II 

110TH CONGRESS 

1ST SESSION S. 40 

To authorize the issuance of Federal charters and licenses for carrying on 

the sale, solicitation, negotiation, and underwriting of insurance or any 

other insurance operations, to provide a comprehensive system for the 

Federal regulation and supervision of national insurers and national 

agencies, to provide for policyholder protections in the event of an insolvency or the impairment of a national insurer, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 24, 2007 

Mr. SUNUNU (for himself and Mr. JOHNSON) introduced the following bill; 

which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To authorize the issuance of Federal charters and licenses 

for carrying on the sale, solicitation, negotiation, and 

underwriting of insurance or any other insurance operations, to provide a comprehensive system for the Federal regulation and supervision of national insurers and 

national agencies, to provide for policyholder protections 

in the event of an insolvency or the impairment of a 

national insurer, 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, 


rwilkins on PROD1PC63 with BILLS
2 

•S 40 IS

1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

3 ‘‘National Insurance Act of 2007’’. 

4 (b) TABLE OF CONTENTS.—The table of contents for 

5 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Purposes. 

Sec. 3. Definitions. 

TITLE I—OFFICE OF NATIONAL INSURANCE 

Subtitle A—Establishment of Office of National Insurance 

Sec. 1101. Establishment. 

Sec. 1102. Commissioner of National Insurance. 

Sec. 1103. Office personnel matters. 

Sec. 1104. Division of Insurance Fraud. 

Sec. 1105. Division of Consumer Affairs. 

Sec. 1106. Insurance self-regulatory organizations. 

Sec. 1107. Office of the Ombudsman. 

Subtitle B—Supervision of National Insurers and National Agencies 

Sec. 1121. Examination of national insurers and national agencies. 

Sec. 1122. Examination fees and other assessments. 

Sec. 1123. Disclosure of information. 

Sec. 1124. Reporting requirement. 

Sec. 1125. Regulatory supervision and relationship to State law. 

Sec. 1126. Preservation of office records. 

Sec. 1127. Compliance with anti-money laundering requirements. 

Subtitle C—Enforcement of Federal Insurance Laws 

Sec. 1141. National insurer license suspension, restriction, or revocation. 

Sec. 1142. Suspension, restriction, or revocation of Federal license of national 

agencies and federally licensed insurance producers. 

Sec. 1143. Cease-and-desist proceedings. 

Sec. 1144. Affirmative action to correct conditions resulting from violations or 

conduct. 

Sec. 1145. Suspension, removal, and prohibition authority. 

Sec. 1146. Suspension or prohibition based on criminal activity. 

Sec. 1147. Ancillary provisions. 

Sec. 1148. Hearings and judicial review of suspension, removal, or prohibition 

order. 

Sec. 1149. Civil and criminal penalties. 

Sec. 1150. Public disclosures of final orders and agreements. 

Sec. 1151. Foreign investigations. 

Sec. 1152. Action or proceeding against non-United States insurers. 

Sec. 1153. Cooperation between Commissioner and State commissioners. 

Subtitle D—Insurance Fraud 


rwilkins on PROD1PC63 with BILLS
3 

•S 40 IS

Sec. 1161. Investigation of insurance fraud. 

Sec. 1162. Penalties. 

Sec. 1163. Civil remedy. 

TITLE II—NATIONAL INSURANCE COMPANIES AND NATIONAL 

INSURANCE AGENCIES 

Subtitle A—Organization, Licensing, and Operations 

Sec. 1201. Organization, operation, and regulation of national insurance companies and national insurance agencies. 

Sec. 1202. United States branches of non-United States insurers. 

Sec. 1203. Federal licensing of national insurers. 

Sec. 1204. Corporate governance. 

Sec. 1205. Participating policy procedures. 

Sec. 1206. Conversion of State insurer to national insurer or State insurance 

agency to national agency. 

Sec. 1207. Conversion of national insurer to State insurer or national agency 

to State agency. 

Sec. 1208. Powers. 

Sec. 1209. Separate accounts of national life insurer. 

Sec. 1210. Protected cells. 

Sec. 1211. Chartering and licensing commencement date. 

Subtitle B—Financial, Product, and Market Regulations 

Sec. 1212. Transitional financial regulations. 

Sec. 1213. Other financial regulations. 

Sec. 1214. Product regulation for national life insurers. 

Sec. 1215. Product regulation for national property/casualty insurers. 

Sec. 1216. Regulation of sales and marketing. 

Sec. 1217. Prompt corrective action. 

Subtitle C—Reinsurance 

Sec. 1221. Federal licensing of reinsurers. 

Sec. 1222. Credit for insurance ceded by a national insurer or federally licensed 

reinsurer. 

Sec. 1223. Relationship to State law. 

Sec. 1224. Freedom of commercial contract. 

Sec. 1225. Review by the Commissioner. 

Subtitle D—Acquisitions of Control; Mergers; Bulk Transfers; Domestication 

Sec. 1231. Acquisition of control of national insurers. 

Sec. 1232. Mergers, consolidations, and acquisitions of national insurers. 

Sec. 1233. Bulk transfers. 

Sec. 1234. Domestication of United States branch of a non-United States insurer. 

Sec. 1235. Mergers, consolidations, and acquisitions of national agencies. 

Subtitle E—Conversions 

Sec. 1241. Definitions. 

Sec. 1242. Conversion of stock life insurer to national life insurer in mutual 

form. 

Sec. 1243. Conversion of mutual insurer to national insurer in stock form. 


rwilkins on PROD1PC63 with BILLS
4 

•S 40 IS

Subtitle F—State Taxation 

Sec. 1251. State taxation of national insurers. 

Sec. 1252. State taxation of national agencies. 

Sec. 1253. State taxation of non-admitted and surplus lines insurance. 

TITLE III—INSURANCE PRODUCERS AND OTHER INSURANCE 

SERVICING PERSONS 

Sec. 1301. Federal licensing of insurance producers. 

Sec. 1302. Producer database. 

Sec. 1303. Supervision and oversight of federally licensed insurance producers. 

Sec. 1304. Relationship to State law. 

Sec. 1305. Licensing commencement date. 

TITLE IV—HOLDING COMPANIES 

Sec. 1401. Definitions. 

Sec. 1402. Registration. 

Sec. 1403. Standards and management of a national insurer within an insurance holding company system. 

Sec. 1404. Relationship to State law. 

Sec. 1405. Conflict with other Federal laws. 

Sec. 1406. No delegation permitted. 

TITLE V—RECEIVERSHIP 

Sec. 1501. Appointment of Office as receiver. 

Sec. 1502. Effect of receivership proceeding. 

Sec. 1503. Powers and duties. 

Sec. 1504. Rulemaking. 

Sec. 1505. Judicial review. 

TITLE VI—INSOLVENCY PROTECTION 

Sec. 1601. Participation in guaranty associations. 

Sec. 1602. Qualified and nonqualified associations. 

Sec. 1603. Establishment of the National Insurance Guaranty Corporation. 

Sec. 1604. Benefits for policyholders of national life insurers. 

Sec. 1605. Claims covered for policyholders of national property/casualty insurers. 

Sec. 1606. Powers and duties of the Corporation. 

Sec. 1607. Subrogation. 

Sec. 1608. Assessments. 

Sec. 1609. Regulations. 

Sec. 1610. State taxation. 

Sec. 1611. Examination of the Corporation; annual report. 

Sec. 1612. Immunity. 

TITLE VII—CONFORMING AMENDMENTS AND MISCELLANEOUS 

PROVISIONS 

Sec. 1701. Nondiscrimination. 

Sec. 1702. Application of the Federal antitrust laws to national insurers, national agencies, and federally licensed insurance producers. 

Sec. 1703. Application of State law and regulation to national insurers, national agencies, and federally licensed insurance producers. 

Sec. 1704. Federal court jurisdiction. 


rwilkins on PROD1PC63 with BILLS
5 

•S 40 IS

Sec. 1705. Federal court venue. 

Sec. 1706. Judicial review. 

Sec. 1707. Amendment to the Freedom of Information Act. 

Sec. 1708. Amendments to the Federal securities laws. 

Sec. 1709. Amendments to the Employee Retirement Income Security Act of 

1974. 

Sec. 1710. Amendments to the Gramm-Leach-Bliley Act. 

Sec. 1711. Amendments to the Federal Deposit Insurance Act. 

Sec. 1712. Amendments to the Bank Holding Company Act of 1956. 

Sec. 1713. Amendments to title 18 (crimes and criminal procedure). 

Sec. 1714. Amendments to the Americans with Disabilities Act of 1990. 

Sec. 1715. Amendment to the Age Discrimination in Employment Act. 

Sec. 1716. Amendments to the Fair Credit Reporting Act. 

1 SEC. 2. PURPOSES. 

2 The purposes of this Act are— 

3 (1) to establish a comprehensive system of Fed4 eral chartering, licensing, regulation, and supervision 

5 for insurers and insurance producers that is inde6 pendent of the State system of insurance licensing, 

7 regulation, and supervision, yet that requires feder8 ally chartered and licensed insurers and producers to 

9 comply with certain State laws, including State tax 

10 laws; 

11 (2) to provide for the creation of an Office of 

12 National Insurance within the Department of the 

13 Treasury that is funded by assessments imposed 

14 upon federally chartered and licensed insurers and 

15 insurance producers; and 

16 (3) to provide for the appointment of a Com17 missioner of National Insurance, who, among other 

18 duties, is authorized— 


rwilkins on PROD1PC63 with BILLS
6 

•S 40 IS

1 (A) to issue Federal charters and licenses 

2 to insurers and insurance producers; 

3 (B) to exclusively regulate and supervise 

4 the operations and solvency of federally char5 tered or licensed insurers and producers on a 

6 uniform, nationwide basis, including the con7 duct of such insurers and producers with policy8 holders; and 

9 (C) to protect the interests of policyholders 

10 by establishing a comprehensive scheme for the 

11 receivership for federally chartered insurers 

12 that requires federally chartered insurers to 

13 participate in qualified State guaranty funds. 

14 SEC. 3. DEFINITIONS. 

15 In this Act, the following definitions shall apply: 

16 (1) AFFILIATE.—The term ‘‘affiliate’’ means 

17 any person that controls, is controlled by, or is 

18 under common control with another person. 

19 (2) BUSINESS ENTITY.—The term ‘‘business 

20 entity’’ means a corporation, association, partner21 ship, trust, limited liability company, limited liability 

22 partnership, or other legal entity. 

23 (3) BUSINESS OF INSURANCE.—The term 

24 ‘‘business of insurance’’ has the meaning given to 


rwilkins on PROD1PC63 with BILLS
7 

•S 40 IS

1 such term in section 1033(f) of title 18, United 

2 States Code. 

3 (4) COMMISSIONER.—The term ‘‘Commis4 sioner’’ means the Commissioner of National Insur5 ance. 

6 (5) CONTROL.— 

7 (A) IN GENERAL.—The term ‘‘control’’, in8 cluding the terms ‘‘controlling’’, ‘‘controlled 

9 by’’, and ‘‘under common control with’’ means 

10 the possession, direct or indirect, of the power 

11 to direct or cause the direction of the manage12 ment and policies of a person, whether through 

13 the ownership of voting securities, by contract 

14 or otherwise, unless the power is the result of 

15 an official position with or corporate office held 

16 by a person. 

17 (B) SPECIAL RULE.—For purposes of sec18 tions 1204(c), 1231, 1243(g), and title IV, con19 trol shall be presumed to exist if any person, di20 rectly or indirectly, owns, controls, holds with 

21 the power to vote, or holds proxies representing, 

22 10 percent or more of the voting securities of 

23 any other person. 


rwilkins on PROD1PC63 with BILLS
8 

•S 40 IS

1 (6) CORPORATE GOVERNANCE PROCEDURES.— 

2 The term ‘‘corporate governance procedures’’ in3 cludes rules governing— 

4 (A) corporate finance; 

5 (B) shareholders, members, policyholders, 

6 directors, and officers and meetings, elections, 

7 voting, and notice relating to such persons; 

8 (C) indemnification of directors and offi9 cers and insurance for indemnification of direc10 tors and officers; and 

11 (D) the duties of shareholders, directors, 

12 and officers (including any duty of care or duty 

13 of fair dealing and any business judgment rule). 

14 (7) CORPORATION.—The term ‘‘Corporation’’ 

15 means the National Insurance Guaranty Corporation 

16 established under section 1603. 

17 (8) FEDERAL BANKING AGENCIES.—The term 

18 ‘‘Federal banking agencies’’ means the Office of the 

19 Comptroller of the Currency, the Board of Gov20 ernors of the Federal Reserve System, the Federal 

21 Deposit Insurance Corporation, and the Office of 

22 Thrift Supervision. 

23 (9) FEDERALLY LICENSED INSURANCE PRO24 DUCER.—The term ‘‘federally licensed insurance 

25 producer’’ means a person, including a national 


rwilkins on PROD1PC63 with BILLS
9 

•S 40 IS

1 agency and a natural person acting on behalf of a 

2 national agency, that is an insurance producer li3 censed pursuant to section 1301. 

4 (10) FRAUDULENT INSURANCE ACT.—The term 

5 ‘‘fraudulent insurance act’’ has the meaning given to 

6 such term in section 1037A(d)(3) of title 18, United 

7 States Code. 

8 (11) FUNCTIONAL REGULATOR.—The term 

9 ‘‘functional regulator’’ means— 

10 (A) in the case of a broker-dealer, invest11 ment advisor or investment company, the Secu12 rities and Exchange Commission; 

13 (B) in the case of a State insurer or State 

14 insurance producer, the appropriate State in15 surance regulator of a State that has jurisdic16 tion over such insurer or insurance producer; 

17 (C) in the case of a bank holding company 

18 or financial holding company, the Federal Re19 serve Board; 

20 (D) in the case of a savings and loan hold21 ing company, the Office of Thrift Supervision; 

22 (E) in the case of a national bank, the Of23 fice of the Comptroller of the Currency; 


rwilkins on PROD1PC63 with BILLS
10 

•S 40 IS

1 (F) in the case of a Federal savings bank 

2 or Federal savings association, the Office of 

3 Thrift Supervision; 

4 (G) in the case of a State bank, the appro5 priate State banking authority for the State in 

6 which the bank is chartered or the Federal De7 posit Insurance Corporation, in the case of a 

8 State bank that is not a member of the Federal 

9 Reserve System, or the Federal Reserve Board, 

10 in the case of a State bank that is a member 

11 of the Federal Reserve System; 

12 (H) in the case of a State savings bank or 

13 State savings association, the appropriate bank14 ing authority for the State in which the thrift 

15 is chartered; and 

16 (I) in the case of a commodities company, 

17 the Commodities Exchange Commission. 

18 (12) FUNCTIONALLY REGULATED AFFILIATE.— 

19 The term ‘‘functionally regulated affiliate’’ means— 

20 (A) a broker or dealer that is registered 

21 under the Securities Exchange Act of 1934; 

22 (B) a registered investment adviser, reg23 istered by or on behalf of either the Securities 

24 and Exchange Commission or any State; 


rwilkins on PROD1PC63 with BILLS
11 

•S 40 IS

1 (C) an investment company that is reg2 istered under the Investment Company Act of 

3 1940; 

4 (D) a State insurer or State insurance pro5 ducer that is subject to supervision by a State 

6 insurance regulator; 

7 (E) a bank holding company or financial 

8 holding company registered with or certified by 

9 the Federal Reserve Board; 

10 (F) a national bank subject to the super11 vision of the Office of the Comptroller of the 

12 Currency; 

13 (G) a State bank subject to the supervision 

14 of a State banking regulator; 

15 (H) a Federal savings bank or Federal 

16 savings association subject to the supervision of 

17 the Office of Thrift Supervision; 

18 (I) a State savings bank or State savings 

19 association subject to the supervision of a State 

20 banking regulator; and 

21 (J) a business entity that is subject to reg22 ulation by the Commodity Futures Trading 

23 Commission, with respect to commodities activi24 ties of such entity and activities incidental to 

25 such commodities activities. 


rwilkins on PROD1PC63 with BILLS
12 

•S 40 IS

1 (13) INSOLVENCY; INSOLVENT.— 

2 (A) IN GENERAL.—The term ‘‘insolvency’’ 

3 or ‘‘insolvent’’ means the inability of an insurer 

4 to pay its obligations when they are due or 

5 when the assets do not exceed liabilities plus 

6 the greater of— 

7 (i) any capital and surplus required 

8 by law for its organization; or 

9 (ii) the total par or stated value of its 

10 authorized and issued capital stock. 

11 (B) LIABILITIES.—In this paragraph, the 

12 term ‘‘liabilities’’ shall include reserves required 

13 by statute or by rule or specific requirements 

14 imposed by the Commissioner upon an insurer. 

15 (14) INSURANCE OPERATIONS.—The term ‘‘in16 surance operations’’ includes— 

17 (A) the business of insurance; 

18 (B) all acts and transactions relating to 

19 the sale, solicitation, negotiation, and under20 writing of insurance; 

21 (C) all acts and transactions relating to 

22 claims adjustment and settlement; 

23 (D) all acts and transactions relating to 

24 the establishment of rates, rules, risk classifica25 tions, rating classifications, rating territories, 


rwilkins on PROD1PC63 with BILLS
13 

•S 40 IS

1 and forms (including, endorsements, 

2 addendums, and policy language) for insurance; 

3 (E) all acts and transactions relating to 

4 marketing and sales practices; 

5 (F) financial condition and solvency; 

6 (G) holding company transactions; and 

7 (H) corporate governance. 

8 (15) INSURANCE PERSON.—The term ‘‘insur9 ance person’’ has the same meaning as in section 

10 1037A(d)(4) of title 18, United States Code. 

11 (16) INSURANCE PRODUCER.—The term ‘‘in12 surance producer’’— 

13 (A) means any person, including a national 

14 agency and a natural person acting on behalf of 

15 a national agency, that sells, solicits, or nego16 tiates policies of insurance, non-admitted insur17 ance, and surplus lines of insurance; and 

18 (B) does not include— 

19 (i) a national insurer; 

20 (ii) an officer, director, or employee of 

21 a national insurer or of an insurance pro22 ducer— 

23 (I) if the officer, director, or em24 ployee does not receive any commis25 sion or other compensation on insurVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
14 

•S 40 IS

1 ance policies written or sold by the 

2 national insurer or insurance pro3 ducer, which commission or other 

4 compensation is directly dependent 

5 upon the amount of insurance policies 

6 written or sold; and 

7 (II) if— 

8 (aa) the activities of the offi9 cer, director, or employee are ex10 ecutive, administrative, manage11 rial, clerical, or a combination 

12 thereof, and are only indirectly 

13 related to the sale, solicitation, or 

14 negotiation of insurance; 

15 (bb) the functions of the of16 ficer, director, or employee relate 

17 to underwriting, loss control, in18 spection, or the processing, ad19 justing, investigating, or settling 

20 of a claim on a policy of insur21 ance; or 

22 (cc) the officer, director, or 

23 employee is acting in the capacity 

24 of a special agent or agency su25 pervisor assisting insurance proVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
15 

•S 40 IS

1 ducers where the person’s activi2 ties are limited to providing tech3 nical advice and assistance to 

4 federally licensed insurance pro5 ducers, and do not include the 

6 sale, solicitation, or negotiation 

7 of insurance; 

8 (iii) a person who secures and fur9 nishes information for the purpose of 

10 group insurance policies, or for the pur11 pose of enrolling individuals under plans, 

12 or issuing certificates under plans, or oth13 erwise assisting in administering plans, 

14 where no commission or other compensa15 tion directly dependent upon the amount of 

16 insurance policies written or sold is paid to 

17 the person for the service; 

18 (iv) an employer or association or its 

19 officers, directors, employees, or the trust20 ees of an employee trust plan, to the extent 

21 that the employer, association, officer, di22 rector, employee, or trustee is engaged in 

23 the administration or operation of a pro24 gram of employee benefits for the employ25 er’s or association’s own employees or the 


rwilkins on PROD1PC63 with BILLS
16 

•S 40 IS

1 employees of its subsidiaries or affiliates, 

2 which program involves the use of insur3 ance written by the national insurer, as 

4 long as the employer, association, officer, 

5 director, employee, or trustee is not in any 

6 manner compensated, directly or indirectly, 

7 by the national insurer; 

8 (v) an employee of a national insurer 

9 or an organization employed by a national 

10 insurer that is engaging in the inspection, 

11 rating, or classification of risks, or in the 

12 supervision of the training of insurance 

13 producers and that is not individually en14 gaged in the sale, solicitation, or negotia15 tion of insurance; 

16 (vi) a person whose activities are lim17 ited to advertising without the intent to so18 licit insurance through communications in 

19 printed publications or other forms of elec20 tronic mass media, provided that the per21 son does not sell, solicit, or negotiate in22 surance; 

23 (vii) a salaried full-time employee who 

24 counsels or advises his or her employer rel25 ative to the insurance interests of the emVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
17 

•S 40 IS

1 ployer or of the subsidiaries or business af2 filiates of the employer provided that the 

3 employee does not sell or solicit insurance 

4 or receive a commission or other com5 pensation directly dependent upon the 

6 amount of insurance policies written or 

7 sold; 

8 (viii) a person that sells, solicits, or 

9 negotiates a funding agreement; or 

10 (ix) any other kind of person identi11 fied by the Commissioner, by regulation, as 

12 not being an insurance producer for pur13 poses of this Act. 

14 (17) INSURANCE SECURITIZATION.—The term 

15 ‘‘insurance securitization’’ means the issuance of 

16 debt instruments by a national insurer, the proceeds 

17 from which support the exposures attributed to a 

18 protected cell, where repayment of principal or inter19 est, or both, to investors under the transaction terms 

20 is contingent upon the occurrence or nonoccurrence 

21 of an event with respect to which the national in22 surer is exposed to loss under insurance policies or 

23 reinsurance contracts it has written. 

24 (18) INSURER-AFFILIATED PARTY.—The term 

25 ‘‘insurer-affiliated party’’ means— 


rwilkins on PROD1PC63 with BILLS
18 

•S 40 IS

1 (A) any director, officer, employee, or con2 trolling shareholder of, or agent for, a national 

3 insurer or a national agency; 

4 (B) any other person who has filed or is 

5 required to file a statement with the Commis6 sioner under section 1231; 

7 (C) any shareholder, consultant, joint ven8 ture partner, and any other person as deter9 mined by the Commissioner (by regulation or 

10 order) who participates in the conduct of the af11 fairs of a national insurer or a national agency; 

12 and 

13 (D) any independent contractor (including 

14 any attorney, actuary, or accountant) of a na15 tional insurer or a national agency who in that 

16 capacity knowingly or recklessly participates in 

17 any violation of any law or regulation, any 

18 breach of fiduciary duty, or any conduct that 

19 involves an undue risk of loss to the policy20 holders of a national insurer as a whole, and 

21 which violation, breach, or conduct caused or is 

22 likely to cause more than a minimal financial 

23 loss to, or a significant adverse effect on, a na24 tional insurer or the policyholders as a whole of 

25 a national insurer. 


rwilkins on PROD1PC63 with BILLS
19 

•S 40 IS

1 (19) INSURER IN FRATERNAL FORM.—The 

2 term ‘‘insurer in fraternal form’’ means an incor3 porated society, order, or supreme lodge, without 

4 capital stock (generally known as a fraternal benefit 

5 society), that— 

6 (A) is conducted solely for the benefit of 

7 its members and their beneficiaries and not for 

8 profit; 

9 (B) is operated on a lodge system with rit10 ualistic form of work; 

11 (C) has a representative form of govern12 ment; 

13 (D) provides benefits to members and their 

14 dependents; and 

15 (E) operates for 1 or more social, intellec16 tual, educational, charitable, benevolent, moral, 

17 fraternal, patriotic, or religious purposes for the 

18 benefit of its members, which may also be ex19 tended to others. 

20 (20) NAIC.—The term ‘‘NAIC’’ means the Na21 tional Association of Insurance Commissioners. 

22 (21) NATIONAL AGENCY.—The term ‘‘national 

23 agency’’ means a national insurance agency char24 tered under section 1201. 


rwilkins on PROD1PC63 with BILLS
20 

•S 40 IS

1 (22) NATIONAL INSURER.—The term ‘‘national 

2 insurer’’ means a national insurance company char3 tered under section 1201. 

4 (23) NATIONAL LIFE INSURER.—The term ‘‘na5 tional life insurer’’ means a national insurer that 

6 holds a Federal license to sell, solicit, negotiate, and 

7 underwrite 1 or both of life insurance and annuities, 

8 provided that a national life insurer may also sell, 

9 solicit, negotiate, and underwrite disability income 

10 insurance, long-term care insurance, and funding 

11 agreements. 

12 (24) NATIONAL PROPERTY/CASUALTY IN13 SURER.—The term ‘‘national property/casualty in14 surer’’ means a national insurer that holds a Fed15 eral license to sell, solicit, negotiate, and underwrite 

16 any combination of lines of property/casualty insur17 ance. 

18 (25) NEGOTIATE.—The term ‘‘negotiate’’, in 

19 the context of negotiating insurance, means the act 

20 of conferring directly with or offering advice directly 

21 to a purchaser or prospective purchaser of a par22 ticular policy of insurance concerning any of the 

23 substantive benefits, terms, or conditions of the con24 tract, provided that the person engaged in that act 


rwilkins on PROD1PC63 with BILLS
21 

•S 40 IS

1 either sells insurance to or obtains insurance cov2 erage for purchasers. 

3 (26) NON-ADMITTED INSURANCE.—The term 

4 ‘‘non-admitted insurance’’ means any property/cas5 ualty insurance permitted to be placed directly or 

6 through an insurance producer with a non-admitted 

7 insurer eligible to accept such insurance. 

8 (27) NON-ADMITTED INSURER.—The term 

9 ‘‘non-admitted insurer’’ means an insurer that is not 

10 licensed to engage in the business of insurance in a 

11 State and that— 

12 (A) satisfies the eligibility requirements of 

13 the State in which an insured maintains its 

14 principal place of business, or, in the case of an 

15 individual, maintains a principal residence; and 

16 (B) is not a national insurer. 

17 (28) NON-UNITED STATES INSURER.—The term 

18 ‘‘non-United States insurer’’ means a business entity 

19 that is organized under the law of a foreign country 

20 to sell, solicit, negotiate, and underwrite insurance, 

21 but is not so organized under the laws of a State, 

22 and is not a national insurer. 

23 (29) OFFICE.—The term ‘‘Office’’ means the 

24 Office of National Insurance. 


rwilkins on PROD1PC63 with BILLS
22 

•S 40 IS

1 (30) PARTICIPATING POLICY PROCEDURES.— 

2 The term ‘‘participating policy procedures’’— 

3 (A) means the rules applicable to a life in4 surer in mutual form, by which the insurer as5 certains divisible surplus and apportions an 

6 amount of divisible surplus to participating in7 surance policies; and 

8 (B) does not include any limitation on the 

9 amount of surplus that may be retained by a 

10 life insurer in mutual form. 

11 (31) PERSON.—The term ‘‘person’’ means any 

12 natural person, business entity, governmental body 

13 or entity, voluntary organization, or similar organi14 zation. 

15 (32) POLICY OF INSURANCE; INSURANCE POL16 ICY.—The term ‘‘policy of insurance’’ or ‘‘insurance 

17 policy’’ means a policy, contract, certificate, or other 

18 evidence of insurance. ‘‘Policy of insurance’’ or ‘‘in19 surance policy’’ includes an annuity contract and a 

20 funding agreement, but does not include a reinsur21 ance contract. 

22 (33) POLICYHOLDER.—The term ‘‘policyholder’’ 

23 of an insurance policy means the person who is iden24 tified as the legal owner under the terms of the in25 surance policy or who is otherwise vested with legal 


rwilkins on PROD1PC63 with BILLS
23 

•S 40 IS

1 title to the insurance policy. An assignment, absolute 

2 on its face, completed in accordance with the terms 

3 of the insurance policy and properly recording the 

4 assignee as the policyholder on the books of the in5 surer vests legal title in the name of the assignee. 

6 The term ‘‘policyholder’’ does not include a person 

7 with a mere beneficial interest in an insurance policy 

8 or a person to whom an insurance policy is assigned 

9 for collateral security purposes. 

10 (34) PROPERTY/CASUALTY INSURANCE.—The 

11 term ‘‘property/casualty insurance’’— 

12 (A) means a product that insures, guaran13 tees, or indemnifies against liability, loss of life, 

14 loss of health, or loss through damage to or de15 struction of property, including surety bonds, 

16 private passenger or commercial automobile, 

17 homeowners, mortgage guaranty, financial 

18 guaranty, commercial multiperil, general liabil19 ity, professional liability, workers’ compensa20 tion, fire and allied lines, farm or ranch owners 

21 multiperil, aircraft, fidelity, surety, medical 

22 malpractice, ocean marine, inland marine, and 

23 boiler and machinery insurance; and 

24 (B) does not include life insurance, dis25 ability income insurance, long-term care insurVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
24 

•S 40 IS

1 ance, health insurance, annuities, a funding 

2 agreement, or title insurance. 

3 (35) PROTECTED CELL.—The term ‘‘protected 

4 cell’’ means an identified pool of assets and liabil5 ities of a national insurer segregated and insulated 

6 from the remainder of the national insurer’s assets 

7 and liabilities. The remainder of the national insur8 er’s assets and liabilities includes general account 

9 assets and liabilities, separate account assets and li10 abilities, and assets and liabilities of other protected 

11 cells. 

12 (36) PROTECTED CELL ACCOUNT.—The term 

13 ‘‘protected cell account’’ means a specifically identi14 fied bank or custodial account established by a na15 tional insurer for the purpose of segregating the pro16 tected cell assets of 1 protected cell from the pro17 tected cell assets of other protected cells and from 

18 the assets of the national insurer’s general account 

19 and separate accounts. 

20 (37) SELL.—The term ‘‘sell’’, in the context of 

21 selling a policy of insurance, includes exchanging a 

22 policy of insurance by any means, for money or any 

23 other valuable consideration, on behalf of an insurer. 

24 (38) SEPARATE ACCOUNT.—The term ‘‘separate 

25 account’’ means an account established and mainVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
25 

•S 40 IS

1 tained by a national life insurer under which income, 

2 gains, and losses, whether or not realized, from as3 sets allocated to such account, are, in accordance 

4 with the applicable contract, credited to or charged 

5 against such account without regard to other in6 come, gains, or losses of the national life insurer. 

7 (39) SOLICIT.—The term ‘‘solicit’’, in the con8 text of soliciting a policy of insurance, means at9 tempting to sell insurance or asking or urging a per10 son to apply for a particular kind of insurance from 

11 a particular insurer. 

12 (40) STATE.—The term ‘‘State’’ means each of 

13 the 50 States, the District of Columbia, the Com14 monwealth of Puerto Rico, any territory of the 

15 United States, Guam, American Samoa, the Trust 

16 Territory of the Pacific Islands, the United States 

17 Virgin Islands, and the Commonwealth of the North18 ern Mariana Islands. 

19 (41) STATE INSURANCE AGENCY.—The term 

20 ‘‘State insurance agency’’ means an insurance pro21 ducer that is organized under the laws of a State. 

22 (42) STATE INSURER.—The term ‘‘State in23 surer’’ means an insurer incorporated or organized 

24 under the laws of a State. 


rwilkins on PROD1PC63 with BILLS
26 

•S 40 IS

1 (43) SUBSIDIARY.—The term ‘‘subsidiary’’ 

2 means a business entity controlled, directly or indi3 rectly, by another business entity. For purposes of 

4 this definition— 

5 (A) a business entity is conclusively pre6 sumed to be controlled by a person that, di7 rectly or indirectly, with power to vote, owns, 

8 controls, or holds a majority of the outstanding 

9 voting securities of such business entity; 

10 (B) no presumption, either of control or of 

11 absence of control, arises if such ownership, 

12 control, or holding of voting securities is less 

13 than a majority but more than 5 percent; 

14 (C) absence of control is presumed if such 

15 ownership, control or holding of voting securi16 ties is 5 percent or less; and 

17 (D) in determining control, voting securi18 ties held in separate accounts of a business en19 tity shall be deemed to be owned by the busi20 ness entity, but voting securities in an invest21 ment advisory account that are not owned by a 

22 business entity but are held in an account as to 

23 which the business entity is an investment ad24 viser shall not be deemed to be controlled or 

25 held by such business entity. 


rwilkins on PROD1PC63 with BILLS
27 

•S 40 IS

1 (44) SURPLUS LINES OF INSURANCE.—The 

2 term ‘‘surplus lines of insurance’’ means insurance 

3 on properties, risks, or exposures located or to be 

4 performed in a State with a non-admitted insurer 

5 that is sold, solicited, or negotiated by a national 

6 agency, federally licensed insurance producer, or 

7 other insurance producer. 

8 (45) TITLE INSURANCE.—The term ‘‘title in9 surance’’ or ‘‘business of title insurance’’ means any 

10 of the following: 

11 (A) A contract insuring or indemnifying 

12 the owners of real or personal property, or 

13 other persons lawfully interested therein, 

14 against loss or damage arising from any of the 

15 following conditions, or the reinsurance thereof: 

16 (i) Defects in or any liens or encum17 brances on the insured title. 

18 (ii) Unmarketability of the insured 

19 title. 

20 (iii) Invalidity, lack of priority, or un21 enforceability of any liens or encumbrances 

22 on the stated property. 

23 (iv) Lack of legal right of access to 

24 the land. 


rwilkins on PROD1PC63 with BILLS
28 

•S 40 IS

1 (v) Unenforceability of rights in title 

2 to the real or personal property. 

3 (B) Insuring the correctness of searches 

4 and examinations of all instruments, liens, or 

5 charges affecting the title to real or personal 

6 property. 

7 (C) Procuring and furnishing information 

8 relative to the title to real or personal property, 

9 including abstracting, searching, and examining 

10 titles. 

11 (D) Handling escrows, settlements, or clos12 ings done in conjunction with subparagraph 

13 (A), (B), (C), (E), or (F). 

14 (E) Any product or service defined by the 

15 laws of any State, whether by statute, regula16 tion, or administrative determination, as title 

17 insurance. 

18 (F) Doing or proposing to do any business 

19 substantially equivalent to any of the activities 

20 described in this paragraph, in a manner de21 signed to evade the provisions of this Act. 

22 (46) TITLE INSURER.—The term ‘‘title insurer’’ 

23 means a company organized under the laws of a 

24 State for the purpose of conducting the business of 

25 title insurance. 


rwilkins on PROD1PC63 with BILLS
29 

•S 40 IS

1 (47) TRUSTEED ASSETS.—The term ‘‘trusteed 

2 assets’’ means, with respect to a United States 

3 branch, assets required or permitted by this title to 

4 be deposited by a non-United States insurer with a 

5 qualified trustee for the security of its policyholders 

6 and creditors in the United States. 

7 (48) TRUSTEED SURPLUS.—The term ‘‘trusteed 

8 surplus’’ means, with respect to a United States 

9 branch, the value of the insurer’s trusteed assets de10 posited with a trustee under section 1202(b), plus 

11 accrued investment income thereon where such in12 come is collectible by the trustee, less the aggregate 

13 net amount of all of its reserves and other liabilities 

14 in the United States as determined under section 

15 1202(b). 

16 (49) UNITED STATES BRANCH.—The term 

17 ‘‘United States branch’’ means the business unit 

18 through which business is transacted within the 

19 United States by a non-United States insurer and 

20 the assets and liabilities of the insurer within the 

21 United States pertaining to such business. 

22 (50) UNITED STATES HOLDING COMPANY.— 

23 The term ‘‘United States holding company’’ means, 

24 with respect to a national insurer, a person orgaVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00029 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
30 

•S 40 IS

1 nized or incorporated in a State that directly or indi2 rectly controls a national insurer. 

3 (51) VIOLATION.—The term ‘‘violation’’ in4 cludes any action or inaction (alone or with another 

5 or others) for or toward causing, bringing about, 

6 participating in, counseling, or aiding or abetting a 

7 violation. 

8 (52) VOTING SECURITIES.—The term ‘‘voting 

9 securities’’ means securities of any class or any own10 ership interest having voting power for the election 

11 of directors, trustees, or management of a business 

12 entity, other than securities having such power only 

13 by reason of the happening of a contingency. 

14 TITLE I—OFFICE OF NATIONAL 

15 INSURANCE 

16 Subtitle A—Establishment of Office 

17 of National Insurance 

18 SEC. 1101. ESTABLISHMENT. 

19 (a) IN GENERAL.—There is established, in the De20 partment of the Treasury, the Office of National Insur21 ance, which shall be headed by the Commissioner of Na22 tional Insurance. 

23 (b) OFFICES.—The Commissioner shall establish a 

24 main office in Washington, D.C., not fewer than 6 regional 

25 offices, and such additional offices, within or outside the 


rwilkins on PROD1PC63 with BILLS
31 

•S 40 IS

1 United States, as the Commissioner determines to be nec2 essary to carry out the provisions of this Act. 

3 (c) FUNDING.—The operations of the Office, includ4 ing the compensation of the Commissioner and all employ5 ees of the Office, shall be paid from fees and assessments 

6 imposed under the terms of section 1122. 

7 (d) APPLICABILITY OF ADMINISTRATIVE PROCE8 DURES ACT.—The Office shall be an agency of the United 

9 States for purposes of subchapter II of chapter 5 and 

10 chapter 6 of title 5, United States Code. 

11 (e) ANNUAL REPORT.—The Commissioner shall pre12 pare and submit to Congress an annual report on the ac13 tivities of the Office. 

14 SEC. 1102. COMMISSIONER OF NATIONAL INSURANCE. 

15 (a) APPOINTMENT.— 

16 (1) IN GENERAL.—The Commissioner of Na17 tional Insurance shall be appointed by the President, 

18 by and with the advice and consent of the Senate, 

19 from among individuals who are citizens of the 

20 United States. 

21 (2) TERM.—The Commissioner shall be ap22 pointed for a term of 5 years. 

23 (3) VACANCY.—A vacancy in the position of the 

24 Commissioner, which occurs before the expiration of 

25 the term for which the Commissioner was appointed 


rwilkins on PROD1PC63 with BILLS
32 

•S 40 IS

1 shall be filled in the manner established under para2 graph (1). The Commissioner appointed to fill the 

3 vacancy shall be appointed only for the remainder of 

4 the term of the preceding Commissioner. 

5 (4) SERVICE AFTER TERM.—An individual may 

6 serve as the Commissioner after the expiration of 

7 the term for which appointed until the earlier of— 

8 (A) such time as a successor has been ap9 pointed; or 

10 (B) 1 year after the expiration of the indi11 vidual’s term. 

12 (5) PROHIBITION ON FINANCIAL INTERESTS.— 

13 The Commissioner may not have a direct or indirect 

14 financial interest in any national insurer, national 

15 agency, or other federally licensed insurance pro16 ducer, except that the Commissioner may own, di17 rectly or indirectly, or may have a direct or indirect 

18 beneficial interest in any insurance policy written or 

19 sold by a national insurer or national agency. 

20 (6) OVERSIGHT.—The Commissioner shall be 

21 subject to the general oversight of the Secretary of 

22 the Treasury, who may not intervene in any matter 

23 or proceeding before the Commissioner unless other24 wise specifically provided by law. 

25 (7) EXECUTIVE SCHEDULE.— 


rwilkins on PROD1PC63 with BILLS
33 

•S 40 IS

1 (A) IN GENERAL.—The Commissioner 

2 shall receive compensation at the rate pre3 scribed by law under section 5314 of title 5, 

4 United States Code, for positions at level III of 

5 the Executive Schedule. 

6 (B) TECHNICAL AMENDMENT.—Section 

7 5314 of title 5, United States Code, is amended 

8 by inserting ‘‘Commissioner of National Insur9 ance, Department of the Treasury.’’ as a new 

10 item after ‘‘Administrator, Pipeline and Haz11 ardous Materials Safety Administration.’’. 

12 (b) POWERS OF THE COMMISSIONER.— 

13 (1) IN GENERAL.— 

14 (A) POWERS.—The Commissioner shall— 

15 (i) oversee the organization, incorpo16 ration, operation, regulation, and super17 vision of national insurers and national 

18 agencies; 

19 (ii) issue charters and licenses for na20 tional insurers and national agencies; 

21 (iii) license, regulate, and supervise 

22 federally licensed insurance producers 

23 other than national agencies; and 

24 (iv) have exclusive authority to deter25 mine whether a person subject to this Act 


rwilkins on PROD1PC63 with BILLS
34 

•S 40 IS

1 has complied with the Act or the applica2 tion of any State law to matters regulated 

3 under this Act, including the determination 

4 of any complaint raised by any person. 

5 (B) FINAL AGENCY ACTION.—A deter6 mination of the Commissioner under subpara7 graph (A)(iv) shall be the final agency action 

8 for purposes of judicial review of that action. 

9 (2) RULEMAKING.— 

10 (A) ISSUANCE OF REGULATIONS AND

11 OTHER ACTIONS.—The Commissioner may issue 

12 such rules, regulations, orders, and interpreta13 tions as the Commissioner determines to be 

14 necessary to carry out the purposes of this Act. 

15 (B) AUTONOMY.—The Secretary of the 

16 Treasury may not delay or prevent the issuance 

17 of any rule, regulation, order, or interpretation 

18 by the Commissioner, unless otherwise specifi19 cally authorized by law. 

20 (C) NO DELEGATION PERMITTED.—The 

21 Commissioner may not delegate any authority 

22 conferred under subparagraph (A) to any insur23 ance self-regulatory organization. 

24 (3) LITIGATION AUTHORITY.— 


rwilkins on PROD1PC63 with BILLS
35 

•S 40 IS

1 (A) IN GENERAL.—The Commissioner may 

2 sue and be sued, complain and defend, and oth3 erwise litigate, in the Commissioner’s name and 

4 through the Commissioner’s own attorney, in 

5 any Federal or State court, other than the Su6 preme Court of the United States in which the 

7 Commissioner shall be represented by the Solic8 itor General of the United States. 

9 (B) ENFORCEMENT.—The Commissioner 

10 may apply to the United States district court 

11 for the jurisdiction in which the main office of 

12 a national insurer or national agency is located, 

13 or in which any other federally licensed insur14 ance producer or other person is located, for the 

15 enforcement of any effective and outstanding 

16 rule, regulation, order, or interpretation issued 

17 pursuant to this Act. 

18 (4) CONSULTATION WITH STATE INSURANCE

19 REGULATORS.—The Commissioner may, as appro20 priate, consult with State insurance regulators re21 sponsible for the supervision of States insurers, 

22 State insurance agencies, and State licensed insur23 ance producers regarding regulatory and supervisory 

24 matters of common interest. 


rwilkins on PROD1PC63 with BILLS
36 

•S 40 IS

1 (5) INTERNATIONAL COORDINATION AND CO2 OPERATION.— 

3 (A) IN GENERAL.—The Commissioner may 

4 engage in international efforts to secure bilat5 eral and multilateral cooperation and agree6 ments, as appropriate, with respect to insurance 

7 regulation in global markets in order to pro8 mote open and fair competition in such markets 

9 and to improve the quality and uniformity of in10 surance regulation in all countries. 

11 (B) FOREIGN INSURANCE REGULATORS.— 

12 The Commissioner may provide appropriate 

13 technical assistance to, and cooperation with, 

14 individual foreign insurance regulators and re15 gional and global regulatory organizations in in16 surance matters affecting international com17 merce, including— 

18 (i) the development and implementa19 tion of international regulatory standards; 

20 and 

21 (ii) the development and implementa22 tion of bilateral and multilateral mutual 

23 recognition agreements on the licensing of 

24 insurance companies and insurance pro25 ducers. 


rwilkins on PROD1PC63 with BILLS
37 

•S 40 IS

1 (C) CONSULTATION AND COOPERATION.— 

2 In exercising the authority granted under sub3 paragraphs (A) and (B), the Commissioner— 

4 (i) shall consult and cooperate with 

5 the Executive Office of the President and 

6 the United States Trade Representative; 

7 and 

8 (ii) may include a representative of 

9 any interested State insurance regulators 

10 as the Commissioner determines to be ap11 propriate. 

12 (6) INDEPENDENCE IN CONGRESSIONAL TESTI13 MONY AND RECOMMENDATIONS.—Section 111 of 

14 Public Law 93–495 (12 U.S.C. 250) is amended by 

15 inserting ‘‘the Commissioner of National Insurance,’’ 

16 after ‘‘the Director of the Office of Thrift Super17 vision,’’. 

18 (c) GAO AUDIT.—The Commissioner shall make 

19 available to the Comptroller General of the United States 

20 all books and records necessary to audit all of the activities 

21 of the Office. 

22 SEC. 1103. OFFICE PERSONNEL MATTERS. 

23 (a) IN GENERAL.—The Commissioner may employ 

24 such examiners, lawyers, accountants, actuaries, and other 


rwilkins on PROD1PC63 with BILLS
38 

•S 40 IS

1 employees as are necessary to carry out the provisions of 

2 this Act. 

3 (b) COMPENSATION.—The Commissioner shall fix the 

4 compensation and number of employees of the Office with5 out regard to chapter 51 or subchapter III of chapter 53 

6 of title 5, United States Code. 

7 (c) ADDITIONAL COMPENSATION.—The Commis8 sioner may provide additional compensation and benefits 

9 to employees of the Office if the same type of compensa10 tion or benefits are then being provided by any Federal 

11 banking agency or, if not then being provided, could be 

12 provided by any such agency under applicable provisions 

13 of law or regulation. In setting and adjusting the total 

14 amount of compensation and benefits for employees of the 

15 Office, the Commissioner shall consult, and seek to main16 tain comparability with, the Federal banking agencies. 

17 (d) ACTING COMMISSIONER.—The Commissioner 

18 shall designate an employee of the Office to serve as the 

19 Acting Commissioner during the absence or disability of 

20 the Commissioner. 

21 (e) DELEGATION OF POWERS.— 

22 (1) EMPLOYEES AND OTHERS.—Unless other23 wise prohibited by this Act, the Commissioner may 

24 delegate to any employee, representative, or agent 

25 any power of the Commissioner. 


rwilkins on PROD1PC63 with BILLS
39 

•S 40 IS

1 (2) SELF-REGULATORY ORGANIZATIONS.—Un2 less otherwise prohibited by this Act, the Commis3 sioner may, by regulation, delegate to any insurance 

4 self-regulatory organization any power of the Com5 missioner in accordance with the terms of section 

6 1106. 

7 SEC. 1104. DIVISION OF INSURANCE FRAUD. 

8 (a) ESTABLISHMENT.—There is established, within 

9 the Office, a Division of Insurance Fraud. 

10 (b) AUTHORITY.—The Division of Insurance Fraud 

11 shall have all powers necessary to enforce the terms of 

12 subtitle D, other than the power to execute search and 

13 arrest warrants. 

14 SEC. 1105. DIVISION OF CONSUMER AFFAIRS. 

15 (a) ESTABLISHMENT.—There is established, within 

16 the Office, a Division of Consumer Affairs. 

17 (b) AUTHORITY.—The Division of Consumer Affairs 

18 shall support the Commissioner in the implementation and 

19 enforcement of the market conduct regulations issued pur20 suant to section 1216. 

21 SEC. 1106. INSURANCE SELF-REGULATORY ORGANIZA22 TIONS. 

23 (a) AUTHORITY OF THE COMMISSIONER.—Subject to 

24 the terms of this section, and the regulations issued pursuVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00039 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
40 

•S 40 IS

1 ant to this section, the Commissioner shall have the au2 thority to— 

3 (1) provide for the registration of an insurance 

4 self-regulatory organization; and 

5 (2) supervise and regulate any registered insur6 ance self-regulatory organization, which shall include 

7 the authority to— 

8 (A) review, approve, abrogate, modify, or 

9 add to the operating rules of an insurance self10 regulatory organization; 

11 (B) review, approve, abrogate, or modify 

12 any disciplinary action taken by an insurance 

13 self-regulatory organization; 

14 (C) remove, suspend, or bar an individual 

15 from serving as an officer or director of an in16 surance self-regulatory organization; 

17 (D) remove or suspend a member of an in18 surance self-regulatory organization; and 

19 (E) suspend or revoke the registration of 

20 an insurance self-regulatory organization. 

21 (b) AUTHORITY OF REGISTERED INSURANCE SELF22 REGULATORY ORGANIZATIONS.—An insurance self-regu23 latory organization that is registered by the Commissioner 

24 shall have the authority to— 

25 (1) carry out the purpose of this Act; and 


rwilkins on PROD1PC63 with BILLS
41 

•S 40 IS

1 (2) enforce compliance by its members with the 

2 provisions of this Act, applicable regulations issued 

3 by the Commissioner, and the rules of the organiza4 tion. 

5 (c) MEMBERSHIP.—An insurance self-regulatory or6 ganization may be formed by, and consist exclusively of— 

7 (1) national insurers; 

8 (2) national agencies; 

9 (3) federally licensed insurance producers; or 

10 (4) any combination of national insurers, na11 tional agencies, and federally licensed insurance pro12 ducers. 

13 (d) REGULATIONS.—Not later than 2 years after the 

14 date of enactment of this Act, the Commissioner shall 

15 issue regulations governing the registration and operations 

16 of insurance self-regulatory organizations. Such regula17 tions shall establish— 

18 (1) the procedures insurance self-regulatory or19 ganizations must follow to be registered by the Com20 missioner, which shall provide for public notice and 

21 an opportunity for public comment on the proposed 

22 registration; 

23 (2) the standards that the Commissioner shall 

24 apply in reviewing a proposed registration, which 


rwilkins on PROD1PC63 with BILLS
42 

•S 40 IS

1 shall require an insurance self-regulatory organiza2 tion to demonstrate that— 

3 (A) it has the capacity to— 

4 (i) carry out the purpose of this Act; 

5 and 

6 (ii) enforce compliance by its members 

7 with the provisions of this Act, applicable 

8 regulations, and the rules of the organiza9 tion; and 

10 (B) its operating rules— 

11 (i) assure a fair representation of its 

12 members in the selection of its directors 

13 and the administration of its affairs; 

14 (ii) provide for the equitable allocation 

15 of fees, dues, and other charges among its 

16 members; 

17 (iii) provide for the organization to 

18 take appropriate disciplinary actions 

19 against members, including the revocation 

20 of membership status, for violations of this 

21 Act, the regulations issued pursuant to this 

22 Act, or the operating rules of the organiza23 tion; and 

24 (iv) include procedures for members 

25 that are subject to disciplinary actions to 


rwilkins on PROD1PC63 with BILLS
43 

•S 40 IS

1 obtain review of such actions by the Com2 missioner; 

3 (3) the procedures and standards the Commis4 sioner shall follow in reviewing, approving, abro5 gating, or modifying any new operating rule or any 

6 amendment to an existing operating rule that is pro7 posed by an insurance self-regulatory organization, 

8 which shall include procedures for public notice and 

9 comment on such rule or amendment; 

10 (4) the procedures and standards the Commis11 sioner shall follow in abrogating, modifying, or add12 ing to the operating rules of an insurance self-regu13 latory organization; 

14 (5) the procedures and standards the Commis15 sioner shall follow in reviewing, approving, abro16 gating, or modifying any disciplinary action by an 

17 insurance self-regulatory organization; 

18 (6) the procedures and standards the Commis19 sioner shall follow in removing, suspending, or bar20 ing any individual from serving as an officer or di21 rector of an insurance self-regulatory organization; 

22 (7) the procedures and standards the Commis23 sioner shall follow in suspending or revoking the reg24 istration of an insurance self-regulatory organiza25 tion; and 


rwilkins on PROD1PC63 with BILLS
44 

•S 40 IS

1 (8) such other matters as the Commissioner de2 termines appropriate to ensure and protect the pub3 lic interest and the interests of policyholders. 

4 SEC. 1107. OFFICE OF THE OMBUDSMAN. 

5 (a) ESTABLISHMENT OF THE OFFICE OF THE OM6 BUDSMAN.—There is established within the Office, an Of7 fice of the Ombudsman. The Commissioner shall appoint 

8 an Ombudsman to administer the Office of the Ombuds9 man. The Ombudsman shall report directly to the Com10 missioner. 

11 (b) DUTIES OF THE OMBUDSMAN.— 

12 (1) IN GENERAL.—The Ombudsman shall act 

13 as a liaison between the Office and any regulated 

14 person adversely affected by the supervisory or regu15 latory activities of the Office, including the failure of 

16 the Office to take a requested action. The Ombuds17 man shall assure that safeguards exist to encourage 

18 complainants to come forward and preserve con19 fidentiality. 

20 (2) DEFINITION.—For purposes of this section 

21 the term, a ‘‘regulated person’’ means a national in22 surer, a national agency, a federally licensed insur23 ance producer, or an insurer-affiliated party. 

24 (c) POWERS OF THE OMBUDSMAN.—The Ombuds25 man— 


rwilkins on PROD1PC63 with BILLS
45 

•S 40 IS

1 (1) with the prior consent of the Commissioner, 

2 may stay any appealable decision or action during 

3 the resolution of an appealable matter; and 

4 (2) shall review and report any weakness in pol5 icy or procedures to the Commissioner, and make 

6 recommendations to the Commissioner regarding 

7 changes in such policies or procedures. 

8 (d) APPEALABLE MATTERS.—Any regulated person 

9 adversely affected by an Office decision or action may seek 

10 Ombudsman review of such decision or action, other 

11 than— 

12 (1) the appointment of a receiver or conser13 vator; 

14 (2) any preliminary examination conclusions 

15 communicated to the regulated person before a final 

16 examination report is issued; 

17 (3) any formal enforcement-related action or 

18 decision, including the issuance of a cease-and-desist 

19 order, assessment of a civil money penalty, or com20 mencement of a formal investigation; 

21 (4) any formal or informal rulemaking pursuant 

22 to subchapter II of chapter 5 of title 5, United 

23 States Code; 

24 (5) any decision or recommended decision fol25 lowing a formal adjudication conducted pursuant to 


rwilkins on PROD1PC63 with BILLS
46 

•S 40 IS

1 subchapter II of chapter 5 of title 5, United States 

2 Code; or 

3 (6) any request for agency records pursuant to 

4 section 552 of title 5, United States Code (com5 monly referred to as the Freedom of Information 

6 Act). 

7 (e) PROCEDURES FOR FILING AN APPEAL TO THE

8 OMBUDSMAN.—A regulated person may seek review of an 

9 appealable matter by filing a written appeal with the Of10 fice of the Ombudsman. In the case of a regulated person 

11 that is an entity, the appeal shall be signed by the Presi12 dent or Chief Executive Officer of the regulated person. 

13 The appeal shall set forth all of the reasons for the appeal 

14 and supporting documentation. The Ombudsman may ar15 range for a meeting of Office personnel and the complain16 ants to discuss the appeal. 

17 (f) DECISIONS OF THE OMBUDSMAN.—After a thor18 ough investigation of the matter, and after considering all 

19 relevant information provided by the complainant and the 

20 Office, the Ombudsman shall issue a written determina21 tion of the appeal. Such determination shall become the 

22 final decision of the Office, unless reversed, modified, or 

23 stayed by the Commissioner. 

24 (g) RETALIATION PROHIBITED.—The Office and its 

25 staff may not take any adverse action against a complainVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00046 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
47 

•S 40 IS

1 ant for appealing any decision or action to the Ombuds2 man. Upon learning of any possible retaliatory actions, the 

3 Ombudsman shall investigate the matter, and if the Om4 budsman determines that reasonable grounds exist to con5 clude that retaliation has taken place, shall refer the mat6 ter to the Commissioner. 

7 Subtitle B—Supervision of Na8 tional Insurers and National 

9 Agencies 

10 SEC. 1121. EXAMINATION OF NATIONAL INSURERS AND NA11 TIONAL AGENCIES. 

12 (a) IN GENERAL.— 

13 (1) EXAMINATION.—The Commissioner shall 

14 provide for examinations of national insurers and 

15 national agencies. 

16 (2) REGULAR AND SPECIAL EXAMINATIONS OF

17 NATIONAL INSURERS.—Not less than once during 

18 each 36-month period, the Commissioner shall con19 duct an on-site examination of each national insurer, 

20 and may conduct a special examination of a national 

21 insurer whenever the Commissioner determines that 

22 a special examination is necessary. 

23 (3) EXAMINATION OF NATIONAL AGENCIES.— 

24 The Commissioner may examine a national agency 

25 only in response to a complaint or any other eviVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00047 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
48 

•S 40 IS

1 dence that the national agency has violated or is 

2 about to violate— 

3 (A) a law, rule, or regulation; 

4 (B) any condition imposed in writing by 

5 the Commissioner in connection with issuing a 

6 license for a federally licensed insurance pro7 ducer; or 

8 (C) any written agreement entered into 

9 with the Commissioner. 

10 (4) AFFILIATES.— 

11 (A) IN GENERAL.—In making examina12 tions of national insurers or national agencies, 

13 the Commissioner may, to the extent necessary 

14 to discover information concerning activities of 

15 an affiliate that may have a materially adverse 

16 effect on the operations, management, or finan17 cial condition of the national insurer or national 

18 agency— 

19 (i) require an affiliate to make such 

20 reports and provide such material as the 

21 Commissioner may direct; and 

22 (ii) conduct an examination of the af23 fairs of an affiliate, if— 

24 (I) the Commissioner has reason25 able cause to believe that the activities 


rwilkins on PROD1PC63 with BILLS
49 

•S 40 IS

1 of the affiliate may have such an ef2 fect; 

3 (II) the examination is limited to 

4 the extent necessary to disclose infor5 mation related to such effect; and 

6 (III) the Commissioner is unable 

7 to obtain the necessary information 

8 from the national insurer or national 

9 agency. 

10 (B) ACCEPTANCE OF AVAILABLE INFORMA11 TION.—To the extent that the Commissioner re12 quires an affiliate to make reports or provide 

13 material under subparagraph (A), the Commis14 sioner shall, to the fullest extent possible, ac15 cept— 

16 (i) reports that the affiliate has pro17 vided or been required to provide to other 

18 Federal or State regulatory authorities or 

19 appropriate self-regulatory organizations; 

20 (ii) information that is otherwise re21 quired to be reported publicly; and 

22 (iii) audited financial statements. 

23 (C) USE OF REGULATORY REPORTS.—If 

24 the Commissioner determines to conduct an ex25 amination of an affiliate under subparagraph 


rwilkins on PROD1PC63 with BILLS
50 

•S 40 IS

1 (B) and such affiliate is a functionally regu2 lated affiliate, the Commissioner shall, to the 

3 fullest extent possible, rely on the examination 

4 reports made by the functional regulator of 

5 such affiliate. 

6 (b) ACCESS TO PEOPLE AND RECORDS.— 

7 (1) IN GENERAL.—In the course of examining 

8 a national insurer, national agency, or affiliate of a 

9 national insurer or national agency, the Commis10 sioner, upon request, shall be given prompt and rea11 sonable access to officers, employees, agents, books, 

12 records, and documents of such insurer, agency, or 

13 affiliate. 

14 (2) COURT ORDER.—If prompt and reasonable 

15 access is not given as required under paragraph (1), 

16 the Commissioner may apply to the United States 

17 district court for the judicial district in which the 

18 main office of the national insurer or the national 

19 agency is located, or in which the affiliate or person 

20 denying such access resides or conducts business, for 

21 an order requiring that such information be prompt22 ly provided. 

23 (3) SUBPOENA POWER.—In connection with ex24 aminations of national insurers, national agencies, or 

25 affiliates under this section and the examination of 


rwilkins on PROD1PC63 with BILLS
51 

•S 40 IS

1 federally licensed insurance producers under section 

2 1301, the Commissioner may— 

3 (A) administer oaths and affirmations; 

4 (B) examine, take, and preserve testimony 

5 under oath as to any matter in respect of the 

6 affairs or ownership of any such national in7 surer, national agency, affiliate, or federally li8 censed insurance producer; 

9 (C) issue subpoenas; and 

10 (D) in order to enforce a subpoena issued 

11 under subparagraph (C), apply to the United 

12 States district court for the judicial district— 

13 (i) in which the main office of the na14 tional insurer, national agency, or affiliate 

15 is located; 

16 (ii) in which the federally licensed in17 surance producer is located; or 

18 (iii) in which the witness resides or 

19 carries on business. 

20 SEC. 1122. EXAMINATION FEES AND OTHER ASSESSMENTS. 

21 (a) EXAMINATION FEE.— 

22 (1) NATIONAL INSURERS, NATIONAL AGENCIES, 

23 AND FEDERALLY LICENSED INSURANCE PRO24 DUCERS.—The Commissioner shall assess the cost of 

25 conducting examinations of national insurers, naVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00051 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
52 

•S 40 IS

1 tional agencies, and federally licensed insurance pro2 ducers against each such insurer, agency, or pro3 ducer, as the Commissioner determines to be appro4 priate. 

5 (2) AFFILIATES.—The Commissioner shall as6 sess the cost of conducting examinations of affiliates 

7 against each such affiliate, as the Commissioner de8 termines to be appropriate. 

9 (3) REFUSAL TO PAY.— 

10 (A) IN GENERAL.—Subject to subpara11 graph (B), if any affiliate refuses to pay an as12 sessment imposed pursuant to paragraph (2), 

13 the Commissioner may assess such cost against 

14 the affiliated national insurer or national agen15 cy. 

16 (B) SHARED AFFILIATES.—If an affiliate 

17 is an affiliate of more than 1 national insurer 

18 or national agency, the assessment with respect 

19 to that affiliate may be assessed against, and 

20 collected from, any affiliated national insurer or 

21 national agency, in such proportions as the 

22 Commissioner may prescribe. 

23 (b) PROCESSING FEE.—The Commissioner may as24 sess a fee against any person who submits to the Office 


rwilkins on PROD1PC63 with BILLS
53 

•S 40 IS

1 an application, filing, statement, notice, or request for ap2 proval to cover the cost of processing such submission. 

3 (c) OTHER ASSESSMENTS.—The Commissioner may 

4 assess against national insurers, national agencies, and 

5 federally licensed insurance producers such additional fees 

6 as the Commissioner determines to be necessary and ap7 propriate to fund the expenses of the Office. 

8 (d) NOTICE.—The Commissioner shall notify na9 tional insurers, national agencies, and federally licensed 

10 insurance producers of— 

11 (1) the initial fees and assessments imposed 

12 under this section; and 

13 (2) any change in fees and assessments. 

14 (e) TREATMENT OF FEES AND ASSESSMENTS.— 

15 (1) DEPOSITS.—Amounts received by the Com16 missioner from fees and assessments imposed under 

17 this section shall be deposited in the manner pro18 vided for in section 5234 of the Revised Statutes of 

19 the United States (12 U.S.C. 192) with respect to 

20 assessments by the Comptroller of the Currency. 

21 (2) GOVERNMENT FUNDS; APPORTIONMENT.— 

22 Notwithstanding any other provision of law, 

23 amounts received by the Commissioner from any fee 

24 or assessment imposed under this section— 


rwilkins on PROD1PC63 with BILLS
54 

•S 40 IS

1 (A) shall not be considered Government or 

2 public funds or appropriated money; and 

3 (B) shall not be subject to apportionment 

4 for purpose of chapter 15 of title 31, United 

5 States Code, or under any other authority. 

6 (f) WORKING CAPITAL FUND.— 

7 (1) IN GENERAL.—The Commissioner may im8 pose fees and assessments pursuant to subsections 

9 (a), (b), and (c), in excess of actual expenses for any 

10 given year, to maintain an appropriate working cap11 ital fund. 

12 (2) REFUNDS.—The Commissioner shall remit 

13 to the payers of such fees and assessments any 

14 funds collected in excess of what the Commissioner 

15 determines to be necessary to maintain such working 

16 capital fund. 

17 (g) USE OF FUNDS.—The Commissioner may use the 

18 combined resources collected through fees and assess19 ments imposed pursuant to this section to pay all direct 

20 and indirect operating costs of the Office, including the 

21 salary and administrative expenses of the Office. 

22 (h) APPROPRIATIONS DURING START-UP PERIOD.— 

23 (1) AUTHORIZATION.—The Commissioner may 

24 borrow from the Secretary of the Treasury such 

25 funds as the Commissioner determines to be necVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00054 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
55 

•S 40 IS

1 essary and appropriate to organize and begin oper2 ations of the Office. 

3 (2) PAYMENT.—Any loan extended pursuant to 

4 paragraph (1) shall be repaid, in full (with interest 

5 at a rate set by the Secretary of the Treasury), 

6 within 30 years following the date of enactment of 

7 this Act, with individual payments on any loan to be 

8 made in such amounts and at such times as the 

9 Commissioner determines to be appropriate. 

10 (i) RULEMAKING.—The Commissioner shall promul11 gate regulations with respect to the computation, assess12 ment, notice, and collection of the fees and assessments 

13 provided for in this section. 

14 SEC. 1123. DISCLOSURE OF INFORMATION. 

15 (a) REGULATIONS REQUIRED.—The Commissioner 

16 shall, by regulation, establish standards for the disclosure 

17 of examination reports, other reports, applications, filings, 

18 correspondence, records, and other information prepared 

19 by, reported to, obtained by, or submitted to, the Commis20 sioner. The regulation shall exclude matters to be ad21 dressed under regulations required under section 1161. 

22 (b) SUPERVISORY PRIVILEGE.—The regulation 

23 issued pursuant to subsection (a) shall prohibit the disclo24 sure of confidential supervisory information, as such infor25 mation is defined by the Commissioner in such regulation. 


rwilkins on PROD1PC63 with BILLS
56 

•S 40 IS

1 (c) OTHER PRIVILEGES.—The submission by any 

2 person of any information to the Commissioner for any 

3 purpose in the course of any supervisory or regulatory 

4 process of the Commissioner shall not be construed as 

5 waiving, destroying, or otherwise affecting any privilege 

6 that such person may claim with respect to such informa7 tion under Federal or State law as to any person or entity 

8 other than the Commissioner. 

9 SEC. 1124. REPORTING REQUIREMENT. 

10 (a) GENERAL AUTHORITY.—The Commissioner is 

11 authorized to require national insurers and national agen12 cies to make such reports, containing such information 

13 and in such form, as the Commissioner may prescribe by 

14 regulation. 

15 (b) FINANCIAL STATEMENTS.—Each national in16 surer holding a Federal license shall submit annual and 

17 quarterly financial statements, in compliance with the ac18 counting principles and auditing standards specified under 

19 section 1211, to the Commissioner at such times and in 

20 such form as the Commissioner may require under regula21 tions promulgated pursuant to subsection (c). 

22 (c) REGULATIONS.—The Commissioner shall promul23 gate regulations that— 


rwilkins on PROD1PC63 with BILLS
57 

•S 40 IS

1 (1) specify the information that shall be dis2 closed in the financial statements required under 

3 subsection (b); and 

4 (2) specify any additional financial schedules 

5 that national insurers shall make available for exam6 ination by the Commissioner upon request. 

7 SEC. 1125. REGULATORY SUPERVISION AND RELATIONSHIP 

8 TO STATE LAW. 

9 (a) IN GENERAL.—Except as authorized by this Act 

10 or otherwise authorized under Federal law, national insur11 ers, national agencies, and federally licensed insurance 

12 producers shall not be subject to any form of licensing, 

13 examination, reporting, regulation, or other supervision 

14 relating to— 

15 (1) the sale, solicitation, or negotiation of insur16 ance; 

17 (2) the underwriting of insurance; or 

18 (3) any other insurance operations. 

19 (b) APPLICABLE STATE LAWS.—Notwithstanding 

20 subsection (a), national insurers, national agencies, and 

21 federally licensed insurance producers shall be subject 

22 to— 

23 (1) applicable State unclaimed property and es24 cheat laws; 


rwilkins on PROD1PC63 with BILLS
58 

•S 40 IS

1 (2) applicable tax laws of a State, in accordance 

2 with sections 1251, 1252, and 1253; 

3 (3) applicable State law relating to participa4 tion in an assigned risk plan, mandatory joint un5 derwriting association, or any other mandatory re6 sidual market mechanism designed to make insur7 ance available to those unable to obtain insurance in 

8 the voluntary market, except to the extent that such 

9 State law— 

10 (A) relates to participation in any vol11 untary joint underwriting association or similar 

12 arrangement; 

13 (B) results in rates in effect for an as14 signed risk plan, mandatory joint underwriting 

15 association, or any other mandatory residual 

16 market mechanism that fail to cover the ex17 pected value of all future costs associated with 

18 insurance policies written by such residual mar19 ket mechanism; 

20 (C) requires a national insurer to use any 

21 particular rate, rating element, price, or form; 

22 or 

23 (D) is inconsistent with any provision of 

24 this Act; 


rwilkins on PROD1PC63 with BILLS
59 

•S 40 IS

1 (4) applicable State insurance law that pre2 scribes the compulsory coverage requirements for 

3 workers’ compensation or motor vehicle insurance, 

4 or both, that every insurer must provide if the in5 surer issues insurance policies in such State, except 

6 to the extent that such State law requires a national 

7 insurer to use any particular rate, rating element, 

8 price, or form; 

9 (5) applicable State insurance law mandating 

10 the participation of insurers in an advisory or statis11 tical organization, except to the extent that such 

12 State law requires a national insurer to use any par13 ticular rate, rating element, price, or form; and 

14 (6) applicable State law relating to participa15 tion in a workers’ compensation administration 

16 mechanism, except to the extent that such State law 

17 is inconsistent with any provision of this Act. 

18 (c) TERMS.—For purposes of this section, the term— 

19 (1) ‘‘advisory or statistical organization’’ does 

20 not include the National Association of Insurance 

21 Commissioners; 

22 (2) ‘‘compulsory coverage’’ does not include any 

23 State statutory requirement other than those pre24 scribing the minimum extent of insurance protection 

25 afforded by a policy of insurance; and 


rwilkins on PROD1PC63 with BILLS
60 

•S 40 IS

1 (3) ‘‘mandatory residual market’’ means a facil2 ity, entity, or plan required by and established pur3 suant to State law to provide coverage for persons 

4 that cannot obtain insurance in the private market. 

5 SEC. 1126. PRESERVATION OF OFFICE RECORDS. 

6 (a) IN GENERAL.—The Commissioner may cause any 

7 and all records, papers, or documents kept by the Office 

8 or in the possession or custody of the Office to be— 

9 (1) photographed or microphotographed or oth10 erwise reproduced upon film; or 

11 (2) preserved in any electronic medium or for12 mat which is capable of— 

13 (A) being read or scanned by computer; 

14 and 

15 (B) being reproduced from such electronic 

16 medium or format by printing any other form 

17 or reproduction of electronically stored data. 

18 (b) TREATMENT AS ORIGINAL RECORDS.—Any pho19 tographs, microphotographs, or photographic film or cop20 ies thereof described in subsection (a)(1) or reproduction 

21 or electronically stored data described in subsection (a)(2) 

22 shall be deemed to be an original record for all purposes, 

23 including introduction in evidence in all State and Federal 

24 courts or administrative agencies, and shall be admissible 


rwilkins on PROD1PC63 with BILLS
61 

•S 40 IS

1 to prove any act, transaction, occurrence, or event therein 

2 recorded. 

3 (c) AUTHORITY OF THE COMMISSIONER.—Any pho4 tographs, microphotographs, or photographic film or cop5 ies thereof described in subsection (a)(1) or reproduction 

6 of electronically stored data described in subsection (a)(2) 

7 shall be preserved in such manner as the Commissioner 

8 shall prescribe, and the original records, papers, or docu9 ments may be destroyed or otherwise disposed of, as the 

10 Commissioner may direct. 

11 SEC. 1127. COMPLIANCE WITH ANTI-MONEY LAUNDERING 

12 REQUIREMENTS. 

13 (a) COMPLIANCE REQUIRED.—The Commissioner 

14 shall prescribe regulations requiring national life insurers 

15 to establish and maintain procedures reasonably designed 

16 to assure and monitor compliance with the requirements 

17 of subchapter II of chapter 53 of title 31, United States 

18 Code, to the extent applicable. 

19 (b) EXAMINATIONS.—Each examination of a national 

20 life insurer shall include a review of the procedures re21 quired to be established and maintained under subsection 

22 (a). 

23 (c) ORDER.—The Commissioner shall issue an order, 

24 in the manner prescribed in subsection (c) or (d) of section 

25 1142, requiring such insurer to cease and desist from a 


rwilkins on PROD1PC63 with BILLS
62 

•S 40 IS

1 violation of this section or regulations prescribed under 

2 this section, if the Commissioner determines that a na3 tional life insurer— 

4 (1) has failed to establish and maintain the pro5 cedures described in subsection (a); or 

6 (2) has failed to correct any problem with the 

7 procedures maintained by such national life insurer 

8 which was previously reported to such insurer by the 

9 Commissioner. 

10 Subtitle C—Enforcement of 

11 Federal Insurance Laws 

12 SEC. 1141. NATIONAL INSURER LICENSE SUSPENSION, RE13 STRICTION, OR REVOCATION. 

14 (a) IN GENERAL.—In accordance with the conditions 

15 under this section, the Commissioner may revoke or re16 strict the Federal license of a national insurer if the Com17 missioner determines that the national insurer— 

18 (1) has engaged in conduct that is hazardous to 

19 the national insurer and that involves an undue risk 

20 to the policyholders of the national insurer, as a 

21 whole; 

22 (2) is in a financial or other condition that is 

23 not consistent with the continuation of existing oper24 ations; or 

25 (3) has violated any— 


rwilkins on PROD1PC63 with BILLS
63 

•S 40 IS

1 (A) applicable law or regulation; 

2 (B) order or condition imposed in writing 

3 by the Commissioner in connection with the ap4 proval of an application, filing, statement, no5 tice, or other request by the national insurer; or 

6 (C) written agreement entered into be7 tween the national insurer and the Commis8 sioner. 

9 (b) NOTICE TO NATIONAL INSURER.— 

10 (1) IN GENERAL.—If the Commissioner deter11 mines under subsection (a) that the Federal license 

12 of a national insurer should be revoked or restricted, 

13 the Commissioner shall— 

14 (A) serve the national insurer with written 

15 notice of the intent of the Commissioner to re16 voke or restrict such Federal license; 

17 (B) provide the national insurer with a 

18 statement of the basis for the determination to 

19 revoke or restrict such Federal license; and 

20 (C) notify, not less than 30 days before a 

21 hearing under subsection (c), the date and place 

22 of the hearing. 

23 (2) NOTICE OF SERVICE.—Any service required 

24 or authorized to be made by the Commissioner 

25 under this section may be made by registered mail, 


rwilkins on PROD1PC63 with BILLS
64 

•S 40 IS

1 or in such other manner reasonably calculated to 

2 give actual notice as the Commissioner may by regu3 lation or otherwise provide. 

4 (c) REVOCATION OR RESTRICTION HEARING.— 

5 (1) IN GENERAL.—Before revoking or restrict6 ing a Federal license, the Commissioner shall con7 duct a hearing in accordance with section 554 of 

8 title 5, United States Code, to determine if the con9 ditions described in subsection (a) exist. 

10 (2) AUTHORITY TO REVOKE OR RESTRICT FED11 ERAL LICENSE.—If, on the basis of the evidence pre12 sented at the hearing under paragraph (1) and the 

13 written findings of the Commissioner with respect to 

14 such evidence, the Commissioner establishes the ex15 istence of any conduct, condition, or violation speci16 fied in the notice sent to a national insurer under 

17 subsection (b), the Commissioner may issue an order 

18 revoking or restricting the Federal license of the na19 tional insurer, which shall be effective as of a date 

20 subsequent to such finding. 

21 (3) CONSENT TO REVOCATION OR RESTRIC22 TION.—If a duly authorized representative of the na23 tional insurer fails to appear at the hearing under 

24 this subsection, the national insurer shall be deemed 

25 to have consented to the revocation or restriction of 


rwilkins on PROD1PC63 with BILLS
65 

•S 40 IS

1 its Federal license, and the Commissioner may im2 mediately revoke or restrict such Federal license. 

3 (d) NOTICE OF REVOCATION OR RESTRICTION RE4 QUIRED.— 

5 (1) NOTICE BY NATIONAL INSURER.— 

6 (A) IN GENERAL.—The national insurer 

7 shall give notice of a revocation or restriction of 

8 its Federal license under this section to each 

9 policyholder affected by the revocation or re10 striction. 

11 (B) TYPE OF NOTICE.—Notice under this 

12 paragraph shall be sent to the last address of 

13 record of the policyholder on the books of the 

14 national insurer, in such manner and at such 

15 time as the Commissioner determines to be nec16 essary for the protection of policyholders. 

17 (2) NOTICE BY COMMISSIONER.— 

18 (A) IN GENERAL.—The Commissioner 

19 shall publish notice of a revocation or restric20 tion under this section. If the Commissioner de21 termines that a national insurer has not given 

22 notice of an order under this subsection in ac23 cordance with the requirements of the Commis24 sioner, the Commissioner may provide such noVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00065 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
66 

•S 40 IS

1 tice in such manner as the Commissioner may 

2 find to be necessary and proper. 

3 (B) COSTS.—The cost of any notice pro4 vided under subparagraph (A) shall be paid by 

5 the national insurer. 

6 (e) TEMPORARY SUSPENSION OR RESTRICTION.— 

7 (1) IN GENERAL.—If the Commissioner, in the 

8 course of a revocation proceeding under this section, 

9 finds that the national insurer poses an immediate 

10 threat to the interests of its policyholders as a whole 

11 or to the public, the Commissioner may issue an 

12 order temporarily suspending or restricting the Fed13 eral license of the national insurer. 

14 (2) NOTICE OF TEMPORARY ORDER.—A na15 tional insurer whose Federal license is temporarily 

16 suspended or restricted under this subsection shall 

17 give notice of an order issued under this paragraph 

18 to each affected policyholder in such manner and at 

19 such times as the Commissioner may find to be nec20 essary and may order for the protection of policy21 holders and the public. 

22 (3) EFFECTIVE PERIOD OF TEMPORARY

23 ORDER.—A temporary order issued under paragraph 

24 (1) shall— 


rwilkins on PROD1PC63 with BILLS
67 

•S 40 IS

1 (A) become effective not earlier than 10 

2 days from the date of service upon the national 

3 insurer; and 

4 (B) unless set aside, limited, or suspended 

5 by a court in proceedings authorized under 

6 paragraph (4), remain effective and enforceable 

7 until the earlier of— 

8 (i) the effective date of an order under 

9 subsection (c)(2); or 

10 (ii) the date on which the Commis11 sioner determines that there is insufficient 

12 evidence to revoke or restrict a Federal li13 cense under this subsection. 

14 (4) JUDICIAL REVIEW.— 

15 (A) IN GENERAL.—During the 10-day pe16 riod beginning on the date on which a tem17 porary order has been issued under paragraph 

18 (1), the national insurer may apply to a court 

19 described in subparagraph (B) for an injunction 

20 setting aside, limiting, or suspending the en21 forcement, operation, or effectiveness of such 

22 order. 

23 (B) JURISDICTION.—The United States 

24 District Court for the District of Columbia and 

25 the United States district court for the judicial 


rwilkins on PROD1PC63 with BILLS
68 

•S 40 IS

1 district in which the main office of the national 

2 insurer is located shall have jurisdiction to issue 

3 an injunction under this paragraph. 

4 (f) DECISION TO SUSPEND, RESTRICT, OR RE5 VOKE.— 

6 (1) IN GENERAL.—Except as provided under 

7 paragraph (2), any decision by the Commissioner to 

8 suspend, restrict, or revoke a Federal license under 

9 this section shall be made by the Commissioner and 

10 may not be delegated. 

11 (2) EXCEPTION.—The Commissioner may, by 

12 order, designate an employee of the Office who may 

13 make a decision described in paragraph (1), if the 

14 Commissioner is not able to act by reason of recusal 

15 or is otherwise disqualified from acting. 

16 (g) JUDICIAL REVIEW.—Any national insurer whose 

17 Federal license has been revoked or restricted by order 

18 of the Commissioner under this section shall have the 

19 right of judicial review of such order only to the same ex20 tent as provided for the review of orders under section 

21 1148. 


rwilkins on PROD1PC63 with BILLS
69 

•S 40 IS

1 SEC. 1142. SUSPENSION, RESTRICTION, OR REVOCATION OF 

2 FEDERAL LICENSE OF NATIONAL AGENCIES 

3 AND FEDERALLY LICENSED INSURANCE PRO4 DUCERS. 

5 (a) IN GENERAL.—In accordance with the provisions 

6 of this section, the Commissioner may revoke or restrict 

7 the Federal producer license, including lines of insurance 

8 covered by such license, of a national agency or other fed9 erally licensed insurance producer if the Commissioner de10 termines that the Agency or producer has— 

11 (1) violated any applicable law, regulation, 

12 order, condition imposed in writing by the Commis13 sioner in connection with the approval of an applica14 tion, filing, statement, notice or other request by the 

15 producer, or written agreement entered into between 

16 the producer and the Commissioner; 

17 (2) provided incorrect, misleading, incomplete, 

18 or materially untrue information in an application 

19 for a Federal charter or a Federal producer license; 

20 (3) used fraudulent, coercive, or dishonest prac21 tices; or 

22 (4) demonstrated incompetence, 

23 untrustworthiness, or financial irresponsibility as an 

24 insurance producer. 

25 (b) NOTICE TO FEDERALLY LICENSED INSURANCE

26 PRODUCER.—If the Commissioner determines that any 


rwilkins on PROD1PC63 with BILLS
70 

•S 40 IS

1 conduct, breach, or violation specified in subsection (a) re2 quires revocation or restriction of the Federal producer li3 cense of a national agency or other federally licensed in4 surance producer, the Commissioner shall— 

5 (1) serve written notice on the national agency 

6 or other federally licensed insurance producer of the 

7 Commissioner’s intention to revoke or restrict the 

8 Federal producer license; 

9 (2) provide the national agency or other feder10 ally licensed insurance producer with a statement of 

11 the basis for the determination to revoke or restrict 

12 the Federal producer license; and 

13 (3) notify the national agency or other federally 

14 licensed insurance producer, not less than 30 days 

15 before a hearing under subsection (c), of the date 

16 and place of the hearing. 

17 (c) REVOCATION OR RESTRICTION HEARING.— 

18 (1) IN GENERAL.—Before revoking or restrict19 ing a Federal producer license, the Commissioner 

20 shall conduct a hearing in accordance with section 

21 554 of title 5, United States Code, to determine if 

22 the conditions described in subsection (a) exist. 

23 (2) AUTHORITY TO REVOKE OR RESTRICT FED24 ERAL LICENSE.—If, on the basis of the evidence pre25 sented at the hearing under paragraph (1) and the 


rwilkins on PROD1PC63 with BILLS
71 

•S 40 IS

1 written findings of the Commissioner with respect to 

2 such evidence, the Commissioner finds any conduct, 

3 condition, or violation specified in the notice sent to 

4 a national agency or other federally licensed insur5 ance producer under subsection (b), the Commis6 sioner may issue an order revoking or restricting the 

7 Federal producer license of the national agency or 

8 other federally licensed insurance producer, which 

9 shall be effective as of a date subsequent to such 

10 finding. 

11 (3) CONSENT TO REVOCATION OR RESTRIC12 TION.—If a duly authorized representative of the na13 tional agency or other federally licensed insurance 

14 producer fails to appear at the hearing under this 

15 subsection, the national agency or other federally li16 censed insurance producer shall be deemed to have 

17 consented to the revocation or restriction of its Fed18 eral producer license, and the Commissioner may im19 mediately revoke or restrict such Federal producer 

20 license. 

21 (d) NOTICE OF REVOCATION OR RESTRICTION RE22 QUIRED.— 

23 (1) NOTICE BY FEDERALLY LICENSED INSUR24 ANCE PRODUCER.—Each national agency or other 

25 federally licensed insurance producer shall give writVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00071 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
72 

•S 40 IS

1 ten notice of revocation or restriction under this sec2 tion to each national insurer or State insurer for 

3 which such agency or producer acts as an insurance 

4 producer. 

5 (2) NOTICE BY COMMISSIONER.— 

6 (A) IN GENERAL.—The Commissioner 

7 shall publish notice of a revocation or restric8 tion under this section. If the Commissioner de9 termines that a national agency or other feder10 ally licensed insurance producer has not given 

11 notice of an order under this subsection in ac12 cordance with the requirements of the Commis13 sioner, the Commissioner may provide such no14 tice in any manner that the Commissioner de15 termines to be necessary and proper. 

16 (B) COSTS.—The cost of any notice pro17 vided under subparagraph (A) shall be paid by 

18 the national agency or other federally licensed 

19 insurance producer. 

20 (e) TEMPORARY SUSPENSION OR RESTRICTION.— 

21 (1) IN GENERAL.—If the Commissioner, in the 

22 course of a revocation or restriction proceeding 

23 under this section, finds that the national agency or 

24 other federally licensed insurance producer poses an 

25 immediate threat to the interests of the policyholders 


rwilkins on PROD1PC63 with BILLS
73 

•S 40 IS

1 of a national insurer or a State insurer as a whole, 

2 or to the public, the Commissioner may issue a tem3 porary order suspending or restricting the Federal 

4 producer license of the agency or other producer. 

5 (2) NOTICE OF TEMPORARY ORDER.—The na6 tional agency or other federally licensed insurance 

7 producer shall give notice of a temporary order 

8 issued under this paragraph in such manner and at 

9 such times as the Commissioner may find to be nec10 essary and may order for the protection of policy11 holders and the public. 

12 (3) EFFECTIVE PERIOD OF TEMPORARY

13 ORDER.—Any temporary order issued under para14 graph (1) shall— 

15 (A) become effective not earlier than 10 

16 days from the date of service upon the national 

17 agency or other federally licensed insurance 

18 producer; and 

19 (B) unless set aside, limited, or suspended 

20 by a court under paragraph (4), remain effec21 tive and enforceable until an order of the Com22 missioner under subsection (c) becomes final or 

23 until the Commissioner dismisses the pro24 ceedings under paragraph (4). 

25 (4) JUDICIAL REVIEW.— 


rwilkins on PROD1PC63 with BILLS
74 

•S 40 IS

1 (A) IN GENERAL.—During the 10-day pe2 riod beginning on the date on which a tem3 porary order has been issued under paragraph 

4 (1), the national agency or other federally li5 censed insurance producer may apply to a court 

6 described in subparagraph (B) for an injunction 

7 setting aside, limiting, or suspending the en8 forcement, operation, or effectiveness of such 

9 order. 

10 (B) JURISDICTION.—The United States 

11 District Court for the District of Columbia and 

12 the United States district court for the judicial 

13 district in which the federally licensed insurance 

14 producers (or the main office of the national 

15 agency) is located shall have jurisdiction to 

16 issue an injunction under this paragraph. 

17 (f) JUDICIAL REVIEW.—Any national agency or other 

18 federally licensed insurance producer whose Federal pro19 ducer license has been revoked or restricted by order of 

20 the Commissioner under this subsection shall have the 

21 right of judicial review of such order only to the same ex22 tent as provided for the review of orders under section 

23 1148. 

24 SEC. 1143. CEASE-AND-DESIST PROCEEDINGS. 

25 (a) NOTICE.— 


rwilkins on PROD1PC63 with BILLS
75 

•S 40 IS

1 (1) ISSUANCE.—The Commissioner may issue 

2 and serve upon a national insurer, national agency, 

3 federally licensed insurance producer, or insurer-af4 filiated party a notice of charges if the Commis5 sioner determines that such insurer, agency, pro6 ducer, or party— 

7 (A) has engaged, or is about to engage, in 

8 conduct that is hazardous to a national insurer 

9 or a State insurer and involves an undue risk 

10 to the policyholders as a whole of a national in11 surer or a State insurer; or 

12 (B) has violated, or is about to violate— 

13 (i) a law, rule, or regulation; 

14 (ii) any condition imposed in writing 

15 by the Commissioner in connection with 

16 the granting of any application, filing, 

17 statement, notice, or other request by the 

18 national insurer, national agency, federally 

19 licensed insurance producer, or party; or 

20 (iii) any written agreement entered 

21 into with the Commissioner by such in22 surer, agency, producer, or party. 

23 (2) CONTENTS.—The notice issued under para24 graph (1) shall— 


rwilkins on PROD1PC63 with BILLS
76 

•S 40 IS

1 (A) contain a statement of the facts consti2 tuting the alleged violations; and 

3 (B) state the time and place at which a 

4 hearing will be held to determine whether an 

5 order to cease and desist should be issued 

6 against the national insurer, national agency, 

7 federally licensed insurance producer, or in8 surer-affiliated party. 

9 (b) HEARING.— 

10 (1) TIMING.—A hearing under this section shall 

11 be scheduled for a date which is not earlier than 30 

12 days nor later than 60 days after the service of no13 tice under subsection (a) unless another date is set 

14 by the Commissioner at the request of any party so 

15 served. 

16 (2) CONSENT.—If a duly authorized representa17 tive of a party served notice under subsection (a) 

18 fails to appear at a hearing under this section, the 

19 party shall be deemed to have consented to the 

20 issuance of the cease-and-desist order. 

21 (c) CEASE-AND-DESIST ORDER.— 

22 (1) IN GENERAL.—If the Commissioner finds, 

23 upon the record made at a hearing under this sec24 tion, that any violation or conduct specified in the 

25 notice of charges has been established, or if the 


rwilkins on PROD1PC63 with BILLS
77 

•S 40 IS

1 party consents, the Commissioner may issue and 

2 serve upon the national insurer, national agency, 

3 federally licensed insurance producer, or insurer-af4 filiated party, an order to cease and desist from any 

5 such violation or conduct. 

6 (2) CONTENTS.—A cease-and-desist order 

7 issued under this subsection may— 

8 (A) require the national insurer, national 

9 agency, federally licensed insurance producer, 

10 or insurer-affiliated party to cease and desist 

11 from the alleged violation or conduct; and 

12 (B) take affirmative action to correct the 

13 conditions resulting from any such violation or 

14 conduct. 

15 (3) EFFECTIVE DATE.—A cease-and-desist 

16 order issued under this subsection shall— 

17 (A) take effect on the expiration of the 

18 date which is 30 days after the service of such 

19 order upon the party or on another date, if 

20 issued upon consent; and 

21 (B) remain in effect and enforceable as 

22 provided therein, unless stayed, modified, termi23 nated, or set aside by action of the Commis24 sioner or a reviewing court. 


rwilkins on PROD1PC63 with BILLS
78 

•S 40 IS

1 (4) AUTHORITY TO LIMIT ACTIVITIES.—The au2 thority to issue an order under this section includes 

3 the authority to place limitations on the activities or 

4 functions of a national insurer, national agency, a 

5 federally licensed insurance producer, or an insurer6 affiliated party. 

7 (5) STANDARD FOR CERTAIN ORDERS.—No au8 thority under this section to prohibit any insurer-af9 filiated party from withdrawing, transferring, remov10 ing, dissipating, or disposing of any funds, assets, or 

11 other property may be exercised, unless the Commis12 sioner meets the standards of Rule 65 of the Federal 

13 Rules of Civil Procedure, without regard to the re14 quirement of such rule that the applicant show that 

15 the injury, loss, or damage is irreparable and imme16 diate. 

17 (d) TEMPORARY CEASE-AND-DESIST ORDERS.— 

18 (1) IN GENERAL.—If the Commissioner deter19 mines that the violation, threatened violation, or 

20 conduct specified in the notice of charges served 

21 under subsection (c)(1) is likely to cause insolvency 

22 or significant dissipation of assets or earnings of a 

23 national insurer or a State insurer, or is likely to 

24 weaken the condition of a national insurer or a State 

25 insurer or otherwise prejudice the interests of the 


rwilkins on PROD1PC63 with BILLS
79 

•S 40 IS

1 policyholders, as a whole, of a national insurer or a 

2 State insurer before the completion of the pro3 ceedings conducted under subsection (c)(1), the 

4 Commissioner may issue a temporary order requir5 ing the national insurer, national agency, producer, 

6 or party to— 

7 (A) cease and desist from any such viola8 tion or conduct; and 

9 (B) take affirmative action to prevent or 

10 remedy such insolvency, dissipation, condition, 

11 or prejudice pending completion of such pro12 ceedings. 

13 (2) CONTENTS OF ORDER; EFFECTIVE DATE.— 

14 A temporary cease-and-desist order issued under 

15 paragraph (1)— 

16 (A) may include any action authorized 

17 under section 1144(2); 

18 (B) shall become effective upon service to 

19 the national insurer, national agency, producer, 

20 or party; and 

21 (C) unless set aside, limited, or suspended 

22 by a court under paragraph (3), shall remain in 

23 effect and enforceable until the date on which— 

24 (i) administrative proceedings pursu25 ant to such order are completed; 


rwilkins on PROD1PC63 with BILLS
80 

•S 40 IS

1 (ii) the Commissioner dismisses the 

2 charges specified in such order; or 

3 (iii) if a cease-and-desist order is 

4 issued against such national insurer, na5 tional agency, producer, or party, such 

6 order is effective. 

7 (3) INJUNCTION.— 

8 (A) IN GENERAL.—A national insurer, na9 tional agency, federally licensed insurance pro10 ducer, or insurer-affiliated party that has been 

11 served with a temporary cease-and-desist order 

12 under this subsection may, not later than 10 

13 days after the date of such service, apply to a 

14 court described in subparagraph (B) for an in15 junction setting aside, limiting, or suspending 

16 the enforcement, operation, or effectiveness of 

17 such order until the completion of administra18 tive proceedings under this section. 

19 (B) JURISDICTION.—The United States 

20 District Court for the District of Columbia and 

21 the United States district court for the judicial 

22 district in which the producer, party, or main 

23 office of the national insurer or national agency 

24 is located shall have jurisdiction to issue an in25 junction under this paragraph. 


rwilkins on PROD1PC63 with BILLS
81 

•S 40 IS

1 (4) INCOMPLETE OR INACCURATE RECORDS.— 

2 (A) TEMPORARY ORDER.—If a notice of 

3 charges served under subsection (a) specifies, 

4 on the basis of particular facts and cir5 cumstances, that the books and records of a na6 tional insurer are so incomplete or inaccurate 

7 that the Commissioner is unable, through the 

8 normal supervisory process, to determine the fi9 nancial condition of that national insurer or the 

10 details or purpose of any transaction or trans11 actions that may have a material effect on the 

12 financial condition of that national insurer, the 

13 Commissioner may issue a temporary order re14 quiring— 

15 (i) the cessation of any activity or 

16 practice which gave rise to the incomplete 

17 or inaccurate state of the books or records; 

18 or 

19 (ii) affirmative action to restore such 

20 books or records to a complete and accu21 rate state. 

22 (B) EFFECTIVE PERIOD.—A temporary 

23 order issued under subparagraph (A)— 

24 (i) shall become effective upon service; 

25 and 


rwilkins on PROD1PC63 with BILLS
82 

•S 40 IS

1 (ii) unless set aside, limited, or sus2 pended by a court in proceedings under 

3 paragraph (2), shall remain in effect and 

4 enforceable until the earlier of— 

5 (I) the completion of the pro6 ceeding initiated under subsection (a) 

7 in connection with the notice of 

8 charges; or 

9 (II) the date the Commissioner 

10 determines, by examination or other11 wise, that the books and records of 

12 the national insurer accurately reflect 

13 the financial condition of the national 

14 insurer. 

15 SEC. 1144. AFFIRMATIVE ACTION TO CORRECT CONDITIONS 

16 RESULTING FROM VIOLATIONS OR CONDUCT. 

17 The authority granted to the Commissioner under 

18 this subtitle to issue an order that requires a national in19 surer, national agency, federally licensed insurance pro20 ducer, or insurer-affiliated party to take affirmative action 

21 to correct or remedy any condition resulting from any vio22 lation or conduct with respect to which such order is 

23 issued includes the authority to require such national in24 surer, national agency, producer, or party to— 

25 (1) restrict the growth of the national insurer; 


rwilkins on PROD1PC63 with BILLS
83 

•S 40 IS

1 (2) dispose of any asset or insurance policy or 

2 reinsurance contract; 

3 (3) rescind any other agreements or contracts, 

4 other than insurance policies or reinsurance con5 tracts, to which the national insurer is the issuer; 

6 (4) employ qualified officers or employees, sub7 ject to approval by the Commissioner; and 

8 (5) take such other action as the Commissioner 

9 determines to be appropriate if— 

10 (A) such national insurer, national agency, 

11 producer, or party was unjustly enriched in con12 nection with such violation or conduct; or 

13 (B) the violation or conduct involved a 

14 reckless disregard for the law or any applicable 

15 regulations or prior order of the Commissioner. 

16 SEC. 1145. SUSPENSION, REMOVAL, AND PROHIBITION AU17 THORITY. 

18 (a) AUTHORITY TO ISSUE ORDER.—The Commis19 sioner may serve a written notice of the Commissioner’s 

20 intention to suspend or remove an insurer-affiliated party 

21 from office or to prohibit any further participation by such 

22 party in the conduct of the affairs of any national insurer 

23 or national agency, if the Commissioner determines that— 

24 (1) an insurer-affiliated party has— 

25 (A) violated— 


rwilkins on PROD1PC63 with BILLS
84 

•S 40 IS

1 (i) any law or regulation; 

2 (ii) any final cease-and-desist order 

3 issued under section 1143; 

4 (iii) any condition imposed in writing 

5 by the Commissioner in connection with 

6 the grant of any application, filing, state7 ment, notice, or other request by such na8 tional insurer or national agency; or 

9 (iv) any written agreement between 

10 such national insurer or national agency 

11 and the Commissioner; 

12 (B) engaged or participated in any conduct 

13 that— 

14 (i) is hazardous to the national in15 surer or national agency; and 

16 (ii) involves an undue risk to the pol17 icyholders of such national insurer, as a 

18 whole, or the policyholders, as a whole, 

19 serviced by such national agency; or 

20 (C) committed or engaged in any act, 

21 omission, or practice, which constitutes a 

22 breach of the fiduciary duty of such party; 

23 (2) through any violation, conduct, practice, or 

24 breach described in paragraph (1)— 


rwilkins on PROD1PC63 with BILLS
85 

•S 40 IS

1 (A) such national insurer or national agen2 cy has suffered, or will probably suffer, finan3 cial loss or other damage; 

4 (B) the interests of the policyholders of the 

5 national insurer or the policyholders serviced by 

6 the national agency have been, or could be, 

7 prejudiced; or 

8 (C) such party has received financial gain 

9 or other benefit by reason of such violation, 

10 practice, or breach; and 

11 (3) the violation, conduct, practice, or breach— 

12 (A) involves personal dishonesty on the 

13 part of such party; or 

14 (B) demonstrates willful or continuing dis15 regard by such party for the condition of such 

16 national insurer or national agency or the inter17 ests of the national insurer’s policyholders or 

18 the policyholders serviced by the national agen19 cy. 

20 (b) TEMPORARY SUSPENSION ORDER.— 

21 (1) SUSPENSION OR PROHIBITION AUTHOR22 IZED.—If the Commissioner serves written notice 

23 under subsection (a) on any insurer-affiliated party 

24 of the Commissioner’s intention to issue an order 

25 under such subsection, the Commissioner may issue 


rwilkins on PROD1PC63 with BILLS
86 

•S 40 IS

1 a temporary order suspending such party from office 

2 or prohibiting such party from further participation 

3 in any manner in the conduct of the affairs of the 

4 national insurer or national agency, if the Commis5 sioner— 

6 (A) determines that such action is nec7 essary for the protection of the national insurer 

8 or its policyholders or the national agency or 

9 the policyholders serviced by such Agency; and 

10 (B) serves such party with the temporary 

11 order of suspension or prohibition. 

12 (2) EFFECTIVE PERIOD.—Any temporary order 

13 issued under paragraph (1)— 

14 (A) shall become effective upon service; 

15 and 

16 (B) unless a court issues a stay of such 

17 order under subsection (e), shall remain in ef18 fect and enforceable until— 

19 (i) the date the Commissioner dis20 misses the charges contained in the notice 

21 served under subsection (a) with respect to 

22 such party; or 

23 (ii) the effective date of an order 

24 issued by the Commissioner to such party 

25 under subsection (a). 


rwilkins on PROD1PC63 with BILLS
87 

•S 40 IS

1 (3) COPY OF ORDER.—If the Commissioner 

2 issues a temporary order under paragraph (1) to any 

3 insurer-affiliated party, the Commissioner shall serve 

4 a copy of such order on any national insurer or na5 tional agency with which such party is affiliated at 

6 the time such order is issued. 

7 (c) PROCEDURES.— 

8 (1) CONTENTS OF NOTICE.—A notice served 

9 under subsection (a) shall include— 

10 (A) a statement of the grounds for facts 

11 underlying such notice; and 

12 (B) the time and place of a hearing to be 

13 held thereon. 

14 (2) HEARING.—The hearing referred to in 

15 paragraph (1)(B) shall take place not earlier than 

16 30 days nor later than 60 days after the date of 

17 service of notice under subsection (a), unless another 

18 date is set by the Commissioner at the request of 

19 such party. 

20 (3) SUSPENSION OR REMOVAL.— 

21 (A) FAILURE TO APPEAR.—If a duly au22 thorized representative of the party receiving 

23 notice of a hearing under this subsection fails 

24 to appear at such hearing, such party shall be 


rwilkins on PROD1PC63 with BILLS
88 

•S 40 IS

1 deemed to have consented to the issuance of an 

2 order of such removal or prohibition. 

3 (B) SUSPENSION OR REMOVAL.—In the 

4 event of such consent, or if upon the record 

5 made at any hearing under this subsection the 

6 Commissioner finds that any of the grounds 

7 specified in such notice have been established, 

8 the Commissioner may issue such orders of sus9 pension or removal from office, or prohibition 

10 from participation in the conduct of the affairs 

11 of the national insurer or national agency, as 

12 the Commissioner determines to be appropriate. 

13 (C) EFFECTIVE DATE.—Any order issued 

14 under subparagraph (B) shall become effective 

15 on the expiration of 30 days after service upon 

16 the national insurer or national agency and 

17 such party (except in the case of an order 

18 issued upon consent, which shall become effec19 tive at the time specified in such order). Such 

20 order shall remain effective and enforceable as 

21 provided therein, except to such extent as it is 

22 stayed, modified, terminated, or set aside by ac23 tion of the Commissioner or a reviewing court. 

24 (d) INDUSTRYWIDE PROHIBITION.— 


rwilkins on PROD1PC63 with BILLS
89 

•S 40 IS

1 (1) IN GENERAL.—Except as provided under 

2 paragraph (2), any person who, pursuant to any 

3 order issued under this section or section 1146, has 

4 been removed or suspended from office in a national 

5 insurer or national agency or prohibited from par6 ticipating in the conduct of the affairs of a national 

7 insurer or national agency may not, while such order 

8 is in effect— 

9 (A) continue or commence to hold any of10 fice in, or participate in any manner in the con11 duct of the affairs of any national insurer or 

12 national agency; 

13 (B) solicit, procure, transfer, attempt to 

14 transfer, vote, or attempt to vote any proxy, 

15 consent, or authorization with respect to any 

16 voting rights in any national insurer or national 

17 agency; 

18 (C) act as an insurer-affiliated party; or 

19 (D) act as a federally licensed insurance 

20 producer. 

21 (2) EXCEPTION.—If, on or after the date on 

22 which an order is issued under this subsection that 

23 removes or suspends from office any insurer-affili24 ated party or prohibits such party from participating 

25 in the conduct of the affairs of a national insurer or 


rwilkins on PROD1PC63 with BILLS
90 

•S 40 IS

1 national agency, such party receives the written con2 sent of the Commissioner, paragraph (1) shall, to 

3 the extent of such consent, cease to apply to such 

4 party with respect to the national insurer or national 

5 agency described in each written consent. 

6 (3) VIOLATION OF ORDER.—Any violation of 

7 paragraph (1) by any person who is subject to an 

8 order described in such subparagraph shall be treat9 ed as a violation of the order. 

10 (e) STAY OF SUSPENSION OR PROHIBITION.—Not 

11 later than 10 days after any insurer-affiliated party has 

12 been suspended from office or prohibited from participa13 tion in the conduct of the affairs of a national insurer or 

14 national agency by a temporary order issued under sub15 section (b), such party may apply to the United States 

16 district court for the judicial district in which the main 

17 office of the national insurer or national agency is located, 

18 or the United States District Court for the District of Co19 lumbia, for a stay of such suspension or prohibition pend20 ing the completion of the administrative proceedings pur21 suant to the notice served upon such party under sub22 section (a), and such court shall have jurisdiction to stay 

23 such suspension or prohibition. 


rwilkins on PROD1PC63 with BILLS
91 

•S 40 IS

1 SEC. 1146. SUSPENSION OR PROHIBITION BASED ON CRIMI2 NAL ACTIVITY. 

3 (a) SUSPENSION OR PROHIBITION.— 

4 (1) IN GENERAL.—The Commissioner may sus5 pend an insurer-affiliated party from office or pro6 hibit such party from further participation in any 

7 manner in the conduct of the affairs of a national 

8 insurer or national agency, by written notice served 

9 upon such party and the national insurer or national 

10 agency, if— 

11 (A) continued service or participation by 

12 such party may pose a threat to the national in13 surer or national agency or the interests of the 

14 policyholders of the national insurer, as a 

15 whole, or the policyholders, as a whole, serviced 

16 by the national agency; and 

17 (B) such party is charged in any informa18 tion, indictment, or complaint, with the commis19 sion of or participation in— 

20 (i) a crime involving dishonesty or 

21 breach of trust which is punishable by im22 prisonment for a term exceeding 1 year 

23 under Federal or State law; or 

24 (ii) a criminal violation of section 

25 1956, 1957, or 1960 of title 18, United 


rwilkins on PROD1PC63 with BILLS
92 

•S 40 IS

1 States Code, or section 5322 or 5324 of 

2 title 31, United States Code. 

3 (2) EFFECTIVE PERIOD.—A suspension or pro4 hibition under paragraph (1) shall remain in effect 

5 until the information, indictment, or complaint re6 ferred to in paragraph (1)(B) is resolved or other7 wise terminated by the Commissioner. 

8 (b) REMOVAL OR PROHIBITION.— 

9 (1) IN GENERAL.—If a judgment of conviction 

10 or an agreement to enter a pretrial diversion or 

11 other similar program is entered against an insurer12 affiliated party in connection with a crime described 

13 in subsection (a)(1)(B)(i), the Commissioner may 

14 issue and serve upon such party and the national in15 surer or national agency an order removing such 

16 party from office or prohibiting such party from fur17 ther participation in any manner in the conduct of 

18 the affairs of the national insurer or national agency 

19 without the prior written consent of the Commis20 sioner if— 

21 (A) such judgment is not subject to further 

22 appellate review; and 

23 (B) continued service or participation by 

24 such party may pose a threat to the national in25 surer or the interests of the policyholders of the 


rwilkins on PROD1PC63 with BILLS
93 

•S 40 IS

1 national insurer or a national agency or the pol2 icyholders serviced by such agency. 

3 (2) REQUIRED FOR CERTAIN OFFENSES.—In 

4 the case of a judgment of conviction or agreement 

5 against an insurer-affiliated party in connection with 

6 a violation described in subsection (a)(1)(B)(ii), the 

7 Commissioner shall issue and serve upon such party 

8 and the national insurer or national agency an order 

9 removing such party from office or prohibiting such 

10 party from further participation in any manner in 

11 the conduct of the affairs of the national insurer or 

12 national agency without the prior written consent of 

13 the Commissioner. 

14 (3) EFFECT ON DIRECTOR OR OFFICER.—An 

15 insurer-affiliated party who is a director or officer 

16 and who is subject to an order under this subsection, 

17 shall cease to be a director or officer of such na18 tional insurer or national agency. 

19 (4) EFFECT OF ACQUITTAL.—A finding of not 

20 guilty or other disposition of the charge shall not 

21 preclude the Commissioner from instituting pro22 ceedings after such finding or disposition to remove 

23 such party from office or to prohibit further partici24 pation in national insurer or national agency affairs 

25 under subsection (a) or (b) of section 1145. 


rwilkins on PROD1PC63 with BILLS
94 

•S 40 IS

1 (5) EFFECTIVE PERIOD.—A notice of suspen2 sion or order of removal issued under this subsection 

3 shall remain effective and outstanding until the com4 pletion of any hearing or appeal under subsection (c) 

5 or unless the suspension or order of removal is oth6 erwise terminated by the Commissioner. 

7 (c) ADMINISTRATIVE HEARING.— 

8 (1) REQUEST.—Not later than 30 days after 

9 the date on which a notice of suspension or order of 

10 removal is received by an insurer-affiliated party 

11 under this subsection, such party may submit a writ12 ten request to the Commissioner for an opportunity 

13 to appear before the Commissioner to show that the 

14 continued service to, or participation in, the conduct 

15 of the affairs of the national insurer or national 

16 agency by such party will not pose a threat to the 

17 national insurer or to the interests of its policy18 holders or to a national agency or the policyholders 

19 serviced by such Agency. 

20 (2) TIME AND PLACE.—Upon receipt of a re21 quest under paragraph (1), the Commissioner shall 

22 set a time and place at which the requesting party 

23 may appear, personally or through counsel, before 1 

24 or more designated employees of the Commissioner 

25 to submit written materials or, at the discretion of 


rwilkins on PROD1PC63 with BILLS
95 

•S 40 IS

1 the Commissioner, oral testimony, and oral argu2 ment. A hearing under this subsection shall take 

3 place not later than 30 days after the receipt of a 

4 request under paragraph (1), unless extended at the 

5 request of the party. 

6 (3) NOTIFICATION OF DECISION.—Not later 

7 than 60 days after a hearing under this subsection, 

8 the Commissioner shall provide written notification 

9 to the insurer-affiliated party that indicates— 

10 (A) whether the suspension or prohibition 

11 from participation in any manner in the con12 duct of the affairs of the national insurer or na13 tional agency will be continued, terminated, or 

14 otherwise modified; 

15 (B) whether the order removing such party 

16 from office or prohibiting such party from fur17 ther participation in any manner in the conduct 

18 of the affairs of the national insurer or national 

19 agency will be rescinded or otherwise modified; 

20 and 

21 (C) the basis for any decision by the Com22 missioner that is adverse to such party. 

23 SEC. 1147. ANCILLARY PROVISIONS. 

24 (a) POWERS RELATED TO HEARINGS.—In the course 

25 of or in connection with any proceeding or other action 


rwilkins on PROD1PC63 with BILLS
96 

•S 40 IS

1 under this subtitle, the Commissioner, and any person des2 ignated to conduct any hearing under this section, may— 

3 (1) administer oaths and affirmations; 

4 (2) take depositions or cause depositions to be 

5 taken; and 

6 (3) issue, revoke, quash, or modify subpoenas 

7 and subpoenas duces tecum. 

8 (b) SUBPOENA POWER.— 

9 (1) IN GENERAL.—The Commissioner, or des10 ignee of the Commissioner, may require the attend11 ance of witnesses and the production of documents 

12 provided for in this section from any place in any 

13 State or other place subject to the jurisdiction of the 

14 United States at any designated place where such 

15 proceeding or other action is being conducted. 

16 (2) ENFORCEMENT.—The Commissioner or any 

17 party to proceedings under this section may apply 

18 for the enforcement of any subpoena or subpoena 

19 duces tecum issued under this section to— 

20 (A) the United States District Court for 

21 the District of Columbia; or 

22 (B) the United States district court for the 

23 judicial district in which— 

24 (i) such proceeding or other action is 

25 being conducted; or 


rwilkins on PROD1PC63 with BILLS
97 

•S 40 IS

1 (ii) the witness resides or conducts 

2 business. 

3 (3) JURISDICTION.—The courts described under 

4 paragraph (2) shall have jurisdiction and power to 

5 order and require compliance with any subpoena or 

6 subpoena duces tecum issued under this section. 

7 (4) FEES AND MILEAGE.—Any witness subpoe8 naed under this subsection shall be paid the same 

9 fees and mileage that are paid witnesses in the dis10 trict courts of the United States. 

11 (5) PENALTY FOR NONCOMPLIANCE.—Any per12 son who willfully fails or refuses to attend and tes13 tify or to answer any lawful inquiry or to produce 

14 books, papers, correspondence, memoranda, con15 tracts, agreements, or other records, if in such per16 son’s power so to do, in obedience to the subpoena 

17 of the Commissioner, shall be guilty of a mis18 demeanor and, upon conviction, shall be subject to 

19 a fine of not more than $1,000 or to imprisonment 

20 for a term of not more than 1 year or both. 

21 (c) EXPENSES AND ATTORNEY FEES.— 

22 (1) IN GENERAL.—Any court having jurisdic23 tion of any proceeding or other action instituted 

24 under this section by a national insurer or national 

25 agency, a federally licensed insurance producer, or 


rwilkins on PROD1PC63 with BILLS
98 

•S 40 IS

1 an insurer-affiliated party may allow any such in2 surer, agency, producer, or party to receive such rea3 sonable expenses and attorney fees, as it determines 

4 to be just and proper. 

5 (2) PAYMENT OF EXPENSES AND FEES.—Ex6 penses and fees awarded under paragraph (1) shall 

7 be paid by the national insurer or national agency, 

8 the federally licensed insurance producer, or the in9 surer-affiliated party from the assets of such in10 surer, agency, producer, or party. 

11 (d) RULEMAKING.—The Commissioner may promul12 gate such regulations as may be necessary with respect 

13 to any proceedings, claims, examinations, investigations, 

14 or other actions authorized by this subtitle. 

15 (e) EFFECT ON BOARD OF DIRECTORS.— 

16 (1) LACK OF QUORUM.—If the suspension of 1 

17 or more directors under this subtitle reduces the 

18 board of directors of a national insurer or national 

19 agency below a quorum, all powers and functions 

20 vested in or exercisable by such board shall vest in, 

21 and be exercisable by, the director or directors on 

22 the board not so suspended, until a quorum is rees23 tablished. 

24 (2) TEMPORARY APPOINTMENTS.—If all of the 

25 directors of a national insurer or national agency are 


rwilkins on PROD1PC63 with BILLS
99 

•S 40 IS

1 suspended under this subtitle, the Commissioner 

2 shall appoint persons to serve temporarily as direc3 tors in their place until the earlier of the date on 

4 which— 

5 (A) the suspensions are terminated; or 

6 (B) the suspended directors are replaced 

7 on the board of directors of the national insurer 

8 or national agency. 

9 (f) NOTICE AFTER SEPARATION FROM SERVICE.— 

10 The resignation, termination of employment or participa11 tion, or separation of an insurer-affiliated party (including 

12 a separation caused by the closing of a national insurer 

13 or national agency) shall not affect the jurisdiction and 

14 authority of the Commissioner to issue any notice against 

15 any such party under this subtitle if such notice is served 

16 before the end of the 6-year period beginning on the date 

17 on which such party ceased to be an insurer-affiliated 

18 party with respect to such national insurer or national 

19 agency. 

20 SEC. 1148. HEARINGS AND JUDICIAL REVIEW OF SUSPEN21 SION, REMOVAL, OR PROHIBITION ORDER. 

22 (a) JUDICIAL HEARING.— 

23 (1) IN GENERAL.—A hearing under this subtitle 

24 (except for a hearing under section 1146(c))— 


rwilkins on PROD1PC63 with BILLS
100 

•S 40 IS

1 (A) shall be conducted in accordance with 

2 the provisions of chapter 5 of title 5, United 

3 States Code; and 

4 (B) shall be held in the Federal judicial 

5 district in which the main office of the national 

6 insurer or national agency is located or in 

7 which the federally licensed insurance producer 

8 or the insurer-affiliated party is located, unless 

9 the party afforded the hearing consents to an10 other place. 

11 (2) JUDGMENT.—After a hearing under this 

12 subsection and not later than 90 days after the 

13 Commissioner has notified the parties that the case 

14 has been submitted to the Commissioner for final 

15 decision, the Commissioner shall— 

16 (A) render a decision; 

17 (B) issue and serve upon each party to the 

18 proceeding an order or orders consistent with 

19 the provisions of this subtitle; and 

20 (C) include findings of fact upon which the 

21 decision of the Commissioner is predicated. 

22 (b) JUDICIAL REVIEW.— 

23 (1) IN GENERAL.—Judicial review of any order 

24 under this subtitle shall be limited to the provisions 

25 under this section. 


rwilkins on PROD1PC63 with BILLS
101 

•S 40 IS

1 (2) MODIFICATION OR TERMINATION OF ORDER

2 BY COMMISSIONER.— 

3 (A) BEFORE APPEAL.—Until a petition for 

4 review is timely filed in a court of appeals of 

5 the United States, in accordance with para6 graph (3), the Commissioner may modify, ter7 minate, or set aside any order under this sec8 tion. 

9 (B) AFTER APPEAL.—After an appeal de10 scribed under subparagraph (A) is filed, the 

11 Commissioner may not modify, terminate, or 

12 set aside any order under this section without 

13 the permission of the court. 

14 (3) FILING OF PETITION.— 

15 (A) IN GENERAL.—Except as provided 

16 under subparagraph (B), any party to a pro17 ceeding under this section may obtain judicial 

18 review of any order served under subsection (a) 

19 by filing a written petition in a court of appeals 

20 described in subparagraph (C) not later than 

21 30 days after the date of service of such order, 

22 requesting that the order of the Commissioner 

23 be modified, terminated, or set aside. 

24 (B) EXCEPTION.—Judicial review shall not 

25 be available for an order issued under subVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00101 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
102 

•S 40 IS

1 section (d) with the consent of the national in2 surer or national agency, the federally licensed 

3 insurance producer, or the insurer-affiliated 

4 party. 

5 (C) JURISDICTION.—After a petition is 

6 filed under this paragraph, the following courts 

7 shall have exclusive jurisdiction to modify, ter8 minate, or set aside, in whole or in part, the 

9 order of the Commissioner: 

10 (i) The court of appeals of the United 

11 States for the circuit in which— 

12 (I) the main office of the national 

13 insurer or national agency is located; 

14 or 

15 (II) the federally licensed insur16 ance producer or the insurer-affiliated 

17 party is located. 

18 (ii) The United States Court of Ap19 peals for the District of Columbia circuit. 

20 (4) FILING OF RECORD.—The clerk of the court 

21 shall transmit a copy of the petition filed under 

22 paragraph (3) to the Commissioner, who shall file in 

23 the court the record in the proceeding, in accordance 

24 with section 2112 of title 28, United States Code. 


rwilkins on PROD1PC63 with BILLS
103 

•S 40 IS

1 (5) EFFECT OF REVIEW PROCEEDINGS.—The 

2 commencement of proceedings for judicial review 

3 under this subsection shall not, unless specifically 

4 ordered by the court, operate as a stay of any order 

5 issued by the Commissioner. 

6 (6) FINAL JUDGMENT.—Judicial review under 

7 this section shall be subject to chapter 7 of title 5, 

8 United States Code. The judgment and decree of the 

9 court shall be final, except that the same shall be 

10 subject to review by the Supreme Court upon certio11 rari, as provided in section 1254 of title 28, United 

12 States Code. 

13 (c) ENFORCEMENT OF COMMISSIONER ORDER.— 

14 (1) APPLICATION.—The Commissioner may 

15 submit an application, to enforce any effective and 

16 outstanding notice or order issued under this sec17 tion, to the United States district court for the judi18 cial district in which— 

19 (A) the main office of the national insurer 

20 or national agency is located; 

21 (B) the federally licensed insurance pro22 ducer is located; or 

23 (C) the insurer-affiliated party is located. 

24 (2) JURISDICTION.—The courts described in 

25 paragraph (1)— 


rwilkins on PROD1PC63 with BILLS
104 

•S 40 IS

1 (A) shall have jurisdiction and power to 

2 order and require compliance with an order of 

3 the Commissioner under this subtitle; and 

4 (B) except as otherwise provided in this 

5 subtitle, shall not have jurisdiction to affect, by 

6 injunction or otherwise, the issuance or enforce7 ment of any notice or order under this subtitle, 

8 or to review, modify, suspend, terminate, or set 

9 aside any such notice or order. 

10 SEC. 1149. CIVIL AND CRIMINAL PENALTIES. 

11 (a) CIVIL MONEY PENALTY.— 

12 (1) FIRST TIER.—A national insurer or na13 tional agency, federally licensed insurance producer, 

14 or insurer-affiliated party shall pay a civil penalty of 

15 not more than $5,000 for each day during which 

16 such person— 

17 (A) violates any law or regulation; 

18 (B) violates any final order or temporary 

19 order issued pursuant to section 1143, 1144, 

20 1145, or 1146; 

21 (C) violates any condition imposed in writ22 ing by the Commissioner in connection with the 

23 grant of any application or other request by 

24 such national insurer or national agency, pro25 ducer or party; or 


rwilkins on PROD1PC63 with BILLS
105 

•S 40 IS

1 (D) violates any written agreement be2 tween such national insurer or national agency, 

3 producer, or party and the Commissioner. 

4 (2) SECOND TIER.—Notwithstanding paragraph 

5 (1), a national insurer, national agency, federally li6 censed insurance producer, or insurer-affiliated 

7 party shall pay a civil penalty of not more than 

8 $25,000 for each day— 

9 (A) during which such person— 

10 (i) commits any violation described in 

11 any clause of paragraph (1); 

12 (ii) recklessly engages in any conduct 

13 that is hazardous to a national insurer, 

14 State insurer, or national agency and that 

15 involves an undue risk to the policyholders, 

16 as a whole, of such national insurer or 

17 State insurer, or the policyholders, as a 

18 whole, serviced by such national agency; or 

19 (iii) breaches any fiduciary duty; and 

20 (B) for which such violation, conduct, or 

21 breach— 

22 (i) is part of a pattern of misconduct; 

23 (ii) causes or is likely to cause more 

24 than a minimal loss to such national in25 surer or State insurer; or 


rwilkins on PROD1PC63 with BILLS
106 

•S 40 IS

1 (iii) results in pecuniary gain or other 

2 benefit to such national agency, producer, 

3 or affiliated party. 

4 (3) THIRD TIER.—Notwithstanding paragraphs 

5 (1) and (2), a national insurer, national agency, fed6 erally licensed insurance producer, or any insurer-af7 filiated party shall pay a civil penalty in an amount 

8 not to exceed the applicable maximum amount deter9 mined under paragraph (4) for each day during 

10 which such person— 

11 (A) knowingly— 

12 (i)(I) commits any violation described 

13 in any clause of paragraph (1); or 

14 (II) engages in any conduct that is 

15 hazardous to a national insurer, State in16 surer, or national agency and that involves 

17 an undue risk to the policyholders, as a 

18 whole, of such national insurer, State in19 surer, or the policyholders, as a whole, 

20 serviced by such national agency; and 

21 (ii) breaches any fiduciary duty; and 

22 (B) knowingly or recklessly causes a sub23 stantial loss to such national insurer, State in24 surer, or national agency or a substantial pecu25 niary gain or other benefit to such producer or 


rwilkins on PROD1PC63 with BILLS
107 

•S 40 IS

1 affiliated party by reason of such violation, con2 duct, or breach. 

3 (4) MAXIMUM AMOUNTS OF PENALTIES FOR

4 ANY VIOLATION DESCRIBED IN PARAGRAPH (3).— 

5 The maximum daily amount of any civil penalty 

6 which may be assessed under paragraph (3) for any 

7 violation, practice, or breach described in such para8 graph is $1,000,000. 

9 (5) ASSESSMENT.— 

10 (A) WRITTEN NOTICE.—Any penalty im11 posed under paragraph (1), (2), or (3) may be 

12 assessed and collected by the Commissioner by 

13 written notice, which shall contain a statement 

14 of the facts constituting the basis for the as15 sessment of any penalty imposed under para16 graph (1), (2), or (3). 

17 (B) FINALITY OF ASSESSMENT.—If, with 

18 respect to any assessment under subparagraph 

19 (A), a hearing is not requested under para20 graph (8) within the period of time allowed 

21 under such paragraph, the assessment shall 

22 constitute a final and unappealable order. 

23 (6) AUTHORITY TO MODIFY OR REMIT PEN24 ALTY.—The Commissioner may compromise, modify, 

25 or remit any penalty which the Commissioner may 


rwilkins on PROD1PC63 with BILLS
108 

•S 40 IS

1 assess or had already assessed under paragraph (1), 

2 (2), or (3). 

3 (7) MITIGATING FACTORS.—In determining the 

4 amount of any penalty imposed under paragraph 

5 (1), (2), or (3), the Commissioner shall take into ac6 count the appropriateness of the penalty in relation 

7 to— 

8 (A) the size of financial resources and good 

9 faith of the national insurer, national agency, or 

10 other person charged; 

11 (B) the gravity of the violation; 

12 (C) the history of previous violations; and 

13 (D) such other matters as justice may re14 quire. 

15 (8) HEARING.—The national insurer, national 

16 agency, or other person against whom any penalty is 

17 assessed under this paragraph shall be afforded a 

18 hearing by the Commissioner if such national in19 surer, national agency, or person submits a request 

20 for such hearing within 20 days after the issuance 

21 of the notice of assessment. 

22 (9) COLLECTION.— 

23 (A) REFERRAL.—If any national insurer, 

24 national agency, or other person fails to pay an 

25 assessment after any penalty assessed under 


rwilkins on PROD1PC63 with BILLS
109 

•S 40 IS

1 this paragraph has become final, the Commis2 sioner shall recover the amount assessed by ac3 tion in the appropriate United States district 

4 court. 

5 (B) APPROPRIATENESS OF PENALTY NOT

6 REVIEWABLE.—In any civil action under sub7 paragraph (A), the validity and appropriateness 

8 of the penalty shall not be subject to review. 

9 (10) DISBURSEMENT AND USE.—All penalties 

10 collected under authority of this paragraph shall be 

11 deposited into the Treasury, and shall not be used 

12 to fund the compensation of the Commissioner or 

13 employees of the Office or the expenses of the Of14 fice. 

15 (b) PREJUDGMENT ATTACHMENT.— 

16 (1) IN GENERAL.—In any action brought by the 

17 Commissioner under this section, or in actions 

18 brought in aid of, or to enforce an order in, any ad19 ministrative or other civil action for money damages, 

20 restitution, or civil money penalties brought by the 

21 Commissioner, the court may, upon application of 

22 the Commissioner, issue a restraining order that— 

23 (A) prohibits any person subject to the 

24 proceeding from withdrawing, transferring, reVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00109 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
110 

•S 40 IS

1 moving, dissipating, or disposing of any funds, 

2 assets, or other property; and 

3 (B) appoints a temporary receiver to ad4 minister the restraining order. 

5 (2) STANDARD.— 

6 (A) SHOWING.—Rule 65 of the Federal 

7 Rules of Civil Procedure shall apply with re8 spect to any proceeding under paragraph (1), 

9 without regard to the requirement of such rule 

10 that the applicant show that the injury, loss, or 

11 damage is irreparable and immediate. 

12 (B) STATE PROCEEDING.—If, in the case 

13 of any proceeding in a State court, the court 

14 determines that rules of civil procedure avail15 able under the laws of such State provide sub16 stantially similar protections to a party’s right 

17 to due process as rule 65, the relief sought 

18 under paragraph (1) may be requested under 

19 the laws of such State. 

20 (c) CRIMINAL PENALTY.— 

21 (1) IN GENERAL.—Chapter 21 of title 18, 

22 United States Code, is amended by adding at the 

23 end the following: 


rwilkins on PROD1PC63 with BILLS
111 

•S 40 IS

1 ‘‘§ 404. Violation of order by Commissioner of Na2 tional Insurance 

3 ‘‘Any person who, being subject to an order under 

4 section 1145 or 1146 of the National Insurance Act of 

5 2007, without the prior written approval of the Commis6 sioner of National Insurance, knowingly participates, di7 rectly or indirectly, in any manner (including by engaging 

8 in an activity specifically prohibited in such an order) in 

9 the conduct of the affairs of any national insurer or na10 tional agency shall be fined not more than $1,000,000, 

11 imprisoned for not more than 5 years, or both.’’. 

12 (2) CLERICAL AMENDMENT.—The table of sec13 tions at the beginning of chapter 21 of title 18, 

14 United States Code, is amended by adding at the 

15 end the following: 

‘‘Sec. 404. Violation of order by Commissioner of National Insurance.’’. 

16 SEC. 1150. PUBLIC DISCLOSURES OF FINAL ORDERS AND 

17 AGREEMENTS. 

18 (a) IN GENERAL.—Unless the Commissioner deter19 mines that publication of any such agreement, statement, 

20 order, modification, or termination would be contrary to 

21 the public interest, the Commissioner shall, on a monthly 

22 basis, publish and make publicly available— 

23 (1) any written agreement or other written 

24 statement for which a violation may be enforced by 

25 the Commissioner; 


rwilkins on PROD1PC63 with BILLS
112 

•S 40 IS

1 (2) any final order issued with respect to any 

2 administrative enforcement proceeding initiated by 

3 the Commissioner under this section or any other 

4 law; and 

5 (3) any modification to or termination of any 

6 order or agreement made public pursuant to this 

7 paragraph. 

8 (b) HEARINGS.—All hearings on the record with re9 spect to any notice of charges issued by the Commissioner 

10 shall be open to the public, unless the Commissioner deter11 mines that holding an open hearing would be contrary to 

12 the public interest. 

13 (c) TRANSCRIPT OF HEARING.—A transcript con14 taining all testimony and other documentary evidence shall 

15 be prepared for all hearings commenced pursuant to sec16 tion 1148. A transcript of public hearings shall be made 

17 available to the public pursuant to section 552 of title 5, 

18 United States Code. 

19 (d) DOCUMENTS FILED UNDER SEAL.— 

20 (1) IN GENERAL.—The Commissioner may file 

21 any document or part of a document under seal in 

22 any administrative hearing commenced by the Com23 missioner if the Commissioner determines that dis24 closure of all or part of the document would be con25 trary to the public interest. 


rwilkins on PROD1PC63 with BILLS
113 

•S 40 IS

1 (2) WRITTEN REPORT.—A written report shall 

2 be made part of any determination to withhold any 

3 part of a document from the transcript of the hear4 ing required under subsection (b). 

5 (e) RETENTION OF DOCUMENTS.—The Commis6 sioner shall maintain a record for not less than 6 years 

7 of— 

8 (1) all the documents described in subsection 

9 (a); and 

10 (2) all informal enforcement agreements and 

11 other supervisory actions and supporting documents 

12 issued in connection with any administrative enforce13 ment proceeding initiated by the Commissioner. 

14 (f) DISCLOSURES TO CONGRESS.—No provision of 

15 this section may be construed to authorize the with16 holding, or to prohibit the disclosure, of any information 

17 to Congress. 

18 SEC. 1151. FOREIGN INVESTIGATIONS. 

19 (a) REQUESTING ASSISTANCE FROM FOREIGN GOV20 ERNMENTS.—In conducting any investigation, examina21 tion, or enforcement action under this subtitle, the Com22 missioner may request the assistance of any foreign gov23 ernment. 

24 (b) PROVIDING ASSISTANCE TO FOREIGN GOVERN25 MENTS.— 


rwilkins on PROD1PC63 with BILLS
114 

•S 40 IS

1 (1) IN GENERAL.—The Commissioner may as2 sist any foreign government that is conducting an 

3 investigation to determine whether any person has 

4 violated, is violating, or is about to violate any law 

5 or regulation relating to insurance matters or cur6 rency transactions administered or enforced by such 

7 foreign government. 

8 (2) INVESTIGATION BY COMMISSIONER.—The 

9 Commissioner may investigate and collect informa10 tion and evidence pertinent to a request for assist11 ance under paragraph (1). Any such investigation 

12 shall comply with the laws of the United States and 

13 the policies and procedures of the Commissioner. 

14 (3) FACTORS TO CONSIDER.—In deciding 

15 whether to provide assistance under this section, the 

16 Commissioner shall consider— 

17 (A) whether the requesting authority has 

18 agreed to provide reciprocal assistance with re19 spect to insurance matters within the jurisdic20 tion of the Commissioner; and 

21 (B) whether compliance with the request 

22 would prejudice the public interest of the 

23 United States. 

24 (c) RULE OF CONSTRUCTION.—Nothing in this sec25 tion shall be construed to limit the authority of the ComVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00114 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
115 

•S 40 IS

1 missioner or any other Federal agency to provide or re2 ceive assistance or information to or from any foreign gov3 ernmental authority with respect to any matter. 

4 SEC. 1152. ACTION OR PROCEEDING AGAINST NON-UNITED 

5 STATES INSURERS. 

6 (a) IN GENERAL.—The Commissioner may not take 

7 any action under this subtitle against a non-United States 

8 insurer or any officer, director, employee, or agent of such 

9 insurer unless the Commissioner believes that conduct or 

10 practice of such insurer or individual has been, is, or is 

11 likely to be, carried on in connection with an act or prac12 tice within 1 or more States, which constitutes an appro13 priate basis for action by the Commissioner under this 

14 subtitle. 

15 (b) REMOVAL OF OFFICER OR DIRECTOR.—If an of16 ficer, director, or other person associated with a non17 United States insurer fails to appear promptly as a party 

18 in any case in which an action or proceeding is brought, 

19 pursuant to an allegation under subsection (a), for the 

20 suspension or removal of such officer, director, or other 

21 person, or fails to comply with any effective order or judg22 ment therein, any failure by the non-United States insurer 

23 to secure the removal of the officer, director, or other per24 son from any office such person holds in such insurer and 

25 from any further participation in its affairs shall conVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00115 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
116 

•S 40 IS

1 stitute grounds for ordering the non-United States insurer 

2 to terminate the sale, solicitation, negotiation, and under3 writing of insurance and all other insurance operations in 

4 the United States. 

5 (c) VENUE.— 

6 (1) IN GENERAL.—Except as provided under 

7 paragraph (2), if the venue of any judicial or admin8 istrative proceeding under this section is to be deter9 mined by reference to the location of the main office 

10 of a national insurer, the venue of such a proceeding 

11 shall be within the judicial district or other relevant 

12 jurisdiction in which the non-United States insurer 

13 has 1 or more offices. 

14 (2) MULTIPLE JURISDICTIONS.—If a national 

15 insurer has offices in more than 1 jurisdiction, the 

16 venue of a proceeding under this section— 

17 (A) shall be in the jurisdiction within 

18 which the office or offices involved in the pro19 ceeding are located; and 

20 (B) if there is more than 1 jurisdiction 

21 under subparagraph (A), shall be proper in any 

22 such jurisdiction in which the proceeding is 

23 brought or to which it may appropriately be 

24 transferred. 

25 (d) SERVICE OF PROCESS.— 


rwilkins on PROD1PC63 with BILLS
117 

•S 40 IS

1 (1) IN GENERAL.—Any service required or au2 thorized to be made on a non-United States insurer 

3 may be made on any office located within any State. 

4 (2) EXCEPTION.—If any service of process 

5 under paragraph (1) is in connection with an action 

6 or proceeding involving 1 or more offices located in 

7 any State, service shall be made on at least 1 office 

8 so involved. 

9 SEC. 1153. COOPERATION BETWEEN COMMISSIONER AND 

10 STATE COMMISSIONERS. 

11 (a) NOTICE TO STATE COMMISSIONERS.—The Com12 missioner shall notify the State commissioner in each 

13 State in which a national insurer or national agency is 

14 doing business not later than 30 days after the date of 

15 taking any of the following actions: 

16 (1) Revocation, suspension, or restriction of the 

17 authority of the national insurer or national agency 

18 to transact insurance. 

19 (2) The entry of a formal order that the na20 tional insurer restrict its premium writing, obtain 

21 additional contributions to surplus, reinsure all or 

22 any part of its business, or increase capital, surplus, 

23 or any other account for the security of policyholders 

24 or creditors. 


rwilkins on PROD1PC63 with BILLS
118 

•S 40 IS

1 (3) The placement of a national insurer into re2 ceivership. 

3 Subtitle D—Insurance Fraud 

4 SEC. 1161. INVESTIGATION OF INSURANCE FRAUD. 

5 (a) INVESTIGATIVE AUTHORITY OF COMMIS6 SIONER.—The Commissioner may investigate suspected 

7 fraudulent insurance acts by insurance persons engaged 

8 in the business of insurance or by other persons. 

9 (b) FRAUD WARNING REQUIRED.—The Commis10 sioner, by regulation, shall require each national insurer 

11 to place a fraud warning on claim forms and applications 

12 for policies of insurance written, or to be written, by a 

13 national insurer, regardless of the form of transmission. 

14 (c) MANDATORY REPORTING OF FRAUDULENT IN15 SURANCE ACTS.—A national insurer, or an insurance per16 son engaged in the business of insurance, that knows or 

17 reasonably believes that a fraudulent insurance act is 

18 being, will be, or has been committed, shall submit such 

19 information to the Commissioner in a form and manner 

20 prescribed by the Commissioner. 

21 (d) IMMUNITY FROM LIABILITY.— 

22 (1) IN GENERAL.—Except as provided under 

23 paragraphs (2) and (3), any person who furnishes 

24 information concerning suspected, anticipated, or 

25 completed fraudulent insurance acts shall not be liaVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00118 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
119 

•S 40 IS

1 ble to any person under any law or regulation of the 

2 United States, any constitution, law, or regulation of 

3 any State or political subdivision of any State, or 

4 under any contract or other legally enforceable 

5 agreement (including any arbitration agreement), for 

6 such act, if the information is provided to or re7 ceived from— 

8 (A) the Commissioner or any employee, 

9 agent, or representative of the Commissioner; 

10 (B) Federal, State, or local enforcement or 

11 regulatory officials or their employees, agents, 

12 or representatives; 

13 (C) a self-regulatory organization or its 

14 employees, agents, or representatives; 

15 (D) a person involved in the prevention 

16 and detection of fraudulent insurance acts or 

17 that person’s agents, employees, or representa18 tives; or 

19 (E) the NAIC or its employees, agents, or 

20 representatives. 

21 (2) MALICE.— 

22 (A) IN GENERAL.—Paragraph (1) shall not 

23 apply to false statements made with actual mal24 ice. 


rwilkins on PROD1PC63 with BILLS
120 

•S 40 IS

1 (B) CONTENTS OF COMPLAINT.—In an ac2 tion brought against a person for filing a report 

3 or furnishing other information concerning a 

4 fraudulent insurance act, the party bringing the 

5 action shall plead specifically any allegation 

6 that paragraph (1) does not apply because the 

7 person filed the report or furnished the infor8 mation with actual malice. 

9 (3) PRESERVATION OF PRIVILEGE AND IMMUNI10 TIES.—This subsection does not abrogate or modify 

11 common law or statutory privileges or immunities 

12 enjoyed by a person described in paragraph (1). 

13 (e) CONFIDENTIALITY REGULATIONS.—The Commis14 sioner shall, by regulation, establish standards for the pro15 tection of confidential information submitted or obtained 

16 in an investigation of a suspected or actual fraudulent in17 surance act, the ability of the Commissioner to testify in 

18 private civil actions concerning any such confidential in19 formation and the sharing by the Commissioner of any 

20 such confidential information with other regulators, self21 regulatory organizations, and other persons. 

22 SEC. 1162. PENALTIES. 

23 If a person committing an offense under subsection 

24 (a) or (c) of section 1033 of title 18, United States Code, 

25 is a national insurer, a national agency, or other federally 


rwilkins on PROD1PC63 with BILLS
121 

•S 40 IS

1 licensed insurance producer, or an insurer-affiliated party, 

2 the Commissioner may, in addition to the punishment set 

3 forth in section 1034 of title 18, United States Code— 

4 (1) revoke, suspend, or restrict the Federal li5 cense of such national insurer, national agency, or 

6 other federally licensed insurance producer, or in7 surer-affiliated party pursuant to subtitle C; and 

8 (2) order such national insurer, national agen9 cy, or other federally licensed insurance producer, or 

10 insurer-affiliated party to make restitution to per11 sons aggrieved by such offenses. 

12 SEC. 1163. CIVIL REMEDY. 

13 (a) RECOVERY AUTHORIZED.—Any national insurer, 

14 national agency, or federally licensed insurance producer 

15 that is injured by reason of a fraudulent insurance act 

16 may recover from the person committing the act— 

17 (1) return of any profit, benefit, compensation, 

18 or payment received by the person committing the 

19 act; 

20 (2) reasonable attorney fees, related legal ex21 penses, including internal legal expenses and court 

22 costs; and 

23 (3) all other economic damages directly result24 ing from the act. 

25 (b) LIMITATIONS.—No action under this section— 


rwilkins on PROD1PC63 with BILLS
122 

•S 40 IS

1 (1) may be certified as a class action or made 

2 part of a class action; and 

3 (2) may be maintained under this section if a 

4 court has ordered restitution to the injured national 

5 insurer, national agency, or federally licensed insur6 ance producer upon criminal conviction of the person 

7 committing the fraudulent insurance act. 

8 (c) SOLE PRIVATE REMEDY.—The remedy provided 

9 under this section shall be the only private remedy for 

10 commission of a fraudulent insurance act, and no addi11 tional remedies shall be implied, nor shall the remedy pro12 vided under this section be used in conjunction with or 

13 in addition to any other remedies available at law or in 

14 equity to duplicate recovery for the same element of eco15 nomic damage. 

16 TITLE II—NATIONAL INSURANCE 

17 COMPANIES AND NATIONAL 

18 INSURANCE AGENCIES 

19 Subtitle A—Organization, 

20 Licensing, and Operations 

21 SEC. 1201. ORGANIZATION, OPERATION, AND REGULATION 

22 OF NATIONAL INSURANCE COMPANIES AND 

23 NATIONAL INSURANCE AGENCIES. 

24 (a) AUTHORIZATION.— 


rwilkins on PROD1PC63 with BILLS
123 

•S 40 IS

1 (1) IN GENERAL.—The Commissioner may, in 

2 accordance with the provisions of this Act, and 

3 under regulations prescribed by the Commissioner 

4 pursuant to paragraph (2)— 

5 (A) provide for the organization, incorpora6 tion, operation, and regulation of national in7 surance companies and national insurance 

8 agencies; and 

9 (B) issue charters therefor. 

10 (2) RULEMAKING.—The Commissioner shall 

11 issue regulations that permit the organization of na12 tional insurers in stock, mutual, reciprocal, or fra13 ternal form, and address such other matters related 

14 to the chartering and licensing of national insurers 

15 and national agencies, as the Commissioner deter16 mines appropriate. 

17 (3) ORGANIZATION.—The Commissioner shall 

18 require each national agency to be organized as a 

19 corporation, partnership, limited liability company, 

20 or in such other form as is recognized under State 

21 law. 

22 (b) CHARTERING CRITERIA.— 

23 (1) FACTORS.—In determining whether to issue 

24 a charter for a national insurer or national agency, 

25 the Commissioner shall consider— 


rwilkins on PROD1PC63 with BILLS
124 

•S 40 IS

1 (A) the character and competency of the 

2 parties seeking the charter; and 

3 (B) the financial resources and future 

4 prospects of the proposed national insurer or 

5 proposed national agency. 

6 (2) INFORMATION.—The Commissioner shall re7 quest such information from the applicant as the 

8 Commissioner determines necessary to make the 

9 evaluation required under paragraph (1). 

10 (3) CORPORATE NAME.— 

11 (A) NATIONAL INSURERS.—The corporate 

12 name of each national insurer shall include at 

13 the end the words ‘‘national insurer’’ or the ini14 tials ‘‘N.I.’’. 

15 (B) NATIONAL AGENCIES.—The corporate 

16 name of each national agency shall include at 

17 the end the words ‘‘National Insurance Agency’’ 

18 or the initials ‘‘N.I.A.’’. 

19 (C) SAVINGS PROVISION.—Nothing in this 

20 Act shall preclude a State insurer or State in21 surance agency from using the word ‘‘national’’ 

22 or ‘‘Federal’’ in its corporate name if such word 

23 was included in the corporate name of the State 

24 insurer or agency on or before the date of en25 actment of this Act. 


rwilkins on PROD1PC63 with BILLS
125 

•S 40 IS

1 (c) ISSUANCE OR DENIAL OF CHARTER.— 

2 (1) DETERMINATION.—Not later than 60 days 

3 after the receipt of the articles of incorporation or 

4 other organization document from a proposed na5 tional insurer or national agency, and such other in6 formation required under subsection (b)(2), the 

7 Commissioner shall— 

8 (A) issue a charter certificate to the appli9 cant; or 

10 (B) provide the applicant with a written 

11 explanation of the grounds for denying a char12 ter. 

13 (2) FEDERAL PRODUCER LICENSE.—If the 

14 Commissioner issues a charter certificate to a na15 tional agency, the Commissioner shall concurrently 

16 issue a Federal producer license to the applicant 

17 pursuant to section 1301. A national agency may 

18 not sell, solicit, or negotiate any line of insurance for 

19 which it does not hold a Federal producer license. 

20 (3) GROUNDS FOR DENIAL.—The Commissioner 

21 shall not grant a charter to an applicant if— 

22 (A) the applicant fails to— 

23 (i) comply with all applicable forma24 tion requirements; and 


rwilkins on PROD1PC63 with BILLS
126 

•S 40 IS

1 (ii) provide any information requested 

2 by the Commissioner under subsection 

3 (b)(2); 

4 (B) the applicant lacks— 

5 (i) the financial resources necessary to 

6 comply with the standards under this Act; 

7 or 

8 (ii) the character or competence to op9 erate the national insurer or national agen10 cy in accordance with the standards under 

11 this Act; or 

12 (C) the Commissioner determines that the 

13 national insurer or national agency is being 

14 formed for an illegitimate purpose. 

15 (d) AMENDMENT OF CHARTER.—The Commissioner 

16 may, under such regulations as the Commissioner may 

17 prescribe, provide for the amendment of charters issued 

18 to national insurers and national agencies. 

19 (e) NO DELEGATION PERMITTED.—The Commis20 sioner may not delegate to any insurance self-regulatory 

21 organization any authority conferred under this section 

22 with respect to— 

23 (1) the organization, incorporation, and powers 

24 of national insurers or national agencies; or 


rwilkins on PROD1PC63 with BILLS
127 

•S 40 IS

1 (2) the issuance and amendment of charters to 

2 a national insurer or national agency. 

3 (f) MAIN OFFICE.— 

4 (1) DESIGNATION.—Subject to the approval of 

5 the Commissioner, a national insurer or national 

6 agency may designate any office at which it conducts 

7 insurance operations as its main office. 

8 (2) CHARTER TO SPECIFY MAIN OFFICE.—The 

9 charter of a national insurer or national agency shall 

10 specify the State in which its main office is located. 

11 (3) CHANGE IN MAIN OFFICE.—With the ap12 proval of the Commissioner, a national insurer or 

13 national agency may change the designation of its 

14 main office, including to another existing office of 

15 the national insurer or national agency. 

16 (4) CITIZENSHIP.—For purposes of jurisdiction, 

17 a national insurer or national agency shall be 

18 deemed a citizen of the State in which its main of19 fice is located and of the State in which it has its 

20 principal place of business. 

21 (g) INSURER IN FRATERNAL FORM.—Any charter 

22 granted to a national insurer in fraternal form in connec23 tion with a conversion from a State insurer shall include 

24 provisions that allow the national insurer to operate as 


rwilkins on PROD1PC63 with BILLS
128 

•S 40 IS

1 an insurer in fraternal form in a manner consistent with 

2 the requirements of its former State charter. 

3 SEC. 1202. UNITED STATES BRANCHES OF NON-UNITED 

4 STATES INSURERS. 

5 (a) AUTHORIZATION OF NON-UNITED STATES IN6 SURER.—A non-United States insurer may transact insur7 ance in the United States through a United States branch 

8 by qualifying and licensing the United States branch to 

9 do business as a national insurer under this Act, under 

10 such regulations as the Commissioner may prescribe. 

11 (b) TRUST ACCOUNT.— 

12 (1) IN GENERAL.—The Commissioner shall not 

13 license a United States branch until the non-United 

14 States insurer establishes a trust account, pursuant 

15 to a deed of trust that meets the requirements of 

16 this subsection. 

17 (2) ASSETS.—The trusteed assets of a United 

18 States branch shall be held pursuant to a deed of 

19 trust with a United States bank that meets such re20 quirements as the Commissioner may prescribe, in 

21 trust for the exclusive benefit, security, and protec22 tion of the policyholders, or policyholders and credi23 tors, of the United States branch in the United 

24 States maintained as long as there is outstanding 


rwilkins on PROD1PC63 with BILLS
129 

•S 40 IS

1 any liability of the United States branch arising out 

2 of its insurance transactions in the United States. 

3 (3) SURPLUS.—The trusteed surplus of a 

4 United States branch shall be subject to the same 

5 solvency standards required of national insurers, in6 cluding the risk-based capital standards described in 

7 section 1212(a)(4). 

8 (4) FILING.—The Commissioner may require a 

9 United States branch to file a statement, in such 

10 form as the Commissioner may prescribe, that has 

11 been certified by the trustee. 

12 (c) SUBJECT TO APPLICABLE LAWS.—Except as oth13 erwise provided under this section, a United States branch 

14 established under this section— 

15 (1) shall be subject to all laws applicable to a 

16 national insurer; and 

17 (2) shall be treated as a national insurer for all 

18 purposes of this Act. 

19 SEC. 1203. FEDERAL LICENSING OF NATIONAL INSURERS. 

20 (a) IN GENERAL.—A national insurer may not sell, 

21 solicit, negotiate, or underwrite any line of insurance for 

22 which it does not hold a Federal license. 

23 (b) ISSUANCE OF FEDERAL LICENSES.— 


rwilkins on PROD1PC63 with BILLS
130 

•S 40 IS

1 (1) IN GENERAL.—The Commissioner shall, 

2 under such regulations as the Commissioner shall 

3 prescribe, issue Federal licenses that— 

4 (A) permit national insurers to sell, solicit, 

5 negotiate, and underwrite lines of insurance; 

6 and 

7 (B) specify the lines of insurance that each 

8 national insurer may sell, solicit, negotiate, and 

9 underwrite. 

10 (2) RULEMAKING.—The regulations prescribed 

11 by the Commissioner pursuant to paragraph (1) 

12 shall provide that— 

13 (A) a national insurer may hold a license 

14 to sell, solicit, negotiate, and underwrite prop15 erty/casualty insurance; 

16 (B) a national insurer that holds a license 

17 to sell, solicit, negotiate, and underwrite life in18 surance may also sell, solicit, negotiate, and un19 derwrite disability income insurance, long-term 

20 care insurance, annuities, and funding agree21 ments; and 

22 (C) no national insurer may obtain— 

23 (i) a Federal license to engage in the 

24 sale, solicitation, negotiation, and under25 writing of property/casualty insurance; and 


rwilkins on PROD1PC63 with BILLS
131 

•S 40 IS

1 (ii) a Federal license to engage in the 

2 sale, solicitation, negotiation, and under3 writing of life insurance, annuities, or 

4 funding agreements. 

5 (3) AUTHORITY TO LIMIT SCOPE OF INSUR6 ANCE.—Subject to paragraph (2), the regulations 

7 prescribed by the Commissioner pursuant to para8 graph (1) may provide that a national insurer that 

9 holds a license to sell, solicit, negotiate, and under10 write specified lines of insurance may not hold a li11 cense to sell, solicit, negotiate, and underwrite other 

12 specified lines of insurance. 

13 (4) TITLE INSURANCE.—The Commissioner 

14 shall not license any person to engage in the busi15 ness of title insurance, except that nothing in this 

16 Act shall prevent a provider of title insurance from 

17 being affiliated with a national insurer or national 

18 agency. 

19 (5) DURATION.—A Federal license issued by 

20 the Commissioner pursuant to this subsection shall 

21 remain in effect until the license is— 

22 (A) surrendered by the national insurer; or 

23 (B) revoked or suspended by the Commis24 sioner in accordance with the provisions of this 

25 Act. 


rwilkins on PROD1PC63 with BILLS
132 

•S 40 IS

1 (c) REINSURANCE.—A national insurer may— 

2 (1) only reinsure the lines of insurance that the 

3 national insurer is— 

4 (A) licensed to sell, solicit, negotiate, and 

5 underwrite under its Federal license; or 

6 (B) otherwise permitted to reinsure by the 

7 terms of its Federal license; and 

8 (2) confine its business to reinsurance. 

9 (d) NONDISCRIMINATION.— 

10 (1) IN GENERAL.—Except as provided in para11 graph (2) and section 1202, the Commissioner may 

12 not impose any condition for the granting of a Fed13 eral license to a national insurer under this section 

14 solely because the national insurer is— 

15 (A) a subsidiary of a non-United States 

16 person; 

17 (B) partially owned by a non-United States 

18 person; or 

19 (C) a United States branch of a non20 United States insurer. 

21 (2) EXCEPTION.—Notwithstanding paragraph 

22 (1), the Commissioner may impose conditions for the 

23 granting of a Federal license that are different from 

24 those imposed on other national insurers— 


rwilkins on PROD1PC63 with BILLS
133 

•S 40 IS

1 (A) if the conditions attached are imposed 

2 on the legal form in which the national insurer 

3 chooses to operate; or 

4 (B) if the Commissioner makes a written 

5 finding that the conditions are related to the 

6 protection of policyholders and are the min7 imum conditions necessary to achieve the pur8 poses of this Act. 

9 SEC. 1204. CORPORATE GOVERNANCE. 

10 (a) COMPLIANCE WITH THIS ACT AND APPLICABLE

11 REGULATIONS.—The corporate governance procedures of 

12 a national insurer and a national agency shall be con13 sistent with the provisions of this Act and all regulations 

14 issued by the Commissioner under this Act. 

15 (b) ADHERENCE TO STATE LAW.— 

16 (1) IN GENERAL.—Except as provided under 

17 paragraph (3), and to the extent not inconsistent 

18 with the provisions of this Act or regulations issued 

19 by the Commissioner under this Act, each national 

20 insurer and national agency shall adhere to cor21 porate governance procedures of the relevant State 

22 law of the State in which its main office is located 

23 or the State in which 1 of its United States holding 

24 companies is organized or incorporated. 


rwilkins on PROD1PC63 with BILLS
134 

•S 40 IS

1 (2) DESIGNATION.—Each national insurer and 

2 national agency shall designate in its bylaws the 

3 body of relevant State law selected for its corporate 

4 governance procedures. 

5 (3) DISCRIMINATORY PROVISION.—If the Com6 missioner determines that any provision of a State 

7 corporate governance law is discriminatory as ap8 plied to national insurers or national agencies, such 

9 insurer or agency— 

10 (A) shall not be obligated to follow such a 

11 provision of the relevant State law; and 

12 (B) may follow such other provision of law 

13 as the Commissioner determines to be appro14 priate. 

15 (c) INDEPENDENT AUDIT COMMITTEE FOR NA16 TIONAL INSURERS.— 

17 (1) ESTABLISHMENT.—Each national insurer 

18 shall establish an audit committee of its board of di19 rectors, which shall be composed entirely of outside 

20 directors who are independent of management of the 

21 national insurer. 

22 (2) SATISFACTION.—The requirement described 

23 in paragraph (1) will be satisfied if— 

24 (A) any person that controls the national 

25 insurer has established an audit committee of 


rwilkins on PROD1PC63 with BILLS
135 

•S 40 IS

1 its board of directors entirely composed of out2 side directors who are independent of manage3 ment of such controlling person; and 

4 (B) the role of the audit committee of the 

5 controlling person in subparagraph (A) includes 

6 review of financial statements of the national 

7 insurer. 

8 SEC. 1205. PARTICIPATING POLICY PROCEDURES. 

9 (a) CHOICE OF PROCEDURES.—A national life in10 surer in mutual form shall, at the time of its initial char11 tering and licensing under sections 1201 and 1203, or its 

12 conversion under section 1206, elect to either— 

13 (1) adhere to participating policy procedures of 

14 the relevant law of the State in which its main office 

15 is located; or 

16 (2) adhere to the participating policy proce17 dures established by regulation of the Commissioner 

18 under subsection (b). 

19 (b) REGULATIONS.—The Commissioner shall, by reg20 ulation, establish participating policy procedures, as the 

21 Commissioner determines to be appropriate to carry out 

22 this Act. 

23 (c) EXCEPTION.—No national life insurer in mutual 

24 form shall be subject to any limitation on the amount of 

25 surplus that it may retain. 


rwilkins on PROD1PC63 with BILLS
136 

•S 40 IS

1 SEC. 1206. CONVERSION OF STATE INSURER TO NATIONAL 

2 INSURER OR STATE INSURANCE AGENCY TO 

3 NATIONAL AGENCY. 

4 (a) AUTHORIZATION TO CONVERT.— 

5 (1) IN GENERAL.—Notwithstanding any other 

6 provision of law and subject to the approval of the 

7 Commissioner, a State insurer may convert to a na8 tional insurer and a State insurance agency may 

9 convert to a national agency. 

10 (2) ORGANIZATIONAL FORM.—A State insurer 

11 that converts to a national insurer under paragraph 

12 (1) may— 

13 (A) retain an organizational form per14 mitted under section 1201(a)(2); or 

15 (B) change directly to another organiza16 tional form that is permitted under section 

17 1201(a)(2). 

18 (b) CONVERSION PROCEDURES.— 

19 (1) IN GENERAL.—The Commissioner may, 

20 under such regulations as the Commissioner may 

21 prescribe, provide for— 

22 (A) the conversion of State insurers into 

23 national insurers; 

24 (B) the conversion of State insurance 

25 agencies to national agencies; and 


rwilkins on PROD1PC63 with BILLS
137 

•S 40 IS

1 (C) the issuance of charters to such con2 verted insurers and agencies. 

3 (2) RULEMAKING.—Regulations issued by the 

4 Commissioner under this section shall be consistent 

5 with— 

6 (A) the regulations issued by the Commis7 sioner under section 1201; and 

8 (B) the provisions of section 1242 or 1243, 

9 as applicable, in the case of a change of form 

10 effected at the time of a conversion of a State 

11 insurer into a national insurer. 

12 (c) EFFECT OF CONVERSION.— 

13 (1) IN GENERAL.—Except as provided under 

14 paragraph (2), a State insurer or State insurance 

15 agency that converts under this section— 

16 (A) shall be subject to the provisions of 

17 this Act and to examination and regulation as 

18 provided under this Act to the same extent as 

19 other national insurers and national agencies 

20 organized under this Act; 

21 (B) shall be deemed to be a continuation 

22 of the corporate existence of the State insurer 

23 or State insurance agency, as applicable; and 

24 (C) shall, by operation of law and without 

25 further action, hold and be subject to all rights, 


rwilkins on PROD1PC63 with BILLS
138 

•S 40 IS

1 privileges, liabilities, property interests, and 

2 other interests and obligations that the State 

3 insurer or State insurance agency held, or was 

4 subject to, immediately before the conversion. 

5 (2) EXCEPTIONS.—Notwithstanding paragraph 

6 (1), a State insurer or State insurance agency that 

7 converts under this section— 

8 (A) shall not be subject to any requirement 

9 to maintain deposits with State insurance regu10 latory authorities; 

11 (B) shall not hold any State license to sell, 

12 solicit, negotiate, and underwrite insurance that 

13 was held by the State insurer or State insur14 ance agency; and 

15 (C) shall obtain, in accordance with section 

16 1203 or 1301, as applicable, a Federal license 

17 for all lines of insurance that it sells, solicits, 

18 negotiates, or underwrites. 

19 (d) SPECIAL AUTHORITY.—The Commissioner may, 

20 subject to such conditions as the Commissioner may pre21 scribe by regulation, permit a national insurer or national 

22 agency resulting from the conversion of a State insurer 

23 or State insurance agency, as applicable, to retain, hold, 

24 or exercise assets, liabilities, powers, and authorities that 

25 do not conform to the legal requirements otherwise appliVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00138 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
139 

•S 40 IS

1 cable to national insurers or national agencies to the ex2 tent the Commissioner determines is appropriate. 

3 (e) MUTUAL HOLDING COMPANY CONTROLLING

4 STATE INSURERS IN STOCK FORM.— 

5 (1) IN GENERAL.—If a State insurer converting 

6 under this section is an insurer in stock form that 

7 is controlled by a mutual holding company as a re8 sult of a previous conversion under State law from 

9 an insurer in mutual form to an insurer in stock 

10 form, and, after the conversion under this section, 

11 the mutual holding company would not control any 

12 other State insurers having policies in force that give 

13 rise to membership in the mutual holding company, 

14 then, notwithstanding any other provision of law, in 

15 accordance with this section and regulations issued 

16 by the Commissioner— 

17 (A) upon the conversion under this section, 

18 the mutual holding company may remain a cor19 poration organized under the law of the State 

20 under which it was incorporated or may merge 

21 into a mutual holding company incorporated 

22 under the law of another State; and 

23 (B) upon and after the conversion under 

24 this section, the mutual holding company— 


rwilkins on PROD1PC63 with BILLS
140 

•S 40 IS

1 (i) shall, to the extent provided in reg2 ulations issued by the Commissioner, be 

3 subject to— 

4 (I) title V; and 

5 (II) examination, reporting, regu6 lation, and other supervision under 

7 this Act; and 

8 (ii) shall not be subject to any form of 

9 licensing, examination, reporting, regula10 tion, or other supervision by reason of 

11 being a mutual holding company or relat12 ing to the rights of members, the sale, so13 licitation, negotiation, or underwriting of 

14 insurance (including all products of na15 tional insurers) or any other insurance op16 erations except as authorized under Fed17 eral law and except as provided in section 

18 1125(b), as if the mutual holding company 

19 were a national insurer under this Act. 

20 (2) CONVERSION TO A CORPORATION IN STOCK

21 FORM.—Notwithstanding any other provision of law 

22 and in accordance with this subsection and regula23 tions issued by the Commissioner, a mutual holding 

24 company described in paragraph (1) may convert to 

25 a corporation in stock form in a manner that— 


rwilkins on PROD1PC63 with BILLS
141 

•S 40 IS

1 (A) is found by the Commissioner to be 

2 fair and equitable to the mutual holding com3 pany and its members; and 

4 (B) is generally similar to conversion of an 

5 insurer in mutual form to a national insurer in 

6 stock form pursuant to section 1243. 

7 (f) NO DELEGATION PERMITTED.—The Commis8 sioner may not delegate any authority under this section 

9 involving the conversion of a State insurer into a national 

10 insurer or a State insurance agency into a national agency 

11 to any insurance self-regulatory organization. 

12 SEC. 1207. CONVERSION OF NATIONAL INSURER TO STATE 

13 INSURER OR NATIONAL AGENCY TO STATE 

14 AGENCY. 

15 (a) IN GENERAL.—Subject to such notification proce16 dures as the Commissioner may prescribe by regulation, 

17 a national insurer may convert into a State insurer and 

18 a national agency may convert into a State insurance 

19 agency, in accordance with applicable State law. 

20 (b) SAVINGS PROVISION.—Nothing in this section or 

21 in the conversion of a national insurer into a State insurer 

22 or a national agency into a State insurance Agency shall 

23 operate to abrogate any rights, privileges, liabilities, prop24 erty interests, or other interests or obligations that a naVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00141 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
142 

•S 40 IS

1 tional insurer or national agency held or was subject to 

2 immediately before the conversion. 

3 SEC. 1208. POWERS. 

4 (a) IN GENERAL.—Upon issuance of its charter, a 

5 national insurer or national agency shall have the power, 

6 subject to such regulations as the Commissioner may pre7 scribe— 

8 (1) to have, alter, use, and reproduce a cor9 porate seal, or a facsimile of it; 

10 (2) to have perpetual succession until such time 

11 as it is liquidated, dissolved, merged, or otherwise 

12 wound up in accordance with applicable law; 

13 (3) to adopt, amend, and repeal by-laws; 

14 (4) to sue or be sued, complain and defend, and 

15 otherwise litigate in any court and participate, as a 

16 party or otherwise, in any judicial, administrative, 

17 arbitral, or other proceeding, in its corporate name; 

18 (5) to make contracts and guarantees, incur li19 abilities, borrow money, issue notes, bonds, and 

20 other obligations (which may be convertible into or 

21 include the option to purchase other securities of the 

22 national insurer or national agency), and secure any 

23 of its obligations by mortgage or pledge of any of its 

24 property, franchises, or income; 


rwilkins on PROD1PC63 with BILLS
143 

•S 40 IS

1 (6) to purchase, receive, subscribe for, or other2 wise acquire, own, hold, vote, improve, employ, use, 

3 and otherwise deal in and with real and personal 

4 property or other assets, or any interest therein, and 

5 sell, convey, mortgage, lease, exchange, transfer, or 

6 otherwise dispose of, or mortgage or pledge, all or 

7 any of its property and assets, or any interest there8 in; 

9 (7) to lend money, invest, and reinvest its funds 

10 and receive and hold real and personal property as 

11 security for repayment; 

12 (8) to participate with others in any corpora13 tion, partnership, limited partnership, joint venture, 

14 or other association, or in any transaction, under15 taking, or arrangement, which the national insurer 

16 or national agency would have power to conduct by 

17 itself, whether or not such participation involves 

18 sharing or delegating control with or to others; 

19 (9) to elect or appoint directors, officers, em20 ployees, and agents of the national insurer or na21 tional agency, define their duties, fix their com22 pensation, and lend them money and credit; 

23 (10) to pay pensions and establish pension 

24 plans, pension trusts, profit-sharing plans, share 

25 bonus plans, share option plans, and other benefit or 


rwilkins on PROD1PC63 with BILLS
144 

•S 40 IS

1 incentive plans for any or all current or former di2 rectors, officers, employees, and agents of the na3 tional insurer or national agency, its subsidiaries or 

4 its affiliates; 

5 (11) to provide insurance for its benefit on the 

6 life of any of its directors, officers, or employees, or 

7 on the life of any shareholder for the purpose of ac8 quiring, at the death of such shareholder, shares of 

9 its stock owned by such shareholder; 

10 (12) in the case of a national life insurer— 

11 (A) to establish and maintain 1 or more 

12 separate accounts and allocate amounts to such 

13 accounts (including any proceeds applied under 

14 optional modes of settlement or under dividend 

15 options) to provide for life insurance, annuities, 

16 disability income insurance, long-term care in17 surance, or funding agreements (and incidental 

18 benefits), payable in fixed or variable amounts 

19 (or both) from such accounts or from the gen20 eral account (or both); 

21 (B) to hold and accumulate funds pursu22 ant to funding agreements; and 

23 (C) to provide investment advice and in24 vestment management services; 

25 (13) in the case of a national insurer— 


rwilkins on PROD1PC63 with BILLS
145 

•S 40 IS

1 (A) to engage in the sale, solicitation, ne2 gotiation, and underwriting of insurance; 

3 (B) to establish and maintain 1 or more 

4 protected cells in connection with an insurance 

5 securitization and attribute to such cells insur6 ance and reinsurance obligations with respect to 

7 its general account, obligations relating to the 

8 insurance securitization, and assets to fund 

9 such obligations; and 

10 (C) to engage in all other insurance oper11 ations and exercise all such incidental powers as 

12 shall be necessary to carry on insurance oper13 ations; 

14 (14) in the case of a national agency— 

15 (A) to engage in the sale, solicitation, and 

16 negotiation of— 

17 (i) policies of insurance issued by any 

18 national insurer or State insurer; and 

19 (ii) surplus lines insurance and non20 admitted insurance for a non-admitted in21 surer; and 

22 (B) to exercise all such incidental powers 

23 as shall be necessary to carry out such activi24 ties, including claims adjustment and settle25 ment, risk management, employee benefits adVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00145 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
146 

•S 40 IS

1 vice, retirement planning, and any other insur2 ance-related consulting activities; 

3 (15) to provide benefits or payments to its di4 rectors, officers, and employees, subsidiaries or af5 filiates, and to their estates, families, dependents, or 

6 beneficiaries, in recognition of the past services of 

7 the directors, officers, and employees to the national 

8 insurer or national agency or its subsidiaries or af9 filiates; 

10 (16) to make donations and otherwise devote its 

11 resources for the public welfare or for charitable, sci12 entific, educational, humanitarian, philanthropic, or 

13 religious purposes; 

14 (17) to serve as a promoter, partner, member, 

15 associate, or manager of any business entity; 

16 (18) to provide loss control, advice, exposure 

17 identification, and reduction strategies, and rec18 ommend and expedite risk financing alternatives; 

19 (19) to engage in any other lawful activity that 

20 is necessary or convenient to further its activities 

21 and affairs; and 

22 (20) to exercise the powers granted by this Act 

23 in any State and in any foreign jurisdiction. 

24 (b) EFFECT ON STATE LAW.—No State may, by stat25 ute, regulation, order, interpretation, or otherwise, prevent 


rwilkins on PROD1PC63 with BILLS
147 

•S 40 IS

1 or restrict a national insurer or national agency from exer2 cising any power conferred by this section or by any regu3 lation authorized by this section. 

4 (c) SUBSIDIARIES.— 

5 (1) NATIONAL INSURERS.— 

6 (A) AUTHORIZATION.— 

7 (i) IN GENERAL.—A national insurer 

8 may establish, invest in, or otherwise ac9 quire 1 or more subsidiaries engaged or or10 ganized to engage in any business lawful 

11 under the laws of the jurisdictions in which 

12 the subsidiaries are organized. 

13 (ii) RESTRICTION.—Without the prior 

14 written approval of the Commissioner, not 

15 more than 20 percent of the national in16 surer’s assets may be invested in any 1 

17 subsidiary described in clause (i) and not 

18 more than 40 percent of a national insur19 er’s assets may be invested in 2 or more 

20 subsidiaries engaged in such other activi21 ties. 

22 (B) CALCULATION.—In calculating the 

23 amount invested by a national insurer in a sub24 sidiary under subparagraph (A), there shall be 

25 included only the following: 


rwilkins on PROD1PC63 with BILLS
148 

•S 40 IS

1 (i) Total net monies or other consider2 ation expended and obligations assumed by 

3 the national insurer in the acquisition or 

4 formation of the subsidiary, including all 

5 organizational expenses and contributions 

6 to capital and surplus of the subsidiary 

7 whether or not represented by the pur8 chase of capital stock or issuance of other 

9 securities. 

10 (ii) All amounts expended by the na11 tional insurer in acquiring additional com12 mon stock, preferred stock, debt obliga13 tions, and other securities of the sub14 sidiary. 

15 (iii) All contributions by the national 

16 insurer to the capital or surplus of the sub17 sidiary subsequent to its acquisition or for18 mation. 

19 (C) QUALIFICATION OF INVESTMENT; 

20 WHEN DETERMINED.—Whether any investment 

21 made pursuant to subparagraph (A) meets the 

22 applicable requirements of such subparagraph 

23 shall be determined before the investment is 

24 made by calculating the applicable investment 

25 limitations as though the investment had alVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00148 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
149 

•S 40 IS

1 ready been made, taking into account the then 

2 outstanding principal balance on all previous in3 vestments in debt obligations, and the value of 

4 all previous investments in equity securities as 

5 of the day they were made, net of any return 

6 of capital invested, not including dividends. 

7 (D) EXCEPTION.—The limitations provided 

8 for in subparagraph (A) shall not apply to in9 vestments by a national insurer in— 

10 (i) any subsidiary engaged primarily 

11 in the sale, solicitation, negotiation, and 

12 underwriting of any line of insurance that 

13 the national insurer is authorized to sell, 

14 solicit, negotiate, and underwrite; or 

15 (ii) any subsidiary whose sole business 

16 function is to own assets (including other 

17 subsidiaries) that the national insurer 

18 itself is authorized to own. 

19 (E) NOTICE.—A national insurer shall no20 tify the Commissioner, in writing, not later 

21 than 20 calendar days after establishing, invest22 ing in, or acquiring a subsidiary, unless the 

23 transaction requires the prior written approval 

24 of the Commissioner under subparagraph (A). 

25 (2) NATIONAL AGENCIES.— 


rwilkins on PROD1PC63 with BILLS
150 

•S 40 IS

1 (A) AUTHORIZATION.—A national agency 

2 may establish, invest in, or otherwise acquire 1 

3 or more subsidiaries engaged or organized to 

4 engage in any business activity that is lawful 

5 for a national agency under this Act. 

6 (B) NOTICE.—A national agency shall no7 tify the Commissioner, in writing, not later 

8 than 30 calendar days after establishing, invest9 ing in, or acquiring a subsidiary. 

10 (d) DIVIDENDS AND DISTRIBUTIONS TO SHARE11 HOLDERS.— 

12 (1) SHAREHOLDER DIVIDENDS AND DISTRIBU13 TIONS PERMITTED.—A national insurer may declare 

14 and pay dividends or make other distributions in 

15 cash, bonds, or property on its outstanding shares, 

16 unless— 

17 (A) the national insurer is insolvent or 

18 would be made insolvent by such payment; or 

19 (B) the declaration, payment, or distribu20 tion would be contrary to any restrictions con21 tained in the charter of the national insurer. 

22 (2) SOURCE OF SHAREHOLDER DIVIDENDS AND

23 DISTRIBUTIONS.—A national insurer may only de24 clare and pay dividends or make other distributions 

25 out of surplus if the assets of the national insurer 


rwilkins on PROD1PC63 with BILLS
151 

•S 40 IS

1 after such declaration, payment, or distribution is 

2 not less than the amount of its capital. 

3 (3) OTHER PROVISIONS.—Shareholder divi4 dends and distributions made pursuant to this sub5 section shall be subject to— 

6 (A) the standards set forth in section 

7 1403(a)(1)(E); and 

8 (B) the notice requirements of section 

9 1403(b). 

10 SEC. 1209. SEPARATE ACCOUNTS OF NATIONAL LIFE IN11 SURER. 

12 (a) OWNERSHIP.—Any amount allocated by a na13 tional life insurer to a separate account shall be owned 

14 by the national life insurer, the assets therein shall be the 

15 property of the national life insurer, and no national life 

16 insurer by reason of such account shall be or hold itself 

17 out to be a trustee. 

18 (b) LIABILITIES.—Assets allocated by a national life 

19 insurer to a separate account shall not be chargeable with 

20 liabilities arising out of any other business of the national 

21 life insurer to the extent so provided in the applicable 

22 agreements. 

23 (c) SECURITY INTERESTS PERMITTED.—A national 

24 life insurer may allow for a security interest to attach to 

25 assets allocated to a separate account if the security interVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00151 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
152 

•S 40 IS

1 est is in favor of a creditor of the separate account and 

2 otherwise allowed under applicable law. 

3 SEC. 1210. PROTECTED CELLS. 

4 (a) ESTABLISHMENT.—A national insurer may, in 

5 connection with an insurance securitization, establish 1 or 

6 more protected cells with the approval of the Commis7 sioner. 

8 (b) PROTECTED CELL ASSETS.— 

9 (1) OWNERSHIP.—All amounts attributed to a 

10 protected cell established under this section, includ11 ing assets transferred to a protected cell account, 

12 shall be owned by the national insurer. 

13 (2) TRUSTEE.—The national insurer may not 

14 be, nor hold itself out to be, a trustee with respect 

15 to the protected cell assets of the protected cell ac16 count described in paragraph (1). 

17 (3) LIABILITIES.—The assets of a protected cell 

18 established under this section shall not be chargeable 

19 with liabilities arising out of any other business of 

20 the national insurer. 

21 (c) SECURITY INTERESTS PERMITTED.—A national 

22 insurer may allow for a security interest to attach to pro23 tected cell assets or a protected cell account if the security 

24 interest is in favor of a creditor of the protected cell and 

25 otherwise allowed under applicable law. 


rwilkins on PROD1PC63 with BILLS
153 

•S 40 IS

1 (d) REACH OF CREDITORS AND OTHER CLAIM2 ANTS.— 

3 (1) AVAILABILITY.—Protected cell assets shall 

4 only be available to the creditors of a national in5 surer that are creditors in respect to that protected 

6 cell. 

7 (2) RECOURSE.—Creditors with respect to a 

8 protected cell shall have no recourse against the pro9 tected cell assets of other protected cells or the gen10 eral account assets of the national insurer. 

11 (3) FRAUD.—The establishment of a protected 

12 cell shall not, in and of itself, constitute a fraudulent 

13 conveyance, an intent by a national insurer to de14 fraud creditors, or the carrying out of business by 

15 a national insurer for any other fraudulent purpose. 

16 (e) RULEMAKING.—The Commissioner shall promul17 gate regulations that establish standards for protected 

18 cells established by national insurers. 

19 (f) EFFECT ON STATE LAW.—No State may, by stat20 ute, regulation, order, interpretation, or otherwise, require 

21 licensing or otherwise regulate in any manner— 

22 (1) an investor in an insurance securitization, 

23 solely by reason of its investment, as an insurer, re24 insurer, or other person transacting insurance; or 


rwilkins on PROD1PC63 with BILLS
154 

•S 40 IS

1 (2) an underwriter or selling agent (or its part2 ners, directors, officers, members, managers, em3 ployees, agents, representatives, or advisors) in an 

4 insurance securitization as an insurance or reinsur5 ance agent, broker, producer, intermediary, advisor, 

6 consultant, or similar insurance professional by vir7 tue of its activities in connection with the insurance 

8 securitization. 

9 SEC. 1211. CHARTERING AND LICENSING COMMENCEMENT 

10 DATE. 

11 (a) NATIONAL INSURER.—The Commissioner may 

12 not charter or license a national insurer until after the 

13 following regulations have been published in final form or 

14 interim final form: 

15 (1) The fee and assessment regulations required 

16 by section 1122. 

17 (2) The reporting regulations required by sec18 tion 1124. 

19 (3) The organizational regulations required by 

20 section 1201. 

21 (4) The licensing regulations required by sec22 tion 1203. 

23 (5) The participating policy procedures regula24 tions required by section 1205. 


rwilkins on PROD1PC63 with BILLS
155 

•S 40 IS

1 (6) The charter conversion regulations required 

2 by section 1206. 

3 (7) The transitional financial regulations re4 quired by section 1212. 

5 (8) The product regulations required by section 

6 1214. 

7 (9) The market conduct regulations required by 

8 section 1216. 

9 (10) The control regulations required by section 

10 1231. 

11 (11) The merger, consolidation, and acquisition 

12 regulations required by section 1232. 

13 (12) The bulk transfer regulations required by 

14 section 1233. 

15 (13) The conversion regulations required by 

16 sections 1242 and 1243. 

17 (14) The holding company regulations required 

18 by sections 1402 and 1403. 

19 (15) The receivership regulations required by 

20 section 1504. 

21 (16) The insolvency protection regulations re22 quired by section 1609. 

23 (b) NATIONAL AGENCIES.—The Commissioner may 

24 charter or license a national agency after the following 


rwilkins on PROD1PC63 with BILLS
156 

•S 40 IS

1 regulations have been published in final form, including 

2 interim final form: 

3 (1) The fee and assessment regulations required 

4 by section 1122. 

5 (2) The reporting regulations required by sec6 tion 1124. 

7 (3) The organizational regulations required by 

8 section 1201. 

9 (4) The charter conversion regulations required 

10 by section 1206. 

11 (5) The market conduct regulations required by 

12 section 1216. 

13 (6) The merger, consolidation, and acquisition 

14 regulations required by section 1232. 

15 (7) The producer licensing regulations required 

16 by section 1301. 

17 (8) The holding company regulations required 

18 by sections 1402 and 1403. 

19 (c) TIMING AND NOTICE.— 

20 (1) TIMING.—The regulations described in sub21 sections (a) and (b) shall be published in final form 

22 or interim final form, not later than 2 years after 

23 the date of the initial appointment and confirmation 

24 of the Commissioner. 


rwilkins on PROD1PC63 with BILLS
157 

•S 40 IS

1 (2) NOTICE.—At such time as the regulations 

2 described in subsections (a) or (b) have been issued 

3 in final form or interim final form, the Commis4 sioner shall publish a notice in the Federal Register 

5 announcing that the Office is prepared to act on 

6 chartering and licensing applications. 

7 (3) CONSIDERING AND ACTING UPON APPLICA8 TIONS.—Notwithstanding any challenge to the regu9 lations described in subsections (a) and (b), the 

10 Commissioner shall have the authority to consider, 

11 and act upon, chartering and licensing applications 

12 immediately upon publication of the notice described 

13 in paragraph (2). 

14 Subtitle B—Financial, Product, and 

15 Market Regulations 

16 SEC. 1212. TRANSITIONAL FINANCIAL REGULATIONS. 

17 (a) PROMULGATION OF FINANCIAL REGULATIONS

18 THAT ARE CONSISTENT WITH NAIC STANDARDS AND

19 MODELS.—The Commissioner shall establish, by regula20 tion, the following: 

21 (1) Accounting principles for a national insurer, 

22 which are consistent with the statutory accounting 

23 practices promulgated by the NAIC in its ‘‘Account24 ing Practices and Procedures Manual’’. 


rwilkins on PROD1PC63 with BILLS
158 

•S 40 IS

1 (2) Auditing standards for a national insurer, 

2 which are consistent with the guidance prescribed by 

3 the NAIC in its ‘‘Model Regulation Requiring An4 nual Audited Financial Reports’’. 

5 (3) Investment standards for a national insurer, 

6 which are consistent with the ‘‘Investment of Insur7 ers Model Act (Defined Standards Version)’’ of the 

8 NAIC, except that such investment standards shall 

9 not be bound by the provisions of the Model Act re10 lated to authorized classes of investments, class or 

11 individual investment limitations, or prohibited in12 vestments. 

13 (4) Risk-based capital standards for a national 

14 insurer, which are consistent with the ‘‘Risk-Based 

15 Capital (RBC) for Insurers Model Act’’ and the re16 lated ‘‘RBC Instructions’’ of the NAIC and non17 disclosure rules and remedies for failing to meet 

18 such standards. 

19 (5) Valuation standards for the obligations and 

20 liabilities of a national life insurer, which are con21 sistent with the statutory valuation practices pro22 mulgated by the NAIC in its ‘‘Accounting Practices 

23 and Procedures Manual’’. 

24 (6) Continuing and alternative (nonforfeiture) 

25 benefits standards applicable to national life insurVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00158 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
159 

•S 40 IS

1 ers, which are consistent with the ‘‘Standard Non2 forfeiture Law for Life Insurance, Variable Life In3 surance Model Regulation, Standard Nonforfeiture 

4 Law for Individual Deferred Annuities, Long-Term 

5 Care Insurance Model Act, and Long-Term Care In6 surance Model Regulation’’ of the NAIC. 

7 (7) Standards for the preparation and filing of 

8 an annual actuarial opinion on the adequacy of the 

9 assets of a national life insurer to meet its reason10 ably expected obligations and liabilities, which are 

11 consistent with the ‘‘Actuarial Opinion and Memo12 randum Regulation’’ of the NAIC. 

13 (8) Standards for the preparation and filing of 

14 an annual actuarial opinion on the loss and loss ad15 justment expense reserves of a national property/cas16 ualty insurer, which are consistent with the NAIC’s 

17 ‘‘Property and Casualty Actuarial Opinion Model 

18 Law’’ and applicable ‘‘NAIC Property and Casualty 

19 Annual Statement Instructions’’. 

20 (b) NAIC STANDARDS, MODELS, PRACTICES, AND

21 INSTRUCTIONS.—The NAIC standards, models, practices, 

22 and instructions referred to in subsection (a) shall be the 

23 standards, models, practices, and instructions adopted by 

24 the NAIC as of May 24, 2007. 


rwilkins on PROD1PC63 with BILLS
160 

•S 40 IS

1 (c) EFFECTIVE DATE AND FIVE-YEAR TRANSI2 TIONAL PERIOD FOR INITIAL FINANCIAL REGULA3 TIONS.—The financial regulations specified in subsection 

4 (a) shall be issued in final form no later than 2 years fol5 lowing the initial appointment and confirmation of the 

6 Commissioner, and each regulation shall remain in effect 

7 for 5 years following the date upon which it becomes effec8 tive. 

9 (d) NAIC AMENDMENTS.—If, after May 24, 2007, 

10 the NAIC amends any standard, model, practice, or in11 struction upon which the initial financial regulations are 

12 based, the Commissioner shall determine, by regulation, 

13 whether such amendment shall apply to a national insurer. 

14 If the Commissioner determines that an NAIC amendment 

15 to a standard, model, practice, or instruction should apply 

16 to a national insurer, the Commissioner may specify, by 

17 regulation, whether the amendment applies in whole or in 

18 part. 

19 (e) REVISIONS OR MODIFICATIONS TO INITIAL FI20 NANCIAL REGULATIONS BY COMMISSIONER.— 

21 (1) IN GENERAL.—Subject to paragraph (2), 

22 after an initial financial regulation specified in sub23 section (a) has been in effect for 5 years, the Com24 missioner may, by regulation, revise or modify the 

25 regulation. 


rwilkins on PROD1PC63 with BILLS
161 

•S 40 IS

1 (2) SPECIAL CIRCUMSTANCE.—The Commis2 sioner may, by regulation, revise or modify an initial 

3 financial regulation at any time if the Commissioner 

4 determines that any such revision or modification is 

5 necessary to protect policyholders or prevent haz6 ardous conduct by a national insurer. 

7 (f) ACCOUNTING PRINCIPLES.—Notwithstanding 

8 subsections (c), (d), and (e), accounting principles for a 

9 national property/casualty insurer shall be consistent with 

10 the statutory accounting practices promulgated by the 

11 NAIC for State property/casualty insurers in its ‘‘Ac12 counting Practices and Procedures Manual’’, including 

13 any amendments thereto. 

14 SEC. 1213. OTHER FINANCIAL REGULATIONS. 

15 In addition to the financial regulations specified in 

16 section 1212, the Commissioner may issue other financial 

17 regulations as the Commissioner determines necessary. 

18 SEC. 1214. PRODUCT REGULATION FOR NATIONAL LIFE IN19 SURERS. 

20 (a) APPLICABILITY.—This section shall apply to the 

21 insurance business of national life insurers. 

22 (b) UNDERWRITING STANDARDS.—A national in23 surer may classify or underwrite risks if any decision to 

24 refuse to insure, to continue to insure, to limit the amount, 


rwilkins on PROD1PC63 with BILLS
162 

•S 40 IS

1 extent, or kind of coverage, or to charge a different rate 

2 for the same coverage is— 

3 (1) based on sound actuarial principles; or 

4 (2) related to actual or reasonably anticipated 

5 experience. 

6 (c) LAW APPLICABLE TO INSURANCE POLICIES OR

7 OTHER PRODUCTS OF NATIONAL INSURERS.— 

8 (1) LAW SPECIFIED BY PARTIES.—Subject to 

9 any applicable Federal law, the provisions of any in10 surance policy or other product of a national insurer 

11 shall be interpreted in accordance with the law of 

12 the jurisdiction specified by the parties to the insur13 ance policy or other product if the parties have spec14 ified the law of— 

15 (A) the jurisdiction in which the main of16 fice of the national insurer is located; 

17 (B) the jurisdiction in which the principal 

18 place of business of the national insurer is lo19 cated; or 

20 (C) the jurisdiction in which the insurance 

21 policy or other product is delivered. 

22 (2) DEFAULT LAW.—If the parties to an insur23 ance policy or other product of a national insurer 

24 have not specified the jurisdiction whose law shall 

25 govern the provisions of the insurance policy or 


rwilkins on PROD1PC63 with BILLS
163 

•S 40 IS

1 other product, such provisions shall be interpreted in 

2 accordance with the law of the jurisdiction in which 

3 the insurance policy or other product is delivered. 

4 (3) RULEMAKING.—The Commissioner shall es5 tablish, by regulation, choice of law rules and stand6 ards under this subsection. 

7 (d) STANDARDS FOR POLICIES.— 

8 (1) POLICY.—In this subsection, the term ‘‘pol9 icy’’— 

10 (A) means a policy, contract, certificate, or 

11 other evidence of life insurance, disability in12 come insurance, or long-term care insurance, or 

13 an annuity contract or a rider or endorsement 

14 thereto; and 

15 (B) does not include— 

16 (i) a funding agreement; 

17 (ii) a reinsurance contract; or 

18 (iii) an agreement, special rider, or 

19 endorsement relating only to the manner of 

20 distributing benefits or to the reservation 

21 of rights and benefits used at the request 

22 of the individual policyholder. 

23 (2) RULEMAKING.—The Commissioner shall es24 tablish, by regulation, standards for policies issued 

25 by a national insurer. 


rwilkins on PROD1PC63 with BILLS
164 

•S 40 IS

1 (3) TYPES OF POLICY REQUIREMENTS.—The 

2 standards established under paragraph (2) may in3 clude general policy requirements and requirements 

4 regarding particular classes of policies. 

5 (e) PRODUCT FILINGS.— 

6 (1) FORM FILING.—A national insurer shall not 

7 issue a policy until the form of the policy has been 

8 received by the Commissioner. 

9 (2) EXEMPTIONS.—The Commissioner may, by 

10 regulation, exempt particular categories of policies 

11 from the filing requirement. 

12 (3) COMPLIANCE CERTIFICATE.—In accordance 

13 with regulations promulgated by the Commissioner, 

14 any filing of a policy form shall be accompanied by 

15 written certification by an officer of the national in16 surer that the policy form complies with the stand17 ards applicable to such form. 

18 (f) INTERPRETIVE RULINGS.— 

19 (1) PROCEDURES.—The Commissioner shall es20 tablish procedures by which national insurers may 

21 obtain interpretive rulings from the Office regarding 

22 the interpretation and application of the standards 

23 established under this section. 

24 (2) PUBLIC AVAILABILITY.—Except as provided 

25 under paragraph (3), requests by national insurers 


rwilkins on PROD1PC63 with BILLS
165 

•S 40 IS

1 for interpretive rulings from the Office and the com2 plete text of such interpretive rulings shall not be 

3 made available to the public. 

4 (3) PUBLICATION OF SUMMARIES.—Notwith5 standing paragraph (2), the Commissioner shall pub6 lish a summary of each interpretive opinion, exclud7 ing the name of the national insurer and any other 

8 identifying information, either promptly after the 

9 issuance of such opinion or, upon the request of the 

10 national insurer, after such delay as the Commis11 sioner determines appropriate. 

12 (g) GROUP, BLANKET, AND FRANCHISE INSUR13 ANCE.— 

14 (1) AUTHORIZATION.—A national insurer 

15 may— 

16 (A) sell, solicit, negotiate, and underwrite 

17 group, blanket, and franchise insurance policies; 

18 and 

19 (B) extend group, blanket, or franchise in20 surance policies to insure the dependents of em21 ployees or members, or any class of employees 

22 or members. 

23 (2) RULEMAKING.—The Commissioner shall, by 

24 regulation, establish standards for kinds and qualiVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00165 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
166 

•S 40 IS

1 fications of permissible groups for group, blanket, 

2 and franchise insurance policies. 

3 (h) INSURABLE INTEREST.— 

4 (1) REGULATIONS REQUIRED.—The Commis5 sioner shall, by regulation— 

6 (A) define the term ‘‘insurable interest’’; 

7 (B) identify what persons have an insur8 ance interest in the health and bodily safety of 

9 an individual; 

10 (C) establish circumstances under which 

11 an insurance policy issued with respect to an in12 dividual, other than a group insurance policy, 

13 may be effectuated, including any insured con14 sent requirements; and 

15 (D) establish rules for insurance policy 

16 transfers and assignments, which transactions 

17 shall be permitted for insurance policies written 

18 or sold in compliance with the regulations. 

19 (2) LIMITATION ON APPLICABILITY.—The regu20 lations required by paragraph (1) shall not apply to 

21 an annuity contract or a funding agreement. 

22 (i) EFFECT OF STATE LAW.—No State may, by stat23 ute, regulation, order, interpretation, or otherwise, impose 

24 any standard, relating to any matter addressed in this secVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00166 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
167 

•S 40 IS

1 tion, on national insurers or persons who purchase insur2 ance from national insurers. 

3 SEC. 1215. PRODUCT REGULATION FOR NATIONAL PROP4 ERTY/CASUALTY INSURERS. 

5 (a) APPLICATION.—This section shall apply to the 

6 business of national property/casualty insurers. 

7 (b) MAINTENANCE OF COPIES OF POLICIES.—A na8 tional insurer shall maintain for inspection a copy of every 

9 insurance policy form that it uses to insure risks. 

10 (c) ANNUAL POLICY FORM LISTING.—A national in11 surer shall annually provide the Commissioner with a list 

12 of all standard policy forms it uses to insure risks. 

13 (d) RATES, RATING ELEMENTS, PRICE, AND

14 FORMS.—The Act does not authorize the Commissioner 

15 to require a national insurer to use any particular rate, 

16 rating element, price, or form. 

17 SEC. 1216. REGULATION OF SALES AND MARKETING. 

18 (a) PURPOSE.—The purpose of this section is to en19 sure appropriate Federal regulation of the sales and mar20 keting practices of national insurers, national agencies, 

21 and federally licensed insurance producers to prevent un22 fair methods of competition and unfair and deceptive acts 

23 and practices in the advertising, sale, issuance, distribu24 tion, and administration of insurance policies and other 


rwilkins on PROD1PC63 with BILLS
168 

•S 40 IS

1 products of national insurers, and claims under insurance, 

2 policies and other products of national insurers. 

3 (b) RULEMAKING.—The Commissioner shall promul4 gate such regulations, applicable to national insurers, na5 tional agencies, and federally licensed insurance pro6 ducers, as the Commissioner determines to be necessary 

7 to carry out the purpose of this section, including rules 

8 governing the advertising, sale, issuance, distribution, and 

9 administration of insurance policies and other products of 

10 national insurers and claims under insurance policies and 

11 other products of national insurers. 

12 SEC. 1217. PROMPT CORRECTIVE ACTION. 

13 (a) RULEMAKING.— 

14 (1) IN GENERAL.—Not later than the expira15 tion of the 6-month period beginning upon the date 

16 of submission of the report under subsection (b)(3) 

17 to the Commissioner, the Commissioner shall pro18 mulgate such regulations, applicable to national in19 surers, as the Commissioner determines appropriate 

20 and consistent with the recommendation in that re21 port to ensure that prompt corrective action is taken 

22 to resolve any hazardous financial condition of a na23 tional insurer. 

24 (2) AUTHORIZED CONTENT.—Rules required by 

25 this subsection may include such capital measures 


rwilkins on PROD1PC63 with BILLS
169 

•S 40 IS

1 and categories, capital standards, supervisory cri2 teria, restrictions on permissible actions of such in3 surers, requirements for such insurers, procedures, 

4 provisions regarding conservatorship and receiver5 ship of such insurers, and other provisions as the 

6 Commissioner considers are appropriate and con7 sistent with any recommendations in the report and 

8 the regulations issued pursuant to section 

9 1212(a)(4). 

10 (b) GAO STUDY AND REPORT.— 

11 (1) IN GENERAL.—The Comptroller General of 

12 the United States shall conduct a study to identify 

13 an appropriate structure of procedures and require14 ments for taking prompt corrective actions with re15 spect to national insurers, to ensure that any haz16 ardous financial condition of such a national insurer 

17 is resolved effectively and efficiently, with the fewest 

18 possible losses. 

19 (2) REQUIREMENTS.—In conducting the study 

20 required by this subsection, the Comptroller General 

21 shall analyze and evaluate various proposals, struc22 tures, methods, and systems for taking prompt cor23 rective actions with respect to various financial enti24 ties and institutions, including— 


rwilkins on PROD1PC63 with BILLS
170 

•S 40 IS

1 (A) the prompt corrective action require2 ments under section 38 of the Federal Deposit 

3 Insurance Act (12 U.S.C. 1831o) with respect 

4 to insured depository institutions; and 

5 (B) the ‘‘Model Regulation to Define 

6 Standards and Commissioner’s Authority for 

7 Companies Deemed to be in Hazardous Finan8 cial Condition’’ of the NAIC, as updated in 

9 2006. 

10 (3) REPORT.— 

11 (A) IN GENERAL.—Not later than the ex12 piration of the 6-month period beginning on the 

13 date of enactment of this Act, the Comptroller 

14 General shall submit a report to the Committee 

15 on Banking, Housing, and Urban Affairs of the 

16 Senate, the Committee on Financial Services of 

17 the House of Representatives, and the Commis18 sioner, regarding the study required under this 

19 subsection. 

20 (B) CONTENTS.—The report required 

21 under this paragraph shall describe the study 

22 and the results of the evaluations conducted 

23 under the study, and shall include a specific 

24 recommendation to the Commissioner for estab25 lishment of an appropriate structure of proceVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00170 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
171 

•S 40 IS

1 dures and requirements for taking prompt cor2 rective actions with respect to national insurers, 

3 to ensure that any hazardous financial condi4 tion of a national insurer is resolved effectively 

5 and efficiently with the fewest possible losses. 

6 Subtitle C—Reinsurance 

7 SEC. 1221. FEDERAL LICENSING OF REINSURERS. 

8 (a) AUTHORITY TO LICENSE.— 

9 (1) IN GENERAL.—The Commissioner may— 

10 (A) license insurers that are not National 

11 Insurers to provide reinsurance; and 

12 (B) prescribe, by regulation, the standards 

13 and procedures for granting such licenses. 

14 (2) CRITERIA.—The standards prescribed under 

15 paragraph (1)(B) shall give due consideration to— 

16 (A) the public interest in providing secure 

17 and sufficient reinsurance capacity in the 

18 United States; and 

19 (B) the need for promoting fair and effec20 tive competition. 

21 (b) DETERMINATION AND FINDING; ISSUANCE OF LI22 CENSE.— 

23 (1) EXAMINATION AND INVESTIGATION.—Upon 

24 the receipt of an application for a license under this 

25 section, the Commissioner shall examine the inforVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00171 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
172 

•S 40 IS

1 mation submitted by the applicant and may conduct 

2 further examinations and investigations, as nec3 essary, to determine whether the applicant satisfies 

4 the standards for a license under this section. 

5 (2) PUBLICATION OF FINDINGS.—The Commis6 sioner shall publish the Commissioner’s findings and 

7 determination under paragraph (1). 

8 (3) ISSUANCE OF FEDERAL LICENSE.— 

9 (A) IN GENERAL.—Except as provided in 

10 subparagraph (B), if the Commissioner deter11 mines that the applicant has satisfied the appli12 cable requirements of this section, the Commis13 sioner shall issue a Federal license to provide 

14 reinsurance. 

15 (B) RESTRICTION.—The Commissioner 

16 shall not issue a Federal license for reinsurance 

17 until after the Commissioner is authorized to 

18 charter and license a National Insurer pursuant 

19 to section 1211. 

20 (c) MINIMUM STANDARDS FOR LICENSING OF NON21 UNITED STATES INSURERS.—The Commissioner shall not 

22 issue a license under this section to any insurer that is 

23 not a State insurer or a United States branch of a non24 United States insurer unless the insurer agrees to— 


rwilkins on PROD1PC63 with BILLS
173 

•S 40 IS

1 (1) report its financial statements to the Com2 missioner on a basis that the Commissioner deter3 mines to be substantially similar to that required of 

4 National Insurers under section 1124; 

5 (2) submit to the jurisdiction of Federal, State, 

6 and local courts in the United States; and 

7 (3) demonstrate that all judgments of all 

8 United States courts would be enforceable and col9 lectible by— 

10 (A) being organized or incorporated in a 

11 jurisdiction with which the United States has 

12 entered into a treaty on the recognition and en13 forcement of judgments rendered by Federal, 

14 State, and local courts in the United States; or 

15 (B) agreeing to post prejudgment security 

16 in the United States upon the commencement 

17 of any litigation or arbitration in the United 

18 States, subject to such regulations as the Com19 missioner may prescribe. 

20 (d) REVOCATION OF LICENSE.— 

21 (1) IN GENERAL.—The Commissioner may re22 voke, suspend, or restrict a Federal reinsurer’s li23 cense in accordance with subtitle C of title I. 

24 (2) STATUS OF FEDERALLY LICENSED REIN25 SURER.—For purposes of this subsection, a federally 


rwilkins on PROD1PC63 with BILLS
174 

•S 40 IS

1 licensed reinsurer shall be deemed to be a National 

2 Insurer under subtitle C of title I. 

3 (e) ANNUAL REPORTS.—The Commissioner shall re4 quire each reinsurer licensed under this section to submit 

5 an annual report of its financial condition and an annual 

6 report on the condition of any trust fund regulated under 

7 this subtitle in such form as may be prescribed by the 

8 Commissioner. 

9 SEC. 1222. CREDIT FOR INSURANCE CEDED BY A NATIONAL 

10 INSURER OR FEDERALLY LICENSED REIN11 SURER. 

12 (a) CREDIT FOR INSURANCE CEDED TO A NATIONAL

13 INSURER OR A FEDERALLY LICENSED REINSURER.—A 

14 national insurer may establish an asset or reduce its liabil15 ities, to the extent of such liabilities, for insurance ceded 

16 to another national insurer or federally licensed reinsurer. 

17 (b) OTHER ASSET OR REDUCTION FROM LIABILITY

18 FOR INSURANCE CEDED.—A national insurer may estab19 lish an asset or reduce its liabilities, to the extent of such 

20 liabilities, for insurance— 

21 (1) that is ceded to— 

22 (A) a State insurer; 

23 (B) a United States branch entered 

24 through a State; or 

25 (C) a non-United States insurer; and 


rwilkins on PROD1PC63 with BILLS
175 

•S 40 IS

1 (2) if such insurance is ceded consistent with 

2 the standards established by the Commissioner pur3 suant to subsection (c). 

4 (c) REGULATION.—The Commissioner shall establish, 

5 by regulation, standards governing insurance ceded by a 

6 national insurer, as the Commissioner may determine to 

7 be necessary to protect the policyholders of a national in8 surer. 

9 SEC. 1223. RELATIONSHIP TO STATE LAW. 

10 (a) DOMICILIARY STATE DISCRIMINATION PROHIB11 ITED.—Except as provided in section 1224(b), no State 

12 may, by statute, regulation, order, interpretation, or other13 wise, prevent or interfere with a State insurer domiciled 

14 in such State or a United States branch entered through 

15 such State from establishing an asset or reducing its liabil16 ity as a result of insurance ceded to a national insurer 

17 or a federally licensed reinsurer, to the same extent as the 

18 State would allow such insurer, if the insurance were 

19 ceded to another State insurer domiciled in such State. 

20 (b) NON-DOMICILIARY ACTION PROHIBITED.—No 

21 State may, by statute, regulation, order, interpretation, or 

22 otherwise, prevent or interfere with a State insurer not 

23 domiciled in that State or a United States branch entered 

24 through another State from establishing an asset or reduc25 ing its liability as a result of insurance ceded to a national 


rwilkins on PROD1PC63 with BILLS
176 

•S 40 IS

1 insurer or a federally licensed reinsurer, if the domicile 

2 of the ceding insurer allows such asset or reduction. 

3 SEC. 1224. FREEDOM OF COMMERCIAL CONTRACT. 

4 (a) PROHIBITION.—Except as provided in subsection 

5 (b), a State may not— 

6 (1) deny a State insurer or a United States 

7 branch entered through a State all or part of any 

8 asset, or require any increase in liability for insur9 ance ceded to any national insurer or federally li10 censed reinsurer because its reinsurance contract 

11 contains, or does not contain, 1 or more specific con12 tract terms; or 

13 (2) otherwise require specific language or terms 

14 in any reinsurance contract. 

15 (b) CONSTRUCTION.—Notwithstanding subsection 

16 (a), a State may require a State insurer domiciled in such 

17 State or a United States branch entered through that 

18 State to use contract terms that are substantially equiva19 lent to those required under section 1222(c). 

20 SEC. 1225. REVIEW BY THE COMMISSIONER. 

21 (a) REVIEW.—The Commissioner shall review any 

22 State action taken pursuant to subsection (b) of section 

23 1224 to determine if the State action meets the standards 

24 set forth in that subsection. 


rwilkins on PROD1PC63 with BILLS
177 

•S 40 IS

1 (b) STANDARDS OF REVIEW.—Any State action 

2 taken pursuant to section 1224(b) shall meet the stand3 ards of this section, if— 

4 (1) it is closely based on standards established 

5 by the Commissioner pursuant to section 1222(c); 

6 (2) it is made in consultation with the Commis7 sioner; 

8 (3) it serves a legitimate State interest; and 

9 (4) it does not frustrate the subject reinsurance 

10 contract. 

11 (c) NOTICE OF FAILURE; EFFECT OF FAILURE.—If 

12 the Commissioner finds that any State action taken pursu13 ant to subsection (b) of section 1224 fails to meet any 

14 of the standards set forth in that subsection, the Commis15 sioner shall provide the applicable State and State insurer 

16 with notice of, and reasons for, such failure, and such 

17 State action shall be deemed to be subject to section 

18 1224(a), notwithstanding the terms of section 1224(b). 

19 (d) NO DELEGATION PERMITTED.—The Commis20 sioner may not delegate to any insurance self-regulatory 

21 organization any authority conferred under this section 

22 with respect to review by the Commissioner of any State 

23 action taken pursuant to section 1224(b). 


rwilkins on PROD1PC63 with BILLS
178 

•S 40 IS

1 Subtitle D—Acquisitions of Con2 trol; Mergers; Bulk Transfers; 

3 Domestication 

4 SEC. 1231. ACQUISITION OF CONTROL OF NATIONAL INSUR5 ERS. 

6 (a) DEFINITIONS.—For purposes of this section— 

7 (1) the term ‘‘national insurer’’ includes any 

8 person controlling a national insurer; and 

9 (2) the term ‘‘person’’ does not include any se10 curities broker holding, in the usual and customary 

11 functions of the broker, less than 20 percent of the 

12 voting securities of a national insurer or of any per13 son who controls a national insurer. 

14 (b) COMMISSIONER APPROVAL REQUIRED.— 

15 (1) IN GENERAL.—No person, other than the 

16 issuer, shall make a tender offer for, make a request 

17 or invitation for tenders of, or enter into any agree18 ment to exchange securities for, or acquire, in the 

19 open market or otherwise, any voting security of a 

20 national insurer if, after the consummation of such 

21 transaction, such person would, directly or indirectly 

22 (or by conversion or by exercise of any right to ac23 quire) be in control of the national insurer. No per24 son shall enter into an agreement to merge with or 

25 otherwise acquire control of a national insurer or 


rwilkins on PROD1PC63 with BILLS
179 

•S 40 IS

1 any person controlling a national insurer unless, at 

2 the time the offer, request, or invitation is made or 

3 the agreement is entered into, or before the acquisi4 tion of the securities if no offer or agreement is in5 volved— 

6 (A) such person has filed with the Com7 missioner and has sent to the national insurer, 

8 a statement that complies with the regulations 

9 prescribed under paragraph (3); and 

10 (B) the offer, request, invitation, agree11 ment, or acquisition has been approved by the 

12 Commissioner. 

13 (2) SAVINGS PROVISION.—Nothing in this sub14 section shall be construed to prohibit a person from 

15 making an offer, request, or invitation or entering 

16 into an agreement to acquire control of a national 

17 insurer, if such transaction is conditioned upon ob18 taining the approval of the Commissioner in accord19 ance with paragraph (1). 

20 (3) FORM AND CONTENT OF STATEMENT.—The 

21 Commissioner shall, by regulation, prescribe the 

22 form and content of the statement to be filed under 

23 paragraph (1)(A). 

24 (4) APPROVAL BY COMMISSIONER.—The Com25 missioner shall approve any merger or other acquisiVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00179 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
180 

•S 40 IS

1 tion of control referred to in this subsection unless 

2 the Commissioner finds that— 

3 (A) after the acquisition of control, the na4 tional insurer would not be able to satisfy the 

5 requirements for the issuance of a Federal li6 cense to write the line or lines of insurance for 

7 which the national insurer was previously li8 censed; 

9 (B) the financial condition of any acquir10 ing person may jeopardize the financial stability 

11 of the national insurer or be hazardous to the 

12 policyholders of the national insurer; 

13 (C) the plans or proposals of the acquiring 

14 person to liquidate the national insurer, sell its 

15 assets, consolidate or merge it with any person, 

16 or make any other material change in its busi17 ness or corporate structure or management, are 

18 unfair and unreasonable to policyholders of the 

19 national insurer and not in the public interest; 

20 (D) those persons who would control the 

21 operation of the national insurer lack the com22 petence, experience, or integrity required to pro23 tect the interests of policyholders of the na24 tional insurer; or 


rwilkins on PROD1PC63 with BILLS
181 

•S 40 IS

1 (E) the acquisition is likely to be haz2 ardous to the insurance-buying public. 

3 (c) HEARING.— 

4 (1) IN GENERAL.—The Commissioner may, in 

5 his sole discretion, hold a hearing on a merger or 

6 other acquisition of control that is subject to this 

7 section and for which a statement has been filed 

8 under subsection (b)(1)(A). 

9 (2) PROCEDURES.—A hearing under this sub10 section shall be subject to the procedures under sec11 tion 1148, except that the Commissioner may deter12 mine the location of such hearing. 

13 (d) EXEMPTIONS.—The provisions of this section 

14 shall not apply to— 

15 (1) any offer, request, invitation, agreement, or 

16 acquisition exempted by the Commissioner for not 

17 having been made or entered into for the purpose, 

18 and not having the effect, of changing or influencing 

19 the control of a national insurer, or as otherwise not 

20 comprehended within the purposes of this section; or 

21 (2) a merger, consolidation, or acquisition sub22 ject to section 1232. 

23 (e) VOTING OF SECURITIES.— 

24 (1) PROHIBITION.—No security which is the 

25 subject of any agreement or arrangement regarding 


rwilkins on PROD1PC63 with BILLS
182 

•S 40 IS

1 acquisition, or which is acquired or to be acquired, 

2 in contravention of the provisions of this section may 

3 be voted at any shareholder meeting, or may be 

4 counted for quorum purposes. 

5 (2) EFFECT ON SHARES.—Any action of share6 holders requiring the affirmative vote of a percent7 age of shares may be taken as though the securities 

8 described under paragraph (1) were not issued and 

9 outstanding. 

10 (3) INVALIDATION OF ACTION.—No action 

11 taken at any meeting described under paragraph (1) 

12 shall be invalidated by the voting of the securities, 

13 unless— 

14 (A) the action would affect control of the 

15 national insurer; or 

16 (B) such invalidation is ordered by a court. 

17 (4) ACQUISITION IN CONTRAVENTION OF THIS

18 ACT.—If a national insurer or the Commissioner has 

19 reason to believe that any security of the national in20 surer has been or is about to be acquired in con21 travention of the provisions of this section, the na22 tional insurer or the Commissioner may apply to the 

23 United States district court for the judicial district 

24 in which the main office of the national insurer is 


rwilkins on PROD1PC63 with BILLS
183 

•S 40 IS

1 located or the United States District Court for the 

2 District of Columbia— 

3 (A) to enjoin any offer, request, invitation, 

4 agreement, or acquisition made in contravention 

5 of this section; 

6 (B) to enjoin the voting of any security so 

7 acquired; 

8 (C) to void any vote of the security already 

9 cast at any meeting of shareholders; and 

10 (D) for such other equitable relief as the 

11 nature of the case and the interest of the na12 tional insurer’s policyholders, the creditors and 

13 shareholders of the national insurer or the pub14 lic may require. 

15 (f) SEQUESTRATION OF VOTING SECURITIES.— 

16 (1) IN GENERAL.—If a person has acquired or 

17 is proposing to acquire any voting securities in viola18 tion of this section, the national insurer or the Com19 missioner may request the United States district 

20 court for the judicial district in which the main of21 fice of the national insurer is located or the United 

22 States District Court for the District of Columbia 

23 to— 


rwilkins on PROD1PC63 with BILLS
184 

•S 40 IS

1 (A) seize or sequester any voting securities 

2 of the national insurer owned directly or indi3 rectly by the person; and 

4 (B) issue such order as may be appropriate 

5 to carry out the provisions of this section. 

6 (2) SITUS OF OWNERSHIP.—Notwithstanding 

7 any other provision of law, for the purposes of this 

8 section, the situs of ownership of the securities of a 

9 national insurer shall be deemed to be the State in 

10 which the main office of the national insurer is lo11 cated. 

12 (g) CONFLICT WITH OTHER FEDERAL LAWS.—This 

13 section shall be interpreted and applied so as not to con14 flict with or supersede the provisions of any other Federal 

15 law or regulation governing the regulation of holding com16 panies, including financial holding companies (as defined 

17 in section 2(p) of the Bank Holding Company Act of 1956 

18 (12 U.S.C. 1841(p))). 

19 (h) NO DELEGATION PERMITTED.—The Commis20 sioner may not delegate to any insurance self-regulatory 

21 organization any authority conferred under this section 

22 with respect to any merger or other acquisition of control 

23 of a national insurer. 


rwilkins on PROD1PC63 with BILLS
185 

•S 40 IS

1 SEC. 1232. MERGERS, CONSOLIDATIONS, AND ACQUISI2 TIONS OF NATIONAL INSURERS. 

3 (a) NATIONAL INSURER AS RESULTING INSURER.— 

4 (1) IN GENERAL.—Notwithstanding any other 

5 provision of law, except as provided under subsection 

6 (e), a national insurer may, with the approval of the 

7 Commissioner, merge, consolidate with, acquire all 

8 or substantially all the assets of, or assume all or 

9 substantially all the liabilities of, another national 

10 insurer or a State insurer in a transaction in which 

11 a national insurer is the resulting insurer, the ac12 quiring insurer, or the assuming insurer, regardless 

13 of whether the insurers involved in the transaction 

14 are in stock form, mutual form, or fraternal form. 

15 (2) MERGER, CONSOLIDATION, AND ACQUISI16 TION PROCEDURES.—The Commissioner shall estab17 lish, by regulation, procedures for— 

18 (A) the merger or consolidation of a na19 tional insurer with another national insurer or 

20 a State insurer in a transaction in which a na21 tional insurer is the resulting insurer; and 

22 (B) the acquisition or assumption by a na23 tional insurer of all or substantially all the as24 sets or liabilities of another national insurer or 

25 a State insurer in a transaction in which the 


rwilkins on PROD1PC63 with BILLS
186 

•S 40 IS

1 national insurer is the acquiring insurer or as2 suming insurer. 

3 (3) EFFECT OF MERGER OR CONSOLIDATION.— 

4 Upon the merger or consolidation of a national in5 surer with another national insurer or a State in6 surer under this section— 

7 (A) the corporate existence of each of the 

8 merging or consolidating insurers shall be 

9 merged or consolidated into the resulting in10 surer, and the resulting insurer shall be deemed 

11 to be the same corporation as each insurer par12 ticipating in the merger or consolidation; 

13 (B) except as provided under subpara14 graph (D), the resulting insurer shall hold and 

15 be subject to all rights, privileges, liabilities, 

16 property interests, and other interests and obli17 gations that each insurer participating in the 

18 merger or consolidation held or was subject to 

19 immediately prior to the merger or consolida20 tion; 

21 (C) the resulting insurer shall obtain, in 

22 accordance with section 1203, a Federal license 

23 for all lines of insurance that it sells, solicits, 

24 negotiates, or underwrites, except for those 

25 lines of insurance for which a national insurer 


rwilkins on PROD1PC63 with BILLS
187 

•S 40 IS

1 participating in the merger or consolidation 

2 held a Federal license immediately before the 

3 merger or consolidation; and 

4 (D) the resulting insurer shall not hold any 

5 State license to sell, solicit, negotiate, or under6 write insurance that was held by a State in7 surer participating in the merger or consolida8 tion. 

9 (4) SPECIAL AUTHORITY.—The Commissioner 

10 may, subject to such conditions as the Commissioner 

11 shall prescribe, permit a national insurer resulting 

12 from a merger or consolidation under this section to 

13 retain, hold, or exercise such assets, liabilities, pow14 ers, and authorities that do not conform to the legal 

15 requirements applicable to national insurers, as the 

16 Commissioner determines appropriate. 

17 (b) STATE INSURER AS RESULTING INSURER.— 

18 (1) IN GENERAL.—Subject to applicable State 

19 law and such notification procedures as the Commis20 sioner shall prescribe by regulation, a State insurer 

21 may merge with, consolidate with, acquire assets of, 

22 or assume liabilities of, a national insurer in a trans23 action in which a State insurer is the resulting in24 surer. 


rwilkins on PROD1PC63 with BILLS
188 

•S 40 IS

1 (2) SAVINGS PROVISION.—Nothing in this sub2 section or in a transaction under this subsection 

3 shall abrogate any rights, privileges, liabilities, prop4 erty interests, or other interests or obligations that 

5 the national insurer held or was subject to imme6 diately before the transaction. 

7 (c) EFFECT OF ASSUMPTION OF LIABILITIES.—If the 

8 liabilities of a national insurer are assumed by another 

9 national insurer or a State insurer in accordance with this 

10 Act, the national insurer shall be released from all such 

11 liabilities upon their assumption by the other national in12 surer or a State insurer. 

13 (d) NO DELEGATION PERMITTED.—The Commis14 sioner may not delegate to any insurance self-regulatory 

15 organization any authority conferred under this section 

16 with respect to any merger, consolidation, acquisition of 

17 assets, or assumption of liabilities involving a national in18 surer. 

19 (e) COORDINATION.—This section shall not apply to 

20 any bulk transfer (as defined in section 1233(a)(2)) that 

21 is subject to approval of the Commissioner in accordance 

22 with section 1233(b). 

23 SEC. 1233. BULK TRANSFERS. 

24 (a) DEFINITIONS.—In this section, the following defi25 nitions shall apply: 


rwilkins on PROD1PC63 with BILLS
189 

•S 40 IS

1 (1) ASSUMING INSURER.—The term ‘‘assuming 

2 insurer’’ means the insurer that purchases or other3 wise acquires existing insurance policies from an4 other insurer by bulk transfer. 

5 (2) BLOCK OF BUSINESS.—The term ‘‘block of 

6 business’’ means all those insurance policies of an 

7 insurer under a particular policy form. 

8 (3) BULK TRANSFER.—The term ‘‘bulk trans9 fer’’— 

10 (A) means the transfer by an insurer to 

11 another insurer of existing insurance policies 

12 constituting all or substantially all of 1 or more 

13 of its lines of business or blocks of business; 

14 and 

15 (B) does not include— 

16 (i) any sale in which the transferring 

17 insurer retains direct or indirect control of 

18 the assets supporting the transferred in19 surance policies; 

20 (ii) any transaction effected by an 

21 agreement under which the transferring in22 surer continues to remain directly liable to 

23 the policyholders under the insurance poli24 cies; 


rwilkins on PROD1PC63 with BILLS
190 

•S 40 IS

1 (iii) the substitution of 1 insurer for 

2 another upon the expiration of insurance 

3 coverage pursuant to statutory or contrac4 tual requirements and the issuance of a 

5 new policy of insurance by that insurer; 

6 (iv) the transfer of policies of insur7 ance pursuant to merger or consolidation 

8 of 2 or more insurers to the extent that 

9 those transactions are regulated by statute; 

10 (v) any transaction effected by an in11 surer subject to a judicial order of receiver12 ship, liquidation, or rehabilitation; or 

13 (vi) any transfer of liabilities from 1 

14 insurer to another under a single group in15 surance policy upon the request of the 

16 group policyholder. 

17 (4) PERMITTED NATIONAL INSURER.—The 

18 term ‘‘permitted national insurer’’ means— 

19 (A) a State insurer that is converting to a 

20 national insurer under section 1206; or 

21 (B) a national insurer that is being newly 

22 chartered under section 1201 and licensed 

23 under section 1203. 


rwilkins on PROD1PC63 with BILLS
191 

•S 40 IS

1 (5) TRANSFERRED INSURANCE POLICIES.—The 

2 term ‘‘transferred insurance policies’’ means the in3 surance policies that are subject to the bulk transfer. 

4 (6) TRANSFERRING INSURER.—The term 

5 ‘‘transferring insurer’’ means the insurer in privity 

6 of contract with the policyholders under the existing 

7 insurance policies that are subject to the bulk trans8 fer. 

9 (b) BULK TRANSFERS AUTHORIZED.—The following 

10 bulk transfers are authorized: 

11 (1) A State insurer as the transferring insurer 

12 and a permitted national insurer as the assuming in13 surer. 

14 (2) A permitted national insurer as the trans15 ferring insurer and a State insurer as the assuming 

16 insurer. 

17 (3) A national insurer as the transferring in18 surer and a national insurer as the assuming in19 surer. 

20 (4) A State insurer as the transferring insurer 

21 and a national insurer that is not a permitted na22 tional insurer as the assuming insurer. 

23 (5) A national insurer that is not a permitted 

24 national insurer as the transferring insurer and a 

25 State insurer as the assuming insurer. 


rwilkins on PROD1PC63 with BILLS
192 

•S 40 IS

1 (c) COMMISSIONER APPROVAL.— 

2 (1) IN GENERAL.—A national insurer shall not 

3 effect a bulk transfer as either the transferring in4 surer or the assuming insurer as authorized under 

5 paragraph (1), (2), (3), or (5) of subsection (b) 

6 without the prior approval of the Commissioner, in 

7 accordance with such regulations as the Commis8 sioner shall prescribe. 

9 (2) STANDARD OF APPROVAL.—The Commis10 sioner shall approve a bulk transfer under paragraph 

11 (1), after notice and a hearing, unless the Commis12 sioner determines that the bulk transfer is likely to 

13 be hazardous to policyholders of transferred insur14 ance policies, policyholders of the transferring in15 surer, or policyholders of the assuming insurer. 

16 (d) POLICYHOLDER CONSENT.— 

17 (1) NO CONSENT REQUIRED.—Notwithstanding 

18 any other provision of law, a national insurer may, 

19 upon the approval of the Commissioner, effect a bulk 

20 transfer under paragraph (1) or (2) of subsection 

21 (b), as either the transferring insurer or the assum22 ing insurer, without obtaining policyholder consent. 

23 (2) BETWEEN NATIONAL INSURERS.—Notwith24 standing any other provision of law, a national in25 surer may, upon the approval of the Commissioner, 


rwilkins on PROD1PC63 with BILLS
193 

•S 40 IS

1 effect a bulk transfer under subsection (b)(3) as ei2 ther the transferring insurer or the assuming in3 surer, in accordance with the requirements pre4 scribed by the Commissioner. Such requirements 

5 shall specify whether policyholder consent to such a 

6 bulk transfer is required and, if policyholder consent 

7 is required, the form in which such consent is re8 quired to be given. 

9 (3) ADDITIONAL PROVISIONS.—In addition to 

10 any policyholder consent required by any other appli11 cable provision of law, the Commissioner may pre12 scribe, by regulation, whether policyholder consent is 

13 required for a bulk transfer authorized under sub14 section (b)(5) and, if policyholder consent is re15 quired, the form in which such consent is required 

16 to be given. 

17 (e) RELEASE FROM LIABILITY.—Upon the comple18 tion of a bulk transfer under this section, the transferring 

19 insurer shall be released from its obligations under the 

20 transferred insurance policies. 

21 (f) STATE LAW.— 

22 (1) PROHIBITION.—Except as provided in para23 graph (2), a State may not, by statute, regulation, 

24 order, interpretation, or otherwise— 


rwilkins on PROD1PC63 with BILLS
194 

•S 40 IS

1 (A) require a national insurer, a permitted 

2 national insurer, or a State insurer to— 

3 (i) obtain policyholder consent to a 

4 bulk transfer; or 

5 (ii) submit the bulk transfer to State 

6 review or action (including approval and 

7 nondisapproval); or 

8 (B) prevent or significantly interfere with 

9 a bulk transfer effected pursuant to this sec10 tion. 

11 (2) CONSTRUCTION.—Paragraph (1) shall not 

12 be construed to prohibit any State from— 

13 (A) collecting, reviewing, and taking action 

14 (including approval or disapproval) on applica15 tions and other documents or reports con16 cerning a proposed bulk transfer permitted 

17 under— 

18 (i) paragraph (2), (4), or (5) of sub19 section (b) to which a State insurer (other 

20 than a permitted national insurer) domi21 ciled in that State is a party; or 

22 (ii) paragraph (4) or (5) of subsection 

23 (b) to which a State insurer (other than a 

24 permitted national insurer), other than a 

25 State insurer domiciled in that State, is a 


rwilkins on PROD1PC63 with BILLS
195 

•S 40 IS

1 party, if the review or action meets the 

2 standards set forth in paragraph (3); or 

3 (B) requiring policyholder consent of a 

4 proposed bulk transfer permitted under para5 graph (4) or (5) of subsection (b). 

6 (3) STANDARDS.—A review or action meets the 

7 standards under this paragraph, if it— 

8 (A) is based on standards that are not 

9 more onerous than those imposed by the Com10 missioner; 

11 (B) occurs within a reasonable time frame 

12 that advances the purposes of this section; 

13 (C) is made in close consultation and co14 operation with the Commissioner; 

15 (D) is without bias or discrimination to16 ward either the transferring insurer or the as17 suming insurer; 

18 (E) serves a legitimate State interest; and 

19 (F) does not frustrate the proposed bulk 

20 transfer. 

21 (4) NOTICE OF FAILURE.—If the Commissioner 

22 finds that any State review or action under para23 graph (2)(A) fails to meet any of the standards set 

24 forth in paragraph (3), the Commissioner may proVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00195 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
196 

•S 40 IS

1 vide the applicable State with notice of such failure 

2 and the reasons for such failure. 

3 (g) DIFFERENTIAL TREATMENT PROHIBITED.—A 

4 State may not, by statute, regulation, order, interpreta5 tion, or otherwise, treat a national insurer, a permitted 

6 national insurer, or a State insurer entering into a bulk 

7 transfer agreement with a national insurer, a permitted 

8 national insurer, a State insurer, or any affiliate or sub9 sidiary of such insurer, differently than any other insurer 

10 operating in that State. 

11 (h) NO DELEGATION PERMITTED.—The Commis12 sioner may not delegate to any insurance self-regulatory 

13 organization any authority conferred under this section 

14 with respect to any bulk transfer involving a national in15 surer. 

16 SEC. 1234. DOMESTICATION OF UNITED STATES BRANCH 

17 OF A NON-UNITED STATES INSURER. 

18 (a) DOMESTICATION PERMITTED.—Notwithstanding 

19 any other provision of law, any non-United States insurer 

20 having its United States branch entered through a State 

21 or established pursuant to section 1202, and owning bene22 ficially, directly or indirectly, all outstanding shares of a 

23 national insurer may, upon the written approval by the 

24 Commissioner, domesticate its United States branch by 

25 agreeing in writing with such national insurer to the acVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00196 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
197 

•S 40 IS

1 quisition of the business and assets, and the assumption 

2 of all liabilities, of the United States branch, by the na3 tional insurer for no consideration except such assump4 tion. 

5 (b) APPROVAL BY COMMISSIONER.—If the Commis6 sioner determines that the domestication of a United 

7 States branch of a non-United States insurer complies 

8 with the provisions of this section and that the interests 

9 of policyholders and creditors of the United States branch 

10 are not materially affected in an adverse manner by such 

11 domestication, the Commissioner may approve the domes12 tication in accordance with this section. 

13 (c) EFFECTIVE DATE OF DOMESTICATION.— 

14 (1) IN GENERAL.—The domestication of the 

15 United States branch shall be effective on the date 

16 on which a certified copy of the instrument of trans17 fer and assumption is filed with the Commissioner. 

18 (2) EFFECT OF DOMESTICATION.—On the date 

19 described in paragraph (1)— 

20 (A) all rights, franchises, and interests of 

21 such United States branch in and to every spe22 cies of property, real, personal, and mixed, and 

23 things in action belonging to such branch, shall 

24 be deemed transferred to and vested in the ac25 quiring national insurer; 


rwilkins on PROD1PC63 with BILLS
198 

•S 40 IS

1 (B) the acquiring national insurer shall be 

2 deemed to have assumed all liabilities of the 

3 United States branch; 

4 (C) all deposits of the United States 

5 branch held by State officers or other State 

6 regulatory agencies under State law shall be re7 leased; and 

8 (D) the non-United States insurer and the 

9 United States branch shall be released from all 

10 liabilities so assumed. 

11 (d) RELEASE OF DEPOSITS.—At the time of the do12 mestication of a United States branch under this section, 

13 the Commissioner shall— 

14 (1) transfer to the account of the acquiring na15 tional insurer the securities deposited by such 

16 United States branch in compliance with the provi17 sions of this Act; and 

18 (2) consent that the trustee of the trusteed as19 sets deposited by such United States branch in com20 pliance with the provisions of this Act shall with21 draw from the trust and transfer and deliver to the 

22 acquiring national insurer all assets held by such 

23 trustee. 

24 (e) WITHDRAWAL AND TRANSFER OF TRUSTEED AS25 SETS.— 


rwilkins on PROD1PC63 with BILLS
199 

•S 40 IS

1 (1) IN GENERAL.—At the time of the domes2 tication of a United States branch established under 

3 State law, the trustee of any trusteed assets depos4 ited by such United States branch in compliance 

5 with applicable State law shall, with the consent of 

6 the Commissioner— 

7 (A) withdraw the trusteed assets from the 

8 trust; and 

9 (B) transfer and deliver to the acquiring 

10 national insurer all assets held by such trustee. 

11 (2) LIMITATION.—No State may, by statute, 

12 regulation, order, interpretation, or otherwise, pre13 vent, significantly interfere with, review, approve, or 

14 disapprove the withdrawal of trusteed assets or other 

15 deposits of a United States branch established under 

16 State law that is domesticated pursuant to this sec17 tion, if such withdrawal is made contemporaneously 

18 with or subsequent to the consummation of a domes19 tication of the United States branch under this sec20 tion. 

21 (f) NO DELEGATION PERMITTED.—The Commis22 sioner may not delegate to any insurance self-regulatory 

23 organization any authority under this section with respect 

24 to the domestication of a United States branch of a non25 United States insurer. 


rwilkins on PROD1PC63 with BILLS
200 

•S 40 IS

1 SEC. 1235. MERGERS, CONSOLIDATIONS, AND ACQUISI2 TIONS OF NATIONAL AGENCIES. 

3 (a) NATIONAL AGENCY RESULTING.— 

4 (1) IN GENERAL.—Notwithstanding any other 

5 provision of law, a national agency may, with the ap6 proval of the Commissioner, merge, consolidate with, 

7 acquire all or substantially all the assets of, or as8 sume all or substantially all the liabilities of, another 

9 national agency or a State insurance agency in a 

10 transaction in which a national agency is the result11 ing agency, the acquiring agency, or the assuming 

12 agency. 

13 (2) MERGER, CONSOLIDATION, AND ACQUISI14 TION PROCEDURES.—The Commissioner is author15 ized, under such regulations as the Commissioner 

16 may prescribe, to provide for— 

17 (A) the merger or consolidation of a na18 tional agency with another national agency or a 

19 State insurance agency in a transaction in 

20 which a national agency is the resulting agency; 

21 and 

22 (B) the acquisition or assumption by a na23 tional agency of all or substantially all the as24 sets or all or substantially all the liabilities of 

25 another national agency or a State insurance 


rwilkins on PROD1PC63 with BILLS
201 

•S 40 IS

1 agency in a transaction in which the national 

2 agency is the acquiring or assuming agency. 

3 (3) EFFECT OF MERGER OR CONSOLIDATION.— 

4 Upon the merger or consolidation of a national 

5 agency with another national agency or a State in6 surance agency under this section— 

7 (A) the corporate existence of each of the 

8 merging or consolidating agencies shall be 

9 merged or consolidated into the resulting agen10 cy, and the resulting agency shall be deemed to 

11 be the same corporation as each agency partici12 pating in the merger or consolidation; and 

13 (B) except as provided under paragraph 

14 (4), the resulting agency shall have all the 

15 rights, privileges, liabilities, property interests, 

16 and other interests and obligations that each 

17 agency participating in the merger or consolida18 tion had immediately before the merger or con19 solidation. 

20 (4) LIMITATION.—Upon a merger or consolida21 tion under this subsection, the resulting agency— 

22 (A) shall not hold any State license to sell, 

23 solicit, or negotiate insurance that was held by 

24 a State agency participating in the merger or 

25 consolidation; and 


rwilkins on PROD1PC63 with BILLS
202 

•S 40 IS

1 (B) shall obtain, in accordance with section 

2 1301, appropriate licenses for all lines of insur3 ance that it sells, solicits, or negotiates except 

4 for those lines of insurance for which a national 

5 agency participating in the merger or consolida6 tion held a Federal producer’s license imme7 diately before the merger or consolidation. 

8 (5) SPECIAL AUTHORITY.—The Commissioner 

9 may, subject to such regulations as the Commis10 sioner may prescribe, permit a national agency re11 sulting from a merger or consolidation under this 

12 subsection to retain, hold, or exercise such assets, li13 abilities, powers, and authorities that do not con14 form to the legal requirements applicable to national 

15 agencies as the Commissioner determines to be ap16 propriate. 

17 (b) STATE INSURANCE AGENCY RESULTING.— 

18 (1) IN GENERAL.—Subject to such notification 

19 procedures as the Commissioner may prescribe by 

20 regulation, a State insurance agency may merge, 

21 consolidate with, acquire assets of, or assume liabil22 ities of, a national agency in a transaction in which 

23 a State insurance agency is the resulting agency, in 

24 accordance with applicable State law. 


rwilkins on PROD1PC63 with BILLS
203 

•S 40 IS

1 (2) SAVINGS PROVISION.—Nothing in this sub2 section or in a transaction pursuant to this sub3 section shall abrogate any rights, privileges, liabil4 ities, property interests, other interests, or obliga5 tions that the national agency had immediately be6 fore the transaction. 

7 (c) EFFECT OF ASSUMPTION OF LIABILITIES.—If the 

8 liabilities of a national agency are assumed by another na9 tional agency or a State insurance agency in accordance 

10 with the provisions of this Act, such national agency from 

11 whom the liabilities are assumed shall be released from 

12 all liabilities so assumed upon their assumption by the 

13 other national agency or a State insurance agency. 

14 (d) NO DELEGATION PERMITTED.—The Commis15 sioner may not delegate to any insurance self-regulatory 

16 organization any authority conferred under this section 

17 with respect to any merger, consolidation, or acquisition 

18 of assets or assumption of liabilities involving a national 

19 agency. 

20 Subtitle E—Conversions 

21 SEC. 1241. DEFINITIONS. 

22 In this subtitle, the following definitions shall apply: 

23 (1) ADOPTION DATE.—The term ‘‘adoption 

24 date’’ means the date on which the board of direcVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00203 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
204 

•S 40 IS

1 tors of the converting mutual insurer or converting 

2 stock insurer adopts the plan of conversion. 

3 (2) CONVERTED MUTUAL INSURER.—The term 

4 ‘‘converted mutual insurer’’ means the national life 

5 insurer in mutual form into which a stock life in6 surer has been converted in accordance with the pro7 visions of section 1242. 

8 (3) CONVERTED STOCK INSURER.—The term 

9 ‘‘converted stock insurer’’ means the national in10 surer in stock form into which a mutual insurer has 

11 been converted in accordance with the provisions of 

12 section 1243. 

13 (4) CONVERTING MUTUAL INSURER.—The term 

14 ‘‘converting mutual insurer’’ means the mutual in15 surer that is converting under a plan of conversion 

16 under section 1243. 

17 (5) CONVERTING STOCK INSURER.—The term 

18 ‘‘converting stock insurer’’ means the stock life in19 surer that is converting under a plan of conversion 

20 under section 1242. 

21 (6) MEMBERSHIP INTERESTS.—The term 

22 ‘‘membership interests’’— 

23 (A) means the interests of members and 

24 policyholders of the mutual insurer arising 


rwilkins on PROD1PC63 with BILLS
205 

•S 40 IS

1 under the charter and bylaws of the mutual in2 surer or otherwise by applicable law; 

3 (B) includes the right to vote for directors 

4 of the mutual insurer and the right to vote on 

5 any plan of merger or consolidation of the mu6 tual insurer; and 

7 (C) does not include rights in surplus, if 

8 any. 

9 (7) MUTUAL INSURER.—The term ‘‘mutual in10 surer’’ means the State insurer in mutual form or 

11 national insurer in mutual form that is converting to 

12 a national insurer in stock form pursuant to a plan 

13 of conversion adopted in accordance with section 

14 1243. 

15 (8) PLAN OF CONVERSION OR PLAN.—The 

16 terms ‘‘plan of conversion’’ and ‘‘plan’’ mean a plan 

17 of conversion adopted by a stock life insurer or a 

18 mutual insurer in accordance with this subtitle. 

19 (9) RIGHTS IN SURPLUS.—The term ‘‘rights in 

20 surplus’’— 

21 (A) means rights, if any, of members or 

22 policyholders of the mutual insurer to a return 

23 of that portion of the surplus that has not been 

24 apportioned or declared by the board of direc25 tors for policyholder dividends; 


rwilkins on PROD1PC63 with BILLS
206 

•S 40 IS

1 (B) includes rights of members or policy2 holders of the mutual insurer to a distribution 

3 of surplus in liquidation or conservation of the 

4 insurer under applicable law, or in a dissolution 

5 or winding up; and 

6 (C) does not include any right expressly 

7 conferred solely by the terms of an insurance 

8 policy. 

9 (10) STOCK LIFE INSURER.—The term ‘‘stock 

10 life insurer’’ means the State life insurer in stock 

11 form or national life insurer in stock form that is 

12 converting to a national life insurer in mutual form 

13 pursuant to a plan of conversion adopted in accord14 ance with section 1242. 

15 SEC. 1242. CONVERSION OF STOCK LIFE INSURER TO NA16 TIONAL LIFE INSURER IN MUTUAL FORM. 

17 (a) AUTHORITY TO CONVERT.—Notwithstanding any 

18 other provision of law, a stock life insurer may convert 

19 to a national insurer in mutual form in accordance with 

20 a plan of conversion approved by the Commissioner under 

21 this section that meets the requirements of this section, 

22 and by complying with the requirements of this section 

23 and rules issued by the Commissioner under this Act. 

24 (b) PLAN OF CONVERSION.— 


rwilkins on PROD1PC63 with BILLS
207 

•S 40 IS

1 (1) IN GENERAL.—The plan of conversion re2 quired by this section— 

3 (A) shall be adopted by the board of direc4 tors of the converting stock insurer; and 

5 (B) shall provide for the conversion of the 

6 converting stock insurer into a national life in7 surer in mutual form. 

8 (2) ISSUANCE OF STOCK AFTER ADOPTION

9 DATE.—No additional shares of capital stock shall 

10 be issued after the adoption date, except that— 

11 (A) stock options to purchase capital stock 

12 may continue to be issued under existing con13 tracts; and 

14 (B) outstanding options may continue to 

15 be exercised until the effective date of the plan 

16 of conversion. 

17 (3) CONTENTS.—The plan of conversion shall 

18 provide for— 

19 (A) the purchase by the converting stock 

20 insurer of all of its outstanding capital stock, at 

21 a price either specified in the plan or to be de22 termined under a formula specified in the plan, 

23 for cash or other consideration as set forth in 

24 the plan; and 


rwilkins on PROD1PC63 with BILLS
208 

•S 40 IS

1 (B) the termination, upon terms specified 

2 in the plan, of any contractual obligation incon3 sistent with the nature of a mutual insurer, in4 cluding any obligation to issue stock options or 

5 issue capital stock upon exercise of options. 

6 (c) APPROVAL OF PLAN BY COMMISSIONER.—The 

7 Commissioner shall approve the plan of conversion re8 quired by this section, if the Commissioner finds, after a 

9 hearing, that— 

10 (1) the plan is fair and equitable to the policy11 holders, shareholders, and holders of options to ac12 quire capital stock of the converting stock insurer; 

13 (2) the plan does not violate the law; and 

14 (3) the converted mutual insurer will, after the 

15 conversion, satisfy the requirements for the issuance 

16 of a license to write the lines of insurance for which 

17 it is licensed. 

18 (d) VOTE ON APPROVAL OF PLAN.— 

19 (1) STOCKHOLDERS.—The plan of conversion 

20 shall be submitted to the holders of record on the 

21 adoption date of the converting stock insurer’s 

22 shares entitled to vote thereon and shall be subject 

23 to approval of the holders of a majority of such 

24 shares. 

25 (2) POLICYHOLDERS.— 


rwilkins on PROD1PC63 with BILLS
209 

•S 40 IS

1 (A) SUBMISSION.—The plan of conversion 

2 shall be submitted to policyholders of the con3 verting stock insurer— 

4 (i) who are insured for at least 

5 $1,000; and 

6 (ii) whose policy of insurance is in 

7 force— 

8 (I) for a period of at least 1 year 

9 before the adoption date; 

10 (II) on the adoption date; and 

11 (III) on the date of the meeting 

12 of policyholders called for the purpose 

13 of approving the plan of conversion. 

14 (B) APPROVAL.—The plan of conversion 

15 shall be subject to the approval of a majority of 

16 the votes cast by the policyholders described in 

17 subparagraph (A). 

18 (e) EFFECT OF CONVERSION ON CONVERTED MU19 TUAL INSURERS.— 

20 (1) IN GENERAL.—On the effective date of the 

21 plan of conversion, the stock insurer shall become a 

22 national life insurer in mutual form and share23 holders eligible to receive consideration under the 

24 plan of conversion are entitled to receive the consid25 eration specified in the plan in exchange for their 


rwilkins on PROD1PC63 with BILLS
210 

•S 40 IS

1 shares of capital stock of the converting stock in2 surer. 

3 (2) NO EFFECT ON EXISTING RIGHTS AND LI4 ABILITIES.—The converted mutual insurer is a con5 tinuation of the original stock life insurer, and the 

6 conversion shall not annul, modify, or change any of 

7 the original stock life insurer’s existing suits, rights, 

8 contracts, or liabilities, except as provided in the 

9 plan of conversion. 

10 (3) RIGHTS AFTER CONVERSION.—After con11 version, the converted mutual insurer shall— 

12 (A) exercise all the rights and powers and 

13 perform all the duties conferred or imposed by 

14 law upon insurers writing the classes of insur15 ance written by the converted mutual insurer; 

16 and 

17 (B) retain the rights and contracts existing 

18 prior to conversion, subject to the effect of the 

19 plan. 

20 (f) TIME LIMITS FOR PLAN ACTIONS.— 

21 (1) IN GENERAL.—Notwithstanding any other 

22 provision of law, actions concerning any plan of con23 version or proposed plan of conversion under this 

24 section or any acts taken or proposed to be taken 

25 under this section shall be commenced not later than 


rwilkins on PROD1PC63 with BILLS
211 

•S 40 IS

1 30 days after the date on which the plan of conver2 sion is approved by the Commissioner under sub3 section (c). 

4 (2) PLAN WITHDRAWN.—If the plan of conver5 sion is withdrawn, the actions described in para6 graph (1) shall be commenced not later than 30 

7 days after the date on which the board of directors 

8 approves a resolution to withdraw the plan. 

9 (g) EFFECT ON STATE LAW.—No State may, by stat10 ute, regulation, order, interpretation, or otherwise, prevent 

11 or interfere with a conversion under this section or impede 

12 the activities of, take any action against, or apply any pro13 vision of law or regulation to, any such stock life insurer 

14 because the stock life insurer plans to convert, or has con15 verted, to a national life insurer in mutual form under this 

16 section. 

17 (h) NO DELEGATION PERMITTED.—The Commis18 sioner may not delegate to any insurance self-regulatory 

19 organization any authority under this section with respect 

20 to the conversion of a stock life insurer. 

21 SEC. 1243. CONVERSION OF MUTUAL INSURER TO NA22 TIONAL INSURER IN STOCK FORM. 

23 (a) AUTHORITY TO CONVERT.—Notwithstanding any 

24 other provision of law, a mutual insurer may convert to 

25 a national insurer in stock form in accordance with a plan 


rwilkins on PROD1PC63 with BILLS
212 

•S 40 IS

1 of conversion approved by the Commissioner under this 

2 section that meets the requirements of this section, and 

3 by complying with the requirements of this section and 

4 the rules issued by the Commissioner under this Act. 

5 (b) PLAN OF CONVERSION.— 

6 (1) IN GENERAL.—The plan of conversion— 

7 (A) shall be adopted by the board of direc8 tors of the converting mutual insurer; 

9 (B) shall provide for the conversion of the 

10 converting mutual insurer into a national in11 surer in stock form; and 

12 (C) may provide for effecting the conver13 sion by merger of the mutual insurer with an14 other company. 

15 (2) CONTENTS.—The plan of conversion shall 

16 provide that— 

17 (A) all membership interests and rights in 

18 surplus are extinguished; 

19 (B) each eligible person will receive, with20 out payment by the person, consideration that 

21 is allocated among the eligible persons using a 

22 fair and equitable formula; and 

23 (C) eligible persons may receive 1 or more 

24 kinds of consideration, including— 

25 (i) cash; 


rwilkins on PROD1PC63 with BILLS
213 

•S 40 IS

1 (ii) shares of capital stock of the con2 verting mutual insurer; 

3 (iii) shares of capital stock (or inter4 ests in shares of capital stock) of a cor5 poration that, after the conversion, directly 

6 or indirectly, controls the converted stock 

7 insurer; 

8 (iv) premium credits; 

9 (v) enhanced insurance benefits; or 

10 (vi) in the case of a converting mutual 

11 insurer that is a life insurer, credits to in12 surance policy account values, as set forth 

13 in the plan. 

14 (c) APPROVAL OF PLAN BY COMMISSIONER.—The 

15 Commissioner shall approve the plan of conversion re16 quired by this section, if the Commissioner finds, after a 

17 hearing, that— 

18 (1) the plan is fair and equitable to the insurer 

19 and its policyholders; 

20 (2) the plan does not violate the law; and 

21 (3) the converted stock insurer will, after the 

22 conversion, satisfy the requirements for the issuance 

23 of a license to write the line or lines of insurance for 

24 which it is licensed. 


rwilkins on PROD1PC63 with BILLS
214 

•S 40 IS

1 (d) VOTE ON APPROVAL OF PLAN.—The plan of con2 version shall be submitted to those persons who are eligible 

3 to vote on the plan and shall be subject to approval of 

4 a majority of the votes cast by such persons. 

5 (e) EMPLOYEE STOCK PURCHASES; STOCK OP6 TIONS.—Subject to regulations prescribed by the Commis7 sioner, the converted insurer or a corporation that, after 

8 the conversion, directly or indirectly, controls the con9 verted insurer, may establish stock option, incentive, and 

10 share ownership plans customary for publicly traded com11 panies in the same and similar industries. 

12 (f) EFFECT OF CONVERSION ON CONVERTED STOCK

13 INSURERS.— 

14 (1) IN GENERAL.—On the effective date of the 

15 plan of conversion— 

16 (A) the mutual insurer shall become a na17 tional insurer in stock form; 

18 (B) all membership interests and rights in 

19 surplus shall be extinguished; and 

20 (C) persons eligible to receive consideration 

21 under the plan of conversion shall be entitled to 

22 receive the consideration specified in the plan in 

23 exchange for membership interests and liquida24 tion of rights in surplus. 


rwilkins on PROD1PC63 with BILLS
215 

•S 40 IS

1 (2) NO EFFECT ON EXISTING RIGHTS AND LI2 ABILITIES.—The converted stock insurer is a con3 tinuation of the original mutual insurer, and the 

4 conversion shall not annul, modify, or change any of 

5 the original mutual insurer’s existing suits, rights, 

6 contracts, or liabilities, except as provided in the 

7 plan of conversion. 

8 (3) RIGHTS AFTER CONVERSION.—After con9 version, the converted stock insurer shall— 

10 (A) exercise all the rights and powers and 

11 perform all the duties conferred or imposed by 

12 law upon insurers writing the classes of insur13 ance written by the converted stock insurer; 

14 and 

15 (B) retain the rights and contracts existing 

16 prior to conversion, subject to the effect of the 

17 plan. 

18 (g) LIMITATIONS ON ACQUIRING CONVERTED STOCK

19 INSURER.— 

20 (1) IN GENERAL.—During the 5-year period be21 ginning on the effective date of the plan of conver22 sion, no person or group of persons acting in concert 

23 shall directly or indirectly offer to acquire, or ac24 quire in any manner, the beneficial ownership of 5 

25 percent or more of any class of voting securities of 


rwilkins on PROD1PC63 with BILLS
216 

•S 40 IS

1 a converted insurer or of a person that controls the 

2 converted insurer, without the prior consent of the 

3 Commissioner. 

4 (2) EFFECT OF VIOLATION.—Upon the viola5 tion of paragraph (1), or any action that, if con6 summated, would constitute such a violation, all vot7 ing securities of the converted insurer or of the per8 son acquired by any person in excess of the max9 imum amount permitted to be acquired by the per10 son under paragraph (1) shall be deemed to be non11 voting securities of the converted stock insurer or of 

12 that person. 

13 (3) ENFORCEMENT.— 

14 (A) COMMENCEMENT.—A violation or ac15 tion described in paragraph (1) may be en16 forced or enjoined by appropriate proceeding 

17 commenced by the converted stock insurer or 

18 the Commissioner in— 

19 (i) the United States district court for 

20 the judicial district in which the main of21 fice of the converted stock insurer is lo22 cated; 

23 (ii) the United States District Court 

24 for the District of Columbia; or 


rwilkins on PROD1PC63 with BILLS
217 

•S 40 IS

1 (iii) any other court having jurisdic2 tion. 

3 (B) ORDER.—The court may issue any 

4 order it finds necessary to cure the violation or 

5 to prevent the proposed action. 

6 (h) TIME LIMITS FOR PLAN ACTIONS.— 

7 (1) IN GENERAL.—Notwithstanding any other 

8 provision of law, actions concerning any plan of con9 version or proposed plan of conversion under this 

10 section or any acts taken or proposed to be taken 

11 under this section shall be commenced not later than 

12 30 days after the date on which the plan of conver13 sion is approved by the Commissioner under sub14 section (c). 

15 (2) PLAN WITHDRAWN.—If the plan of conver16 sion is withdrawn, the actions shall be commenced 

17 not later than 30 days after the date on which the 

18 board of directors approves a resolution to withdraw 

19 the plan. 

20 (i) EFFECT ON STATE LAW.—No State may, by stat21 ute, regulation, order, interpretation, or otherwise, prevent 

22 or interfere with a conversion under this section or impede 

23 the activities of, take any action against, or apply any pro24 vision of law or regulation to, any such mutual insurer 

25 because that mutual insurer plans to convert, or has conVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00217 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
218 

•S 40 IS

1 verted, to a national insurer in stock form under this sec2 tion. 

3 (j) NO DELEGATION PERMITTED.—The Commis4 sioner may not delegate to any insurance self-regulatory 

5 organization any authority under this section with respect 

6 to the conversion of a mutual insurer. 

7 Subtitle F—State Taxation 

8 SEC. 1251. STATE TAXATION OF NATIONAL INSURERS. 

9 (a) STATE TAXATION RULE.—Except as provided in 

10 subsection (b) and section 1610, a national insurer doing 

11 business in any State shall be subject to all applicable 

12 State and local taxes, assessments, and charges including 

13 insurance retaliatory taxes or other similar taxes, and 

14 shall be entitled to all applicable tax credits, deductions, 

15 and offsets provided under State law, as well as all policy16 holder surcharge provisions under State law, to the same 

17 extent and in the same manner as an insurer licensed to 

18 do business in such State and chartered in the State where 

19 the national insurer is considered domiciled under sub20 section (c) or (d), except that, such national insurer shall 

21 not be subject to— 

22 (1) any additional taxes, assessments, and 

23 charges imposed by such State (or local government) 

24 by reason of the failure of the national insurer to be 


rwilkins on PROD1PC63 with BILLS
219 

•S 40 IS

1 licensed or otherwise authorized to conduct business 

2 or write or sell insurance policies, by such State; or 

3 (2) special assessments and charges that fund 

4 services that the State does not provide with respect 

5 to the national insurer. 

6 (b) EXCEPTION.—No State shall have power to im7 pose an insurance retaliatory tax on any national insurer, 

8 unless— 

9 (1) for any tax purpose for which State of 

10 domicile is relevant, every national insurer is treated 

11 by such State as domiciled in the State designated 

12 by each national insurer under subsection (c); and 

13 (2) the insurance retaliatory tax is imposed by 

14 such State on every national insurer to the same ex15 tent and in the same manner as it is imposed on 

16 every insurer chartered in the State where the na17 tional insurer is considered domiciled under sub18 section (c). 

19 (c) DESIGNATION OF DOMICILE.— 

20 (1) IN GENERAL.—A national insurer may des21 ignate, as its State of domicile, by filing such des22 ignation in writing with the Commissioner— 

23 (A) the State in which the national insur24 er’s principal place of business in the United 

25 States is located; or 


rwilkins on PROD1PC63 with BILLS
220 

•S 40 IS

1 (B) in the case of an insurer that has con2 verted from a State insurer to a national in3 surer under this Act, the State in which such 

4 insurer was domiciled immediately before such 

5 conversion. 

6 (2) NO DESIGNATION BY NATIONAL INSURER.— 

7 If a national insurer does not make a designation of 

8 a State of domicile under this subsection, the na9 tional insurer shall be deemed to have designated as 

10 its State of domicile the State in which its principal 

11 place of business in the United States is located. 

12 (d) CHANGE IN DOMICILE.—A national insurer may 

13 change its State of domicile, with the approval of the Com14 missioner, to any other State meeting the requirements 

15 under subsection (c). 

16 (e) STATUS OF NATIONAL INSURER.—For purposes 

17 of State taxation, a national insurer— 

18 (1) shall not be considered a department, agen19 cy, or instrumentality of the Federal Government; 

20 and 

21 (2) except as provided in this section, a national 

22 insurer shall not be exempt from any State tax or 

23 subject to a lesser burden of any State tax, solely by 

24 reason of its status as a national insurer under this 

25 Act. 


rwilkins on PROD1PC63 with BILLS
221 

•S 40 IS

1 SEC. 1252. STATE TAXATION OF NATIONAL AGENCIES. 

2 (a) STATE TAXATION RULE.—A national agency 

3 shall be subject to all taxes imposed under any applicable 

4 provision of State law, to the same extent and in the same 

5 manner as an agency chartered in the State in which the 

6 national agency is considered domiciled pursuant to sub7 section (b). 

8 (b) STATE OF DOMICILE.—For purposes of this sec9 tion, the State of domicile of a national agency shall be 

10 deemed to be the State in which the principal place of 

11 business of the national agency in the United States is 

12 located. 

13 (c) STATUS OF NATIONAL AGENCY.—For purposes 

14 of State taxation, a national agency shall not— 

15 (1) be considered to be a department, agency, 

16 or instrumentality of the Federal Government; and 

17 (2) except as provided in this section, be ex18 empt from any State tax or subject to a lesser bur19 den of any State tax, solely by reason of its status 

20 as a national agency under this Act. 

21 SEC. 1253. STATE TAXATION OF NON-ADMITTED AND SUR22 PLUS LINES INSURANCE. 

23 (a) IN GENERAL.—No State, other than the State in 

24 which an insured maintains its principal place of business 

25 or, in the case of an individual, maintains a principal resiVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00221 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
222 

•S 40 IS

1 dence, may require any Premium Tax for Non-Admitted 

2 Insurance or Surplus Lines Insurance. 

3 (b) DEFINITION.—For purposes of this section, the 

4 term ‘‘Premium Tax for Non-Admitted or Surplus Lines 

5 Insurance’’ means any tax, fee, assessment, or other 

6 charge imposed by a State on an insured, either directly 

7 or through a producer that is based upon any payment 

8 made as consideration for Non-Admitted Insurance or 

9 Surplus Lines Insurance, and any other compensation 

10 given in consideration for a contract of insurance. 

11 TITLE III—INSURANCE PRO12 DUCERS AND OTHER INSUR13 ANCE SERVICING PERSONS 

14 SEC. 1301. FEDERAL LICENSING OF INSURANCE PRO15 DUCERS. 

16 (a) COMMISSION AUTHORITY.—The Commissioner— 

17 (1) shall have authority to issue Federal pro18 ducer licenses; and 

19 (2) shall, by regulation— 

20 (A) define the line or lines of insurance for 

21 which a person may obtain a Federal producer 

22 license, which shall include surplus lines of in23 surance or non-admitted insurance; and 

24 (B) specify educational and examination 

25 requirements for persons seeking a Federal proVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00222 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
223 

•S 40 IS

1 ducer license, other than national agencies that 

2 are subject to chartering criteria under section 

3 1201. 

4 (b) NATIONAL AGENCIES.—The Commissioner shall 

5 issue a Federal producer license to a national agency upon 

6 the issuance of a charter certificate to such Agency pursu7 ant to section 1201. 

8 (c) AUTHORITY OF PERSON HOLDING A FEDERAL

9 PRODUCER LICENSE.—A Federal producer license issued 

10 under this section authorizes the person to sell, solicit, or 

11 negotiate insurance in any State for any line or lines of 

12 insurance specified in such license, and exercise all such 

13 incidental powers, as shall be necessary to carry out such 

14 activities, including claims adjustments and settlement, 

15 risk management, employee benefits advice, retirement 

16 planning, and any other insurance-related consulting ac17 tivities. 

18 (d) EXAMINATIONS AND REPORTS.—In addition to 

19 the examination and reporting requirements applicable to 

20 national agencies pursuant to sections 1124 and 1125, the 

21 Commissioner may— 

22 (1) provide for the examination of federally li23 censed insurance producers that are not national 

24 agencies only in response to a complaint or any eviVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00223 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
224 

•S 40 IS

1 dence that the federally licensed insurance producer 

2 has violated or is about to violate— 

3 (A) a law, rule, or regulation; 

4 (B) any condition imposed in writing by 

5 the Commissioner in connection with issuing a 

6 Federal producer license; or 

7 (C) any written agreement entered into 

8 with the Commissioner; and 

9 (2) require federally licensed insurance pro10 ducers that are not national agencies to make such 

11 reports, containing such information and in such 

12 form, as the Commissioner may prescribe by regula13 tion, to the extent necessary to require compliance 

14 with this Act. 

15 (e) INFORMATION PRACTICES.—The Commissioner 

16 may, by regulation, provide that there shall be no civil li17 ability imposed on and no cause of action shall arise from 

18 a national insurer or national agency, an insurer-affiliated 

19 party, or a federally licensed insurance producer submit20 ting any statement or information required under this Act 

21 or any regulation thereunder or requested in writing by 

22 the Commissioner relating to the conduct of a federally 

23 licensed insurance producer, provided that— 

24 (1) this protection may not apply to false state25 ments made with actual malice; and 


rwilkins on PROD1PC63 with BILLS
225 

•S 40 IS

1 (2) such regulation shall not abrogate or modify 

2 any existing common law or statutory privileges or 

3 immunities. 

4 (f) AUTHORITY OF STATE LICENSED INSURANCE

5 PRODUCER.—An insurance producer licensed by a State 

6 may sell, solicit, or negotiate insurance in such State on 

7 behalf of a national insurer without a Federal producer 

8 license. 

9 SEC. 1302. PRODUCER DATABASE. 

10 (a) IN GENERAL.—The Commissioner shall adopt 

11 regulations for the development of an electronic database 

12 consisting of information relating to federally licensed in13 surance producers and an electronic communication net14 work that links the Commissioner with State insurance 

15 regulators and insurers for an electronic exchange of such 

16 information. 

17 (b) MAINTENANCE.—The Commissioner, by rule or 

18 order, may delegate authority over the maintenance of 

19 each database described in subsection (a) to an insurance 

20 self-regulatory organization. In making any such rule or 

21 entering any such order, the Commissioner shall take into 

22 consideration the regulatory capabilities and procedures of 

23 the insurance self-regulatory organization, availability of 

24 staff, convenience of location, avoidance of unnecessary 

25 regulatory duplication, and any other factors the CommisVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00225 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
226 

•S 40 IS

1 sioner may consider appropriate to the protection of pol2 icyholders, the efficiency of the producer licensing system, 

3 and the cooperation and coordination among regulatory 

4 organizations. 

5 SEC. 1303. SUPERVISION AND OVERSIGHT OF FEDERALLY 

6 LICENSED INSURANCE PRODUCERS. 

7 (a) PURPOSE.—The purpose of this section is to es8 tablish when a national insurer, national agency, or other 

9 federally licensed insurance producer has a duty to super10 vise a federally licensed insurance producer who is an indi11 vidual. The duty to supervise as required in this section 

12 shall be in addition to the authority of the Commissioner 

13 to exercise its powers under section 1102(b). 

14 (b) DUTY TO SUPERVISE.— 

15 (1) NATIONAL INSURERS.—A national insurer 

16 shall have a duty to supervise the sales and mar17 keting practices of a federally licensed insurance 

18 producer who is an individual with respect to the 

19 sale, solicitation, or negotiation of insurance policies 

20 of such national insurer, if— 

21 (A) such producer is an— 

22 (i) employee of the national insurer; 

23 or 

24 (ii) agent of the national insurer; and 


rwilkins on PROD1PC63 with BILLS
227 

•S 40 IS

1 (B) the entire or principal business activity 

2 of such producer is devoted to the sale, solicita3 tion, or negotiation of insurance policies for 

4 such insurer, the supervision of the agents for 

5 such insurer, or both. 

6 (2) NATIONAL AGENCIES AND OTHER FEDER7 ALLY LICENSED PRODUCERS.—A national agency or 

8 other federally licensed insurance producer has a 

9 duty to supervise the sales and marketing practices 

10 of a federally licensed insurance producer who is an 

11 individual with respect to the sale, solicitation, or 

12 negotiation of insurance policies, if such producer— 

13 (A) is an employee of such agency or other 

14 producer, and the sale, solicitation, and negotia15 tion of insurance is within the scope of employ16 ment of the producer; or 

17 (B) is an agent of such agency or other 

18 producer, and the sale, solicitation, and negotia19 tion of insurance is pursuant to the terms of an 

20 agreement between the agent and such national 

21 agency or other producer. 

22 (3) STANDARDS FOR SUPERVISION.—The Com23 missioner shall, by regulation, establish standards 

24 for the duties established in paragraphs (1) and (2). 

25 Such standards shall not conflict with the rules 


rwilkins on PROD1PC63 with BILLS
228 

•S 40 IS

1 adopted by any self-regulatory organization approved 

2 by the Securities and Exchange Commission pursu3 ant to its authority under section 19(b)(1) of the Se4 curities Exchange Act of 1934 (15 U.S.C. 78s(b)(1)) 

5 for broker-dealer supervision of registered represent6 atives. 

7 (4) EXEMPTION.—The Commissioner may, by 

8 regulation, exempt any class of persons from the du9 ties established under paragraphs (1) and (2), if the 

10 Commissioner determines that, given the nature of 

11 the business relationship with the federally licensed 

12 insurance producer who is an individual, it would be 

13 unreasonable or inappropriate to require the class 

14 member to supervise such producer. 

15 (5) NO DUTY.—A national insurer, national 

16 agency, or other federally licensed insurance pro17 ducer shall not have a duty to supervise the sales 

18 and marketing practices of persons not described in 

19 paragraph (1) or (2). 

20 (6) OVERSIGHT OF INDIVIDUAL INDEPENDENT

21 FEDERALLY LICENSED INSURANCE PRODUCERS.— 

22 (A) IN GENERAL.—The sales and mar23 keting practices of a federally licensed insur24 ance producer who is an individual with respect 

25 to the sale, solicitation, or negotiation of insurVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00228 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
229 

•S 40 IS

1 ance policies shall be subject to the direct over2 sight of the Commissioner, if such producer is 

3 not a person subject to supervision under the 

4 terms of paragraph (1) or (2). 

5 (B) STANDARDS AND PROCEDURES.—The 

6 Commissioner shall, by regulation, establish 

7 standards and procedures for the direct over8 sight of the sales and marketing practices of 

9 federally licensed insurance producers described 

10 in subparagraph (A). 

11 (c) WHOLESALE LIFE INSURANCE BROKERAGE

12 AGENCIES.—This section shall not apply to any wholesale 

13 life insurance brokerage agency, as that term is defined 

14 by the Commissioner. 

15 SEC. 1304. RELATIONSHIP TO STATE LAW. 

16 (a) NO STATE RESTRICTIONS.—No State may, by 

17 statute, regulation, order, interpretation, or otherwise, 

18 prevent or restrict a national insurer from engaging in the 

19 acts described in subsection (b) for any person, or from 

20 engaging the services of a person who engages in such acts 

21 for the national insurer, nor shall any State require that 

22 a person be licensed by reason of engaging in such acts 

23 for a national insurer. 


rwilkins on PROD1PC63 with BILLS
230 

•S 40 IS

1 (b) ACTS PROTECTED FROM STATE RESTRIC2 TIONS.—The acts referred to in subsection (a) are the fol3 lowing: 

4 (1) Investigating, evaluating, ascertaining, or 

5 determining the amount of or negotiating, settling, 

6 or adjusting or otherwise participating in the dis7 posal of claims, losses, or damages arising under in8 surance policies written by a national insurer, 

9 whether the person performing the act is called an 

10 adjuster, independent adjuster, or another name. 

11 (2) Soliciting, negotiating, or placing reinsur12 ance cessions or retrocessions on behalf of a ceding 

13 national insurer without the authority or power to 

14 bind reinsurance on behalf of such national insurer, 

15 whether the person performing the act is called a re16 insurance intermediary or another name. 

17 (3) Having authority to bind or manage all or 

18 part of the assumed reinsurance business of a na19 tional insurer that is a reinsurer (including the man20 agement of a separate division, department, or un21 derwriting office) and acting as an agent for such 

22 reinsurer, whether the person performing the act is 

23 called a reinsurance intermediary-manager, man24 ager, or another name. 


rwilkins on PROD1PC63 with BILLS
231 

•S 40 IS

1 (4) Directly or indirectly underwriting, col2 lecting charges or premiums, or adjusting or settling 

3 claims, in connection with policies of insurance writ4 ten by a national insurer. 

5 (c) ACTIVITIES OF FEDERALLY LICENSED INSUR6 ANCE PRODUCERS.—No State may— 

7 (1) by statute, regulation, order, interpretation, 

8 or otherwise, prevent or restrict a federally licensed 

9 insurance producer from engaging in any activity 

10 within the scope of authority granted under section 

11 1301(c); or 

12 (2) require such producer to be licensed by rea13 son of engaging in such acts on behalf of a national 

14 insurer, State insurer, or a United States branch of 

15 a non-United States insurer. 

16 (d) ACTIVITIES OF STATE PRODUCERS.—No State 

17 may, by statute, regulation, order, interpretation, or other18 wise, prevent or restrict an insurance producer licensed 

19 by such State from selling, soliciting, or negotiating insur20 ance in such State on behalf of a national insurer. 

21 SEC. 1305. LICENSING COMMENCEMENT DATE. 

22 (a) FEDERALLY LICENSED INSURANCE PRO23 DUCERS.—The Commissioner shall not license a Federal 

24 insurance producer until after the following regulations 

25 have been published in final form or interim final form: 


rwilkins on PROD1PC63 with BILLS
232 

•S 40 IS

1 (1) The fee and assessment regulations required 

2 by section 1122. 

3 (2) The reporting regulations required by sec4 tion 1124. 

5 (3) The market conduct regulations required by 

6 section 1216. 

7 (4) The producer licensing regulations required 

8 by section 1301. 

9 (5) Such other regulations that the Commis10 sioner determines, at the discretion of the Commis11 sioner, to be necessary prior to the initial licensing 

12 of Federal insurance producers. 

13 (b) TIMING AND NOTICE.— 

14 (1) TIMING.—The regulations described in sub15 section (a) shall be published in final form, not later 

16 than 2 years after the initial appointment and con17 firmation of the Commissioner. 

18 (2) NOTICE.—At such time as the regulations 

19 described in subsection (a) have been issued in final 

20 form, the Commissioner shall publish a notice in the 

21 Federal Register announcing that the Office is pre22 pared to act on licensing applications under this 

23 title. 


rwilkins on PROD1PC63 with BILLS
233 

•S 40 IS

1 TITLE IV—HOLDING COMPANIES 

2 SEC. 1401. DEFINITIONS. 

3 In this title, the following definitions shall apply: 

4 (1) EXTRAORDINARY DIVIDEND OR DISTRIBU5 TION.—Except as may otherwise be specified by the 

6 Commissioner by regulation, the term ‘‘extraor7 dinary dividend or distribution’’ means a dividend or 

8 distribution of cash or other property on its out9 standing shares (excluding pro rata distributions of 

10 any class of the national insurer’s own shares), 

11 whose fair market value, together with that of other 

12 dividends or distributions made within the prior 12 

13 months, exceeds the greater of— 

14 (A) 10 percent of the policyholder surplus 

15 of the national insurer, as of the prior Decem16 ber 31; or 

17 (B) the net income of the national insurer 

18 for the 12-month period ending on the prior 

19 December 31. 

20 (2) INSURANCE HOLDING COMPANY SYSTEM.— 

21 The term ‘‘insurance holding company system’’ 

22 means 2 or more affiliated persons, 1 or more of 

23 which is a national insurer. 


rwilkins on PROD1PC63 with BILLS
234 

•S 40 IS

1 SEC. 1402. REGISTRATION. 

2 (a) REGISTRATION.—Each national insurer that is a 

3 member of an insurance holding company system shall 

4 register with the Commissioner. 

5 (b) REGISTRATION STATEMENT.—The Commissioner 

6 shall, by regulation, prescribe— 

7 (1) the form and content of the registration 

8 statement to be filed pursuant to subsection (a); and 

9 (2) the time and place where the registration 

10 statement is required to be filed with the Commis11 sioner. 

12 (c) TERMINATION OF REGISTRATION.—The Commis13 sioner shall terminate the registration of any national in14 surer which demonstrates that it no longer is a member 

15 of an insurance holding company system. 

16 (d) CONSOLIDATED REGISTRATION STATEMENT.— 

17 The Commissioner may require or allow 2 or more affili18 ated national insurers to file a consolidated registration 

19 statement. 

20 (e) EXEMPTIONS.—The provisions of this section 

21 shall not apply to any national insurer, information, or 

22 transaction if, and to the extent that, the Commissioner 

23 by regulation or order, exempts such insurer, information, 

24 or transaction from the provisions of this section. 

25 (f) DISCLAIMER.—Any person may file with the Com26 missioner a disclaimer of affiliation with any national inVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00234 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
235 

•S 40 IS

1 surer or a disclaimer may be filed by the national insurer 

2 or any member of an insurance holding company system. 

3 The disclaimer shall fully disclose all material relation4 ships and bases for affiliation between the person and the 

5 national insurer as well as the basis for disclaiming the 

6 affiliation. After a disclaimer has been filed, the national 

7 insurer shall be relieved of any duty to register or report 

8 under this section which may arise out of the national in9 surer’s relationship with the person unless and until the 

10 Commissioner disallows the disclaimer. The Commissioner 

11 shall disallow a disclaimer only after furnishing all parties 

12 in interest with notice and opportunity to be heard and 

13 after making specific findings of fact to support the dis14 allowance. 

15 SEC. 1403. STANDARDS AND MANAGEMENT OF A NATIONAL 

16 INSURER WITHIN AN INSURANCE HOLDING 

17 COMPANY SYSTEM. 

18 (a) TRANSACTIONS WITHIN AN INSURANCE HOLDING

19 COMPANY SYSTEM.— 

20 (1) STANDARDS.—Transactions within an in21 surance holding company system to which a national 

22 insurer subject to registration under section 1402 is 

23 a party shall be subject to the following standards: 

24 (A) The terms shall be fair, reasonable, 

25 and at least as favorable to the national insurer 


rwilkins on PROD1PC63 with BILLS
236 

•S 40 IS

1 as those that would be offered to, or would 

2 apply to, a nonaffiliate. 

3 (B) Charges or fees for services performed 

4 shall be reasonable and at least as favorable to 

5 the national insurer as those that would be of6 fered to, or would apply to, a nonaffiliate. 

7 (C) Expenses incurred and payment re8 ceived shall be allocated to the national insurer 

9 in conformity with customary insurance ac10 counting practices consistently applied. 

11 (D) The books, accounts, and records of 

12 each party to all such transactions shall be so 

13 maintained as to clearly and accurately disclose 

14 the nature and details of the transactions in15 cluding such accounting information as is nec16 essary to support the reasonableness of the 

17 charges or fees to the respective parties. 

18 (E) The national insurer’s surplus fol19 lowing any dividends or distributions to share20 holders shall be reasonable in relation to the 

21 outstanding liabilities of the national insurer 

22 and adequate to meet its financial needs. 

23 (2) APPROVAL OF CERTAIN TRANSACTIONS.— 

24 The Commissioner shall, by regulation, specify cer25 tain transactions involving a national insurer and 


rwilkins on PROD1PC63 with BILLS
237 

•S 40 IS

1 any person in its insurance holding company system 

2 that are not permissible for a national insurer unless 

3 the national insurer has notified the Commissioner 

4 in writing of its intention to enter into the trans5 action and the Commissioner either has approved or 

6 not disapproved the transaction within a specified 

7 time period. 

8 (3) COMPLIANCE WITH STANDARDS.—The 

9 Commissioner, in reviewing any transaction for 

10 which notice is required pursuant to paragraph (2), 

11 shall consider whether the transaction complies with 

12 the standards set forth in paragraph (1) and wheth13 er the transaction may adversely affect the interests 

14 of policyholders. 

15 (b) EXTRAORDINARY DIVIDENDS.— 

16 (1) IN GENERAL.—No national insurer that is 

17 a member of an insurance holding company system 

18 shall pay any extraordinary dividend or distribution 

19 to its shareholders until 30 days after the Commis20 sioner has received notice of the declaration in a 

21 form prescribed by the Commissioner. 

22 (2) CONDITIONAL DIVIDEND OR DISTRIBU23 TION.—A national insurer that is a member of an 

24 insurance holding company system may declare an 

25 extraordinary dividend or distribution which is conVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00237 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
238 

•S 40 IS

1 ditional upon the Commissioner’s approval, and the 

2 declaration shall confer no rights upon shareholders 

3 unless— 

4 (A) the Commissioner has approved the 

5 payment of the dividend or distribution; or 

6 (B) the Commissioner has not disapproved 

7 payment within the 30-day period referred to in 

8 paragraph (1). 

9 SEC. 1404. RELATIONSHIP TO STATE LAW. 

10 (a) PERMITTED AFFILIATION.—A national insurer 

11 that is part of an insurance holding company system may 

12 be affiliated with an insurer or agency that is not char13 tered or licensed under this Act. 

14 (b) REINSURANCE POOLING AGREEMENTS.—The 

15 Commissioner shall have exclusive jurisdiction over rein16 surance pooling agreements to which 1 or more national 

17 property/casualty insurers and affiliated State property/ 

18 casualty insurers, or agency are parties under which poli19 cies of insurance sold, solicited, negotiated, and under20 written by and reinsurance assumed by affiliated national 

21 property/casualty insurers and State property/casualty in22 surers are pooled. 

23 SEC. 1405. CONFLICT WITH OTHER FEDERAL LAWS. 

24 This title shall be interpreted and applied so as not 

25 to conflict with or supersede the provisions of any other 


rwilkins on PROD1PC63 with BILLS
239 

•S 40 IS

1 Federal law or regulation governing the regulation of hold2 ing companies, including financial holding companies, as 

3 defined in section 2 of the Bank Holding Company Act 

4 of 1956 (12 U.S.C. 1841), and saving and loan holding 

5 companies, as defined in section 10 of the Homeowners’ 

6 Loan Act (12 U.S.C. 1467a). 

7 SEC. 1406. NO DELEGATION PERMITTED. 

8 The Commissioner may not delegate to any insurance 

9 self-regulatory organization any authority conferred under 

10 this title with respect to regulation of a national insurer 

11 that is a member of an insurance holding company system. 

12 TITLE V—RECEIVERSHIP 

13 SEC. 1501. APPOINTMENT OF OFFICE AS RECEIVER. 

14 (a) IN GENERAL.—Notwithstanding any other provi15 sion of Federal or State law, if any of the grounds under 

16 subsection (c) exist, at the discretion of the Commissioner, 

17 the Commissioner may establish a receivership for a na18 tional insurer for the purpose of rehabilitation or liquida19 tion, as appropriate. 

20 (b) APPOINTMENT.—In any receivership established 

21 under this title, the Commissioner shall appoint the Office 

22 as receiver. 

23 (c) GROUNDS FOR APPOINTMENT.—The grounds for 

24 establishing a receivership for the purpose of rehabili25 tating or liquidating a national insurer are as follows: 


rwilkins on PROD1PC63 with BILLS
240 

•S 40 IS

1 (1) INSOLVENCY.—The national insurer is in2 solvent. 

3 (2) SUBSTANTIAL DISSIPATION.—The national 

4 insurer has substantial dissipation of assets or earn5 ings due to— 

6 (A) any violation of any provision of Fed7 eral or State law; or 

8 (B) any hazardous practice. 

9 (3) HAZARDOUS CONDITION.—The national in10 surer is in such condition that the further trans11 action of business would be hazardous, financially or 

12 otherwise, to policyholders, creditors, or the public. 

13 (4) CEASE-AND-DESIST ORDERS.—The national 

14 insurer has willfully violated a cease-and-desist order 

15 that has become final. 

16 (5) CONCEALMENT.—The national insurer has 

17 concealed the books, papers, records, or assets of the 

18 national insurer, or has refused to submit the books, 

19 papers, records, or affairs of the national insurer, 

20 for inspection to any examiner or to any lawful 

21 agent of the Commissioner. 

22 (6) INABILITY TO MEET OBLIGATIONS.—The 

23 national insurer is likely to be unable to pay its obli24 gations or meet the demands of its creditors in the 

25 normal course of business. 


rwilkins on PROD1PC63 with BILLS
241 

•S 40 IS

1 (7) VIOLATIONS OF LAW.—The national insurer 

2 has willfully and continuously violated any law or 

3 regulation, or committed any hazardous practice or 

4 condition, that is likely to— 

5 (A) cause insolvency or substantial dissipa6 tion of assets or earnings; or 

7 (B) weaken the condition of the national 

8 insurer. 

9 (8) CONSENT.—The national insurer, by resolu10 tion of its board of directors or its shareholders or 

11 members, consents to the appointment. 

12 (9) MONEY LAUNDERING.—The Attorney Gen13 eral notifies the Commissioner in writing that the 

14 national insurer has been found guilty of a criminal 

15 offense under section 1956 or 1957 of title 18, 

16 United States Code, or section 5322 or 5324 of title 

17 31, United States Code. 

18 (d) DIRECTORS NOT LIABLE.—The members of the 

19 board of directors of a national insurer shall not be liable 

20 to the shareholders, members, policyholders, or creditors 

21 of the insurer for acquiescing in, or consenting in good 

22 faith to, the appointment of the Office as a receiver. 

23 (e) OFFICE NOT SUBJECT TO ANY OTHER FEDERAL

24 AGENCY.—When acting as receiver, the Office shall not 

25 be subject to the direction or supervision of any other 


rwilkins on PROD1PC63 with BILLS
242 

•S 40 IS

1 agency of the United States or any State in the exercise 

2 of the rights, powers, and privileges of the Office. 

3 SEC. 1502. EFFECT OF RECEIVERSHIP PROCEEDING. 

4 Any order issued placing a national insurer into a re5 ceivership under this title for purposes of liquidation shall 

6 be deemed to be and have the effect of an order of liquida7 tion by a court of competent jurisdiction with a finding 

8 of insolvency against the insurer for purposes of any provi9 sion of State law relating to guaranty associations. 

10 SEC. 1503. POWERS AND DUTIES. 

11 (a) IN GENERAL.—The Office, as receiver, shall have 

12 all of the powers of the directors, officers, and managers 

13 of the national insurer, whose authority shall be sus14 pended, except as they are redelegated by the receiver. 

15 (b) SPECIFIC POWERS.—In addition to those powers 

16 otherwise provided by this title, the Office, as receiver, 

17 shall have the power to— 

18 (1) use, sell, or lease property of the insurer; 

19 (2) after notice and a hearing, borrow money 

20 on the security of the national insurer’s assets, bor21 row money without security, and execute and deliver 

22 all documents necessary to such transaction for the 

23 purpose of facilitating the receiver; 

24 (3) collect all debts and monies due and claims 

25 belonging to the national insurer, wherever located; 


rwilkins on PROD1PC63 with BILLS
243 

•S 40 IS

1 (4) institute and pursue legal actions and to 

2 continue any pending action, in any jurisdiction; 

3 (5) suspend, limit, or permit insurance policy 

4 withdrawals in connection with insurance policies; 

5 (6) do other acts as are necessary or expedient 

6 to collect, marshal, or protect the assets or property, 

7 including the power to sell, compound, compromise, 

8 or assign debts for purposes of collection upon such 

9 terms and conditions as the receiver considers best 

10 and that are consistent with this title; 

11 (7) enter into contracts necessary to carry out 

12 the order of rehabilitation or liquidation; 

13 (8) hold hearings, subpoena witnesses to compel 

14 their attendance, administer oaths, examine a person 

15 under oath, and compel a person to subscribe to the 

16 person’s testimony after it has been correctly re17 duced to writing and, in connection with these pow18 ers, require the production of books, papers, records, 

19 or other documents that the receiver considers rel20 evant to the inquiry; and 

21 (9) exercise all powers held or conferred upon 

22 receivers by the laws of the United States that are 

23 not inconsistent with the provisions of this title. 


rwilkins on PROD1PC63 with BILLS
244 

•S 40 IS

1 SEC. 1504. RULEMAKING. 

2 (a) IN GENERAL.—The Commissioner shall establish, 

3 by regulation, standards and procedures for receivership 

4 proceedings commenced under this title, including provi5 sions regarding automatic stays and other stays of pro6 ceedings, procedures, and priorities for the allowance or 

7 disallowance of claims, standards for the treatment of re8 insurance, and such other matters as the Commissioner 

9 determines appropriate. 

10 (b) MODEL.—Except as otherwise provided in this 

11 title, the regulations issued by the Commissioner under 

12 subsection (a) shall be substantially similar to the cor13 responding provisions of the Uniform Receivership Law 

14 adopted by the Interstate Insurance Receivership Compact 

15 Commission in September 1998. 

16 (c) RULES REGARDING COORDINATION WITH STATE

17 GUARANTY ASSOCIATIONS.—In order to facilitate insol18 vency protection of consumers pursuant to title VI, the 

19 regulations issued by the Commissioner under subsection 

20 (a) shall contain provisions that are substantially similar 

21 to sections 8I, 8J, 8K, and 14C of the Life and Health 

22 Insurance Guaranty Association Model Act, as promul23 gated by the NAIC, and in effect on May 24, 2007, and 

24 provisions substantially similar to sections 405 and 612 

25 of the Insurer Receivership Model Act, promulgated by the 

26 NAIC in December 2005. 


rwilkins on PROD1PC63 with BILLS
245 

•S 40 IS

1 SEC. 1505. JUDICIAL REVIEW. 

2 (a) NATIONAL INSURERS.— 

3 (1) IN GENERAL.—Whenever the Office is ap4 pointed as a receiver for a national insurer, the na5 tional insurer may, within 30 days of such appoint6 ment, bring an action in the United States District 

7 Court for the judicial district in which the principal 

8 place of business of such insurer is located, or in the 

9 United States District Court for the District of Co10 lumbia, for an order requiring the Office to remove 

11 itself as receiver. 

12 (2) REVIEW.—Upon the filing of an action 

13 under paragraph (1), the court shall, upon the mer14 its dismiss such action or direct the Office to remove 

15 itself as such receiver. 

16 (b) CLAIMANTS.—If the Office, acting as a receiver, 

17 disallows a claim against the receivership, a claimant may, 

18 within 60 days of the notice of disallowance, bring an ac19 tion in the United States District Court for the judicial 

20 district in which the principal place of business of the na21 tional insurer is located, or in the United States District 

22 Court for the District of Columbia, to challenge the dis23 allowance. 


rwilkins on PROD1PC63 with BILLS
246 

•S 40 IS

1 TITLE VI—INSOLVENCY 

2 PROTECTION 

3 SEC. 1601. PARTICIPATION IN GUARANTY ASSOCIATIONS. 

4 (a) PARTICIPATION IN STATE GUARANTY ASSOCIA5 TIONS.— 

6 (1) NATIONAL INSURERS.—A national insurer 

7 shall become and continue as a member of a quali8 fied association, as provided in section 1602, for 

9 each line of insurance covered in each State in which 

10 the national insurer is doing business. 

11 (2) ASSESSMENTS.—Qualified associations shall 

12 be authorized to levy assessments on national insur13 ers. National insurers shall be obligated to pay such 

14 assessments, to the extent that they are levied on 

15 the same terms that State insurers are obligated to 

16 pay assessments to the association or fund under ap17 plicable State law. 

18 (b) PARTICIPATION IN NATIONAL INSURANCE GUAR19 ANTY CORPORATION.—A national insurer or a State in20 surer that offers a line of insurance in a State that does 

21 not have a qualified association for such line of insurance 

22 shall become and continue to be a member of the Corpora23 tion, if such line of insurance is the subject of coverage 

24 by the Corporation. 


rwilkins on PROD1PC63 with BILLS
247 

•S 40 IS

1 SEC. 1602. QUALIFIED AND NONQUALIFIED ASSOCIATIONS. 

2 (a) QUALIFIED ASSOCIATION.—In this title, the term 

3 ‘‘qualified association’’ means a State insurance guaranty 

4 association or State insurance guaranty fund that— 

5 (1) admits as members both State and national 

6 insurers; 

7 (2) in the event that a member is placed into 

8 receivership, provides benefits or coverage to the pol9 icyholders of such member that are not less than the 

10 benefits or coverage described in section 1604 (for 

11 life and health insurance guaranty associations or 

12 funds) or section 1605 (for property and casualty 

13 guaranty funds); and 

14 (3) has a board of directors that is— 

15 (A) representative of insurers on a basis 

16 that does not unfairly discriminate against na17 tional insurers; and 

18 (B) fairly representative of insurers of dif19 ferent sizes and lines of insurance written. 

20 (b) DETERMINATION, ELECTION, AND RECERTIFI21 CATION.— 

22 (1) DETERMINATION.—Before the third anni23 versary of the date of enactment of this Act (re24 ferred to in this section as the ‘‘pre-publication pe25 riod’’), the Commissioner shall— 


rwilkins on PROD1PC63 with BILLS
248 

•S 40 IS

1 (A) review all existing State insurance 

2 guaranty associations and State insurance 

3 guaranty funds; 

4 (B) publish a list of those associations and 

5 funds that the Commissioner has determined to 

6 be qualified associations in accordance with the 

7 requirements of subsection (a); and 

8 (C) give the reasons why any State insur9 ance association or State insurance guaranty 

10 fund is not determined to be a qualified associa11 tion, in accordance with the requirements of 

12 subsection (a). 

13 (2) PETITION AND ELECTION.—After the pre14 publication period, any association or fund— 

15 (A) that is not identified on the list pub16 lished pursuant to paragraph (1) may petition 

17 the Commissioner for a determination that the 

18 association or fund is a qualified association, 

19 and the Commissioner shall make such a deter20 mination if the association or fund establishes 

21 to the satisfaction of the Commissioner that the 

22 requirements of subsection (a) have been met; 

23 and 

24 (B) that is named on the list published 

25 pursuant to paragraph (1) shall have an addiVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00248 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
249 

•S 40 IS

1 tional 1-year period of time following the pre2 publication period (referred to in this section as 

3 the ‘‘post-publication period’’) in which to no4 tify the Commissioner of the decision of the as5 sociation or fund to be a nonqualified associa6 tion, as defined in subsection (d). 

7 (3) PREEMPTION.—Any association or fund 

8 that elects to be a nonqualified association shall be 

9 subject to Federal preemption according to sub10 sections (e) and (f). 

11 (4) RECONSIDERATION.— 

12 (A) LETTER TO COMMISSIONER.—A State 

13 insurance guaranty association or State insur14 ance guaranty fund may seek qualification as a 

15 qualified association by letter to the Commis16 sioner, if the Commissioner— 

17 (i) determines that a State insurance 

18 guaranty association or State insurance 

19 guaranty fund does not meet the require20 ments of subsection (a), after the reasons 

21 for such denial have been addressed; or 

22 (ii) revokes the status of a State in23 surance guaranty association or State in24 surance guaranty fund as a qualified asso25 ciation pursuant to subsection (c), after 


rwilkins on PROD1PC63 with BILLS
250 

•S 40 IS

1 the reasons for such revocation have been 

2 addressed. 

3 (B) OTHER ELECTIONS.—An association 

4 or fund may seek qualification as a qualified as5 sociation by letter to the Commissioner after it 

6 meets the terms of the definition of a qualified 

7 association, as set forth in subsection (a), in 

8 any case in which a State insurance guaranty 

9 association or State insurance guaranty fund— 

10 (i) elects to be a nonqualified associa11 tion pursuant to paragraph (2)(B); or 

12 (ii) refuses to assume responsibilities 

13 of a qualified association pursuant to sub14 section (f). 

15 (c) REVOCATION.—The Commissioner shall revoke a 

16 determination that an association or fund is a qualified 

17 association, if, at any time, the Commissioner determines 

18 that the association or fund fails to satisfy the terms of 

19 the definition of a qualified association, as set forth in 

20 subsection (a). In such event, the Commissioner shall pro21 vide a written notice of the revocation to the affected asso22 ciation or fund, and the relevant State insurance regu23 lator, and the association or fund or the State insurance 

24 regulator may seek a review of the revocation under the 

25 terms of section 1706. 


rwilkins on PROD1PC63 with BILLS
251 

•S 40 IS

1 (d) NONQUALIFIED ASSOCIATION.—For purposes of 

2 this title, any State insurance guaranty association or 

3 State insurance guaranty fund that is not a qualified asso4 ciation shall be a ‘‘nonqualified association’’. 

5 (e) PREEMPTION.— 

6 (1) CONSERVATION, REHABILITATION, OR LIQ7 UIDATION.—Except as provided in paragraph (2) 

8 and in subsection (f), a nonqualified association may 

9 not levy an assessment upon a national insurer or 

10 State insurer to pay claims for a member insurer 

11 that is subject to an order of conservation, rehabili12 tation, or liquidation. 

13 (2) EXCEPTION.—In the event that a conserva14 tion, rehabilitation, or liquidation of a national in15 surer or State insurer referred to in paragraph (1) 

16 commences at a time when a State insurance guar17 anty association or State insurance guaranty fund is 

18 a qualified association, but such association or fund 

19 subsequently becomes a nonqualified association, 

20 such association or fund shall be entitled to levy as21 sessments in respect of such pending conservation, 

22 rehabilitation, or liquidation on all companies doing 

23 business in the State where the association or fund 

24 resides as if the association or fund remained a 

25 qualified association, unless the Commissioner finds 


rwilkins on PROD1PC63 with BILLS
252 

•S 40 IS

1 that such association or fund has failed to provide 

2 protection to consumers in accordance with State 

3 law or is unfairly discriminating in coverage or as4 sessments between national insurers and State in5 surers (in which case the Commissioner may, by 

6 order, transfer all coverage responsibilities and as7 sessment powers of the association or fund to the 

8 Corporation). 

9 (3) CORPORATION AUTHORITY.—The Corpora10 tion may contract with a nonqualified association de11 scribed in paragraph (2) for the purpose of assum12 ing the responsibilities of such nonqualified associa13 tion. The Corporation also may contract with a 

14 State insurance guaranty association or State insur15 ance guaranty fund that has been determined to be 

16 a qualified association pursuant to subsection (b)(4) 

17 for the purpose of permitting such association or 

18 fund to assume the responsibilities of the Corpora19 tion in a State where the association or fund resides 

20 in respect to a conservation, rehabilitation, or liq21 uidation that commenced at a time when such asso22 ciation or fund was a nonqualified association. 

23 (f) TEMPORARY PERIOD.— 

24 (1) IN GENERAL.—Except as provided in para25 graph (2), in the event of a conservation, rehabilitaVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00252 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
253 

•S 40 IS

1 tion, or liquidation of a State insurer or national in2 surer during the temporary period, a State insur3 ance guaranty association or State insurance guar4 anty fund, in addition to its existing powers under 

5 State law, may— 

6 (A) assess national insurers in an insol7 vency of a State insurer; and 

8 (B) assess State insurers and national in9 surers in an insolvency of a national insurer. 

10 (2) EXCEPTION.—Assessments may not be 

11 made under paragraph (1) if, not later than 6 

12 months after the date of enactment of this Act or 

13 on the date of levying any such assessment, which14 ever occurs first, the State association or fund pro15 vides notice to the Commissioner that it does not in16 tend to levy such assessments or provide coverage or 

17 benefits to persons holding insurance policies issued 

18 by national insurers. If a State association or fund 

19 provides such notice and does not withdraw the no20 tice during the temporary period, the Corporation 

21 shall provide coverage or benefits in respect to any 

22 conservation, rehabilitation, or liquidation that 

23 would have otherwise been the responsibility of the 

24 State association or fund during the temporary pe25 riod. 


rwilkins on PROD1PC63 with BILLS
254 

•S 40 IS

1 (3) DEFINITION.—In this subsection, the term 

2 ‘‘temporary period’’ means the 4-year period begin3 ning on the date of enactment of this Act. 

4 SEC. 1603. ESTABLISHMENT OF THE NATIONAL INSURANCE 

5 GUARANTY CORPORATION. 

6 (a) ESTABLISHMENT OF THE CORPORATION.— 

7 (1) IN GENERAL.—In the event that the list 

8 published under section 1602(b)(1) indicates that in 

9 any State, the principal life and health or property 

10 and casualty guaranty association or fund (or both) 

11 in such State has not been determined to be a quali12 fied association, and if the Commissioner has not 

13 granted any petition to reconsider any such deter14 mination before the end of the 4-year period begin15 ning on the date of enactment of this Act, the Com16 missioner shall establish the National Insurance 

17 Guaranty Corporation (in this section referred to as 

18 the ‘‘Corporation’’), in accordance with this section. 

19 (2) NONPROFIT AND SUCCESSION.—The Cor20 poration shall be a nonprofit corporation and shall 

21 have succession until dissolved by an Act of Con22 gress. 

23 (3) APPLICATION OF DISTRICT OF COLUMBIA

24 NONPROFIT CORPORATION ACT.—The Corporation 

25 shall, except as otherwise provided in this title, be 


rwilkins on PROD1PC63 with BILLS
255 

•S 40 IS

1 subject to, and have all the powers conferred upon 

2 a nonprofit corporation by the District of Columbia 

3 Nonprofit Corporation Act (D.C. Code, 29–301.01 

4 et seq., or any successor thereto). 

5 (b) MEMBERSHIP OF THE CORPORATION.— 

6 (1) IN GENERAL.—The membership of the Cor7 poration shall consist of member insurers. 

8 (2) DEFINITION.—In this title, the term ‘‘mem9 ber insurer’’— 

10 (A) means any national insurer or a State 

11 insurer that operates in a State that does not 

12 have a qualified association for the line of in13 surance offered by such national insurer or 

14 State insurer in such State, if such line of in15 surance is the subject of coverage by the Cor16 poration; and 

17 (B) does not include— 

18 (i) a hospital or medical service orga19 nization, whether for profit or not-for-prof20 it; 

21 (ii) a health maintenance organiza22 tion; 

23 (iii) a fraternal benefit society; 

24 (iv) a mandatory or voluntary State 

25 pooling plan; 


rwilkins on PROD1PC63 with BILLS
256 

•S 40 IS

1 (v) a mutual assessment company or 

2 other person that operates on an assess3 ment basis; 

4 (vi) a surplus lines carrier, a risk re5 tention group, or a State insurer writing 

6 business on a non-admitted or unlicensed 

7 basis; 

8 (vii) an organization whose lines of 

9 business include only charitable gift annu10 ities; or 

11 (viii) an entity similar to any entity 

12 described in any of clauses (i) through 

13 (vii). 

14 (c) CORPORATE GOVERNANCE.— 

15 (1) GOVERNING BODY.—The board of directors 

16 of the Corporation shall be the governing body of the 

17 Corporation and shall be vested with all powers nec18 essary for the management and administration of 

19 the affairs of the Corporation and the promotion of 

20 the purposes of the Corporation, as authorized by 

21 this Act. The authority of the board of directors 

22 shall be specified in the bylaws of the Corporation. 

23 (2) ELECTION OR APPOINTMENT.—The initial 

24 board of directors of the Corporation shall be elected 

25 by the membership of the Corporation, provided that 


rwilkins on PROD1PC63 with BILLS
257 

•S 40 IS

1 if the membership fails to elect the initial board of 

2 the Corporation on or before the end of the 4-year 

3 period specified in section 1602(f), then the initial 

4 board shall be appointed from among the member5 ship by the Commissioner. Membership on the board 

6 of directors shall be fairly representative of members 

7 of differing size and lines of business written. 

8 (3) INITIAL BYLAWS AND RULES.—The Com9 missioner shall prescribe the initial bylaws and rules 

10 governing the Corporation, which shall set forth the 

11 composition of the board of directors, the term of 

12 board members, filling of board vacancies, board 

13 compensation, election of officers and procedures to 

14 call board meetings, and all matters necessary for 

15 the governance of the Corporation not addressed by 

16 the District of Columbia Nonprofit Corporation Act 

17 (D.C. Code, 29–301.01 et seq.). 

18 (4) AMENDMENTS TO BYLAWS AND RULES.— 

19 An amendment to the bylaws and rules of the Cor20 poration following the establishment of the initial by21 laws and rules as provided in paragraph (3) shall be 

22 adopted by the board of directors of the Corporation 

23 following the approval of the amendment by the 

24 Commissioner. 


rwilkins on PROD1PC63 with BILLS
258 

•S 40 IS

1 (d) RELATIONSHIP OF CORPORATION TO THE FED2 ERAL GOVERNMENT.— 

3 (1) SUPERVISION AND OVERSIGHT.—The Cor4 poration shall be subject to supervision and over5 sight by the Commissioner. 

6 (2) NOT AN AGENCY OR INSTRUMENTALITY OF

7 THE FEDERAL GOVERNMENT.—The Corporation 

8 shall not be an agency or instrumentality of the 

9 United States Government. 

10 (3) FULL FAITH AND CREDIT.—The obligations 

11 of the Corporation shall not be backed, directly or 

12 indirectly, by the full faith and credit of the United 

13 States. The Corporation shall receive no financial as14 sistance from or have any authority to borrow from 

15 the United States. 

16 (4) FUNDS NOT INCLUDED IN THE FEDERAL

17 BUDGET.—Funds held by or due to the Corporation 

18 shall not be included in the budget of the United 

19 States, nor may the United States borrow or pledge 

20 such funds. 

21 (e) CONTRACTING WITH PERSON TO ADMINISTER

22 BENEFITS.—The Corporation may contract, with the ap23 proval of the Commissioner, with another person to ad24 minister the benefits to be provided by the Corporation, 


rwilkins on PROD1PC63 with BILLS
259 

•S 40 IS

1 or otherwise as necessary to fulfill the responsibilities of 

2 the Corporation under this title. 

3 (f) ACCOUNTS FOR ADMINISTRATION AND ASSESS4 MENTS.—For purposes of administration and assess5 ments, the Corporation shall establish and separately 

6 maintain 6 accounts as follows: 

7 (1) A life insurance account. 

8 (2) An annuity account. 

9 (3) A health account. 

10 (4) A workers’ compensation account. 

11 (5) An automobile insurance account. 

12 (6) An account for all other lines of property/ 

13 casualty insurance to which this title applies. 

14 SEC. 1604. BENEFITS FOR POLICYHOLDERS OF NATIONAL 

15 LIFE INSURERS. 

16 (a) IN GENERAL.—If a national life insurer or State 

17 life insurer is doing business in a State that does not have 

18 a qualified association, as defined in section 1602, for the 

19 line of insurance offered by such national life insurer or 

20 State life insurer in such State (and if such line of insur21 ance is covered by the Corporation), and such national life 

22 insurer or State life insurer is placed into receivership for 

23 purposes of liquidation, the Corporation shall provide ben24 efits as specified in subsections (b) and (c). 


rwilkins on PROD1PC63 with BILLS
260 

•S 40 IS

1 (b) COVERED PERSONS.—Benefits shall be made 

2 available as follows: 

3 (1) To persons who, regardless of where the 

4 persons reside, are the beneficiaries, assignees, or 

5 payees of the persons covered under paragraph (2). 

6 (2) To persons who are owners of or certificate 

7 holders under the insurance policies, and in each 

8 case who are residents of the State in which the 

9 nonqualified association is located. 

10 (3) This title shall not provide coverage to a 

11 person who is a payee (or beneficiary) of a policy 

12 owner, if the payee (or beneficiary) is afforded any 

13 coverage by a qualified association. 

14 (4) This title is intended to provide coverage to 

15 persons who are residents of States in which non16 qualified associations are located and, in special cir17 cumstances, to persons who are not residents of such 

18 States. In order to avoid duplicate coverage, if a per19 son who would otherwise receive coverage under this 

20 title is provided coverage under the laws of any 

21 State other than the State in which the nonqualified 

22 association is located, the person shall not be pro23 vided coverage under this title. In determining the 

24 application of the provisions of this paragraph in sit25 uations where a person could be covered by the assoVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00260 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
261 

•S 40 IS

1 ciation of more than 1 State, whether as a policy 

2 owner, payee, beneficiary, or assignee, this title shall 

3 be construed in conjunction with the laws of such 

4 States to result in coverage by only 1 association or 

5 by the Corporation. 

6 (c) INSURANCE POLICIES COVERED AND COVERAGE

7 LIMITS.— 

8 (1) REGULATION.—The Commissioner shall es9 tablish, by regulation, the lines of insurance covered, 

10 the scope of coverage, defenses, exclusions, and the 

11 coverage limits on benefits for policyholders. 

12 (2) NAIC MODEL.—The regulations described 

13 in paragraph (1) shall be substantially similar to the 

14 ‘‘Life and Health Insurance Guaranty Association 

15 Model Act’’ of the NAIC in effect on May 24, 2007, 

16 subject to the exclusions and benefits described in 

17 paragraphs (3) and (4), respectively. 

18 (3) EXCLUSIONS FROM COVERAGE.—There 

19 shall be excluded from coverage under this title— 

20 (A) any portion of a policy or contract not 

21 guaranteed by the insurer, or under which the 

22 risk is borne by the policy or contract owner; 

23 (B) any policy or contract of reinsurance, 

24 unless assumption certificates have been issued 

25 pursuant to the reinsurance policy or contract; 


rwilkins on PROD1PC63 with BILLS
262 

•S 40 IS

1 (C) any portion of a policy or contract, to 

2 the extent that the rate of interest on which it 

3 is based— 

4 (i) averaged over the period of 4 years 

5 prior to the date on which the Corporation 

6 becomes obligated with respect to the pol7 icy or contract, exceeds a rate of interest 

8 determined by subtracting 2 percentage 

9 points from the average corporate bond 

10 yield, as determined by the Commissioner, 

11 averaged for that same 4-year period or for 

12 such lesser period, if the policy or contract 

13 was issued less than 4 years before the 

14 Corporation became so obligated; and 

15 (ii) on and after the date on which the 

16 Corporation becomes obligated with respect 

17 to the policy or contract, exceeds the rate 

18 of interest determined by subtracting 3 

19 percentage points from the average cor20 porate bond yield, as most recently avail21 able, as determined by the Commissioner; 

22 (D) any portion of a policy or contract 

23 issued to a plan or program of an employer, as24 sociation, or other person to provide life, health, 

25 or annuity benefits to its employees, members, 


rwilkins on PROD1PC63 with BILLS
263 

•S 40 IS

1 or others, to the extent that the plan or pro2 gram is self-funded or uninsured, including ben3 efits payable by an employer, association, or 

4 other person under— 

5 (i) a multiple employer welfare ar6 rangement, as defined in section 514 of the 

7 Employee Retirement Income Security Act 

8 of 1974; 

9 (ii) a minimum premium group insur10 ance plan; 

11 (iii) a stop-loss group insurance plan; 

12 or 

13 (iv) an administrative services only 

14 contract; 

15 (E) any portion of a policy or contract, to 

16 the extent that it provides for— 

17 (i) dividends or experience rating 

18 credits; 

19 (ii) voting rights; or 

20 (iii) payment of any fees or allowances 

21 to any person, including the policy or con22 tract owner, in connection with the service 

23 to or administration of the policy or con24 tract; 


rwilkins on PROD1PC63 with BILLS
264 

•S 40 IS

1 (F) any portion of a policy or contract, to 

2 the extent that the assessments required by sec3 tion 1608 with respect to the policy or contract 

4 are preempted by Federal or State law; 

5 (G) any obligation that does not arise 

6 under the express written terms of the policy or 

7 contract issued by the insurer to the contract 

8 owner or policy owner, including— 

9 (i) claims based on marketing mate10 rials; 

11 (ii) claims based on side letters, rid12 ers, or other documents that were issued 

13 by the insurer without meeting applicable 

14 policy form filing or approval require15 ments; 

16 (iii) misrepresentations of or regard17 ing policy benefits; 

18 (iv) extra-contractual claims; or 

19 (v) a claim for penalties or consequen20 tial or incidental damages; 

21 (H) any contractual agreement that estab22 lishes the obligations of the member insurer to 

23 provide a book value accounting guaranty for 

24 defined contribution benefit plan participants 

25 by reference to a portfolio of assets that is 


rwilkins on PROD1PC63 with BILLS
265 

•S 40 IS

1 owned by the benefit plan or its trustee, which 

2 in each case is not an affiliate of the member 

3 insurer; 

4 (I) any unallocated annuity contract; and 

5 (J) any funding agreement. 

6 (4) COVERAGE BENEFITS.—The benefits pro7 vided under this title shall in no event exceed the 

8 lesser of— 

9 (A) the contractual obligations for which 

10 the insurer is liable, or would have been liable 

11 if it were not an impaired or insolvent insurer; 

12 or 

13 (B) with respect to— 

14 (i) 1 life, regardless of the number of 

15 insurance policies— 

16 (I) $300,000 in life insurance 

17 death benefits, but not more than 

18 $100,000 in net cash surrender and 

19 net cash withdrawal values for life in20 surance; 

21 (II) in health insurance bene22 fits— 

23 (aa) $100,000 for long-term 

24 care; or 


rwilkins on PROD1PC63 with BILLS
266 

•S 40 IS

1 (bb) $300,000 for disability 

2 insurance; or 

3 (III) $100,000 in the present 

4 value of annuity benefits, including 

5 net cash surrender and net cash with6 drawal values; and 

7 (ii) each payee of a structured settle8 ment annuity (or beneficiary or bene9 ficiaries of the payee if deceased), 

10 $100,000 in present value annuity bene11 fits, in the aggregate, including net cash 

12 surrender and net cash withdrawal values, 

13 if any, except that, in no event shall bene14 fits exceed— 

15 (I) an aggregate of $300,000 in 

16 benefits with respect to any 1 life 

17 under clause (i) and this clause; or 

18 (II) with respect to 1 policy 

19 owner of multiple nongroup insurance 

20 policies of life insurance, or 1 policy 

21 owner of 1 or more group insurance 

22 policies of life insurance insuring the 

23 lives of multiple insureds, where the 

24 policy owner (or any benefit plan, 

25 trust, or other entity sponsored or 


rwilkins on PROD1PC63 with BILLS
267 

•S 40 IS

1 controlled by the policy owner) is also 

2 the beneficiary, whether the policy 

3 owner is an individual, firm, corpora4 tion, or other person, and whether the 

5 individuals insured are officers, man6 agers, employees, or other individuals, 

7 more than $5,000,000 in benefits, re8 gardless of the number of such poli9 cies held by the policy owner. 

10 (5) RULE OF CONSTRUCTION.—The limitations 

11 set forth in this subsection are limitations on bene12 fits under this title before taking into account either 

13 the subrogation and assignment rights or the extent 

14 to which those benefits could be provided out of the 

15 assets of the impaired or insolvent insurer attrib16 utable to covered policies. 

17 (6) USE OF ASSETS.—The obligations for bene18 fits under this title may be met by the use of assets 

19 attributable to covered policies or reimbursed to the 

20 Corporation pursuant to the subrogation and assign21 ment rights in section 1607. 

22 (d) OTHER EXCLUSIONS.—The Corporation shall not 

23 be required to guarantee, assume, reinsure, or perform or 

24 cause to be guaranteed, assumed, reinsured, or performed, 

25 the contractual obligations of the insolvent or impaired inVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00267 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
268 

•S 40 IS

1 surer under a covered policy that do not materially affect 

2 the economic values or economic benefits of the covered 

3 policy. 

4 SEC. 1605. CLAIMS COVERED FOR POLICYHOLDERS OF NA5 TIONAL PROPERTY/CASUALTY INSURERS. 

6 (a) DEFINITIONS.—For purposes of this section, the 

7 following definitions shall apply: 

8 (1) ASSOCIATION.—The term ‘‘Association’’ 

9 means any property/casualty insurance guaranty as10 sociation created under the laws of the relevant 

11 State, no matter how denominated, which performs 

12 the role of an association or fund paying certain 

13 property/casualty claims made under policies of an 

14 insolvent insurer to or on behalf of policyholders re15 siding in the State. 

16 (2) CLAIMANT.—The term ‘‘claimant’’ means 

17 any insured making a first party claim or any per18 son instituting a liability claim, except that no per19 son who is an affiliate of the insolvent insurer may 

20 be a claimant. 

21 (3) COVERED CLAIM.—The term ‘‘covered 

22 claim’’— 

23 (A) means an unpaid claim, including one 

24 for unearned premiums, submitted by a claim25 ant, which arises out of and is within the covVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00268 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
269 

•S 40 IS

1 erage and is subject to the applicable limits of 

2 an insurance policy to which this title applies 

3 issued by a member insurer, if— 

4 (i) such member insurer becomes an 

5 insolvent insurer after the effective date of 

6 this title; and 

7 (ii) either— 

8 (I) the claimant or insured is a 

9 resident of a State that does not have 

10 a qualified association covering the 

11 type of risk insured at the time of the 

12 insured event (for which purpose, in 

13 the case of an entity other than an in14 dividual, the residence of a claimant, 

15 insured, or policyholder is the State in 

16 which its principal place of business is 

17 located at the time of the insured 

18 event); or 

19 (II) the claim is a first party 

20 claim for damage to property with a 

21 permanent location in the State; and 

22 (B) does not include— 

23 (i) any amount awarded as punitive or 

24 exemplary damages; 


rwilkins on PROD1PC63 with BILLS
270 

•S 40 IS

1 (ii) any amount sought as a return of 

2 premium under any retrospective rating 

3 plan; 

4 (iii) any amount due any reinsurer, 

5 insurer, insurance pool, underwriting asso6 ciation, health maintenance organization, 

7 hospital plan corporation, professional 

8 health service corporation, or self-insurer 

9 as subrogation recoveries, reinsurance re10 coveries, contribution, indemnification, or 

11 otherwise, and no such claim for any 

12 amount due any reinsurer, insurer, insur13 ance pool, underwriting association, health 

14 maintenance organization, hospital plan 

15 corporation, or self-insurer may be as16 serted against a person insured under a 

17 policy issued by an insolvent insurer, other 

18 than to the extent that such claim exceeds 

19 the obligation limitations of the Corpora20 tion set forth in this Act; 

21 (iv) any first party claim by an in22 sured whose net worth exceeds 

23 $25,000,000 on December 31 of the year 

24 prior to the year in which the member in25 surer becomes an insolvent insurer (for 


rwilkins on PROD1PC63 with BILLS
271 

•S 40 IS

1 which purpose, the net worth of the in2 sured on that date shall be deemed to in3 clude the aggregate net worth of the in4 sured and all of its affiliates and subsidi5 aries, as calculated on a consolidated 

6 basis); or 

7 (v) any first party claim by an insured 

8 which is an affiliate of the insolvent in9 surer. 

10 (4) INSOLVENT INSURER.—The term ‘‘insolvent 

11 insurer’’ means an insurer with a line of business 

12 covered by the Corporation and doing business in a 

13 State without a qualified association, covering the 

14 type of risk insured, and against whom a final order 

15 of liquidation with a finding of insolvency has been 

16 issued pursuant to title V and the regulations pro17 mulgated thereunder. 

18 (b) IN GENERAL.—If a national property and cas19 ualty insurer or a State property and casualty insurer is 

20 doing business in a State that does not have a qualified 

21 association for the line of insurance offered by such in22 surer in such State (and if such line of insurance is cov23 ered by the Corporation), and such insurer is placed into 

24 receivership for purposes of liquidation, the Corporation 

25 shall provide benefits as specified in this section. 


rwilkins on PROD1PC63 with BILLS
272 

•S 40 IS

1 (c) INSURANCE LINES INCLUDED.—This title shall 

2 provide coverage for covered claims on all lines of direct 

3 insurance (other than those specified in subsection (d))— 

4 (1) existing prior to the order of liquidation; 

5 (2) arising not later than 30 days after the 

6 order of liquidation; 

7 (3) arising before the insurance policy expira8 tion date, if earlier than 30 days after the order or 

9 liquidation; or 

10 (4) arising before the insured replaces the in11 surance policy or causes its cancellation, if the in12 sured does so not later than 30 days after the order 

13 of liquidation. 

14 (d) INSURANCE LINES EXCLUDED.—This title shall 

15 not provide coverage on claims for— 

16 (1) life, annuity, health, or disability insurance 

17 (except as provided in section 1604); 

18 (2) mortgage guaranty, financial guaranty, or 

19 other forms of insurance offering protection against 

20 investment risks; 

21 (3) fidelity or surety bonds, or any other bond22 ing obligations; 

23 (4) credit insurance, vendors single interest in24 surance, or collateral protection insurance or any 


rwilkins on PROD1PC63 with BILLS
273 

•S 40 IS

1 similar insurance protecting the interests of the 

2 creditor arising out of a creditor-debtor transaction; 

3 (5) insurance of warranties or service contracts 

4 including insurance that provides for the repair, re5 placement, or service of goods or property, indem6 nification for repair, replacement, or service for the 

7 operational or structural failure of the goods or 

8 property due to a defect in materials, workmanship, 

9 or normal wear and tear, or provides reimbursement 

10 for the liability incurred by the issuer of agreements 

11 or service contracts that provide such benefits; 

12 (6) title insurance; 

13 (7) ocean marine insurance; 

14 (8) any transaction or combination of trans15 actions between a person (including affiliates of such 

16 person) and an insurer (including affiliates of such 

17 insurer) which involves the transfer of investment or 

18 credit risk unaccompanied by transfer of insurance 

19 risk; or 

20 (9) any insurance provided by or guaranteed by 

21 any State or the Federal Government. 

22 (e) COVERAGE LIMITATIONS.— 

23 (1) IN GENERAL.—The obligation to a claimant 

24 under this section shall be satisfied by paying to the 

25 claimant— 


rwilkins on PROD1PC63 with BILLS
274 

•S 40 IS

1 (A) the full amount of a covered claim for 

2 the benefits under a workers’ compensation in3 surance coverage; 

4 (B) an amount not exceeding $10,000 per 

5 policy for a covered claim for return of un6 earned premiums, less a deductible of $100; 

7 and 

8 (C) an amount not exceeding $300,000 per 

9 claim for all other covered claims, except that 

10 for purposes of such limitation, all claims of 

11 any kind whatsoever arising out of, or related 

12 to, bodily injury or death to any 1 person shall 

13 constitute a single claim, regardless of the num14 ber of insurance policies issued by the insolvent 

15 insurer, the number of claims made, or the 

16 number of claimants. 

17 (2) LIMITATION.—In no event shall a claimant 

18 be entitled to an amount in excess of the obligation 

19 of the insolvent insurer under the policy or coverage 

20 from which the claim arises. 

21 (3) EXCLUSIONS.—Notwithstanding any other 

22 provisions of this title, for purposes of this sub23 section, a covered claim shall not include— 

24 (A) a claim filed more than 18 months 

25 after the entry of the order of liquidation or the 


rwilkins on PROD1PC63 with BILLS
275 

•S 40 IS

1 final date set for the filing of claims against the 

2 liquidator or receiver of the insolvent insurer 

3 pursuant to title V and the regulations promul4 gated thereunder, whichever date occurs first; 

5 or 

6 (B) any claim filed with the Corporation or 

7 the receiver for losses incurred but not reported 

8 under the policy of the insured. 

9 (f) EXHAUSTION OF OTHER COVERAGE.— 

10 (1) IN GENERAL.—Any person having a claim 

11 under an insurance policy, whether or not it is a pol12 icy issued by a member insurer, and the claim under 

13 such other policy arises from the same facts, injury, 

14 or loss that gave rise to a covered claim against the 

15 Corporation, shall be required first to exhaust all 

16 coverage provided by any such policy. 

17 (2) REDUCTIONS.—Any amount payable on a 

18 covered claim under this title shall be reduced by the 

19 full applicable limits stated in such other insurance 

20 policy, and the Corporation shall receive a full credit 

21 for such stated limits, or, where there are no appli22 cable stated limits, the claim shall be reduced by the 

23 total recovery. 

24 (3) LIMITATION.—Notwithstanding paragraphs 

25 (1) and (2)— 


rwilkins on PROD1PC63 with BILLS
276 

•S 40 IS

1 (A) no person shall be required to exhaust 

2 any right under the policy of an insolvent in3 surer; 

4 (B) a claim under a policy providing liabil5 ity coverage to a person who may be jointly and 

6 severally liable with or a joint tortfeasor with 

7 the person covered under the policy of the insol8 vent insurer that gives rise to the covered claim 

9 shall be considered to be a claim arising from 

10 the same facts, injury, or loss that gave rise to 

11 the covered claim against the Corporation; 

12 (C) a claim under an insurance policy shall 

13 also include, for purposes of this section— 

14 (i) a claim against a health mainte15 nance organization, a hospital plan cor16 poration, or a professional health service 

17 corporation; and 

18 (ii) any amount payable by or on be19 half of a self-insurer; and 

20 (D) to the extent that the obligation of the 

21 Corporation is reduced by the application of 

22 this section, the liability of the person insured 

23 by the policy of the insolvent insurer for the 

24 claim shall be reduced in the same amount. 


rwilkins on PROD1PC63 with BILLS
277 

•S 40 IS

1 (4) ORDER OF RECOVERY.—Any person having 

2 a claim which may be recovered under more than 1 

3 qualified association shall seek recovery first, from 

4 the qualified association of the place of residence of 

5 the insured (or the Corporation, if the place of resi6 dence is a State that does not have a qualified asso7 ciation), except that if it is a first party claim for 

8 damage to property with a permanent location, the 

9 person shall seek recovery first from the qualified 

10 association (or the Corporation, if applicable) of the 

11 location of the property, and if it is a workers’ com12 pensation claim, the person shall seek recovery first 

13 from the qualified association (or the Corporation, if 

14 applicable) of the residence of the claimant. Any re15 covery under this Act shall be reduced by the 

16 amount of recovery from any other insurance guar17 anty association or its equivalent. 

18 (g) RIGHT TO RECOVER.—The Corporation shall 

19 have the right to recover all amounts paid the Corporation 

20 on behalf of a person, whether for indemnity, defense, or 

21 otherwise, in the case of— 

22 (1) any insured whose net worth on December 

23 31 of the year immediately preceding the date on 

24 which the insurer becomes an insolvent insurer ex25 ceeds $25,000,000 (and for such purpose, the net 


rwilkins on PROD1PC63 with BILLS
278 

•S 40 IS

1 worth of an insured on such date shall be deemed 

2 to include the aggregate net worth of the insured 

3 and all of its subsidiaries and affiliates, as calculated 

4 on a consolidated basis); and 

5 (2) any person who is an affiliate of the insol6 vent insurer. 

7 (h) PAYMENT OF CLAIMS.—Payment of claims under 

8 this title by the Corporation shall be made from the appro9 priate property and casualty account established pursuant 

10 to section 1603. 

11 SEC. 1606. POWERS AND DUTIES OF THE CORPORATION. 

12 (a) POWERS AND DUTIES RELATED TO CERTAIN NA13 TIONAL LIFE INSURERS AND STATE LIFE INSURERS.— 

14 (1) NATIONAL LIFE INSURERS AND STATE LIFE

15 INSURERS WHO ARE MEMBER INSURERS SUBJECT TO

16 REHABILITATION.—Subject to the provisions of this 

17 title, if a national life insurer or a State life insurer 

18 is a member insurer placed into receivership for pur19 poses of rehabilitation, the Corporation may, in its 

20 discretion, and subject to any conditions imposed by 

21 the Corporation that do not impair the contractual 

22 obligations of the national life insurer or State life 

23 insurer, and that are approved by the Commis24 sioner— 


rwilkins on PROD1PC63 with BILLS
279 

•S 40 IS

1 (A) guarantee, assume, or reinsure, or 

2 cause to be guaranteed, assumed, or reinsured, 

3 any or all of the insurance policies of the na4 tional life insurer or State life insurer; or 

5 (B) provide such monies, pledges, loans, 

6 notes, guarantees, or other means as are proper 

7 to effectuate subparagraph (A) and assure pay8 ment of the contractual obligations of the na9 tional life insurer or State life insurer, pending 

10 action under subparagraph (A). 

11 (2) NATIONAL LIFE INSURERS AND STATE LIFE

12 INSURERS WHO ARE MEMBER INSURERS SUBJECT TO

13 LIQUIDATION.— 

14 (A) IN GENERAL.—Subject to the provi15 sions of this title, if a national life insurer or 

16 a State life insurer is a member insurer placed 

17 into receivership for purposes of liquidation, the 

18 Corporation shall, in its discretion, take either 

19 the actions specified in subparagraph (B) or the 

20 actions specified in subparagraph (C). 

21 (B) ASSUMPTION OF OBLIGATIONS OF NA22 TIONAL LIFE INSURER OR STATE LIFE INSURER

23 WHO IS A MEMBER INSURER.—The Corpora24 tion— 

25 (i) shall— 


rwilkins on PROD1PC63 with BILLS
280 

•S 40 IS

1 (I) guarantee, assume, or rein2 sure, or cause to be guaranteed, as3 sumed, or reinsured, the insurance 

4 policies of the national life insurer or 

5 State life insurer; or 

6 (II) assure payment of the con7 tractual obligations of the national life 

8 insurer or State life insurer; and 

9 (ii) shall provide monies, pledges, 

10 loans, notes, guarantees, or other means 

11 reasonably necessary to discharge the du12 ties imposed by this section. 

13 (C) PROVISION OF BENEFITS TO POLICY14 HOLDERS.—The Corporation— 

15 (i) with respect to life insurance poli16 cies and annuities, shall assure payment of 

17 benefits for premiums identical to the pre18 miums and benefits (except for terms of 

19 conversion and renewability) that would 

20 have been payable under the insurance 

21 policies of the national life insurer or State 

22 life insurer who is a member insurer, for 

23 claims incurred— 

24 (I) with respect to group insur25 ance policies, not later than the earVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00280 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
281 

•S 40 IS

1 lier of the next renewal date under 

2 those insurance policies or 45 days, 

3 but not less than 30 days, after the 

4 date on which the Corporation be5 comes obligated under this section 

6 with respect to such policies; and 

7 (II) with respect to nongroup in8 surance policies, not later than the 

9 earlier of the next renewal date (if 

10 any) under the insurance policies or 1 

11 year, but not less than 30 days, from 

12 the date on which the Corporation be13 comes obligated under this section 

14 with respect to such policies; 

15 (ii) shall make diligent efforts to pro16 vide all known insureds or annuitants (for 

17 nongroup insurance policies), or group pol18 icyholders with respect to group insurance 

19 policies, 30 days advance notice of the ter20 mination (pursuant to clause (i)) of the 

21 benefits provided; 

22 (iii) with respect to nongroup insur23 ance policies covered by this title, shall 

24 make available to each known insured or 

25 annuitant and to each individual formerly 


rwilkins on PROD1PC63 with BILLS
282 

•S 40 IS

1 insured or formerly an annuitant under a 

2 group policy who is not eligible for replace3 ment group coverage, substitute coverage 

4 on an individual basis in accordance with 

5 the provisions of clause (iv), if the insured 

6 or annuitants had a right under law or the 

7 terminated policy or annuity to convert 

8 coverage to individual coverage or to con9 tinue an individual policy or annuity in 

10 force until a specified age or for a specified 

11 time, during which the national life insurer 

12 or State life insurer had no right unilater13 ally to make changes in any provision of 

14 the policy or had a right only to make 

15 changes in premium by class; 

16 (iv) in providing the substitute cov17 erage required under clause (iii), may offer 

18 either to reissue the terminated coverage 

19 or to issue an alternative policy, which al20 ternative or reissued insurance policies— 

21 (I) shall be offered without re22 quiring evidence of insurability; 

23 (II) may not provide for any 

24 waiting period or exclusion that would 


rwilkins on PROD1PC63 with BILLS
283 

•S 40 IS

1 not have applied under the terminated 

2 policy; and 

3 (III) may be reinsured by the 

4 Corporation; and 

5 (v) shall obtain the approval of the 

6 Commissioner of all alternative policies 

7 adopted or issued by the Corporation 

8 under this paragraph. 

9 (D) TERMINATION OF BENEFITS.—Bene10 fits under this title with respect to coverage 

11 under any policy of an insolvent national life in12 surer or under any reissued or alternative policy 

13 shall cease on the date on which the coverage 

14 or policy is replaced by another similar policy 

15 by the policyholder, the insured, or the Cor16 poration. 

17 (3) TREATMENT OF PREMIUMS.— 

18 (A) NONPAYMENT OF PREMIUMS.—The 

19 nonpayment of premiums within 31 days after 

20 the date required under the terms of any guar21 anteed, assumed, alternative, or reissued policy 

22 or substitute coverage provided pursuant to 

23 paragraphs (1) or (2) shall terminate benefits 

24 under this title with respect to the policy, ex25 cept with respect to any claims incurred or any 


rwilkins on PROD1PC63 with BILLS
284 

•S 40 IS

1 net cash surrender value that may be due in ac2 cordance with the provisions of this title. 

3 (B) PREMIUMS DUE AFTER LIQUIDATION

4 INITIATED.—Premiums due for coverage under 

5 covered policies after the Commissioner has ini6 tiated the liquidation of a national life insurer 

7 or a State life insurer who is a member insurer 

8 shall belong to and be payable at the direction 

9 of the Corporation, and the Corporation shall 

10 be liable for unearned premiums due to the pol11 icyholders under the covered policies. 

12 (4) PERMANENT AND TEMPORARY LIENS.—In 

13 carrying out the duties under paragraph (2), the 

14 Corporation may, subject to the approval of the 

15 Commissioner— 

16 (A) impose permanent policy liens in con17 nection with a guarantee, assumption, or rein18 surance contract, if the Corporation finds that 

19 the amounts which can be assessed under this 

20 title are less than the amounts needed to assure 

21 full and prompt performance of the protections 

22 provided under this title, or that the economic 

23 or financial conditions as they affect the insur24 ance industry are sufficiently adverse to render 


rwilkins on PROD1PC63 with BILLS
285 

•S 40 IS

1 the imposition of such permanent policy liens to 

2 be in the public interest; or 

3 (B) impose temporary moratoriums or 

4 liens on payments of cash values and policy 

5 loans, or any other right to withdraw funds on 

6 payments of cash values and policy loans, or 

7 any other right to withdraw funds held in con8 junction with insurance policies, in addition to 

9 any contractual provisions for deferral of cash 

10 or policy loan value. 

11 (5) INDEXED INSURANCE POLICIES.— 

12 (A) IN GENERAL.—In carrying out its du13 ties in connection with paragraphs (1) or (2), 

14 the Corporation may, subject to the approval of 

15 the Commissioner, issue substitute coverage for 

16 an insurance policy that provides an interest 

17 rate, crediting rate, or similar factor deter18 mined by use of an index or other external ref19 erence stated in the insurance policy employed 

20 in calculating returns or changes in value by 

21 issuing an alternative insurance policy in ac22 cordance with subparagraph (B). 

23 (B) APPLICABILITY.—Subparagraph (A) 

24 shall apply in any case in which— 


rwilkins on PROD1PC63 with BILLS
286 

•S 40 IS

1 (i) in lieu of the index or other exter2 nal reference provided for in the original 

3 insurance policy, the alternative insurance 

4 policy provides for— 

5 (I) a fixed interest rate; 

6 (II) payment of dividends with 

7 minimum guarantees; or 

8 (III) a different method for cal9 culating interest or changes in value; 

10 (ii) there is no requirement for evi11 dence of insurability, waiting period, or 

12 other exclusion that would not have applied 

13 under the replaced insurance policy; and 

14 (iii) the alternative insurance policy is 

15 substantially similar to the replaced insur16 ance policy in all other material terms. 

17 (b) POWERS AND DUTIES RELATED TO NATIONAL

18 PROPERTY/CASUALTY INSURERS AND STATE PROPERTY/ 

19 CASUALTY INSURERS WHO ARE MEMBER INSURERS

20 WITH RESPECT TO COVERED CLAIMS.— 

21 (1) IN GENERAL.—Subject to the terms of this 

22 title, when a national property/casualty insurer or a 

23 State property/casualty insurer is a member insurer 

24 placed into receivership for purposes of liquidation, 


rwilkins on PROD1PC63 with BILLS
287 

•S 40 IS

1 the Corporation shall exercise the powers and duties 

2 specified in this subsection. 

3 (2) ASSUMPTION OF OBLIGATIONS.—The Cor4 poration shall be deemed the insurer to the extent 

5 of its obligation on covered claims and to that ex6 tent, shall have all rights, duties, and obligations of 

7 the insolvent national property/casualty insurer or 

8 State property/casualty insurer, as if such insurer 

9 had not become insolvent, including the right to pur10 sue and retain salvage and subrogation recoverable 

11 on covered claims obligations to the extent paid by 

12 the Corporation. 

13 (3) INVESTIGATION AND PAYMENT OF

14 CLAIMS.—The Corporation shall investigate claims 

15 brought against the Corporation and adjust, com16 promise, settle, and pay covered claims, to the extent 

17 of the obligations of the Corporation. The Corpora18 tion shall pay claims in any order that it determines 

19 reasonable, including the payment of claims as they 

20 are received from the claimants or in groups or cat21 egories of claims. The Corporation may review set22 tlements, releases, and adjustments to which the in23 solvent national property/casualty insurer or State 

24 property/casualty insurer or its insured were parties 

25 to determine the extent to which the settlements, reVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00287 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
288 

•S 40 IS

1 leases, and judgments may be properly contested. 

2 The Corporation shall have the right to appoint or 

3 substitute and to direct legal counsel retained under 

4 liability insurance policies for the defense of covered 

5 claims. 

6 (c) OTHER CORPORATION POWERS.—In addition to 

7 the rights and powers provided elsewhere in this title, the 

8 Corporation may— 

9 (1) enter into such contracts as are necessary 

10 or proper to carry out the provisions and purposes 

11 of this title; 

12 (2) sue or be sued, including taking any legal 

13 actions necessary or proper to recover any unpaid 

14 assessments under section 1608 and to settle claims 

15 or potential claims against the Corporation; 

16 (3) borrow money to effect the purposes of this 

17 title (and any notes or other evidence of indebted18 ness of the Corporation not in default shall be legal 

19 investments for national insurers and may be carried 

20 as assets); 

21 (4) employ or retain such persons as are nec22 essary or appropriate to handle the financial trans23 actions of the Corporation and to perform such 

24 other functions as become necessary or proper under 

25 this title; 


rwilkins on PROD1PC63 with BILLS
289 

•S 40 IS

1 (5) take such legal action as may be necessary 

2 or appropriate to avoid or recover payment of im3 proper claims; 

4 (6) exercise, for the purposes of this title and 

5 to the extent approved by the Commissioner, the 

6 powers of a national insurer, except that the Cor7 poration may not issue insurance policies or annuity 

8 contracts other than those issued to provide the pro9 tections under this title; 

10 (7) request information from a person seeking 

11 protection under this title in order to aid the Cor12 poration in determining its obligations under this 

13 title with respect to the person, which person shall 

14 promptly comply with the request; and 

15 (8) take other necessary or appropriate action 

16 to discharge the duties and obligations of the Cor17 poration under this title or to exercise the powers of 

18 the Corporation under this title. 

19 SEC. 1607. SUBROGATION. 

20 (a) IN GENERAL.—Persons receiving benefits or pay21 ments for claims under this title shall be deemed to have 

22 assigned their rights under, and any causes of action 

23 against any person for losses arising under, resulting 

24 from, or otherwise relating to, their covered policies to the 

25 Corporation, and the Corporation shall have a claim by 


rwilkins on PROD1PC63 with BILLS
290 

•S 40 IS

1 way of subrogation to the rights of such persons against 

2 the assets of the insolvent insurer, to the extent of the 

3 benefits received or claims paid because of this title. The 

4 Corporation shall also have the right to require an assign5 ment to the Corporation of such rights and cause of action 

6 by any payee, policyowner, beneficiary, insured, or annu7 itant as a condition precedent to the receipt of any right 

8 or benefits conferred by this title upon the person. 

9 (b) COMMON LAW RIGHTS.—In addition to sub10 section (a), the Corporation shall have all common law 

11 rights of subrogation and any other equitable or legal rem12 edy that would have been available to the national insurer 

13 or policyowner, beneficiary, or payee of an insurance policy 

14 with respect to the policy. 

15 (c) PRIORITY.—The priority of the subrogation rights 

16 of the Corporation against the assets of a national insurer 

17 shall be governed by the regulations issued by the Com18 missioner pursuant to section 1504. 

19 (d) RESULT IF FOUND INVALID OR INEFFECTIVE.— 

20 If any other provision of this section is held to be invalid 

21 or ineffective with respect to any person or claim for any 

22 reason, the amount payable under this title with respect 

23 to the related benefits or payments under this title shall 

24 be reduced by the amount realized by any other person 

25 with respect to the person or claim that is attributable 


rwilkins on PROD1PC63 with BILLS
291 

•S 40 IS

1 to the insurance policies (or portion of the insurance poli2 cies) covered by this title. 

3 (e) PAYMENT OF PORTION.—If benefits or payments 

4 have been provided under this title with respect to a cov5 ered obligation and a person recovers amounts as to which 

6 the Corporation has rights, as described in this section, 

7 the person shall pay to the Corporation the portion of the 

8 recovery attributable to the insurance policies (or portion 

9 of the insurance policies) covered by this title. 

10 SEC. 1608. ASSESSMENTS. 

11 (a) ASSESSMENTS BY CORPORATION AUTHORIZED.— 

12 For the purpose of providing the funds necessary to pro13 vide the benefits or payments under this title, the Corpora14 tion shall be authorized to assess member insurers sepa15 rately for each account, at such time and for such amounts 

16 as the board of directors of the Corporation finds nec17 essary, in accordance with this section. 

18 (b) CLASSES OF ASSESSMENTS.— 

19 (1) IN GENERAL.—The Corporation shall im20 pose 3 classes of assessments in accordance with 

21 paragraphs (2) through (4). 

22 (2) GENERAL ADMINISTRATIVE ASSESS23 MENTS.— 

24 (A) IN GENERAL.—Each member insurer 

25 shall be assessed an amount necessary to cover 


rwilkins on PROD1PC63 with BILLS
292 

•S 40 IS

1 the general administrative and legal costs of the 

2 Corporation, other than the costs specified in 

3 paragraphs (3) and (4). 

4 (B) AMOUNT.—In setting the amount of 

5 the assessment under subparagraph (A), the 

6 Corporation shall divide such administrative 

7 and legal expenses equally among all member 

8 insurers. 

9 (C) DEPOSIT.—The amount collected pur10 suant to this paragraph shall be deposited, in 

11 equal amounts, in the accounts established pur12 suant to section 1603(f). 

13 (3) PROPERTY/CASUALTY ASSESSMENTS.— 

14 (A) IN GENERAL.—The Corporation 

15 shall— 

16 (i) allocate claims paid and expenses 

17 incurred among the workers’ compensation 

18 account, the automobile insurance account, 

19 or the other property/casualty account; and 

20 (ii) assess member insurers doing 

21 business in States without qualified asso22 ciations covering the types of risks insured 

23 that are licensed to sell property/casualty 

24 insurance separately for each account de25 scribed in clause (i) the amounts necessary 


rwilkins on PROD1PC63 with BILLS
293 

•S 40 IS

1 to pay the obligations of the Corporation 

2 under section 1605 and the expenses of 

3 handling such claims. 

4 (B) AMOUNT.—The assessment established 

5 under subparagraph (A)(ii) shall equal an 

6 amount that bears the same ratio to the total 

7 amount of claims and expenses allocated to an 

8 account pursuant to subparagraph (A)(i) as the 

9 premiums received by such member insurer in 

10 States without qualified associations on the 

11 kind of insurance in the account during the cal12 endar year preceding the assessment bears to 

13 the premiums received by all assessed member 

14 insurers in States without qualified associations 

15 on the kind of insurance in the account during 

16 the year preceding the assessment. 

17 (C) DEPOSIT.—The assessments received 

18 pursuant to this paragraph shall be deposited in 

19 the workers’ compensation account, the auto20 mobile insurance account, or the other property/ 

21 casualty account, as appropriate. 

22 (4) LIFE AND ANNUITY ASSESSMENTS.— 

23 (A) IN GENERAL.—The Corporation 

24 shall— 


rwilkins on PROD1PC63 with BILLS
294 

•S 40 IS

1 (i) allocate benefits paid and expenses 

2 incurred among the life insurance account, 

3 the annuity account, and the health ac4 count; and 

5 (ii) assess member insurers doing 

6 business in States without qualified asso7 ciations that are licensed to sell life insur8 ance separately for each account described 

9 in clause (i) the amounts necessary to pay 

10 the obligations of the Corporation under 

11 section 1604 and the expenses of providing 

12 such benefits. 

13 (B) AMOUNT.—The assessment established 

14 under subparagraph (A)(ii) shall equal an 

15 amount that bears the same ratio to the total 

16 of benefits and expenses allocated to an account 

17 pursuant to subparagraph (A)(i) as the pre18 miums received by such member insurer in 

19 States without qualified associations on the 

20 kind of insurance in the account during the cal21 endar year preceding the assessment bears to 

22 the premiums received by all assessed member 

23 insurers in States without qualified associations 

24 on the kind of insurance in the account during 

25 the year preceding the assessment. 


rwilkins on PROD1PC63 with BILLS
295 

•S 40 IS

1 (C) DEPOSIT.—The assessments received 

2 pursuant to this paragraph shall be deposited in 

3 the life insurance account, the annuity account, 

4 or the health account, as appropriate. 

5 (c) NOTICE AND IMPOSITION OF ASSESSMENTS.— 

6 (1) WRITTEN NOTICE REQUIRED.—The Cor7 poration shall provide each member insurer a writ8 ten notice of an assessment, and assessments shall 

9 be payable not earlier than 30 days after the date 

10 of receipt of such notice. 

11 (2) LATE PAYMENT.—Member insurers that fail 

12 to pay an assessment when due shall be subject to 

13 an interest charge on the assessment, as set by the 

14 Corporation. 

15 (3) ASSESSMENTS NOT IMPOSED UNTIL NEED16 ED.—The Corporation shall not impose an assess17 ment described in paragraph (3) or (4) of subsection 

18 (b) until such funds are needed. 

19 (4) MAXIMUM ASSESSMENT.— 

20 (A) IN GENERAL.—The Corporation may 

21 not assess a member insurer doing business in 

22 States without qualified associations in any 

23 year on any account in an amount greater than 

24 2 percent of the net direct written premiums of 

25 the insurer for the calendar year preceding the 


rwilkins on PROD1PC63 with BILLS
296 

•S 40 IS

1 assessment on the kind of insurance in the ac2 count. 

3 (B) INSUFFICIENT AMOUNT IN LIFE IN4 SURANCE ACCOUNT, ANNUITY ACCOUNT, OR

5 HEALTH ACCOUNT.— 

6 (i) INSUFFICIENT AMOUNT IN LIFE

7 INSURANCE ACCOUNT.—If the maximum 

8 assessment in any year does not provide an 

9 amount sufficient to make all necessary 

10 payments from the life insurance account, 

11 the Corporation may assess the annuity ac12 count, the health account, or both, for the 

13 necessary additional amount, except that 

14 in each subsequent year, for so long as 

15 necessary, the Corporation shall assess up 

16 to the maximum on the life insurance ac17 count, in order to— 

18 (I) make all necessary payments 

19 from the life insurance account; and 

20 (II) reimburse the annuity ac21 count or the health account, or both, 

22 for the amounts assessed on behalf of 

23 the life insurance account. 

24 (ii) INSUFFICIENT AMOUNT IN ANNU25 ITY ACCOUNT.—If the maximum assessVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00296 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
297 

•S 40 IS

1 ment in any year does not provide an 

2 amount sufficient to make all necessary 

3 payments from the annuity account, the 

4 Corporation may assess the life insurance 

5 account, the health account, or both, for 

6 the necessary additional amount, except 

7 that, in each subsequent year, for so long 

8 as necessary, the Corporation shall assess 

9 up to the maximum on the annuity ac10 count, in order to— 

11 (I) make all necessary payments 

12 from the annuity account; and 

13 (II) reimburse the life insurance 

14 account, the health account, or both, 

15 for the amounts assessed on behalf of 

16 the annuity account. 

17 (iii) INSUFFICIENT AMOUNT IN

18 HEALTH ACCOUNT.—If the maximum as19 sessment in any year does not provide an 

20 amount sufficient to make all necessary 

21 payments from the health account, the 

22 Corporation may assess the life insurance 

23 account, the annuity account, or both, for 

24 the necessary additional amount, except 

25 that, in each subsequent year, for so long 


rwilkins on PROD1PC63 with BILLS
298 

•S 40 IS

1 as necessary, the Corporation shall assess 

2 up to the maximum on the health account, 

3 in order to— 

4 (I) make all necessary payments 

5 from the health account; and 

6 (II) reimburse the life insurance 

7 account, the annuity account, or both, 

8 for the amounts assessed on behalf of 

9 the health account. 

10 (C) INSUFFICIENT AMOUNT IN WORKERS’ 

11 COMPENSATION ACCOUNT, AUTOMOBILE INSUR12 ANCE ACCOUNT, OR OTHER PROPERTY/CAS13 UALTY INSURANCE ACCOUNT.— 

14 (i) INSUFFICIENT AMOUNT IN WORK15 ERS’ COMPENSATION ACCOUNT.—If the 

16 maximum assessment in any year does not 

17 provide an amount sufficient to make all 

18 necessary payments from the workers’ 

19 compensation account, the Corporation 

20 may assess the automobile insurance ac21 count, other property/casualty insurance 

22 account, or both, for the necessary addi23 tional amount, except that, in each subse24 quent year, for as long as necessary, the 

25 Corporation shall assess up to the maxVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00298 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
299 

•S 40 IS

1 imum on the workers compensation ac2 count, in order to— 

3 (I) make all necessary payments 

4 from the workers’ compensation ac5 count; and 

6 (II) reimburse the automobile in7 surance account, the other property/ 

8 casualty insurance account, or both, 

9 for the amounts assessed on behalf of 

10 the workers’ compensation account. 

11 (ii) INSUFFICIENT AMOUNT IN AUTO12 MOBILE INSURANCE ACCOUNT.—If the 

13 maximum assessment in any year does not 

14 provide an amount sufficient to make all 

15 necessary payments from the automobile 

16 insurance account, the Corporation may 

17 assess the workers’ compensation account, 

18 the other property/casualty insurance ac19 count, or both, for the necessary additional 

20 amount, except that, in each subsequent 

21 year, for so long as necessary, the Cor22 poration shall assess up to the maximum 

23 on the automobile insurance account, in 

24 order to— 


rwilkins on PROD1PC63 with BILLS
300 

•S 40 IS

1 (I) make all necessary payments 

2 from the automobile insurance ac3 count; and 

4 (II) reimburse the workers’ com5 pensation account, the other property/ 

6 casualty insurance account, or both, 

7 for the amounts assessed on behalf of 

8 the automobile insurance account. 

9 (iii) INSUFFICIENT AMOUNT IN OTHER

10 PROPERTY/CASUALTY INSURANCE AC11 COUNT.—If the maximum assessment in 

12 any year does not provide an amount suffi13 cient to make all necessary payments from 

14 the other property/casualty insurance ac15 count, the Corporation may assess the 

16 workers’ compensation account, the auto17 mobile insurance account, or both, for the 

18 necessary additional amount, except that, 

19 in each subsequent year for so long as nec20 essary, the Corporation shall assess up to 

21 the maximum on the other property/cas22 ualty insurance account, in order to— 

23 (I) make all necessary payments 

24 from the other property/casualty in25 surance account; and 


rwilkins on PROD1PC63 with BILLS
301 

•S 40 IS

1 (II) reimburse the automobile in2 surance account, the workers’ com3 pensation account, or both, for the 

4 amounts assessed on behalf of the 

5 other property casualty insurance ac6 count. 

7 (d) ABATED OR DEFERRED ASSESSMENTS.— 

8 (1) AUTHORITY OF CORPORATION.—The board 

9 of directors of the Corporation may abate or defer, 

10 in whole or in part, an assessment imposed on a 

11 member insurer under this title if, in the opinion of 

12 the board, payment of the assessment would endan13 ger the ability of the member insurer to fulfill its 

14 contractual obligations. 

15 (2) SHARED BURDEN.—In the event an assess16 ment against a member insurer is abated or de17 ferred, in whole or in part, the amount by which the 

18 assessment is abated or deferred may be assessed 

19 against the other member insurers doing business in 

20 States without qualified associations, in a manner 

21 consistent with the basis for assessments set forth in 

22 this section. Once the conditions that caused action 

23 under this subsection have been removed or rectified, 

24 the member insurer shall pay all assessments that 


rwilkins on PROD1PC63 with BILLS
302 

•S 40 IS

1 were deferred pursuant to a repayment plan ap2 proved by the board of directors of the Corporation. 

3 (e) REFUNDS.—The board of directors of the Cor4 poration may, by an equitable method, as established by 

5 its operating rules, refund to member insurers, in propor6 tion to the contribution of each insurer to that account, 

7 the amount by which the assets of the account exceed the 

8 amount that the board finds is necessary to carry out dur9 ing the coming year the obligations of this title with re10 gard to that account, including assets accruing from as11 signment, subrogation, net realized gains, and income 

12 from investments. A reasonable amount may be retained 

13 in any account to provide funds for the continuing ex14 penses of the Corporation, and for future claims. 

15 (f) ASSESSMENT PROTESTS.— 

16 (1) IN GENERAL.—A member insurer that wish17 es to protest all or part of an assessment under this 

18 title shall pay when due the full amount of the as19 sessment, as set forth in the notice provided by the 

20 Corporation. The payment shall be available to meet 

21 obligations under this title during the pendency of 

22 the protest or any subsequent appeal. Payment shall 

23 be accompanied by a statement in writing that the 

24 payment is made under protest and setting forth a 

25 brief statement of the grounds for the protest. 


rwilkins on PROD1PC63 with BILLS
303 

•S 40 IS

1 (2) NOTIFICATION OF DETERMINATION.—Not 

2 later than 60 days after the date of payment of an 

3 assessment under protest by a member insurer, the 

4 Corporation shall notify the member insurer in writ5 ing of the determination of the Corporation with re6 spect to the protest, unless the Corporation notifies 

7 the insurer that additional time is required to re8 solve the issues raised by the protest. 

9 (3) FINAL DECISION.—Not later than 30 days 

10 after a final decision has been made, the Corpora11 tion shall notify the protesting member insurer in 

12 writing of the final decision. Not later than 60 days 

13 after the date of receipt of notice of the final deci14 sion, the protesting member insurer may appeal that 

15 final action to the Commissioner. 

16 (4) REFERRAL.—In the alternative to rendering 

17 a final decision with respect to a protest based on 

18 a question regarding the assessment base, the Cor19 poration may refer protests to the Commissioner for 

20 a final decision, with or without a recommendation 

21 from the Corporation. 

22 (5) PROTEST OR APPEAL UPHELD.—If the pro23 test or appeal on the assessment is upheld, the 

24 amount paid in error or excess shall be returned to 

25 the member insurer. Interest on a refund due a proVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00303 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
304 

•S 40 IS

1 testing member insurer shall be paid at the rate ac2 tually earned by the Corporation. 

3 (g) TRANSITIONAL RESPONSIBILITIES.—In the event 

4 that the conservation, rehabilitation, or liquidation of a 

5 national insurer or State insurer commences at a time 

6 when a State insurance guaranty association or State in7 surance guaranty fund is a nonqualified association, but 

8 such association or fund subsequently becomes a qualified 

9 association, the Corporation shall continue to be respon10 sible for such conservation, rehabilitation, or liquidation, 

11 unless and until the Corporation shall contract with such 

12 association or fund pursuant to section 1602(e)(3). The 

13 Corporation shall continue to be entitled to levy assess14 ments in respect of such pending conservation, rehabilita15 tion, or liquidation on all companies doing business in the 

16 State where the association or fund resides, as if the asso17 ciation or fund remained a nonqualified association. 

18 (h) INFORMATION REQUESTS.—The Corporation 

19 may request information of member insurers doing busi20 ness in States without qualified associations in order to 

21 aid in carrying out its duties under this section, and such 

22 member insurers shall promptly comply with such a re23 quest. 


rwilkins on PROD1PC63 with BILLS
305 

•S 40 IS

1 SEC. 1609. REGULATIONS. 

2 In addition to the duties and powers enumerated else3 where in this title, the Commissioner shall issue such regu4 lations as the Commissioner determines necessary to fa5 cilitate the operations of the Corporation and implement 

6 the terms of this title. 

7 SEC. 1610. STATE TAXATION. 

8 No State shall have the power to impose its premium 

9 tax, franchise tax, income tax, retaliatory tax, or other pri10 mary tax applicable to insurance companies, on any na11 tional insurer, unless such State allows the national in12 surer to recoup Corporation assessments allocable to such 

13 State— 

14 (1) in the same manner and to the same extent 

15 that a State insurer is allowed to recoup State insur16 ance guaranty association or State insurance guar17 anty fund assessments in such State; or 

18 (2) through the rates or a policyholder sur19 charge, at the election of the national insurer, in any 

20 State that allows State insurers to recoup State in21 surance guaranty association or State insurance 

22 guaranty fund assessments only through the rates. 

23 SEC. 1611. EXAMINATION OF THE CORPORATION; ANNUAL 

24 REPORT. 

25 The Corporation shall be subject to examination and 

26 regulation by the Commissioner. The Corporation shall 


rwilkins on PROD1PC63 with BILLS
306 

•S 40 IS

1 submit to the Commissioner, and each State insurance 

2 commissioner in any State without a qualified association, 

3 a financial report in a form approved by the Commissioner 

4 and a report of the activities of the Corporation during 

5 the preceding fiscal year, as the activities relate to its du6 ties and functions carried out under this title. 

7 SEC. 1612. IMMUNITY. 

8 There shall be no liability on the part of, and no 

9 cause of action of any nature shall arise against, any of 

10 the following persons for any action or omission by them 

11 in the performance of their powers and duties under the 

12 State insurance guaranty association or fund or provisions 

13 of State insurance guaranty association or fund law or 

14 under this title: 

15 (1) A member insurer and its directors, officers, 

16 employees, and agents. 

17 (2) Any State insurance guaranty association or 

18 State insurance guaranty fund and its respective di19 rectors, officers, employees, or agents. 

20 (3) The Corporation and its directors, officers, 

21 employees, and agents. 

22 (4) The Commissioner and the representatives 

23 thereof. 

24 (5) Any State insurance commissioner and rep25 resentatives thereof. 


rwilkins on PROD1PC63 with BILLS
307 

•S 40 IS

1 TITLE VII—CONFORMING 

2 AMENDMENTS AND MIS3 CELLANEOUS PROVISIONS 

4 SEC. 1701. NONDISCRIMINATION. 

5 No State may, by statute, regulation, order, interpre6 tation, or otherwise, discriminate, in any manner, 

7 against— 

8 (1) any State insurer because such insurer or 

9 any affiliate has applied to become, or has declared 

10 its intention to become, a national insurer chartered 

11 under this Act; 

12 (2) any State-licensed insurance producer be13 cause such insurance producer or an affiliate has ap14 plied to become, or has declared its intention to be15 come, a national agency chartered under this Act or 

16 a federally licensed insurance producer licensed 

17 under this Act; 

18 (3) any affiliate of a national insurer, national 

19 agency, or a federally licensed insurance producer 

20 because the affiliate is so affiliated; 

21 (4) any policyholder, insured, claimant, State-li22 censed insurance producer, or any person engaged in 

23 the acts described in section 1304(b) because of any 

24 dealing with a national insurer, national agency, a 

25 federally licensed insurance producer, or an affiliate 


rwilkins on PROD1PC63 with BILLS
308 

•S 40 IS

1 of a national insurer, national agency, or a federally 

2 licensed insurance producer; or 

3 (5) any State-licensed insurance producer (in4 cluding with respect to such producer’s sales, solici5 tation, or negotiation of any insurance policy written 

6 or sold by a State insurer) because it sells, solicits, 

7 or negotiates an insurance policy written or sold by 

8 a national insurer. 

9 SEC. 1702. APPLICATION OF THE FEDERAL ANTITRUST 

10 LAWS TO NATIONAL INSURERS, NATIONAL 

11 AGENCIES, AND FEDERALLY LICENSED IN12 SURANCE PRODUCERS. 

13 (a) APPLICATION.—Except as provided in subsection 

14 (b), the Sherman Act (15 U.S.C. 1 et seq.), the Clayton 

15 Act (15 U.S.C. 12 et seq.), the Federal Trade Commission 

16 Act (15 U.S.C. 41 et seq.), and the Act of June 19, 1936 

17 (49 Stat. 1526) (commonly known as the Robinson-Pat18 man Antidiscrimination Act), shall be applicable to na19 tional insurers, national agencies, and federally licensed 

20 insurance producers to the same extent as other busi21 nesses are subject to such laws, except as follows: 

22 (1) Such laws shall not apply to the develop23 ment, dissemination, or use of standard insurance 

24 policy forms (including standard endorsements, 

25 addendums, and policy language), or to activities inVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00308 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
309 

•S 40 IS

1 cidental thereto, by national insurers, national agen2 cies, and federally licensed insurance producers. 

3 (2) Section 3 of the Act of March 9, 1945 (59 

4 Stat. 33; 15 U.S.C. 1013), shall apply to national 

5 insurers, national agencies, and federally licensed in6 surance producers to the extent that such insurers 

7 and producers are subject to State law. 

8 (b) EXCEPTION.—Section 5 of the Federal Trade 

9 Commission Act (15 U.S.C. 45) shall not apply to national 

10 insurers, national agencies, and federally licensed insur11 ance producers. 

12 SEC. 1703. APPLICATION OF STATE LAW AND REGULATION 

13 TO NATIONAL INSURERS, NATIONAL AGEN14 CIES, AND FEDERALLY LICENSED INSURANCE 

15 PRODUCERS. 

16 Except to the extent expressly provided in this Act, 

17 national insurers, national agencies, and federally licensed 

18 insurance producers shall not be subject under State law 

19 to any form of licensing, examination, reporting, regula20 tion, or other supervision relating to the sale, solicitation, 

21 or negotiation of insurance, to the underwriting of insur22 ance, or to any other insurance operations. 

23 SEC. 1704. FEDERAL COURT JURISDICTION. 

24 Chapter 85 of part IV of title 28, United States Code, 

25 is amended by adding at the end the following: 


rwilkins on PROD1PC63 with BILLS
310 

•S 40 IS

1 ‘‘§ 1370. National insurer as party 

2 ‘‘The district courts shall have original jurisdiction 

3 of any civil action— 

4 ‘‘(1) commenced by the United States, or by di5 rection of any officers thereof, against any national 

6 insurer, national agency, or any federally licensed in7 surance producer; 

8 ‘‘(2) to enjoin the Commissioner of National In9 surance in the Commissioner’s capacity as head of 

10 the Office of National Insurance or as the receiver 

11 of a national insurer.’’. 

12 SEC. 1705. FEDERAL COURT VENUE. 

13 Chapter 87 of part IV of title 28, United States Code, 

14 is amended by adding at the end the following: 

15 ‘‘SEC. 1414. NATIONAL INSURER OR NATIONAL AGENCY AC16 TION AGAINST COMMISSIONER OF NATIONAL 

17 INSURANCE. 

18 ‘‘Any civil action by a national insurer or a national 

19 agency to enjoin the Commissioner of National Insurance, 

20 under the provisions of any Act of Congress relating to 

21 such insurers or agencies, may be prosecuted in the judi22 cial district where such insurer or agency is located.’’. 

23 SEC. 1706. JUDICIAL REVIEW. 

24 Except as otherwise expressly provided in this Act, 

25 any party aggrieved by an order of the Commissioner 

26 under this Act may obtain a review of such order in the 


rwilkins on PROD1PC63 with BILLS
311 

•S 40 IS

1 United States Court of Appeals within any circuit wherein 

2 such party has its main office, or in the Court of Appeals 

3 for the District of Columbia, by filing in the court, within 

4 30 days after the entry of the Commissioner’s order, a 

5 petition praying that the order of the Commissioner be 

6 set aside, modified, or terminated. A copy of such petition 

7 shall be forthwith transmitted to the Commissioner by the 

8 clerk of the court, and thereupon the Commissioner shall 

9 file in the court the record made before the Commissioner, 

10 as provided in section 2112 of title 28, United States 

11 Code. Upon the filing of such petition, the court shall have 

12 jurisdiction to affirm, set aside, modify, or terminate the 

13 order of the Commissioner and to require the Commis14 sioner to take such action with regard to the matter under 

15 review as the court determines proper. Review of an order 

16 under this section shall be had as provided in chapter 7 

17 of part I of title 5, United States Code. The judgment 

18 and decree of the court shall be final, except that the same 

19 shall be subject to review by the Supreme Court upon cer20 tiorari, as provided in section 1254 of title 28, United 

21 States Code. 

22 SEC. 1707. AMENDMENT TO THE FREEDOM OF INFORMA23 TION ACT. 

24 Section 552(b)(8) of title 5, United States Code, is 

25 amended by inserting ‘‘(including national insurers, naVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00311 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
312 

•S 40 IS

1 tional agencies, and federally licensed insurance pro2 ducers)’’ after ‘‘financial institutions’’. 

3 SEC. 1708. AMENDMENTS TO THE FEDERAL SECURITIES 

4 LAWS. 

5 (a) SECURITIES ACT OF 1933.—The Securities Act 

6 of 1933 (15 U.S.C. 77a et seq.) is amended— 

7 (1) in section 2(a)(13), by inserting ‘‘the Com8 missioner of National Insurance or’’ after ‘‘subject 

9 to supervision by’’; 

10 (2) in section 2(a)(14), by inserting ‘‘the 

11 United States or’’ after ‘‘the laws of’’; 

12 (3) in section 3(a)(8), by inserting ‘‘the Com13 missioner of National Insurance or’’ after ‘‘subject 

14 to the supervision of’’; and 

15 (4) in section 4(5)(A)(ii), by inserting ‘‘the 

16 Commissioner of National Insurance or’’ after ‘‘sub17 ject to the supervision of’’. 

18 (b) SECURITIES EXCHANGE ACT OF 1934.—The Se19 curities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 

20 is amended— 

21 (1) in section 10A(i)(1)(A) (15 U.S.C. 78j– 

22 l(i)(1)(A)), by inserting ‘‘or Federal’’ after ‘‘pur23 poses of State’’; 

24 (2) in section 15(b)(4)(H) (15 U.S.C. 

25 78o(b)(4)(H))— 


rwilkins on PROD1PC63 with BILLS
313 

•S 40 IS

1 (A) by striking ‘‘or the National’’ and in2 serting ‘‘the National’’; and 

3 (B) by inserting, ‘‘or the Commissioner of 

4 National Insurance’’ after ‘‘Union Administra5 tion’’. 

6 (3) in section 17(i)(3)(C)(iii), by inserting ‘‘or 

7 by the Commissioner of National Insurance’’ after 

8 ‘‘appropriate State insurance regulator’’; and 

9 (4) in section 17(i)(4)— 

10 (A) in subparagraph (A), by striking 

11 ‘‘and’’ after the semicolon; 

12 (B) in subparagraph (B), by striking the 

13 period at the end and inserting ‘‘; and’’; and 

14 (C) by adding at the end the following: 

15 ‘‘(D) the Commissioner of National Insur16 ance with regard to all interpretations of, and 

17 the enforcement of, the National Insurance Act 

18 of 2007 relating to the activities, conduct, and 

19 operations of national insurers, national agen20 cies, and federally licensed insurance pro21 ducers.’’. 

22 (c) AMENDMENTS TO INVESTMENT COMPANY ACT OF

23 1940.—The Investment Company Act of 1940 (15 U.S.C. 

24 80a–1 et seq.) is amended— 


rwilkins on PROD1PC63 with BILLS
314 

•S 40 IS

1 (1) in section 2(a)(17), by inserting ‘‘the Com2 missioner of National Insurance or’’ after ‘‘subject 

3 to supervision by’’; 

4 (2) in section 2(a)(37), by inserting ‘‘the 

5 United States or’’ after ‘‘the laws of’’; 

6 (3) in section 12(g)— 

7 (A) by inserting ‘‘the Commissioner of Na8 tional Insurance or’’ after ‘‘affect or derogate 

9 from the powers of’’; and 

10 (B) by inserting ‘‘Federal or’’ after ‘‘affect 

11 the right under’’; 

12 (4) in section 26(f)(2)(B)(ii), by inserting ‘‘or, 

13 in the case of a national insurer chartered under the 

14 National Insurance Act of 2007, files with the Com15 missioner of National Insurance,’’ after ‘‘files with 

16 the insurance regulatory authority of the State 

17 which is the domiciliary State of the insurance com18 pany,’’; and 

19 (5) in section 26(f)(2)(B)(iii), by inserting ‘‘or, 

20 in the case of a national insurer chartered under the 

21 National Insurance Act of 2007, the Commissioner 

22 of National Insurance’’ after ‘‘insurance authority of 

23 such State’’. 


rwilkins on PROD1PC63 with BILLS
315 

•S 40 IS

1 (d) INVESTMENT ADVISERS ACT OF 1940.—Section 

2 203(e)(9) of the Investment Advisers Act of 1940 (15 

3 U.S.C. 80b–3(e)(9)) is amended— 

4 (1) by striking ‘‘or the National’’ and inserting 

5 ‘‘the National’’; and 

6 (2) by inserting ‘‘, or the Commissioner of Na7 tional Insurance’’ after ‘‘Union Administration’’. 

8 SEC. 1709. AMENDMENTS TO THE EMPLOYEE RETIREMENT 

9 INCOME SECURITY ACT OF 1974. 

10 The Employee Retirement Income Security Act of 

11 1974 (29 U.S.C. 1001 et seq.) is amended— 

12 (1) in section 401(b)(2)(A), by inserting ‘‘or li13 censed as a national insurer’’ after ‘‘qualified to do 

14 business in a State’’; and 

15 (2) in section 733(b)(2), by inserting ‘‘or which 

16 is licensed as a national insurer and which is subject 

17 to the authority of the Commissioner of National In18 surance’’ after ‘‘(within the meaning of section 

19 514(b)(2))’’. 

20 SEC. 1710. AMENDMENTS TO THE GRAMM-LEACH-BLILEY 

21 ACT. 

22 (a) INTERAGENCY CONSULTATION.— 

23 (1) AMENDMENTS.—Section 307 of the 

24 Gramm-Leach-Bliley Act (15 U.S.C. 6716) is 

25 amended by adding at the end the following: 


rwilkins on PROD1PC63 with BILLS
316 

•S 40 IS

1 ‘‘(g) OFFICE OF NATIONAL INSURANCE.—In this sec2 tion, the terms ‘State insurance regulator’, ‘State insur3 ance regulators’, and ‘insurance regulator of any State’ 

4 shall include the Office of National Insurance.’’. 

5 (2) NO WAIVER.—The provision of information 

6 or material by the Office of National Insurance to 

7 a Federal banking agency (as defined in section 3 of 

8 the Federal Deposit Insurance Act (12 U.S.C. 

9 1813)) shall not constitute a waiver of, or otherwise 

10 affect, any privilege or other form of legal protection 

11 or exemption from public disclosure to which such 

12 information or material is otherwise subject. 

13 (b) PRIVACY.—The Gramm-Leach-Bliley Act (Public 

14 Law 106–102; 113 Stat. 1338) is amended— 

15 (1) in section 504(a)(1), by inserting ‘‘the Com16 missioner of National Insurance,’’ after ‘‘Federal 

17 banking agencies,’’; 

18 (2) in section 504(a)(3), by inserting ‘‘, except 

19 that, in the case of the Commissioner of National 

20 Insurance, such regulations shall be issued in final 

21 form not later than 12 months after the date of en22 actment of the National Insurance Act of 2007’’ 

23 after ‘‘enactment of this Act’’; 

24 (3) in section 505(a)(6), by inserting ‘‘(other 

25 than a person subject to the jurisdiction of the OfVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00316 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
317 

•S 40 IS

1 fice of National Insurance under paragraph (8))’’ 

2 after ‘‘providing insurance’’; 

3 (4) in section 505(a)— 

4 (A) by redesignating paragraph (7) as 

5 paragraph (8); and 

6 (B) by inserting after paragraph (6) the 

7 following: 

8 ‘‘(7) Under subtitle C of title I of the National 

9 Insurance Act of 2007, by the Commissioner of Na10 tional Insurance with respect to any national insurer 

11 or national agency, any subsidiaries of such an enti12 ty (except any financial institution or other person 

13 subject to the jurisdiction of any agency or authority 

14 under paragraphs (1) through (6)), and any feder15 ally licensed insurance producer.’’; 

16 (5) in section 505(a)(8), as redesignated by 

17 paragraph (4) of this section, by striking ‘‘through 

18 (6)’’ and inserting ‘‘through (7)’’; 

19 (6) in section 505(b)(2), by striking ‘‘and (7)’’ 

20 and inserting ‘‘(7), and (8)’’; 

21 (7) in section 509(2)— 

22 (A) by redesignating subparagraphs (E) 

23 and (F) as subparagraphs (F) and (G), respec24 tively; and 


rwilkins on PROD1PC63 with BILLS
318 

•S 40 IS

1 (B) by inserting after subparagraph (D) 

2 the following: 

3 ‘‘(E) the Commissioner of National Insur4 ance;’’; 

5 (8) in section 521(e), by inserting ‘‘or Federal’’ 

6 after ‘‘such institution under State’’; 

7 (9) in section 522(b)(1)— 

8 (A) in subparagraph (A)(iv), by striking 

9 ‘‘and’’ after the semicolon; 

10 (B) in subparagraph (B), by striking the 

11 period at the end and inserting ‘‘; and’’; and 

12 (C) by inserting after subparagraph (B) 

13 the following: 

14 ‘‘(C) subtitle C of title I of the National 

15 Insurance Act of 2007, by the Commissioner of 

16 National Insurance with respect to any national 

17 insurer or national agency and any federally li18 censed insurance producer.’’; and 

19 (10) in section 525, by inserting ‘‘the Commis20 sioner of National Insurance,’’ after ‘‘National Cred21 it Union Administration,’’. 

22 (c) OTHER CONFORMING AMENDMENTS.—The 

23 Gramm-Leach-Bliley Act (Public Law 106–102; 113 Stat. 

24 1338) is amended— 


rwilkins on PROD1PC63 with BILLS
319 

•S 40 IS

1 (1) in section 104(b), by inserting ‘‘, or as re2 quired by the Commissioner of National Insurance 

3 in accordance with the National Insurance Act of 

4 2007’’ after ‘‘subject to subsections (c), (d), and 

5 (e)’’; 

6 (2) in section 104(f)— 

7 (A) by striking ‘‘Subsections (c) and (d)’’ 

8 and inserting the following: 

9 ‘‘(1) IN GENERAL.—Subsections (c) and (d)’’; 

10 (B) by striking ‘‘(1) the jurisdiction’’ and 

11 inserting the following: ‘‘(A) the jurisdiction’’; 

12 (C) by striking ‘‘(A) to investigate’’ and in13 serting the following: ‘‘(i) to investigate’’; 

14 (D) by striking ‘‘(B) to require’’ and in15 serting the following: ‘‘(ii) to require’’; 

16 (E) by striking ‘‘(2) State laws’’ and in17 serting the following: ‘‘(B) State laws’’; and 

18 (F) by adding at the end the following: 

19 ‘‘(2) OTHER.—Notwithstanding any provision 

20 of subsection (d), paragraphs (2) and (3) of sub21 section (d) and subsection (e) shall not apply to any 

22 person to the extent that such person is engaged in 

23 the business of insurance or other insurance oper24 ations pursuant to authority provided under the Na25 tional Insurance Act of 2007.’’; 


rwilkins on PROD1PC63 with BILLS
320 

•S 40 IS

1 (3) in section 104(g)(4), by striking ‘‘business 

2 of insurance.’’ and inserting ‘‘business of insurance, 

3 but only to the extent that such person is doing so 

4 pursuant to a license issued under the authority of 

5 State law.’’; 

6 (4) in section 112, by inserting in the heading 

7 ‘‘COMMISSIONER OF NATIONAL INSURANCE’’ 

8 after ‘‘AUTHORITY OF STATE INSURANCE REGU9 LATOR’’; 

10 (5) in section 301, by inserting ‘‘, except that 

11 the insurance activities of a national insurer, na12 tional agency, and a federally licensed insurance pro13 ducer shall be functionally regulated by the Office of 

14 National Insurance’’ after ‘‘subject to section 104’’; 

15 and 

16 (6) in section 311, by inserting at the end the 

17 following: ‘‘This subtitle shall not apply to a national 

18 insurer in mutual form that is reorganizing into a 

19 mutual holding company.’’. 

20 SEC. 1711. AMENDMENTS TO THE FEDERAL DEPOSIT IN21 SURANCE ACT. 

22 The Federal Deposit Insurance Act (12 U.S.C. 1811 

23 et seq.) is amended— 

24 (1) in section 45, by inserting in the section 

25 heading ‘‘, COMMISSIONER OF OFFICE OF NAVerDate Aug 31 2005 19:00 May 27, 2007 Jkt 059196 PO 00000 Frm 00320 Fmt 6652 Sfmt 6201 E:\BILLS\S40.IS S40

rwilkins on PROD1PC63 with BILLS
321 

•S 40 IS

1 TIONAL INSURANCE,’’ after ‘‘STATE INSURANCE

2 REGULATOR’’; and 

3 (2) in section 47(g)(1)— 

4 (A) in subparagraph (A), by striking ‘‘or’’ 

5 after the semicolon; 

6 (B) in subparagraph (B), by striking the 

7 period at the end and inserting ‘‘; or’’; and 

8 (C) by adding at the end the following: 

9 ‘‘(C) any authority of the Commissioner of 

10 National Insurance under the National Insur11 ance Act of 2007.’’. 

12 SEC. 1712. AMENDMENTS TO THE BANK HOLDING COM13 PANY ACT OF 1956. 

14 The Bank Holding Company Act of 1956 (12 U.S.C. 

15 1841 et seq.) is amended— 

16 (1) in section 4(k)(4)(I)(iii), by inserting ‘‘or 

17 Federal’’ after ‘‘relevant State’’; 

18 (2) in section 5(c)(2)(E)(iii), by inserting ‘‘or 

19 by or on behalf of the Commissioner of National In20 surance’’ after ‘‘for the supervision of insurance 

21 companies’’; 

22 (3) in section 5(c)(3)(A)(ii)(I), by inserting ‘‘or 

23 the Office of National Insurance’’ after ‘‘Securities 

24 and Exchange Commission’’; 


rwilkins on PROD1PC63 with BILLS
322 

•S 40 IS

1 (4) in section 5(c)(4)(B), by inserting ‘‘or the 

2 Commissioner of National Insurance’’ after ‘‘a State 

3 insurance authority’’; 

4 (5) in section 5(c)(5)(B)(iv), by inserting ‘‘or by 

5 the Commissioner of National Insurance’’ after 

6 ‘‘State insurance regulator’’; 

7 (6) in section 5(g), by inserting in the heading 

8 ‘‘, COMMISSIONER OF NATIONAL INSURANCE’’ after 

9 ‘‘STATE INSURANCE REGULATOR’’; 

10 (7) in section 5(g)(1)(B), by inserting ‘‘or the 

11 Commissioner of National Insurance’’ after ‘‘State 

12 insurance authority’’; 

13 (8) in section 5(g)(2)— 

14 (A) in the heading, by inserting ‘‘, COM15 MISSIONER OF NATIONAL INSURANCE,’’ after 

16 ‘‘STATE INSURANCE AUTHORITY’’; and 

17 (B) by inserting ‘‘or the Commissioner of 

18 National Insurance’’ after ‘‘the Board shall 

19 promptly notify the State insurance authority’’; 

20 and 

21 (9) in section 5(g)(3), by inserting ‘‘, the Com22 missioner of National Insurance,’’ after ‘‘If the 

23 Board receives a notice described in paragraph 

24 (1)(B) from a State insurance authority’’. 


rwilkins on PROD1PC63 with BILLS
323 

•S 40 IS

1 SEC. 1713. AMENDMENTS TO TITLE 18 (CRIMES AND CRIMI2 NAL PROCEDURE). 

3 (a) AMENDMENTS TO TITLE 18.—Section 1033(b) of 

4 title 18, United States Code, is amended— 

5 (1) in paragraph (1)— 

6 (A) by inserting ‘‘removes, conceals, alters, 

7 destroys,’’ after ‘‘willfully embezzles, abstracts, 

8 purloins,’’; and 

9 (B) by inserting ‘‘assets,’’ after ‘‘moneys, 

10 funds, premiums, credits,’’; and 

11 (2) in paragraph (2)— 

12 (A) in the first sentence, by inserting ‘‘re13 moval, concealment, alteration, destruction,’’ 

14 after ‘‘embezzlement, abstraction, purloining,’’; 

15 and 

16 (B) in the second sentence, by inserting 

17 ‘‘removed, concealed, altered, destroyed,’’ after 

18 ‘‘embezzled, abstracted, purloined,’’. 

19 (b) INSURANCE FRAUD.—Title 18, United States 

20 Code, is amended by inserting after section 1037 the fol21 lowing: 

22 ‘‘§ 1037A. Insurance fraud 

23 ‘‘(a) Whoever commits a fraudulent insurance act or 

24 whoever knowingly and intentionally interferes with the 

25 enforcement of the provisions of subtitle D of title I of 

26 the National Insurance Act of 2007 or investigations of 


rwilkins on PROD1PC63 with BILLS
324 

•S 40 IS

1 suspected or actual violations of this section shall be pun2 ished as provided in subsection (b). 

3 ‘‘(b)(1) Except as provided in paragraph (2), the 

4 punishment for an offense under subsection (a) is a fine 

5 as provided under this title or imprisonment for not more 

6 than 10 years, or both. 

7 ‘‘(2) Where the person committing an offense under 

8 subsection (a) is a national insurer, national agency, in9 surer-affiliated party, or a federally licensed insurance 

10 producer, punishment for an offense under subsection (a) 

11 shall be a fine, the maximum of which is the greater of— 

12 ‘‘(A) $1,000,000 per violation; or 

13 ‘‘(B) a fine as provided under this title, or im14 prisonment for not more than 10 years, or both. 

15 ‘‘(3) If the fraudulent insurance act involved an 

16 amount or value not exceeding $5,000, whoever violates 

17 subsection (a) shall be fined as provided in this title or 

18 imprisoned not more than 1 year, or both. 

19 ‘‘(4) The punishment in this subsection shall be in 

20 addition to any other penalties under the National Insur21 ance Act of 2007. 

22 ‘‘(5) Any person convicted of an offense under sub23 section (a) shall be ordered to make monetary restitution 

24 for any financial loss or damage sustained by any other 

25 person as a result of such offense. Such restitution shall 


rwilkins on PROD1PC63 with BILLS
325 

•S 40 IS

1 be the exclusive monetary remedy available to the victim 

2 at law or in equity after entry of judgment. However, 

3 nothing in this paragraph shall preclude the maintenance 

4 of an action pursuant to section 1163 of the National In5 surance Act of 2007, absent a conviction. If the person 

6 convicted of an offense under subsection (a) holds an occu7 pational license under any provision of State or Federal 

8 law, the court shall notify the appropriate licensing au9 thority of the conviction. 

10 ‘‘(c)(1) Any individual who has been convicted of any 

11 criminal felony involving dishonesty or breach of trust, 

12 and who participates in the business of insurance, shall 

13 be fined as provided in this title or imprisoned not more 

14 than 5 years, or both. 

15 ‘‘(2) Any insurance person who is engaged in the 

16 business of insurance who knowingly and intentionally 

17 permits the participation described in paragraph (1) shall 

18 be fined as provided in this title or imprisoned not more 

19 than 5 years, or both. 

20 ‘‘(3) A person described in paragraph (1) or (2) may 

21 participate in the business of insurance or permit such 

22 participation, as the case may be, if such person has the 

23 written consent of the Commissioner of National Insur24 ance. 

25 ‘‘(d) In this section— 


rwilkins on PROD1PC63 with BILLS
326 

•S 40 IS

1 ‘‘(1) the terms ‘Commissioner,’ ‘insurance pol2 icy,’ ‘insurance producer,’ ‘insurer-affiliated party,’ 

3 ‘national agency,’ ‘national insurer,’ ‘person,’ and 

4 ‘policy of insurance’ have the meanings given to the 

5 terms in section 3 of the National Insurance Act of 

6 2007; 

7 ‘‘(2) the term ‘business of insurance’ has the 

8 meaning given to the term in section 1033(f)(1); 

9 ‘‘(3) the term ‘fraudulent insurance act’ means 

10 an act or omission committed by a person who, 

11 knowingly and with intent to defraud, and for the 

12 purpose of depriving another of property or for pecu13 niary gain, commits, participates in, or aids, abets, 

14 or conspires to commit or solicits another person to 

15 commit, or permits its employees or its agents to 

16 commit, 1 or more of the following— 

17 ‘‘(A) presenting, causing to be presented or 

18 preparing with knowledge or belief that it will 

19 be presented to or by a national insurer, na20 tional agency, or an insurance producer acting 

21 with respect to a policy of insurance written by 

22 a national insurer, false information as part of, 

23 in support of or concerning a fact material to 

24 1 or more of the following— 


rwilkins on PROD1PC63 with BILLS
327 

•S 40 IS

1 ‘‘(i) an application for a new or re2 newal of an insurance policy or reinsurance 

3 contract; 

4 ‘‘(ii) the rating of a national insurer 

5 that writes an insurance policy or enters 

6 into a reinsurance contract; 

7 ‘‘(iii) a claim for payment or benefit 

8 pursuant to an insurance policy or reinsur9 ance contract; 

10 ‘‘(iv) premiums paid on an insurance 

11 policy or reinsurance contract; 

12 ‘‘(v) payments made in accordance 

13 with the terms of an insurance policy or 

14 reinsurance contract; 

15 ‘‘(vi) a document filed with the Com16 missioner; 

17 ‘‘(vii) the financial condition of a na18 tional insurer; 

19 ‘‘(viii) the formation, acquisition, 

20 merger, consolidation, dissolution, or with21 drawal from 1 or more lines of insurance 

22 or reinsurance by a national insurer; 

23 ‘‘(ix) the issuance of evidence of in24 surance, whether in writing, electronic 

25 form, or otherwise; or 


rwilkins on PROD1PC63 with BILLS
328 

•S 40 IS

1 ‘‘(x) the reinstatement of an insurance 

2 policy; 

3 ‘‘(B) solicitation or acceptance of new or 

4 renewal insurance risks on behalf of a national 

5 insurer, national agency, or other persons en6 gaged in the business of insurance by a person 

7 who knows or should know that the national in8 surer or other person responsible for the risk is 

9 insolvent at the time of the transaction; 

10 ‘‘(C) removal, concealment, alteration, or 

11 destruction of the records of a national insurer, 

12 national agency, or other person engaged in the 

13 business of insurance; 

14 ‘‘(D) transaction of the business of insur15 ance in violation of laws requiring a license 

16 therefore under the National Insurance Act of 

17 2007; or 

18 ‘‘(E) attempting to commit, aiding or abet19 ting in the commission of, or conspiracy to com20 mit the acts or omissions specified in, this para21 graph; and 

22 ‘‘(4) the term ‘insurance person’ means officers, 

23 directors, agents, or employees of national insurers 

24 or national agencies, or other persons authorized to 


rwilkins on PROD1PC63 with BILLS
329 

•S 40 IS

1 act on behalf of national insurers or national agen2 cies.’’. 

3 SEC. 1714. AMENDMENTS TO THE AMERICANS WITH DIS4 ABILITIES ACT OF 1990. 

5 Section 501(c) of the Americans with Disabilities Act 

6 of 1990 (42 U.S.C. 12201(c)) is amended— 

7 (1) in paragraph (1), by inserting ‘‘or Federal’’ 

8 after ‘‘based on or not inconsistent with State’’; 

9 (2) in paragraph (2), by inserting ‘‘or Federal’’ 

10 after ‘‘based on or not inconsistent with State’’; and 

11 (3) in paragraph (3), by inserting ‘‘or Federal’’ 

12 after ‘‘subject to State’’. 

13 SEC. 1715. AMENDMENT TO THE AGE DISCRIMINATION IN 

14 EMPLOYMENT ACT. 

15 Section 12(c)(2) of the Age Discrimination in Em16 ployment Act of 1967 (29 U.S.C. 631(c)(2)) is amended 

17 by inserting ‘‘and the Commissioner of National Insur18 ance’’ after ‘‘after consultation with the Secretary of the 

19 Treasury’’. 

20 SEC. 1716. AMENDMENTS TO THE FAIR CREDIT REPORTING 

21 ACT. 

22 Section 621 of the Fair Credit Reporting Act (15 

23 U.S.C. 1681s) is amended— 

24 (1) in subsection (b)— 


rwilkins on PROD1PC63 with BILLS
330 

•S 40 IS

1 (A) in paragraph (5), by striking ‘‘and’’ 

2 after the semicolon; 

3 (B) in paragraph (6), by striking the pe4 riod at the end and inserting ‘‘; and’’; 

5 (C) by inserting after paragraph (6) the 

6 following: 

7 ‘‘(7) subtitle C of title I of the National Insur8 ance Act of 2007, by the Commissioner of National 

9 Insurance with respect to any national insurer, na10 tional agency, and any federally licensed insurance 

11 producer.’’; and 

12 (D) by adding at the end of the undesig13 nated matter at the end the following: ‘‘The 

14 terms used in paragraph (7) that are not de15 fined in this title shall have the meaning given 

16 to them in section 3 of the National Insurance 

17 Act of 2007.’’; and 

18 (2) in subsection (e), by adding at the end the 

19 following: 

20 ‘‘(3) The Commissioner of National Insurance 

21 shall prescribe such regulations as are necessary to 

22 carry out the purpose of this title with respect to 

23 any persons identified in subsection (b)(7).’’. 

Æ 


rwilkins on PROD1PC63 with BILLS