I

103D CONGRESS

1ST SESSION H. R. 1257

To reconstitute the Federal Insurance Administration as an independent

agency within the executive branch, provide for minimum standards applicable to foreign insurers and reinsurers providing insurance in the United

States, make liquidity assistance available to well-capitalized insurance

companies, and provide for public access to information regarding the

availability of insurance, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 9, 1993

Mr. KENNEDY (for himself and Mr. GONZALEZ) introduced the following bill;

which was referred to the Committee on Banking, Finance and Urban Affairs

A BILL

To reconstitute the Federal Insurance Administration as an

independent agency within the executive branch, provide

for minimum standards applicable to foreign insurers

and reinsurers providing insurance in the United States,

make liquidity assistance available to well-capitalized insurance companies, and provide for public access to information regarding the availability of insurance, and

for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

2 (a) SHORT TITLE.—This Act may be cited as the

3 ‘‘Federal Insurance Administration Act’’.

4 (b) TABLE OF CONTENTS.—

Sec. 1. Short title and table of contents.

TITLE I—FEDERAL INSURANCE ADMINISTRATION

Sec. 101. Reestablishment of Federal Insurance Administration as independent

establishment in executive branch.

Sec. 102. Administrator.

Sec. 103. Transfer of functions.

Sec. 104. Personnel.

Sec. 105. Property and records.

Sec. 106. Administrative provisions.

Sec. 107. Continuation of service of Administrator.

Sec. 108. Report.

Sec. 109. References.

Sec. 110. Savings provisions.

Sec. 111. Definitions.

Sec. 112. Conforming amendments.

Sec. 113. Effective date.

TITLE II—REGULATION OF FOREIGN INSURERS

Sec. 201. Purpose.

Sec. 202. Certification of direct insurers.

Sec. 203. Standards for certification of direct insurers.

Sec. 204. Certification of reinsurers.

Sec. 205. Standards for certification of reinsurers.

Sec. 206. Financial statements and examinations.

Sec. 207. Decertification.

Sec. 208. GAO audits.

Sec. 209. National insurance intelligence database.

Sec. 210. Penalties.

Sec. 211. Definitions.

Sec. 212. Limitation on preemption.

Sec. 213. Effective date.

TITLE III—LIQUIDITY ASSISTANCE BY FEDERAL RESERVE

BANKS TO WELL-CAPITALIZED INSURANCE COMPANIES

Sec. 301. Short title.

Sec. 302. Certification of eligibility for liquidity assistance.

Sec. 303. Requests for liquidity assistance.

Sec. 304. Report.

Sec. 305. Provision of liquidity assistance to insurance companies by Federal

Reserve banks.

Sec. 306. Regulations.

TITLE IV—DISCLOSURE OF INSURANCE AVAILABILITY

INFORMATION
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Sec. 401. Short title.

Sec. 402. Findings and construction.

Sec. 403. Maintenance of information and public disclosure.

Sec. 404. Requirements.

Sec. 405. Access system.

Sec. 406. Submission to Administrator.

Sec. 407. Designations.

Sec. 408. Disclosures to rejected applicants.

Sec. 409. Termination of agents.

Sec. 410. Implementation.

Sec. 411. Improved methods.

Sec. 412. Compilation of aggregate data.

Sec. 413. Testers.

Sec. 414. Report.

Sec. 415. Enforcement.

Sec. 416. Relation to State laws.

Sec. 417. Definitions.

Sec. 418. Effective date.

1 TITLE I—FEDERAL INSURANCE

2 ADMINISTRATION

3 SEC. 101. REESTABLISHMENT OF FEDERAL INSURANCE AD4 MINISTRATION AS INDEPENDENT ESTABLISH5 MENT IN EXECUTIVE BRANCH.

6 The Federal Insurance Administration of the Federal

7 Emergency Management Agency is hereby established as

8 an independent establishment in the executive branch of

9 the Government to be known as the Federal Insurance Ad10 ministration.

11 SEC. 102. ADMINISTRATOR.

12 There shall be at the head of the Federal Insurance

13 Administration a Federal Insurance Administrator, who

14 shall be appointed by the President, by and with the advice

15 and consent of the Senate. The Administration shall be

16 administered under the supervision and direction of the

17 Administrator.
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1 SEC. 103. TRANSFER OF FUNCTIONS.

2 (a) IN GENERAL.—There are transferred to the Ad3 ministrator all functions of—

4 (1) the Director of the Federal Emergency

5 Management Agency under—

6 (A) the Flood Disaster Protection Act of

7 1973 (42 U.S.C. 4001 et seq.);

8 (B) the National Flood Insurance Act of

9 1968 (42 U.S.C. 4011 et seq.), including bor10 rowing under section 1309 of such Act pursu11 ant to the authority under section 15(e) of the

12 Federal Flood Insurance Act of 1956 (42

13 U.S.C. 2414(e));

14 (C) title XII of the National Housing Act

15 (12 U.S.C. 1749bbb et seq.);

16 (D) the Coastal Barrier Resources Act (16

17 U.S.C. 3501 et seq.); and

18 (E) section 2(d) of Executive Order 11988

19 (42 U.S.C. 4321 note; relating to floodplain

20 management); and

21 (2) the Federal Insurance Administrator and

22 Federal Insurance Administration, of the Federal

23 Emergency Management Agency.

24 (b) EFFECT OF TRANSFERS.—The transfer of each

25 function from an officer or office under subsection (a)
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1 shall include any aspects of such function vested in a sub2 ordinate of such officer or in a component of such office.

3 SEC. 104. PERSONNEL.

4 (a) APPOINTMENT.—The Administrator may select,

5 appoint, employ, and fix the compensation of any officers

6 and employees necessary to carry out the functions of the

7 Administrator.

8 (b) TRANSFER.—

9 (1) IN GENERAL.—The personnel employed in

10 connection with the functions and office transferred

11 by this title are hereby transferred to the Adminis12 trator.

13 (2) EFFECT.—Any full-time or part-time per14 sonnel employed in permanent positions shall not be

15 separated or reduced in grade or compensation be16 cause of the transfer under this subsection during

17 the 1-year period beginning upon the date of the ef18 fectiveness of this title.

19 (c) TREATMENT OF REQUIREMENTS UNDER TITLE

20 5, UNITED STATES CODE.—

21 (1) APPOINTMENTS ABOVE GS–15.—The Direc22 tor of the Office of Personnel Management shall,

23 under section 5108 of title 5, United States Code,

24 provide for the establishment, upon the transfer of

25 personnel by this section, in each of the grade levels
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1 above GS–15 of a number of positions in the Admin2 istration equal to the number of positions in such

3 grade level that were filled by personnel transferred

4 by this section.

5 (2) INAPPLICABILITY OF APPROVAL PROVI6 SION.—Personnel referred to in paragraph (1) may

7 be appointed to positions established under such

8 paragraph without regard to the provisions of sec9 tion 3324 of title 5, United States Code, if the indi10 vidual appointed in such position is an individual

11 who is transferred by this section and, on the day

12 preceding the date of the effectiveness of this title,

13 holds a position and has duties comparable to those

14 of the position to which appointed hereunder.

15 (3) TERMINATION OF AUTHORITY.—The au16 thority under this subsection with respect to any po17 sition shall terminate when the person first ap18 pointed to fill such position ceases to hold such posi19 tion.

20 SEC. 105. PROPERTY AND RECORDS.

21 The contracts, liabilities, records, property, and other

22 assets and interests of, or made available in connection

23 with, the functions and office transferred by this title are

24 hereby transferred to the Administrator for appropriate

25 allocation.
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1 SEC. 106. ADMINISTRATIVE PROVISIONS.

2 The Administrator may—

3 (1) issue any regulations the Administrator con4 siders necessary to carry out the functions of the

5 Administrator;

6 (2) organize the Administration as the Adminis7 trator determines necessary or appropriate, subject

8 to the provisions of this title;

9 (3) except as otherwise provided by law, dele10 gate any function of the Administrator to the offi11 cers and employees of the Administration as the Ad12 ministrator may designate, and may authorize suc13 cessive redelegations of such functions as the Ad14 ministrator considers necessary or appropriate; ex15 cept that the delegation of functions under this

16 paragraph shall not relieve the Administrator of re17 sponsibility for the administration of such functions;

18 (4) procure the services of experts and consult19 ants in accordance with section 3109 of title 5,

20 United States Code;

21 (5) accept and use gifts, bequests, and dona22 tions of property;

23 (6) use the United States mails in the same

24 manner and under the same conditions as other de25 partments and agencies of the United States;
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1 (7) subject to the provisions of the Federal

2 Property and Administrative Services Act of 1949,

3 make, enter into, and perform such contracts,

4 grants, leases, cooperative agreements, or other simi5 lar transactions and make such payments as the Ad6 ministrator determines necessary or appropriate to

7 carry out the functions of the Administrator; except

8 that the authority to enter into contracts and to

9 make payments shall be effective only to such extent

10 or in such amounts as are provided in appropriation

11 Acts; and

12 (8) cause a seal of office to be made for the Ad13 ministration of such design as the Administrator

14 shall approve, and judicial notice shall be taken of

15 the seal.

16 SEC. 107. CONTINUATION OF SERVICE OF ADMINISTRATOR.

17 The individual serving as the Federal Insurance Ad18 ministrator of the Federal Emergency Management Agen19 cy on the date of the effectiveness of this title may act

20 as Administrator until the date an individual is appointed

21 under this Act to the position of Administrator, or until

22 the end of the 120-day period provided for in section 3348

23 of title 5, United States Code (relating to limitations on

24 the period of time a vacancy may be filled temporarily),
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1 whichever is earlier, and while so acting shall be com2 pensated at the rate provided for the Administrator.

3 SEC. 108. REPORT.

4 Not later than 3 months after the conclusion of each

5 fiscal year, the Administrator shall submit to the Commit6 tee on Banking, Finance and Urban Affairs of the House

7 of Representatives and the Committee on Banking, Hous8 ing, and Urban Affairs of the Senate, a report regarding

9 the activities of the Administration during the fiscal year.

10 The report shall include a statement of the goals, prior11 ities, and plans for the Administration, an assessment of

12 the progress made toward attainment of such goals, prior13 ities, and plans, and a financial statement of the Adminis14 tration describing the operations of the Administration

15 and the financial operating plans and forecasts for the Ad16 ministration for the ensuing year.

17 SEC. 109. REFERENCES.

18 Any reference in any other Federal law, Executive

19 order, rule, regulation, or delegation of authority, or any

20 document of or pertaining to the Federal Emergency Man21 agement Agency—

22 (1) to the Federal Insurance Administrator of

23 the Federal Emergency Management Agency is

24 deemed to refer to the Federal Insurance Adminis-
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1 trator of the Federal Insurance Administration es2 tablished under this title; and

3 (2) to the Federal Insurance Administration

4 under the Federal Emergency Management Agency

5 is deemed to refer to the Federal Insurance Admin6 istration established under this title.

7 SEC. 110. SAVINGS PROVISIONS.

8 (a) LEGAL DOCUMENTS.—All orders, determinations,

9 rules, regulations, permits, grants, contracts, certificates,

10 licenses, and privileges—

11 (1) that have been issued, made, granted, or al12 lowed to become effective by the President, by the

13 Director of the Federal Emergency Management

14 Agency, by the Federal Insurance Administrator of

15 the Federal Emergency Management Agency, or by

16 a court of competent jurisdiction, in the performance

17 of functions of the Director under the provisions re18 ferred to in section 103(a) or the Federal Insurance

19 Administrator of the Federal Emergency Manage20 ment Agency, and

21 (2) that are in effect on the date of the effec22 tiveness of this title (or become effective after such

23 date pursuant to their terms as in effect on such

24 date),
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1 shall continue in effect according to their terms until

2 modified, terminated, superseded, set aside, or revoked in

3 accordance with law by the President, the Administrator

4 or other authorized official, by a court of competent juris5 diction, or by operation of law.

6 (b) PROCEEDINGS.—The provisions of this title shall

7 not affect any proceedings or any application for any bene8 fits, service, license, permit, certificate, or financial assist9 ance pending before the Federal Emergency Management

10 Agency on the date of the effectiveness of this title, but

11 such proceedings and applications shall be continued. Or12 ders shall be issued in such proceedings, appeals shall be

13 taken therefrom, and payments shall be made pursuant

14 to such orders, as if this Act had not been enacted, and

15 orders issued in any such proceeding shall continue in ef16 fect until modified, terminated, superseded, or revoked by

17 a duly authorized official, by a court of competent jurisdic18 tion, or by operation of law. Nothing in this subsection

19 shall be deemed to prohibit the discontinuance or modi20 fication of any such proceeding under the same terms and

21 conditions and to the same extent that such proceeding

22 could have been discontinued or modified if this title had

23 not been enacted.

24 (c) SUITS.—The provisions of this title shall not af25 fect suits commenced before the date of the effectiveness
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1 of this title, and in all such suits, proceeding shall be had,

2 appeals taken, and judgments rendered in the same man3 ner and with the same effect as if this title had not been

4 enacted.

5 (d) NONABATEMENT OF ACTIONS.—No suit, action,

6 or other proceeding commenced by or against the Director

7 of the Federal Emergency Management Agency or the

8 Federal Insurance Administration of such Agency, or by

9 or against any individual in the official capacity of such

10 individual as an officer of such Agency or Administration,

11 shall abate by reason of the enactment of this title.

12 (e) CONTINUANCE OF SUITS.—If, before the date of

13 the effectiveness of this Act, any agency or officer thereof

14 in the official capacity of such officer, is party to a suit,

15 and under this title any function of such agency or officer

16 is transferred to the Administrator or any other official

17 of the Administration, then such suit shall be continued

18 with the Administrator or other appropriate official of the

19 Administration substituted or added as a party.

20 SEC. 111. DEFINITIONS.

21 For purposes of this Act:

22 (1) The term ‘‘Administration’’ means the Fed23 eral Insurance Administration, as established under

24 section 101.
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1 (2) The term ‘‘Administrator’’ means the Fed2 eral Insurance Administrator, as such position is es3 tablished under section 102.

4 (3) The term ‘‘function’’ includes any duty, ob5 ligation, power, authority, responsibility, right, privi6 lege, activity, or program.

7 SEC. 112. CONFORMING AMENDMENTS.

8 (a) FLOOD DISASTER PROTECTION ACT OF 1973.—

9 The Flood Disaster Protection Act of 1973 (42 U.S.C.

10 4001 et seq.) is amended—

11 (1) in section 3(a), by striking paragraph (6)

12 and inserting the following new paragraph:

13 ‘‘(6) ‘Administrator’ means the Federal Insur14 ance Administrator.’’;

15 (2) in section 201(b), by striking ‘‘Director’s’’

16 and inserting ‘‘Administrator’s’’; and

17 (3) by striking ‘‘Director’’ each place it appears

18 and inserting ‘‘Administrator’’.

19 (b) NATIONAL FLOOD INSURANCE ACT OF 1968.—

20 The National Flood Insurance Act of 1968 (42 U.S.C.

21 4011 et seq.) is amended—

22 (1) in section 1304(a), by striking ‘‘Director of

23 the Federal Emergency Management Agency’’ and

24 inserting ‘‘Federal Insurance Administrator’’;

25 (2) in section 1307(f)—
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1 (A) by striking ‘‘Director of the Federal

2 Emergency Management Agency’’ each place it

3 appears and inserting ‘‘Administrator’’; and

4 (B) by striking ‘‘and the Federal Emer5 gency Management Agency’’ and inserting ‘‘and

6 the Federal Insurance Administration’’;

7 (3) in section 1345(c)—

8 (A) by striking ‘‘Director of the Federal

9 Emergency Management Agency’’ each place it

10 appears and inserting ‘‘Administrator’’; and

11 (B) by striking ‘‘part of the Federal Emer12 gency Management Agency’’ each place it ap13 pears and inserting ‘‘part of the Federal Insur14 ance Administration’’;

15 (4) in section 1363, by striking ‘‘Director’s’’

16 each place it appears and inserting ‘‘Administra17 tor’s’’;

18 (5) in section 1370(a), by striking paragraph

19 (6) and inserting the following new paragraph:

20 ‘‘(6) the term ‘Administrator’ means the Fed21 eral Insurance Administrator.’’; and

22 (6) by striking ‘‘Director’’ each place it appears

23 and inserting ‘‘Administrator’’.

24 (c) FEDERAL FLOOD INSURANCE ACT OF 1956.—

25 Section 15(e) of the Federal Flood Insurance Act of 1956
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1 (42 U.S.C. 2414(e)) is amended by striking ‘‘Director of

2 the Federal Emergency Management Agency’’ each place

3 it appears and inserting ‘‘Federal Insurance Adminis4 trator’’.

5 (d) NATIONAL HOUSING ACT.—Title XII of the Na6 tional Housing Act (12 U.S.C. 1749bbb et seq.) is amend7 ed—

8 (1) in section 1203(a), by striking paragraph

9 (17) and inserting the following new paragraph:

10 ‘‘(17) ‘Administrator’ means the Federal Insur11 ance Administrator.’’;

12 (2) in section 1231(c), by striking ‘‘Director’s’’

13 and inserting ‘‘Administrator’s’’; and

14 (3) by striking ‘‘Director’’ each place it appears

15 and inserting ‘‘Administrator’’.

16 (e) COMPENSATION AT LEVEL IV OF EXECUTIVE

17 SCHEDULE.—Section 5315 of title 5, United States Code,

18 is amended by striking ‘‘Federal Insurance Administrator,

19 Federal Emergency Management Agency.’’ and inserting

20 the following new item:

21 ‘‘Federal Insurance Administrator, Federal In22 surance Administration.’’.

23 (f) HOUSING AND URBAN DEVELOPMENT ACT OF

24 1968.—Section 1105 of the Housing and Urban Develop-
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1 ment Act of 1968 (42 U.S.C. 4129) is amended by strik2 ing subsection (a).

3 SEC. 113. EFFECTIVE DATE.

4 (a) IN GENERAL.—Except as provided in subsection

5 (b), this title shall take effect upon the expiration of the

6 180-day period beginning on the date of the enactment

7 of this Act.

8 (b) APPOINTMENT OF ADMINISTRATOR.—Notwith9 standing any other provision of law or of this title, the

10 President may, any time after the date of the enactment

11 of this Act, appoint an individual to serve as Federal In12 surance Administrator, as such position is established

13 under section 102. An appointment under this section may

14 not be construed to affect the position of Federal Insur15 ance Administrator under the Federal Emergency Man16 agement Agency or the authority of such official during

17 the period under subsection (a).

18 TITLE II—REGULATION OF

19 FOREIGN INSURERS

20 SEC. 201. PURPOSE.

21 The purposes of this title are—

22 (1) to establish minimum solvency, registration,

23 and other business requirements for foreign insurers

24 who provide insurance to residents of the United
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1 States covering property or risks located in the Unit2 ed States on a direct written basis; and

3 (2) to establish minimum requirements for rein4 surance ceded to foreign insurers and reinsurers by

5 insurers formed and licensed within the United

6 States that may be claimed as an asset or deduction

7 from liability.

8 SEC. 202. CERTIFICATION OF DIRECT INSURERS.

9 (a) REQUIREMENT FOR CONDUCTING BUSINESS.—

10 Notwithstanding any other State or Federal law, no for11 eign insurer may act as a direct insurer unless the foreign

12 insurer is certified under this title by the Federal Insur13 ance Administrator as a certified direct insurer and no

14 person may assist or facilitate the placement of insurance

15 with a foreign insurer acting as a direct insurer unless

16 the foreign insurer is so certified.

17 (b) APPLICATION.—The Administrator shall provide

18 for foreign insurers to apply, in the form and manner de19 termined by the Administrator, for certification under this

20 title. The Administrator may establish and charge a rea21 sonable application fee to cover any costs of the applica22 tion procedure and reviewing applications.

23 (c) CERTIFICATION.—The Administrator may certify

24 a foreign insurer as a certified direct insurer for purposes

25 of this title only if the foreign insurer submits an applica-
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1 tion under this section containing the information de2 scribed in section 203 and the Administrator determines

3 that the foreign insurer complies with the standards estab4 lished under section 203.

5 SEC. 203. STANDARDS FOR CERTIFICATION OF DIRECT IN6 SURERS.

7 The Administrator shall establish standards for cer8 tifying, and renewing certification, of foreign insurers as

9 certified direct insurers, which shall include the following

10 requirements:

11 (1) EXAMINATIONS, AUDITS, AND FINANCIAL

12 STATEMENTS.—The foreign insurer shall—

13 (A) maintain any books and records in ac14 cordance with any requirements established by

15 the Administrator;

16 (B) provide the Administrator access to

17 such books and records for purpose of examina18 tions under section 206(b); and

19 (C) submit to the Administrator financial

20 information in accordance with section 206(a).

21 (2) REGULATORY FEE.—The foreign insurer

22 shall pay to the Administrator a fee not exceeding

23 the amount determined by the Administrator that,

24 together with other such fees, is sufficient to cover
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1 the costs of administering any activities under this

2 title relating to foreign insurers.

3 (3) MINIMUM NET WORTH.—The foreign in4 surer shall have a net worth in an amount not less

5 than the amount established by the Administrator.

6 The net worth of an insurer and the value of any

7 assets and liabilities of an insurer shall be deter8 mined, for purposes of this paragraph, in accordance

9 with generally accepted accounting practices and as

10 provided by the Administrator.

11 (4) RESERVE.—The foreign insurer shall estab12 lish and maintain a capital reserve with the Admin13 istrator, which shall be in the form determined by

14 the Administrator and shall meet the following re15 quirements:

16 (A) AVAILABILITY OF PROCEEDS.—The

17 proceeds of the reserve shall be available only

18 for the purpose of securing the payment of valid

19 claims of the United States policyholders of the

20 insurer and other claimants under such policies.

21 (B) BALANCE.—Except as provided in sub22 paragraph (C), the reserve shall have a balance,

23 at all times, of cash, readily marketable securi24 ties, and letters of credit, acceptable in the de25 termination of the Administrator, in an amount
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1 not less than the amount equal to the percent2 age of the aggregate amount of the United

3 States direct written obligations of the insurer

4 that is established by the Administrator under

5 this subparagraph. The Administrator shall es6 tablish such percentage based on the percentage

7 of reserves necessary to be held to protect the

8 interests of United States policyholders of the

9 insurer and other claimants under such policies.

10 (C) UNSAFE FINANCIAL CONDITIONS.—

11 The Administrator may increase the percentage

12 under subparagraph (B) for an insurer if the

13 Administrator determines that such insurer is

14 operating in a manner likely to result in an un15 safe or unsound financial condition.

16 (5) AGENT FOR SERVICE OF PROCESS.—The

17 foreign insurer shall appoint and maintain an agent

18 in the United States upon whom process may be

19 served in any action, suit, or proceeding.

20 (6) JURISDICTION OF COURTS.—The foreign in21 surer shall agree to submit to the jurisdiction of any

22 court of the United States or of any State, of com23 petent jurisdiction, to be fully bound by its decision.

24 (7) REGULATION BY DOMICILE.—The foreign

25 insurer shall annually submit to the Administrator a
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1 certificate of compliance, certificate of good stand2 ing, or equivalent documentation (as determined by

3 the Administrator) properly attested by the body re4 sponsible for regulation of the insurer in the domi5 cile of the insurer, evidencing authority under the

6 laws of the domicile of the insurer to engage in the

7 business of insurance.

8 (8) BIOGRAPHICAL INFORMATION.—The foreign

9 insurer shall annually submit to the Administrator,

10 in the form and manner determined by the Adminis11 trator—

12 (A) biographical information on all senior

13 officers and directors of the insurer that dem14 onstrates a level of competency, experience, and

15 integrity sufficient to indicate that permitting

16 the insurer to conduct business in the United

17 States would not be hazardous to United States

18 policyholders and creditors of the insurer or to

19 the general public; and

20 (B) financial, management, and oper21 ational information on any entities that directly

22 or indirectly control the insurer, as the Admin23 istrator shall provide.

24 (9) INSURANCE EXPERIENCE.—The foreign in25 surer shall—
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1 (A) have been actively and continuously

2 engaged in the business of insurance for a pe3 riod of not less than 3 years ending upon the

4 submission of an application under section 202;

5 (B) be a wholly owned subsidiary of an in6 surer and have been actively and continuously

7 engaged in the business of insurance for a pe8 riod of not less than 3 years ending upon the

9 submission of an application under section 202;

10 or

11 (C) be the continuing corporation resulting

12 from a merger or consolidation of insurers, at

13 least one of which has been actively and con14 tinuously engaged in the business of insurance

15 for a period of not less than 3 years ending

16 upon the submission of an application under

17 section 202.

18 (10) OTHER.—The foreign insurer shall meet

19 any other requirements as the Administrator may

20 provide.

21 SEC. 204. CERTIFICATION OF REINSURERS.

22 (a) REQUIREMENT FOR CONDUCTING BUSINESS.—

23 Notwithstanding any other State or Federal law, no in24 surer licensed by any State nor any certified direct insurer

25 under this title may claim reinsurance from a foreign rein-
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1 surer as an asset or deduction from liability for purposes

2 of any financial statement (including financial statements

3 required under this title) unless the foreign reinsurer is

4 certified under this title by the Administrator as a cer5 tified reinsurer.

6 (b) APPLICATION.—The Administrator shall provide

7 for foreign reinsurers to apply, in the form and manner

8 determined by the Administrator, for certification under

9 this title. The Administrator may establish and charge a

10 reasonable application fee to cover any costs of the appli11 cation procedure and reviewing applications.

12 (c) CERTIFICATION.—The Administrator may certify

13 a foreign reinsurer as a certified reinsurer for purposes

14 of this title only if the foreign reinsurer submits an appli15 cation under this section containing any information de16 scribed in section 205 and the Administrator determines

17 that the foreign reinsurer complies with the standards es18 tablished under section 205.

19 SEC. 205. STANDARDS FOR CERTIFICATION OF REINSUR20 ERS.

21 The Administrator shall establish standards for cer22 tifying, and renewing certification, of foreign reinsurers as

23 certified reinsurers, which shall include the following re24 quirements:
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1 (1) EXAMINATIONS, AUDITS, AND FINANCIAL

2 STATEMENTS.—The foreign reinsurer shall—

3 (A) maintain any books and records in ac4 cordance with any requirements established by

5 the Administrator;

6 (B) provide the Administrator access to

7 such books and records for purpose of examina8 tions under section 206(b); and

9 (C) submit to the Administrator financial

10 information in accordance with section 206(a).

11 (2) REGULATORY FEE.—The foreign reinsurer

12 shall pay to the Administrator a fee not exceeding

13 the amount determined by the Administrator that,

14 together with other such fees, is sufficient to cover

15 the costs of administering any activities under this

16 title relating to foreign reinsurers.

17 (3) MINIMUM NET WORTH.—The foreign rein18 surer shall have a net worth in an amount not less

19 than the amount established by the Administrator.

20 The net worth of a reinsurer and the value of any

21 assets and liabilities of a reinsurer shall be deter22 mined, for purposes of this paragraph, in accordance

23 with generally accepted accounting practices and as

24 provided by the Administrator.
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1 (4) TRUST FUND.—The foreign reinsurer shall

2 establish and maintain a capital reserve with the Ad3 ministrator, which shall be in the form determined

4 by the Administrator and shall meet the following

5 requirements:

6 (A) AVAILABILITY OF PROCEEDS.—The

7 proceeds of the reserve shall be available only

8 for the purpose of securing the payment of valid

9 claims of the United States policyholders of the

10 reinsurer and other claimants under such poli11 cies.

12 (B) BALANCE.—Except as provided in sub13 paragraph (C), the reserve shall have a balance,

14 at all times, of cash, readily marketable securi15 ties, and letters of credit, acceptable in the de16 termination of the Administrator, in an amount

17 not less than the amount equal to the percent18 age of the aggregate amount of the United

19 States reinsurance obligations of the reinsurer

20 that is established by the Administrator under

21 this subparagraph. The Administrator shall es22 tablish such percentage based on the percentage

23 of reserves necessary to be held to protect the

24 interests of United States policyholders of the
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1 reinsurer and other claimants under such poli2 cies.

3 (C) UNSAFE FINANCIAL CONDITIONS.—

4 The Administrator may increase the percentage

5 under subparagraph (B) for a reinsurer if the

6 Administrator determines that such reinsurer is

7 operating in a manner likely to result in an un8 safe or unsound financial condition.

9 (5) AGENT FOR SERVICE OF PROCESS.—The

10 foreign reinsurer shall appoint and maintain an

11 agent in the United States upon whom process may

12 be served in any action, suit, or proceeding.

13 (6) JURISDICTION OF COURTS.—

14 (A) IN GENERAL.—The foreign reinsurer

15 shall agree to submit to the jurisdiction of any

16 court of the United States or of any State, of

17 competent jurisdiction, to be fully bound by its

18 decision.

19 (B) ARBITRATION.—The provisions of sub20 paragraph (A) may not be construed to annul,

21 alter, or effect any obligation of the parties to

22 a reinsurance agreement to arbitrate or other23 wise resolve their disputes that is established by

24 such an agreement; except that the title to or

25 the right to be paid out of any trust fund estab-
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1 lished or maintained pursuant to paragraph (4)

2 shall not be subject to arbitration or other reso3 lution.

4 (7) REGULATION BY DOMICILE.—The foreign

5 reinsurer shall annually submit to the Administrator

6 a certificate of compliance, certificate of good stand7 ing, or equivalent documentation (as determined by

8 the Administrator) properly attested by the body re9 sponsible for regulation of the reinsurer in the domi10 cile of the reinsurer, evidencing authority under the

11 laws of the domicile of the reinsurer to engage in the

12 business of reinsurance.

13 (8) BIOGRAPHICAL INFORMATION.—The foreign

14 reinsurer shall annually submit to the Adminis15 trator, in the form and manner determined by the

16 Administrator—

17 (A) biographical information on all senior

18 officers and directors of the reinsurer that dem19 onstrates a level of competency, experience, and

20 integrity sufficient to indicate that permitting

21 the reinsurer to conduct business in the United

22 States would not be hazardous to United States

23 cedants and creditors of the reinsurer or to the

24 general public; and
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•HR 1257 IH

1 (B) financial, management, and oper2 ational information on all entities that directly

3 or indirectly control the reinsurer, as the Ad4 ministrator shall provide.

5 (9) INSURANCE EXPERIENCE.—The foreign re6 insurer shall—

7 (A) have been actively and continuously

8 engaged in the business of insurance for a pe9 riod of not less than 3 years ending upon the

10 submission of an application under section 204;

11 (B) be a wholly owned subsidiary of an in12 surer and have been actively and continuously

13 engaged in the business of insurance for a pe14 riod of not less than 3 years ending upon the

15 submission of an application under section 204;

16 or

17 (C) be the continuing corporation resulting

18 from a merger or consolidation of insurers, at

19 least one of which has been actively and con20 tinuously engaged in the business of insurance

21 for a period of not less than 3 years ending

22 upon the submission of an application under

23 section 204.
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1 (10) OTHER.—The foreign reinsurer shall meet

2 any other requirements as the Administrator may

3 provide.

4 SEC. 206. FINANCIAL STATEMENTS AND EXAMINATIONS.

5 (a) FINANCIAL STATEMENTS.—

6 (1) IN GENERAL.—The Administrator shall es7 tablish standards under this subsection requiring

8 foreign insurers and foreign reinsurers to submit fi9 nancial statements to the Administrator.

10 (2) GAAP PRINCIPLES.—The standards shall

11 require that each financial statement comply with

12 generally accepted accounting principles and be de13 veloped in accordance with such principles.

14 (3) INDEPENDENT AUDIT.—Each financial

15 statement shall include an audit conducted by a

16 independent certified public accountant or other

17 qualified independent auditor in accordance with

18 generally accepted accounting principles.

19 (4) TIMING.—The Administrator shall require

20 submission of a financial statement under this sub21 section by—

22 (A) each insurer and each reinsurer apply23 ing for certification under section 202 or 204,

24 as applicable; and
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1 (B) each certified direct insurer and each

2 certified reinsurer, on an annual basis.

3 (5) ADDITIONAL INFORMATION.—The Adminis4 trator may at any time require any foreign insurer

5 or foreign reinsurer to submit to the Administrator,

6 in addition to the information contained in a finan7 cial statement under this subsection, financial infor8 mation that the Administrator considers reasonable

9 and necessary to determine the financial condition of

10 the insurer or reinsurer.

11 (b) EXAMINATIONS.—

12 (1) IN GENERAL.—The Administrator shall es13 tablish standards under this subsection for examina14 tions of foreign insurers and foreign reinsurers to

15 determine their financial condition.

16 (2) TIMING.—The Administrator—

17 (A) shall conduct an examination under

18 this subsection of each insurer and each rein19 surer applying for certification under section

20 202 or 204; and

21 (B) may conduct an examination of an in22 surer or a reinsurer at any time the Director

23 considers an examination reasonable and nec24 essary to determine the financial condition of

25 the insurer or reinsurer.
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1 (3) EXPENSE.—The Administrator shall assess

2 any costs of an examination under this section

3 against the foreign insurer or foreign reinsurer ex4 amined and shall collect such amounts.

5 SEC. 207. DECERTIFICATION.

6 The Administrator may suspend or revoke the certifi7 cation of certified foreign insurers and reinsurers if the

8 Administrator determines that such an insurer or a rein9 surer fails to comply with the requirements of this title

10 and the standards established pursuant to this title. The

11 Administrator shall establish standards for suspending

12 and revoking such certifications under this section.

13 SEC. 208. GAO AUDITS.

14 The Comptroller General of the United States shall

15 audit the operations of the Administrator carried out

16 under this title in accordance with generally accepted Gov17 ernment auditing standards. All books, records, accounts,

18 reports, files, and property belonging to, or used by, the

19 Administrator shall be made available to the Comptroller

20 General. Audits under this section shall be conducted upon

21 the expiration of the 1-year period beginning upon the

22 date of the effectiveness of this title and biennially there23 after. Upon the conclusion of each audit under this sec24 tion, the Comptroller General shall submit a report de25 scribing the audit to the Committee on Banking, Finance
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1 and Urban Affairs of the House of Representatives and

2 the Committee on Banking, Housing, and Urban Affairs

3 of the Senate.

4 SEC. 209. NATIONAL INSURANCE INTELLIGENCE

5 DATABASE.

6 (a) IN GENERAL.—The Administrator shall collect

7 information regarding individuals and other persons that

8 have engaged in, or that the Administrator has reason to

9 believe to have engaged in, illegal activity relating to insur10 ance or reinsurance activities. The Administrator shall es11 tablish a computer-based database of such information

12 and shall regularly update the database.

13 (b) LAW ENFORCEMENT ACCESS.—The Adminis14 trator shall make information from the database under

15 this section available to appropriate Federal and State law

16 enforcement and regulatory agencies upon request.

17 (c) CONFIDENTIALITY.—Except as provided in sub18 section (b), notwithstanding any other law, regulation, or19 dinance, any agreement, any judgment or order of any

20 court, tribunal, or other officer, or any other legal process,

21 the Administrator may not disclose any information from

22 the database under this section.

23 SEC. 210. PENALTIES.

24 (a) CIVIL MONEY PENALTY.—Any person or insurer

25 who knowingly fails to comply with any provision of this
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1 title shall be subject to a civil penalty, imposed by the Ad2 ministrator, in an amount not to exceed $1,000,000.

3 (b) CRIMINAL OFFENSE.—Whoever knowingly sub4 mits information required under this title to the Adminis5 trator that is false and misleading shall be fined under

6 title 18, United States Code, or imprisoned not more than

7 30 years, or both.

8 SEC. 211. DEFINITIONS.

9 For purposes of this title:

10 (1) ADMINISTRATOR.—The term ‘‘Adminis11 trator’’ means the Administrator of the Federal In12 surance Administration, as established under section

13 101.

14 (2) CERTIFIED DIRECT INSURER AND CER15 TIFIED REINSURER.—The terms ‘‘certified direct in16 surer’’ and ‘‘certified reinsurer’’ mean a foreign in17 surer certified under section 202 and a foreign rein18 surer certified under section 204, respectively.

19 (3) CONTROL.—The term ‘‘control’’ means di20 rect or indirect possession of the power to direct or

21 cause the direction of the management and policies

22 of a person, including through the ownership of vot23 ing securities, by contract other than a commercial

24 contract for goods or nonmanagerial services, or oth-
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1 erwise, unless the power is the result of an official

2 position with or corporate office held by the person.

3 (4) DIRECT INSURER.—The term ‘‘direct in4 surer’’ means a foreign insurer that accepts United

5 States direct risk pursuant to a State surplus or ex6 cess lines law. The term does not include foreign in7 surers accepting United States direct risks by other

8 lawful means.

9 (5) FOREIGN INSURER.—The term ‘‘foreign in10 surer’’ means an insurer or reinsurer other than—

11 (A) an insurer or reinsurer organized

12 under the laws of any State or Canada; and

13 (B) the United States branch of a foreign

14 insurer.

15 The term includes insurers and reinsurers doing

16 business as single insurers, groups of individual un17 incorporated underwriters, and groups of incor18 porated insurers under common administration.

19 (6) FOREIGN REINSURER.—The term ‘‘foreign

20 reinsurer’’ means a foreign insurer that assumes,

21 from an insurer or reinsurer licensed by any State,

22 all or any portion of risks undertaken by the licensed

23 insurer. The term does not include a foreign insurer

24 that—
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1 (A) assumes only risks arising out of the

2 insuring of the company or other person that

3 owns the insurer or of which the insurer is a

4 subsidiary or affiliate; and

5 (B) does not undertake any other business

6 that is not related to the company or other per7 son that owns the insurer or of which the in8 surer is a subsidiary or affiliate.

9 (7) LETTER OF CREDIT.—The term ‘‘letter of

10 credit’’ means a clean irrevocable letter of credit is11 sued or confirmed by a qualified financial institu12 tion, in a form prescribed by the Administrator.

13 (8) READILY MARKETABLE SECURITIES.—The

14 term ‘‘readily marketable securities’’ means securi15 ties registered for trading on a national securities

16 exchange in accordance with section 12 of the Secu17 rities Exchange Act of 1934 and any other securities

18 approved by the Administrator.

19 (9) STATE.—The term ‘‘State’’ means the

20 States of the United States, the District of Colum21 bia, the Commonwealth of Puerto Rico, the Com22 monwealth of the Northern Mariana Islands, Guam,

23 the Virgin Islands, American Samoa, the Trust Ter24 ritory of the Pacific Islands, and any other territory

25 or possession of the United States.
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1 (10) UNITED STATES BRANCH OF FOREIGN IN2 SURER.—The term ‘‘United States branch of foreign

3 Insurer’’ means the business unit through which in4 surance business is transacted within the United

5 States by a foreign insurer and whose assets and li6 abilities pertaining to such business are within the

7 United States.

8 (11) UNITED STATES DIRECT WRITTEN INSUR9 ANCE OBLIGATIONS.—The term ‘‘United States di10 rect written insurance obligations’’ means obliga11 tions of a direct insurer for unearned premium and

12 unpaid claims, including incurred but not reported

13 claims.

14 (12) UNITED STATES REINSURANCE OBLIGA15 TIONS.—The term ‘‘United States reinsurance obli16 gations’’ means obligations to insurers licensed by

17 any State for reported claims, incurred but not re18 ported claims, unearned premium, losses and loss

19 adjustment expense, aggregate life reserves, and ag20 gregate reserves for accident and health risks.

21 SEC. 212. LIMITATION ON PREEMPTION.

22 This title may not be construed to preempt the law

23 of any State, except to the extent that such laws are incon24 sistent with the provisions of this title, and then only to
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1 the extent of such inconsistency. The Administrator is au2 thorized to determine whether such inconsistencies exist.

3 SEC. 213. EFFECTIVE DATE.

4 The provisions of this title shall take effect upon the

5 expiration of the 12-month period beginning on the date

6 of the enactment of this Act.

7 TITLE III—LIQUIDITY ASSIST8 ANCE BY FEDERAL RESERVE

9 BANKS TO WELL-CAPITAL10 IZED INSURANCE COMPANIES

11 SEC. 301. SHORT TITLE.

12 This title may be cited as the ‘‘Insurance Liquidity

13 and Solvency Act of 1993’’.

14 SEC. 302. CERTIFICATION OF ELIGIBILITY FOR LIQUIDITY

15 ASSISTANCE.

16 (a) IN GENERAL.—The Federal Insurance Adminis17 trator shall establish standards under this section for de18 termining the eligibility of, and certifying, insurance com19 panies for liquidity assistance pursuant to section 13B of

20 the Federal Reserve Act.

21 (b) CONTENTS.—The standards under this section

22 shall—

23 (1) establish guidelines for the types and man24 ners of organization of companies that may be cer25 tified under this section;
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1 (2) establish minimum financial resource and

2 solvency requirements for insurance companies that,

3 in the determination of the Administrator, ensure

4 that any company complying with such requirements

5 is sufficiently capitalized for purposes of obtaining

6 liquidity assistance pursuant to section 13B of the

7 Federal Reserve Act; and

8 (3) provide that only insurance companies meet9 ing or exceeding the minimum financial require10 ments established under paragraph (2) may be cer11 tified under this section.

12 (c) COMPLIANCE REPORTS FROM STATES.—No in13 surance company may be certified under this section as

14 eligible for liquidity assistance pursuant to section 13B

15 of the Federal Reserve Act until the Administrator has

16 reviewed any examinations and enforcement and compli17 ance reports received or requested from any State insur18 ance regulatory authority which has jurisdiction over such

19 company, or any activities conducted by such company.

20 (d) EXAMINATIONS AND FINANCIAL STATEMENTS.—

21 In determining whether insurance companies are eligible

22 for certification under this section, the Administrator may

23 require insurance companies to submit financial state24 ments and may conduct examinations of insurance compa-
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•HR 1257 IH

1 nies in the same manner required and conducted with re2 spect to foreign insurers and reinsurers under section 206.

3 (e) PROCEDURES FOR CERTIFICATION OF ELIGIBLE

4 COMPANIES.—

5 (1) IN GENERAL.—The Administrator shall es6 tablish procedures for certifying insurance compa7 nies as eligible for liquidity assistance pursuant to

8 section 13B of the Federal Reserve Act.

9 (2) AVAILABILITY OF LIST.—The Administrator

10 shall make publicly available a list of the insurance

11 companies certified under this section as eligible for

12 liquidity assistance pursuant to such Act.

13 (f) FINANCIAL RESOURCE AND SOLVENCY REQUIRE14 MENTS.—Before the end of the 180-day period beginning

15 on the date of the enactment of this Act, the Adminis16 trator, in consultation with State insurance regulatory au17 thorities, shall establish the minimum financial resource

18 and solvency requirements for insurance companies under

19 subsection (b)(2).

20 (g) DECERTIFICATION.—The Administrator may sus21 pend or revoke the certification of an insurance company

22 previously certified under this section if the Administrator

23 determines that the insurance company fails to comply

24 with the provisions of this section or the requirements es25 tablished under this section. The Administrator shall es-
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1 tablish standards for suspending and revoking such certifi2 cations under this section.

3 SEC. 303. REQUESTS FOR LIQUIDITY ASSISTANCE.

4 (a) IN GENERAL.—The Administrator shall establish

5 standards and procedures under this section for insurance

6 companies certified under section 302 to apply for the ap7 proval of the Administrator for a request for liquidity as8 sistance pursuant to section 13B of the Federal Reserve

9 Act and for the Administrator to approve such applica10 tions.

11 (b) CONTENTS.—The standards established under

12 this section shall provide that the Administrator may ap13 prove an application for a request for liquidity assistance

14 pursuant to section 13B of the Federal Reserve Act only

15 if—

16 (1) the application is submitted by an insurance

17 company certified under section 302;

18 (2) the Administrator determines that the in19 surance company submitting the request is threat20 ened by a liquidity crisis resulting from policyholder

21 withdrawals;

22 (3) the Administrator determines that short23 term credit is not otherwise available to the insur24 ance company; and
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1 (4) the Administrator determines that such li2 quidity assistance is appropriate for the company

3 considering the circumstances of the company and is

4 likely to assist the company in withstanding the li5 quidity crisis.

6 (c) COPIES TO BOARD AND STATE INSURANCE REG7 ULATORY AUTHORITY.—Any insurance company submit8 ting an application under this section to the Administrator

9 for approval of a request for liquidity assistance shall sub10 mit a copy of the application to the Board of Governors

11 of the Federal Reserve System and any appropriate State

12 insurance regulatory authority.

13 (d) CONTENTS OF APPLICATION.—Any application

14 under this section shall contain—

15 (1) evidence of the certification of the insurance

16 company under section 302; and

17 (2) a certification by the insurance company

18 that, as of the date of such application, the company

19 is and, during the 12-month period ending on such

20 date, has been in compliance with the minimum fi21 nancial resource and solvency requirements of the

22 Administrator established under section 302(b)(2)

23 and any appropriate State insurance regulatory au24 thority.
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1 SEC. 304. REPORT.

2 The Administrator shall submit an annual report to

3 the Committee on Banking, Finance and Urban Affairs

4 of the House of Representatives and the Committee on

5 Banking, Housing, and Urban Affairs of the Senate on—

6 (1) any insurance companies certified under

7 section 302 or denied certification under such sec8 tion, during the year covered by the report; and

9 (2) any insurance companies for which applica10 tions for requests for liquidity assistance were ap11 proved or for which such applications were denied,

12 during the year covered by the report.

13 SEC. 305. PROVISION OF LIQUIDITY ASSISTANCE TO INSUR14 ANCE COMPANIES BY FEDERAL RESERVE

15 BANKS.

16 The Federal Reserve Act (12 U.S.C. 221 et seq.) is

17 amended by inserting after section 13A the following new

18 section:

19 ‘‘SEC. 13B. PROCEDURES APPLICABLE TO LIQUIDITY AS20 SISTANCE TO INSURANCE COMPANIES.

21 ‘‘(a) IN GENERAL.—For the purpose of ensuring that

22 liquidity assistance is available on an objective basis to any

23 well-capitalized insurance company that is threatened by

24 a liquidity crisis resulting from policyholder withdrawals

25 and the unavailability of short-term credit, and in addition

26 to any other procedure or condition established under this
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1 Act, the procedures and conditions established under this

2 section shall apply to liquidity assistance provided by any

3 Federal Reserve bank under this Act to any insurance

4 company certified and approved under title III of the Fed5 eral Insurance Administration Act.

6 ‘‘(b) ELIGIBILITY.—An insurance company may ob7 tain liquidity assistance under this Act under the same

8 terms and conditions as a member bank, but only if the

9 company is certified by the Federal Insurance Adminis10 trator to be eligible for such assistance in accordance with

11 the procedures established under section 302 of the Fed12 eral Insurance Administration Act and an application for

13 a request for such liquidity assistance has been approved

14 by the Administrator in accordance with the procedures

15 established under section 303 of such Act.

16 ‘‘(c) TERMS AND CONDITIONS OF ASSISTANCE.—

17 ‘‘(1) IN GENERAL.—Liquidity assistance may

18 be provided under this Act by a Federal Reserve

19 bank only in the amount, and to the extent, that

20 such assistance is requested in an application ap21 proved by the Federal Insurance Administrator

22 under section 303 of the Federal Insurance Admin23 istration Act.

24 ‘‘(2) COMPARABLE TERMS.—Any liquidity as25 sistance provided under this Act by any Federal Re-
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1 serve bank to any insurance company shall be made

2 for such period of time and at such financing costs

3 as are generally applicable to advances to depository

4 institutions (as defined in section 19(b)(1)(A))

5 under sections 10, 10A, and 10B.

6 ‘‘(3) NOTIFICATION OF LIQUIDITY ASSISTANCE

7 AND DENIAL OF ASSISTANCE TO FIA.—Any Federal

8 Reserve bank which provides or denies liquidity as9 sistance under this Act to any insurance company

10 shall provide prompt notice of such assistance or de11 nial to the Federal Insurance Administrator any ap12 propriate State insurance regulatory authority,

13 which shall include the amount of assistance pro14 vided or denied and the reason for any such denial.

15 ‘‘(d) LIQUIDITY ASSISTANCE DEFINED.—For pur16 poses of this section, the term ‘liquidity assistance’ means,

17 with respect to any insurance company—

18 ‘‘(1) any advance made by any Federal Reserve

19 bank under this Act to the insurance company; or

20 ‘‘(2) the discounting by any such bank under

21 this Act of any note, draft, bill, or other obligation

22 issued, drawn, or endorsed by the insurance com23 pany.
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1 ‘‘(e) REGULATIONS.—The Board shall prescribe such

2 regulations as the Board may determine to be appropriate

3 to carry out the purposes of this section.

4 ‘‘(f) ANNUAL REPORT TO BANKING COMMITTEES.—

5 The Board shall submit an annual report to the Commit6 tee on Banking, Finance and Urban Affairs of the House

7 of Representatives and the Committee on Banking, Hous8 ing, and Urban Affairs of the Senate on any liquidity as9 sistance provided by any Federal Reserve bank to any in10 surance company during the year covered by the report.’’.

11 SEC. 306. REGULATIONS.

12 The Administrator may issue any regulations the Ad13 ministrator considers appropriate to carry out the duties

14 of the Administrator under this title.

15 TITLE IV—DISCLOSURE OF IN16 SURANCE AVAILABILITY IN17 FORMATION

18 SEC. 401. SHORT TITLE.

19 This title may be cited as the ‘‘Insurance Disclosure

20 Act’’.

21 SEC. 402. FINDINGS AND CONSTRUCTION.

22 (a) FINDINGS.—The Congress finds that—

23 (1) there are disparities in property and cas24 ualty insurance coverage provided by some insurers
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1 between areas of different incomes and racial com2 position;

3 (2) such disparities adversely affect the afford4 ability and availability of insurance for consumers;

5 (3) the lack of affordable and adequate insur6 ance for qualified consumers severely limits the abil7 ity of such consumers to obtain credit for home,

8 business, and automobile purchases; and

9 (4) disclosures of insurance activities of insur10 ers would benefit consumers and insurance regu11 lators without imposing any undue burden on insur12 ers.

13 (b) CONSTRUCTION.—Nothing in this title is intended

14 to, nor shall it be construed to, encourage unsound under15 writing practices.

16 SEC. 403. MAINTENANCE OF INFORMATION AND PUBLIC

17 DISCLOSURE.

18 (a) DESIGNATED INSURERS.—Except as provided in

19 section 404(e), each insurer designated under section

20 407(a), which sells a line of insurance designated under

21 section 407(b) in a Metropolitan Statistical Area or Con22 solidated Metropolitan Statistical Area (both hereafter in

23 this title referred to as an ‘‘MSA’’) designated by the Di24 rector of the Office of Management and Budget, shall

25 compile and make available for each calendar year to the
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1 Federal Insurance Administrator (in accordance with sec2 tion 406 and regulations of the Administrator) and to the

3 public for inspection and copying at the home office or

4 at a central depository established under section 405 and

5 at least one branch office (if there is one) within such

6 MSA—

7 (1) the number and total coverage amount of

8 insurance policies by designated line which were is9 sued in such MSA;

10 (2) the number and total coverage amount of

11 insurance policies by designated line for which the

12 insurer received a completed application in such

13 MSA;

14 (3) the number and total coverage amount of

15 insurance policies by designated line for which the

16 insurer received a completed application and which

17 were not issued, in such MSA;

18 (4) the number and total coverage amount of

19 insurance policies by designated line which were re20 newed in such MSA;

21 (5) the number and total coverage amount of

22 insurance policies by designated line for which the

23 insurer received a completed application for renewal

24 in such MSA;
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1 (6) the number and total coverage amount of

2 insurance policies by designated line for which the

3 insurer received a completed application for renewal

4 and which were not renewed, in such MSA;

5 (7) the number and total coverage amount of

6 insurance policies by designated line which were can7 celed by the insurer, in such MSA;

8 (8) the number of agents of such insurer whose

9 principal place of business is located in such MSA

10 and the number within each census tract or county,

11 as applicable, in such MSA and with respect to each

12 such agent, whether such agent is an employee,

13 independent contractor working exclusively for such

14 insurer, or an independent contractor appointed to

15 represent such insurer on a nonexclusive basis;

16 (9) the number of agents of such insurer whose

17 principal place of business was located in such MSA

18 but which was relocated outside such MSA or whose

19 agency was terminated, and the number of such

20 agents for each census tract or county, as applicable,

21 in such MSA; and

22 (10) the number of agents of such insurer

23 whose principal place of business was established at

24 a location in such MSA and the number of such
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1 agents for each census tract or county, as applicable,

2 in such MSA.

3 (b) NONDESIGNATED INSURERS.—Except as pro4 vided in section 404(e), every insurer which sells an insur5 ance policy in a designated line of insurance in an MSA

6 and which is not a designated insurer in such MSA shall

7 report for each calendar year to the Administrator (in ac8 cordance with section 406 and regulations of the Adminis9 trator) the number of insurance policies in a designated

10 line sold in such MSA on an annualized basis which ad11 justs for varying durations of insurance policies sold—

12 (1) itemized by census tract for policies sold

13 within any county with a population of more than

14 30,000 within the MSA; or

15 (2) by county for insurance policies sold within

16 any other county in such MSA.

17 Such information shall be made available to the public on

18 a timetable determined by the Administrator but not later

19 than September 1 of the calendar year following the cal20 endar year for which the information is required to be re21 ported.

22 SEC. 404. REQUIREMENTS.

23 (a) CONTENT.—The information required to be main24 tained and made available under section 403(a) shall—
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1 (1) be itemized in order to clearly and conspicu2 ously disclose the number and coverage amount for

3 each line of insurance for which information is re4 quired by—

5 (A) census tracts for insurance policies

6 within any county with a population of more

7 than 30,000 within the MSA; or

8 (B) county for insurance policies within

9 any other county within such MSA;

10 (2) disclose for each designated line of insur11 ance in an MSA and, with respect to each such line,

12 for each census tract or county, as applicable, in the

13 MSA—

14 (A) the total number of claims made which

15 with respect to property insurance shall be

16 disaggregated by the type and use of the prop17 erty insured, which types and uses shall in18 clude—

19 (i) properties consisting of 1 to 4

20 dwelling units;

21 (ii) properties consisting of more than

22 4 dwelling units;

23 (iii) owner-occupied properties;

24 (iv) rental properties; and

25 (v) vacant properties; and
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1 (B) the total amount paid in claims which

2 with respect to property insurance shall be

3 disaggregated by the type and use of the prop4 erty insured, which types and uses shall include

5 the types and uses described in clauses (i)

6 through (v) of subparagraph (A);

7 (3) disclose the standards and criteria used in

8 underwriting each designated line of insurance; and

9 (4) be made available to the public on a time10 table determined by the Administrator but not later

11 than September 1 of the calendar year following the

12 calendar year for which the information is required

13 to be made available.

14 (b) ITEMIZATION OF DATA.—With respect to insur15 ance and applications for which information is required

16 to be maintained and made available under section 403(a),

17 the following information shall be maintained and made

18 available for each policy and each completed application:

19 (1) The MSA for which such insurance is is20 sued or applied and within such MSA the census

21 tract or county, as applicable, for which such insur22 ance is issued or requested.

23 (2) The designated insurer who issued such in24 surance or to whom the application was made.

25 (3) The date of the issuance of such insurance.
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1 (4) The line of the insurance which is des2 ignated and any subline or class of such insurance.

3 (5) The type of insurance or policy form for

4 which applications are made and the types of insur5 ance and policy forms which are issued.

6 (6) The amount of coverage provided under

7 such insurance and any applicable deductibles.

8 (7) The amount of the premiums for such in9 surance.

10 (8) The durations of such insurance.

11 (9) The gender and racial characteristics of the

12 applicants for such insurance.

13 (10) A notation if such insurance was issued in

14 a voluntary or residual market.

15 (11) The date of, and reason for, any declina16 tion, cancellation, or nonrenewal made for such in17 surance.

18 (12) With respect to property insurance, the

19 market value of the property insured and the type

20 and use of property insured.

21 (c) PERIOD OF MAINTENANCE.—Any information re22 quired to be compiled and made available under section

23 403 shall be maintained and made available for a period

24 of 5 years after the close of the first year during which
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1 such information is required to be maintained and made

2 available.

3 (d) FORMAT FOR DISCLOSURES.—Subject to section

4 405, the Administrator shall prescribe a standard format

5 for making information available as required by section

6 403. Such format shall encourage the submission of infor7 mation in a form readable by a computer.

8 (e) EXEMPTIONS.—

9 (1) SECRETARIAL ACTION.—The Administrator

10 may by regulation exempt from the requirements of

11 section 403 any insurer within any State if the Ad12 ministrator determines that under the laws of such

13 State that such insurer is subject to disclosure re14 quirements on a census tract basis substantially

15 similar to those of section 403 and that such law

16 contains adequate provisions for enforcement.

17 (2) UNITED STATES PROGRAM.—Reporting

18 shall not be required under section 403 with respect

19 to insurance provided by a program underwritten or

20 administered by the United States, including the na21 tional flood insurance program under the National

22 Flood Insurance Act of 1968, the program for insur23 ance against burglary and theft under title XII of

24 the National Housing Act, and mortgage insurance

25 under the National Housing Act.
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1 (f) COMPLETED APPLICATION.—For purposes of sec2 tion 403 and this section, the Administrator shall define

3 ‘‘completed applications’’ to—

4 (1) ensure that the disclosure required by such

5 sections appropriately reflects the characteristics of

6 the applicants interested in purchasing insurance in

7 an MSA; and

8 (2) prevent insurers from evading the intent of

9 such sections through practices designed to discour10 age applicants from completing applications.

11 SEC. 405. ACCESS SYSTEM.

12 (a) IN GENERAL.—The Administrator shall imple13 ment a system to facilitate access to information required

14 to be maintained and made available under section 403.

15 Such system shall also include arrangements for a publicly

16 accessible central depository of information in each MSA,

17 as provided under subsection (b), and for a telephone

18 number which can be used by the public, at cost, to re19 quest such information. Written statements containing

20 such information shall be made available to the public for

21 inspection and copying at such central depository of infor22 mation for all designated insurers within such MSA. The

23 Administrator shall make copies of such statements avail24 able in forms readable by widely used personal computers.

25 The Administrator may charge a fee for such information,
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1 which may not exceed the amount, determined by the Ad2 ministrator, that is equal to the cost of producing the com3 puter statements.

4 (b) USE OF HOME MORTGAGE DISCLOSURE ACT DE5 POSITORIES.—To the extent practicable, the central de6 positories referred to in subsection (a) shall be the central

7 depositories established under section 304(f) of the Home

8 Mortgage Disclosure Act of 1975. The Federal Financial

9 Institutions Examination Council shall consult with the

10 Administrator regarding the use of such depositories and

11 shall provide for the use of such depositories to the extent

12 agreed to by such Council and the Administrator.

13 SEC. 406. SUBMISSION TO ADMINISTRATOR.

14 The information referred to in section 403 shall be

15 submitted to the Administrator. The Administrator shall

16 develop regulations prescribing—

17 (1) the format for making such information

18 available;

19 (2) the method for submission of such informa20 tion; and

21 (3) the procedures for making the information

22 available to the public.

23 Any reporting insurer may submit in writing to the Ad24 ministrator such additional data or explanations as it
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1 deems relevant to the decision by such insurer to sell in2 surance.

3 SEC. 407. DESIGNATIONS.

4 (a) DESIGNATION OF INSURERS.—For each MSA,

5 the Administrator shall take the following actions:

6 (1) The Administrator shall annually designate

7 the insurers transacting insurance business in such

8 MSA for which reporting is required under section

9 403. At a minimum, the Administrator shall annu10 ally designate the 25 insurers in such MSA having

11 the largest premium volume in the designated lines

12 of insurance.

13 (2) The Administrator shall also annually des14 ignate any entity providing insurance in a des15 ignated line of insurance as part of a residual mar16 ket established by State law.

17 (3) The Administrator may designate additional

18 insurers on the basis of such criteria as the Admin19 istrator may by regulation develop. Such a regula20 tion shall be issued in accordance with section 553

21 of title 5, United States Code. In considering wheth22 er to designate additional insurers, the Adminis23 trator shall ensure that—

24 (A) insurers who specialize in selling insur25 ance in urban areas, including surplus lines in-
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1 surers, are specifically considered for designa2 tion notwithstanding their premium volume;

3 and

4 (B) insurers representing at least 90 per5 cent of the premium volume in the designated

6 lines of insurance are designated in such MSA.

7 (b) DESIGNATION OF LINES OF INSURANCE.—For

8 each MSA, the Administrator shall designate the lines of

9 insurance sold in such MSA for which reporting is re10 quired under section 403. At a minimum, the Adminis11 trator shall annually designate private mortgage insurance

12 and the following lines of property and casualty insurance:

13 (1) Private passenger automobile insurance (in14 cluding appropriate sublines and classes).

15 (2) Property insurance which does not cover

16 commercial property (including homeowners, fire,

17 burglary and theft, and other lines, and appropriate

18 sublines and classes and related coverages such as

19 coverage of property contents and property insured

20 at full replacement value or market value).

21 (3) Commercial insurance for small business.

22 The Administrator may designate additional lines of insur23 ance on the basis of such criteria as the Administrator

24 may by regulation develop. Such a regulation shall be is25 sued in accordance with section 553 of title 5, United
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1 States Code. For purposes of this title, the designation

2 of a line of insurance includes a designation of a subline

3 or class of insurance.

4 (c) TIMING OF DESIGNATIONS.—The Administrator

5 shall make the annual designations required by sub6 sections (a) and (b) no later than September 1 of the year

7 preceding the year for which reporting is required under

8 section 403. The Administrator shall notify persons in9 volved in the designations no later than the October 1

10 which follows the designation.

11 (d) OBTAINING INFORMATION.—The Administrator

12 may obtain from insurers such information as the Admin13 istrator may require to make designations under this sec14 tion.

15 SEC. 408. DISCLOSURES TO REJECTED APPLICANTS.

16 (a) IN GENERAL.—Except as provided in subsection

17 (e), the Administrator shall, by regulations issued under

18 section 553 of title 5, United States Code—

19 (1) require insurers to provide to each applicant

20 for insurance in a designated line—

21 (A) reasons for denying an application for

22 such insurance or for canceling or not renewing

23 a policy in force; and

24 (B) actions the applicant may take to qual25 ify for such insurance; and
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1 (2) restrict the use insurers may make of infor2 mation relating to—

3 (A) adverse underwriting decisions; or

4 (B) insurance coverage in a residual mar5 ket.

6 (b) MODEL ACTS.—In issuing regulations under sub7 section (a), the Administrator shall consider relevant por8 tions of model acts developed by the National Association

9 of Insurance Commissioners.

10 (c) ENFORCEMENT.—The Administrator may dele11 gate to the States the authority to enforce the require12 ments of regulations issued under subsection (a).

13 (d) PREEMPTION.—Subsection (a) is not to be con14 strued to preempt any State from imposing on insurers

15 requirements of the type stated in such subsection, includ16 ing requirements which are more stringent or more com17 prehensive.

18 (e) EXEMPTION.—A regulation issued under sub19 section (a) may not apply to insurance provided under a

20 program underwritten or administered by the United

21 States, including the national flood insurance program

22 under the National Flood Insurance Act of 1968, the pro23 gram for insurance against burglary and theft under title

24 XII of the National Housing Act, and mortgage insurance

25 under the National Housing Act.
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1 (f) DEFINITION.—For purposes of subsection

2 (a)(2)(A), an adverse underwriting decision means any of

3 the following actions with respect to insurance trans4 actions involving insurance coverage which is individually

5 underwritten:

6 (1) A declination of insurance coverage.

7 (2) A termination of insurance coverage.

8 (3) Failure of an agent to apply for insurance

9 coverage with a specific insurance entity which the

10 agent represents and which is requested by the ap11 plicant.

12 (4) In the case of property or casualty insur13 ance coverage—

14 (A) placement by an insurance entity or

15 agent of a risk with a residual market mecha16 nism, an unauthorized insurer, or an insurance

17 entity which specializes in substandard risks; or

18 (B) the charging of higher rates on the

19 basis of information which differs from that

20 which the applicant or policyholder furnished.

21 SEC. 409. TERMINATION OF AGENTS.

22 (a) REGULATIONS.—Except as provided in subsection

23 (d), the Administrator shall, by regulation issued under

24 section 553 of title 5, United States Code, ensure that

25 the practices of insurers in terminating agents who handle
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1 private mortgage insurance or property or casualty insur2 ance do not result in an inappropriate effect on the avail3 ability or affordability of insurance from such insurers.

4 Such regulations shall specifically ensure that such prac5 tices do not result in unfair discrimination against agents

6 as a result of their geographic locations or of the geo7 graphic locations of their clients. Regulations under this

8 subsection shall be stated in terms of minimum standards.

9 (b) PREEMPTION.—Subsection (a) may not be con10 strued to preempt any State from imposing on insurers

11 requirements of the type stated in such subsection, includ12 ing requirements which are more stringent or more com13 prehensive.

14 (c) ENFORCEMENT.—The Administrator may dele15 gate to the States the enforcement of such regulations.

16 (d) EXEMPTION.—A regulation issued under sub17 section (a) may not apply to insurance provided under a

18 program underwritten or administered by the United

19 States, including the national flood insurance program

20 under the National Flood Insurance Act of 1968, the pro21 gram for insurance against burglary and theft under title

22 XII of the National Housing Act, and mortgage insurance

23 under the National Housing Act.
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1 SEC. 410. IMPLEMENTATION.

2 (a) IN GENERAL.—The Administrator shall prescribe

3 such regulations as may be necessary to carry out sections

4 403 through 406. Such regulations may contain such clas5 sifications, differentiations, or other provisions, and may

6 provide for such adjustments and exceptions for any class

7 of transactions, as in the judgment of the Administrator

8 are necessary and proper to effectuate the purposes of

9 such section and to prevent circumvention or evasion

10 thereof or to facilitate compliance therewith.

11 (b) BURDENS.—In prescribing regulations under sub12 section (a), the Administrator shall take into consideration

13 the administrative, paperwork, and other burdens on in14 surance agents, including independent insurance agents,

15 involved in complying with the requirements of sections

16 403 through 406 and shall minimize the burdens imposed

17 by such requirements with respect to such agents.

18 SEC. 411. IMPROVED METHODS.

19 The Administrator shall develop, or assist in the im20 provement of, methods of matching addresses and census

21 tracts to facilitate compliance by insurers, in as economi22 cal a manner as possible, with the requirements of this

23 title.

24 SEC. 412. COMPILATION OF AGGREGATE DATA.

25 (a) SCOPE OF DATA AND TABLES.—The Adminis26 trator shall compile each year, for each MSA, aggregate
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1 data by census tract for all insurers who are subject to

2 section 403 or who are exempt from section 403 under

3 the provisions of section 404(e)(1) of such section. The

4 Administrator shall also produce tables indicating, for

5 each MSA, aggregate insurance underwriting patterns for

6 various categories of census tracts grouped according to

7 location, age of property, income level, and racial charac8 teristics.

9 (b) AVAILABILITY TO PUBLIC.—The data compiled

10 and the tables produced pursuant to subsection (a) shall

11 be made available to the public on a timetable determined

12 by the Administrator but not later than December 1 of

13 the year following the calendar year on which the data

14 and tables are based. The data shall be made available

15 using the system implemented under section 405, in the

16 forms required under such section, and subject to the pro17 visions of such section.

18 SEC. 413. TESTERS.

19 The Administrator may utilize employees and officers

20 of the Federal Insurance Administration and may provide

21 advice and technical assistance to State and local govern22 ment agencies and public and private entities (including

23 nonprofit organizations), to develop, implement, carry out,

24 or coordinate programs or activities designed to—
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1 (1) prevent or eliminate discriminatory insur2 ance practices; or

3 (2) obtain enforcement of Federal and State

4 laws prohibiting discriminatory insurance practices.

5 SEC. 414. REPORT.

6 The Administrator shall report to the Committee on

7 Banking, Finance and Urban Affairs of the House of Rep8 resentatives and the Committee on Banking, Housing, and

9 Urban Affairs of the Senate on the implementation of this

10 title, any activities carried out pursuant to section 413,

11 and shall make recommendations to such committees on

12 such additional legislation as the Administrator deems ap13 propriate to carry out this title.

14 SEC. 415. ENFORCEMENT.

15 (a) CIVIL PENALTIES.—An insurer who does not

16 comply with the requirements of sections 403 through

17 406, or a regulation issued under section 408 or 409, shall

18 be subject to a civil penalty of not to exceed $5,000 for

19 each day during which such violation continues.

20 (b) INJUNCTION.—The district courts of the United

21 States shall have jurisdiction over a petition of the Admin22 istrator to enjoin an insurer from actions which are in vio23 lation of the requirements of sections 403 through 406

24 or of a regulation issued under section 408 or 409.
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1 SEC. 416. RELATION TO STATE LAWS.

2 This title does not annul, alter, affect, or exempt the

3 obligation of any insurer subject to this title to comply

4 with the laws of any State or subdivision thereof with re5 spect to public disclosure and recordkeeping.

6 SEC. 417. DEFINITIONS.

7 For purposes of this title:

8 (1) The term ‘‘Administrator’’ means the Fed9 eral Insurance Administrator.

10 (2) The term ‘‘commercial insurance’’ means

11 any line of property and casualty insurance, except

12 private passenger automobile and homeowner’s in13 surance.

14 (3) The term ‘‘designated insurer’’ means an

15 insured designated by the Administrator under sec16 tion 407(a).

17 (4) The term ‘‘designated line’’ means a line of

18 insurance designated by the Administrator under

19 section 407(b).

20 (5) The term ‘‘insurer’’ means any corporation,

21 association, society, order, firm, company, partner22 ship, individual, or aggregation of individuals which

23 is subject to examination or supervision by any State

24 insurance regulator, or which is doing or represents

25 an insurance business.
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1 (6) The term ‘‘private mortgage insurance’’

2 means insurance against the nonpayment of, or de3 fault on, a mortgage or loan for residential or com4 mercial property, except that such term does not in5 clude mortgage insurance made available under the

6 National Housing Act.

7 (7) The term ‘‘property and casualty insur8 ance’’ means insurance against loss of or damage to

9 property, insurance against loss of income or extra

10 expense incurred because of loss of, or damage to,

11 property, and insurance against third party liability

12 claims caused by negligence or imposed by statute or

13 contract.

14 (8) The term ‘‘residual market’’ means an as15 signed risk plan, joint underwriting association, or

16 any similar mechanism designed to make insurance

17 available to those unable to obtain it in the vol18 untary market.

19 (9) The term ‘‘State’’ means any State, the

20 District of Columbia, the Commonwealth of Puerto

21 Rico, the Northern Mariana Islands, the Virgin Is22 lands, American Samoa, and the Trust Territory of

23 the Pacific Islands.
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1 SEC. 418. EFFECTIVE DATE.

2 The requirements of this title shall take effect with

3 respect to calendar year 1994.

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