134 
Agency, define their duties, fix their compensation, 
and lend them money and credit; 
(10) pay pensions and establish pension plans, 
pension trusts, profit-sharing plans, share bonus 
plans, share option plans, and other benefit or incen-
tive plans for any or all current or former directors, 
officers, employees, and agents of the National In-
surer or National Agency, its subsidiaries or its af-
filiates; 
(11) 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 acquir-
ing at such shareholder’s death shares of its stock 
owned by such shareholder; 
(12) in the case of a National Life Insurer— 
(A) establish and maintain 1 or more sepa-
rate accounts and allocate amounts to such ac-
counts (including any proceeds applied under 
optional modes of settlement or under dividend 
options); 
(B) provide life insurance, annuities, dis-
ability income insurance, long-term care insur-
ance, or funding agreements (and incidental 
benefits), payable in fixed or variable amounts 
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135 
from the accounts described in subparagraph 
(A) or from the general account; 
(C) hold and accumulate funds pursuant to 
funding agreements; and 
(D) provide investment advice and invest-
ment management services; 
(13) in the case of a National Insurer— 
(A) engage in the sale, solicitation, nego-
tiation, and underwriting of insurance; 
(B) establish and maintain 1 or more pro-
tected cells in connection with an insurance 
securitization and attribute to such cells insur-
ance and reinsurance obligations with respect to 
its general account, obligations relating to the 
insurance securitization and assets to fund such 
obligations; and 
(C) engage in all other insurance oper-
ations and exercise all such incidental powers as 
shall be necessary to carry on insurance oper-
ations; 
(14) in the case of a National Agency, engage 
in the sale, solicitation, and negotiation of policies of 
insurance issued by any National Insurer, State in-
surer, or United States branch of a non-United 
States insurer, and exercise all such incidental pow-
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136 
ers as shall be necessary to carry out such activities, 
including claims adjustment and settlement, risk 
management, employee benefits advice, and retire-
ment planning; 
(15) provide benefits or payments to its direc-
tors, officers, and employees, subsidiaries or affili-
ates, and to their estates, families, dependents, or 
beneficiaries, in recognition of the past services of 
the directors, officers, and employees to the National 
Insurer or National Agency or its subsidiaries or af-
filiates; 
(16) make donations and otherwise devote its 
resources for the public welfare or for charitable, sci-
entific, educational, humanitarian, philanthropic, or 
religious purposes; 
(17) serve as a promoter, partner, member, as-
sociate, or manager of any business entity; 
(18) provide loss control, advice, exposure iden-
tification, and reduction strategies, and recommend 
and expedite risk financing alternatives; 
(19) engage in any other lawful activity that is 
necessary or convenient to further its activities and 
affairs; and 
(20) exercise the powers granted by this Act in 
any State and in any foreign jurisdiction. 
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137 
(b) EFFECT ON STATE LAW.—No State may, by stat-
ute, regulation, order, interpretation, or other action, pre-
vent or restrict a National Insurer or National Agency 
from exercising any power conferred by this section or by 
any regulation authorized by this section. 
(c) SUBSIDIARIES.— 
(1) NATIONAL INSURERS.— 
(A) AUTHORIZATION.— 
(i) IN GENERAL.—A National Insurer 
may establish, invest in, or otherwise ac-
quire 1 or more subsidiaries engaged or or-
ganized to engage in any business lawful 
under the laws of the jurisdictions in which 
the subsidiaries are organized. 
(ii) RESTRICTION.—Without the prior 
written approval of the Commissioner, not 
more than 20 percent of the National In-
surer’s assets may be invested in any 1 
subsidiary described in clause (i) and not 
more than 40 percent of a National Insur-
er’s assets may be invested in 2 or more 
subsidiaries engaged in such other activi-
ties. 
(B) CALCULATION.—In calculating the 
amount invested by a National Insurer in a 
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138 
subsidiary under subparagraph (A), there shall 
be included only the following: 
(i) Total net monies or other consider-
ation expended and obligations assumed by 
the National Insurer in the acquisition or 
formation of the subsidiary, including all 
organizational expenses and contributions 
to capital and surplus of the subsidiary 
whether or not represented by the pur-
chase of capital stock or issuance of other 
securities. 
(ii) All amounts expended by the Na-
tional Insurer in acquiring additional com-
mon stock, preferred stock, debt obliga-
tions, and other securities of the sub-
sidiary. 
(iii) All contributions by the National 
Insurer to the capital or surplus of the 
subsidiary subsequent to its acquisition or 
formation. 
(C) 
QUALIFICATION
OF
INVESTMENT; 
WHEN DETERMINED.—Whether any investment 
made pursuant to subparagraph (A) meets the 
applicable requirements of such subparagraph 
shall be determined before the investment is 
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139 
made by calculating the applicable investment 
limitations as though the investment had al-
ready been made, taking into account the then 
outstanding principal balance on all previous in-
vestments in debt obligations, and the value of 
all previous investments in equity securities as 
of the day they were made, net of any return 
of capital invested, not including dividends. 
(D) EXCEPTION.—The limitations provided 
for in subparagraph (A) shall not apply to in-
vestments by a National Insurer in— 
(i) any subsidiary engaged primarily 
in the sale, solicitation, negotiation, and 
underwriting of any line of insurance that 
the National Insurer is authorized to sell, 
solicit, negotiate, and underwrite; or 
(ii) any subsidiary whose sole business 
function is to own assets (including other 
subsidiaries) that the National Insurer 
itself is authorized to own. 
(E) NOTICE.—A National Insurer shall no-
tify the Commissioner, in writing, not later 
than 20 calendar days after establishing, invest-
ing in, or acquiring a subsidiary, unless the 
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140 
transaction requires the prior written approval 
of the Commissioner under subparagraph (A). 
(2) NATIONAL AGENCIES.— 
(A) AUTHORIZATION.—A National Agency 
may establish, invest in, or otherwise acquire 1 
or more subsidiaries engaged or organized to 
engage in any business activity that is lawful 
for a National Agency under this Act. 
(B) NOTICE.—A National Agency shall no-
tify the Commissioner, in writing, not later 
than 30 calendar days after establishing, invest-
ing in, or acquiring a subsidiary. 
(d) DIVIDENDS
AND DISTRIBUTIONS
TO SHARE-
HOLDERS.— 
(1) SHAREHOLDER DIVIDENDS AND DISTRIBU-
TIONS
PERMITTED.—A National Insurer may de-
clare and pay dividends or make other distributions 
in cash, bonds, or property on its outstanding 
shares, unless— 
(A) the National Insurer is insolvent or 
would be made insolvent by such payment; or 
(B) the declaration, payment, or distribu-
tion would be contrary to any restrictions con-
tained in the charter of the National Insurer. 
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141 
(2) SOURCE OF SHAREHOLDER DIVIDENDS AND 
DISTRIBUTIONS.—A National Insurer may only de-
clare and pay dividends or make other distributions 
out of surplus if the assets of the National Insurer 
after such declaration, payment, or distribution is 
not less than the amount of its capital. 
(3) OTHER
PROVISIONS.—Shareholder divi-
dends and distributions made pursuant to this sub-
section shall be subject to— 
(A) the standards set forth in section 
403(a)(1)(E); and 
(B) the notice requirements of section 
403(b). 
SEC. 208. SEPARATE ACCOUNTS OF NATIONAL LIFE IN-
SURER. 
(a) OWNERSHIP.—Any amount allocated by a Na-
tional Life Insurer to a separate account shall be owned 
and controlled by the National Life Insurer and no Na-
tional Life Insurer by reason of such account shall be or 
hold itself out to be a trustee. 
(b) LIABILITIES.—Assets allocated by a National 
Life Insurer to a separate account shall not be chargeable 
with liabilities arising out of any other business of the Na-
tional Life Insurer to the extent so provided in the applica-
ble agreements. 
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142 
(c) SECURITY INTERESTS PERMITTED.—A National 
Life Insurer may allow for a security interest to attach 
to assets allocated to a separate account if the security 
interest is in favor of a creditor of the separate account 
and otherwise allowed under applicable law. 
SEC. 209. PROTECTED CELLS. 
(a) ESTABLISHMENT.—A National Insurer may es-
tablish 1 or more protected cells with the approval of the 
Commissioner. 
(b) PROTECTED CELL ASSETS.— 
(1) OWNERSHIP.—All amounts attributed to a 
protected cell established under this section, includ-
ing assets transferred to a protected cell account, 
shall be owned by the National Insurer. 
(2) TRUSTEE.—The National Insurer may not 
be, nor hold itself out to be, a trustee with respect 
to the protected cell assets of the protected cell ac-
count described in paragraph (1). 
(3) LIABILITIES.—The assets of a protected cell 
established under this section shall not be chargeable 
with liabilities arising out of any other business of 
the National Insurer. 
(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 if the security 
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143 
interest is in favor of a creditor of the protected cell and 
otherwise allowed under applicable law. 
(d) REACH
OF CREDITORS
AND OTHER CLAIM-
ANTS.— 
(1) AVAILABILITY.—Protected cell assets shall 
only be available to the creditors of a National In-
surer that are creditors in respect to that protected 
cell. 
(2) RECOURSE.—Creditors with respect to a 
protected cell shall have no recourse against the pro-
tected cell assets of other protected cells or the gen-
eral account assets of the National Insurer. 
(3) FRAUD.—The establishment of a protected 
cell shall not, in and of itself, constitute a fraudulent 
conveyance, an intent by a National Insurer to de-
fraud creditors, or the carrying out of business by 
a National Insurer for any other fraudulent purpose. 
(e) RULEMAKING.—The Commissioner shall promul-
gate regulations that establish standards for protected 
cells established by National Insurers. 
(f) EFFECT ON STATE LAW.—No State may, by stat-
ute, regulation, order, interpretation, or otherwise, require 
licensing or otherwise regulate in any manner— 
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144 
(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, or advisors) in an 
insurance securitization as an insurance or reinsur-
ance agent, broker, producer, intermediary, advisor, 
consultant, or similar insurance professional by vir-
tue of its activities in connection with the insurance 
securitization. 
SEC. 210. CHARTERING AND LICENSING COMMENCEMENT 
DATE. 
(a) NATIONAL INSURER.—The Commissioner may 
charter or license a National Insurer when the following 
regulations have been published in interim final form: 
(1) The fee and assessment regulations author-
ized by section 122. 
(2) The reporting regulations authorized by sec-
tion 124. 
(3) The organizational regulations authorized 
by section 201. 
(4) The licensing regulations authorized by sec-
tion 203. 
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145 
(5) The charter conversion regulations author-
ized by section 205. 
(6) The transitional financial regulations au-
thorized by section 211. 
(7) The product regulations authorized by sec-
tion 213. 
(8) The market conduct regulations authorized 
by section 215. 
(9) The control regulations authorized by sec-
tion 231. 
(10) The merger, consolidation, and acquisition 
regulations authorized by section 232. 
(11) The bulk transfer regulations authorized 
by section 233. 
(12) The conversion regulations authorized by 
sections 242 and 243. 
(13) The holding company regulations author-
ized by sections 402 and 403. 
(14) The receivership regulations authorized by 
section 554. 
(15) The insolvency protection regulations au-
thorized by section 609. 
(b) NATIONAL AGENCIES.—The Commissioner may 
charter or license a National Agency when the following 
regulations have been published in interim final form: 
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146 
(1) The fee and assessment regulations author-
ized by section 122. 
(2) The reporting regulations authorized by sec-
tion 124. 
(3) The organizational regulations authorized 
by section 201. 
(4) The charter conversion regulations author-
ized by section 1205. 
(5) The market conduct regulations authorized 
by section 215. 
(6) The control regulations authorized by sec-
tion 231. 
(7) The merger, consolidation, and acquisition 
regulations authorized by section 232. 
(8) The producer licensing regulations author-
ized by section 301. 
(9) The holding company regulations authorized 
by sections 402 and 403. 
(c) TIMING AND NOTICE.— 
(1) TIMING.—The regulations described in sub-
sections (a) and (b) shall be published in interim 
final form not later than 2 years after the initial ap-
pointment and confirmation of the Commissioner. 
(2) NOTICE.—At such time as the regulations 
described in subsections (a) or (b) have been issued 
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147 
in interim final form, the Commissioner shall publish 
a notice in the Federal Register announcing that the 
Office is prepared to act on chartering and licensing 
applications. 
(3) CONSIDERING AND ACTING UPON APPLICA-
TIONS.—Notwithstanding any challenge to the regu-
lations described in subsections (a) and (b), the 
Commissioner shall have the authority to consider, 
and act upon, chartering and licensing applications 
immediately upon publication of the notice described 
in paragraph (2). 
Subtitle B—Financial, Product, and 
Market Regulation 
SEC. 211. TRANSITIONAL FINANCIAL REGULATIONS. 
(a) PROMULGATION OF INITIAL FINANCIAL REGULA-
TIONS THAT ARE CONSISTENT WITH NAIC STANDARDS 
AND MODELS.—The Commissioner shall establish, by reg-
ulation, the following: 
(1) Accounting principles for a National In-
surer, which are consistent with the statutory ac-
counting practices promulgated by the NAIC in its 
‘‘Accounting Practices and Procedures Manual’’. 
(2) Auditing standards for a National Insurer, 
which are consistent with the guidance prescribed by 
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148 
the NAIC in its ‘‘Model Regulation Requiring An-
nual Audited Financial Reports’’. 
(3) Investment standards for a National In-
surer, which are consistent with the NAIC’s ‘‘Invest-
ment of Insurers Model Act (Defined Standards 
Version)’’. 
(4) Risk-based capital standards for a National 
Insurer, which are consistent with NAIC’s ‘‘Risk- 
Based Capital (RBC) for Insurers Model Act’’ and 
the related ‘‘RBC Instructions’’. 
(5) Valuation standards for the obligations and 
liabilities of a National Life Insurer, which are con-
sistent with the NAIC’s ‘‘Standard Valuation Law, 
Valuation of Life Insurance Policies Regulation, 
Universal Life Insurance Model Regulation, and 
Variable Life Insurance Model Regulation’’. 
(6) Continuing and alternative (nonforfeiture) 
benefits standards applicable to National Life Insur-
ers, which are consistent with the NAIC’s ‘‘Standard 
Nonforfeiture Law for Life Insurance, Variable Life 
Insurance Model Regulation, Standard Nonforfeiture 
Law for Individual Deferred Annuities, Long-Term 
Care Insurance Model Act, and Long-Term Care In-
surance Model Regulation’’. 
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149 
(7) Standards for the preparation and filing of 
an annual actuarial opinion on the adequacy of a 
National Life Insurer’s assets to meet its reasonably 
expected obligations and liabilities, which are con-
sistent with the NAIC’s ‘‘Actuarial Opinion and 
Memorandum Regulation’’. 
(8) Standards for the preparation and filing of 
an annual actuarial opinion on the loss and loss ad-
justment expense reserves of a National Property/ 
Casualty Insurer, which are consistent with the 
NAIC’s ‘‘Property and Casualty Actuarial Opinion 
Model Law’’ and applicable ‘‘NAIC Property and 
Casualty Annual Statement Instructions’’. 
(b) NAIC STANDARDS AND MODELS.—The NAIC 
standards and models cited in subsection (a) shall be the 
standards and models adopted by the NAIC as of the date 
of introduction of the National Insurance Act of 2006 as 
a bill in Congress. 
(c) EFFECTIVE DATE
AND FIVE-YEAR TRANSI-
TIONAL
PERIOD
FOR
INITIAL
FINANCIAL
REGULA-
TIONS.—The financial regulations specified in subsection 
(a) shall be issued in final form no later than 2 years fol-
lowing the initial appointment and confirmation of the 
Commissioner, and each regulation shall remain in effect 
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150 
for 5 years following the date upon which it becomes effec-
tive. 
(d) NAIC AMENDMENTS.—If, after the date of intro-
duction of the National Insurance Act of 2006 as a bill 
in Congress, the NAIC amends any standard or model 
upon which the initial financial regulations are based, the 
Commissioner shall determine, by regulation, whether 
such amendment shall apply to a National Insurer. If the 
Commissioner determines that an NAIC amendment to a 
standard or model should apply to a National Insurer, the 
Commissioner may specify, by regulation, whether the 
amendment applies in whole or in part. 
(e) REVISIONS OR MODIFICATIONS TO INITIAL REGU-
LATIONS BY COMMISSIONER.— 
(1) IN GENERAL.—Subject to paragraph (2), 
after an initial financial regulation specified in sub-
section (a) has been in effect for 5 years, the Com-
missioner may, by regulation, revise or modify the 
regulation. 
(2) SPECIAL
CIRCUMSTANCE.—The Commis-
sioner may, by regulation, revise or modify an initial 
financial regulation at any time if the Commissioner 
determines that any such revision or modification is 
necessary to protect policyholders or prevent haz-
ardous conduct by a National Insurer. 
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151 
SEC. 212. OTHER FINANCIAL REGULATIONS. 
In addition to the financial regulations specified in 
section 211, the Commissioner may issue other financial 
regulations as the Commissioner determines necessary. 
SEC. 213. PRODUCT REGULATION FOR NATIONAL LIFE IN-
SURERS. 
(a) APPLICABILITY.—This section shall apply to the 
insurance business of National Life Insurers. 
(b) UNDERWRITING STANDARDS.—A National In-
surer may classify or underwrite risks if any decision to 
refuse to insure, to continue to insure, to limit the amount, 
extent, or kind of coverage, or to charge a different rate 
for the same coverage is— 
(1) based on sound actuarial principles; or 
(2) related to actual or reasonably anticipated 
experience. 
(c) LAW APPLICABLE TO INSURANCE POLICIES OR 
OTHER PRODUCTS OF NATIONAL INSURERS.— 
(1) LAW SPECIFIED BY PARTIES.—Subject to 
any applicable Federal law, the provisions of any in-
surance policy or other product of a National In-
surer shall be interpreted in accordance with the law 
of the jurisdiction specified by the parties to the in-
surance policy or other product if the parties have 
specified the law of— 
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152 
(A) the jurisdiction in which the main of-
fice of the National Insurer is located; 
(B) the jurisdiction in which the principal 
place of business of the National Insurer is lo-
cated; or 
(C) the jurisdiction in which the insurance 
policy or other product is delivered. 
(2) DEFAULT LAW.—If the parties to an insur-
ance policy or other product of a National Insurer 
have not specified 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 insurance policy or other product is delivered. 
(3) RULEMAKING.—The Commissioner shall es-
tablish, by regulation, choice of law rules and stand-
ards under this subsection. 
(d) STANDARDS FOR POLICIES.— 
(1) POLICY.—In this subsection, the term ‘‘pol-
icy’’— 
(A) means— 
(i) a policy, contract, certificate, or 
other evidence of life insurance, disability 
income insurance, or long-term care insur-
ance; or 
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153 
(ii) an annuity contract or a rider or 
endorsement to such contract; and 
(B) does not include— 
(i) a funding agreement; 
(ii) a reinsurance contract; or 
(iii) an agreement, special rider, or 
endorsement relating only to the manner of 
distributing benefits or to the reservation 
of rights and benefits used at the request 
of the individual policyholder. 
(2) RULEMAKING.—The Commissioner shall es-
tablish, by regulation, standards for policies issued 
by a National Insurer. 
(3) TYPES
OF
POLICY
REQUIREMENTS.—The 
standards established under paragraph (1) may in-
clude general policy requirements and requirements 
regarding particular classes of policies. 
(e) PRODUCT FILINGS.— 
(1) FORM APPROVAL.—A National Insurer shall 
not issue a policy until the form of the policy has 
been received by the Commissioner. 
(2) EXEMPTIONS.—The Commissioner may, by 
regulation, exempt particular categories of policies 
from the filing requirement. 
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154 
(3) COMPLIANCE CERTIFICATE.—In accordance 
with regulations promulgated by the Commissioner, 
any filing of a policy form shall be accompanied by 
written certification by an officer of the National In-
surer that the policy form complies with the stand-
ards applicable to such form. 
(f) INTERPRETIVE RULINGS.— 
(1) PROCEDURES.—The Commissioner shall es-
tablish procedures by which National Insurers may 
obtain interpretive rulings from the Office regarding 
the interpretation and application of the standards 
established under this section. 
(2) PUBLIC AVAILABILITY.—Except as provided 
under paragraph (3), requests by National Insurers 
for interpretive rulings from the Office and the com-
plete text of such interpretive rulings shall not be 
made available to the public. 
(3) PUBLICATION
OF
SUMMARIES.—Notwith-
standing paragraph (2), the Commissioner shall pub-
lish a summary of each interpretive opinion, exclud-
ing the name of the National Insurer and any other 
identifying information, either promptly after the 
issuance of such opinion or, upon the request of the 
National Insurer, after such delay as the Commis-
sioner determines appropriate. 
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155 
(g) GROUP, BLANKET, AND FRANCHISE INSUR-
ANCE.— 
(1) 
AUTHORIZATION.—A 
National 
Insurer 
may— 
(A) sell, solicit, negotiate, and underwrite 
group, blanket, and franchise insurance policies; 
and 
(B) extend group, blanket, or franchise in-
surance policies to insure the dependents of em-
ployees or members, or any class of employees 
or members. 
(2) RULEMAKING.—The Commissioner shall, by 
regulation, establish standards for kinds and quali-
fications of permissible groups for group, blanket, 
and franchise insurance policies. 
(h) INSURABLE INTEREST.—The Commissioner shall 
define, by regulation, the term ‘‘insurable interest’’. 
(i) CRITERIA UNDER WHICH NEW LIFE INSURANCE 
MAY EXCEED THE INSURANCE BEING REPLACED.—Any 
new life insurance may exceed the insurance being re-
placed— 
(1) if a business entity or a trust entity has an 
insurable interest and the authority to purchase life 
insurance; 
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156 
(2) to the extent the application of the cash 
surrender value of the insurance being replaced as a 
premium under the new life insurance policy re-
quires a larger amount of insurance— 
(A) to qualify as life insurance; or 
(B) to not be treated as a modified endow-
ment contract for Federal income tax purposes; 
(3) to otherwise comply with applicable Federal 
law; and 
(4) if, upon cessation of premium payments, a 
former employee or trustee elects under the insur-
ance policy to use the cash value available under the 
insurance policy to restructure the term, face 
amount, or investment options under the insurance 
policy. 
(j) EFFECT OF STATE LAW.—No State may impose 
any standard, relating to any matter addressed in this sec-
tion, on National Insurers or persons who purchase insur-
ance from National Insurers. 
SEC. 214. PRODUCT REGULATION FOR NATIONAL PROP-
ERTY/CASUALTY INSURERS. 
(a) APPLICATION.—This section shall apply to the 
business of National Property/Casualty Insurers. 
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157 
(b) MAINTENANCE OF COPIES OF POLICIES.—A Na-
tional Insurer shall maintain for inspection a copy of every 
insurance policy form that it uses to insure risks. 
(c) ANNUAL POLICY FORM LISTING.—A National In-
surer shall annually provide the Commissioner with a list 
of all standard policy forms it uses to insure risks. 
(d) RATES, RATING
ELEMENTS, PRICE, 
AND 
FORMS.—The Act does not authorize the Commissioner 
to require a National Insurer to use any particular rate, 
rating element, price, or form. 
SEC. 215. REGULATION OF SALES AND MARKETING. 
(a) PURPOSE.—The purpose of this section is to en-
sure appropriate Federal regulation of the sales and mar-
keting practices of National Insurers, National Agencies, 
and federally licensed insurance producers to prevent un-
fair methods of competition and unfair and deceptive acts 
and practices in the advertising, sale, issuance, distribu-
tion, and administration of insurance policies and other 
products of National Insurers and claims under insurance 
policies and other products of National Insurers. 
(b) RULEMAKING.—The Commissioner shall promul-
gate such regulations, applicable to National Insurers, Na-
tional Agencies, and federally licensed insurance pro-
ducers, as the Commissioner determines to be necessary 
to carry out the purpose of this section, including rules 
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