year following the year in which a Presidential elec-
tion occurs. The term of the first Director appointed
pursuant to this section shall terminate at the end
of July 31 of the year following the first Presidential
election occurring after confirmation of such Direc-
tor to the office of Director.
(3) VACANCY.—A vacancy in the position of Di-
rector which occurs before the expiration of the term
for which a Director was appointed shall be filled in
the manner established in paragraph (1) and the Di-
rector appointed to fill such vacancy shall be ap-
pointed only for the remainder of such term.
(4) SERVICE AFTER END OF TERM.—An indi-
vidual may serve as Director after the expiration of
the term for which appointed until a successor Di-
rector has been appointed.
(e) PROHIBITION ON FINANCIAL INTERESTS.—The
Director shall not have a direct or indirect financial inter-
est in any national insurer or State licensed insurance pro-
ducer, except that the Director may own, directly or indi-
rectly, or may have a direct or indirect beneficial interest
in any insurance policy underwritten or sold by a national
insurer.
(f) ANNUAL REPORT REQUIRED.—The Director shall
make an annual report to the Congress. Such report shall
include a description of any changes the Director has
made or is considering making in any district offices of
the Office, including a description of the geographic allo-
cation of the Office’s resources and personnel used to
carry out examination and supervision functions.
(g) STAFF.—
(1) APPOINTMENT AND COMPENSATION.—The
Director shall fix the compensation and number of,
and appoint and direct, all employees of the Office
of 
National 
Insurers 
notwithstanding 
section
301(f)(1) of title 31, United States Code, without
regard to the provisions of title 5, United States
Code, governing appointments in the competitive
service (except such provisions that relate to dis-
crimination), and without regard to the provisions of
chapter 51 and subchapter III of chapter 53 of that
title relating to classification and General Schedule
pay rates.
(2) RATES OF BASIC PAY.—Rates of basic pay
for employees of the Office may be set and adjusted
by the Director without regard to the provisions of
chapter 51 or subchapter III of chapter 53 of title
5, United States Code.
(3) ADDITIONAL
COMPENSATION
AND
BENE-
FITS.—The Director may provide additional com-
pensation and benefits to employees of the Office if
the same type of compensation or benefits are then
being provided by any Federal banking agency or, if
not then being provided, could be provided by such
an agency under applicable provisions of law, rule or
regulation. In setting and adjusting the total amount
of compensation and benefits for employees of the
Office, the Director shall consult, and seek to main-
tain comparability with, the Federal banking agen-
cies.
(4) DELEGATION AUTHORITY.—Except to the
extent expressly prohibited by the provisions of this
Act, the Director may—
(A) designate who shall act as Director in
the Director’s absence; and
(B) delegate to any employee, representa-
tive, or agent any power conferred on the Direc-
tor by this Act.
(h) LITIGATION AUTHORITY.—The Director shall
have authority to sue and be sued, complain and defend,
and otherwise litigate, in the Director’s own name and
through the Director’s own attorney, in any court, State
or Federal.
(i) FUNDING THROUGH ASSESSMENTS.—The com-
pensation of the Director and employees of the Office and
all other expenses of the Office may be paid from assess-
ments levied under section 204.
(j) GAO AUDIT.—The Director shall make available
to the Comptroller General of the United States all books
and records necessary to audit all of the activities of the
Office of National Insurers.
(k) AUTHORITY
TO
ESTABLISH
DISTRICT
OF-
FICES.—The Director shall have the authority to estab-
lish, in his discretion, such district offices of the Office,
at such locations, as the Director deems necessary to per-
form the Office’s duties.
(l) DIVISION OF CONSUMER AFFAIRS.—The Director
shall establish a Division of Consumer Affairs within the
Office.
SEC. 202. SUPERVISION OF NATIONAL INSURERS.
(a) EXAMINATIONS.—
(1) IN GENERAL.—The Director shall provide
for the examination of national insurers. The Direc-
tor shall, not less than once during each 12-month
period, conduct an on-site financial examination and
an onsite market conduct examination of each na-
tional insurer.
(2) EXEMPTION.—The Director may exempt a
national insurer from the requirement under para-
graph (1) of an annual on-site financial examination
if the Director determines that the financial condi-
tion of the national insurer warrants such an exemp-
tion. The Director may not exempt any national in-
surer from such requirement for 2 successive years.
(b) REPORTS.—
(1) IN GENERAL.—The Director may require
national insurers to make such reports, containing
such information and in such form, as the Director
may prescribe by regulation. Every national insurer
that holds a Federal license shall file with the Direc-
tor annual and quarterly financial statements at
such times and in such form as the Director may re-
quire by regulation. Financial statements shall fol-
low the accounting principles specified pursuant to
section 331. The Director shall by regulation require
that annual financial statements be audited and ac-
companied by a report thereon of independent ac-
countants. The regulations shall specify the informa-
tion that must be disclosed in the financial state-
ments and accompanying notes and may specify ad-
ditional schedules that need not be filed with the fi-
nancial statements but must be available for exam-
ination by the Director upon request for a period of
time specified in the regulations.
(2) PUBLIC DISCLOSURE.—
(A) The Director shall, by regulation, pre-
scribe the extent to which the following shall, in
whole or in part, be made available to the pub-
lic upon request—
(i) reports of examinations conducted
pursuant to subsection (a), and the infor-
mation contained in such reports;
(ii) reports by national insurers pur-
suant to paragraph (1), and the informa-
tion contained in such reports;
(iii) information reported pursuant to
section 602 or 603 (or regulations there-
under); and
(iv) any workpapers or other materials
of a national insurer that the Director ob-
tains in connection with an examination
conducted pursuant to subsection (a), a re-
port pursuant to paragraph (1), a submis-
sion pursuant to section 602 or 603 (or
regulations thereunder) or otherwise and
that are in the Director’s possession at the
time of the request, and the information
contained in such workpapers or other ma-
terials, except that neither the provision of
such workpapers or other materials of a
national insurer to the Director nor any-
thing in this Act or in any regulations
issued under this Act shall constitute a
waiver of, or otherwise affect, any privilege
or other form of legal protection or exemp-
tion from public disclosure to which such
workpapers or other materials, and the in-
formation contained in such workpapers or
other materials, are otherwise subject.
(B) Except to the extent prescribed in reg-
ulations issued by the Director in accordance
with subparagraph (A) and subject to clause
(iv) of subparagraph (A), reports of examina-
tion conducted pursuant to subsection (a), re-
ports by national insurers pursuant to para-
graph (1), information reported pursuant to
section 602 or 603 (or regulations thereunder),
and any workpapers or other materials of a na-
tional insurer that the Director obtains in con-
nection with an examination conducted pursu-
ant to subsection (a), a report pursuant to
paragraph (1), a submission pursuant to section
602 or 603 (or regulations thereunder) or oth-
erwise and that are in the Director’s possession
at the time of the request, and all information
contained in such reports, workpapers or other
materials, shall be made available to the public
upon request unless the Director determines—
(i) that a particular item or classifica-
tion of information should not be made
public in order to protect the insurer or in-
surers concerned, or the policyholders of
such insurer or insurers; or
(ii) that public disclosure would other-
wise not be in the public interest.
(C) Any determination made by the Direc-
tor under subparagraph (B) not to permit the
public disclosure of information shall be made
in writing, and if the Director restricts any
item of information for national insurers gen-
erally, the Director shall disclose the reason in
detail in the Federal Register.
(3) ACCESS BY CERTAIN PARTIES.—
(A) Notwithstanding paragraph (2), the
persons described in subparagraph (B) shall not
be denied access to any information contained
in a report required under paragraph (1), sub-
ject to reasonable requirements of confiden-
tiality. Those requirements shall not prevent
such information from being transmitted to the
Comptroller General of the United States for
analysis.
(B) The following persons are described in
this subparagraph for purposes of subpara-
graph (A)—
(i) the Chairman or ranking minority
member of the Committee on Commerce,
Science and Transportation of the Senate
and their designees; and
(ii) the Chairman or ranking minority
member of the Committee on Financial
Services of the House of Representatives
and their designees.
(c) COMPLIANCE WITH MONETARY TRANSACTION
RECORDKEEPING AND REPORT REQUIREMENTS.—
(1) COMPLIANCE
PROCEDURES
REQUIRED.—
The Secretary of the Treasury shall prescribe regu-
lations requiring national insurers to establish and
maintain procedures reasonably designed to ensure
and monitor the compliance of such national insur-
ers with the requirements of subchapter II of chap-
ter 53 of title 31, United States Code.
(2) EXAMINATIONS OF NATIONAL INSURERS TO
INCLUDE REVIEW OF COMPLIANCE PROCEDURES.—
(A) IN GENERAL.—Each examination of a
national insurer by the Director shall include a
review of the procedures required to be estab-
lished and maintained under paragraph (1).
(B) 
EXAMINATION
REPORT
REQUIRE-
MENT.—The report of examination shall de-
scribe any problem with the procedures main-
tained by the national insurer.
(3) ORDER
TO
COMPLY
WITH
REQUIRE-
MENTS.—If the Director determines that a national
insurer—
(A) has failed to establish and maintain
the procedures described in paragraph (1); or
(B) has failed to correct any problem with
the procedures maintained by such national in-
surer that was previously reported to the na-
tional insurer by the Director, the Director
shall issue an order in the manner prescribed in
section 205 requiring such national insurer to
cease and desist from its violation of this sub-
section or regulations implementing this sub-
section.
(d) ANCILLARY PROVISIONS.—
(1) In making examinations of national insur-
ers, examiners appointed by the Director shall have
power—
(A) to require an affiliate of a national in-
surer to make such reports and provide such
material as the examiners may direct, but only
to the extent necessary to disclose information
concerning activities of the affiliate that may
affect the operations, management or financial
condition of the national insurer; and
(B) to make examinations of the affairs of
an affiliate of a national insurer, but—
(i) only if the examiners have reason-
able cause to believe that the activities of
the affiliate may affect the operations,
management or financial condition of the
national insurer;
(ii) only if the examiners are unable
to obtain the necessary information from
the national insurer; and
(iii) only to the extent necessary to
disclose information concerning the activi-
ties of the affiliate that may affect the op-
erations, management or financial condi-
tion of the national insurer.
(2) In the course of any examination of any na-
tional insurer, prompt and complete access shall be
given to national insurer officers, directors, employ-
ees, and agents, and to relevant books, records, or
documents of any type.
(3) Upon request made in the course of super-
vision or oversight of any national insurer, for the
purpose of acting on any application or determining
the condition of any national insurer, including
whether operations are being conducted in a manner
that does not involve undue risk of loss to the na-
tional insurer’s policyholders as a whole, or in com-
pliance with charters, laws, regulations, directives,
written agreements, or conditions imposed in writing
in connection with the granting of an application or
other request, the Director shall be given prompt
and complete access to national insurer officers, di-
rectors, employees, and agents, and to relevant
books, records, or documents of any type.
(4) If prompt and complete access upon request
is not given as required in this subsection, the Direc-
tor may apply to the United States district court for
the judicial district (or the United States court in
any territory) in which the main office of the na-
tional insurer is located, or in which the person de-
nying such access resides or carries on business, or
in the United States District Court for the District
of Columbia, for an order requiring that such infor-
mation be promptly provided.
(5) In connection with examinations of national
insurers and affiliates thereof, the Director may—
(A) administer oaths and affirmations and
examine and take and preserve testimony under
oath as to any matter in respect of the affairs
or ownership of any such national insurer or af-
filiate; and
(B) issue subpoenas and, for the enforce-
ment thereof, apply to the United States dis-
trict court for the judicial district (or the
United States court in any territory) in which
the main office of the national insurer or affil-
iate is located, or in which the witness resides
or carries on business, or in the United States
District Court for the District of Columbia.
Such courts shall have jurisdiction and power to
order and require compliance with any such
subpoena.
(6) Any national insurer and any affiliate of
any national insurer shall provide the Director with
complete access to any information or report with
respect to any examination made by any other State
or Federal regulatory authority and furnish any ad-
ditional information with respect thereto as the Di-
rector may reasonably require.
SEC. 203. AUTHORITY TO PRESCRIBE REGULATIONS.
(a) IN GENERAL.—The Director may prescribe such
regulations and issue such orders and interpretations as
the Director may determine to be appropriate to carry out
this Act and all other laws within the Director’s jurisdic-
tion.
(b) SCOPE OF AUTHORITY.—The Secretary of the
Treasury may not delay or prevent the issuance of any
rule or the promulgation of any regulation by the Director.
SEC. 204. EXAMINATION, ASSESSMENTS, AND FEES.
(a) EXAMINATION
OF NATIONAL INSURERS.—The
cost of conducting examinations of national insurers pur-
suant to section 202, implementing this Act, and repaying
amounts provided to the Director pursuant to subsection
(k) of this section, shall be assessed by the Director
against each such national insurer as the Director deems
necessary or appropriate.
(b) EXAMINATION
OF AFFILIATES.—The costs of
conducting examinations of affiliates of national insurers
pursuant to section 202, implementing this Act, and re-
paying amounts provided to the Director pursuant to sub-
section (k) of this section, may be assessed by the Director
against each affiliate that is examined as the Director
deems necessary or appropriate.
(c) ASSESSMENT AGAINST NATIONAL INSURER IN
CASE OF AFFILIATE’S REFUSAL TO PAY.—
(1) IN GENERAL.—Subject to paragraph (2), if
any affiliate of a national insurer—
(A) refuses to pay any assessment under
subsection (b) of this section; or
(B) fails to pay any such assessment be-
fore the end of the 60-day period beginning on
the date of the assessment, the Director may
assess such cost against, and collect such cost
from, such national insurer.
(2) AFFILIATE OF MORE THAN ONE NATIONAL
INSURER.—If any affiliate referred to in paragraph
(1) is an affiliate of more than one national insurer,
the assessment with respect to the affiliate may be
assessed against, and collected from, any affiliated
national insurer in such proportions as the Director
may prescribe.
(d) CIVIL MONEY PENALTY FOR AFFILIATE’S RE-
FUSAL TO COOPERATE.—
(1) PENALTY IMPOSED.—If any affiliate of any
national insurer—
(A) refuses to permit any examiner ap-
pointed by the Director to make an examina-
tion; or
(B) refuses to provide any information re-
quired to be disclosed in the course of any ex-
amination, the national insurer shall forfeit and
pay a civil penalty of not more than $25,000
for each day that any such refusal continues.
(2) ASSESSMENT AND COLLECTION.—Any pen-
alty imposed under paragraph (1) shall be assessed
and collected by the Director, in the manner pro-
vided in subsection (g)(1) of section 205.
(e) REGULATIONS.—The Director may prescribe reg-
ulations with respect to—
(1) the computation of, and the assessment for,
the cost of conducting examinations pursuant to this
section; and
(2) the collection and use of such assessments
and any fees under this section.
Such regulations may establish formulas to determine a
fee or schedule of fees to cover the costs of examinations
and also to cover the cost of processing applications, fil-
ings, statements, notices, and requests for approvals by
the Director or the Director’s designee.
(f) TREATMENT OF EXAMINATION ASSESSMENTS.—
(1) DEPOSITS.—Amounts received by the Direc-
tor from assessments under this section (other than
an assessment under subsection (d)(2) of this sec-
tion) may be deposited in the manner provided in
section 5234 of the Revised Statutes of the United
States (12 U.S.C. 192), with respect to assessments
by the Comptroller of the Currency.
(2) ASSESSMENTS ARE NOT SUBJECT TO AP-
PORTIONMENT
OF
FUNDS.—Notwithstanding any
other provision of law, the amounts received by the
Director from any assessment under this section
(other than an assessment under subsection (d)(2)
of this section) shall not be subject to apportionment
for the purpose of chapter 15 of title 31, United
States Code, or under any other authority.
(g) PROCESSING FEE.—The Director shall assess
against any person that submits to the Office an applica-
tion, filing, statement, notice, or request for approval a
fee for processing such submission.
(h) ADDITIONAL FEES FOR EXPENSES OF THE OF-
FICE.—The Director may assess against national insurers
such additional fees to fund the direct and indirect ex-
penses of the Office as the Director deems necessary or
appropriate. Such fees may be imposed more frequently
than annually at the discretion of the Director.
(i) WORKING CAPITAL.—The Director may impose
fees and assessments pursuant to subsections (a), (b), (e)
and (h) of this section, in excess of actual expenses for
any given year, to permit the Director to maintain a work-
ing capital fund. The Director shall remit to the payers
of such fees and assessments any funds collected in excess
of what he deems necessary to maintain such working cap-
ital fund.
(j) USE OF FUNDS.—The Director may use the com-
bined resources retained through fees and assessments im-
posed pursuant to this section to pay all direct and indi-
rect salary and administrative expenses of the Office, in-
cluding contracts and purchases of property and services,
and the direct and indirect expenses of the examinations
and supervisory activities of the Office.
(k) START-UP FUNDING.—
(1) IN GENERAL.—For purposes of carrying out
the responsibilities of the Office and the Director
under this Act, the Secretary of the Treasury shall
pay to the Director a one-time payment of
$10,000,000 on the date of the enactment of this
Act. Thereafter, expenses of the Office shall be fund-
ed through the collection of fees as provided under
this section.
(2) ADDITIONAL FUNDS.—Except as provided
in this section, funds in addition to the funds pro-
vided under paragraph (1) may be made available to
the Director only if authorized and appropriated by
law.
(3) REPAYMENT
OF
TREASURY
LOAN.—Not
later than the expiration of the 5-year period begin-
ning on the date of the enactment of this act, the
Director shall repay to the Secretary of the Treasury
the unpaid portion of the $10,000,000 paid to the
Director pursuant to paragraph (1).
SEC. 205. ENFORCEMENT.
(a) FEDERAL LICENSE REVOCATION, SUSPENSION,
OR RESTRICTION.—
(1) INVOLUNTARY
REVOCATION
OR
RESTRIC-
TION.—
(A) NOTICE
TO
THE
NATIONAL
IN-
SURER.—If the Director determines that—
(i) a national insurer or its board of
directors has engaged or are engaging in
conduct involving an undue risk of loss to
the national insurer’s policyholders as a
whole;
(ii) a national insurer is in a financial
or other condition that is not consistent
with the continuation of its operations as
presently conducted by the insurer; or
(iii) a national insurer or its board of
directors has violated any applicable law,
regulation, order, condition imposed in
writing by the Director in connection with
the approval of an application, filing, state-
ment, notice or other request by the na-
tional insurer, or written agreement en-
tered into between the national insurer and
the Director, the Director may determine
that such conduct, condition, or violation
requires revocation or restriction of (in-
cluding restrictions on the lines of insur-
ance covered by) the national insurer’s
Federal license.
(B) If the Director determines that any
conduct, condition, or violation specified in sub-
paragraph (A) requires revocation or restriction
of a national insurer’s Federal license, the Di-
rector shall—
(i) serve written notice on the national
insurer of the Director’s intention to re-
voke the Federal license of such national
insurer;
(ii) provide the national insurer with a
statement of the basis for the determina-
tion to revoke or restrict the insurer’s Fed-
eral license; and
(iii) notify the national insurer of the
date (not less than 30 days after notice
under this subparagraph) and place for a
hearing before the Director (or any person
designated by the Director) with respect to
the revocation or restriction of the national
insurer’s Federal license.
(2) HEARING; REVOCATION OR RESTRICTION.—
If, on the basis of the evidence presented at a hear-
ing before the Director (or any person designated by
the Director for such purpose), in which all issues
shall be determined on the record pursuant to sec-
tion 554 of title 5, United States Code, and the
written findings of the Director (or such designated
person) with respect to such evidence (which shall be
conclusive), the Director finds that any conduct,
condition, or violation specified in the notice to a na-
tional insurer under paragraph (1)(B) has been es-
tablished, the Director may issue an order revoking
or restricting the Federal license of the national in-
surer effective as of a date subsequent to such find-
ing.
(3) APPEARANCE; CONSENT TO REVOCATION OR
RESTRICTION.—Unless the national insurer shall ap-
pear at the hearing by a duly authorized representa-
tive, it shall be deemed to have consented to the rev-
ocation or restriction of its Federal license, and rev-
ocation or restriction of its Federal license there-
upon may be ordered by the Director.
(4) JUDICIAL
REVIEW.—Any national insurer
whose Federal license has been revoked or restricted
by order of the Director under this subsection shall
have the right of judicial review of such order only
to the same extent as provided for the review of or-
ders under subsection (f).
(5) PUBLICATION OF NOTICE OF REVOCATION
OR RESTRICTION.—The Director may publish notice
of such revocation or restriction and the national in-
surer shall give notice of such revocation or restric-
tion to each of its policyholders at the policyholder’s
last address of record on the books of the national
insurer, in such manner and at such time as the Di-
rector may find to be necessary and may order for
the protection of policyholders.
(6) TEMPORARY
SUSPENSION
OR
RESTRIC-
TION.—
(A) IN GENERAL.—If the Director initiates
a revocation or restriction proceeding under
paragraph (1) with respect to a national in-
surer, and the Director finds that the national
insurer poses an immediate threat to its policy-
holders or the public, the Director may issue a
temporary order suspending or restricting the
national insurer’s Federal license.
(B) EFFECTIVE
PERIOD
OF
TEMPORARY
ORDER.—Any temporary order issued under
subparagraph (A) shall become effective not
earlier than 10 days from the date of service
upon the national insurer and, unless set aside,
limited, or suspended by a court in proceedings
authorized hereunder, such temporary order
shall remain effective and enforceable until an
order of the Director under paragraph (2) or
(3) becomes final or until the Director dis-
misses the proceedings under paragraph (2).
(C) JUDICIAL REVIEW.—Before the close
of the 10-day period beginning on the date any
temporary order has been served upon a na-
tional insurer under subparagraph (A), such
national insurer may apply to the United States
District Court for the District of Columbia, or
the United States district court for the judicial
district in which the main office of the insurer
is located, for an injunction setting aside, lim-
iting, or suspending the enforcement, operation,
or effectiveness of such order, and such court
shall have jurisdiction to issue such injunction.
(D) PUBLICATION
OF
ORDER.—The na-
tional insurer shall give notice of a temporary
order issued under this paragraph in such man-
ner and at such times as the Director may find
to be necessary and may order for the protec-
tion of policyholders and the public.
(7) NOTICE BY THE DIRECTOR.—If the Direc-
tor shall determine that a national insurer has not
given notice of an order under this subsection sub-
stantially in the manner and at the times ordered by
the Director, the Director may provide such notice
in such manner as the Director may find to be nec-
essary and proper.
(8) DECISION TO REVOKE, SUSPEND, OR RE-
STRICT.—Any decision by the Director to—
(A) issue a temporary order suspending or
restricting a national insurer’s Federal license;
or
(B) issue a final order revoking or restrict-
ing a national insurer’s Federal license, shall be
made by the Director and may not be dele-
gated, except that the Director may, by order,
designate an employee of the Office that may
make such decision in the event that the Direc-
tor is not able to act by reason of recusal or is
otherwise disqualified from acting.
(b) CEASE-AND-DESIST PROCEEDINGS.—
(1) IN GENERAL.—If, in the opinion of the Di-
rector, any national insurer, any State licensed in-
surance producer, or any insurer-affiliated party is
engaging or has engaged, or the Director has rea-
sonable cause to believe that any national insurer,
any State licensed insurance producer, or any in-
surer-affiliated party is about to engage, in conduct
involving an undue risk of loss to such national in-
surer’s policyholders as a whole, or is violating or
has violated, or the Director has reasonable cause to
believe that any national insurer, any State licensed
insurance producer, or any insurer-affiliated party is
about to violate, a law, rule, or regulation, or any
condition imposed in writing by the Director in con-
nection with the granting of any application, filing,
statement, notice or other request by the national in-
surer or the State licensed insurance producer or
any written agreement entered into with the Direc-
tor, the Director may issue and serve upon such na-
tional insurer, producer or party a notice of charges
in respect thereof. The notice shall contain a state-
ment of the facts constituting the alleged violation
or violations or the conduct, and shall fix a time and
place at which a hearing will be held to determine
whether an order to cease and desist therefrom
should issue against the national insurer, the State
licensed insurance producer or the insurer-affiliated
party. Such hearing shall be fixed for a date not ear-
lier than 30 days nor later than 60 days after serv-
ice of such notice unless an earlier or a later date
is set by the Director at the request of any party so
served. Unless the party or parties so served shall
appear at the hearing personally or by a duly au-
thorized representative, they shall be deemed to have
consented to the issuance of the cease-and-desist
order. In the event of such consent, or if upon the
record made at any such hearing, the Director shall
find that any violation or conduct specified in the
notice of charges has been established, the Director
may issue and serve upon the national insurer, the
State licensed insurance producer or the insurer-af-
filiated party, as the case may be, an order to cease
and desist from any such violation or conduct. Such
order may, by provisions which may be mandatory
or otherwise, require the national insurer, the State
licensed insurance producer or the insurer-affiliated
party to cease and desist from the same, and, fur-
ther, to take affirmative action to correct the condi-
tions resulting from any such violation or conduct.
(2) 
EFFECTIVE
DATE.—A 
cease-and-desist
order shall become effective at the expiration of 30
days after the service of such order upon the na-
tional insurer, the State licensed insurance producer
or the insurer-affiliated party, as the case may be
(except in the case of a cease-and-desist order issued
upon consent, which shall become effective at the
time specified therein), and shall remain effective
and enforceable as provided therein, except to such
extent as it is stayed, modified, terminated, or set
aside by action of the Director or a reviewing court.
(3) AFFIRMATIVE ACTION TO CORRECT CONDI-
TIONS
RESULTING
FROM
VIOLATIONS
OR
CON-
DUCT.—The authority under this subsection and
subsection (c) to issue an order that requires a na-
tional insurer, a State licensed insurance producer
or an insurer-affiliated party to take affirmative ac-
tion to correct or remedy any conditions resulting
from any violation or conduct with respect to which
such order is issued includes the authority to require
such national insurer, producer or such party to—
(A) make restitution or provide reimburse-
ment, indemnification, or guarantee against
loss;
(B) restrict the growth of the national in-
surer;
(C) dispose of any asset or insurance con-
tract (including any insurance policy);
(D) rescind any other agreements or con-
tracts, other than insurance contracts (includ-
ing insurance policies) as to which the national
insurer is the issuer; and
(E) employ qualified officers or employees
(who may be subject to approval by the Direc-
tor in his direction); and
(F) take such other action as the Director
determines to be appropriate.
(4) AUTHORITY TO LIMIT ACTIVITIES.—The au-
thority to issue an order under this subsection or
subsection (c) includes the authority to place limita-
tions on the activities or functions of a national in-
surer, a State licensed insurance producer or an in-
surer-affiliated party.
(5) STANDARD FOR CERTAIN ORDERS.—No au-
thority under this subsection or subsection (c) to
prohibit any insurer-affiliated party from with-
drawing, transferring, removing, dissipating, or dis-
posing of any funds, assets, or other property may
be exercised unless the Director meets the standards
of Rule 65 of the Federal Rules of Civil Procedure,
without regard to the requirement of such rule that
the applicant show that the injury, loss, or damage
is irreparable and immediate.
(c) TEMPORARY CEASE-AND-DESIST ORDERS.—
(1) IN GENERAL.—Whenever the Director shall
determine that the violation or threatened violation
or the conduct specified in the notice of charges
served upon a national insurer, a State licensed in-
surance producer or an insurer-affiliated party pur-
suant to subsection (b)(1), or the continuation there-
of, is likely to cause insolvency or significant dissipa-
tion of assets or earnings of a national insurer, or
is likely to weaken the condition of a national in-
surer or otherwise prejudice the interests of the pol-
icyholders of a national insurer prior to the comple-
tion of the proceedings conducted pursuant to sub-
section (b)(1), the Director may issue a temporary
order requiring such national insurer, producer or
party to cease and desist from any such violation or
conduct and to take affirmative action to prevent or
remedy such insolvency, dissipation, condition, or
prejudice pending completion of such proceedings.
Such order may include any requirement authorized
under subsection (b)(3)(B). Such order shall become
effective upon service upon the national insurer, pro-
ducer or party and, unless set aside, limited, or sus-
pended by a court in proceedings authorized by
paragraph (2), shall remain effective and enforceable
pending the completion of the administrative pro-
ceedings pursuant to such notice and until such time
as the Director shall dismiss the charges specified in
such notice or, if a cease-and-desist order is issued
against such national insurer, producer or party,
until the effective date of such order.
(2) INJUNCTION.—Within 10 days after a na-
tional insurer, a State licensed insurance producer
or an insurer-affiliated party has been served with a
temporary cease-and-desist order, the national in-
surer, producer or party may apply to the United
States district court for the judicial district in which
the main office of the national insurer is located or
in which the producer of party is located, as the case
may be, or to the United States District Court for
the District of Columbia, for an injunction setting
aside, limiting, or suspending the enforcement, oper-
ation, or effectiveness of such order pending the
completion of the administrative proceedings pursu-
ant to the notice of charges served upon the national
insurer or such party under subsection (b)(1), and
such court shall have jurisdiction to issue such in-
junction.
(3) INCOMPLETE OR INACCURATE RECORDS.—
(A) TEMPORARY ORDER.—If a notice of
charges served under subsection (b)(1) speci-
fies, on the basis of particular facts and cir-
cumstances, that a national insurer’s books and
records are so incomplete or inaccurate that the
Director is unable, through the normal super-
visory process, to determine the financial condi-
tion of that national insurer or the details or
purpose of any transaction or transactions that
may have a material effect on the financial con-
dition of that national insurer, the Director
may issue a temporary order requiring—
(i) the cessation of any activity or
practice which gave rise, whether in whole
or in part, to the incomplete or inaccurate
state of the books or records; or
(ii) affirmative action to restore such
books or records to a complete and accu-
rate state, until the completion of the pro-
ceedings under subsection (b)(1).
(B) EFFECTIVE PERIOD.—Any temporary
order issued under subparagraph (A)—
(i) shall become effective upon service;
and
(ii) unless set aside, limited, or sus-
pended by a court in proceedings under
paragraph (2), shall remain in effect and
enforceable until the earlier of—
(I) the completion of the pro-
ceeding initiated under subsection
(a)(1) in connection with the notice of
charges; or
(II) the date the Director deter-
mines, by examination or otherwise,
that the national insurer’s books and
records are accurate and reflect the fi-
nancial condition of the national in-
surer.
(d) REMOVAL AND PROHIBITION AUTHORITY.—
(1) AUTHORITY TO ISSUE ORDER.—Whenever
the Director determines that—
(A) any insurer-affiliated party has, di-
rectly or indirectly—
(i) violated—
(I) any law or regulation;
(II) any cease-and-desist order
issued under this section which has
become final;
(III) any condition imposed in
writing by the Director in connection
with the grant of any application, fil-
ing, statement, notice or other request
by such national insurer; or
(IV) any written agreement be-
tween such national insurer and the
Director;
(ii) engaged or participated in any
conduct involving undue risk of loss to
such national insurer’s policyholders as a
whole; or
(iii) committed or engaged in any act,
omission, or practice which constitutes a
breach of such party’s fiduciary duty;
(B) by reason of the violation, practice, or
breach described in any clause of subparagraph
(A)—
(i) such national insurer has suffered
or will probably suffer financial loss or
other damage;
(ii) the interests of the national insur-
er’s policyholders have been or could be
prejudiced; or
(iii) such party has received financial
gain or other benefit by reason of such vio-
lation, practice, or breach; and
(C) such violation, practice, or breach—
(i) involves personal dishonesty on the
part of such party; or
(ii) demonstrates willful or continuing
disregard by such party for the condition
of such national insurer or the interests of
the national insurer’s policyholders, the Di-
rector may serve upon such party a written
notice of the Director’s intention to sus-
pend or remove such party from office or
to prohibit any further participation by
such party, in any manner, in the conduct
of the affairs of any national insurer.
(2) TEMPORARY SUSPENSION ORDER.—
(A) SUSPENSION
OR
PROHIBITION
AU-
THORIZED.—If the Director serves written no-
tice under paragraph (1) on any insurer-affili-
ated party of the Director’s intention to issue
an order under such paragraph, the Director
may issue a temporary order suspending such
party from office or prohibiting such party from
further participation in any manner in the con-
duct of the affairs of the national insurer, if the
Director—
(i) determines that such action is nec-
essary for the protection of the national in-
surer or of the interests of the national in-
surer’s policyholders; and
(ii) serves such party with the tem-
porary order of suspension or prohibition.
(B) EFFECTIVE PERIOD.—Any temporary
order issued under subparagraph (A)—
(i) shall become effective upon service;
and
(ii) unless a court issues a stay of
such order under paragraph (5), shall re-
main in effect and enforceable until—
(I) the date the Director dis-
misses the charges contained in the
notice served under paragraph (1)
with respect to such party; or
(II) the effective date of an order
issued by the Director to such party
under paragraph (1).
(C) COPY
OF
ORDER.—If the Director
issues a temporary order under subparagraph
(A) to any insurer-affiliated party, the Director
shall serve a copy of such order on any national
insurer with which such party is associated at
the time such order is issued.
(3) PROCEDURES.—A notice of intention to re-
move an insurer-affiliated party from office or to
prohibit such party from participating in the con-
duct of the affairs of a national insurer that is
served under paragraph (1), shall contain a state-
ment of the facts constituting grounds therefor, and
shall fix a time and place at which a hearing will be
held thereon. Such hearing shall be fixed for a date
not earlier than 30 days nor later than 60 days after
the date of service of such notice, unless an earlier
or a later date is set by the Director at the request
of (A) such party, or (B) the Attorney General of
the United States. Unless such party shall appear at
the hearing in person or by a duly authorized rep-
resentative, such party shall be deemed to have con-
sented to the issuance of an order of such removal
or prohibition. In the event of such consent, or if
upon the record made at any such hearing the Di-
rector shall find that any of the grounds specified in
such notice have been established, the Director may
issue such orders of suspension or removal from of-
fice, or prohibition from participation in the conduct
of the affairs of the national insurer, as the Director
may deem appropriate. Any such order shall become
effective at the expiration of 30 days after service
upon such national insurer and such party (except
in the case of an order issued upon consent, which
shall become effective at the time specified therein).
Such order shall remain effective and enforceable as
provided therein, except to such extent as it is
stayed, modified, terminated, or set aside by action
of the Director or a reviewing court.
(4) INDUSTRYWIDE PROHIBITION.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), any person who, pursuant to
any order issued under this subsection or sub-
section (e), has been removed or suspended
from office in a national insurer or prohibited
from participating in the conduct of the affairs
of a national insurer may not, while such order
is in effect—
(i) continue or commence to hold any
office in, or participate in any manner in
the conduct of the affairs of any national
insurer;
(ii) solicit, procure, transfer, attempt
to transfer, vote, or attempt to vote any
proxy, consent, or authorization with re-
spect to any voting rights in any national
insurer;
(iii) act as an insurer-affiliated party;
or
(iv) act as a State licensed insurance
producer.
(B) EXCEPTION
IF
DIRECTOR
PROVIDES
WRITTEN CONSENT.—If, on or after the date an
order is issued under this subsection which re-
moves or suspends from office any insurer-af-
filiated party or prohibits such party from par-
ticipating in the conduct of the affairs of a na-
tional insurer, such party receives the written
consent of the Director, subparagraph (A) shall,
to the extent of such consent, cease to apply to
such party with respect to the national insurer
described in each written consent.
(C) VIOLATION OF PARAGRAPH TREATED
AS
VIOLATION
OF
ORDER.—Any violation of
subparagraph (A) by any person who is subject
to an order described in such subparagraph
shall be treated as a violation of the order.
(5) STAY OF SUSPENSION AND/OR PROHIBITION
OF INSURER-AFFILIATED PARTY.—Within 10 days
after any insurer-affiliated party has been suspended
from office or prohibited from participation in the
conduct of the affairs of a national insurer by a tem-
porary order issued under subsection (d)(2), such
party may apply to the United States district court
for the judicial district in which the main office of
the national insurer is located, or the United States
District Court for the District of Columbia, for a
stay of such suspension or prohibition pending the
completion of the administrative proceedings pursu-
ant to the notice served upon such party under sub-
section (d)(1), and such court shall have jurisdiction
to stay such suspension or prohibition.
(e) SUSPENSION OR REMOVAL OF INSURER-AFFILI-
ATED PARTY CHARGED WITH FELONY.—
(1) SUSPENSION OR PROHIBITION.—
(A) IN GENERAL.—Whenever any insurer-
affiliated party is charged in any information,
indictment, or complaint, with the commission
of or participation in—
(i) a crime involving dishonesty or
breach of trust which is punishable by im-
prisonment for a term exceeding 1 year
under State or Federal law, or
(ii) a criminal violation of section
1956, 1957, or 1960 of title 18, United
States Code, or section 5322 or 5324 of
title 31, United States Code, the Director
may, if continued service or participation
by such party may pose a threat to the na-
tional insurer or the interests of the na-
tional insurer’s policyholders, by written
notice served upon such party, suspend
such party from office or prohibit such
party from further participation in any
manner in the conduct of the affairs of the
national insurer.
(B) PROVISIONS
APPLICABLE
TO
NO-
TICE.—
(i) COPY.—A copy of any notice under
subparagraph (A) shall also be served upon
the national insurer.
(ii) EFFECTIVE
PERIOD.—A suspen-
sion or prohibition under subparagraph (A)
shall remain in effect until the informa-
tion, indictment, or complaint referred to
in such subparagraph is finally disposed of
or until terminated by the Director.
(2) REMOVAL OR PROHIBITION.—
(A) IN GENERAL.—If a judgment of con-
viction or an agreement to enter a pretrial di-
version or other similar program is entered
against an insurer-affiliated party in connection
with a crime described in paragraph (1)(A)(i),
at such time as such judgment is not subject to
further appellate review, the Director may, if
continued service or participation by such party
may pose a threat to the national insurer or the
interests of the national insurer’s policyholders,
issue and serve upon such party an order re-
moving such party from office or prohibiting
such party from further participation in any
manner in the conduct of the affairs of the na-
tional insurer without the prior written consent
of the Director.
(B) REQUIRED FOR CERTAIN OFFENSES.—
In the case of a judgment of conviction or
agreement against an insurer-affiliated party in
connection with a violation described in para-
graph (1)(A)(ii), the Director shall issue and
serve upon such party an order removing such
party from office or prohibiting such party from
further participation in any manner in the con-
duct of the affairs of the national insurer with-
out the prior written consent of the Director.
(C) COPY.—A copy of any order under this
paragraph shall also be served upon the na-
tional insurer, whereupon the insurer-affiliated
party who is subject to the order (if a director
or an officer) shall cease to be a director or of-
ficer of such national insurer.
(D) EFFECT OF ACQUITTAL.—A finding of
not guilty or other disposition of the charge
shall not preclude the Director from instituting
proceedings after such finding or disposition to
remove such party from office or to prohibit
further participation in national insurer affairs,
pursuant to paragraphs (1) or (2) of subsection
(d).
(E) EFFECTIVE
PERIOD.—Any notice of
suspension or order of removal issued under
this paragraph or paragraph (1) shall remain
effective and outstanding until the completion
of any hearing or appeal authorized under para-
graph (3) unless terminated by the Director.
(3) Within 30 days from service of any notice
of suspension or order of removal issued pursuant to
paragraph (1) or (2) of this subsection, the insurer-
affiliated party concerned may request in writing an
opportunity to appear before the Director to show
that the continued service to or participation in the
conduct of the affairs of the national insurer by such
party does not, or is not likely to, pose a threat ei-
ther to the national insurer or to the interests of the
national insurer’s policyholders. Upon receipt of any
such request, the Director shall fix a time (not more
than 30 days after receipt of such request, unless
extended at the request of such party) and place at
which such party may appear, personally or through
counsel, before one or more designated employees of
the Director to submit written materials (or, at the
discretion of the Director, oral testimony) and oral
argument. Within 60 days of such hearing, the Di-
rector shall notify such party whether the notice of
suspension or prohibition from participation in any
manner in the conduct of the affairs of the national
insurer will be continued, terminated, or otherwise
modified, or whether the order removing such party
from office or prohibiting such party from further
participation in any manner in the conduct of the af-
fairs of the national insurer will be rescinded or oth-
erwise modified. Such notification shall contain a
statement of the basis for the Director’s decision, if
adverse to such party.
(f) EFFECT ON BOARD OF DIRECTORS.—If at any
time, because of the suspension of one or more directors
pursuant to this section, there shall be on the board of
directors of a national insurer less than a quorum of direc-
tors not so suspended, all powers and functions vested in
or exercisable by such board shall vest in and be exer-
cisable by the director or directors on the board not so
suspended, until such time as there shall be a quorum of
the board of directors. In the event all of the directors
of a national insurer are suspended pursuant to this sec-
tion, the Director shall appoint persons to serve tempo-
rarily as directors in their place and stead pending the
termination of such suspensions, or until such time as
those who have been suspended cease to be directors of
the national insurer and their respective successors take
office.
(g) HEARINGS AND JUDICIAL REVIEW.—
(1) Any hearing provided for in this section
(other than the hearing provided for in subsection
(e)(3) of this section) shall be held in the Federal
judicial district in which the main office of the na-
tional insurer is located or in which the State li-
censed insurance producer or the insurer-affiliated
party is located, as the case may be, unless the party
afforded the hearing consents to another place, and
shall be conducted in accordance with the provisions
of chapter 5 of title 5, United States Code. After
such hearing, and within 90 days after the Director
has notified the parties that the case has been sub-
mitted to the Director for final decision, the Direc-
tor shall render a decision (which shall include find-
ings of fact upon which the Director’s decision is
predicated) and shall issue and serve upon each
party to the proceeding an order or orders consistent
with the provisions of this section. Judicial review of
any such order shall be exclusively as provided in
this subsection. Unless a petition for review is timely
filed in a court of appeals of the United States, as
hereinafter provided in paragraph (2), and there-
after until the record in the proceeding has been
filed as so provided, the Director may at any time,
upon such notice and in such manner as it shall
deem proper, modify, terminate, or set aside any
such order. Upon such filing of the record, the Di-
rector may modify, terminate, or set aside any such
order with permission of the court.
(2) Any party to any proceeding under para-
graph (1) may obtain a review of any order served
pursuant to paragraph (1) of this subsection (other
than an order issued with the consent of the na-
tional insurer, the State licensed insurance producer
or the insurer-affiliated party concerned, or an order
issued under paragraph (e)(1) or (e)(2)) by the fil-
ing in the court of appeals of the United States for
the circuit in which the main office of the national
insurer is located or in which the State licensed in-
surance producer or the insurer-affiliated party is lo-
cated, as the case may be, or in the United States
Court of Appeals for the District of Columbia Cir-
cuit, within 30 days after the date of service of such
order, a written petition praying that the order of
the Office be modified, terminated, or set aside. A
copy of such petition shall be forthwith transmitted
by the clerk of the court to the Director, and there-
upon the Director shall file in the court the record
in the proceeding, as provided in section 2112 of
title 28, United States Code. Upon the filing of such
petition, such court shall have jurisdiction, which
upon the filing of the record shall except as provided
in the last sentence of said paragraph (1) be exclu-
sive, to affirm, modify, terminate, or set aside, in
whole or in part, the order of the Office. Review of
such proceedings shall be had as provided in chapter
7 of title 5, United States Code. The judgment and
decree of the court shall be final, except that the
same shall be subject to review by the Supreme
Court upon certiorari, as provided in section 1254
of title 28, United States Code.
(3) The commencement of proceedings for judi-
cial review under paragraph (2) of this subsection
shall not, unless specifically ordered by the court,
operate as a stay of any order issued by the Direc-
tor.
(h) JURISDICTION AND ENFORCEMENT.—The Direc-
tor may in his discretion apply to the United States dis-
trict court for the judicial district in which the main office
of the national insurer is located or in which the State
licensed insurance producer or the insurer-affiliated party
is located, as the case may be, for the enforcement of any
effective and outstanding notice or order issued under this
section, and such court shall have jurisdiction and power
to order and require compliance therewith; but except as
otherwise provided in this section no court shall have juris-
diction to affect by injunction or otherwise the issuance
or enforcement of any notice or order under any such sec-
tion, or to review, modify, suspend, terminate, or set aside
any such notice or order.
(i) PENALTIES.—
(1) CIVIL MONEY PENALTY.—
(A) FIRST
TIER.—Any national insurer,
State licensed insurance producer or insurer-af-
filiated party that—
(i) violates any law or regulation;
(ii) violates any final order or tem-
porary order issued pursuant to subsection
(b), (c), (d) or (e) of this section or sub-
section (e) of section 201;
(iii) violates any written agreement
between such national insurer, producer or
party and the Office,
shall forfeit and pay a civil penalty of not more
than $5,000 for each day during which such
violation continues.
(B) SECOND TIER.—Notwithstanding sub-
paragraph (A), any national insurer, any State
licensed insurance producer or any insurer-af-
filiated party that—
(i)(I) commits any violation described
in any clause of subparagraph (A);
(II) recklessly engages in any conduct
involving an undue risk of loss to such na-
tional insurer’s policyholders as a whole; or
(III) breaches any fiduciary duty; and
(ii) 
which 
violation, 
practice, 
or
breach—
(I) is part of a pattern of mis-
conduct;
(II) causes or is likely to cause
more than a minimal loss to such na-
tional insurer; or
(III) results in pecuniary gain or
other benefit to such party,
shall forfeit and pay a civil penalty of not more
than $25,000 for each day during which such
violation, practice, or breach continues.
(C) THIRD
TIER.—Notwithstanding sub-
paragraphs (A) and (B), any national insurer,
State licensed insurance producer or any in-
surer-affiliated party that—
(i) knowingly—
(I) commits any violation de-
scribed in any clause of subparagraph
(A);
(II) engages in any conduct in-
volving an undue risk of loss to such
national insurer’s policyholders as a
whole; or
(III) breaches any fiduciary duty;
and
(ii) knowingly or recklessly causes a
substantial loss to such national insurer or
a substantial pecuniary gain or other ben-
efit to such party by reason of such viola-
tion, practice, or breach,
shall forfeit and pay a civil penalty in an
amount not to exceed the applicable maximum
amount determined under subparagraph (D) for
each day during which such violation, practice,
or breach continues.
(D) MAXIMUM
AMOUNTS
OF
PENALTIES
FOR ANY VIOLATION DESCRIBED IN SUBPARA-
GRAPH
(C).—The maximum daily amount of
any civil penalty which may be assessed pursu-
ant to subparagraph (C) for any violation, prac-
tice, or breach described in such subparagraph
is an amount to not exceed $1,000,000.
(E) ASSESSMENT.—
(i) WRITTEN
NOTICE.—Any penalty
imposed under subparagraph (A), (B), or
(C) may be assessed and collected by the
Director by written notice. Such notice
shall contain a statement of the facts con-
stituting the basis for assessment of any
penalty imposed under subparagraph (A),
(B), or (C).
(ii) FINALITY
OF
ASSESSMENT.—If,
with respect to any assessment under
clause (i), a hearing is not requested pur-
suant to subparagraph (H) within the pe-
riod of time allowed under such subpara-
graph, the assessment shall constitute a
final and unappealable order.
(F) AUTHORITY
TO
MODIFY
OR
REMIT
PENALTY.—The Director may compromise,
modify, or remit any penalty which the Director
may assess or had already assessed under sub-
paragraph (A), (B), or (C).
(G) HEARING.—The national insurer or
other person against whom any penalty is as-
sessed under this paragraph shall be afforded a
hearing by the Director if such national insurer
or person submits a request for such hearing
within 20 days after the issuance of the notice
of assessment.
(H) COLLECTION.—
(i) REFERRAL.—If any national in-
surer or other person fails to pay an as-
sessment after any penalty assessed under
this paragraph has become final, the Di-
rector shall recover the amount assessed by
action in the appropriate United States
district court.
(ii) APPROPRIATENESS
OF
PENALTY
NOT
REVIEWABLE.—In any civil action
under clause (i), the validity and appro-
priateness of the penalty shall not be sub-
ject to review.
(I) DISBURSEMENT
AND
USE.—All pen-
alties collected under authority of this para-
graph shall be deposited into the Treasury, and
shall not be used to fund the compensation of
the Director or employees of the Office or the
expenses of the Office.
(2) NOTICE UNDER THIS SECTION AFTER SEPA-
RATION
FROM
SERVICE.—The resignation, termi-
nation of employment or participation, or separation
of an insurer-affiliated party (including a separation
caused by the closing of a national insurer) shall not
affect the jurisdiction and authority of the Director
to issue any notice and proceed under this section
against any such party, if such notice is served be-
fore the end of the 6-year period beginning on the
date such party ceased to be an insurer-affiliated
party with respect to such national insurer.
(3) PREJUDGMENT ATTACHMENT.—
(A) IN GENERAL.—In any action brought
by the Director pursuant to this section, or in
actions brought in aid of, or to enforce an order
in, any administrative or other civil action for
money damages, restitution, or civil money pen-
alties brought by the Director, the court may,
upon application of the Director, issue a re-
straining order that—
(i) prohibits any person subject to the
proceeding from withdrawing, transferring,
removing, dissipating, or disposing of any
funds, assets or other property; and
(ii) appoints a temporary receiver to
administer the restraining order.
(B) STANDARD.—
(i) SHOWING.—Rule 65 of the Federal
Rules of Civil Procedure shall apply with
respect to any proceeding under subpara-
graph (A), without regard to the require-
ment of such rule that the applicant show
that the injury, loss, or damage is irrep-
arable and immediate.
(ii) STATE PROCEEDING.—If, in the
case of any proceeding in a State court,
the court determines that rules of civil pro-
cedure available under the laws of such
State provide substantially similar protec-
tions to a party’s right to due process as
Rule 65 (as modified with respect to such
proceeding by clause (i)), the relief sought
under subparagraph (A) may be requested
under the laws of such State.
(j) CRIMINAL PENALTY.—Whoever, being subject to
an order in effect under subsection (d) or (e), without the
prior written approval of the Director, knowingly partici-
pates, directly or indirectly, in any manner (including by
engaging in an activity specifically prohibited in such an
order) in the conduct of the affairs of any national insurer
shall be fined not more than $1,000,000, imprisoned for
not more than 5 years, or both.
(k) NOTICE OF SERVICE.—Any service required or
authorized to be made by the Director under this section
may be made by registered mail, or in such other manner
reasonably calculated to give actual notice as the Director
may by regulation or otherwise provide.
(l) ANCILLARY
PROVISIONS; SUBPOENA
POWER,
ETC.—In the course of or in connection with any pro-
ceeding or other action under this section, the Director,
or any employee or designated representative thereof, in-
cluding any person designated to conduct any hearing
under this section, shall have the power to administer
oaths and affirmations, to take or cause to be taken depo-
sitions, and to issue, revoke, quash, or modify subpoenas
and subpoenas duces tecum; and the Director is empow-
ered to make rules and regulations with respect to any
such proceedings, claims, examinations, investigations, or
other actions. The attendance of witnesses and the produc-
tion of documents provided for in this subsection may be
required from any place in any State or other place subject
to the jurisdiction of the United States at any designated
place where such proceeding or other action is being con-
ducted. The Director or any party to proceedings under
this section may apply to the United States District Court
for the District of Columbia, or the United States district
court for the judicial district in which such proceeding or
other action is being conducted, or where the witness re-
sides or carries on business, for enforcement of any sub-
poena or subpoena duces tecum issued pursuant to this
subsection, and such courts shall have jurisdiction and
power to order and require compliance therewith. Wit-
nesses subpoenaed under this subsection shall be paid the
same fees and mileage that are paid witnesses in the dis-
trict courts of the United States. Any court having juris-
diction of any proceeding or other action instituted under
this section by a national insurer, a State licensed insur-
ance producer or an insurer-affiliated party thereof, may
allow to any such party such reasonable expenses and at-
torneys’ fees as it deems just and proper; and such ex-
penses and fees shall be paid by the national insurer or
from its assets. Any person who willfully shall fail or
refuse to attend and testify or to answer any lawful in-
quiry or to produce books, papers, correspondence, memo-
randa, contracts, agreements, or other records, if in such
person’s power so to do, in obedience to the subpoena of
the Director, shall be guilty of a misdemeanor and, upon
conviction, shall be subject to a fine of not more than
$1,000 or to imprisonment for a term of not more than
1 year or both.
(m) NON-U.S. INSURER.—
(1) APPLICABILITY.—Except as otherwise spe-
cifically provided in this section, the provisions of
this section shall be applied to non-U.S. insurers in
accordance with this subsection.
(2) ACTIONS.—Any conduct or practice outside
the United States on the part of a non-U.S. insurer
or any officer, director, employee, or agent thereof
may not constitute the basis for any action by the
Director under this section, unless the Director al-
leges a belief that such conduct or practice has been,
is, or is likely to be a cause of or carried on in con-
nection with or in furtherance of an act or practice
within any one or more States which, in and of
itself, would constitute an appropriate basis for ac-
tion by the Director under this section.
(3) TERMINATION OF BUSINESS.—In any case
in which any action or proceeding is brought pursu-
ant to an allegation under paragraph (2) for the
suspension or removal of any officer, director, or
other person associated with a non-U.S. insurer, and
such person fails to appear promptly as a party to
such action or proceeding and to comply with any
effective order or judgment therein, any failure by
the non-U.S. insurer to secure his removal from any
office he holds in such insurer and from any further
participation in its affairs shall, in and of itself, con-
stitute grounds for ordering the non-U.S. insurer to
terminate all underwriting and sale of insurance in
the United States and all other insurance operations
in the United States.
(4) VENUE.—Where the venue of any judicial
or administrative proceeding under this section is to
be determined by reference to the location of the
main office of a national insurer, the venue of such
a proceeding with respect to a non-U.S. insurer hav-
ing one or more offices in not more than one judicial
district or other relevant jurisdiction shall be within
such jurisdiction. Where such a national insurer has
offices in more than one such jurisdiction, the venue
shall be in the jurisdiction within which the office or
offices involved in the proceeding are located, and if
there is more than one such jurisdiction, the venue
shall be proper in any such jurisdiction in which the
proceeding is brought or to which it may appro-
priately be transferred.
(5) SERVICE.—Any service required or author-
ized to be made on a non-U.S. insurer may be made
on any office located within any State, but if such
service is in connection with an action or proceeding
involving one or more offices located in any State,
service shall be made on at least one office so in-
volved.
(n) PUBLIC DISCLOSURES OF FINAL ORDERS AND
AGREEMENTS.—
(1) IN GENERAL.—The Director shall publish
and make available to the public on a monthly
basis—
(A) any written agreement or other written
statement for which a violation may be enforced
by the Director;
(B) any final order issued with respect to
any administrative enforcement proceeding ini-
tiated by the Director under this section or any
other law; and
(C) any modification to or termination of
any order or agreement made public pursuant
to this paragraph, unless the Director, in the
Director’s discretion, determines that publica-
tion of any such agreement, statement, order,
modification or termination would be contrary
to the public interest.
(2) HEARINGS.—All hearings on the record
with respect to any notice of charges issued by the
Director shall be open to the public, unless the Di-
rector, in the Director’s discretion, determines that
holding an open hearing would be contrary to the
public interest.
(3) TRANSCRIPT
OF
HEARING.—A transcript
that includes all testimony and other documentary
evidence shall be prepared for all hearings com-
menced pursuant to subsection (g) of this section. A
transcript of public hearings shall be made available
to the public pursuant to section 552 of title 5,
United States Code.
(4) DOCUMENTS FILED UNDER SEAL IN PUBLIC
ENFORCEMENT HEARINGS.—The Director may file
any document or part of a document under seal in
any administrative hearing commenced by the Direc-
tor if the Director, in the Director’s discretion, de-
termines that disclosure of the document, in whole
or in part, would be contrary to the public interest.
A written report shall be made part of any deter-
mination to withhold any part of a document from
the transcript of the hearing required by paragraph
(2).
(5) RETENTION OF DOCUMENTS.—The Director
shall keep and maintain a record, for a period of at
least 6 years, of all documents described in para-
graph (1) and all informal enforcement agreements
and other supervisory actions and supporting docu-
ments issued with respect to or in connection with
any administrative enforcement proceeding initiated
by the Director under this section or any other laws.
(6) DISCLOSURES TO CONGRESS.—No provision
of this subsection may be construed to authorize the
withholding, or to prohibit the disclosure, of any in-
formation to the Congress or any committee or sub-
committee of the Congress.
(o) FOREIGN INVESTIGATIONS.—
(1) REQUESTING ASSISTANCE FROM FOREIGN
GOVERNMENTAL AUTHORITIES.—In conducting any
investigation, examination, or enforcement action
under this Act, the Director may—
(A) request the assistance of any foreign
governmental authority; and
(B) maintain an office outside the United
States.
(2) PROVIDING ASSISTANCE TO FOREIGN GOV-
ERNMENTAL AUTHORITIES.—
(A) IN GENERAL.—The Director may, at
the request of any foreign governmental author-
ity, assist such authority if such authority
states that the requesting authority is con-
ducting an investigation to determine whether
any person has violated, is violating, or is about
to violate any law or regulation relating to in-
surance matters or currency transactions ad-
ministered or enforced by the requesting au-
thority.
(B) INVESTIGATION BY THE DIRECTOR.—
The Director may, in his discretion, investigate
and collect information and evidence pertinent
to a request for assistance under subparagraph
(A). Any such investigation shall comply with
the laws of the United States and the policies
and procedures of the Director.
(C) FACTORS TO CONSIDER.—In deciding
whether to provide assistance under this para-
graph, the Director shall consider—
(i) whether the requesting authority
has agreed to provide reciprocal assistance
with respect to insurance matters within
the jurisdiction of the Director; and
(ii) whether compliance with the re-
quest would prejudice the public interest of
the United States.
(3) RULE OF CONSTRUCTION.—Paragraphs (1)
and (2) shall not be construed to limit the authority
of the Director or any other Federal agency to pro-
vide or receive assistance or information to or from
any foreign governmental authority with respect to
any matter.
SEC. 206. INSURANCE FRAUD.
(a) DEFINITIONS.—For purposes of this section:
(1) FRAUDULENT INSURANCE ACT.—The term
‘‘fraudulent insurance act’’ shall have the meaning
given such term in section 1036(d) of title 18,
United States Code.
(2) INSURANCE PERSON.—The term ‘‘insurance
person’’ shall have the meaning given such term in
section 1036(d) of title 18, United States Code.
(b) FRAUD WARNING REQUIRED.—Claim forms and
applications for insurance operations, regardless of the
form of transmission, shall contain a fraud warning as
prescribed, by regulation, by the Director.
(c) INVESTIGATIVE AUTHORITY OF DIRECTOR.—The
Director may investigate suspected fraudulent insurance
acts and insurance persons engaged in insurance oper-
ations.
(d) MANDATORY REPORTING OF FRAUDULENT IN-
SURANCE ACTS.—A national insurer or an insurance per-
son engaged in insurance operations having knowledge or
a reasonable belief that a fraudulent insurance act is
being, will be, or has been committed, shall provide to the
Director the information required by, and in a manner
prescribed by, the Director.
(e) IMMUNITY FROM LIABILITY.—
(1) IN GENERAL.—There shall be no civil liabil-
ity imposed on, and no cause of action shall arise
from, a person’s furnishing information concerning
suspected, anticipated, or completed fraudulent in-
surance acts, if the information is provided to or re-
ceived from—
(A) the Director or the Director’s employ-
ees, agents, or representatives;
(B) Federal, State, or local law enforce-
ment or regulatory officials or their employees,
agents, or representatives;
(C) a person involved in the prevention and
detection of fraudulent insurance acts or that
person’s agents, employees, or representatives;
or
(D) the NAIC or its employees, agents, or
representatives.
(2) EXCEPTION
FOR
FALSE
STATEMENTS.—
Paragraph (1) shall not apply to false statements
made with actual malice. In an action brought
against a person for filing a report or furnishing
other information concerning a fraudulent insurance
act, the party bringing the action shall plead specifi-
cally any allegation that paragraph (1) does not
apply because the person filing the report or fur-
nishing the information did so with actual malice.
(3) SAVINGS PROVISION.—This subsection does
not abrogate or modify common law or statutory
privileges or immunities enjoyed by a person de-
scribed in paragraph (1).
(f) CONFIDENTIALITY.—
(1) IN
GENERAL.—Documents, materials or
other information in the possession or control of the
Director that is provided pursuant to subsection (d)
or obtained by the Director in an investigation of
suspected or actual fraudulent insurance acts shall
be confidential by law and privileged, shall not be
made available to the public, shall not be subject to
subpoena, and shall not be subject to discovery or
admissible in evidence in any private civil action.
However, the Director may use the documents, ma-
terials, or other information in the furtherance of
any regulatory or legal action brought as a part of
the Director’s official duties.
(2) RESTRICTIONS
ON
TESTIMONY.—Neither
the Director nor any person who received docu-
ments, materials or other information while acting
under the authority of the Director shall be per-
mitted or required to testify in any private civil ac-
tion concerning any documents, materials, or infor-
mation that are confidential pursuant to paragraph
(1).
(3) AUTHORIZED DISCLOSURE.—In order to as-
sist in the performance of the Director’s duties, the
Director may—
(A) share documents, materials, or other
information, including the confidential and priv-
ileged documents, materials, or information
subject to paragraph (1) with other State, Fed-
eral, and international regulatory agencies, with
the NAIC and its affiliates and subsidiaries,
and with local, State, Federal, and international
law enforcement authorities, but only if the re-
cipient agrees to and has the authority to main-
tain the confidentiality and privileged status of
the document, material, or other information;
(B) receive documents, materials, or infor-
mation, including otherwise confidential and
privileged documents, materials, or information,
from the NAIC and its affiliates and subsidi-
aries, and from regulatory and law enforcement
officials of State or other foreign or domestic
jurisdictions, and shall maintain as confidential
or privileged any document, material, or infor-
mation received with notice or the under-
standing that it is confidential or privileged
under the laws of the jurisdiction that is the
source of the document, material, or informa-
tion; and
(C) enter into agreements governing shar-
ing and use of information, including the fur-
therance of any regulatory or legal action
brought as part of the recipient’s official duties.
(4) NO WAIVER.—No waiver of any applicable
privilege or claim of confidentiality in the docu-
ments, materials, or information shall occur as a re-
sult of disclosure to the Director under this sub-
section or as a result of sharing as authorized in
paragraph (3).
(g) DIVISION OF INSURANCE FRAUD.—
(1) ESTABLISHMENT.—The Director shall es-
tablish a Division of Insurance Fraud within the Of-
fice.
(2) POWERS.—The Division of Insurance Fraud
shall have all powers and authority necessary for the
enforcement of this section, except power to execute
search warrants and arrest warrants.
(h) PENALTIES.—If the person committing an of-
fense under subsection (a) or (c) of section 1036(a) of title
18, United States Code, is a national insurer, an insurer-
affiliated party, or a State licensed insurance producer,
the Director may, in addition to the punishment set forth
in such section 1036—
(1) revoke, suspend or restrict the Federal li-
cense of such national insurer pursuant to section
204 of this Act; and
(2) order such national insurer, insurer-affili-
ated party, or State licensed insurance producer to
make restitution to persons aggrieved by such of-
fenses.
SEC. 207. INTERNATIONAL REGULATORY SUPPORT.
(a) IN GENERAL.—To ensure the effectiveness of the
Director’s licensing and supervision of national insurers,
the Director may engage in international efforts to secure
improved bilateral and multilateral cooperation, as appro-
priate, with respect to improved insurance regulation in
global markets that promotes competition and allows for-
eign participation. Such authority includes provision of ap-
propriate technical assistance to and cooperation with in-
dividual overseas national regulators and regional and
global regulatory organizations in matters, including de-
velopment and implementation of international regulatory
standards, and development of bilateral and multilateral
mutual recognition agreements on licensing, registration,
and professional standards with the objective of improving
the quality and uniformity of insurance regulation in all
countries.
(b) COOPERATION WITH STATE INSURANCE REGU-
LATORS.—Whenever possible, the provisions of subsection
(a) shall be implemented in cooperation with State insur-
ance regulators. In matters of representation, the Director
and any interested State insurance regulators shall jointly
represent the United States market.
(c) 
NEGOTIATION
OF
INTERNATIONAL
TRADE
AGREEMENTS.—With respect to bilateral and multilateral
trade negotiations related to the provision of insurance
services, the United States Trade Representative shall
have responsibility for the negotiation of international
trade agreements associated with trade in insurance. The
United States Trade Representative shall develop relevant
negotiating strategies and appropriate concessions in close
consultation with the Director and State insurance regu-
lators.
TITLE III—NATIONAL INSURERS
Subtitle A—Organization,
Licensing, and Operations
SEC. 301. ORGANIZATION, OPERATION, AND REGULATION
OF NATIONAL INSURERS.
(a) IN GENERAL.—Subject to the provisions of this
Act, the Director may, under such regulations as the Di-
rector may prescribe—
(1) provide for the organization, incorporation,
operation and regulation of national insurers; and
(2) issue charters therefor.
Such regulations shall permit the organization of national
insurers in stock, mutual, or fraternal form.
(b) CHARTERING CRITERIA.—In determining wheth-
er to issue a charter for a national insurer, the Director
shall consider factors which shall include—
(1) the character and competency of the parties
seeking the charter;
(2) and the financial resources and future pros-
pects of the proposed national insurer; and
(3) whether the chartering of the insurer is
likely to be hazardous to the insurance-buying pub-
lic.
(c) FRATERNAL BENEFIT SOCIETIES.—Any charter
granted to a national insurer in fraternal form in connec-
tion with a conversion from a State charter shall include
provisions that allow the national insurer to operate as
a fraternal benefit society in a manner consistent with the
requirements of its former State charter.
(d) AMENDMENT OF CHARTER.—The Director may,
under such regulations as the Director may prescribe, pro-
vide for the amendment of charters issued to national in-
surers.
SEC. 302. U.S. BRANCHES OF NON-U.S. INSURERS.
(a) AUTHORIZATION OF ENTRY OF NON-U.S. IN-
SURER.—A non-U.S. insurer may use this section as a
port of entry to transact insurance in the United States
through a U.S. branch by qualifying the U.S. branch as
a national insurer licensed by the Director to do business
under this Act under such regulations as the Director may
prescribe.
(b) TRUST ACCOUNT.—
(1) ESTABLISHMENT.—The Director shall not
license the U.S. branch until the non-U.S. insurer
establishes a trust account, pursuant to a deed of
trust that meets the requirements of this subsection.
(2) TRUSTEED ASSETS.—The trusteed assets of
a U.S. branch shall be held pursuant to a deed of
trust with a U.S. bank that meets such requirements
as the Director may prescribe, in trust for the exclu-
sive benefit, security and protection of the policy-
holders, or policyholders and creditors, of the U.S.
branch in the United States maintained as long as
there is outstanding any liability of the U.S. branch
arising out of its insurance transactions in the
United States.
(3) TRUSTEED SURPLUS.—The trusteed surplus
of a U.S. branch shall be subject to the same sol-
vency standards required of national insurers, in-
cluding the risk-based capital standards under sec-
tion 337.
(4) CERTIFIED
STATEMENTS.—The Director
may from time to time require a U.S. branch to file
a statement, in such form as the Director may pre-
scribe, certified by the trustee.
(c) APPLICABILITY OF LAWS.—Except as otherwise
provided, a U.S. branch established under this section
shall be subject to all laws applicable to a national insurer
and shall be treated as a national insurer for all purposes
of this Act, including subtitle D of this title.
SEC. 303. FEDERAL LICENSING OF NATIONAL INSURERS.
(a) IN GENERAL.—Notwithstanding any provision of
State law, a national insurer may underwrite and sell in
any State any line of insurance for which it holds a Fed-
eral license. A national insurer may not underwrite or sell
any line of insurance for which it does not hold a Federal
license.
(b) ISSUANCE OF FEDERAL LICENSES.—The Direc-
tor may, under such regulations as the Director may
prescribe—
(1) provide for licensing of national insurers to
underwrite and sell lines of insurance; and
(2) issue to national insurers Federal licenses
specifying the lines of insurance they may under-
write and sell.
(c) DURATION.—A Federal license issued by the Di-
rector pursuant to this section shall remain in effect until
surrendered by the national insurer or until revoked or
suspended by the Director in accordance with the provi-
sions of this Act.
(d) REINSURANCE.—
(1) LIMITATION.—A national insurer may rein-
sure only the lines of insurance that it is licensed to
underwrite and sell under its Federal license or
which it is otherwise permitted to reinsure by the
terms of its Federal license.
(2) AUTHORITY
TO
SELL
ONLY
REINSUR-
ANCE.—A national insurer may confine its business
to reinsurance.
(e) NATIONAL TREATMENT REQUIRED.—
(1) FAIR
TREATMENT
OF
SUBSIDIARIES
AND
BRANCHES.—Except as provided in section 302, the
Director may not impose any condition to the grant-
ing of a Federal license under this section to a na-
tional insurer or the supervision of a national in-
surer granted a Federal license under this section
solely because the national insurer is a subsidiary of
a non-U.S. person, is partially owned by a non-U.S.
person, or is a U.S. branch of a non-U.S. insurer.
(2) 
PERMISSIBLE
CONDITIONS.—Notwith-
standing paragraph (1), the Director may impose
conditions to the granting of a Federal license or the
supervision of a national insurer that are different
from those imposed on other national insurers if—
100
(A) the conditions attached are imposed on
the legal form in which the national insurer
chooses to operate; or
(B) the Director makes a written finding
that the conditions are related to the protection
of policyholders and are the minimum necessary
to achieve the purposes of this Act.
SEC. 304. CORPORATE GOVERNANCE.
(a) IN GENERAL.—With respect to corporate govern-
ance procedures, a national insurer shall comply with ap-
plicable provisions of this Act and applicable regulations
issued by the Director under this Act.
(b) OTHER PROCEDURES.—To the extent not incon-
sistent with provisions of this Act or regulations issued
by the Director under this Act, a national insurer shall
adhere to corporate governance procedures of the relevant
State law of either the State in which its main office is
located or the State in which its holding company is incor-
porated, except that the Director may determine that any
provision of such State law is discriminatory as applied
to national insurers (in which event a national insurer
shall not be obligated to follow such a provision of the
relevant State law and may follow such other provision
of law as the Director deems appropriate). A national in-
101
surer shall designate in its bylaws the body of relevant
State law selected for its corporate governance procedures.
SEC. 305. MAIN OFFICE.
(a) IN GENERAL.—The charter of a national insurer
shall specify the State in which its main office is located.
Subject to the approval of the Director, a national insurer
may designate any office at which it conducts insurance
operations as its main office.
(b) CHANGE IN MAIN OFFICE.—With the approval
of the Director, a national insurer may change the des-
ignation of its main office, including to another existing
office of the national insurer.
(c) CITIZENSHIP.—A national insurer shall, for pur-
poses of jurisdiction, be deemed a citizen of the State in
which its main office is located and of the State in which
it has its principal place of business.
SEC. 306. CONVERSION OF STATE INSURER TO NATIONAL
INSURER.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, a State insurer may, with the approval of the
Director, convert into a national insurer, and in doing so
an insurer may retain a corporate form permitted by sec-
tion 301(a) or change directly to another corporate form
that is so permitted.
(b) CONVERSION PROCEDURES.—
102
(1) AUTHORITY.—The Director may, under
such regulations as the Director may prescribe, pro-
vide for the conversion of State insurers into na-
tional insurers and the issuance of charters to such
converted insurers. Any such conversion shall be car-
ried out solely in accordance with such regulations
as the Director may prescribe.
(2) TERMS.— The regulations issued by the Di-
rector under this section shall—
(A) be consistent with the regulations
issued by the Director under section 301;
(B) in the case of a change of form ef-
fected at the time of a conversion of a State in-
surer into a national insurer, shall be consistent
with the provisions of section 382 and any reg-
ulations issued by the Director thereunder and
shall require compliance with State laws and
procedures regarding the demutualization of
State insurers; and
(C) prohibit any conversion that, in the de-
termination of the Director, would substantially
prejudice the interests of policyholders and
shareholders of the State insurer.
(c) EFFECT
OF
CONVERSION.—Upon conversion
from a State insurer to a national insurer in accordance
103
with this section and the regulations issued by the Direc-
tor hereunder, a national insurer shall be subject to the
provisions of this Act and to examination and regulation
under this Act to the same extent as other national insur-
ers incorporated pursuant to this Act, and such national
insurer shall be deemed to be a continuation of the cor-
porate existence of the State insurer and shall, by oper-
ation of law and without further action, hold and be sub-
ject to all rights, privileges, liabilities, property interests,
and other interests and obligations that the State insurer
held or was subject to immediately prior to the conversion,
except that the national insurer shall not be subject to
any requirement applicable to the State insurer to main-
tain deposits with State insurance regulatory authorities,
shall not hold any State license to underwrite and sell in-
surance that was held by the State insurer, and shall ob-
tain, in accordance with section 303 and the regulations
issued by the Director thereunder, a Federal license for
all lines of insurance that it underwrites and sells.
(d) SPECIAL AUTHORITY.—The Director may, in the
Director’s discretion and subject to such conditions as the
Director may prescribe, permit a national insurer result-
ing from the conversion of a State life insurer, upon such
conversion, to retain for up to 5 years such assets, liabil-
ities, and powers and authorities of the State insurer that
104
do not conform to the legal requirements otherwise appli-
cable to national insurers as the Director deems appro-
priate.
SEC. 307. CONVERSION OF NATIONAL INSURER TO STATE
INSURER.
(a) IN GENERAL.—Subject to subsection (b) and
such notification procedures as the Director may prescribe
by regulation, a national insurer may convert into a State
insurer, as permitted by the relevant provisions of applica-
ble State law. Nothing in this section or in the conversion
of a national insurer into a State insurer shall operate
to abrogate any rights, privileges, liabilities, property in-
terests, or other interests or obligations that such insurer
held or was subject to immediately prior to the conversion.
(b) LIMITATION.—The Director shall not permit any
conversion of a national insurer into a State insurer that,
in the determination of the Director, would substantially
prejudice the interests of policyholders and shareholders
of the national insurer.
Subtitle B—Powers
SEC. 321. POWERS OF NATIONAL INSURERS.
Upon issuance of its charter, a national insurer shall
have the power, subject to the provisions of this Act and
in accordance with such regulations as the Director may
prescribe—
105
(1) to have a corporate seal, which may be al-
tered at will, and to use it, or a facsimile of it, im-
pressing or affixing it or in any other manner repro-
ducing it;
(2) to have perpetual succession until such time
as it is liquidated, dissolved, merged or otherwise
wound up in accordance with applicable law and reg-
ulation;
(3) to sue or be sued, complain and defend, and
otherwise litigate in any court and participate, as a
party or otherwise, in any judicial, administrative,
arbitral or other proceeding, in its corporate name;
(4) to make contracts and guarantees, incur li-
abilities, borrow money, issue notes, bonds, and
other obligations (which may be convertible into or
include the option to purchase other securities of the
national insurer), and secure any of its obligations
by mortgage or pledge of any of its property, fran-
chises or income;
(5) to purchase, receive, subscribe for or other-
wise acquire, own, hold, vote, improve, employ, use,
and otherwise deal in and with real and personal
property or other assets, or any interest therein, and
to sell, convey, mortgage, lease, exchange, transfer
or otherwise dispose of, or mortgage or pledge, all
106
or any of its property and assets, or any interest
therein;
(6) to lend money, invest and reinvest its funds
and receive and hold real and personal property as
security for repayment;
(7) to be a promoter, partner, member, asso-
ciate or manager of any partnership, joint venture,
trust or other entity;
(8) to participate with others in any corpora-
tion, partnership, limited partnership, joint venture,
or other association of any kind, or in any trans-
action, undertaking, or arrangement which the par-
ticipating national insurer would have power to con-
duct by itself, whether or not such participation in-
volves sharing or delegation of control with or to
others;
(9) to elect or appoint directors, officers, em-
ployees, and agents of the national insurer, define
their duties, fix their compensation and lend them
money and credit;
(10) to pay pensions and establish pension
plans, pension trusts, profit sharing plans, share
bonus plans, share option plans, and other benefit or
incentive plans for any or all current or former di-
107
rectors, officers, employees, and agents of the na-
tional insurer, its subsidiaries, or its affiliates;
(11) to provide insurance for its benefit on the
life of any of its directors, officers, or employees, or
on the life of any shareholder for the purpose of ac-
quiring at such shareholder’s death shares of its
stock owned by such shareholder;
(12) to adopt, amend and repeal bylaws;
(13) to engage in the underwriting and sale of
insurance; to establish and maintain one or more
separate accounts and to allocate amounts to such
accounts (including, without limitation, proceeds ap-
plied under optional modes of settlement or under
dividend options) to provide for insurance; to estab-
lish and maintain one or more protected cells in con-
nection with an insurance securitization and at-
tribute to such cells insurance and reinsurance obli-
gations with respect to its general account, obliga-
tions relating to the insurance securitization and as-
sets to fund such obligations; to hold and accumu-
late funds pursuant to funding agreements; to pro-
vide investment advice and investment management
services; to engage in all other insurance operations;
and to exercise all such incidental powers as shall be
necessary to carry on insurance operations;
108
(14) to provide benefits or payments to direc-
tors, officers, and employees of the national insurer,
its subsidiaries, or its affiliates, and to their estates,
families, dependents, or beneficiaries, in recognition
of the past services of the directors, officers, and
employees to the national insurer, its subsidiaries, or
its affiliates;
(15) to make donations and otherwise devote its
resources for the public welfare or for charitable, sci-
entific, educational, humanitarian, philanthropic, or
religious purposes;
(16) to be a promoter, partner, member, asso-
ciate, or manager of any business entity;
(17) to do all such other things necessary or
convenient to further its activities and affairs; and
(18) to exercise the powers granted by this Act
in any State and in any foreign jurisdiction.
SEC. 322. SEPARATE ACCOUNTS.
Amounts allocated by a national life insurer to a sep-
arate account shall be owned by the national life insurer,
the assets therein shall be the property of the national life
insurer, and no national insurer by reason of such account
shall be or hold itself out to be a trustee. If and to the
extent so provided in the applicable agreements, the assets
in a separate account shall not be chargeable with liabil-
109
ities arising out of any other business of the national in-
surer.
SEC. 323. PROTECTED CELLS.
(a) ESTABLISHMENT OF PROTECTED CELLS.—A na-
tional insurer may establish one or more protected cells
with the approval of the Director. The Director shall by
regulation adopt standards for protected cells established
by national insurers.
(b) PROTECTED CELL ASSETS.—Amounts attributed
to a protected cell, including assets transferred to a pro-
tected cell account, are owned by the national insurer and
the national insurer may not be, nor hold itself out to be,
a trustee with respect to those protected cell assets of that
protected cell account. The assets of a protected cell may
not be charged with liabilities arising out of any other
business the national insurer may conduct.
(c) SECURITY INTERESTS PERMITTED.—A national
insurer may allow for a security interest to attach to pro-
tected cell assets or a protected cell account when in favor
of a creditor of the protected cell and otherwise allowed
under applicable law.
(d) REACH
OF CREDITORS
AND OTHER CLAIM-
ANTS.—
(1) CLAIMS TO CERTAIN PROTECTED CELLS AS-
SETS.—Protected cell assets shall only be available
110
to the creditors of a national insurer that are credi-
tors in respect to that protected cell, and such credi-
tors shall have recourse only to the protected cell as-
sets attributable to that protected cell.
(2) NO RECOURSE TO OTHER PROTECTED CELL
ASSETS.—Creditors with respect to a protected cell
shall have no recourse against the protected cell as-
sets of other protected cells or the general account
assets of the national insurer.
(3) TREATMENT OF PROTECTED CELLS.—The
establishment of a protected cell by a national in-
surer shall not, in and of itself, constitute or be
deemed to be a fraudulent conveyance, an intent by
the national insurer to defraud creditors, or the car-
rying out of business by a national insurer for any
other fraudulent purpose.
(e) EFFECT ON STATE LAW.—No State may, by law,
regulation, order, interpretation or otherwise, require li-
censing or otherwise regulate in any manner—
(1) an investor in an insurance securitization,
solely by reason of its investment, as an insurer, re-
insurer or other person transacting insurance; or
(2) an underwriter or selling agent (or its part-
ners, directors, officers, members, managers, em-
ployees, agents, representatives, and advisors) in an
111
insurance securitization as an insurance or reinsur-
ance agent, broker, producer, intermediary, advisor,
consultant or similar capacity by virtue of its activi-
ties in connection with the insurance securitization.
Subtitle C—Financial Regulation
SEC. 331. ACCOUNTING PRINCIPLES AND AUDITING STAND-
ARDS.
(a) REGULATIONS.—
(1) IN GENERAL.—The Director shall, by regu-
lation, specify the accounting principles and auditing
standards to be followed by a national insurer in
preparing financial statements to be filed with the
Director pursuant to section 202(b)(1).
(2) INITIAL REGULATIONS.—The initial regula-
tions under paragraph (1) shall be promulgated on
or before the transition commencement date and
shall require that—
(A) except as provided in section 333, na-
tional insurers shall follow statutory accounting
practices as promulgated by the NAIC in its
Accounting Practices and Procedures Manual;
and
(B) audited financial statements shall be
in accordance with guidance prescribed by the
112
NAIC in its Model Regulation Requiring An-
nual Audited Financial Reports;
each as in effect as of January 1, 2001, and as
amended by the NAIC and in effect thereafter from
time to time prior to the transition termination date,
except that the Director may by regulation specify
that any such amendment by the NAIC shall, in
whole or in part, be inapplicable to national insurers.
(3) AMENDMENT
OF
NAIC
STANDARDS.—The
accounting principles and auditing standards for na-
tional insurers in effect on the transition termination
date pursuant to paragraph (2) may thereafter be
amended by regulations promulgated pursuant to
paragraph (1).
(b) STUDY AND HEARINGS.—The Director shall con-
duct a study and hold hearings prior to the transition ter-
mination date and shall determine whether modification
of the accounting principles and auditing standards for
national insurers established pursuant to subsection (a)
would be consistent with the public interest and the pro-
tection of policyholders.
SEC. 332. INVESTMENTS.
(a) IN GENERAL.—
(1) INVESTMENTS.—A national insurer may
loan or invest its funds, and may buy, sell, hold title
113
to, possess, occupy, pledge, convey, manage, protect,
insure and deal with its investments, property and
other assets. Such investments shall be of sufficient
value, liquidity, and diversity to ensure the national
insurer’s ability to meet its outstanding obligations
based on reasonable assumptions as to its business.
(2) SUBSIDIARIES.—A national insurer may in-
vest in, or otherwise acquire, subsidiaries engaged or
organized to engage in any business lawful under the
laws of the jurisdictions in which such subsidiaries
are organized.
(b) INVESTMENT POLICY.—In acquiring, investing,
exchanging, holding, selling, and managing investments,
a national insurer shall establish and follow a written in-
vestment policy that shall be reviewed and approved by
the national insurer’s board of directors at least annually.
The content and format of a national insurer’s investment
policy shall be at the national insurer’s discretion, but
shall include written guidelines appropriate to the national
insurer’s business as to the following issues:
(1) The general investment policy of the na-
tional insurer, with guidelines and specifications in-
tended to assure that its investments are appro-
priate for the business conducted by the national in-
surer, its liquidity needs and its capital and surplus.
114
(2) Goals and objectives regarding the composi-
tion of classes of investments, including maximum
internal limits.
(3) Requirements for periodic evaluation of the
investment portfolio as to its risk and reward char-
acteristics, and for adoption and oversight of imple-
mentation of procedures and controls covering all as-
pects of the investment function.
(c) STANDARD OF CARE.—In reviewing and approv-
ing the investment policy established pursuant to sub-
section (b), the directors of a national insurer shall per-
form their duties in good faith and with that degree of
care that an ordinarily prudent individual in a like position
would use under similar circumstances. Among the factors
that the board of directors may consider are the following:
(1) The national insurer’s business.
(2) General economic conditions.
(3) The possible effect of inflation or deflation.
(4) The expected tax consequences of invest-
ment decisions or strategies.
(5) The fairness and reasonableness of the
terms of an investment considering its probable risk
and reward characteristics and relationship to the
investment portfolio as a whole.
115
(6) The extent of the diversification of the na-
tional insurer’s investments among—
(A) individual investments;
(B) classes of investments;
(C) industry concentrations; and
(D) geographic areas.
(7) The quality and liquidity of investments in
affiliates.
(8) The investment exposure to—
(A) liquidity risk;
(B) credit and default risk;
(C) systemic (market) risk;
(D) interest rate risk;
(E) call, prepayment, and extension risk;
(F) currency risk; and
(G) foreign sovereign risk.
(9) The amount of the national insurer’s assets,
capital and surplus, premium writings, and insur-
ance in force.
(10) The amount and adequacy of the national
insurer’s reported and unreported liabilities.
(11) The relationship of the expected cash flows
of the national insurer’s assets and liabilities, and
the risk of adverse changes in the national insurer’s
assets and liabilities.
116
(12) The adequacy of the national insurer’s
capital and surplus to support the risks and liabil-
ities of the national insurer.
(13) The amount of investments made in the
communities where the national life insurer sells in-
surance policies or has offices.
(d) INTERNAL CONTROLS.—A national insurer shall
establish and implement internal controls and procedures
to ensure compliance with its investment policy. In this
respect, an evaluation and monitoring process shall occur
periodically for assessing the effectiveness of such controls
and procedures. Additionally, the national insurer shall as-
sess management’s success in meeting the stated objec-
tives within the investment policy.
(e) MINIMUM FINANCIAL SECURITY BENCHMARK.—
(1) ESTABLISHMENT.—The Director shall by
regulation or order establish what portion of the sur-
plus of an individual national insurer or any cat-
egory of national insurers shall constitute a min-
imum financial security benchmark that will provide
reasonable security against contingencies affecting a
national insurer’s financial position that are not
fully covered by reserves or by reinsurance.
(2) MINIMUM.—Any such minimum financial
security benchmark shall be not less than the au-
117
thorized control level risk-based capital (or, absent
an authorized control level risk-based capital, an-
other comparable risk-based capital level established
by the Director) applicable to the national insurer as
established under section 337 less any asset valu-
ation reserve and voluntary investment reserves that
may be required.
(3) FAILURE
TO
COMPLY.—Notwithstanding
the provisions of subsection (c), if a national insurer
fails to meet the minimum financial security bench-
mark applicable to it, the national insurer shall be
subject to such investment standards as the Director
shall establish by regulation or order.
SEC. 333. ASSET VALUATION AND RATING.
The Director shall establish such standards and
means to recognize risk factors appropriate to the valu-
ation and rating of assets held by a national insurer for
purposes pertinent to the supervision of national insurers
other than risk-based capital. The initial standards and
means shall be promulgated on or before the transition
commencement date.
SEC. 334. VALUATION OF LIABILITIES.
(a) REGULATIONS.—The Director shall, by regula-
tion, establish standards for the valuation of insurer obli-
gations and liabilities for national insurers. The regula-
118
tions may prescribe valuation requirements for particular
types of insurance policies and, for other types of insur-
ance policies, shall require that reserves be established
based on a valuation performed by a qualified actuary in
accordance with generally accepted actuarial principles.
(b) REGULATIONS DURING TRANSITION PERIOD.—
The initial regulations under subsection (a) shall be pro-
mulgated on or before the transition commencement date
and shall provide that the standards be based on relevant
NAIC model laws, regulations, and guidelines in the form
adopted by the NAIC, including the Standard Valuation
Law, Valuation of Life Insurance Policies Model Regula-
tion, Universal Life Insurance Model Regulation, Variable
Life Insurance Model Regulation, Health Insurance Re-
serves Model Regulation, and NAIC actuarial guidelines
applicable to insurance policies that may be underwritten
and sold by national insurers, each as in effect as of Janu-
ary 1, 2001, and as amended by the NAIC and in effect
thereafter from time to time prior to the transition termi-
nation date, except that the Director may by regulation
specify that any such amendment by the NAIC shall, in
whole or in part, be inapplicable to national insurers.
(c) REGULATIONS AFTER TRANSITION PERIOD.—
The standards for the valuation of insurer obligations and
liabilities for national insurers in effect on the transition
119
termination date pursuant to subsection (b) may there-
after be amended by regulations promulgated pursuant to
subsection (a).
SEC. 335. CONTINUING AND ALTERNATE BENEFITS.
(a) REGULATIONS.—The Director shall, by regula-
tion, establish standards applicable to national life insur-
ers for the determination of continuing and alternate ben-
efits available at the election of the policyholder or upon
insurance policy termination that are reflective of the ac-
cumulated remaining value in the insurance policy.
(b) REGULATIONS DURING TRANSITION PERIOD.—
The initial regulations under subsection (a) shall be pro-
mulgated on or before the transition commencement date
and shall provide that the standards be based on relevant
NAIC model laws, regulations, and guidelines in the form
adopted by the NAIC, including the Standard Nonfor-
feiture Law for Life Insurance, Variable Life Insurance
Model Regulation, Standard Nonforfeiture Law for Indi-
vidual Deferred Annuities, Long-Term Care Insurance
Model Act, Long-Term Care Insurance Model Regulation,
and NAIC actuarial guidelines applicable to insurance
policies that may be underwritten and sold by national in-
surers, each as in effect as of January 1, 2001, and as
amended by the NAIC and in effect thereafter from time
to time prior to the transition termination date, except
120
that the Director may by regulation specify that any such
amendment by the NAIC shall, in whole or in part, be
inapplicable to national insurers.
(c) REGULATIONS AFTER TRANSITION PERIOD.—
The standards applicable to national life insurers for the
determination of continuing and alternate benefits in ef-
fect on the transition termination date pursuant to sub-
section (b) may thereafter be amended by regulations pro-
mulgated pursuant to subsection (a).
SEC. 336. ACTUARIAL OPINION.
The Director shall, by regulation, require each na-
tional insurer to file an annual written opinion from a
qualified actuary on the adequacy of the national insurer’s
assets to meet its reasonably expected obligations and li-
abilities. The opinion shall be based on analysis consistent
with the nature of the national insurer’s obligations and
liabilities.
SEC. 337. RISK-BASED CAPITAL STANDARDS.
(a) REGULATIONS.—
(1) ESTABLISHMENT.—The Director shall, by
regulation, establish risk-based capital standards for
national insurers that recognize risk factors appro-
priate to the business of national insurers and rem-
edies for failure to meet such standards.
121
(2) REGULATIONS
DURING
TRANSITION
PE-
RIOD.—The initial regulations under paragraph (1)
shall be promulgated on or before the transition
commencement date and shall provide that the
standards be based on NAIC risk-based capital cal-
culations and remedies in the form adopted by the
NAIC, each as in effect as of January 1, 2001, and
as amended by the NAIC and in effect thereafter
from time to time prior to the transition termination
date, except that the Director may by regulation
specify that any such amendment by the NAIC shall,
in whole or in part, be inapplicable to national insur-
ers.
(3) REGULATIONS
AFTER
TRANSITION
PE-
RIOD.—The risk-based capital standards for national
insurers and the remedies for failure to meet such
standards in effect on the transition termination
date pursuant to paragraph (2) may thereafter be
amended by regulations promulgated pursuant to
paragraph (1).
(b) DISCLOSURE.—Except as may be required or per-
mitted under the regulations promulgated pursuant to
subsection (a), a national insurer shall not disclose its
risk-based capital ratio to the general public for any pur-
pose.
122
SEC. 338. DIVIDENDS TO SHAREHOLDERS.
(a) SHAREHOLDER DIVIDENDS PERMITTED.—A na-
tional insurer may declare and pay dividends or make
other distributions in cash or its bonds or its property on
its outstanding shares, except when the national insurer
is insolvent or would thereby be made insolvent, or when
the declaration, payment or distribution would be contrary
to any restrictions contained in its charter or any order
issued by the Director.
(b) SOURCE OF SHAREHOLDER DIVIDENDS.—Divi-
dends may be declared or paid and other distributions may
be made out of surplus only, so that the assets of the na-
tional insurer remaining after such declaration, payment,
or distribution shall at least equal the amount of its cap-
ital.
Subtitle D—Reinsurance
SEC. 351. DEFINITIONS.
For purposes of this subtitle:
(1) FEDERALLY QUALIFIED REINSURER.—The
term ‘‘federally qualified reinsurer’’ means a State
chartered reinsurer or a reinsurer chartered in a for-
eign jurisdiction that holds a license issued by the
Director pursuant to section 356.
(2) FEDERAL REINSURER.—The term ‘‘Federal
reinsurer’’ means a reinsurer that—
123
(A) is a national insurer that holds a Fed-
eral license under this title;
(B) is a federally qualified reinsurer; or
(C) maintains a trust fund pursuant to
section 352(b).
(3) QUALIFIED FINANCIAL INSTITUTION.—The
term ‘‘qualified financial institution’’ means an insti-
tution that is organized or licensed under the laws
of the United States or any State and that is regu-
lated, supervised, and examined by United States
Federal or State authorities having regulatory au-
thority over banks and trust companies. Such term
includes a foreign branch of a qualified United
States financial institution and any other foreign in-
stitution as determined by the Director, consistent
with the purposes of this subtitle.
(4) REINSURER.—The term ‘‘reinsurer’’ means
an insurer that is in or proposes to enter the busi-
ness of providing wholesale insurance risk manage-
ment and related financial management products
and services to insurers or other entities that are in
the business of providing insurance risk manage-
ment and related financial management products
and services in wholesale and retail markets.
124
(5) RISK TRANSFER PRODUCT.—The term ‘‘risk
transfer product’’ means any agreement between or
among parties in which a party contractually as-
sumes a specified financial uncertainty from another
party, for consideration.
SEC. 352. RESERVE CREDIT.
(a) IN GENERAL.—Credit for reinsurance shall be al-
lowed under this Act solely under the provisions of this
subtitle to a national insurer, federally qualified reinsurer,
and a State insurer that cedes any risk to a Federal rein-
surer.
(b) TRUST FUNDS.—
(1) REQUIRED ACTIONS.—If the assuming in-
surer secures all its liabilities attributable to reinsur-
ance ceded by State insurers and U.S. branches en-
tered through a State or established pursuant to sec-
tion 302 with a trust, the assuming insurer shall—
(A) file annually with the Director a copy
of its most recent audited financial statement
and a copy of its annual financial statement in
substantially similar format as those required to
be filed by a national insurer under this Act;
(B) file with the Director evidence of its
submission to the jurisdiction of the Director;
125
(C) submit to examination of its books and
records and bear the expense of the examina-
tion;
(D) file with the Director the form of the
trust and any trust amendments;
(E) deposit in the trust such reasonable
amount in excess of its liabilities for risks resi-
dent or located in the United States, net of re-
insurance, as shall be determined in rules to be
promulgated by the Director; and
(F) comply with such other regulations as
the Director may issue.
(2) AMOUNTS.—Such a trust may be funded
only with—
(A) cash;
(B) securities qualifying as admitted assets
of a national insurer;
(C) clean, irrevocable, unconditional letters
of credit, issued or confirmed by a qualified fi-
nancial institution, effective no later than De-
cember 31 of the year for which the filing is
being made, and in trust for the ceding insurer
on or before the filing date of its annual finan-
cial statement; except that letters of credit
issued or confirmed by institutions that subse-
126
quently fail to meet applicable standards shall
continue to be acceptable as security under this
subsection until the earliest of their expiration,
extension, renewal, modification, or amendment;
or
(D) any other form of security acceptable
to the Director.
(c) OTHER ASSET OR REDUCTION FROM LIABIL-
ITY.—In addition to the reserve credit permitted under
subsections (a) and (b), a national insurer and a federally
qualified reinsurer may establish an asset or reduce its
liabilities, in an amount not exceeding its liabilities, for
reinsurance ceded and secured in accordance with this
subsection. The reduction shall be in the amount of funds
held by or on behalf of the ceding insurer, including funds
held in trust for the ceding insurer, under a reinsurance
contract with the assuming insurer as security for the pay-
ment of obligations thereunder, if the security is subject
to withdrawal solely by, and under the exclusive control
of, the ceding insurer; or in the case of a trust, held in
a qualified financial institution. This security may be in
the form only of—
(1) cash;
(2) securities qualifying as admitted assets of a
national insurer;
127
(3) clean, irrevocable, unconditional letters of
credit, issued or confirmed by a qualified financial
institution, effective no later than December 31 of
the year for which the filing is being made, and in
the possession of, or in trust for, the ceding insurer
on or before the filing date of its annual financial
statement; except that letters of credit issued or con-
firmed by institutions that subsequently fail to meet
applicable standards shall continue to be acceptable
as security under this subsection until the earliest of
their expiration, extension, renewal, modification, or
amendment; or
(4) any other form of security acceptable to the
Director.
(d) 
REQUIRED
REINSURANCE.—Notwithstanding
other provisions of this section or any regulation promul-
gated pursuant to this section, credit shall be allowed for
reinsurance ceded to government-owned or controlled in-
surers or reinsurers or to pools or to guaranty associations
or to residual market mechanisms, as may be required
under applicable law or regulation in any jurisdiction, un-
less the Director determines otherwise, after notice and
hearing.
SEC. 353. RISK TRANSFER REGULATION.
The Director shall issue regulations that—
128
(1) allow a ceding insurer to establish an asset
or to reduce its liability for reinsurance of risk,
whether the risk is mortality, morbidity, lapse, cred-
it, investment, timing, or expense and whether such
risks are proportional or nonproportional;
(2) provides that a Federal reinsurer may as-
sume any risk described in paragraph (1) from any
regulated financial entity, as long as those risks
originated in one or more financial undertakings by
the entity; and
(3) implements the purposes of this subtitle so
that functionally equivalent risk-spreading financial
arrangements should be treated similarly.
SEC. 354. INTERNATIONAL STANDARDS; HOST COUNTRY
RESERVES.
(a) 
INTERNATIONAL
STANDARDS
AND
RECI-
PROCITY.—The Director shall have the responsibility, and
shall take such actions as may be necessary, to—
(1) improve the United States reinsurers’ abil-
ity to compete internationally;
(2) promote the development, by the transition
termination date, of international accounting stand-
ards for reinsurance and functionally equivalent
risk-transfer products;
129
(3) work toward international mutual recogni-
tion on a bilateral or multilateral basis; and
(4) ensure that Federal regulation of reinsurers
imposes no substantial competitive disadvantage on
United States operations of reinsurers.
(b) HOST COUNTRY RESERVES.—By the transition
termination date, the Director shall, by regulation, estab-
lish valuation rules that allow Federal reinsurers to use
the reserving rules of the country where the reinsured risk
originates for any such non-United States risks to the ex-
tent the Director deems necessary or appropriate to pro-
tect the Federal reinsurer’s solvency. Such regulations
may require segregation of assets and liabilities for any
such reinsured non-United States risks.
SEC. 355. REINSURANCE CONTRACT TERMS.
The Director shall adopt regulations governing the
provisions of reinsurance contracts that will be required
in order for an insurer ceding insurance risk to the rein-
surer to establish an asset or to reduce a liability.
SEC. 356. LICENSING OF FEDERALLY QUALIFIED REIN-
SURERS.
(a) IN GENERAL.—The Director may license rein-
surers to provide reinsurance for insurance and prescribe,
by regulation, the standards and procedures for granting
licenses under this Act to entities to provide reinsurance
130
for insurance. Such standards shall give due consideration
to the public interest in providing secure and sufficient
reinsurance capacity in the United States and to the need
for promoting effective, fair competition.
(b) DETERMINATION AND FINDING.—Upon submis-
sion of an application, the Director shall examine the in-
formation submitted and conduct such further examina-
tion and investigation, as the Director finds necessary, to
determine whether the applicant satisfies the standards
for a license to provide reinsurance under this section.
Upon conclusion of the examination and investigation, the
Director shall publish the findings and determination of
the examination. Upon a determination that the applicant
has satisfied the applicable requirements of this section,
the Director shall issue the license.
(c) ANNUAL REPORTS.—The Director shall require
each reinsurer that holds a license to provide reinsurance
under this section to submit an annual report of its finan-
cial condition and an annual report on the condition of
any trust fund regulated under this subtitle in a form pre-
scribed by the Director.
SEC. 357. TRANSITION.
(a) CONGRESSIONAL INTENT.—The Congress intends
to ensure the protection of the American insurance-pur-
131
chasing public and the fair and reciprocal national treat-
ment for regulated entities.
(b) TRANSITION.—For the period of the transition
under subsection (c) of this section, the Director may not,
pursuant to section 356, license any entity that is not a
State insurer.
(c) PERIOD OF TRANSITION.—
(1) IN
GENERAL.—The period of transition
under this subsection shall be the period that—
(A) is determined by the Director in con-
sultation with the United States Trade Rep-
resentative;
(B) ends no earlier than the transition ter-
mination date; and
(C) is terminated on a country-by-country
basis, depending on the determination pursuant
to subparagraph (A).
(2) 
TERMINATION.—Notwithstanding 
para-
graph (1), the transition period shall not be termi-
nated with respect to any country unless the United
States Trade Representative advises that such coun-
try has a mutual recognition agreement with the
United States.
132
SEC. 358. APPLICABILITY OF OTHER SUBTITLES AND LAWS.
(a) IN GENERAL.—No State law, regulation, or prac-
tice relating to any matter addressed in this subtitle or
in regulations implementing any provisions of this subtitle
shall apply, directly or indirectly, to—
(1) any Federal reinsurer; or
(2) any State insurer purchasing a risk transfer
product from a Federal reinsurer.
(b) INAPPLICABILITY OF SUBTITLE E.—A Federal
reinsurer shall be exempt from subtitle E of this title with
respect to its reinsurance operations.
(c) APPLICABILITY OF OTHER LAWS.—No provision
of law of any State, political subdivision, or agency there-
of, or franchising authority, and no provision of any fran-
chise granted by such authority, which is inconsistent with
or more restrictive than, any provision of this subtitle shall
apply to—
(1) any Federal reinsurer; or
(2) any State insurer purchasing a risk transfer
product from a Federal reinsurer.
Subtitle E—Insurance Business
SEC. 361. PRODUCT REGULATION.
(a) DEFINITION OF POLICY.—For purposes of this
section, the term ‘‘policy’’ means a policy, contract, certifi-
cate, or evidence of insurance, or an annuity contract, and
a rider or endorsement thereto, but does not include a
133
funding agreement or a reinsurance contract and does not
include an agreement, special rider or endorsement relat-
ing only to the manner of distributing benefits or to the
reservation of rights and benefits used at the request of
the individual policyholder.
(b) STANDARDS.—The Director shall, by regulation,
establish standards for policies as to policy provisions. The
standards may include general requirements as to policy
provisions generally and requirements as to particular
classes of policies. All policies when written by a national
insurer shall comply with the applicable standards then
in effect.
(c) PRODUCT FILINGS.—No national insurer may
issue a policy until the form of the policy has been filed
with and approved by the Director. Pursuant to regula-
tions promulgated by the Director, any filing of a policy
form shall be accompanied by a certificate of an officer
of the national insurer as to compliance of the policy form
for the standards applicable to the policy form.
(d) INTERPRETIVE RULINGS.—
(1) PROCEDURES.—The Director shall by regu-
lation establish procedures by which national insur-
ers may obtain interpretive rulings from the Office
regarding the interpretation and application of the
standards established pursuant to this section.
134
(2) CONFIDENTIALITY.—Neither the request by
a national insurer for an interpretative ruling nor
the complete text of the interpretative ruling of the
Office shall be made available to the public.
(3) SUMMARIES.—Notwithstanding paragraph
(2), the Director shall make summaries of interpre-
tive opinions public, without the name of the na-
tional insurer or other identifying information,
promptly after issuance of the opinions or after such
delay as the Director may determine at the request
of the national insurer.
(e) STATE
REGULATION
OF
RATES.—Notwith-
standing any other provision of this Act or any other law,
each national insurer and each insurance policy issued by
a national insurer shall be subject to State laws, rules,
regulations, orders, and actions that regulate the rates for
insurance.
SEC. 362. UNDERWRITING STANDARDS FOR LIFE INSUR-
ERS.
A national life insurer may classify or underwrite
risks, except that any decision to—
(1) refuse to insure or to continue to insure,
(2) limit the amount, extent or kind of cov-
erage, or
135
(3) charge a different rate for the same cov-
erage,
shall be—
(A) based on sound actuarial principles; or
(B) related to actual or reasonably anticipated
experience.
SEC. 363. GROUP, BLANKET, AND FRANCHISE INSURANCE.
(a) AUTHORITY.—A national insurer may—
(1) underwrite and sell group, blanket, and
franchise policies for insurance; and
(2) extend group, blanket, or franchise policies
for insurance to insure the dependents of employees
or members, or any class or classes thereof.
(b) REGULATION.—The Director shall, by regulation,
establish standards for kinds and qualifications of permis-
sible groups for group and franchise policies for insurance.
(c) PERMISSIBLE GROUPS.—The regulations issued
under subsection (b) shall provide that the permissible
groups shall include the following groups:
(1) Employees, including retired employees,
former employees, and officers, and directors of an
employer.
(2) Union members.
(3) Creditors or vendors insuring debtors or
purchasers.
136
(4) Holders of a credit card, charge card, or
payment card that can be used to buy goods or serv-
ices issued by a bank, retailer, or other issuer.
(5) Depositors, account holders, or members of
a bank, savings and loan association, credit union,
mutual fund, money market fund, stockbroker, or
other similar financial institution regulated under
State or Federal law.
(6) Multiple employers trusts insuring employ-
ees or union members.
(7) Employer trade associations insuring em-
ployees.
(8) Professional or trade association members.
(9) Association members.
(10) A group for which there is a common en-
terprise or economic or social affinity or relationship.
(11) A group of individuals or businesses lo-
cated in underserved communities.
(12) Any other group as the Director may pro-
vide.
SEC. 364. INSURABLE INTERESTS UNDER LIFE INSURANCE
POLICIES.
(a) DEFINITIONS AND EXCEPTIONS.—
137
(1) DEFINITIONS.—For purposes of subsections
(c)(4), (d)(1)(D), (d)(1)(E), and (d)(1)(F) of this
section, the term ‘‘employee’’ shall include—
(A) any and all directors, officers, part-
ners, employees, retired employees, or the de-
pendents of such persons; and
(B) any former employee not included in
subparagraph (A), but only for the purpose of
replacing existing life insurance with new life
insurance in an amount not exceeding the in-
surance being replaced.
(2) EXCEPTIONS.—This section shall not apply
to—
(A) an annuity contract;
(B) a funding agreement; or
(C) any other life insurance policy the Di-
rector by regulation excepts from the require-
ments of this section.
(b) INSURABLE INTEREST REQUIRED; VIOLATION.—
(1) REQUIREMENT.—No person shall procure
or cause to be procured any life insurance policy
written by a national life insurer upon the person of
another individual unless such person has, at the
time when such life insurance policy is made, an in-
surable interest in the individual insured, or unless
138
the benefits under such life insurance policy are pay-
able to the individual insured or his or her personal
representatives, or to a person having, at the time
when such life insurance policy is made, an insurable
interest in the individual insured, except that an in-
surable interest need not exist at the time loss oc-
curs under the life insurance policy.
(2) VIOLATION.—If the beneficiary, assignee or
other payee under any life insurance policy made in
violation of this subsection receives from the na-
tional life insurer any benefits thereunder accruing
upon the death, disablement, or injury of the indi-
vidual insured, the individual insured or his executor
or administrator may maintain an action to recover
such benefits from the person receiving them.
(c) DEFINITION OF INSURABLE INTEREST.—
(1) IN GENERAL.—For purposes of this section,
the term ‘‘insurable interest’’ means an interest
based upon a reasonable expectation of pecuniary
advantage through the continued life, health, or bod-
ily safety of another individual and consequent loss
by reason of such individual’s death or disability or
a substantial interest engendered by love and affec-
tion in the case of individuals closely related by
blood or by law.
139
(2) INSURABLE INTEREST OF SELF.—An indi-
vidual has an unlimited insurable interest in his or
her own life, health, and bodily safety and may law-
fully take out an insurance policy on his own life,
health, or bodily safety and have the insurance pol-
icy made payable to whomsoever such individual
pleases, regardless of whether the beneficiary des-
ignated has an insurable interest.
(3) INSURABLE INTEREST OF PARTY TO CON-
TRACT
FOR
SALE
OF
A
BUSINESS
INTEREST.—A
party to a contract or option for the purchase or
sale, including a redemption, of an interest in a
business proprietorship, partnership or firm, or of
shares of stock of a business entity or of an interest
in these shares, has an insurable interest in the life,
body and health of each individual party to that con-
tract or option, and for the purposes of that contract
or option only, in addition to any insurable interest
that may otherwise exist as to that individual.
(4) INSURABLE INTEREST OF A BUSINESS EN-
TITY OR TRUST ESTABLISHED BY A BUSINESS ENTI-
TY.—
(A) BUSINESS ENTITY.—A business entity
has an insurable interest in the life or physical
or mental ability of any of its employees or the
140
employees of any of its affiliates or any other
person whose death or physical or mental dis-
ability might cause financial loss to the business
entity; or, pursuant to any contractual arrange-
ment with any shareholder concerning the reac-
quisition of shares owned by him or her at the
time of his or her death or disability, on the
life or physical or mental ability of that share-
holder for the purpose of carrying out such con-
tractual arrangement; or, pursuant to any con-
tract obligating the business entity as part of
compensation arrangements or pursuant to a
contract obligating the business entity as guar-
antor or surety, on the life of the principal obli-
gor.
(B) TRUST.—
(i) The trustee of a trust established
by a business entity substantially for the
benefit of the business entity has the same
insurable interest in the life or physical or
mental ability of any person as does the
business entity.
(ii) The trustee of a trust established
by a business entity providing life, health,
disability, retirement, or similar benefits to
141
some or all of the employees of the busi-
ness entity or its affiliates in which such
business entity has an insurable interest or
the beneficiaries of such employees, and
acting in a fiduciary capacity with respect
to such employees or their beneficiaries,
has the same insurable interest in the life
of such employees as does the business en-
tity.
(C) CONVEYANCE.—The insurable interest
of a business entity or trustee which has been
established pursuant to subparagraph (B) shall
be conveyed automatically to another business
entity or to the trustee of a trust established by
such other business entity for its sole benefit
which has acquired by purchase, merger, or oth-
erwise all or part of the first business entity’s
business. A business entity or the trustee of a
trust established pursuant to subparagraph (B)
may exchange any insurance policy issued to
itself or to another business entity or the trust-
ee of a trust established pursuant to subpara-
graph (B) from which the exchanging business
entity has acquired by purchase, merger, or
otherwise all or part of such other business en-
142
tity’s business for a new insurance policy issued
to itself without establishing a new insurable in-
terest at the time of such exchange.
(5) CHARITABLE INSTITUTIONS.—A charitable
institution as defined under section 501(c)(3),
501(c)(6), 501(c)(8), or 501(c)(9) of the Internal
Revenue Code of 1986 shall have an insurable inter-
est in the life of any donor.
(d) APPLICATION AND CONSENT OF INSURED.—
(1) REQUIRED
CONSENT.—No life insurance
policy upon an individual, except a group insurance
policy, shall be made or effectuated unless at the
time of the making of the life insurance policy the
individual insured, being of competent legal capacity
to contract, applies for an insurance policy or con-
sents in writing to the contract, except in the fol-
lowing cases:
(A) A spouse may effectuate life insurance
upon the other spouse.
(B) Any person having an insurable inter-
est in the life of a minor or any person upon
whom a minor is dependent for support and
maintenance may effectuate life insurance upon
the life of or pertaining to the minor.
144
graph (E) on the life of an employee or retiree
of such other business entity, and the exchang-
ing business entity has acquired by purchase,
merger, or otherwise all or part of such other
business entity’s business for a new life insur-
ance policy on such individual’s life sold to the
exchanging business entity.
(2) LIABILITY.—A national life insurer shall be
entitled to rely upon all statements, declarations,
and representations made by an applicant for insur-
ance relative to the insurable interest which such ap-
plicant has in the insured. No national life insurer
shall incur any legal liability except as set forth in
the insurance policy, by virtue of any untrue state-
ments, declarations, or representations so relied
upon in good faith by the national life insurer.
(e) CONDITIONS FOR NEW INSURANCE EXCEEDING
INSURANCE
BEING
REPLACED.—Notwithstanding the
provisions of subsections (c)(4), (d)(1)(D), (d)(1)(E), or
(d)(1)(F), any new life insurance may exceed the life in-
surance being replaced only—
(1) when an entity has an insurable interest
pursuant to subsection (c)(4) and the authority to
effectuate life insurance pursuant to the provisions
of subsection (d)(1)(D), (d)(1)(E), or (d)(1)(F); and
145
(2)(A) to the extent application of the cash sur-
render value from the old life insurance as a pre-
mium under the new life insurance policy requires a
larger amount of insurance to qualify as life insur-
ance or to be not treated as a modified endowment
contract for Federal income tax purposes;
(B) to otherwise comply with applicable Federal
law; or
(C) when, upon cessation of premium payments,
a former employee or trustee elects under the life in-
surance policy to use the cash value available under
the life insurance policy to restructure the term, face
amount, or investment options under the life insur-
ance policy, even though such restructuring may re-
sult in an increase in the amount of the insurance.
(f) INSURANCE POLICY TRANSFERS
OR ASSIGN-
MENTS.—If a life insurance policy has been issued in com-
pliance with this section, no transfer or assignment of
such insurance policy or any interest thereunder shall be
invalid by reason of a lack of insurable interest of the
transferee or assignee in the life of the insured or the pay-
ment of premiums thereafter by the transferee or assignee.
(g) EFFECT OF STATE LAW.—No State may, by law,
regulation, order, interpretation or otherwise, impose any
standard, relating to any matter addressed in this section,
146
on national life insurers or persons who purchase insur-
ance from national life insurers.
SEC. 365. LAW APPLICABLE TO LIFE INSURANCE POLICIES
OR OTHER PRODUCTS OF NATIONAL LIFE IN-
SURERS.
(a) IN GENERAL.—Subject to any applicable Federal
law, the provisions of any life insurance policy or other
product of a national life insurer shall be interpreted in
accordance with the law of the jurisdiction, if any, speci-
fied by the parties in the life insurance policy or other
product, so long as the parties have specified the law of—
(1) the jurisdiction in which the national life in-
surer has its main office;
(2) the jurisdiction in which the national life in-
surer has its principal place of business; or
(3) the jurisdiction in which the life insurance
policy or other product is delivered.
(b) DEFAULT LAW.—Subject to any applicable Fed-
eral law, if the parties to a life insurance policy or other
product of a national life insurer have not specified, as
provided in subsection (a), the jurisdiction whose law shall
govern the provisions of the insurance policy or other
product, such provisions shall be interpreted in accordance
with the law of the jurisdiction in which the life insurance
policy or other product is delivered.
147
(c) REGULATIONS.—Subsection (b) shall be subject
to such choice of law rules and standards as the Director
may establish by regulation.
Subtitle F—Market Conduct
SEC. 371. PURPOSES AND REGULATIONS.
(a) PURPOSE.—The purposes of this subtitle is to en-
sure appropriate Federal regulation of sales and mar-
keting practices of national insurers and State licensed in-
surance producers selling the products of national insurers
to prevent—
(1) unfair methods of competition and unfair
and deceptive acts and practices in the advertising,
solicitation, sale, issuance, distribution, and adminis-
tration of insurance policies and other products of
national insurers;
(2) unfair claims practices related to insurance
underwritten and sold by such insurers and pro-
ducers;
(3) discrimination in the underwriting of insur-
ance by such insurers and producers; and
(4) insurance fraud.
(b) RULEMAKING AUTHORITY.—The Director shall
promulgate such rules and regulations, applicable to na-
tional insurers and State insurance producers that sell
148
products of national insurers, as the Director deems nec-
essary to carry out the purposes of this subtitle.
(c) ANNUAL EXAMINATIONS.—The Director shall
conduct annual examinations of the market conduct of na-
tional insurers and State insurance producers that sell
products of national insurers.
(d) SAFE HARBOR.—An immaterial clerical error or
mathematical error made in connection with the adver-
tising, solicitation, sale, issuance, distribution, or adminis-
tration of insurance policies and other products of national
insurers and State insurance producers that sell products
of national insurers shall not constitute a violation of this
subtitle.
SEC. 372. UNFAIR OR DECEPTIVE PRACTICES.
(a) GENERAL PROHIBITION.—No person shall en-
gage in any act or practice in or affecting the advertising,
solicitation, sale, issuance, distribution, or administration
of insurance or other products of national insurers, includ-
ing such products sold by State insurance producers, if
such act or practice—
(1) constitutes an unfair or deceptive act or
practice in or affecting the advertising, solicitation,
sale, issuance, distribution, or administration of in-
surance or other products of national insurers; and
149
(2)(A) is committed flagrantly and in conscious
disregard of this subtitle or any regulations promul-
gated under this subtitle; or
(B) has been committed with such frequency as
to indicate a general business practice to engage in
such conduct.
(b) UNFAIR OR DECEPTIVE ACTS OR PRACTICES DE-
FINED.—For purposes of this subtitle, the following acts
or practices constitute unfair or deceptive acts or practices
in or affecting the advertising, solicitation, sale, issuance,
distribution, or administration of insurance or other prod-
ucts of national insurers, including such products sold by
State insurance producers:
(1) MISREPRESENTATIONS AND FALSE ADVER-
TISING OF INSURANCE OR ANNUITY CONTRACTS.—
Making, issuing, circulating, or causing to be made,
issued or circulated, any estimate, illustration, cir-
cular or statement, sales presentation or comparison
that—
(A) misrepresents the benefits, advantages,
conditions or terms of any insurance or annuity
contract issued by a national insurer;
(B) misrepresents the dividends to be re-
ceived on any insurance or annuity contract
issued by a national insurer;
150
(C) makes a false or misleading statement
as to the dividends previously paid on any in-
surance or annuity contract issued by a na-
tional insurer;
(D) is misleading or is a misrepresentation
as to the financial condition of any national in-
surer, or as to the reserves required for a na-
tional insurer;
(E) uses any name or title of any insur-
ance or annuity contract issued by a national
insurer that misrepresents the true nature of
such insurance or annuity contract;
(F) is a misrepresentation, including any
intentional misquote of a premium rate, for the
purpose of inducing or intending to induce the
purchase, lapse, forfeiture, exchange, conversion
or surrender of any insurance or annuity con-
tract issued by a national insurer;
(G) is a misrepresentation for the purpose
of effecting a pledge or assignment of or effect-
ing a loan against any insurance or annuity
contract issued by a national insurer; or
(H) misrepresents any insurance policy
issued by a national insurer as stock.
151
(2) FALSE, DECEPTIVE, OR
MISLEADING
AD-
VERTISING.—Making, publishing, disseminating, cir-
culating, or placing before the public, directly or in-
directly, in a newspaper, magazine or other publica-
tion, or in the form of a notice, circular, pamphlet,
letter or poster, or over the Internet or any radio or
television station, or in any other way, any advertise-
ment, announcement, or statement that contains any
assertion or representation with respect to any na-
tional insurer or State insurance producer selling
products of a national insurer which is untrue, de-
ceptive, or misleading.
(3) DEFAMATION.—Making, publishing, dis-
seminating, or circulating, directly or indirectly, or
aiding, abetting, or encouraging the making, pub-
lishing, disseminating, or circulating of any oral or
written statement or any pamphlet, circular, pam-
phlet, letter, or poster, which is false or maliciously
critical of the financial condition of a national in-
surer or State insurance producer selling products of
a national insurer, and which is calculated to injure
such insurer or producer.
(4) FALSE STATEMENTS.—Filing with the Di-
rector, or any other public official, or making, pub-
lishing, disseminating, circulating, or delivering to
152
any person, or causing, directly or indirectly, to be
made, published, disseminated, circulated, or deliv-
ered to any person, or placed before the public, any
material statement as to the financial condition of
a national insurer or State insurance producer sell-
ing products of a national insurer that is false.
(5) TWISTING.—Making, issuing, or causing to
be made or issued an oral or written statement that
misrepresents or makes incomplete comparisons
about the terms, conditions or benefits contained in
an insurance or annuity contract issued by a na-
tional insurer, including such contracts sold by State
insurance producers, for the purpose of inducing or
attempting to or intending to induce the policyholder
to forfeit, surrender, retain, exchange, or convert an
insurance or annuity contract or allow an insurance
or annuity contract to lapse.
(6) OTHER ACTS AND PRACTICES.—Engaging
in any other act or practice that the Director deter-
mines, by regulation or order, to be an unfair or de-
ceptive act or practice in or affecting the advertising,
solicitation, sale, issuance, distribution, or adminis-
tration of insurance and other products of national
insurers, including such products sold by State in-
surance producers.
153
(c) TIE-IN TRANSACTIONS.—
(1) REAL
OR
PERSONAL
PROPERTY
TRANS-
ACTION.—No person engaged in the business of fi-
nancing the purchase of real or personal property,
lending money on the security thereof, or servicing
a mortgage thereon, and none of its trustees, direc-
tors, officers, agents, or other employees, shall re-
quire, as a condition precedent to financing any such
purchase or making any such loan or renewing or
extending any such loan or mortgage or performing
any other act in connection therewith, that the per-
son, firm or corporation for whom the transaction is
undertaken negotiate any policy of insurance or re-
newal thereof covering such property through a par-
ticular insurance company, agent, or broker.
(2) RIGHT TO APPROVE INSURANCE COMPANY;
NON-DISCRIMINATION.—This section shall not pre-
vent the exercise of any right to approve or dis-
approve the insurer selected to underwrite the insur-
ance, except that in exercising such right, whether
pursuant to this section or any other law, no person
engaged in any such financing, lending or servicing
business and none of its trustees, directors, officers,
agents, or other employees shall—
154
(A) discriminate against an insurance com-
pany which issues a policy of insurance that is
non-assessable as to any designated mortgages
or any secured creditor designated as a loss
payee because of the insurer’s type of organiza-
tion; or
(B) refuse to accept an insurance policy
because it was not negotiated through a par-
ticular insurance company, agent, or broker.
(3) NO FEE TO CHANGE INSURANCE COMPA-
NIES.—No person engaged in any such financing,
lending, or servicing business, and none of its trust-
ees, directors, officers, agents, or other employees
shall, in connection with compliance with a covenant
to insure, require that the person, firm, or corpora-
tion for whom the purchase of the property is fi-
nanced or to whom a mortgage loan is made or who
owns the property shall pay a fee or other charges
as a condition to accepting, during the unexpired
term of a policy then held, another policy of insur-
ance in substitution therefore.
(4) BANKING SERVICES.—A depository institu-
tion (as such term is defined in section 3 of the Fed-
eral Deposit Insurance Act (12 U.S.C. 1813)) en-
gaged, directly or indirectly, in the sale of insurance
155
products shall comply with the anti-coercion, disclo-
sure, and other consumer protections provided for in
section 47 of the Federal Deposit Insurance Act (12
U.S.C. 1831x).
SEC. 373. REPLACEMENT OF LIFE INSURANCE POLICIES.
(a) IN GENERAL.—Any replacement of individual life
insurance policies or individual annuity contracts of a na-
tional insurer by an agent or representative of such in-
surer shall conform to standards set forth in regulations
promulgated by the Director.
(b) REGULATIONS.—The regulation required by sub-
section (a) shall
(1) specify what constitutes replacement and
the disclosure and notification required in order to
replace a policy or contract;
(2) require notification to the national insurer
whose policies or contracts are intended to be re-
placed;
(3) require the timely exchange of illustrative
and cost information necessary for completion of a
comparison of the proposed and replaced coverage;
and
(4) provide for a period following issuance of
the replacement policies or contracts during which
156
the policyholder or contract owner may reinstate the
replaced policies or contracts.
SEC. 374. UNFAIR DISCRIMINATION, UNFAIR CLAIMS SET-
TLEMENT PRACTICES, AND UNLAWFUL IN-
DUCEMENTS.
(a) UNFAIR DISCRIMINATION.—In underwriting in-
surance, no national insurer shall commit any of the fol-
lowing acts:
(1) RATES, DIVIDENDS AND OTHER BENEFITS
ASSOCIATED
WITH
LIFE
INSURANCE
AND
ANNU-
ITIES.—Engage in or allow any unfair discrimina-
tion between individuals of the same class and equal
expectation of life in the rates charged for any life
insurance or annuity contract issued by such na-
tional insurer or in the dividends or other benefits
payable thereon, or in any other terms and condi-
tions of such insurance or annuity contract.
(2) RATES AND BENEFITS ASSOCIATED WITH
ACCIDENT AND HEALTH INSURANCE.—Engage in or
allow any unfair discrimination between individuals
or risks of the same class and of essentially the
same hazard in the rates charged for any accident
or health insurance issued by a national insurer or
in the benefits payable thereunder, or in any of the
157
terms or conditions of such insurance, or in any
other manner.
(3) GEOGRAPHIC LOCATION OF PROPERTY OR
CASUALTY RISK; AGE OF PROPERTY.—Engage in or
allow unfair discrimination between individuals or
risks of the same class and essentially the same haz-
ard by refusing to insure, refusing to renew, can-
celing, or limiting the amount of insurance
coverage—
(A) on a property or casualty risk solely
because of the geographic location of the risk;
or
(B) on the residential property risk, or the
personal property contained therein solely be-
cause of the age of the residential property;
except that it is not unfairly discriminatory if such
action is based on sound actuarial principles or re-
lated to actual or reasonably anticipated experience.
(4) TERMINATION
OF
AGENT
OR
BROKER.—
Refuse to appoint, or terminate the appointment of,
an agent or broker solely because such agent or
broker submitted applications for property or cas-
ualty risks located in a particular geographical area.
(5) SEX, MARTIAL STATUS, RACE, RELIGION OR
NATIONAL ORIGIN.—Refuse to insure, refuse to con-
158
tinue to insure, or limit the amount of coverage
available to, an individual because of the sex, marital
status, race, religion or national origin of the indi-
vidual; except that nothing in this paragraph shall
prohibit a national insurer from taking marital sta-
tus into account for the purpose of defining persons
eligible for dependent benefits.
(6) MENTAL OR PHYSICAL IMPAIRMENT.—Ter-
minate or modify coverage under, or refuse to issue
or refuse to renew, any insurance, or charge a dif-
ferent rate for the same coverage, solely because the
applicant or insured or any employee of either is
mentally or physically impaired; except that—
(A) this paragraph shall not apply to acci-
dent and health insurance sold by a national in-
surer that is chartered to issue property and
casualty insurance;
(B) this paragraph shall not preclude any
such action that is based on sound actuarial
principles or is related to actual or reasonable
anticipated experience, in which case the na-
tional insurer shall, subject to the limitations
under section 375(a), notify the insured or ap-
plicant of the right to receive, or designate a
medical professional to receive, the specific rea-
159
son or reasons for such refusal, limitation or
differential; and
(C) this paragraph shall not be interpreted
to modify any other provision of law related to
the termination, modification, issuance, or re-
newal of, or rates charged with respect to, any
contract issued by a national insurer.
(7) REFUSAL BY ANOTHER INSURER.—Refuse
to insure solely because another national insurer or
State insurer has refused to write an insurance or
annuity contract, or has canceled or has refused to
renew an existing insurance or annuity contract in
which that person was the named insured. Nothing
in this paragraph shall prevent the termination of an
excess insurance contract on the account of the fail-
ure of the insured to maintain any required under-
lying insurance.
(b) UNFAIR CLAIMS SETTLEMENT PRACTICES.—No
national insurer shall engage in any of the following unfair
claims settlement practices if such practice is committed
without just cause and with such frequency as to indicate
a general practice:
(1) Knowingly misrepresent material facts or
provisions that relate to the claim or coverage at
issue.
160
(2) Refuse to pay a claim for an arbitrary or
capricious reason based on all available information.
(3) Attempt to settle a claim based on an appli-
cation that is altered without notice to, or the knowl-
edge or consent of, the insured.
(4) Fail to include with each claim paid to an
insured or beneficiary a statement of the coverage
under which payment is being made.
(5) Fail to settle a claim promptly whenever li-
ability is reasonably clear under one part of an in-
surance or annuity contract, in order to influence
settlements under other parts of the contract.
(6) Fail to provide promptly on request a rea-
sonable explanation of the basis for a denial of a
claim.
(7) Engage in any other practice that the Di-
rector determines, pursuant to a rule or order, to be
an unfair claims settlement practice.
(c) UNLAWFUL INDUCEMENTS.—
(1) IN
GENERAL.—No national insurer, nor
anyone acting on behalf of a national insurer, nor
any State insurance producer, shall pay, allow, or
give, or offer to pay, allow, or give, directly or indi-
rectly, as an inducement to any person to insure, or
shall give, sell, or purchase, or offer to give, sell, or
161
purchase, as such inducement, or interdependent
with any insurance policy or annuity contract, any
stocks, bonds, or other securities, or any dividends
or profits accruing or to accrue thereon, any rebate
of premium, or any other valuable consideration or
inducement whatever having a nominal value in ex-
cess of $20, not specified in such policy or contract.
(2) AFFILIATES OF CORPORATE INSUREDS.—
Within the meaning of paragraph (1), the sharing of
a commission with the insured shall be deemed to in-
clude any case in which an insurance agent or
broker which is an affiliate of any corporate insured,
received commissions for the negotiation or procure-
ment of any policy or contract of insurance for the
insured.
(3) DIVIDENDS
PERMITTED.—This subsection
shall not prohibit any national insurer from equi-
tably distributing to its policyholders, at any time
during the term or at the termination of the con-
tract of insurance, dividends payable from such in-
surer’s surplus, nor prohibit any national insurer or
insurance agent from paying commissions to a li-
censed insurance broker for negotiating a policy or
contract of insurance, nor prohibit any licensed in-
surance broker from sharing or dividing a commis-
162
sion earned or received by him with any other li-
censed insurance broker or brokers who shall have
aided him in respect to the insurance for the nego-
tiation of which the commission has been earned or
paid.
(4) TEMPORARY
CONTRACTS
PERMITTED.—
This subsection shall not prohibit the making of
temporary contracts of insurance, either by tem-
porary binders or other memoranda, if the premium
applicable to the insurance shall be due and shall be
paid for the time during which the insurance is in
force by virtue of the temporary contract.
SEC. 375. HIV WRITTEN INFORMED CONSENT, DISCRIMINA-
TION AGAINST ABUSE VICTIMS, AND HOLO-
CAUST VICTIMS CLAIMS.
(a) HIV WRITTEN INFORMED CONSENT.—
(1) IN GENERAL.—No national insurer or its
designee shall request or require an individual pro-
posed for insurance coverage to be the subject of an
HIV related test without receiving the written in-
formed consent of such individual prior to such test-
ing and without providing general information about
AIDS and the transmission of HIV infection.
(2) WRITTEN
CONSENT.—Written informed
consent to an HIV related test shall consist of a
163
written authorization that is dated and includes at
least the following:
(A) A general description of the test.
(B) A statement of the purpose of the test.
(C) A statement that a positive test result
is an indication that the individual may develop
AIDS and may wish to consider further inde-
pendent testing.
(D) A statement that the individual may
identify on the authorization form the person to
whom the specific test results may be disclosed
in the event of an adverse underwriting deci-
sion, which person may be the individual or a
physician or other designee at the discretion of
the individual proposed for insurance.
(E) The signature of the applicant or indi-
vidual proposed for insurance, or if such indi-
vidual lacks capacity to consent, the signature
of such other person authorized to consent for
such individual.
(3) NOTICE TO INDIVIDUAL.—In the event that
a national insurer’s adverse underwriting decision is
based in whole or in part on the result of an HIV
related test, the national insurer shall notify the in-
dividual of the adverse underwriting decision and
164
ask the individual to elect in writing, unless the indi-
vidual has already done so, whether to have the spe-
cific HIV related test results disclosed directly to the
individual or to such other person as the individual
may designate.
(4) DEFINITIONS.—For purposes of this sub-
section:
(A) ADVERSE UNDERWRITING DECISION.—
The term ‘‘adverse underwriting decision’’
means—
(i) a declination of insurance coverage
as applied for; or
(ii) an offer to issue insurance cov-
erage at a higher than standard rate.
(B) AIDS.—The term ‘‘AIDS’’ means ac-
quired immune deficiency syndrome, as may be
defined from time to time by the Centers for
Disease Control of the United States Public
Health Service.
(C) HIV INFECTION.—The term ‘‘HIV in-
fection’’ means infection with the human im-
munodeficiency virus or any other related virus
identified as a probable causative agent of
AIDS.
165
(D) HIV 
RELATED
TEST.—The term
‘‘HIV related test’’ means any laboratory test
or series of tests for any virus, antibody, anti-
gen, or etiologic agent whatsoever thought to
cause or to indicate the presence of AIDS.
(5) AUTHORITY OF DIRECTOR.—Nothing in this
subsection shall be construed to create, impair, alter,
limit, modify, enlarge, abrogate, or restrict the spe-
cific authority of the Director to allow or prohibit
the use of HIV related tests or the consideration of
HIV related test results for insurance coverage pur-
poses.
(b) DISCRIMINATION BASED ON BEING A VICTIM OF
ABUSE.—
(1) IN GENERAL.—It is unfairly discriminatory
on the part of a national insurer to—
(A) deny, refuse to issue, renew or reissue,
cancel, or otherwise terminate, restrict, or ex-
clude insurance coverage on or add a premium
differential to a policy for an applicant or in-
sured on the basis of the applicant’s or in-
sured’s abuse status; or
(B) exclude, limit, or deny benefits on a
life insurance policy on the basis of an insured’s
166
abuse status except as otherwise permitted or
required by law;
except that the prohibitions contained in this para-
graph shall not preclude a national insurer from tak-
ing any of the actions described in this paragraph so
long as the national insurer relies on underwriting
criteria reasonably related to the physical or mental
condition of a person, their property or claim history
and the decision was based on sound underwriting
and actuarial principles reasonably related to actual
or anticipated loss experience. In such case the selec-
tion criteria permitted must be based on such prin-
ciples. The national insurer shall notify the insured
or applicant of its specific reason or reasons for such
decision.
(2) DISCLOSURE OF CONFIDENTIAL ABUSE IN-
FORMATION.—When a national insurer, agency, or
agent has confidential abuse information in its pos-
session, the disclosure or transfer of such informa-
tion by a person employed by or contracting with a
national insurer, agency, or agent for any purpose or
to any person is unfairly discriminatory, except—
(A) to the subject of abuse or an individual
specifically designated in writing by the subject
of abuse;
167
(B) to a health care provider for the direct
provision of health care services;
(C) to a licensed physician identified and
designated by the subject of abuse;
(D) when ordered by the Director or a
court of competent jurisdiction or otherwise re-
quired by law;
(E) when necessary for a valid business
purpose to transfer information that includes
confidential abuse information that cannot rea-
sonably be segregated without undue hardship;
confidential abuse information may be disclosed
only if the recipient has executed a written
agreement to be bound by the prohibitions of
this subsection in all respects and to be subject
to the enforcement of this subsection by a court
of competent jurisdiction for the benefit of the
applicant or the insured, and only to—
(i) a reinsurer that seeks to indemnify
or indemnifies all or any part of a policy
covering a subject of abuse and that can-
not underwrite or satisfy its obligations
under the reinsurance agreement without
that disclosure;
168
(ii) a party to a proposed or con-
summated sale, transfer, merger, or con-
solidation of all or part of the business of
the national insurer, agency, or agent;
(iii) medical or claims personnel (in-
cluding affiliates of the national insurer,
agency, or agent) contracting with the na-
tional insurer, agency, or agent, only where
necessary to process an application or per-
form the duties of such national insurer,
agency, or agent under the policy or to
protect the safety or privacy of a subject of
abuse; or
(iv) with respect to address and tele-
phone number, to entities with whom the
national insurer, agency, or agent trans-
acts business when the business cannot be
transacted without the address and tele-
phone number;
(F) to an attorney who needs the informa-
tion to represent the national insurer, agency,
or agent effectively, Provided, That the national
insurer, agency, or agent notifies the attorney
of its obligations under this subsection and re-
quests that the attorney exercise due diligence
169
to protect the confidential abuse information
consistent with the attorney’s obligation to rep-
resent the national insurer, agency, or agent;
(G) to the policyholder or assignee, in the
course of delivery of the policy, if the policy
contains information about abuse status; or
(H) to any other entities deemed appro-
priate by the Director.
(3) REQUESTS PROHIBITED.—It is unfairly dis-
criminatory on the part of a national insurer to re-
quest information about acts of abuse or abuse sta-
tus, or make use of that information, however ob-
tained.
(4) EXCEPTIONS.—Nothing in this subsection
shall—
(A) preclude a subject of abuse from ob-
taining his or her insurance records;
(B) prohibit a national insurer, agency, or
agent from declining to issue a life insurance
policy if the applicant or prospective owner of
the policy is or would be designated as a bene-
ficiary of the policy, and if—
(i) the applicant or prospective owner
of the policy lacks an insurable interest in
the insured;
170
(ii) the applicant or prospective owner
of the policy is known, on the basis of
medical, police, or court records, to have
committed an act of abuse against the pro-
posed insured; or
(iii) the insurance or prospective in-
sured is a subject of abuse, and that per-
son, or a person who has assumed the care
of that person if a minor or incapacitated,
has objected to the issuance of the policy
on the ground that the policy would be
issued to or for the direct or indirect ben-
efit of the abuser; or
(C) prohibit a national insurer, agency, or
agent from asking about a medical condition or
from using medical information to underwrite
or to carry out its duties under the policy, even
if the medical information is related to a med-
ical condition that the national insurer, agency,
or agent knows or has reason to know is abuse-
related, to the extent otherwise permitted under
this subsection and other applicable law.
(5) ACTIONS TAKEN IN GOOD FAITH.—A na-
tional insurer, agency, or agent shall not be held civ-
illy or criminally liable for the death of or injury to
171
an insured resulting from any action taken in a good
faith effort to comply with the requirements of this
subsection; except that this paragraph does not pre-
vent an action to investigate or enforce a violation
of this subsection or to assert any other claims au-
thorized by law.
(6) DEFINITIONS.—For purposes of this sub-
section:
(A) ABUSE.—The term ‘‘abuse’’ means an
act that—
(i) would constitute a crime in the
State in which the insured or applicant re-
sides, including acts constituting disorderly
conduct, harassment, menacing, reckless
endangerment, kidnapping, assault, at-
tempted assault, or attempted murder;
(ii) has resulted (or multiple acts that
have resulted) in actual physical or emo-
tional injury or have created a substantial
risk of physical or emotional harm to such
person or such person’s child; and
(iii) is alleged (or multiple acts that
are alleged) to have been committed by a
family or household member.
172
(B) 
CONFIDENTIAL
ABUSE
INFORMA-
TION.—The term ‘‘confidential abuse informa-
tion’’ means information that clearly indicates
that the insured or applicant is a subject of
abuse.
(c) HOLOCAUST VICTIMS’ CLAIMS.—Any national in-
surer in receipt of a claim against it arising from an occur-
rence during the period between January 1, 1929, and De-
cember 31, 1945, from an individual that such national
insurer knows, or reasonably should have known, is a Hol-
ocaust victim shall—
(1) diligently and expeditiously investigate such
claim;
(2) allow claimants to provide alternative docu-
mentation which does not meet the usual standards
of proof required by an insurer to substantiate the
particular claim, subject to standards established for
such documentation as prescribed by regulations
promulgated by the Director; and
(3) attempt to resolve, settle and, if appro-
priate, make payments on claims irrespective of any
statute of limitations or notice requirements imposed
by any law or such insurance policy issued to or cov-
ering the life of a Holocaust victim, provided that
173
the claim is submitted to the insurer within 10 years
from the effective date of this Act.
SEC. 376. MINIMUM NATIONAL STANDARDS.
(a) APPLICABILITY TO INSURERS.—The provisions of
this subtitle and any regulations implementing this sub-
title shall apply to each insurance company (other than
a national insurer) doing business in the United States
to the same extent as a national insurer, and shall be en-
forceable against each such company by the appropriate
State insurance regulator of the State that would other-
wise have jurisdiction over the transaction or activity that
is alleged to constitute a violation of this subtitle. Each
such insurance company shall be subject to the same pen-
alties and sanctions that the Director may impose against
a national insurer for violations of this subtitle.
(b) ENFORCEMENT OF MORE PROTECTIVE STATE
LAWS.—Nothing in this section shall be construed to di-
minish the authority of any State insurance regulator to
enforce a State statute, order, or regulation that provides
greater protection to the policyholder, applicant, or claim-
ant alleging a violation of this subtitle.
174
Subtitle G—Acquisitions of Con-
trol, Mergers, Bulk Transfers,
and Domestication
SEC. 381. ACQUISITION OF CONTROL.
(a) DIRECTOR APPROVAL REQUIRED.—
(1) IN GENERAL.—No person other than the
issuer shall make a tender offer for or a request or
invitation for tenders of, or enter into any agree-
ment to exchange securities for, or acquire, in the
open market or otherwise, any voting security of a
national insurer if, after the consummation thereof,
such person would, directly or indirectly (or by con-
version or by exercise of any right to acquire) be in
control of the national insurer, and no person shall
enter into an agreement to merge with or otherwise
to acquire control of a national insurer or any per-
son controlling a national insurer unless, at the time
the offer, request or invitation is made or the agree-
ment is entered into, or prior to the acquisition of
the securities if no offer or agreement is involved—
(A) such person has filed with the Director
and has sent to the national insurer, a state-
ment, the form and content of which is pre-
scribed in accordance with subsection (b); and
175
(B) the offer, request, invitation, agree-
ment, or acquisition has been approved by the
Director.
(2) CONDITIONAL OFFERS.—Nothing in para-
graph (1) shall prohibit a person from making an
offer, request, or invitation or entering into an
agreement to acquire control of a national insurer,
the completion of which is conditioned upon obtain-
ing the approval of the Director as required in para-
graph (1).
(3) DEFINITIONS.—For purposes of this sec-
tion:
(A) NATIONAL INSURER.—The term ‘‘na-
tional insurer’’ includes any person controlling
a national insurer.
(B) PERSON.—The term ‘‘person’’ does
not include any securities broker holding, in the
usual and customary broker’s function, less
than 20 percent of the voting securities of a na-
tional insurer or of any person which controls
a national insurer.
(b) CONTENT OF STATEMENT.—The Director shall,
by regulation, prescribe the form and content of the state-
ment to be filed pursuant to subsection (a).
176
(c) APPROVAL BY DIRECTOR.—The Director shall ap-
prove any merger or other acquisition of control referred
to in subsection (a) unless the Director finds that—
(1) after the acquisition of control, the national
insurer referred to in subsection (a) would not be
able to satisfy the requirements for the issuance of
a Federal license to write the line or lines of insur-
ance for which it is presently licensed;
(2) the financial condition of any acquiring per-
son is such as might jeopardize the financial sta-
bility of the national insurer, or be hazardous to pol-
icyholders of the national insurer;
(3) the plans or proposals which the acquiring
person has to liquidate the national insurer, sell its
assets, or consolidate or merge it with any person,
or to make any other material change in its business
or corporate structure or management, are unfair
and unreasonable to policyholders of the national in-
surer and not in the public interest;
(4) the competence, experience, and integrity of
those persons who would control the operation of the
national insurer are such that it would not be in the
interest of policyholders of the national insurer and
of the public to permit the merger or other acquisi-
tion of control; or
177
(5) the acquisition is likely to be hazardous to
the insurance-buying public.
(d) DISCLAIMER OF CONTROL.—The Director may
determine upon application that any person does not or
will not upon the taking of some proposed action control
another person. Such determination shall be made within
30 days of the filing of the application or such further
period as the Director may prescribe. The filing of the ap-
plication in good faith by any person shall relieve the ap-
plicant from any obligation or liability imposed by this sec-
tion with respect to the subject of the application until
the Director has acted upon the application. The Director
may prospectively revoke or modify the Director’s deter-
mination, after notice and opportunity to be heard, when-
ever in the Director’s judgment revocation or modification
is consistent with this section.
(e) HEARING PERMITTED.—The Director may, in the
sole discretion of the Director, hold a hearing on a merger
or other acquisition of control that is the subject to this
section and for which a statement has been filed under
subsection (a)(1)(A). The hearing shall be subject to the
procedures contained in section 205(g), except that the
hearing shall be held in such location as the Director may,
in the sole discretion of the Director, specify.
178
(f) EXEMPTIONS.—The provisions of this section
shall not apply to—
(1) any offer, request, invitation, agreement, or
acquisition that the Director by order shall exempt
as not having been made or entered into for the pur-
pose and not having the effect of changing or influ-
encing the control of a national insurer, or as other-
wise not comprehended within the purposes of this
section; and
(2) a merger, consolidation, or acquisition sub-
ject to section 382.
(g) VOTING OF SECURITIES.—
(1) IN
GENERAL.—No security which is the
subject of any agreement or arrangement regarding
acquisition, or which is acquired or to be acquired,
in contravention of the provisions of this section or
of any regulation or order issued by the Director
hereunder may be voted at any shareholder’s meet-
ing, or may be counted for quorum purposes, and
any action of shareholders requiring the affirmative
vote of a percentage of shares may be taken as
though the securities were not issued and out-
standing; but no action taken at any such meeting
shall be invalidated by the voting of the securities,
179
unless the action would affect control of the national
insurer or unless ordered by a court.
(2) INJUNCTION.—If a national insurer or the
Director has reason to believe that any security of
the national insurer has been or is about to be ac-
quired in contravention of the provisions of this sec-
tion or of any regulation or order issued by the Di-
rector hereunder, the national insurer or the Direc-
tor may apply to the United States district court for
the judicial district in which the main office of the
national insurer is located or the United States Dis-
trict Court for the District of Columbia to enjoin
any offer, request, invitation, agreement, or acquisi-
tion made in contravention of this section or any
regulation or order issued by the Director there-
under to enjoin the voting of any security so ac-
quired, to void any vote of the security already cast
at any meeting of shareholders and for such other
equitable relief as the nature of the case and the in-
terest of the national insurer’s policyholders, credi-
tors, and shareholders or the public may require.
(h) SEQUESTRATION OF VOTING SECURITIES.—
(1) IN GENERAL.—In any case where a person
has acquired or is proposing to acquire any voting
securities in violation of this section or any regula-
180
tion or order issued by the Director hereunder, the
United States district court for the judicial district
in which the main office of the national insurer is
located or the United States District Court for the
District of Columbia may, on such notice as the
court deems appropriate, upon the application of the
national insurer or the Director, seize or sequester
any voting securities of the national insurer owned
directly or indirectly by the person, and issue such
order as may be appropriate to effectuate the provi-
sions of this section.
(2) SITUS
OF
OWNERSHIP.—Notwithstanding
any other provisions of law, for the purposes of this
section, the situs of the ownership of the securities
of national insurers shall be deemed to be the State
in which the main office of the national insurer is
located.
(i) CONFLICT WITH OTHER FEDERAL LAWS.—This
section shall be construed and interpreted so as not to con-
flict with or supersede the provisions of any other Federal
law or regulation governing the regulation of holding com-
panies, including financial holding companies as created
under section 2 of the Bank Holding Company of 1956.
(j) NO DELEGATION PERMITTED.—The Director
may not delegate to any insurance self-regulatory organi-
181
zation any authority conferred under this section with re-
spect to any merger or other acquisition of control of a
national insurer.
SEC. 382. MERGERS, CONSOLIDATIONS, AND ACQUISITIONS.
(a) NATIONAL INSURER RESULTING.—
(1) IN GENERAL.—A national insurer may, with
the approval of the Director, merge or consolidate
into, or acquire all or substantially all the assets of
and/or assume all or substantially all the liabilities
of, another national insurer or a State insurer in a
transaction in which a national insurer is the result-
ing insurer or the acquiring and/or assuming insurer
and may do so without regard to whether the insur-
ers involved in the transaction are stock form, mu-
tual form, or fraternal form.
(2) MERGER, CONSOLIDATION, AND
ACQUISI-
TION PROCEDURES.—The Director may, by regula-
tion, provide for—
(A) the merger or consolidation of a na-
tional insurer with another national insurer or
a State insurer in a transaction in which a na-
tional insurer is the resulting insurer; and
(B) the acquisition and/or assumption by a
national insurer of all or substantially all the
assets and/or all or substantially all the liabil-
182
ities of another national insurer or a State in-
surer in a transaction in which the national in-
surer is the acquiring and/or assuming insurer.
Any such merger or consolidation, or acquisition
and/or assumption, shall be carried out solely in ac-
cordance with such regulations as the Director may
prescribe; except that in the case of a transaction in-
volving the demutualization of a State insurer, State
laws, regulations, and orders shall govern the
demutualization process.
(3) EFFECT OF MERGER OR CONSOLIDATION.—
Upon the merger or consolidation of a national in-
surer with another national insurer or a State in-
surer in accordance with this section and regulations
issued by the Director hereunder—
(A) the corporate existence of each of the
merging or consolidating insurers shall be
merged or consolidated into the resulting in-
surer, and the resulting insurer shall be deemed
to be the same corporation as each insurer par-
ticipating in the merger or consolidation; and
(B) the resulting insurer shall, by oper-
ation of law and without further action, hold
and be subject to all rights, privileges, liabil-
ities, property interests, and other interests and
183
obligations that each insurer participating in
the merger or consolidation held or was subject
to immediately prior to the merger or consolida-
tion, except that the resulting insurer shall not
hold, following the merger or consolidation, any
State license to underwrite and sell insurance
that was held by a State insurer participating
in the merger or consolidation and the resulting
insurer shall obtain, in accordance with section
303 and the regulations issued by the Director
thereunder, a Federal license for all lines of in-
surance that it underwrites and sells (except in
the case of those lines of insurance for which a
national insurer participating in the merger or
consolidation held a Federal license immediately
prior to the merger or consolidation).
(4) SPECIAL AUTHORITY.—The Director may,
in the Director’s discretion and subject to such con-
ditions as the Director may prescribe, permit a na-
tional insurer resulting from a merger or consolida-
tion under this section to retain upon such merger
or consolidation such assets, liabilities, and powers
and authorities of any other national insurer or any
State insurer participating in the merger or consoli-
dation that do not conform to the legal requirements
184
applicable to national insurers as the Director deems
appropriate.
(b) STATE INSURER RESULTING.—Subject to such
notification procedures as the Director may prescribe by
regulation, a State insurer may merge or consolidate with,
or acquire assets of and/or assume liabilities of, a national
insurer in a transaction in which a State insurer is the
resulting insurer, as permitted by the relevant provisions
of applicable State law. Nothing in this subsection or in
a transaction pursuant to this subsection shall operate to
abrogate any rights, privileges, liabilities, property inter-
ests, or other interests or obligations that the national in-
surer held or was subject to immediately prior to the
transaction.
(c) EFFECT OF ASSUMPTION OF LIABILITIES.—If li-
abilities of a national insurer are assumed by another na-
tional insurer or a State insurer in accordance with the
provisions of this Act, such national insurer shall be re-
leased from all liabilities so assumed upon their assump-
tion by the other national insurer or a State insurer.
(d) NO DELEGATION PERMITTED.—The Director
may not delegate to any insurance self-regulatory organi-
zation any authority conferred under this section with re-
spect to any merger, consolidation, acquisition of assets,
or assumption of liabilities involving a national insurer.
185
(e) COORDINATION.—This section shall not apply to
any bulk transfer (as defined in section 383(a)) that is
subject to approval of the Director in accordance with sub-
section (b) of such section.
SEC. 383. BULK TRANSFERS.
(a) DEFINITIONS.—For purposes of this section:
(1) ASSUMING INSURER.—The term ‘‘assuming
insurer’’ means the insurer that purchases or other-
wise acquires existing insurance policies from an-
other insurer by bulk transfer.
(2) BULK TRANSFER.—The term ‘‘bulk trans-
fer’’ means the transfer by an insurer to another in-
surer of existing insurance policies constituting all or
substantially all of one or more of its lines of busi-
ness. Such term does not include—
(A) any sale in which the transferring in-
surer retains direct or indirect control of the as-
sets supporting the transferred insurance poli-
cies;
(B) any transaction effected by an agree-
ment under which the transferring insurer con-
tinues to remain directly liable to the policy-
holders under the insurance policies;
(C) the substitution of one insurer for an-
other upon the expiration of insurance coverage
186
pursuant to statutory or contractual require-
ments and the issuance of a new policy of in-
surance by that insurer;
(D) the transfer of policies of insurance
pursuant to merger or consolidation of 2 or
more insurers to the extent that those trans-
actions are regulated by statute;
(E) any transaction effected by an insurer
subject to a judicial order of receivership, liq-
uidation, or rehabilitation;
(F) any transaction to which the National
Insurance Guaranty Corporation or a State in-
surance guaranty association is a party; or
(G) any transfer of liabilities from one in-
surer to another under a single group insurance
policy upon the request of the group policy-
holder.
(3) PERMITTED
NATIONAL
INSURER.—The
term ‘‘permitted national insurer’’ means—
(A) a State insurer that is converting to a
national insurer under section 306; or
(B) a national insurer that is being newly
chartered under section 301 and licensed under
section 303.
187
(4) TRANSFERRED INSURANCE POLICIES.—The
term ‘‘transferred insurance policies’’ means the in-
surance policies that are subject to the bulk transfer.
(5) 
TRANSFERRING
INSURER.—The 
term
‘‘transferring insurer’’ means the insurer in privity
of contract with the policyholders under the existing
insurance policies that are subject to the bulk trans-
fer.
(b) BULK TRANSFERS AUTHORIZED.—The following
bulk transfers are authorized:
(1) A State insurer as the transferring insurer
and a permitted national insurer as the assuming in-
surer.
(2) A permitted national insurer as the trans-
ferring insurer and a State insurer as the assuming
insurer.
(3) A national insurer as the transferring in-
surer and a national insurer as the assuming in-
surer.
(4) A State insurer as the transferring insurer
and a national insurer that is not a permitted na-
tional insurer as the assuming insurer.
(5) A national insurer that is not a permitted
national insurer as the transferring insurer and a
State insurer as the assuming insurer.
188
(c) DIRECTOR APPROVAL.—
(1) REQUIREMENT.—A national insurer, before
effecting a bulk transfer as either the transferring
insurer or the assuming insurer as authorized under
subsection (b)(1), (b)(2), (b)(3), or (b)(5) of this
section, shall obtain the prior approval of the Direc-
tor in accordance with such regulations as the Direc-
tor may prescribe.
(2) STANDARD.—The Director shall approve a
bulk transfer under paragraph (1), after notice and
a hearing, unless the Director finds that the bulk
transfer is likely to be hazardous to policyholders of
transferred insurance policies, policyholders of the
transferring insurer, or policyholders of the assum-
ing insurer.
(d) POLICYHOLDER CONSENT.—
(1) TRANSFER WITHOUT CONSENT.—Notwith-
standing any other provision of law, a national in-
surer may, following the Director’s approval required
by subsection (c), effect a bulk transfer as either the
transferring insurer or the assuming insurer as au-
thorized under subsection (b)(1) or (b)(2) without
obtaining policyholder consent to the bulk transfer.
(2) 
CONSENT
REQUIRED.—Notwithstanding
any other provision of law, a national insurer may,
189
following the Director’s approval required by sub-
section (c), effect a bulk transfer as either the trans-
ferring insurer or the assuming insurer as author-
ized under subsection (b)(3) by complying with re-
quirements the Director shall prescribe by regulation
specifying whether policyholder consent to such a
bulk transfer is required and, if policyholder consent
is required, the form in which such consent is re-
quired to be given.
(3) AUTHORITY TO REQUIRE CONSENT.—In ad-
dition to any policyholder consent required by any
other applicable provision of law, the Director may
by regulation prescribe whether policyholder consent
is required for a bulk transfer authorized under sub-
section (b)(5) and, if policyholder consent is re-
quired, the form in which such consent is required
to be given.
(e) RELEASE FROM LIABILITY.—Upon the effective-
ness of a bulk transfer under this section, the transferring
insurer shall be released from its obligations under the
transferred insurance policies.
(f) STATE LAW.—
(1) CONSENT
REQUIREMENTS
PROHIBITED.—
Except as provided in paragraph (2), no State may,
by law, regulation, interpretation, or otherwise re-
190
quire a national insurer, a permitted national in-
surer, or a State insurer to obtain policyholder con-
sent to a bulk transfer or to submit the bulk trans-
fer to State review or action (including approval and
nondisapproval) or prevent or significantly interfere
with a bulk transfer effected pursuant to this sec-
tion.
(2) PERMISSIBLE
STATE
ACTION.—Paragraph
(1) does not prevent any State from—
(A) collecting, reviewing, and taking action
(including approval or disapproval) on applica-
tions and other documents or reports con-
cerning a proposed bulk transfer permitted
under—
(i) subsection (b)(2), (b)(4), or (b)(5)
to which a State insurer (other than a per-
mitted national insurer) domiciled in that
State is a party; or
(ii) subsection (b)(4) or (b)(5) to
which a State insurer (other than a per-
mitted national insurer), other than a
State insurer domiciled in that State, is a
party,
if the review or action meets the standards set
forth in paragraph (2); or
191
(B) requiring policyholder consent of a
proposed bulk transfer permitted under sub-
section (b)(4) or (b)(5).
(3) STANDARDS.—The standards applicable to
paragraph (1)(A) are that the review or action—
(A) is based on standards no more onerous
than those imposed by the Director and occurs
within a reasonable time frame that advances
the purposes of this section;
(B) is made in close consultation and co-
operation with the Director and is without bias
or discrimination toward either the transferring
insurer or the assuming insurer; and
(C) serves a legitimate State interest and
does not frustrate the proposed bulk transfer.
(4) FAILURE TO MEET STANDARDS.—If the Di-
rector finds that any State review or action under
paragraph (2)(A) fails to meet any of the standards
set forth in paragraph (3)(A), (3)(B), or (3)(C), the
Director may give notice to the applicable State of
the reasons for such failure whereupon such State
review or action shall be deemed to fail to meet the
standards of paragraph (3).
(g) DIFFERENTIAL TREATMENT PROHIBITED.—No
State may, by law, regulation, interpretation, or otherwise,
192
treat a national insurer, a permitted national insurer, or
a State insurer entering into a bulk transfer agreement
with a national insurer, a permitted national insurer, or
a State insurer, or any affiliate or subsidiary thereof, dif-
ferently than any other insurer operating in that State.
(h) DELEGATION PROHIBITED.—The Director may
not delegate to any insurance self-regulatory organization
any authority conferred under this section with respect to
any bulk transfer involving a national insurer.
SEC. 384. DOMESTICATION OF U.S. BRANCH OF A NON-U.S.
INSURER.
(a) DOMESTICATION PERMITTED.—Notwithstanding
any other provision of law, upon compliance with the pro-
visions of this section and the Directors regulations here-
under, any non-U.S. insurer having its U.S. branch en-
tered through a State or established pursuant to section
302 and owning beneficially, directly or indirectly, all out-
standing shares of a national insurer, may, subject to
prior written approval of the Director, domesticate its
U.S. branch by agreeing in writing with such national in-
surer to the acquisition of the business and assets, and
the assumption of all liabilities, of the U.S. branch, by
the national insurer for no consideration except such as-
sumption.
193
(b) APPROVAL BY DIRECTOR.—If satisfied that the
domestication is in accordance with the provisions of this
section and that the interests of policyholders and credi-
tors of the U.S. branch are not materially adversely af-
fected, the Director may approve such domestication and
authorize its consummation in compliance with the provi-
sions of subsection (c).
(c) CONSUMMATION
OF DOMESTICATION AGREE-
MENT; RELEASE
OF
DEPOSITS; WITHDRAWAL
OF
TRUSTEED ASSETS.—
(1) 
CONSUMMATION
OF
DOMESTICATION
AGREEMENT.—Upon the filing with the Director of
a certified copy of the instrument of transfer and
assumption—
(A) the domestication of the U.S. branch
shall be effective;
(B) all rights, franchises and interests of
such U.S. branch in and to every species of
property, real, personal and mixed, and things
in action thereunto belonging, shall be deemed
transferred to and vested in the acquiring na-
tional insurer and it shall be deemed to have
assumed all liabilities of such U.S. branch; and
(C) all deposits of the U.S. branch held by
State officers or other State regulatory agencies
194
pursuant to State laws shall be released, and
the non-U.S. insurer and the U.S. branch shall
be released from all liabilities so assumed.
(2) 
RELEASE
OF
DEPOSITS.—Contempora-
neously with the consummation of the domestication
of a U.S. branch established under this section, the
Director shall transfer to the account of the acquir-
ing national insurer the securities deposited by such
U.S. branch in compliance with the provisions of this
Act, and the Director shall consent that the trustee
of the trusteed assets deposited by such U.S. branch
in compliance with the provisions of this Act shall
withdraw from the trust and transfer and deliver to
the acquiring national insurer all assets held by such
trustee.
(3) WITHDRAWAL
OF
TRUSTEED
ASSETS.—
Contemporaneously with the consummation of the
domestication of a U.S. branch established under
State law, the trustee of any trusteed assets depos-
ited by such U.S. branch in compliance with applica-
ble State law shall, with the consent of the Director,
withdraw the trusteed assets from the trust and
transfer and deliver to the acquiring national insurer
all assets held by such trustee. No State may, by
statute, regulation, order, interpretation, or other-
195
wise prevent, significantly interfere with, or have the
authority to review, approve, or disapprove the with-
drawal of trusteed assets or other deposits of a U.S.
branch established under State law that is domes-
ticating pursuant to this section, Provided, That
such withdrawal is being made contemporaneously
with or subsequent to the consummation of a domes-
tication of the U.S. branch pursuant to this section.
(d) PROHIBITION OF DELEGATION.—The Director
may not delegate to any insurance self-regulatory organi-
zation any authority under this section with respect to the
domestication of a U.S. branch of a non-U.S. insurer.
Subtitle H—Health Insurance
SEC. 391. RECOMMENDATIONS FOR HEALTH INSURANCE.
Not later than 3 years after the date of the enact-
ment of this Act, the Director shall submit a report to
the Congress—
(1) making recommendations on whether na-
tional insurers should be authorized to underwrite
health insurance; and
(2) including proposed legislation to authorize
such underwriting.
196
TITLE IV—STATE TAXATION
SEC. 401. STATE TAXATION.
(a) IN GENERAL.—Except as provided in subsection
(b), a national insurer shall be subject to all taxes, includ-
ing insurance retaliatory taxes, imposed under the author-
ity of any State legislation to the same extent and in the
same manner as an insurer chartered in the State where
the national insurer is considered domiciled pursuant to
subsection (c).
(b) EXCEPTION.—No State shall have power to im-
pose its insurance retaliatory tax on any national insurer
unless, for any tax purpose for which State of domicile
is relevant, every national insurer is treated by such State
as domiciled in the State designated by each national in-
surer in accordance with subsection (c) and unless the in-
surance retaliatory tax is imposed on insurers chartered
by the State to the same extent and in the same manner.
(c) DESIGNATION OF DOMICILE.—For purposes of
this section, a national insurer may designate one of the
following States as its State of domicile, by filing such
designation in writing with the Director:
(1) The State in which is located the national
insurer’s principal place of business in the United
States.
197
(2) In the case of an insurer that has converted
from being a State insurer to being a national in-
surer under this Act, the State in which such insurer
was domiciled immediately prior to such conversion.
If a national insurer makes no designation of a State of
domicile pursuant to this subsection, it shall be deemed
to have designated as its State of domicile that State in
which is located its principal place of business in the
United States.
(d) CHANGE IN DOMICILE.—With the approval of the
Director, a national insurer may change its State of domi-
cile to any other State meeting the requirements of sub-
section (c).
(e) STATUS OF NATIONAL INSURER.—For purposes
of State taxation, a national insurer shall not be consid-
ered to be a department, agency, or instrumentality of the
Federal Government, nor, except as provided in this sec-
tion, shall a national insurer be exempt from any State
tax or subject to a lesser burden of any State tax, solely
by reason of its status as a national insurer under this
Act.
198
TITLE V—TREATMENT OF
MCCARRAN-FERGUSON ACT
SEC. 501. REPEAL OF ANTITRUST EXEMPTION FOR BUSI-
NESS OF INSURANCE.
The antitrust laws of the United States shall apply
to national insurers, State insurers, and all reinsurers
doing business in the United States (regardless of the
domicile of such reinsurers), to the same extent as other
business are subject to such laws, except that the antitrust
laws shall not apply to—
(1) the sharing of historical loss data among in-
surers, Provided, That this paragraph shall not be
construed to permit the sharing of trending data;
and
(2) the activities of insurers required to partici-
pate in State mandatory residual market mecha-
nisms designed to make insurance available to those
unable to obtain insurance in the voluntary market
and to the activities of insurers required to partici-
pate in a worker’s compensation administration
mechanism.
TITLE VI—HOLDING COMPANIES
SEC. 601. DEFINITIONS.
For purposes of this title:
199
(1) AFFILIATE.—The term ‘‘affiliate’’ means
any person that controls, is controlled by, or is
under common control with another person.
(2) EXTRAORDINARY DIVIDEND OR DISTRIBU-
TION.—Except as may otherwise be specified by the
Director by regulation, the term ‘‘extraordinary divi-
dend or distribution’’ means a dividend or distribu-
tion of cash or other property by a national insurer,
whose fair market value together with that of other
dividends or distributions made within the preceding
12 months exceeds the greater of—
(A) 10 percent of the national insurer’s
surplus as regards policyholders as of the next
preceding December 31; or
(B) the net income of the national insurer
for the 12-month period ending the December
31 next preceding, but does not include pro
rata distributions of any class of the national
insurer’s own securities.
(3) INSURANCE HOLDING COMPANY SYSTEM.—
The term ‘‘insurance holding company system’’
means two or more affiliated persons, one or more
of which is a national insurer.
200
(4) 
SUBSIDIARY.—The 
term 
‘‘subsidiary’’
means, with respect to a person, an affiliate con-
trolled, directly or indirectly, by such person.
SEC. 602. REGISTRATION.
(a) REGISTRATION.—Each national insurer that is a
member of an insurance holding company system shall
register with the Director.
(b) REGISTRATION STATEMENT.—The Director shall,
by regulation, prescribe—
(1) the form and content of the registration
statement to be filed pursuant to subsection (a); and
(2) the time by which the registration state-
ment is required to be filed with the Director.
(c) INFORMATION
OF NATIONAL INSURERS.—Any
person within an insurance holding company system sub-
ject to registration under subsection (a) shall be required
to provide complete and accurate information to a national
insurer, in any case in which the information is reasonably
necessary to enable the insurer to comply with the provi-
sions of this title.
(d) TERMINATION OF REGISTRATION.—The Director
shall terminate the registration of any national insurer
that demonstrates that it no longer is a member of an
insurance holding company system.
201
(e) EXEMPTIONS.—The provisions of this section
shall not apply to any national insurer, information, or
transaction if and to the extent that the Director by regu-
lation or order provides for such inapplicability.
(f) DISCLAIMER.—Any person may file with the Di-
rector a disclaimer of affiliation with any national insurer
or a disclaimer may be filed by the national insurer or
any member of an insurance holding company system. The
disclaimer shall fully disclose all material relationships and
bases for affiliation between the person and the national
insurer as well as the basis for disclaiming the affiliation.
After a disclaimer has been filed, the national insurer shall
be relieved of any duty to register or report under this
section which may arise out of the national insurer’s rela-
tionship with the person unless and until the Director dis-
allows the disclaimer. The Director shall disallow a dis-
claimer only after furnishing all parties in interest with
notice and opportunity to be heard and after making spe-
cific findings of fact to support the disallowance.
SEC. 603. STANDARDS AND MANAGEMENT OF NATIONAL IN-
SURER WITHIN AN INSURANCE HOLDING
COMPANY SYSTEM.
(a) TRANSACTIONS WITHIN INSURANCE HOLDING
COMPANY SYSTEM.—
202
(1) STANDARDS.—Transactions within an in-
surance holding company system to which a national
insurer subject to registration is a party shall be
subject to the following standards:
(A) The terms shall be fair, reasonable and
at least as favorable to the national insurer as
those that would be offered to, or would apply
to, a non-affiliate.
(B) Charges or fees for services performed
shall be reasonable and at least as favorable to
the national insurer as those that would be of-
fered to, or would apply to, a non-affiliate.
(C) Expenses incurred and payment re-
ceived shall be allocated to the national insurer
in conformity with customary insurance ac-
counting practices consistently applied.
(D) The books, accounts and records of
each party to all such transactions shall be so
maintained as to clearly and accurately disclose
the nature and details of the transactions, in-
cluding such accounting information as is nec-
essary to support the reasonableness of the
charges or fees to the parties.
(E) The national insurer’s surplus as re-
gards policyholders following any dividends or
203
distributions to shareholders shall be reasonable
in relation to the national insurer’s outstanding
liabilities and adequate to meet its financial
needs.
(2) AUTHORITY TO REQUIRE APPROVAL IN AD-
VANCE OF TRANSACTIONS.—The Director may, by
regulation, prescribe certain transactions involving a
national insurer and any person in its insurance
holding company system that may not be entered
into unless the national insurer has notified the Di-
rector in writing of its intention to enter into the
transaction and the Director either has approved or
not disapproved the transaction within a specified
time period.
(3) REVIEW BY DIRECTOR.—The Director, in
reviewing any transactions for which notice is re-
quired pursuant to paragraph (2), shall consider
whether the transactions comply with the standards
set forth in paragraph (1) and whether they may ad-
versely affect the interests of policyholders.
(b) EXTRAORDINARY DIVIDENDS.—
(1) NOTICE OF DECLARATION.—No national in-
surer that is a member of an insurance holding com-
pany system shall pay any extraordinary dividend or
distribution to its shareholders until 30 days after
204
the Director has received notice of the declaration in
a form prescribed by the Director.
(2) CONDITIONAL
DECLARATION.—A national
insurer that is a member of an insurance holding
company system may declare an extraordinary divi-
dend or distribution which is conditional upon the
Director’s approval, and the declaration shall confer
no rights upon shareholders until—
(A) the Director has approved the payment
of the dividend or distribution; or
(B) the Director has not disapproved pay-
ment within the 30-day period referred to in
paragraph (1).
SEC. 604. CONFLICT WITH OTHER FEDERAL LAWS.
This title shall be construed and interpreted so as not
to conflict with or supersede the provisions of any other
Federal law or regulation governing the regulation of hold-
ing companies, including financial holding companies as
created under Section 2 of the Bank Holding Company
Act of 1956 (12 U.S.C. 1841).
TITLE VII—RELATIONSHIPS
WITH STATE LAW
SEC. 701. DEFINITIONS.
For purposes of this title: