish the 
        operations of NIPC to provide for its ongoing staff and other 
        administrative expenses for the current year. The amount to be 
        assessed may vary for each division under subsection (d) but 
        shall be on the same basis for each member of the division on 
        which the assessment is made. Assessments shall be levied in 
        the same proportion that the net direct written premiums 
        written by each member insurer in the preceding calendar year 
        on insurance covered by a NIPC guaranty bears to the total such 
        premiums of all division members. Further, the Board of 
        Directors may amend its bylaws to modify this assessment 
        procedure to reflect the risk of insolvency of the members.
            (2) The amounts assessed in accordance with this subsection 
        shall be due no later than 30 days after the notice of the 
        assessment is distributed to members.
    (d) Assessments for Covered Claims.--
            (1) NIPC shall establish separate claims divisions for 
        obligations related to covered claims of--
                    (A) property and casualty insurers, except for 
                those included in subparagraph (C);
                    (B) life and health insurers, except for those 
                included in subparagraph (C); and
                    (C) commercial insurance purchased from highly 
                capitalized insurers by large insurance buyers.
            (2) NIPC shall establish separate claims accounts within 
        the claims divisions designated in paragraphs (1)(A) and (1)(B) 
        as follows:
                    (A) The claims division designated in paragraph 
                (1)(A) shall be separated into a personal insurance 
                account and a commercial insurance account.
                    (B) The claims division designated in paragraph 
                (1)(B) shall be separated into a life insurance 
                account, a health insurance account, and an annuity 
                account.
            (3) Each claims division or account may borrow funds from 
        other claims divisions or accounts, with any such borrowing 
        first between accounts, and then between divisions if the 
        account in the same division has insufficient funds to loan. If 
        any funds are borrowed between divisions or accounts, such 
        funds, including interest at a rate to be determined by the 
        Board of Directors, must be repaid from assessments before 
        funds can begin to accumulate in the claims accounts that 
        benefited from the borrowing. This paragraph shall not be 
        interpreted to prohibit the borrowing claims account from 
        paying covered benefits or claims while such loans are 
        outstanding.
            (4) Except as provided in subsection (d) with respect to 
        assessments related to commercial insurance purchased from 
        highly capitalized insurers, each member insurer shall pay to 
        NIPC on or before the one hundred and twentieth day following 
        December 31 a regular annual assessment calculated to cover the 
        predicted future obligations of the fund. Such assessments 
        shall be calculated as a percentage of the net direct written 
        premiums from the covered lines of business of such member for 
        the applicable accounts during the preceding calendar year.
            (5) The bylaws shall impose upon member insurers such 
        additional special assessments as may be necessary to make up 
        any shortfall in an account caused by the inadequacy of regular 
        annual assessments. Any assessments so made shall be in 
        conformity with contractual obligations made by NIPC in 
        connection with any borrowing incurred by NIPC. Any such 
        assessment upon the members or any one or more classes thereof 
        shall be based upon the net direct written premiums for the 
        covered lines of business in the claims divisions and claims 
        accounts specified in this section.
    (e) Standards For Assessments.--
            (1) no assessment shall be made upon a member otherwise 
        than pursuant to this section,
            (2) the total of all assessments made under subsections (c) 
        and (d) shall not exceed 1 percent of net direct written 
        premiums during any 12-month period.
    (f) Date Assessments Due.--All assessments shall be paid not more 
than 30 days after notice thereof is sent by NIPC to the member unless 
the notice specifies that the assessment or a portion thereof is not 
payable until a later date.
    (g) Effect of Assessments.--Assessments made upon a member insurer 
under this title shall constitute ordinary and necessary expenses in 
carrying on the business of such member.
    (h) Information To Set Assessments.--Each member insurer shall file 
such information as NIPC shall determine to be necessary or appropriate 
for the purpose of making the assessments authorized by this section.
    (i) Underpayments and Late Payments.--If a member insurer fails to 
pay when due all or any part of an assessment made upon such member, 
the unpaid portion thereof shall bear interest at such rate as may be 
provided by the bylaws, and, in addition to such interest, NIPC may 
impose such penalty charge as may be provided in the bylaws. Any such 
penalty shall not exceed 25 percent of any unpaid portion of the 
assessment. NIPC may waive such penalty charge in whole or in part in 
circumstances where it considers such waiver appropriate.
    (j) Claims Payments and Recoveries.--
            (1) Covered claims, including the direct expenses of 
        handling such covered claims, which NIPC pays or becomes 
        obligated to pay by reason of its guaranty obligations shall be 
        paid from one or more claims divisions or accounts under 
        procedures established by the Board of Directors.
            (2) Amounts recovered from any source as reimbursement, 
        subrogation, or other recovery of amounts previously paid out 
        or incurred pursuant to NIPC's obligations shall be credited to 
        the appropriate claims division and account which had been 
        charged with the claim.
    (k) Special Provisions.--Notwithstanding the provisions of this 
section, all assessments under subsection (d) for covered claims 
related to commercial insurance purchased from highly capitalized 
insurers by large insurance buyers shall be calculated and maintained 
separately from the other claims accounts and shall be calculated to 
reflect the risk of both such insurer and its insureds that buy as 
large insurance buyers becoming insolvent.
    (l) Return of Excess Assessments.--If the Fund, through investment 
returns, exceeds the level established in the bylaws for 3 successive 
years, the Board shall distribute the excess to the members on the same 
basis as that on which the assessments were made.

SEC. 515. BORROWING AUTHORITY.

    NIPC shall have the authority, in addition to that described in 
section 514, to borrow as necessary and upon prior approval of the 
Board of Directors. Any such borrowing shall be made upon such terms 
and conditions as the Board determines, except that any funds so 
borrowed shall be repaid out of the assessments as collected and the 
funds resulting from such collection shall not be applied to any 
purpose other than the payment of guaranteed claims until the borrowed 
funds have been repaid. To secure the payment of principal and interest 
on any such borrowings the Corporation may pledge future assessments.

SEC. 516. FUNCTIONS OF THE FEDERAL INSURANCE SOLVENCY COMMISSION.

    (a) Administrative Procedure.--Determinations of the Commission, 
for purposes of making rules pursuant to section 510, shall be made 
after appropriate notice and opportunity for a hearing, and for 
submission of views of interested persons, in accordance with the 
rulemaking procedures specified in section 553 of title 5, United 
States Code.
    (b) Enforcement of Actions.--In the event of the refusal of NIPC to 
commit its funds or otherwise to act as required by this title, the 
Commission may apply to the district court of the United States in 
which the principal office of NIPC is located for an order requiring 
NIPC to discharge its obligations under this title, and for such other 
relief as the court may determine to be appropriate to carry out the 
purposes of this title.
    (c) Examinations and Reports.--
            (1) The Commission may make such examinations and 
        inspections of NIPC and require NIPC to furnish it with such 
        reports and records or copies thereof as the Commission may 
        consider necessary or appropriate in the public interest or to 
        effectuate the purposes of this title.
            (2) As soon as practicable after the close of each fiscal 
        year, NIPC shall submit to the Commission a written report 
        relative to the conduct of its business, and the exercise of 
        the other rights and powers granted by this title, during such 
        fiscal year. Such report shall include financial statements 
        setting forth the financial position of NIPC at the end of such 
        fiscal year and the results of its operations (including the 
        source and application of its funds) for such fiscal year. The 
        financial statements so included shall be examined by an 
        independent accountant in the same manner as for the financial 
        reports of federally certified insurers under this Act, and 
        shall be accompanied by the report thereon by such accountant. 
        The Commission shall transmit such report to the President and 
        the Congress with such comment thereon as the Commission 
        determines to be appropriate.

SEC. 517. NOTICE TO COMMISSION OF CHANGES IN CONDITIONS IN INSURANCE 
              MARKETS.

    Whenever NIPC shall conclude from all the information available to 
it that there have been developments in the insurance markets, industry 
practices, investment markets, the economy, regulatory supervision, or 
any other factors that might have a negative impact on the financial 
condition or solvency of federally certified insurers and reinsurers, 
it shall give written notice to the Commission of this conclusion along 
with any recommendations it may have to address the situation.

SEC. 518. LIABILITY OF THE MEMBER INSURERS.

    (a) Liability as to NIPC Obligations.--The liability of member 
insurers with respect to claims covered by NIPC shall be limited to the 
assessments authorized in this title and the members shall have no 
other liability under this Act as a member of NIPC for, or in 
connection with, any act or omission of any other member insurer, and 
shall have no liability for any indebtedness incurred by NIPC or for 
any act or omission of any officer, agent, or employee of NIPC.
    (b) Liability Under State Guaranty Funds After Obtaining A Federal 
Certificate of Solvency.--
            (1) A federally certified insurer shall remain liable, 
        notwithstanding its Federal certificate, for any assessment for 
        which it would have been liable under any State guaranty fund 
        law on account of policies issued by an insurer against which a 
        court order of liquidation with a finding of insolvency has 
        been issued prior to the date when the federally certified 
        insurer became a member of NIPC.
            (2) A federally certified insurer shall have limited 
        liability for assessments pursuant to State orders of 
        liquidation issued after it obtained a Federal certificate. 
        Such liability shall continue for each of the 4 years following 
        its obtaining a Federal certificate. Such assessments in such 
        cases shall be reduced by 25 percent each year until they 
        terminate entirely in the fifth year. Assessments shall be 
        based on the last 3 years of the insurer's operations before it 
        obtained its Federal certificate.
            (3) A federally certified insurer shall have no liability 
        for any assessments by State guaranty funds on account of 
        policies issued by an insurer against which a court order of 
        liquidation with a finding of insolvency has been issued on or 
        after the date such insurer becomes federally certified.
    (c) Liability to NIPC After Surrender of Federal Certificate of 
Solvency.--A federally certified insurer shall be subject to 
assessments based on the time for which it was certified, except that, 
notwithstanding anything to the contrary in sections 205(b) and 504(a), 
such insurer that surrenders its certification, whether voluntarily or 
involuntarily, shall continue to be liable on account of policies 
issued by other federally certified insurers against which a 
declaration of insolvency was entered on or before the date of the 
insurer's departure from NIPC. Upon decertification, the insurer shall 
have continuing liability for a period of 4 years for the amounts that 
would have been assessed had it remained federally certified. 
Assessments shall be reduced by 25 percent each year until they 
terminate entirely in the fifth year. Assessments shall otherwise be 
calculated in accordance with section 514.

SEC. 519. LIABILITY OF NIPC AND ITS DIRECTORS, OFFICERS, AND EMPLOYEES.

    (a) In General.--NIPC shall not be deemed to be an insurer within 
the meaning of any State law, rule, regulation, or order regulating or 
taxing insurers or other entities engaged in the business of insurance, 
including provisions imposing premium taxes, regulating insurer 
solvency or financial condition, establishing guaranty funds and 
levying assessments, or regulating claims settlement practices. The 
Corporation additionally shall be exempt from all taxes, assessments or 
other levies imposed by the United States or any State, municipal, 
county, or local government.
    (b) Liability of NIPC, its Directors, Officers, and Employees.--
Neither NIPC nor any of its directors, officers, or employees shall 
have any liability to any person for any action taken or omitted in 
good faith under or in connection with any matter subject to this Act.

SEC. 520. ADVERTISING.

    NIPC shall, by bylaw, prescribe the manner in which a member 
insurer may display any sign (or include in any advertisement or 
statement a provision) relating to the protection of customers and any 
other protections afforded by this Act. No member insurer may display 
any such sign or include in any advertisement any such statement except 
in accordance with such bylaws. NIPC may also, by bylaw, prescribe such 
minimal requirements as it considers necessary and appropriate to 
require a member of NIPC to provide public notice of its membership in 
NIPC.

SEC. 521. IMPROVEMENT OF INSOLVENCY PREVENTION AND DETECTION.

    NIPC shall assist the Commission in the development of improved 
standards for financial requirements, reporting and examination, or 
other procedures, methods, or techniques for avoiding insurance 
insolvencies and for promoting early detection and protective action in 
the case of insurers that are insolvent or approaching insolvency.

SEC. 522. GUARANTEE OBLIGATION OF NIPC.

    (a) Coverage.--NIPC shall as guarantor be obligated to pay covered 
benefits for claims upon a declaration by the Commission that a member 
insurer is financially impaired or insolvent. It shall pay all claims 
for which coverage exists under this Act. The Commission shall adjust 
for inflation the amount of benefits set by this section. This 
adjustment shall be made every fifth year unless for good cause the 
Commission determines that it should be adjusted more frequently.
    (b) Matters Subject to Payment from the Property and Casualty 
Insurance Claims Division.--The guaranty obligation as to covered 
claims for property and casualty insurance shall be satisfied by paying 
to the claimant an amount as follows:
            (1) The full amount of a covered claim for benefits under a 
        workers' compensation insurance coverage.
            (2) Any amount in excess of $100, but limited to $10,000 
        per policy for a covered claim for the return of unearned 
        premium.
            (3) An amount not exceeding $300,000 per claim for all 
        other covered claims which shall also not exceed that part of 
        the first $300,000 of the loss or liability giving rise to the 
        covered claim which the insurer would have been obligated to 
        pay under its policy or policies but for the order of 
        liquidation.
    (c) Matters Subject to Payment Under the Life and Health Insurance 
and Annuity Claims Division.--The guaranty obligation as to covered 
claims for life and health insurance and annuity coverage shall be 
satisfied by paying to the claimant an amount not exceeding the lesser 
of--
            (1) the contractual obligations for which the insurer is 
        liable or would have been liable if it were not an impaired or 
        insolvent insurer; or
            (2) with respect to any one life, regardless of the number 
        of policies or contracts--
                    (A) $300,000 in life insurance death benefits, but 
                not more than $100,000 in net cash surrender and net 
                cash withdrawal values for life insurance;
                    (B) $100,000 in health insurance benefits, 
                including any net cash surrender and net cash 
                withdrawal values;
                    (C) $100,000 in the present value of annuity 
                benefits, including net cash surrender and net cash 
                withdrawal values;
            (3) with respect to each individual participating in a 
        governmental retirement plan established under section 401, 
        403(b), or 457 of the Internal Revenue Code of 1986 covered by 
        an unallocated annuity contract or the beneficiaries of each 
        such individual if deceased, in the aggregate, $100,000 in 
        present value annuity benefits, including net case surrender 
        and net cash withdrawal values; or
            (4) with respect to any one contract holder covered by any 
        unallocated annuity contract not included in paragraph (2)(C), 
        $5,000,000 in benefits, irrespective of the number of such 
        contracts held by that contract holder, except that in no event 
        shall NIPC be liable to expend more than $300,000 in the 
        aggregate with respect to any one individual under paragraphs 
        (2) and (3).
    (d) Management of Claims.--In order to perform the obligations 
imposed by this section, NIPC shall--
            (1) investigate claims brought against NIPC and adjust, 
        compromise, settle and pay covered claims to the extent of 
        NIPC's obligation and deny all other claims and may review 
        settlements, releases and judgments to which the insolvent 
        insurer or its insureds were parties to determine the extent to 
        which such settlements, releases, and judgments may be properly 
        contested;
            (2) notify such persons as the Commission directs under 
        this Act;
            (3) handle claims through its employees or through one or 
        more insurers or other persons designated as servicing 
        facilities;
            (4) reimburse each servicing facility for obligations of 
        NIPC paid by the facility and for expenses incurred by the 
        facility while handling claims on behalf of NIPC and shall pay 
        the other expenses of NIPC authorized by this Act; and
            (5) be authorized to report information on suspected fraud 
        or civil violations to the Department of Justice and to the 
        Commission.
    (e) Limitations on Payments.--In no event shall NIPC be obligated 
to pay a claimant more than the insurer would have been obligated to 
pay, but for the order of rehabilitation or liquidation, under the 
policy from which the claim arose. Notwithstanding any other provision 
of this Act, NIPC shall not be obligated to pay any part of any claim 
filed with the receiver in rehabilitation or liquidation after the 
final date for the filing of claims against the receiver.

SEC. 523. EFFECT OF PAID CLAIMS.

    (a) Assignment.--Any person whose claim is paid by NIPC under this 
Act shall be deemed to have assigned its rights under the policy to 
NIPC to the extent of its payment from NIPC. Every insured or claimant 
seeking the protection of this Act shall cooperate with NIPC to the 
same extent as such person would have been required to cooperate with 
the insolvent insurer. NIPC shall have no cause of action against the 
insured of the insolvent insurer for any sums it has paid out except 
such causes of action as the insolvent insurer would have had if such 
sums had been paid by the insolvent insurer and except as provided in 
subsection (b). In the case of an insolvent insurer operating on a plan 
with assessment liability, payments of claims of NIPC shall not operate 
to reduce the liability of the insureds to the receiver for unpaid 
assessments.
    (b) Recovery.--NIPC shall have the right to recover from the 
affiliate of an insolvent insurer the amount of any liability 
obligations paid on behalf of such affiliate.

SEC. 524. NONDUPLICATION OF PAYMENT OF CLAIMS.

    Any person having a claim against an insurer under any provision in 
an insurance policy, other than a policy of an insolvent insurer, which 
is also a covered claim, shall be required to exhaust first its rights 
under such policy. Any amount payable on a covered claim under this Act 
shall be reduced by the amount of any recovery under such insurance 
policy.

SEC. 525. REPORTS ON PAYMENT OF CLAIMS.

    (a) Annual and Other Reports On Claims.--NIPC shall file with the 
Commission an annual statement, and such other statements as the 
Commission directs, of the covered claims paid by NIPC and estimates of 
anticipated claims on NIPC.
    (b) Examination of NIPC Records.--The Commission shall permit 
access by NIPC to such of the insolvent insurer's records which are 
necessary to carry out NIPC's functions under this Act with regard to 
covered claims. In addition, the Commission shall provide NIPC with 
copies of such records upon request and at NIPC's expense.

SEC. 526. STAY OF PROCEEDINGS.

    All proceedings in which the insolvent member insurer is a party or 
is obligated to defend a party in any court shall be stayed for 6 
months and such additional time thereafter as may be determined by the 
court from the date the insolvency is determined to permit proper 
defense by NIPC of all pending causes of action. As to any covered 
claim arising from a judgment under any decision verdict or finding 
based on the default of the insolvent insurer or its failure to defend 
an insured, NIPC, either on its own behalf or on behalf of such 
insured, may apply to have such judgment, order, decision, verdict or 
finding set aside by the same court or administrator that made such 
judgment, order, decision, verdict, or finding and shall be permitted 
to defend such claim on the merits.

SEC. 527. JUDICIAL REVIEW.

    (a) Jurisdiction.--The appropriate United States district court 
shall have exclusive jurisdiction over litigation involving NIPC, 
including--
            (1) disputes between NIPC and its member insurers that 
        arise under this Act;
            (2) controversies between NIPC and claimants seeking NIPC 
        guaranty fund coverage; and
            (3) suits brought by NIPC under this Act and against 
        persons affiliated with the insolvent insurer.
Suits brought in State court involving NIPC shall be deemed to have 
arisen under Federal law and therefore subject to jurisdiction in the 
appropriate United States district court.
    (b) Exhaustion of Remedies.--A claimant must exhaust the 
administrative remedies before NIPC and the Commission as to a claim 
before it may seek judicial review of the decision on the claim.

    TITLE VI--NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS

SEC. 601. NATIONAL ASSOCIATION OF REGISTERED AGENTS AND BROKERS.

    There is established a body corporate to be known as the ``National 
Association of Registered Agents and Brokers''. NARAB shall be a 
nonprofit corporation and shall have succession until dissolved by an 
Act of Congress. NARAB shall--
            (1) not be an agency or establishment of the United States 
        Government; and
            (2) except as otherwise provided in this Act, be subject 
        to, and have all the powers conferred upon a nonprofit 
        corporation by, the District of Columbia Nonprofit Corporation 
        Act (D.C. Code, sec. 29-1001 and fol.).

SEC. 602. PURPOSE.

    The purpose of NARAB is to provide a mechanism by which the multi-
State services of State-licensed insurance producers may be more 
efficiently provided to policyholders, while preserving the right of 
States to license, supervise, and discipline insurance producers.

SEC. 603. RELATIONSHIP TO THE FEDERAL GOVERNMENT.

    NARAB shall be subject to the supervision and oversight of the 
Commission. Funds held by or due to NARAB shall not be included in the 
budget of the United States nor may the United States borrow or pledge 
such funds.

SEC. 604. MEMBERSHIP.

    (a) In General.--All State-licensed insurance agents, brokers, 
surplus lines brokers, insurance consultants, and limited insurance 
representatives (hereinafter referred to as ``insurance producers'') 
are eligible for membership in NARAB.
    (b) Authority to Establish Membership Criteria.--NARAB shall have 
the authority to establish membership criteria that--
            (1) bear a reasonable relationship to the purposes for 
        which NARAB was established; and
            (2) do not unfairly limit the access of smaller agencies to 
        NARAB membership.
    (c) Classes of Membership.--NARAB shall have the authority to 
establish separate classes of membership, with separate criteria, where 
it reasonably determines that performance of different duties requires 
different levels of education, training, or experience. NARAB shall 
have the authority to establish separate categories of membership for 
individuals and for other persons.
    (d) Membership Criteria.--NARAB shall have the authority to 
establish membership criteria to establish the integrity, personal 
qualifications, education, training, and experience of members, and any 
criteria reasonably incidental thereto.
    (e) Annual Renewal.--Membership in NARAB shall be renewed on an 
annual basis and may be subject to reasonable continuing education 
requirements.
    (f) Suspension and Revocation.--NARAB shall have the authority to 
inspect and examine its members to determine compliance with NARAB 
criteria and to suspend or revoke membership upon a showing that--
            (1) applicable membership criteria are no longer being met, 
        or
            (2) a member has been subject to disciplinary proceedings 
        under the jurisdiction of a State insurance regulator and NARAB 
        concludes that retention of membership would not be in the 
        public interest.

SEC. 605. CORPORATE POWERS.

    NARAB shall have the power--
            (1) to sue and be sued, in its corporate name and through 
        its own counsel in any State, Federal or other court;
            (2) to adopt, alter, and use a corporate seal, which shall 
        be judicially noticed;
            (3) to adopt, amend, and repeal, by its Board of Directors, 
        such bylaws and rules as may be necessary or appropriate to 
        carry out the purposes of this title, including bylaws relating 
        to--
                    (A) the conduct of its business; and
                    (B) the indemnity of its directors, officers, and 
                employees for liabilities and expenses actually and 
                reasonably incurred by any such person in connection 
                with the defense or settlement of an action or suit if 
                such person acted in good faith and in a manner 
                reasonably believed to be consistent with the purposes 
                of this title;
            (4) to adopt, amend, and repeal, by its Board of Directors 
        such rules as may be necessary or appropriate to carry out the 
        purposes of this title, including rules relating to--
                    (A) the definition of terms used in this title, 
                other than those terms for which a definition is 
                provided herein;
                    (B) the procedures for payment of NARAB 
                assessments; and
                    (C) the exercise of all other rights and powers 
                granted to it by this title;
            (5) to conduct its business (including the carrying on of 
        operations and the maintenance of offices) and to exercise all 
        other rights and powers granted to it by this title in any 
        State or other jurisdiction without regard to any 
        qualification, licensing, or other statutory requirement in 
        such State or other jurisdiction;
            (6) to lease, purchase, accept gifts or donations of or 
        otherwise acquire, to own, hold, improve, use, or otherwise 
        deal in or with, and to sell, convey, mortgage, pledge, lease, 
        exchange or otherwise dispose of any property, real, personal 
        or mixed, or any interest therein, wherever situated;
            (7) to elect or appoint such officers, attorneys, 
        employees, and agents as may be required, to determine their 
        qualifications, to define their duties, to fix their salaries, 
        require bonds for them, and fix the penalty thereof;
            (8) to enter into contracts, to execute instruments, to 
        incur liabilities, and to do any and all other acts and things 
        as may be necessary or incidental to the conduct of its 
        business and the exercise of all other rights and powers 
        granted to NARAB by this title;
            (9) to suspend or revoke NARAB membership in the manner 
        provided elsewhere in this title;
            (10) to levy and collect assessments upon its members, in 
        the manner and, to the extent provided elsewhere in this Act, 
        to cover the administrative expenses of NARAB in a manner that 
        does not unfairly discriminate against smaller insurance 
        producers;
            (11) to provide advice and recommendations to Congress, the 
        courts and the Commission on matters pertaining to the 
        regulation and practices of insurance producers.

SEC. 606. BOARD OF DIRECTORS.

    (a) Powers.--The Board of Directors shall be the governing body of 
NARAB and shall be vested with all powers necessary for the management 
and administration of the affairs of the Corporation and the promotion 
of its purposes as authorized by this title. The Board's authority 
shall be specified in the bylaws of NARAB.
    (b) Composition.--The Board shall be composed of 7 members or such 
higher number as determined by the Board and as approved by the 
Commission. All directors shall be elected by the membership of NARAB. 
The bylaws of NARAB shall require that directors be selected in a 
manner fairly representing the various types of insurance producers who 
are eligible to become NARAB members.
    (c) Terms.--The term of each director shall, after the first 
election, be for 3 years, with one-third of the directors to stand for 
election each year. Directors may be elected to serve for any number of 
terms.
    (d) Vacancies.--A vacancy in the Board shall be filled in the same 
manner as the original appointment.
    (e) Compensation.--All matters relating to compensation of 
directors shall be as provided in the bylaws of NARAB.
    (f) Initial Appointments.--The Commission shall appoint an initial 
Board to carry out the establishment of the bylaws and the first 
elections of NARAB.

SEC. 607. CHAIRPERSON AND VICE CHAIRPERSON.

    (a) Election.--The members of NARAB shall select the chairperson 
and vice chairperson from among those candidates for the Board.
    (b) Initial Appointments.--The Commission shall select the initial 
chairperson and vice chairperson from among the initial appointments to 
the Board under section 606. The persons so selected shall carry out 
the authorities of office until the first election by the member 
insurers. They shall act to ensure that such election is scheduled at 
the earliest appropriate time.

SEC. 608. OFFICERS.

    The officers of NARAB shall consist of a chairman, a vice chairman, 
a president, a secretary, and a treasurer, and may include one or more 
vice presidents and such other officers and assistant officers as may 
be deemed necessary, each of whom shall be elected or appointed at such 
time and in such manner and for such terms not exceeding 3 years as may 
be prescribed by bylaw. In the absence of any such provision, all 
officers shall be elected or appointed annually by the Board of 
Directors.

SEC. 609. MEETINGS OF BOARD.

    The Board of Directors shall meet at the call of its Chairman, or 
as otherwise provided by the bylaws of NARAB.

SEC. 610. BYLAWS, RULES, AND DISCIPLINARY ACTION.

    (a) Adoption and Amendment of Bylaws.--The Board of Directors of 
NARAB shall file with the Commission a copy of the proposed bylaws or 
any proposed amendment to the bylaws, accompanied by a concise general 
statement of the basis and purpose of such proposal. The proposed 
bylaws and each proposed amendment shall take effect 30 days after the 
date of the filing of a copy thereof with the Commission, or upon such 
later date as NARAB may designate or such earlier date as the 
Commission may determine, unless--
            (1) the Commission, by notice to NARAB setting forth the 
        reasons therefore, disapproves such proposal as being contrary 
        to the public interest or contrary to the purposes of this 
        title; or
            (2) the Commission finds that such proposal involves a 
        matter of such significant public interest that public comment 
        should be obtained, in which case it may, after notifying NARAB 
        in writing of such finding, require that the procedures set 
        forth in subsection (b) be followed with respect to such 
        proposal, in the same manner as if such proposed bylaw change 
        were a proposed rule change within the meaning of such 
        paragraph.
    (b) Adoption and Amendment of Rules.--
            (1) The Board of Directors of NARAB shall file with the 
        Commission, in accordance with its regulations, a copy of any 
        proposed rule or any proposed amendment to a rule of NARAB 
        accompanied by a concise general statement of the basis and 
        purpose of such proposal. The Commission shall, upon the filing 
        of any proposal, publish notice thereof, together with the 
        terms of substance of such proposal or a description of the 
        subjects and issues involved. The Commission shall give 
        interested persons an opportunity to submit written views, and 
        arguments with respect to such proposal. No proposed rule or 
        amendment shall take effect unless approved by the Commission 
        or otherwise permitted in accordance with this paragraph.
            (2) Within 35 days after the date of publication of notice 
        of the filing of a proposal, or within such longer period as 
        the Commission may designate of not more than 90 days after 
        such date if it finds such longer period to be appropriate and 
        publishes its reasons for so finding, or as to which NARAB 
        consents, the Commission shall--
                    (A) by order approve such proposed rule or 
                amendment; or
                    (B) institute proceedings to determine whether such 
                proposed rule or amendment should be modified or 
                disapproved.
            (3) Proceedings instituted with respect to a proposed rule 
        or amendment pursuant to paragraph (2) shall include notice of 
        the grounds for disapproval under consideration and opportunity 
        for hearing and shall be concluded within 180 days after the 
        date of publication of notice of the filing of such proposed 
        rule or amendment. At the conclusion of such proceedings, the 
        Commission shall, by order, approve or disapprove such proposed 
        rule or amendment. The Commission may extend the time for 
        conclusion of such proceedings for not more than 60 days if it 
        finds good cause for such extension and publishes its reasons 
        for so finding, or for such longer period as to which NARAB 
        consents.
            (4) The Commission shall approve a proposed rule or 
        amendment if it finds that it is in the public interest and is 
        consistent with the purposes of this title, and any proposed 
        rule or amendment so approved shall be given force and effect 
        as if promulgated by the Commission. The Commission shall 
        disapprove a proposed rule or amendment if it does not make the 
        finding referred to in the preceding sentence. The Commission 
        shall not approve any proposed rule change prior to 30 days 
        after the date of publication of notice of the filing thereof, 
        unless the Commission finds good cause for so doing and 
        publishes its reasons for so findings.
            (5) Notwithstanding any other provision of this subsection, 
        a proposed rule or amendment may take effect--
                    (A) upon the date of filing with the Commission, if 
                such proposed rule or amendment is designated by NARAB 
                as relating solely to matters which the Commission, 
                consistent with the public interest and the purposes of 
                this subsection, determines by rule do not require the 
                procedures set forth in this paragraph; or
                    (B) upon such date as the Commission shall for good 
                cause determine, except that any proposed rule or 
                amendment, which takes effect under this subparagraph, 
                shall be filed promptly thereafter and reviewed in 
                accordance with paragraph (1).
        At any time within 60 days after the date of filing of any 
        proposed rule or amendment under subparagraph (A) or (B), the 
        Commission may summarily abrogate such rule or amendment and 
        require that it be refiled and reviewed in accordance with this 
        paragraph, if the Commission finds that such action is 
        necessary or appropriate in the public interest, for the 
        protection of insurance producers or policyholders, or 
        otherwise in furtherance of the purposes of this title. Any 
        action of the Commission pursuant to the preceding sentence 
        shall not affect the validity or force of a rule change during 
        the period it was in effect and shall not be subject to 
        judicial review or be considered to be final agency action.
    (c) Action Required by the Commission.--The Commission may, by such 
rules as it determines to be necessary or appropriate to the public 
interest or to carry out the purposes of this title, require NARAB to 
adopt, amend, or repeal any NARAB bylaw or rule, whenever adopted.
    (d) Legal Effect of Bylaws and Rules.--The bylaws and rules adopted 
pursuant to this section shall be subject to judicial review in the 
same manner as the regulations of the Commission.
    (e) Disciplinary Action by NARAB.--In any proceeding to determine 
whether membership shall be denied, suspended, revoked, and not renewed 
(hereinafter referred to as ``disciplinary action''), NARAB shall bring 
specific charges, notify such member of, and give the member an 
opportunity to defend against such charges and keep a record. A 
determination to take disciplinary action shall be supported by a 
statement setting forth--
            (1) any act or practice in which such member has been found 
        to have engaged;
            (2) the specific provision of this title, the rules or 
        regulations thereunder, or the rules of NARAB which any such 
        act or practice is deemed to violate; and
            (3) the sanction imposed and the reason therefor.
    (f) Commission Review Of Disciplinary Action.--If NARAB orders any 
disciplinary action, it shall promptly notify the Commission. Such 
disciplinary action shall be subject to review by the Commission on its 
own motion, or upon application by any person aggrieved thereby filed 
within 30 days after the date such notice was filed with the Commission 
and received by such aggrieved person or within such longer period as 
the Commission may determine. Application to the Commission for review, 
or the institution of review by the Commission on its own motion, shall 
not operate as a stay of disciplinary action unless the Commission 
otherwise orders. In any proceeding to review such action, after notice 
and the opportunity for hearing, the Commission shall--
            (1) determine whether the action should be taken;
            (2) affirm, modify, or rescind the disciplinary sanction; 
        or
            (3) remand to NARAB for further proceedings.
The Commission shall also have the authority to dismiss a proceeding to 
review disciplinary action if the Commission finds that the specific 
grounds on which the action is based exist in fact; that the action is 
in accordance with applicable rules and regulations; and that such 
rules and regulations are, and were, applied in a manner consistent 
with the purposes of this title.

SEC. 611. CONSULTATION WITH THE FEDERAL INSURANCE SOLVENCY COMMISSION.

    The Commission shall, as appropriate, consult with NARAB concerning 
the regulation and activities of insurance producers. The purpose of 
this consultation shall be to provide the Commission the benefit of the 
expert views of the NARAB on these matters.

SEC. 612. BORROWING AUTHORITY.

    NARAB shall have the authority to borrow as necessary and upon 
prior approval of the Board of Directors. Any such borrowing shall be 
made upon such terms and conditions as the board determines, except 
that any funds so borrowed shall be repaid out of the assessments as 
collected. To secure the payment of principal and interest on any such 
borrowings the Corporation may pledge future assessments.

SEC. 613. ASSESSMENTS.

    All insurance producers that are members of NARAB shall be subject 
to assessments for the costs of considering their applications, on 
acceptance as members, and annually each year thereafter. Such 
assessments shall be set by NARAB by rule and shall cover the costs of 
operation of NARAB.

SEC. 614. FUNCTIONS OF THE FEDERAL INSURANCE SOLVENCY COMMISSION.

    (a) Administrative Procedure.--Determinations of the Commission, 
for purposes of making rules pursuant to section 610, shall be made 
after appropriate notice and opportunity for a hearing and for 
submission of views of interested persons, in accordance with the 
rulemaking procedures specified in section 553 of title 5, United 
States Code.
    (b) Examinations and Reports.--
            (1) The Commission may make such examinations and 
        inspections of NARAB and require NARAB to furnish it with such 
        reports and records or copies thereof as the Commission may 
        consider necessary or appropriate in the public interest or to 
        effectuate the purposes of this title.
            (2) As soon as practicable after the close of each fiscal 
        year, NARAB shall submit to the Commission a written report 
        relative to the conduct of its business, and the exercise of 
        the other rights and powers granted by this title, during such 
        fiscal year. Such report shall include financial statements 
        setting forth the financial position of NARAB at the end of 
        such fiscal year and the results of its operations (including 
        the source and application of its funds) for such fiscal year. 
        The financial statements so included shall be examined by an 
        independent accountant in the same manner as for the financial 
        reports of federally certified insurers under this Act, and 
        shall be accompanied by the report thereon by such accountant. 
        The Commission shall transmit such report to the President and 
        the Congress with such comment thereon as the Commission 
        determines to be appropriate.

SEC. 615. LIABILITY OF NARAB AND ITS DIRECTORS, OFFICERS, AND 
              EMPLOYEES.

    (a) In General.--NARAB shall not be deemed to be an insurer or 
insurance producer within the meaning of any State law, rule, 
regulation, or order regulating or taxing insurers, insurance 
producers, or other entities engaged in the business of insurance, 
including provisions imposing premium taxes, regulating insurer 
solvency or financial condition, establishing guaranty funds and 
levying assessments, or requiring claims settlement practices. The 
Corporation additionally shall be exempt from all taxes, assessments, 
or other levies imposed by any State, municipal, county, or local 
government.
    (b) Liability of NARAB, Its Directors, Officers, and Employees.--
Neither NARAB nor any of its directors, officers, or employees shall 
have any liability to any person for any action taken or omitted in 
good faith under or in connection with any matter subject to this 
title.

SEC. 616. RELATIONSHIP TO STATE LAW.

    (a) In General.--Except as set forth in subsection (b), all State 
laws, regulations, provisions, or actions purporting to regulate 
insurance producers shall remain in full force and effect.
    (b) Preemption of State Laws.--State laws, regulations, provisions 
or actions purporting to regulate insurance producers shall be 
preempted in the following instances:
            (1) No State shall impede the activities of, take any 
        action against, or apply any provision of law or regulation to, 
        any insurance producers because that insurance producer or any 
        affiliates plan to become, has applied to become, or is, a 
        member of NARAB.
            (2) No State shall impose any requirement upon a member of 
        NARAB that has the effect of limiting that member's activities 
        because of its residence or place of operations including, but 
        not limited to, any requirement that a licensed insurance 
        producer be a resident of a particular State or any requirement 
        that it comply with the conditions of a counter-signature law.
            (3) No State shall impose any requirement upon a member of 
        NARAB that is different than the criteria for NARAB membership 
        or renewal thereof.
            (4) No State shall implement the procedures of its system 
        of licensing or renewing the licenses of insurance producers in 
        a manner different than NARAB authority, as set forth in 
        section 617.
    (c) Preemption Authority.--The State laws, regulations, provisions, 
and actions enumerated in subsection (b) shall be preempted on the date 
of the enactment of this Act. Where it is unclear whether State laws or 
regulations fall into the categories enumerated in subsection (b), the 
Commission shall have the authority, by regulation, to define those 
State laws and regulations that have been preempted by this Act. The 
Commission shall also have the authority to issue, after the 
opportunity for a hearing on the record, an order that stays the effect 
of any State law or regulation which is preempted until the Commission 
can complete the issuance of a regulation defining such preemption.

SEC. 617. COORDINATION WITH OTHER REGULATORS.

    (a) Coordination With State Insurance Regulators.--NARAB shall have 
the authority, subject to Commission review, to--
            (1) issue uniform insurance producer applications and 
        renewal applications that may be used to apply for the issuance 
        or removal of State licenses, while preserving the ability of 
        each State to impose such conditions on the issuance or renewal 
        of a license as are consistent with section 616,
            (2) establish a central clearinghouse through which NARAB 
        members may apply for the issuance or renewal of licenses in 
        multiple States, and
            (3) establish a national database for the collection of 
        regulatory information concerning the activities of insurance 
        producers.
    (b) Coordination With the National Association of Securities 
Dealers.--NARAB shall coordinate with the National Association of 
Securities Dealers in order to ease any administrative burdens that 
fall on persons that are members of both associations, consistent with 
the purposes of this title and the Federal securities laws.

SEC. 618. JUDICIAL REVIEW.

    (a) Jurisdiction.--The appropriate United States district court 
shall have exclusive jurisdiction over litigation involving NARAB, 
including disputes between NARAB and its members that arise under this 
title. Suits brought in State court involving NARAB shall be deemed to 
have arisen under Federal law and therefore be subject to jurisdiction 
in the appropriate United States district court.
    (b) Exhaustion of Remedies.--An aggrieved person must exhaust the 
administrative remedies before NARAB before it may seek judicial review 
of the NARAB decision.

               TITLE VII--REHABILITATION AND LIQUIDATION

SEC. 701. JURISDICTION.

    (a) Receivership.--(1) The Commission shall act as receiver of any 
federally certified insurer or reinsurer for purposes of rehabilitation 
or liquidation and shall be appointed as receiver in proceedings 
instituted in accordance with this title.
    (2) The appropriate State insurance regulator shall act as receiver 
of any insurer or reinsurer which does not have a Federal certificate. 
Such regulator may request the Commission to act as receiver in its 
place.
    (b) Administrative Intervention.--The Commission and the 
appropriate State insurance regulator shall administratively seize an 
insurer or reinsurer under their jurisdiction if the financial 
condition of such insurer or reinsurer is substantially and imminently 
threatened and the seizure is in accordance with this title.
    (c) Court.--The United States district courts shall have exclusive 
jurisdiction of proceedings to appoint a receiver of an insurer or 
reinsurer and of disputes regarding administrative intervention and, 
following appointment of a receiver, to supervise a rehabilitation or 
liquidation in conformity with this title.

SEC. 702. PETITION FOR APPOINTMENT.

    (a) Filing of Petition.--A proceeding to appoint the receiver shall 
be commenced by the filing of a petition, by the Commission or by the 
appropriate State insurance regulator, seeking such appointment in the 
appropriate United States district court.
    (b) Recommendation of the National Insurance Protection 
Corporation.--In determining whether to file a petition for 
receivership as to a federally certified insurer, the Commission may 
consult with NIPC concerning the advisability of filing such petition, 
concerning whether the petition should be for rehabilitation or 
liquidation, and concerning such other matters as the Commission 
determines appropriate.

SEC. 703. ORDER APPOINTING COMMISSION RECEIVER.

    (a) In General.--An order appointing a receiver as provided by 
section 701 shall--
            (1) specify whether the receiver is to act to rehabilitate 
        or to liquidate the insurer or reinsurer; and
            (2) require financial status reports which include a 
        listing of all funds received or disbursed by the receiver 
        during the period covered by the report to be filed within 6 
        months of the court order of receivership and quarterly 
        thereafter.
    (b) State Regulated Insurers and Reinsurers.--If the insurer or 
reinsurer holds a State insurance license, a copy of the reports shall 
be served upon the insurance regulators of the State of the insurer or 
reinsurer's domicile and of each State in which it is or was licensed 
or transacted any insurance business.

SEC. 704. EFFECT OF ORDER.

    (a) Transfers.--The order appointing the receiver shall have the 
effect of immediately transferring to the receiver the possession and 
control and the unconditional right to possession and control of all of 
the business, assets, and affairs of the insurer or reinsurer.
    (b) Contracts.--The entry of an order appointing a receiver shall 
not constitute an anticipatory breach of any contract of the insurer or 
reinsurer or provide ground for revocation or cancellation of any such 
contract other than by the receiver.
    (c) Legal Remedies.--The receiver is vested with all rights of 
action--
            (1) held by the insurer or reinsurer in receivership; and
            (2) raised on behalf of policyholders and creditors.

SEC. 705. APPLICABILITY OF RECEIVERSHIP TO FOREIGN INSURERS AND 
              REINSURERS.

    The Commission shall be appointed as receiver under this Act for a 
foreign insurer or reinsurer to the extent of its assets, operations, 
and business in the United States. To the extent that such assets are 
insufficient to cover claims against a foreign insurer or reinsurer, 
the receiver may bring an action in the United States district court 
with jurisdiction over the receivership to recover amounts due and 
owing.

SEC. 706. INJUNCTIONS AND ORDERS.

    The Commission may at any time apply for such restraining orders, 
preliminary and permanent injunctions, and other orders as may be 
deemed necessary to prevent--
            (1) the transaction of further business by or on behalf of 
        the insurer or reinsurer;
            (2) the transfer of property of or on behalf of the insurer 
        or reinsurer;
            (3) interference with the receiver or with a proceeding 
        under this Act;
            (4) waste of the assets of the insurer or reinsurer;
            (5) dissipation and transfer of bank accounts of the 
        insurer or reinsurer;
            (6) the institution or further prosecution of any actions 
        or proceedings against the insurer or reinsurer, the receiver, 
        or any reinsurer of the insurer or reinsurer except when such 
        reinsurer has a valid contractual obligation to pay reinsurance 
        proceeds to a party other than the insurer or reinsurer;
            (7) the obtaining of preferences, judgments, attachments, 
        garnishments, or liens against the insurer or reinsurer or its 
        assets;
            (8) the levying of execution against the insurer or 
        reinsurer or its assets;
            (9) the making of any sale or deed for nonpayment of taxes 
        or assessments that would lessen the value of the assets of the 
        insurer or reinsurer;
            (10) the withholding from the receiver of books, accounts, 
        documents, or other records relating to the business of the 
        insurer or reinsurer; or
            (11) any other threatened or contemplated action that might 
        lessen the value of the insurer's or reinsurer's assets or 
        prejudice the rights of policyholders, creditors, or 
        shareholders, or the administration of any proceeding under 
        this Act.
The Court shall not require the receiver to submit a bond or other 
security as a condition of issuing an order under this section.

SEC. 707. ACTIONS BY AND AGAINST THE RECEIVER.

    (a) Automatic Stay.--The entry of the order of the district court 
appointing the receiver for an insurer or reinsurer shall operate as a 
stay of--
            (1) every action or proceeding in any State or Federal 
        court, and
            (2) every administrative proceeding,
in which the insurer or reinsurer is a party, or is obligated to defend 
a party, for 90 days to enable the receiver, guaranty associations, and 
insureds to obtain representation and prepare for further proceedings. 
The district court, upon application of the receiver, guaranty 
associations, and insureds, shall grant injunctions and orders directed 
to any and all courts, persons, and parties as necessary to confirm or 
secure such stays of proceedings, or to extend any such stay upon a 
showing by the applicant that additional time is necessary for it to 
participate competently in the further conduct of the action or 
proceeding. Any decision, verdict, or finding based on the default of 
the insurer or reinsurer or on the failure of the receiver or any 
guaranty association to defend an insured shall, upon application by 
the receiver or guaranty association, be set aside by the court or 
administrator that entered such decision, verdict, or finding.
    (b) Pending Litigation.--The receiver shall take such action 
respecting all pending litigation in which the insurer or reinsurer is 
a party as it deems necessary in the interests of justice for the 
protection of creditors, policyholders, and the public.
    (c) Preservation of Actions.--No statute of limitations or defense 
of laches shall run with respect to any cause of action by or against 
an insurer or reinsurer between the filing of a petition for 
appointment of the receiver and the order granting or denying that 
petition. Any action against the insurer or reinsurer that might have 
been commenced when the petition was filed may be commenced within 90 
days after the order appointing the receiver has been entered or the 
petition is denied. The receiver may within one year, or such longer 
time as applicable law may permit, institute an action on behalf of an 
insurer or reinsurer upon any cause of action against which the period 
of limitation fixed by applicable law has not expired at the time of 
the filing of the petition.

SEC. 708. JURISDICTION OVER ACTIONS BY AND AGAINST RECEIVER; TRANSFER.

    The appropriate district court of the United States shall have 
exclusive jurisdiction over cases brought by the receiver pursuant to 
this title. All cases pending or thereafter initiated against the 
estate of the insurer or reinsurer or against the receiver shall be 
filed with or transferred to the district court with jurisdiction over 
the receivership proceedings.

SEC. 709. EXPENSES OF ESTABLISHING RECEIVERSHIP.

    (a) Payment.--All expenses of the receiver or of any person acting 
under its authority and direction--
            (1) in the taking possession of the insurer or reinsurer in 
        receivership,
            (2) of conducting the proceedings placing the insurer or 
        reinsurer in receivership,
            (3) of obtaining the appointment of the receiver, and
            (4) in the administration of the receivership and in the 
        conduct of all proceedings related to the receivership,
shall be paid out of the funds or assets of the covered entity as a 
Class 1 expense as described in section 743.
    (b) Expenses.--In the event that the estate of the entity does not 
contain sufficient cash or liquid assets to defray the costs incurred, 
the receiver may pay the costs so incurred from its general funds. Any 
amounts so advanced for expenses of establishing the receivership and 
for its administration shall be repaid to the receiver as 
administrative expenses when sufficient assets are liquidated.

SEC. 710. PROCEEDINGS AGAINST CULPABLE PERSONS.

    If it appears to the receiver in a rehabilitation or liquidation 
proceeding that there has been criminal or tortious conduct, or breach 
of any contractual or fiduciary obligation detrimental to the insurer 
or reinsurer by any officer, manager, agent, broker, employee or other 
person, the receiver may pursue all appropriate legal remedies on 
behalf of the insurer or reinsurer in receivership.

SEC. 711. SPECIAL DEPOSITS.

    Any deposit of an insurer or reinsurer for which the Commission is 
receiver and that is held by a State insurance regulator shall be 
transferred to the Commission upon entry of the receivership order.

SEC. 712. AUDITS.

    Any insurer or reinsurer in receivership that has more than 
$500,000 in assets shall be audited annually by an independent outside 
certified public accountant approved by the court. The cost of the 
audit shall be paid from the assets of the insurer or reinsurer in 
receivership.

SEC. 713. STANDING OF GUARANTY ASSOCIATIONS.

    NIPC and any guaranty association shall have standing to appear in 
any court proceeding concerning the rehabilitation or liquidation of an 
insurer or reinsurer if such association has paid guaranty obligations 
for which it has not been reimbursed or is or may become liable for as 
guarantor of obligations of the insurer or reinsurer in rehabilitation 
or liquidation.

SEC. 714. PROHIBITED AND VOIDABLE TRANSFERS PRIOR TO PETITION FOR 
              RECEIVERSHIP.

    (a) Prohibited Transfers.--No insurer or reinsurer shall make any 
transfer of its property with the effect of giving to or enabling any 
creditor or policyholder to obtain a greater percentage of the 
creditor's debt than any other creditor of the same class.
    (b) Voidable Transfers.--Any transfer of property which gives or 
enables any creditor or policyholder to obtain a greater percentage of 
the creditor's debt than any other creditor or policyholder in the same 
class may be avoided by the receiver if the insurer or reinsurer was 
insolvent at the time of the transfer and either--
            (1) the transfer was made within 4 months before the filing 
        of a petition for receivership; or
            (2) the creditor receiving such transfer was--
                    (A) an officer of the insurer or reinsurer;
                    (B) any person other than an officer who was in 
                fact in a position of influence over the insurer or 
                reinsurer comparable to that of an officer;
                    (C) any shareholder holding directly or indirectly 
                more than 5 percent of any class of any equity security 
                issued by the insurer or reinsurer; or
                    (D) any other person with whom the insurer or 
                reinsurer did not deal at arm's length.
The 4-month period referred to in paragraph (1) shall not expire until 
4 months after the date of the recording or the registering of the 
transfer if by law such recording or registering is required.
    (c) Liability for Transfers.--Every director, officer, employee, 
stockholder, member, or any other person, acting on behalf of an 
insurer or reinsurer in receivership, who, within 2 years prior to the 
filing of the petition for receivership, shall knowingly participate in 
the making of any transfer prohibited by subsection (a) and every 
person receiving any property of, or cash surrender from, such insurer 
or reinsurer or the benefit thereof, as a result of a transaction 
voidable under subsection (b) shall be jointly and severally liable 
therefor and shall be bound to account to the receiver.
    (d) Avoidance of Transfers.--The receiver may avoid any transfer of 
the property of such insurer or reinsurer which any creditor, 
stockholder, or member might have avoided and may recover the property 
so transferred or its value from the person to whom it was transferred 
unless the transferee was a bona fide holder for value prior to the 
date of the entry of the order of receivership. Such property may be 
recovered or its value collected from whomever may have received it 
except a bona fide holder for value.
    (e) Reinsurance Transactions.--Any transaction which consists of 
the termination or reduction in coverage or limits of a reinsurance 
contract that meets all of the following conditions shall be voidable:
            (1) The transaction was agreed upon or made effective or 
        executed prior to the expiration of 180 days from the date of 
        which the reinsurance originally became effective.
            (2) The transaction released the assuming reinsurer, in 
        whole or in part, from its obligation to pay its originally 
        specified share of those losses which had occurred prior to the 
        time of the transaction but which had not been paid by the 
        ceding insurer or reinsurer.
            (3) Any part of the transaction was effected within 1 year 
        prior to the filing of the petition for receivership.
            (4) The ceding insurer or reinsurer did not receive fair 
        consideration for the transaction based on information 
        available to such insurer or reinsurer at the time of the 
        transaction.
The receiver or the court may avoid such transaction at any time within 
180 days after such application for receivership by tender to the 
assuming reinsurer of any money or other consideration which passed to 
the ceding insurer or reinsurer in connection with such transaction. If 
such transaction has been avoided, the receiver or the court may 
enforce the reinsurance contract as it existed prior to such 
transaction, both as to losses prior to such transaction and as to 
losses occurring after such transaction and prior to the appointment of 
the receiver. If the court finds that such transaction was made in bad 
faith by the assuming reinsurer, or with intent to obtain a preference 
among creditors, or with knowledge that any sums or other property paid 
in such transaction would not be applied to the use and benefit of the 
ceding insurer or reinsurer or its policyholders, then the return 
tender shall not be a condition to the avoidance of the transaction.
    (f) Presumption.--For purposes of this section, the insurer or 
reinsurer is presumed to be insolvent on and during the 4-month period 
immediately preceding the date of the filing of the petition for 
receivership.
    (g) Transfers Covered.--For purposes of this section, a transfer 
shall include a preference, lien, conveyance, assignment, or 
encumbrance.
    (h) Exceptions.--The receiver may not avoid a transfer under this 
section--
            (1) to the extent that such a transfer was--
                    (A) intended by the insurer or reinsurer in 
                receivership and the creditor to or for the benefit of 
                which such transfer was made to be a contemporaneous 
                exchange for new value given to such insurer or 
                reinsurer; and
                    (B) in fact, a substantially contemporaneous 
                exchange; or
            (2) to the extent that such transfer was--
                    (A) in payment of a debt incurred by such insurer 
                or reinsurer in the ordinary course of business or 
                financial affairs with the transferee;
                    (B) made in the ordinary course of business or 
                financial affairs with the transferee; and
                    (C) made according to ordinary business terms.

SEC. 715. VOIDABLE PREFERENCES TO CULPABLE OFFICERS.

    (a) Voidable Executive Benefits.--Any reimbursement of a fine 
related to the insurer or reinsurer in receivership, or any payment of 
a fee or bonus or any prepayment of compensation or defense costs by 
such insurer or reinsurer which are paid to or for the benefit of a 
culpable executive officer of such insurer or reinsurer and which are 
not in the ordinary course of business, shall be voidable if paid 
within 4 months prior to the filing of a complaint under this article.
    (b) Applicability.--For purposes of subsection (a), payment shall 
be in the ordinary course of business if it is--
            (1) part of the executive's annual salary paid not more 
        than a month in advance or is compensation for valid travel and 
        entertainment expenses;
            (2) made pursuant to a retirement plan which is qualified 
        (or is intended to be qualified) under section 401 of the 
        Internal Revenue Code of 1986 or other nondiscriminatory 
        benefit plan;
            (3) made pursuant to a bona fide deferred compensation or 
        arrangement;
            (4) made pursuant to a bona fide bonus plan based on 
        superior performance; or
            (5) made by reason of the death or disability of the 
        officer.
    (c) Culpability.--An executive officer shall be culpable if the 
receiver finds that such officer--
            (1) is substantially responsible for the condition which 
        caused such insurer or reinsurer to be placed in receivership;
            (2) has committed a fraudulent act or omission, or breach 
        of trust or insider abuse with respect to the insurer or 
        reinsurer resulting in a material adverse financial impact to 
        such; or
            (3) has materially violated applicable Federal or State 
        insurance laws or regulations and that such violation has had 
        an adverse material impact on the financial condition of such 
        insurer or reinsurer.

SEC. 716. FRAUDULENT TRANSFER AFTER PETITION FOR RECEIVERSHIP.

    (a) In General.--Any transfer of real property of an insurer or 
reinsurer made after the filing of a petition for receivership to a 
person acting in good faith shall be valid against the receiver if made 
for a present fair equivalent value, or, if not made for a present fair 
equivalent value, then to the extent of the present consideration 
actually paid therefor, for which amount the transferee shall have a 
lien on the property so transferred. The commencement of a receivership 
proceeding shall be constructive notice upon the recording of a copy of 
the petition for or order of receivership with the recorder of deeds in 
the county where any real property in question is located. The exercise 
by a court of the United States or any State or jurisdiction to 
authorize or effect a judicial sale of real property of the insurer or 
reinsurer in receivership within any county in any State shall not be 
impaired by the pendency of such a proceeding unless the copy is 
recorded in the county before the consummation of the judicial sale.
    (b) Other Actions.--After a petition for receivership has been 
filed and before either the receiver takes possession of the property 
of the insurer or reinsurer or an order of receivership is granted--
            (1) a transfer of any of the property of such insurer or 
        reinsurer, other than real property, made to a person acting in 
        good faith shall be valid against the receiver if made for a 
        present fair equivalent value, or, if not made for a present 
        fair equivalent value, then to the extent of the present 
        consideration actually paid therefor, for which amount the 
        transferee shall have a lien on the property so transferred;
            (2) a person indebted to or holding property of such 
        insurer or reinsurer may, if acting in good faith, pay the 
        indebtedness or deliver the property, or any part thereof, to 
        such insurer or reinsurer or upon its order, with the same 
        effect as if the petition were not pending; and
            (3) a person having actual knowledge of the pending 
        receivership shall be deemed not to act in good faith.
A person asserting the validity of a transfer under this subsection 
shall have the burden of proof.
    (c) Liability.--Every person receiving any property from an insurer 
or reinsurer in receivership or any benefit thereof which is a 
fraudulent transfer under subsection (a) shall be personally liable 
therefor and shall be bound to account to the receiver.
    (d) Construction.--Nothing in this title shall impair the 
negotiability of currency or negotiable instruments.

SEC. 717. CLAIMS OF HOLDERS OF VOIDABLE TRANSFERS.

    (a) In General.--No claims of a creditor which has received or 
acquired a voidable preference, lien, conveyance, transfer, assignment, 
or encumbrance shall be allowed unless the creditor surrenders the 
preference, lien, conveyance, transfer, assignment, or encumbrance. If 
the avoidance is effected by a proceeding in which a final judgment has 
been entered, the claim shall not be allowed unless the money is paid 
or the property is delivered to the receiver within 30 days from the 
date of the entering of the final judgment, except that the court 
having jurisdiction over the receivership may allow further time if 
there is an appeal or other continuation of the proceeding.
    (b) Filing.--A claim allowable under subsection (a) by reason of 
the avoidance, whether voluntary or involuntary, of a preference, lien, 
conveyance, transfer, assignment, or encumbrance, may be filed as an 
excused late filing under section 736 if filed within 30 days from the 
date of the avoidance or within the further time allowed by the court 
under subsection (a).

SEC. 718. COOPERATION OF AN INSURER'S OR REINSURER'S OFFICERS, OWNERS, 
              AND EMPLOYEES.

    (a) Cooperation.--Any officer, manager, director, trustee, owner, 
employee, or agent of any insurer or reinsurer in receivership, or any 
other person with authority over or in charge of any segment of such 
insurer or reinsurer's affairs, shall cooperate with the receiver in 
any proceeding under this Act or any investigation preliminary to such 
proceeding.
    (b) Construction.--This section shall not be construed to abridge 
otherwise existing legal rights, including the right to resist a 
petition for rehabilitation or liquidation.
    (c) Penalties.--
            (1) Any person who fails to cooperate with the Commission 
        in violation of subsection (a) is subject to the imposition of 
        a civil penalty not to exceed $10,000, and shall be subject to 
        the suspension or revocation of any insurance certificate 
        issued by the Commission. Such fine, suspension, or revocation 
        may be imposed only after the person has had an opportunity for 
        a hearing on the record. The Commission may recommend to any 
        State insurance regulator the suspension or revocation of any 
        insurance license issued by such State as a further penalty for 
        violation of this section.
            (2) If the receiver is a State insurance regulator, such 
        regulator may, in addition to any authority under State law to 
        impose penalties, petition the Commission for the imposition of 
        a penalty under this section for failure to cooperate with such 
        regulator.
    (d) Definitions.--For purposes of this section--
            (1) the term ``person'' includes any person or entity who 
        exercises control, directly or indirectly over activities of 
        the insurer or reinsurer through any holding company or other 
        affiliate of the insurer or reinsurer; and
            (2) the term ``to cooperate'' includes--
                    (A) replying promptly in writing to any inquiry 
                from the receiver requesting such a reply; and
                    (B) making available to the receiver any books, 
                accounts, documents, or other records or information or 
                property of or pertaining to the insurer or reinsurer 
                and in its possession, custody, or control.

SEC. 719. ADMINISTRATIVE SEIZURE.

    (a) In General.--The receiver may issue an administrative order to 
seize an insurer or reinsurer when the receiver has reason to believe 
that--
            (1) there exists any ground that would justify a court 
        order for receivership against the insurer or reinsurer; and
            (2) the interests of policyholders, creditors, or the 
        public will be endangered by delay.
    (b) Effect of Order.--Upon issuance of the administrative seizure 
order by the receiver, it shall take possession and control of all the 
property, books, accounts, documents, and other records of the insurer 
or reinsurer, and the premises it occupies. The receiver may, through 
such order, enjoin the insurer or reinsurer, its officers, directors, 
managers, agents, and employees from disposition of any property of the 
insurer or reinsurer and from the further transaction of any business 
except upon written consent of the receiver.
    (c) Duration of Order.--The receiver shall specify in its order the 
duration of the seizure, which shall be such time as is necessary for 
the receiver to ascertain the actual condition of the insurer or 
reinsurer, except that absent approval by the district court, the order 
shall not extend beyond 60 days. On its own initiative or upon request 
of the insurer or reinsurer, the receiver may hold such hearings as it 
deems necessary, after notice as it deems appropriate, and may extend, 
shorten, or modify the terms of the order.
    (d) Effect on Contracts.--Entry of an order under this section 
shall not constitute an anticipatory breach of any contract of the 
insurer or reinsurer.
    (e) Petition to Terminate Order.--An insurer or reinsurer subject 
to an order under this section may petition the appropriate district 
court, at any time after the issuance of the order, for a hearing and 
review of the order. The district court shall hold such hearing to 
determine the reasonableness of the issuance and terms of the order not 
more than 15 days after the filing of such petition. A hearing under 
this subsection shall be held privately, unless the court, after 
hearing argument from the parties, orders otherwise.
    (f) Confidentiality of Order.--The seizure and judicial review 
thereof shall be confidential except as is necessary for the receiver 
to obtain compliance with the order. All records and documents of the 
insurer or reinsurer and the receiver and all court records and 
documents, so far as they pertain to or are a part of the seizure, or 
the judicial review thereof, shall remain confidential. The 
confidentiality of the seizure and judicial proceedings shall continue 
until the court, after hearing arguments from the parties, shall order 
otherwise.
    (g) Determination on Receivership.--Prior to termination of the 
order, the receiver shall determine whether to proceed with a complaint 
for receivership or release the insurer or reinsurer.
    (h) Administrative Expenses.--No order shall be entered by the 
receiver or the district court releasing the insurer or reinsurer 
unless the receiver's expenses of the seizure have been paid by the 
insurer or reinsurer or a reasonable plan for repayment has been agreed 
upon.

SEC. 720. GROUNDS FOR REHABILITATION.

    (a) In General.--The Commission or the appropriate State insurance 
regulator may apply by petition to the appropriate United States 
district court for an order authorizing the rehabilitation of an 
insurer or reinsurer on any one or more of the following grounds:
            (1) The insurer or reinsurer is in such condition that the 
        further transaction of business would be hazardous financially 
        to its policyholders, creditors, or the public.
            (2) There is reasonable cause to believe that there has 
        been embezzlement from the insurer or reinsurer, wrongful 
        sequestration or diversion of its assets, or forgery, fraud 
        affecting it or other illegal conduct in, by, or with respect 
        to it that if established would endanger assets in an amount 
        threatening the solvency of the insurer or reinsurer.
            (3) The insurer or reinsurer has failed to remove any 
        person who in fact has executive authority, whether an officer, 
        manager, agent, employee, or other person, if the person has 
        been found after notice and hearing by the Commission or the 
        appropriate State insurance regulator to be dishonest or 
        untrustworthy in a way affecting the insurer's or reinsurer's 
        business.
            (4) Control of the insurer or reinsurer, whether by stock 
        ownership or otherwise, and whether direct or indirect, is in a 
        person found after the opportunity for a hearing on the record 
        to be untrustworthy.
            (5) Any person who in fact has executive authority in the 
        insurer or reinsurer, whether an officer, manager, agent, 
        director or trustee, employee, or other person, has refused to 
        be examined under oath by the Commission or the appropriate 
        State insurance regulator concerning its affairs, and after 
        reasonable notice of the fact, the insurer or reinsurer has 
        failed promptly and effectively to terminate the employment and 
        status of the person and all such person's influence on 
        management.
            (6) After demand by the Commission or the appropriate State 
        insurance regulator under this Act, the insurer or reinsurer 
        has failed to promptly make available for examination any of 
        its own property, books, accounts, documents, or other records, 
        those of any affiliate, or those of any person having executive 
        authority in the insurer or reinsurer so far as they pertain to 
        it.
            (7) Without first obtaining the written consent of the 
        Commission or the appropriate State insurance regulator, the 
        insurer or reinsurer has transferred, or attempted to transfer, 
        in a manner in violation of any solvency regulation or order of 
        the Commission or such regulator, substantially its entire 
        property or business, or has entered into any transaction the 
        effect of which is to merge, consolidate, or reinsure 
        substantially its entire property or business in or with the 
        property or business of any other person.
            (8) Within the previous 4 years the insurer or reinsurer 
        has willfully violated its charter or articles of commission, 
        its bylaws, any Federal or State insurance law, or any valid 
        order of the Commission or appropriate State insurance 
        regulator.
            (9) The insurer or reinsurer has failed to pay within 60 
        days after the due date any obligation to any State or any 
        political subdivision thereof or any judgment entered in any 
        State if the court in which such judgment was entered had 
        jurisdiction over such subject matter, except that such 
        nonpayment shall not be a ground until 60 days after any good 
        faith effort by the entity to contest the obligation has been 
        terminated, whether it is before the Commission, the 
        appropriate State insurance regulator or in the courts, or the 
        insurer or reinsurer has systematically attempted to compromise 
        or renegotiate previously agreed settlements with its creditors 
        on the ground that is financially unable to pay its obligations 
        in full.
            (10) The insurer or reinsurer has failed to file its annual 
        report or other financial report required by statute within the 
        time allowed by law and, after written demand by the Commission 
        or appropriate State insurance regulator, has failed to give an 
        adequate explanation immediately.
            (11) The board of directors or the holders of a majority of 
        the shares of the insurer or reinsurer which are entitled to 
        vote, or a majority of those individuals entitled to the 
        control of it, request or consent to rehabilitation under this 
        title.
            (12) The insurer or reinsurer has concealed, removed, 
        altered, destroyed, or failed to establish and maintain books, 
        records, documents, accounts, vouchers, or other pertinent 
        materials adequate for the determination of its financial 
        condition by examination or has failed to properly administer 
        claims and to maintain claim records which are adequate for the 
        determination of its outstanding claims liability.
            (13) The insurer or reinsurer has neglected or refused to 
        comply with an order of the Commission or the appropriate State 
        insurance regulator to make good within the time prescribed by 
        law any deficiency, whenever its capital and minimum required 
        surplus, if a stock company, or its required surplus, if a 
        company other than stock, has become impaired.
            (14) The insurer or reinsurer is found to be in such 
        condition that it could not meet the requirements for 
        organization and authorization as required by applicable law, 
        except as to the amount of the original surplus required of a 
        stock company and except as to the amount of the surplus 
        required of a mutual company in excess of the minimum surplus 
        required to be maintained.
            (15) The insurer or reinsurer has not organized and 
        obtained a certificate authorizing it to commence the 
        transaction of its business within the period of time 
        prescribed by applicable statute.
            (16) The insurer's or reinsurer's certificate of authority 
        has been revoked or none was ever issued.
    (b) Determination to Seek Rehabilitation.--The Commission shall 
file a petition for rehabilitation rather than liquidation only if it 
determines, in its sole discretion, that there is a realistic 
probability that the insurer or reinsurer involved can be 
rehabilitated.

SEC. 721. REHABILITATION ORDERS.

    An order to rehabilitate an insurer or reinsurer shall direct the 
receiver forthwith to take possession of the assets of the entity and 
to administer them under the general supervision of the United States 
district court which ordered the rehabilitation. The filing or 
recording of the order with the clerk of the court or recorder of deeds 
of the county in which the principal business of the insurer or 
reinsurer is conducted, or the county in which its principal office or 
place of business is located, shall impart the same notice as a deed, 
bill of sale, or other evidence of title duly filed or recorded with 
the recorder of deeds would have imparted.

SEC. 722. POWERS AND DUTIES OF THE RECEIVER IN REHABILITATION.

    (a) Powers.--The receiver may take such action as it deems 
necessary or appropriate to reform and rehabilitate the insurer or 
reinsurer for which it has been appointed receiver in rehabilitation. 
The receiver shall have all the powers of the directors, officers, and 
managers, whose authority shall be suspended except as they are 
redelegated by the receiver. The receiver shall have full power to 
direct and manage, hire, and discharge employees subject to any 
contract rights they may have and to deal with the property and 
business of the insurer or reinsurer and to carry on its business.
    (b) Plan.--If the receiver determines that reorganization, 
consolidation, conversion, reinsurance, merger, or other transformation 
of the insurer or reinsurer is appropriate, the receiver shall prepare 
a plan to effect such changes. Upon application of the receiver for 
approval of the plan, and after such notice and hearings as the court 
may prescribe, the United States district court which presided over the 
rehabilitation may either approve or disapprove the plan proposed or 
may modify it and approve it as modified. Any plan approved under this 
subsection shall be, in the judgment of the court, fair and equitable 
to all parties concerned. If the plan is approved, the receiver shall 
carry out the plan.
    (c) Advisory Committee.--The receiver may, with the approval of the 
court, appoint an advisory committee of policyholders, claimants, or 
other creditors, including, as appropriate, NIPC and any guaranty 
associations which have standing under section 713, if the receiver 
determines such a committee to be necessary. If an advisory committee 
is appointed for a federally certified insurer, it shall include NIPC. 
Such committee shall serve at the pleasure of the receiver and shall 
serve without compensation other than reimbursement for reasonable 
travel and per diem living expenses incurred in attending meetings for 
such committee.

SEC. 723. TERMINATION OF REHABILITATION.

    (a) Termination of Rehabilitation.--The receiver or the directors 
of an insurer or reinsurer in rehabilitation may at any time petition 
the court for an order terminating the rehabilitation on the ground 
that the insurer or reinsurer is rehabilitated and may safely 
recommence the transaction of an insurance or reinsurance business. If 
any such petition by the directors is denied, another such petition may 
not be made by the directors for at least 6 months. The court may order 
payment from the estate of the insurer or reinsurer of such costs and 
other expenses of such petition and rehabilitation as justice may 
require. If the court finds that--
            (1) rehabilitation has been accomplished,
            (2) grounds for rehabilitation no longer exist, and
            (3) the insurer or reinsurer may safely recommence the 
        transaction of an insurance or reinsurance business,
the court shall order that the insurer or reinsurer be restored to 
possession of its property and the control of its business. The court 
may also make such finding and issue such order at any time upon its 
own motion.
    (b) Termination of Rehabilitation To Initiate Liquidation.--
            (1) If the payment of policy obligations of an insurer is 
        suspended in substantial part for a period of 6 months at any 
        time after the appointment of the receiver for rehabilitation 
        of the insurer and the receiver has not filed an application 
        for approval of a plan under section 720(b), the receiver shall 
        petition the court for an order of liquidation on grounds of 
        insolvency.
            (2) Whenever the receiver believes further attempts to 
        rehabilitate an insurer or reinsurer would not be in the best 
        interests of its creditors, policyholders, or the public, or 
        would be futile, the receiver may petition the court for an 
        order of liquidation. The court shall permit the directors of 
        the insurer or reinsurer to take such actions as are reasonably 
        necessary to defend against the petition and may order payment 
        from the estate of such costs and other expenses of defense as 
        justice may require.

SEC. 724. GROUNDS FOR LIQUIDATION.

    The Commission or State insurance regulator may petition the 
appropriate United States district court for an order directing the 
liquidation of an insurer or reinsurer at any time, including during or 
at the termination of the rehabilitation under section 723, on the 
basis that--
            (1) one or more of the conditions for rehabilitation set 
        forth in section 720 exists; and
            (2) the Commission or State insurance regulator determines 
        that an effort at rehabilitation would not be in the best 
        interests of its policyholders, creditors, and the public or 
        that an effort at rehabilitation would be futile.

SEC. 725. LIQUIDATION ORDERS.

    (a) In General.--If a receiver is ordered to liquidate an insurer 
or reinsurer, it shall have possession and control over all of the 
assets, property, contracts, and rights of action of such insurer or 
reinsurer and all of its books and records, wherever located. The 
filing or recording of the order with the clerk of the court and the 
recorder of deeds of the county in which the insurer or reinsurer's 
principal office or place or business is located, or, in the case of 
real estate, with the recorder of deeds of the county where the 
property is located, shall impart the same notice as a deed, bill of 
sale, or other evidence of title duly filed or recorded with that 
recorder of deeds would have imparted.
    (b) Fixing of Rights and Liabilities.--Upon issuance of the order, 
the rights and liabilities of the insurer or reinsurer in liquidation 
and of its creditors, policyholders, shareholders, members, and all 
other persons interested in its estate shall become fixed as of the 
date of entry of the order of liquidation, except as provided in 
sections 726 and 738 or as otherwise provided by the court for good 
cause shown.
    (c) Foreign Insurer or Reinsurer.--An order to liquidate the 
business of a foreign insurer or reinsurer shall be in the same terms 
and have the same legal effect as an order to liquidate an insurer or 
reinsurer licensed in the United States, except that the assets, 
operations, and business in the United States shall be the only assets, 
operations, and business included in the order.
    (d) Insolvency.--At the time of petitioning for an order of 
liquidation, or at any time thereafter, the receiver may petition the 
court for a judicial declaration of insolvency. After providing such 
notice and hearing as it deems proper, the court may make the 
declaration.
    (e) Plan.--
            (1) Within 5 days of the appointment of the receiver or, if 
        the appointment is appealed, within 5 days after the initiation 
        of an appeal of an order of liquidation, which order has not 
        been stayed, the receiver shall present for the court's 
        approval a plan for the continued performance of the insurer's 
        policy claims obligations, including the duty to defend 
        insureds under liability insurance policies, during the 
        pendency of an appeal. Such plan shall provide for the 
        continued performance and payment of policy claims obligations 
        in the normal course of events, notwithstanding the grounds 
        alleged in support of the order of liquidation, including the 
        ground of insolvency. In the event the insurer's financial 
        condition will not, in the judgment of the receiver, support 
        the full performance of all policy claims obligations during 
        the pendency of the appeal, the plan may, on the basis of 
        hardship, prefer the claims of certain policyholders and 
        claimants over creditors and interested parties as well as 
        other policyholders and claimants, as the receiver finds to be 
        fair and equitable considering the relative circumstances of 
        such policyholders and claimants. The court shall examine the 
        plan submitted by the receiver and if it finds the plan to be 
        in the best interests of the parties, the court shall approve 
        the plan. No action shall lie against the receiver based on 
        preference in a plan approved by the court.
            (2) The plan shall not supersede or affect the obligations 
        of NIPC or of any insurance guaranty association.
            (3) The plan shall provide for equitable adjustments to be 
        made by the receiver to any distributions of assets of the 
        insurer or reinsurer to NIPC to any guaranty associations if 
        the receiver pays claims from assets of its estate which would 
        otherwise be the obligations of NIPC or any particular guaranty 
        association so that NIPC and all guaranty associations equally 
        benefit on a pro rata basis from the assets of such estate. In 
        the event an order of liquidation is set aside upon appeal, the 
        insurer or reinsurer shall not be released from liquidation 
        proceedings unless and until all funds advanced by the 
        receiver, NIPC, and any guaranty association, including 
        reasonable administrative expenses relating to obligations of 
        the company, shall be repaid in full, together with interest at 
        the rate provided in section 3717 of title 31, United States 
        Code, or until a repayment plan has been agreed to by the 
        receiver and any affected guaranty associations.

SEC. 726. CONTINUANCE OF COVERAGE.

    (a) In General.--Any policy, including bonds and other 
noncancellable business, in effect at the time of issuance of an order 
of liquidation shall continue in force only for the earlier of--
            (1) a period of 30 days from the date of entry of the 
        liquidation order;
            (2) the date of expiration of the policy coverage;
            (3) the date when the insured has replaced the insurance 
        coverage with equivalent insurance in another insurer or 
        otherwise terminated the policy;
            (4) the effective date the receiver has effected a transfer 
        of the policy obligation; or
            (5) the date proposed by the receiver and approved by the 
        court to cancel coverage.
    (b) Termination.--An order of liquidation under section 725 shall 
terminate coverages at the time specified in subsection (a) for 
purposes of any statute.
    (c) Applicability to Policies of Life and Health Insurance.--
            (1) Policies of life or health insurance or annuities shall 
        continue in force for such period and under such terms as are 
        provided for by NIPC or appropriate guaranty association.
            (2) Policies of life or health insurance or annuities or 
        any period of coverage of such policies not covered by NIPC or 
        any guaranty association shall terminate under subsections (a) 
        and (b).

SEC. 727. DISSOLUTION OF AN INSURER OR REINSURER.

    The receiver may petition for an order dissolving the corporate 
existence of an insurer or reinsurer, or its United States branch in 
the case of a foreign insurer or reinsurer, at the time the receiver 
applies for a liquidation order. The court shall order dissolution of 
the insurer or reinsurer upon petition by the receiver upon or after 
the granting of a liquidation order.

SEC. 728. POWERS OF THE LIQUIDATOR.

    (a) In General.--The receiver shall have the following powers in 
liquidation:
            (1) To collect all assets, debts, and moneys due and claims 
        belonging to the insurer or reinsurer in liquidation, wherever 
        located, and for this purpose--
                    (A) to institute timely action in other 
                jurisdictions in order to forestall garnishment and 
                attachment proceedings against such debts;
                    (B) to do such other acts as are necessary or 
                expedient to collect, conserve, or protect its assets 
                or property, including the power to sell, compound, 
                compromise, or assign debts for purposes of collection 
                upon such terms and conditions as the receiver deems 
                best; and
                    (C) to pursue any creditor's remedies available to 
                enforce the receiver's claims.
            (2) To acquire, encumber, lease, improve, sell, transfer, 
        abandon, or otherwise dispose of or deal with, any property of 
        the insurer or reinsurer at its market value or upon such terms 
        and conditions as are fair and reasonable.
            (3) To execute, acknowledge, and deliver any deed, 
        assignment, release, and other instrument necessary or proper 
        to effectuate any sale of property or other transaction in 
        connection with the liquidation.
            (4) To conduct public and private sales of the property of 
        the insurer or reinsurer and to agree to a merger with another 
        insurer or reinsurer.
            (5) To use assets of the estate under a liquidation order 
        to transfer policy obligations to a solvent insurer or 
        reinsurer if the transfer can be arranged without prejudice to 
        applicable priorities.
            (6) To audit the books and records of the holding company 
        (when applicable), affiliates, and all agents of the insurer or 
        reinsurer insofar as those records relate to its business 
        activities.
            (7) To hold hearings, to subpoena witnesses to compel their 
        attendance, to administer oaths, to examine any person under 
        oath, and, in connection therewith, to require the production 
        of any books, papers, records, or other documents which the 
        receiver deems relevant to the liquidation.
            (8) To remove any record and property of the insurer or 
        reinsurer to such place as may be convenient for the purposes 
        of efficient and orderly execution of the liquidation.
            (9) To prosecute any action or right of action which may 
        exist on behalf of the creditors, policyholders, or 
        shareholders of the insurer or reinsurer against any of its 
        officers or any other person.
            (10) To borrow money on the security of the insurer's or 
        reinsurer's assets or without security and to execute and 
        deliver all documents necessary to that transaction for the 
        purpose of facilitating the liquidation. Any such funds 
        borrowed may be repaid as an administrative expense.
            (11) To enter into such contracts as are necessary to carry 
        out the order to liquidate and to affirm or disavow any 
        contract to which the insurer or reinsurer is a party.
            (12) To continue to prosecute and to institute in the name 
        of the insurer or reinsurer or in its own name any suit and 
        other legal proceeding and to abandon the prosecution of claims 
        it deems not to be in the best interests of the insurer or 
        reinsurer, its policyholders, or creditors. If the insurer or 
        reinsurer is dissolved, the receiver shall have the power to 
        apply to any court for leave to substitute itself for the 
        insurer or reinsurer as party to any action or proceeding.
            (13) To deposit in one or more banks such sums as are 
        required for meeting current administrative expenses and 
        dividend distributions.
            (14) To invest all sums not currently needed.
            (15) To file any necessary documents for recording in the 
        office of any recorder of deeds or record office wherever 
        property of the insurer or reinsurer is located.
            (16) To assert all defenses available as against third 
        persons, including statutes of limitation, statutes of frauds, 
        and the defense of usury. A waiver of any defense by the 
        insurer or reinsurer after a petition in liquidation has been 
        filed shall not bind the receiver.
            (17) To exercise and enforce all the rights, remedies, and 
        powers of any creditor, shareholder, policyholder, or member, 
        including any power to avoid any transfer or lien that may be 
        given by the law and that is not included in sections 714, 715, 
        and 716.
            (18) To intervene in any proceeding wherever instituted 
        that may affect the insurer or reinsurer or its assets.
            (19) To exercise all powers now held or hereafter conferred 
        upon a receiver by the laws of the United States.
            (20) To defray from the funds or assets of the insurer or 
        reinsurer all expenses of taking possession of, conserving, 
        conducting, liquidating, disposing of, or otherwise dealing 
        with, the business and property of the insurer or reinsurer. In 
        the event that the property of the insurer or reinsurer does 
        not contain sufficient cash or liquid assets to defray the 
        costs incurred, the receiver may pay the costs so incurred from 
        its general funds. Any amounts so advanced for expenses of 
        administration shall be repaid to the receiver as 
        administrative expenses when sufficient assets are liquidated.
            (21) To appoint, with the approval of the court, an 
        advisory committee of policyholders, claimants, or other 
        creditors, including, as appropriate, NIPC and any guaranty 
        associations which have standing under section 713, if the 
        receiver determines such a committee to be necessary. If an 
        advisory committee is appointed for a federally certified 
        insurer, it shall include NIPC. Such committee shall serve 
        without compensation other than reimbursement for reasonable 
        travel and per diem living expenses incurred in attending 
        committee meetings.
    (b) Continued Defense on Pending Cases.--The obligation of the 
insurer or reinsurer to defend or continue the defense of any claim or 
suit required under a liability policy shall terminate on the entry of 
an order of receivership, except during the appeal of an order of 
liquidation, except that NIPC and the appropriate guaranty association 
shall defend or continue the defense of insurers against claims or 
suits under covered liability policies, in accordance with the terms of 
said policies.

SEC. 729. NOTICE TO CREDITORS AND OTHERS.

    (a) In General.--Unless the court otherwise directs, the receiver 
shall give or cause to be given notice of a liquidation order as soon 
as possible--
            (1) to the insurance regulator of each State in which the 
        insurer or reinsurer is domiciled, licensed, or transacting the 
        business of insurance;
            (2) to NIPC or any guaranty association which is or may 
        become obligated as a result of the liquidation;
            (3) to all agents or brokers of the insurer or reinsurer;
            (4) to all persons known or reasonably expected to have 
        claims against the insurer or reinsurer, including all current 
        policyholders, at their last known address as indicated by the 
        records of the insurer or reinsurer; and
            (5) by publication in a newspaper of general circulation in 
        the county in which the insurer or reinsurer has its principal 
        place of business and in such other locations as the receiver 
        determines to be appropriate.
    (b) Notice to Claimants.--Except as otherwise established by the 
receiver with approval of the court, notice to potential claimants 
under subsection (a) shall require claimants to file with the receiver 
their claims together with proper proofs thereof on or before a date 
the receiver shall specify in the notice. All claimants shall have a 
duty to keep the receiver informed of any changes of address.
    (c) Guaranty Association.--
            (1) Notice under subsection (a) to agents of an insurer and 
        to potential claimants who are policyholders shall include, 
        where applicable, notice that coverage by NIPC or guaranty 
        associations may be available for all or part of policy 
        benefits in accordance with this Act or applicable guaranty 
        laws.
            (2) The receiver shall promptly provide to NIPC and 
        guaranty associations such information concerning the 
        identities and addresses of such policyholders and their policy 
        coverages as may be within the receiver's possession or 
        control, and otherwise cooperate with NIPC and guaranty 
        associations to assist them in providing to such policyholders 
        timely notice of NIPC's or the guaranty association's coverage 
        of policy benefits, including, as applicable, coverage of 
        claims and continuation or termination of coverages.
    (d) Distribution of Assets.--If notice is given in accordance with 
this section, the distribution of assets of the insurer or reinsurer 
under section 745 shall be conclusive with respect to all claimants, 
whether or not they received notice.

SEC. 730. DUTIES OF AGENTS.

    Every person who receives notice that an insurer which the person 
represents as an agent is the subject of a liquidation order shall, 
within 30 days of such notice, provide to the receiver the information 
in the agent's records related to any policy or reinsurance agreement 
issued by the insurer or reinsurer through the agent. The provision of 
information pursuant to this section shall not infringe in any way on 
any preexisting property rights that an agent has in such information, 
such as the ownership of insurance expiration lists. The information 
provided pursuant to this section may not be used by any person other 
than the agent to solicit renewal of any policy issued by the insurer 
(or its successor), other insurance or any other products, or a change 
in the agent of record.

SEC. 731. SETOFFS.

    (a) In General.--Mutual debts or mutual credits, whether arising 
out of one or more reinsurance or other contracts between the insurer 
or reinsurer in receivership and another person shall be set off and 
the balance only shall be allowed or paid.
    (b) Limitations on Setoff.--No setoff shall be allowed in favor of 
a person if--
            (1) the circumstances creating the obligation of the 
        insurer or reinsurer in receivership occurred after the 
        effective date of the cancellation or termination of policies 
        in effect at the time of the entry of the receivership order;
            (2) the obligation of the insurer or reinsurer to the 
        person was purchased by or transferred to the person with the 
        intent of its being used as a setoff;
            (3) the obligation of the insurer or reinsurer is owed to 
        an affiliate of the person or to any other entity or 
        association other than the person;
            (4) the obligation of the person is owed to an affiliate of 
        the insurer or reinsurer, or to any other person;
            (5) the obligation of the person is to pay an assessment 
        levied against the members or subscribers of the insurer or 
        reinsurer, or is to pay a balance upon a subscription to the 
        capital stock of the insurer or reinsurer, or is in any other 
        way in the nature of a capital contribution; or
            (6) the obligations between the person and the insurer or 
        reinsurer arise out of transactions where either the person or 
        the insurer or reinsurer has assumed risks and obligations from 
        the other party and then has ceded back to that party 
        substantially the same risks and obligations.
    (c) Debts Due and Payable.--The receiver shall provide persons 
claiming a setoff with accounting statements identifying debts which 
are due and payable. Where a person owes amounts which are due and 
payable, against which the person asserts setoff of mutual credits 
which may become due and payable from the insurer or reinsurer in 
receivership in the future, the person shall promptly pay to the 
receiver the amounts due and payable. Notwithstanding section 745, the 
receiver shall promptly and fully refund, to the extent of the person's 
prior payments, any mutual credits that become due and payable to the 
person by the insurer or reinsurer in receivership.

SEC. 732. OBLIGATION OF A REINSURER.

    In the event of a receivership, the reinsurance recoverables due 
under any reinsurance contract shall be payable by the assuming 
reinsurer directly to the receiver. Subject to the right of setoff and 
verification of coverage under the relevant contract, the assuming 
reinsurer shall pay its share of the loss at the time that the amount 
of the claim is ultimately determined in the liquidation proceeding. 
The receiver shall, within a reasonable time after the initiation of 
the receivership, provide the assuming reinsurer with claim information 
in accordance with the reinsurance contracts. During the pendency of 
any such claim, the assuming reinsurer may investigate the claim and, 
at its own expense, interpose in the proceeding where the claim is to 
be adjudicated any defenses which it may deem available to the ceding 
insurer or reinsurer, or its receiver. Expenses of investigation and 
defense incurred by the assuming reinsurer shall be chargeable against 
the ceding insurer or reinsurer as part of the administrative expense 
of liquidation, in proportion to the benefit accruing to the ceding 
insurer or reinsurer solely as a result of the defense undertaken by 
the assuming reinsurer. The reinsurance proceeds shall be payable as 
provided in the agreement, except when such assuming reinsurer has a 
valid contractual obligation to pay reinsurance proceeds to a party 
other than the ceding insurer or reinsurer.

SEC. 733. REINSURER'S LIABILITY.

    The amount recoverable by the receiver from a reinsurer shall not 
be reduced as a result of delinquency proceedings regardless of any 
provision in the reinsurance contract or other agreement. Payment made 
directly to an insured or other creditor shall not diminish the 
reinsurer's obligation to such ceding insurer's or reinsurer's estate 
except when such reinsurer has a valid contractual obligation to pay 
reinsurance proceeds to a party other than the insurer or reinsurer.

SEC. 734. RECOVERY OF PREMIUMS OWED.

    (a) Responsibilities and Rights of Agents and Similar Persons.--An 
agent, broker, premium finance company, or any other person, other than 
the insured, responsible for the collection or payment of a premium 
shall be obligated to pay any collected, earned premium held by such 
person at any time of the order of liquidation and shall fulfill 
contractual obligations, as they have been customarily required to be 
performed during the course of the relationship with the insurer, to 
collect and pay earned premiums to the insurer. Such person shall not 
be obligated to--
            (1) collect or pay unearned premiums, or
            (2) pay to the receiver commissions due the insurer on 
        earned premiums.
    (b) Responsibilities and Rights of Insured.--
            (1) An insured shall be obligated to pay any earned premium 
        due, but shall not be obligated to pay any unearned premium. An 
        insured shall be entitled to any collected, unearned premium 
        that an agent, broker, premium finance company, or any other 
        person has collected from that insured and that at the time of 
        the order of liquidation has not been paid to the insurer. The 
        insured may direct such person to return the unearned premium 
        or to use such unearned premium to secure replacement coverage.
            (2) An insured shall be obligated to continue paying 
        premiums or annuity considerations due on life or health 
        insurance policies or annuities that are continued under 
        section 726(c).
    (c) Definitions.--For purposes of this section, the following 
definitions apply:
            (1) The term ``earned premium'' means that portion of an 
        insurance premium covering the unexpired term of the policy 
        prior to the cancellation or renewal of coverage.
            (2) The term ``unearned premium'' means that portion of an 
        insurance premium covering the term of the policy subsequent to 
        the cancellation or nonrenewal of coverage.
            (3) The term ``uncollected premium'' means that portion of 
        an insurance premium for an insurance policy that an agent, 
        broker, premium finance company, or similar person has a legal 
        obligation to collect from an insured but has not yet received.

SEC. 735. RECEIVER'S PROPOSAL TO DISTRIBUTE ASSETS.

    (a) Application.--Within 120 days of a final determination of 
insolvency and the issuance by a district court of a liquidation order, 
the receiver shall make application to the court for approval of a 
proposal to disburse funds as appropriate out of marshalled assets of 
an insurer in liquidation from time to time as such assets become 
available to NIPC and to guaranty associations having obligations 
because of such liquidation. If the receiver determines that there are 
insufficient assets to disburse, the application required by this 
subsection shall be considered satisfied by a filing by the receiver 
stating the reason for this determination.
    (b) Content of Proposal.--A proposal under subsection (a) shall at 
least include provisions for--
            (1) reserving amounts for the payment of expenses of 
        administration and the payment of claims of secured creditors 
        to the extent of the value of the security held, and claims 
        falling within the priorities established by section 743 for 
        Classes 1 and 2;
            (2) disbursement of the funds marshalled to date and 
        subsequent disbursement of funds as they become available; and
            (3) equitable allocation of disbursements to the guaranty 
        associations for reimbursement of costs advanced or guarantee 
        obligations paid.
    (c) Disbursements.--The receiver's proposal under subsection (a) 
may provide for disbursements to NIPC and to the guaranty associations 
for amounts estimated to be the amounts of covered claim payments to be 
made in the future by NIPC and by the guaranty associations for which 
claims could be asserted against the insurer. The receiver shall 
account to the court from time to time as to the application of such 
advances, the claims' obligations paid, and the investment yield on the 
advances, which shall be applied as if part of the advances.
    (d) Notice.--Notice of an application under subsection (a) shall be 
given to the State insurance regulator of each of the States in which 
the insurer in liquidation is domiciled, licensed, or doing business, 
and to NIPC and to any appropriate guaranty associations. Any such 
notice shall be deemed to have been given when deposited in the United 
States mails, first class postage prepaid, at least 30 days before 
submission of an application under subsection (a) to the court. Action 
on the application may be taken by the court if the notice has been 
given and if the receiver's proposal complies with paragraphs (1) and 
(2) of subsection (b).

SEC. 736. FILING OF CLAIMS.

    (a) Form for Filing.--Proof of all claims shall be filed with the 
receiver in the form required by section 737 on or before the last day 
for filing specified in the notice required under section 729.
    (b) Excused Late Filed Claims.--The receiver may permit a claimant 
making a late filing to share in distributions, whether past or future, 
as if it were not late to the extent that any such payment will not 
prejudice the orderly administration of the receivership, under any of 
the following circumstances:
            (1) A transfer to a creditor was avoided under sections 
        714, 715, and 716, or was voluntarily surrendered under section 
        717, and the filing satisfies the conditions of such section.
            (2) The valuation under section 742 of security held by a 
        secured creditor shows a deficiency, which is filed within 30 
        days after the valuation.
            (3) The receiver shall permit late filed claims to share in 
        distributions, whether past or future, as if they were not 
        late, if such claims are claims of NIPC or a guaranty 
        association for reimbursement of claims paid or expenses 
        incurred, or both, subsequent to the last day for filing where 
        such payments were made and expenses incurred as provided by 
        law.
    (c) Other Late Filed Claims.--The receiver may consider any claim 
filed which is not covered by subsection (b), and permit the claimant 
to receive distributions which are subsequently declared on any claims 
of the same or lower priority if the payment does not prejudice the 
orderly administration of the receivership. The late-filing claimant 
shall receive, at each such distribution, the same percentage of the 
amount allowed on its claim as is then being paid to claimants of any 
lower priority. Such claimant shall not share in any distributions made 
or declared prior to the filing of said claim.

SEC. 737. PROOF OF CLAIM.

    (a) In General.--Proof of claim shall consist of a statement signed 
by the claimant that includes all of the following that are applicable:
            (1) The basis of the claim including the consideration 
        given for it.
            (2) The identity and amount of the security on the claim.
            (3) The payments made on the debt, if any.
            (4) The sum claimed is justly owing and there is no setoff, 
        counterclaim, or defense to the claim.
            (5) Any right of priority of payment or other specific 
        right asserted by the claimants.
            (6) A copy of the written instrument which is the 
        foundation of the claim. If such instrument has been lost or 
        destroyed, a statement of such fact and of the circumstances of 
        such loss or destruction shall be filed under oath with the 
        claim.
            (7) The name and address of the claimant and the attorney 
        who represents the claimant, if any.
The proof of claim requirement of this subsection shall be satisfied if 
a policyholder who does not know or have reason to know of the 
existence of actual or potential claims by the policyholder states the 
intention to reserve the right to assert all future claims that are 
covered by the policy.
    (b) Consideration.--Except as provided in the last sentence of 
subsection (a), no claim need be considered if it does not contain all 
the information required by subsection (a) which may be applicable. The 
receiver may require that a prescribed form be used and may require 
that other information and documents be included.
    (c) Additional Information.--At any time the receiver may request 
the claimant to present information or evidence supplementary to the 
information required under subsection (a) and may take statements under 
oath, require production of affidavits or depositions, or otherwise 
obtain additional information or evidence.
    (d) Effect of Judgment.--A judgment entered against an insured of 
an insurer or reinsurer after the date of the entry of a receivership 
shall not be considered by the receiver as conclusive evidence of 
liability or of the value of any claim against the insurer or 
reinsurer. If any such judgment exceeds the receiver's valuation of the 
claim, the amount of excess shall be classified as a Class 5 priority 
in accordance with section 743.
    (e) Effect of Default or Collusive Judgment.--A judgment entered 
against an insured of an insurer or reinsurer or against the insurer or 
reinsurer itself that is taken by default or collusion prior to or 
subsequent to the date of the entry of the receivership order shall not 
be considered by the receiver as evidence of liability or of the value 
of the claim.
    (f) Claims.--All claims of NIPC and a guaranty association shall be 
in such form and contain such substantiation as determined by the 
receiver.

SEC. 738. CONTINGENT AND IMMATURE CLAIMS.

    (a) Contingent Claims.--A claim may be allowed even if contingent 
if it is filed in accordance with section 736. It may be allowed and 
may participate in all distributions declared after it is filed to the 
extent that it does not prejudice the orderly administration of the 
receivership.
    (b) Contingent Third Party Claims.--The claim of a third party 
which is contingent only on its first obtaining a judgment against the 
insured shall be considered as if there were no such contingency. A 
contingent claim may be allowed--
            (1) if it may be reasonably inferred from the proof 
        presented upon such claim that the person would be able to 
        obtain a judgment upon such cause of action against such 
        insured;
            (2) if such person shall furnish suitable proof, unless the 
        court for good cause shown shall otherwise direct, that no 
        further valid claims against the insurer or reinsurer arising 
        out of this cause of action other than those already presented 
        can be made; and
            (3) if the total liability of the insurer or reinsurer to 
        all claimants arising out of the same act of its insured shall 
        be no greater than its total liability would be were it not in 
        receivership.
    (c) Immature Claims.--Claims that are due except for the passage of 
time shall be treated as other claims are treated, except that such 
claims may be discounted at the legal rate of interest.

SEC. 739. VALUATION OF CLAIMS.

    (a) Third Party Claims.--Whenever any third party asserts a cause 
of action against an insured of an insurer or reinsurer in 
receivership, the third party may file a claim with the receiver.
    (b) Insured's Contingent Claims.--Any insured under a liability 
insurance policy shall have the right to file a contingent claim 
pursuant to the following procedures:
            (1) The court, at the time of the entry of the order of 
        receivership, shall fix the final date for the filing of 
        information or evidence by which an insured's contingent claim 
        may be fixed in an amount certain, but in no event shall such 
        date be more than 3 years after the last day fixed for the 
        filing of proofs of claim. Such date may be extended by the 
        court upon the petition of the receiver should it be determined 
        that such extension will not delay the distribution of the 
        insurer's or reinsurer's assets.
            (2) No contingent claim of an insured shall be allowed 
        unless such claim is fixed in an amount certain and the insured 
        claimant presents evidence of payment of such claim to the 
        receiver on or before the last day fixed by the court.
            (3) An insured may include as part of his contingent claim 
        reasonable attorney's fees for services rendered subsequent to 
        the date that the insurer's or reinsurer's obligation, if any, 
        to defend or continue the defense of the claim terminated if 
        such attorney's fees have actually be paid to the insured and 
        evidence of payment has been presented to the receiver.
    (c) Several Claims.--If several claims founded upon one policy are 
filed, whether by third parties or as claims by the insured under this 
section, and the aggregate allowed amount of the claims to which the 
same limit of liability in the policy is applicable exceeds that limit, 
each claim as allowed shall be reduced in the same proportion so that 
the total equals the policy limit.
    (d) Presentment of Claim.--No claim may be presented under this 
section if it has been paid or is obligated to be paid by NIPC and any 
guaranty association.

SEC. 740. DISPUTED CLAIMS.

    (a) Denial of Claim.--When a claim is denied in whole or in part by 
the receiver, written notice of the determination shall be given to the 
claimant or its attorney by first class mail at the address shown in 
the proof of claim. Within 60 days from the mailing of the notice, the 
claimant may file its objections with the receiver. If no such filing 
is made, the claimant may not further object to the determination.
    (b) Action on Claim.--Whenever objections are filed with the 
receiver and the receiver does not alter its denial of the claim as a 
result of the objections, the receiver shall ask the court for a 
hearing as soon as practicable and give notice of the hearing by first 
class mail to the claimant or its attorney and to any other person 
directly affected, not less than 10 days before the date of the 
hearing. The matter may be heard by the court or by a court-appointed 
master who shall submit findings of fact and a recommended decision.

SEC. 741. CLAIMS OF SURETY.

    Whenever a creditor whose claim against an insurer or reinsurer in 
receivership is secured, in whole or in part, by the undertaking of 
another person and the creditor fails to file and prove that claim, the 
other person may do so in the creditor's name and shall be subrogated 
to the rights of the creditor, whether the claim has been filed by the 
creditor or by the other person in the creditor's name, to the extent 
that it discharges the undertaking. In the absence of an agreement with 
the creditor to the contrary, the other person shall not be entitled to 
any distribution until the amount paid to the creditor on the 
undertaking plus the distributions paid on the claim from the insurer's 
or reinsurer's estate to the creditor equals the amount of the entire 
claim of the creditor. Any excess received by the creditor shall be 
held by it in trust for such other person. The term ``other person'' as 
used in this section is not intended to apply to the receiver, NIPC, or 
to a guaranty association.

SEC. 742. SECURED CREDITORS' CLAIMS.

    (a) In General.--A creditor with a secured claim may collect its 
debt--
            (1) by converting the security into money according to the 
        terms of the agreement pursuant to which the security was 
        delivered to the creditors; or
            (2) by agreement, arbitration, or compromise between the 
        creditor and the receiver.
    (b) Insufficient Security.--If the security held by a creditor is 
valued pursuant to subsection (a) and such value is insufficient to 
extinguish the debt to the creditor, then such insufficiency shall be 
classified and paid as an unsecured claim. If the claimant surrenders 
its security to the receiver, the entire claim shall be classified as 
an unsecured claim.

SEC. 743. PRIORITY OF DISTRIBUTION.

    The priority of distribution of claims from the estate of an 
insurer or reinsurer in receivership shall be in accordance with the 
order in which each class of claims is herein set forth. Every claim in 
each class shall be paid in full or adequate funds shall be retained 
for such payment before the members of the next class receive any 
payment. No subclasses shall be established within any class. The order 
of distribution of claims shall be as follows:
            (1) Class 1--The costs and expenses of administration 
        during receivership, including--
                    (A) the actual and necessary costs of preserving or 
                recovering the assets of the insurer or reinsurer;
                    (B) compensation for all authorized services 
                rendered in the receivership, including reasonable 
                compensation to the receiver as approved by the court 
                to cover the portion of the total expenses of the 
                receiver which are reasonably related to the conduct of 
                the receivership of the insurer or reinsurer without 
                provision for any profit to the receiver;
                    (C) any necessary filing fees;
                    (D) the fees and mileage payable to witnesses;
                    (E) reasonable attorney's fees and other 
                professional services rendered in the receivership; and
                    (F) the reasonable expenses of the National 
                Insurance Protection Corporation or a guaranty 
                association in handling claims on behalf of the insurer 
                or reinsurer.
            (2) Class 2--Reasonable compensation to employees for 
        services performed to the extent that they do not exceed 2 
        months of monetary compensation and represent payment for 
        services performed within one year before the filing of the 
        petition for receivership. Principal officers and directors 
        shall not be entitled to the benefit of this priority except as 
        otherwise approved by the receiver and the court.
            (3) Class 3--All claims under insurance policies and 
        insurance contracts issued by the insurer, including claims of 
        NIPC and any guaranty association for claims paid on behalf of 
        the insurer and unearned premiums and other premium refunds. 
        Claims under this category include all claims under life 
        insurance and annuity policies, whether for death proceeds, 
        annuity proceeds, or investment values.
            (4) Class 4--Claims for any amount due an assuming 
        reinsurer or ceding insurer for sums due under reinsurance 
        contracts entered into with the insurer or reinsurer in 
        receivership.
            (5) Class 5--Claims for punitive or exemplary damages and 
        any claim for any amount due an insurer, insurance pool, or 
        underwriting association as subrogated recoveries, 
        contribution, indemnification, or otherwise. All other claims 
        of general creditors not falling within any other priority 
        under this section, including claims for taxes and debts due 
        the Federal Government or any State or local government.
            (6) Class 6--Claims filed late and all other claims other 
        than claims under Classes 7 and 8.
            (7) Class 7--Surplus or contribution notes, or similar 
        obligations.
            (8) Class 8--Proprietary claims of shareholders, members, 
        or other owners in their capacity as such.

SEC. 744. RECEIVER'S RECOMMENDATIONS TO THE COURT.

    (a) In General.--The receiver shall review all claims duly filed in 
receivership and shall make such further investigation as it shall deem 
necessary. If the insurer has issued annuities or life insurance 
policies, the receiver shall report the persons to whom, according to 
the records of the insurer, amounts are owed as cash value or other 
investment value. The receiver may compound, compromise, or in any 
other manner negotiate the amount for which claims will be recommended 
to the court. Unresolved disputes shall be determined under section 
740. As soon as practicable, it shall periodically present to the court 
a report of the claims against the insurer or reinsurer with its 
recommendations. The report shall include the name and address of each 
claimant and the amount of the claim finally recommended, if any.
    (b) Allowance of Claim.--The court may approve, disapprove, or 
modify the claims as recommended by the receiver. No claim under a 
policy of insurance shall be allowed for an amount in excess of the 
applicable policy limits.

SEC. 745. DISTRIBUTION OF ASSETS.

    Under the direction of the court, the receiver shall pay 
distributions in a manner that will assure the proper recognition of 
priorities and a reasonable balance between the expeditious completion 
of the receivership and the protection of unliquidated and undetermined 
claims, including third party claims. Distribution of assets in kind 
may be made at valuations set by agreement between the receiver and the 
creditor and approved by the court.

SEC. 746. UNCLAIMED AND WITHHELD FUNDS.

    All unclaimed funds subject to distribution remaining in the 
receiver's possession at the time it applies to the court for 
discharge, including the amount distributable to any creditor, 
shareholder, member, or other person who is unknown or cannot be found, 
shall be paid into the court and disposed of as under chapter 129 of 
title 28, United States Code.

SEC. 747. TERMINATION OF PROCEEDINGS.

    (a) In General.--When all assets justifying the expense of 
collection and distribution have been collected and distributed, the 
receiver shall apply to the court for discharge. The court may grant 
the discharge and make any other order, including an order to dispose 
of any remaining funds that are uneconomic to distribute, by paying 
said funds into the court and disposing of same pursuant to chapter 129 
of title 28, United States Code.
    (b) Reopening.--After a receivership proceeding has been terminated 
and the receiver discharged, the receiver or other interested party may 
at any time petition the district court to reopen the proceedings for 
good cause, including the discovery of additional assets. If the court 
is satisfied that there is justification for reopening, it shall so 
order.

SEC. 748. DISPOSITION OF RECORDS DURING AND AFTER TERMINATION OF 
              RECEIVERSHIP.

    Whenever it shall appear to the receiver that the records of any 
insurer or reinsurer subject to receivership are no longer useful, it 
may recommend to the court and the court shall direct which records 
should be retained for future reference and which should be destroyed. 
The receiver shall provide for those records which the court orders to 
be retained. The court shall order that sufficient funds for this and 
other administrative purposes be reserved by the receiver. Any funds 
remaining after payment of all such administrative expenses shall be 
paid into the court and disposed of pursuant to chapter 129 of title 
28, United States Code.

SEC. 749. TRANSITION PERIOD.

    (a) In General.--This title shall take effect on the date of 
enactment of this Act.
    (b) Commission Authority to Act as Receiver for State-Regulated 
Insurers and Reinsurers.--The Commission shall have the authority to 
contract with any State insurance regulator to assume the 
responsibility of administering receiverships in existence prior to the 
effective date in subsection (a). In such case, the applicable State 
law shall apply to the receivership.

                         TITLE VIII-DEFINITIONS

SEC. 801. DEFINITIONS.

    For purposes of this Act:
            (1) The term ``accident and health insurance'' means 
        insurance against death or personal injury by accident and 
        insurance against sickness, ailment or bodily injury, but does 
        not include insurance providing benefits pursuant to any 
        workers' compensation law.
            (2) The term ``admitted insurer'' means an insurer licensed 
        to do an insurance business pursuant to a certificate of 
        authority issued by any State, except that with respect to 
        certificates of authority issued by one or more States, an 
        insurer shall be admitted insurer only with respect to risks 
        located in a State which has issued a certificate of authority 
        to the insurer.
            (3) The term ``affiliate'' means an entity which controls, 
        is under the control of, or under common control with, another 
        entity.
            (4) The term ``authorized'' means that the entity has 
        received the approval of the relevant governmental authority to 
        engage in the activity described.
            (5) The term ``aviation insurance'' means insurance on 
        aircraft owned or operated by manufacturers of aircraft, or on 
        aircraft operated in commercial flight, or cargo of that 
        aircraft, or against liability, other than workers compensation 
        and employers liability, arising out of the ownership, 
        maintenance or use of that aircraft.
            (6) The term ``captive insurer'' means any pure captive 
        insurer or group captive insurer. For purposes of this 
        paragraph, the term ``pure captive insurer'' means any company 
        that insures risks of its parent or affiliates. The term 
        ``group captive insurer'' means any company that insures risks 
        of its owners or affiliates.
            (7) The term ``ceding insurer'' means an insurer which 
        agrees to reinsure all or part of a risk it has contractually 
        undertaken.
            (8) The term ``certificate of authority'' means evidence 
        issued by any State that an insurer is licensed to transact an 
        insurance business within that State.
            (9) The term ``certified reinsurer'' means a reinsurer 
        certified pursuant to section 302 or 303.
            (10) The term ``claimant'' means any insured, or their 
        successor in interest, making a claim on an insurance policy or 
        any person instituting a claim covered by such policy.
            (11) The term ``commercial insurance'' means any line of 
        property and casualty insurance except private passenger 
        automobile and homeowner's insurance.
            (12) The term ``Commission'' means the Federal Insurance 
        Solvency Commission.
            (13) The term ``contractual obligation'' means any 
        obligation under a policy or contract or certificate under a 
        group policy or contract, or portion thereof for which coverage 
        is provided.
            (14) The term ``control'' means the possession, direct or 
        indirect, of the power to direct or cause the direction of the 
        management and policies of a person, whether through the 
        ownership of voting securities, by contract other than a 
        commercial contract for goods or nonmanagement services, or 
        otherwise, unless the power is the result of an official 
        position with or corporate office held by the person. Control 
        shall be presumed to exist if any person, directly or 
        indirectly, owns, controls, holds with the power to vote, or 
        holds proxies representing, 10 percent or more of the voting 
        securities of any person. This presumption may be rebutted by a 
        showing that control does not exist in fact. The Commission 
        may, after furnishing all persons in interest notice and 
        opportunity to comment, determine that control exists in fact, 
        notwithstanding the absence of a presumption to that effect.
            (15) The term ``creditor'' means a person having any claim, 
        whether matured or unmatured, liquidated or unliquidated, 
        secured or unsecured, absolute, fixed, or contingent.
            (16) The term ``declaration of insolvency'' means an order 
        entered by a United States District Court pursuant to section 
        725(d).
            (17) The term ``direct placement'' means a placement in 
        which an insured procures insurance from a nonadmitted insurer 
        without utilizing the services of a surplus lines licensee 
        licensed by the State in which the insured resides or the 
        insured risk is located.
            (18) The term ``doing business'' includes any of the 
        following acts, whether effected by mail or otherwise:
                    (A) The issuance or delivery of contracts of 
                insurance.
                    (B) The issuance or delivery of any contract of 
                guaranty or suretyship as a vocation and not merely 
                incidental to any other legitimate business or activity 
                of the guarantor or surety.
                    (C) The solicitation of applications for such 
                contracts, or other negotiations preliminary to the 
                execution of such contracts;
                    (D) The receipt or collection of premiums, 
                membership fees, assessments, or other consideration 
                for such contracts.
                    (E) The transaction of matters subsequent to 
                execution of such contracts and arising out of them.
                    (F) The transaction of business in substance 
                equivalent to subparagraphs (A) through (E) in a manner 
                designed to evade laws regarding the regulation of 
                insurance.
                    (G) Operating under a license or certificate of 
                authority or a certificate of solvency issued by the 
                Commission or by a State insurance regulator.
            (19) The term ``domestic insurer or reinsurer'' means an 
        entity which is domiciled in the United States and is 
        authorized by the Commission or a State to conduct the business 
        of insurance or reinsurance within the States, territories, or 
        possessions of the United States. It includes the duly licensed 
        United States branch of a foreign insurer or reinsurer.
            (20) The term ``domiciliary State'' means the State in 
        which an insurer or reinsurer is incorporated or organized.
            (21) The term ``eligible surplus lines insurer'' means a 
        nonadmitted insurer with which a surplus lines licensee may 
        place surplus lines insurance under this Act.
            (22) The term ``fair consideration'' means consideration 
        given for property or an obligation--
                    (A) when in exchange for such property or 
                obligation, as a fair equivalent therefor, and in good 
                faith, property is conveyed or services are rendered or 
                an obligation is incurred or an antecedent debt is 
                satisfied; or
                    (B) when such property or obligation is received in 
                good faith to secure a present advance or antecedent 
                debt in an amount not disproportionally small as 
                compared to the value of the property or obligation 
                obtained.
            (23) The term ``financial impairment'' means a member 
        insurer which is not an insolvent insurer, and which is--
                    (A) determined by the Commission to be potentially 
                unable to fulfill its contractual obligations; or
                    (B) placed under an order of rehabilitation or 
                conservation by a court of competent jurisdiction.
            (24) The term ``financial statement'' means any financial 
        statement which an insurer is required by law to file with its 
        principal regulatory agency or, if none is so required, the 
        insurer's annual financial report.
            (25) The term ``foreign country'' means any jurisdiction 
        not in any State.
            (26) The term ``foreign insurer or reinsurer'' means an 
        entity which is domiciled outside the United States and is 
        authorized to conduct the business of insurance or reinsurance 
        by a jurisdiction, country, territory, or possession outside 
        the United States.
            (27) The term ``general assets'' means all property, real, 
        personal, or otherwise, not specifically mortgaged, pledged, 
        deposited, or otherwise encumbered for the security or benefit 
        of specified persons or classes of persons. As to specifically 
        encumbered property, the term ``general assets'' includes all 
        such property or its proceeds in excess of the amount necessary 
        to discharge the sum secured thereby.
            (28) The term ``guaranty association'' means any property, 
        casualty, worker's compensation, life, health, and any other 
        association established for the payment of claims of an insurer 
        in receivership.
            (29) The term ``highly capitalized insurer'' means an 
        insurer that maintains at all times a minimum net worth or 
        trusteed surplus of at least $50,000,000 (to be subject to 
        periodic adjustment for inflation pursuant to section 
        202(c)(2)).
            (30) The term ``holding company'' means any person or 
        entity which directly or indirectly controls an insurer.
            (31) The term ``holding company system'' means a holding 
        company together with its controlled insurers, reinsurers, and 
        other controlled activities.
            (32) The term ``insolvency'' or ``insolvent'' means that an 
        insurer or reinsurer is unable to pay its obligations when they 
        are due or that its admitted assets (as determined under this 
        Act or its State of regulation) do not exceed its liabilities 
        plus the greater of--
                    (A) any net worth required by law for its 
                organization; or
                    (B) the total par or stated value of its authorized 
                and issued capital stock.
        For purposes of this paragraph, the term ``liabilities'' shall 
        include specific requirements imposed by the Commission upon 
        the insurer or reinsurer at the time of certification or 
        subsequent thereto.
            (33) The term ``insurer'' means any corporation, 
        association, society, order, firm, company, partnership, 
        individual, or aggregation of individuals which is subject to 
        examination or supervision by the Commission or any State 
        insurance regulator, or which is doing or represents an 
        insurance business.
            (34) The term ``large insurance buyer'' means a purchaser 
        with assets in excess of liabilities of at least $10,000,000 as 
        of December 31 of the preceding year (to be subject to periodic 
        adjustment for inflation pursuant to section 202(c)(2)) and 
        where--
                    (A) the purchaser certifies to the insurer, under 
                standards established by the Commission, that it meets 
                the net worth requirement;
                    (B) the insurer maintains such certification in its 
                files; and
                    (C) the insurer submits to the Commission in its 
                annual report a list of all such large insurance 
                purchasers.
            (35) The term ``life insurance'' means insurance upon the 
        lives of human beings and insurance pertaining thereto.
            (36) The term ``market assistance plan'' means any plan, 
        other than a residual market plan, established by a State to 
        assist insurance consumers to procure coverage from admitted 
        insurers.
            (37) The term ``member insurer'' means an insurer which is 
        a member of the National Insurance Protection Corporation.
            (38) The term ``NARAB'' means the National Association of 
        Registered Agents and Brokers.
            (39) The term ``net direct written premiums'' means direct 
        gross premiums written on insurance policies to which title V 
        applies, less returned premiums thereon and dividends paid or 
        credited to policyholders on such direct business. ``Net direct 
        written premiums'' does not include premiums on contracts 
        between insurers and reinsurers.
            (40) The term ``net reinsurance premium'' means premiums 
        paid for reinsurance to which this title applies less premiums 
        paid to another reinsurer.
            (41) The term ``net worth'' means, with respect to an 
        insurer, the excess of total assets over liabilities of an 
        insurer, which is the sum of all net worth accounts minus any 
        impairment thereof.
            (42) The term ``NIPC'' means the National Insurance 
        Protection Corporation.
            (43) The term ``nonadmitted insurer'' means an insurer not 
        licensed to do an insurance business pursuant to a certificate 
        of authority issued by a State, except that an insurer holding 
        a certificate of authority issued by one or more States may be 
        a nonadmitted insurer with respect to risks located in any 
        State in which the insurer does not hold a certificate of 
        authority.
            (44) The term ``personal lines insurer'' means any property 
        and casualty insurance issued for noncommercial personal, 
        family, or household purposes.
            (45) The term ``property and casualty insurance'' means 
        insurance against loss of, damage to, loss of income or extra 
        expense incurred because of loss of, or damage to, property; 
        insurance against third party liability claims caused by 
        negligence or imposed by statute or contract; insurance 
        providing benefits pursuant to any workers' compensation law.
            (46) The term ``professional reinsurer'' means a reinsurer, 
        including the United States branch of a foreign reinsurer 
        which, as its exclusive business, contracts to indemnify 
        insurers against loss or obligations contractually undertaken 
        by the insurer, and retains substantial net risk for its own 
        account. Regardless of how such business is regulated for other 
        purposes, a professional reinsurer may undertake co-surety 
        obligations if--
                    (A) the lead surety is licensed by a State;
                    (B) the obligations of such co-surety are not 
                covered by any State guaranty fund; and
                    (C) premiums for such obligations are subject to 
                State premium taxes.
            (47) The term ``qualified financial institution'' means any 
        financial institution that--
                    (A) is organized, or in the case of a United States 
                branch or office of a foreign banking organization 
                licensed, under the laws of the United States or any 
                State thereof;
                    (B) is regulated, supervised, and examined by 
                Federal or State authorities having regulatory 
                authority over banks and trust companies; and
                    (C) has been determined by the Commission to meet 
                such standards of financial condition and strength as 
                are considered necessary for the protection of the 
                public.
            (48) The term ``railroad insurance'' means insurance on 
        operations of railroads engaged in transportation in interstate 
        commerce and their property used in those operations.
            (49) The term ``receiver'' means the Commission or the 
        appropriate State insurance regulator acting in the capacity of 
        rehabilitator or liquidator of an insurer or reinsurer.
            (50) The term ``receivership'' means the rehabilitation or 
        liquidation of an insurer or reinsurer.
            (51) The term ``reinsurance'' means the assumption by the 
        reinsurer of all or part of a risk originally undertaken by the 
        ceding insurer, but does not mean the substitution of one 
        insurer for another through a novation.
            (52) the term ``reinsurer'' means an insurer which 
        contracts to indemnify a ceding insurer for all or part of a 
        risk originally undertaken by the ceding insurer. ``Reinsurer'' 
        shall not include any entity that is more than 25 percent owned 
        or financially controlled by any State, by a foreign 
        government, or by any political subdivision, instrumentality, 
        or agency of either, if--
                    (A) such government, subdivision, instrumentality, 
                or agency provides financial support to the business of 
                insurance of the entity and thereby enables it to 
                compete unfairly for business with other reinsurers; or
                    (B) such ownership or control provides the insurer 
                with sovereign immunity.
            (53) The term ``residual market'' means an assigned risk 
        plan, joint underwriting association, or any similar mechanism 
        designed to make insurance available to those unable to obtain 
        it in the voluntary market.
            (54) The term ``secured claim'' means any claim secured by 
        mortgage, trust, deed, pledge, deposit as security, escrow, or 
        otherwise, but does not include claims against general assets.
            (55) The term ``special deposit claim'' means any claim 
        secured by a deposit made pursuant to statute for the security 
        or benefit of a limited class or classes of persons, but does 
        not include any claim secured by general assets.
            (56) The term ``State'' means any State, the District of 
        Columbia, the Commonwealth of Puerto Rico, the Northern Mariana 
        Islands, the Virgin Islands, American Samoa, and the Trust 
        Territory of the Pacific Islands.
            (57) The term ``State insurance regulator'' means the 
        principal insurance regulatory authority of a State.
            (58) The term ``State law'' means the constitution and 
        statutes of any State and any regulation, rule, or requirement 
        promulgated pursuant to statutory authority.
            (59) The term ``surplus lines insurance'' means any 
        insurance permitted to be placed through a surplus lines 
        licensee with a nonadmitted insurer eligible to accept such 
        insurance pursuant to section 203.
            (60) The term ``surplus lines licensee'' means an 
        individual partnership, firm, association, or corporation 
        licensed in one or more States to place surplus lines insurance 
        with nonadmitted insurers eligible to accept such insurance.
            (61) The term ``transfer'' includes the sale and every 
        other and different mode, direct or indirect, of disposing of 
        or of parting with property or with an interest therein, 
        disposing of or of parting with the possession thereof, or 
        fixing a lien upon property or upon an interest therein, 
        absolutely, conditionally, or voluntarily, by or without 
        judicial proceedings. The retention of a security title to 
        property delivered to a debtor shall be deemed a transfer 
        suffered by the debtor.
            (62) The term ``trusteed surplus'' means the fair market 
        value of the amount placed in trust by a reinsurer for the 
        exclusive benefit of its ceding insurers, minus any incurred 
        losses.
            (63) The term ``United States branch'' means the business 
        unit through which business is transacted in the United States 
        by an insurer, including the assets and liabilities of such 
        insurer within the United States pertaining to such business 
        and the management powers pertaining to such business.
            (64) The term ``United States reinsurance liabilities'' 
        means the amount reflected as an asset or deduction from 
        liabilities on the financial statement of a domestic insurer 
        for reinsurance recoverable from a domestic or foreign insurer 
        or reinsurer.
            (65) The term ``wet marine and transportation insurance'' 
        means--
                    (A) insurance upon vessels, crafts, hulls, and of 
                interests therein or with relation thereto;
                    (B) insurance of marine builders' risks, marine war 
                risks, and contracts of marine protection and indemnity 
                insurance;
                    (C) insurance of freights and disbursements 
                pertaining to a subject of insurance coming within this 
                subsection; and
                    (D) insurance of personal property and interests 
                therein, in the course of exportation from or 
                importation into any country, or in the course of 
                transportation coastwide or on inland waters, including 
                transportation by land, water, or air from point of 
                origin to final destination; in connection with any and 
                all risks or perils of navigation, transit or 
                transportation; and while being prepared for and while 
                awaiting shipment; and during any delays, 
                transshipment, or reshipment incident thereto.

             TITLE IX--TECHNICAL AND CONFORMING AMENDMENTS

SEC. 901. EXECUTIVE SCHEDULE TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Title 5.--
            (1) Section 5314 of title 5, United States Code, is amended 
        by adding at the end the following:
            ``Chairman, Federal Insurance Solvency Commission.''.
            (2) Section 5315 of such title is amended by adding at the 
        end the following:
            ``Members, Federal Insurance Solvency Commission.''.
    (b) Securities Exchange Act of 1934.--Section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3) is amended by adding at the end 
the following:
    ``(j) Coordination With NARAB.--Each registered national securities 
association shall coordinate with the National Association of 
Registered Agents and Brokers established under section 601 of the 
Federal Insurance Solvency Act of 1993 in order to ease any 
administrative burdens that fall on persons that are members of both 
associations, consistent with the purposes of such Act and this Act.

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