135
in the bylaws. Any such penalty shall not exceed 25 per-
cent of any unpaid portion of the assessment. NIPC may
waive such penalty charge in whole or in part in cir-
cumstances where it considers such waiver appropriate.
(j) CLAIMS PAYMENTS AND RECOVERIES.—
(1) Covered claims, including the direct ex-
penses of handling such covered claims, which NIPC
pays or becomes obligated to pay by reason of its
guaranty obligations shall be paid from one or more
claims divisions or accounts under procedures estab-
lished by the Board of Directors.
(2) Amounts recovered from any source as re-
imbursement, subrogation, or other recovery of
amounts previously paid out or incurred pursuant to
NIPC’s obligations shall be credited to the appro-
priate claims division and account which had been
charged with the claim.
(k) SPECIAL PROVISIONS.—Notwithstanding the pro-
visions of this section, all assessments under subsection
(d) for covered claims related to commercial insurance
purchased from highly capitalized insurers by large insur-
ance buyers shall be calculated and maintained separately
from the other claims accounts and shall be calculated to
reflect the risk of both such insurer and its insureds that
buy as large insurance buyers becoming insolvent.
136
(l) RETURN
OF
EXCESS
ASSESSMENTS.—If the
Fund, through investment returns, exceeds the level estab-
lished in the bylaws for 3 successive years, the Board shall
distribute the excess to the members on the same basis
as that on which the assessments were made.
SEC. 515. BORROWING AUTHORITY.
NIPC shall have the authority, in addition to that
described in section 514, to borrow as necessary and upon
prior approval of the Board of Directors. Any such bor-
rowing shall be made upon such terms and conditions as
the Board determines, except that any funds so borrowed
shall be repaid out of the assessments as collected and
the funds resulting from such collection shall not be ap-
plied to any purpose other than the payment of guaran-
teed claims until the borrowed funds have been repaid. To
secure the payment of principal and interest on any such
borrowings the Corporation may pledge future assess-
ments.
SEC. 516. FUNCTIONS OF THE FEDERAL INSURANCE SOL-
VENCY COMMISSION.
(a) ADMINISTRATIVE PROCEDURE.—Determinations
of the Commission, for purposes of making rules pursuant
to section 510, shall be made after appropriate notice and
opportunity for a hearing, and for submission of views of
interested persons, in accordance with the rulemaking pro-
137
cedures specified in section 553 of title 5, United States
Code.
(b) ENFORCEMENT OF ACTIONS.—In the event of the
refusal of NIPC to commit its funds or otherwise to act
as required by this title, the Commission may apply to
the district court of the United States in which the prin-
cipal office of NIPC is located for an order requiring
NIPC to discharge its obligations under this title, and for
such other relief as the court may determine to be appro-
priate to carry out the purposes of this title.
(c) EXAMINATIONS AND REPORTS.—
(1) The Commission may make such examina-
tions and inspections of NIPC and require NIPC to
furnish it with such reports and records or copies
thereof as the Commission may consider necessary
or appropriate in the public interest or to effectuate
the purposes of this title.
(2) As soon as practicable after the close of
each fiscal year, NIPC shall submit to the Commis-
sion a written report relative to the conduct of its
business, and the exercise of the other rights and
powers granted by this title, during such fiscal year.
Such report shall include financial statements set-
ting forth the financial position of NIPC at the end
of such fiscal year and the results of its operations
138
(including the source and application of its funds)
for such fiscal year. The financial statements so in-
cluded shall be examined by an independent account-
ant in the same manner as for the financial reports
of federally certified insurers under this Act, and
shall be accompanied by the report thereon by such
accountant. The Commission shall transmit such re-
port to the President and the Congress with such
comment thereon as the Commission determines to
be appropriate.
SEC. 517. NOTICE TO COMMISSION OF CHANGES IN CONDI-
TIONS IN INSURANCE MARKETS.
Whenever NIPC shall conclude from all the informa-
tion available to it that there have been developments in
the insurance markets, industry practices, investment
markets, the economy, regulatory supervision, or any
other factors that might have a negative impact on the
financial condition or solvency of federally certified insur-
ers and reinsurers, it shall give written notice to the Com-
mission of this conclusion along with any recommenda-
tions it may have to address the situation.
SEC. 518. LIABILITY OF THE MEMBER INSURERS.
(a) LIABILITY AS TO NIPC OBLIGATIONS.—The li-
ability of member insurers with respect to claims covered
by NIPC shall be limited to the assessments authorized
139
in this title and the members shall have no other liability
under this Act as a member of NIPC for, or in connection
with, any act or omission of any other member insurer,
and shall have no liability for any indebtedness incurred
by NIPC or for any act or omission of any officer, agent,
or employee of NIPC.
(b) LIABILITY UNDER STATE GUARANTY FUNDS
AFTER OBTAINING A FEDERAL CERTIFICATE OF SOL-
VENCY.—
(1) A federally certified insurer shall remain
liable, notwithstanding its Federal certificate, for
any assessment for which it would have been liable
under any State guaranty fund law on account of
policies issued by an insurer against which a court
order of liquidation with a finding of insolvency has
been issued prior to the date when the federally cer-
tified insurer became a member of NIPC.
(2) A federally certified insurer shall have lim-
ited liability for assessments pursuant to State or-
ders of liquidation issued after it obtained a Federal
certificate. Such liability shall continue for each of
the 4 years following its obtaining a Federal certifi-
cate. Such assessments in such cases shall be re-
duced by 25 percent each year until they terminate
entirely in the fifth year. Assessments shall be based
140
on the last 3 years of the insurer’s operations before
it obtained its Federal certificate.
(3) A federally certified insurer shall have no li-
ability for any assessments by State guaranty funds
on account of policies issued by an insurer against
which a court order of liquidation with a finding of
insolvency has been issued on or after the date such
insurer becomes federally certified.
(c) LIABILITY
TO NIPC AFTER SURRENDER
OF
FEDERAL CERTIFICATE OF SOLVENCY.—A federally cer-
tified insurer shall be subject to assessments based on the
time for which it was certified, except that, notwithstand-
ing anything to the contrary in sections 205(b) and
504(a), such insurer that surrenders its certification,
whether voluntarily or involuntarily, shall continue to be
liable on account of policies issued by other federally cer-
tified insurers against which a declaration of insolvency
was entered on or before the date of the insurer’s depar-
ture from NIPC. Upon decertification, the insurer shall
have continuing liability for a period of 4 years for the
amounts that would have been assessed had it remained
federally certified. Assessments shall be reduced by 25
percent each year until they terminate entirely in the fifth
year. Assessments shall otherwise be calculated in accord-
ance with section 514.
141
SEC. 519. LIABILITY OF NIPC AND ITS DIRECTORS, OFFI-
CERS, AND EMPLOYEES.
(a) IN GENERAL.—NIPC shall not be deemed to be
an insurer within the meaning of any State law, rule, regu-
lation, or order regulating or taxing insurers or other enti-
ties engaged in the business of insurance, including provi-
sions imposing premium taxes, regulating insurer solvency
or financial condition, establishing guaranty funds and
levying assessments, or regulating claims settlement prac-
tices. The Corporation additionally shall be exempt from
all taxes, assessments or other levies imposed by the Unit-
ed States or any State, municipal, county, or local govern-
ment.
(b) LIABILITY OF NIPC, ITS DIRECTORS, OFFICERS,
AND EMPLOYEES.—Neither NIPC nor any of its directors,
officers, or employees shall have any liability to any person
for any action taken or omitted in good faith under or
in connection with any matter subject to this Act.
SEC. 520. ADVERTISING.
NIPC shall, by bylaw, prescribe the manner in which
a member insurer may display any sign (or include in any
advertisement or statement a provision) relating to the
protection of customers and any other protections afforded
by this Act. No member insurer may display any such sign
or include in any advertisement any such statement except
in accordance with such bylaws. NIPC may also, by bylaw,
142
prescribe such minimal requirements as it considers nec-
essary and appropriate to require a member of NIPC to
provide public notice of its membership in NIPC.
SEC. 521. IMPROVEMENT OF INSOLVENCY PREVENTION
AND DETECTION.
NIPC shall assist the Commission in the development
of improved standards for financial requirements, report-
ing and examination, or other procedures, methods, or
techniques for avoiding insurance insolvencies and for pro-
moting early detection and protective action in the case
of insurers that are insolvent or approaching insolvency.
SEC. 522. GUARANTEE OBLIGATION OF NIPC.
(a) COVERAGE.—NIPC shall as guarantor be obli-
gated to pay covered benefits for claims upon a declaration
by the Commission that a member insurer is financially
impaired or insolvent. It shall pay all claims for which cov-
erage exists under this Act. The Commission shall adjust
for inflation the amount of benefits set by this section.
This adjustment shall be made every fifth year unless for
good cause the Commission determines that it should be
adjusted more frequently.
(b) MATTERS SUBJECT
TO PAYMENT
FROM
THE
PROPERTY
AND CASUALTY INSURANCE CLAIMS DIVI-
SION.—The guaranty obligation as to covered claims for
143
property and casualty insurance shall be satisfied by pay-
ing to the claimant an amount as follows:
(1) The full amount of a covered claim for ben-
efits under a workers’ compensation insurance cov-
erage.
(2) Any amount in excess of $100, but limited
to $10,000 per policy for a covered claim for the re-
turn of unearned premium.
(3) An amount not exceeding $300,000 per
claim for all other covered claims which shall also
not exceed that part of the first $300,000 of the loss
or liability giving rise to the covered claim which the
insurer would have been obligated to pay under its
policy or policies but for the order of liquidation.
(c) MATTERS SUBJECT TO PAYMENT UNDER THE
LIFE AND HEALTH INSURANCE AND ANNUITY CLAIMS
DIVISION.—The guaranty obligation as to covered claims
for life and health insurance and annuity coverage shall
be satisfied by paying to the claimant an amount not ex-
ceeding the lesser of—
(1) the contractual obligations for which the in-
surer is liable or would have been liable if it were
not an impaired or insolvent insurer; or
(2) with respect to any one life, regardless of
the number of policies or contracts—
144
(A) $300,000 in life insurance death bene-
fits, but not more than $100,000 in net cash
surrender and net cash withdrawal values for
life insurance;
(B) $100,000 in health insurance benefits,
including any net cash surrender and net cash
withdrawal values;
(C) $100,000 in the present value of annu-
ity benefits, including net cash surrender and
net cash withdrawal values;
(3) with respect to each individual participating
in a governmental retirement plan established under
section 401, 403(b), or 457 of the Internal Revenue
Code of 1986 covered by an unallocated annuity con-
tract or the beneficiaries of each such individual if
deceased, in the aggregate, $100,000 in present
value annuity benefits, including net case surrender
and net cash withdrawal values; or
(4) with respect to any one contract holder cov-
ered by any unallocated annuity contract not in-
cluded in paragraph (2)(C), $5,000,000 in benefits,
irrespective of the number of such contracts held by
that contract holder, except that in no event shall
NIPC be liable to expend more than $300,000 in the
145
aggregate with respect to any one individual under
paragraphs (2) and (3).
(d) MANAGEMENT OF CLAIMS.—In order to perform
the obligations imposed by this section, NIPC shall—
(1) investigate claims brought against NIPC
and adjust, compromise, settle and pay covered
claims to the extent of NIPC’s obligation and deny
all other claims and may review settlements, releases
and judgments to which the insolvent insurer or its
insureds were parties to determine the extent to
which such settlements, releases, and judgments may
be properly contested;
(2) notify such persons as the Commission di-
rects under this Act;
(3) handle claims through its employees or
through one or more insurers or other persons des-
ignated as servicing facilities;
(4) reimburse each servicing facility for obliga-
tions of NIPC paid by the facility and for expenses
incurred by the facility while handling claims on be-
half of NIPC and shall pay the other expenses of
NIPC authorized by this Act; and
(5) be authorized to report information on sus-
pected fraud or civil violations to the Department of
Justice and to the Commission.
146
(e) LIMITATIONS ON PAYMENTS.—In no event shall
NIPC be obligated to pay a claimant more than the in-
surer would have been obligated to pay, but for the order
of rehabilitation or liquidation, under the policy from
which the claim arose. Notwithstanding any other provi-
sion of this Act, NIPC shall not be obligated to pay any
part of any claim filed with the receiver in rehabilitation
or liquidation after the final date for the filing of claims
against the receiver.
SEC. 523. EFFECT OF PAID CLAIMS.
(a) ASSIGNMENT.—Any person whose claim is paid
by NIPC under this Act shall be deemed to have assigned
its rights under the policy to NIPC to the extent of its
payment from NIPC. Every insured or claimant seeking
the protection of this Act shall cooperate with NIPC to
the same extent as such person would have been required
to cooperate with the insolvent insurer. NIPC shall have
no cause of action against the insured of the insolvent in-
surer for any sums it has paid out except such causes of
action as the insolvent insurer would have had if such
sums had been paid by the insolvent insurer and except
as provided in subsection (b). In the case of an insolvent
insurer operating on a plan with assessment liability, pay-
ments of claims of NIPC shall not operate to reduce the
148
with copies of such records upon request and at NIPC’s
expense.
SEC. 526. STAY OF PROCEEDINGS.
All proceedings in which the insolvent member in-
surer is a party or is obligated to defend a party in any
court shall be stayed for 6 months and such additional
time thereafter as may be determined by the court from
the date the insolvency is determined to permit proper de-
fense by NIPC of all pending causes of action. As to any
covered claim arising from a judgment under any decision
verdict or finding based on the default of the insolvent
insurer or its failure to defend an insured, NIPC, either
on its own behalf or on behalf of such insured, may apply
to have such judgment, order, decision, verdict or finding
set aside by the same court or administrator that made
such judgment, order, decision, verdict, or finding and
shall be permitted to defend such claim on the merits.
SEC. 527. JUDICIAL REVIEW.
(a) JURISDICTION.—The appropriate United States
district court shall have exclusive jurisdiction over litiga-
tion involving NIPC, including—
(1) disputes between NIPC and its member in-
surers that arise under this Act;
(2) controversies between NIPC and claimants
seeking NIPC guaranty fund coverage; and
149
(3) suits brought by NIPC under this Act and
against persons affiliated with the insolvent insurer.
Suits brought in State court involving NIPC shall be
deemed to have arisen under Federal law and therefore
subject to jurisdiction in the appropriate United States
district court.
(b) EXHAUSTION OF REMEDIES.—A claimant must
exhaust the administrative remedies before NIPC and the
Commission as to a claim before it may seek judicial re-
view of the decision on the claim.
TITLE VI—NATIONAL ASSOCIA-
TION 
OF 
REGISTERED
AGENTS AND BROKERS
SEC. 
601. 
NATIONAL 
ASSOCIATION 
OF 
REGISTERED
AGENTS AND BROKERS.
There is established a body corporate to be known
as the ‘‘National Association of Registered Agents and
Brokers’’. NARAB shall be a nonprofit corporation and
shall have succession until dissolved by an Act of
Congress. NARAB shall—
(1) not be an agency or establishment of the
United States Government; and
(2) except as otherwise provided in this Act, be
subject to, and have all the powers conferred upon
a nonprofit corporation by, the District of Columbia
150
Nonprofit Corporation Act (D.C. Code, sec. 29–1001
and fol.).
SEC. 602. PURPOSE.
The purpose of NARAB is to provide a mechanism
by which the multi-State services of State-licensed insur-
ance producers may be more efficiently provided to policy-
holders, while preserving the right of States to license,
supervise, and discipline insurance producers.
SEC. 603. RELATIONSHIP TO THE FEDERAL GOVERNMENT.
NARAB shall be subject to the supervision and over-
sight of the Commission. Funds held by or due to NARAB
shall not be included in the budget of the United States
nor may the United States borrow or pledge such funds.
SEC. 604. MEMBERSHIP.
(a) IN
GENERAL.—All State-licensed insurance
agents, brokers, surplus lines brokers, insurance consult-
ants, and limited insurance representatives (hereinafter
referred to as ‘‘insurance producers’’) are eligible for
membership in NARAB.
(b) AUTHORITY TO ESTABLISH MEMBERSHIP CRI-
TERIA.—NARAB shall have the authority to establish
membership criteria that—
(1) bear a reasonable relationship to the pur-
poses for which NARAB was established; and
151
(2) do not unfairly limit the access of smaller
agencies to NARAB membership.
(c) CLASSES OF MEMBERSHIP.—NARAB shall have
the authority to establish separate classes of membership,
with separate criteria, where it reasonably determines that
performance of different duties requires different levels of
education, training, or experience. NARAB shall have the
authority to establish separate categories of membership
for individuals and for other persons.
(d) MEMBERSHIP CRITERIA.—NARAB shall have the
authority to establish membership criteria to establish the
integrity, personal qualifications, education, training, and
experience of members, and any criteria reasonably inci-
dental thereto.
(e) ANNUAL RENEWAL.—Membership in NARAB
shall be renewed on an annual basis and may be subject
to reasonable continuing education requirements.
(f) SUSPENSION AND REVOCATION.—NARAB shall
have the authority to inspect and examine its members
to determine compliance with NARAB criteria and to sus-
pend or revoke membership upon a showing that—
(1) applicable membership criteria are no longer
being met, or
(2) a member has been subject to disciplinary
proceedings under the jurisdiction of a State insur-
152
ance regulator and NARAB concludes that retention
of membership would not be in the public interest.
SEC. 605. CORPORATE POWERS.
NARAB shall have the power—
(1) to sue and be sued, in its corporate name
and through its own counsel in any State, Federal
or other court;
(2) to adopt, alter, and use a corporate seal,
which shall be judicially noticed;
(3) to adopt, amend, and repeal, by its Board
of Directors, such bylaws and rules as may be nec-
essary or appropriate to carry out the purposes of
this title, including bylaws relating to—
(A) the conduct of its business; and
(B) the indemnity of its directors, officers,
and employees for liabilities and expenses actu-
ally and reasonably incurred by any such person
in connection with the defense or settlement of
an action or suit if such person acted in good
faith and in a manner reasonably believed to be
consistent with the purposes of this title;
(4) to adopt, amend, and repeal, by its Board
of Directors such rules as may be necessary or ap-
propriate to carry out the purposes of this title, in-
cluding rules relating to—
153
(A) the definition of terms used in this
title, other than those terms for which a defini-
tion is provided herein;
(B) 
the 
procedures 
for 
payment 
of
NARAB assessments; and
(C) the exercise of all other rights and
powers granted to it by this title;
(5) to conduct its business (including the carry-
ing on of operations and the maintenance of offices)
and to exercise all other rights and powers granted
to it by this title in any State or other jurisdiction
without regard to any qualification, licensing, or
other statutory requirement in such State or other
jurisdiction;
(6) to lease, purchase, accept gifts or donations
of or otherwise acquire, to own, hold, improve, use,
or otherwise deal in or with, and to sell, convey,
mortgage, pledge, lease, exchange or otherwise dis-
pose of any property, real, personal or mixed, or any
interest therein, wherever situated;
(7) to elect or appoint such officers, attorneys,
employees, and agents as may be required, to deter-
mine their qualifications, to define their duties, to
fix their salaries, require bonds for them, and fix the
penalty thereof;
154
(8) to enter into contracts, to execute instru-
ments, to incur liabilities, and to do any and all
other acts and things as may be necessary or inci-
dental to the conduct of its business and the exercise
of all other rights and powers granted to NARAB by
this title;
(9) to suspend or revoke NARAB membership
in the manner provided elsewhere in this title;
(10) to levy and collect assessments upon its
members, in the manner and, to the extent provided
elsewhere in this Act, to cover the administrative ex-
penses of NARAB in a manner that does not un-
fairly discriminate against smaller insurance produc-
ers;
(11) to provide advice and recommendations to
Congress, the courts and the Commission on matters
pertaining to the regulation and practices of insur-
ance producers.
SEC. 606. BOARD OF DIRECTORS.
(a) POWERS.—The Board of Directors shall be the
governing body of NARAB and shall be vested with all
powers necessary for the management and administration
of the affairs of the Corporation and the promotion of its
purposes as authorized by this title. The Board’s authority
shall be specified in the bylaws of NARAB.
155
(b) COMPOSITION.—The Board shall be composed of
7 members or such higher number as determined by the
Board and as approved by the Commission. All directors
shall be elected by the membership of NARAB. The by-
laws of NARAB shall require that directors be selected
in a manner fairly representing the various types of insur-
ance producers who are eligible to become NARAB mem-
bers.
(c) TERMS.—The term of each director shall, after
the first election, be for 3 years, with one-third of the di-
rectors to stand for election each year. Directors may be
elected to serve for any number of terms.
(d) VACANCIES.—A vacancy in the Board shall be
filled in the same manner as the original appointment.
(e) COMPENSATION.—All matters relating to com-
pensation of directors shall be as provided in the bylaws
of NARAB.
(f) INITIAL APPOINTMENTS.—The Commission shall
appoint an initial Board to carry out the establishment
of the bylaws and the first elections of NARAB.
SEC. 607. CHAIRPERSON AND VICE CHAIRPERSON.
(a) ELECTION.—The members of NARAB shall se-
lect the chairperson and vice chairperson from among
those candidates for the Board.
156
(b) INITIAL APPOINTMENTS.—The Commission shall
select the initial chairperson and vice chairperson from
among the initial appointments to the Board under section
606. The persons so selected shall carry out the authori-
ties of office until the first election by the member insur-
ers. They shall act to ensure that such election is sched-
uled at the earliest appropriate time.
SEC. 608. OFFICERS.
The officers of NARAB shall consist of a chairman,
a vice chairman, a president, a secretary, and a treasurer,
and may include one or more vice presidents and such
other officers and assistant officers as may be deemed nec-
essary, each of whom shall be elected or appointed at such
time and in such manner and for such terms not exceeding
3 years as may be prescribed by bylaw. In the absence
of any such provision, all officers shall be elected or
appointed annually by the Board of Directors.
SEC. 609. MEETINGS OF BOARD.
The Board of Directors shall meet at the call of its
Chairman, or as otherwise provided by the bylaws of
NARAB.
SEC. 610. BYLAWS, RULES, AND DISCIPLINARY ACTION.
(a) ADOPTION AND AMENDMENT OF BYLAWS.—The
Board of Directors of NARAB shall file with the Commis-
sion a copy of the proposed bylaws or any proposed
157
amendment to the bylaws, accompanied by a concise gen-
eral statement of the basis and purpose of such proposal.
The proposed bylaws and each proposed amendment shall
take effect 30 days after the date of the filing of a copy
thereof with the Commission, or upon such later date as
NARAB may designate or such earlier date as the
Commission may determine, unless—
(1) the Commission, by notice to NARAB set-
ting forth the reasons therefore, disapproves such
proposal as being contrary to the public interest or
contrary to the purposes of this title; or
(2) the Commission finds that such proposal in-
volves a matter of such significant public interest
that public comment should be obtained, in which
case it may, after notifying NARAB in writing of
such finding, require that the procedures set forth in
subsection (b) be followed with respect to such pro-
posal, in the same manner as if such proposed bylaw
change were a proposed rule change within the
meaning of such paragraph.
(b) ADOPTION AND AMENDMENT OF RULES.—
(1) The Board of Directors of NARAB shall file
with the Commission, in accordance with its regula-
tions, a copy of any proposed rule or any proposed
amendment to a rule of NARAB accompanied by a
158
concise general statement of the basis and purpose
of such proposal. The Commission shall, upon the
filing of any proposal, publish notice thereof, to-
gether with the terms of substance of such proposal
or a description of the subjects and issues involved.
The Commission shall give interested persons an op-
portunity to submit written views, and arguments
with respect to such proposal. No proposed rule or
amendment shall take effect unless approved by the
Commission or otherwise permitted in accordance
with this paragraph.
(2) Within 35 days after the date of publication
of notice of the filing of a proposal, or within such
longer period as the Commission may designate of
not more than 90 days after such date if it finds
such longer period to be appropriate and publishes
its reasons for so finding, or as to which NARAB
consents, the Commission shall—
(A) by order approve such proposed rule or
amendment; or
(B) institute proceedings to determine
whether such proposed rule or amendment
should be modified or disapproved.
(3) Proceedings instituted with respect to a pro-
posed rule or amendment pursuant to paragraph (2)
159
shall include notice of the grounds for disapproval
under consideration and opportunity for hearing and
shall be concluded within 180 days after the date of
publication of notice of the filing of such proposed
rule or amendment. At the conclusion of such pro-
ceedings, the Commission shall, by order, approve or
disapprove such proposed rule or amendment. The
Commission may extend the time for conclusion of
such proceedings for not more than 60 days if it
finds good cause for such extension and publishes its
reasons for so finding, or for such longer period as
to which NARAB consents.
(4) The Commission shall approve a proposed
rule or amendment if it finds that it is in the public
interest and is consistent with the purposes of this
title, and any proposed rule or amendment so ap-
proved shall be given force and effect as if promul-
gated by the Commission. The Commission shall dis-
approve a proposed rule or amendment if it does not
make the finding referred to in the preceding sen-
tence. The Commission shall not approve any pro-
posed rule change prior to 30 days after the date of
publication of notice of the filing thereof, unless the
Commission finds good cause for so doing and pub-
lishes its reasons for so findings.
160
(5) Notwithstanding any other provision of this
subsection, a proposed rule or amendment may take
effect—
(A) upon the date of filing with the Com-
mission, if such proposed rule or amendment is
designated by NARAB as relating solely to
matters which the Commission, consistent with
the public interest and the purposes of this sub-
section, determines by rule do not require the
procedures set forth in this paragraph; or
(B) upon such date as the Commission
shall for good cause determine, except that any
proposed rule or amendment, which takes effect
under this subparagraph, shall be filed prompt-
ly thereafter and reviewed in accordance with
paragraph (1).
At any time within 60 days after the date of filing
of any proposed rule or amendment under subpara-
graph (A) or (B), the Commission may summarily
abrogate such rule or amendment and require that
it be refiled and reviewed in accordance with this
paragraph, if the Commission finds that such action
is necessary or appropriate in the public interest, for
the protection of insurance producers or policy-
holders, or otherwise in furtherance of the purposes
161
of this title. Any action of the Commission pursuant
to the preceding sentence shall not affect the validity
or force of a rule change during the period it was
in effect and shall not be subject to judicial review
or be considered to be final agency action.
(c) ACTION REQUIRED BY THE COMMISSION.—The
Commission may, by such rules as it determines to be nec-
essary or appropriate to the public interest or to carry out
the purposes of this title, require NARAB to adopt,
amend, or repeal any NARAB bylaw or rule, whenever
adopted.
(d) LEGAL EFFECT OF BYLAWS AND RULES.—The
bylaws and rules adopted pursuant to this section shall
be subject to judicial review in the same manner as the
regulations of the Commission.
(e) DISCIPLINARY ACTION BY NARAB.—In any pro-
ceeding to determine whether membership shall be denied,
suspended, revoked, and not renewed (hereinafter referred
to as ‘‘disciplinary action’’), NARAB shall bring specific
charges, notify such member of, and give the member an
opportunity to defend against such charges and keep a
record. A determination to take disciplinary action shall
be supported by a statement setting forth—
(1) any act or practice in which such member
has been found to have engaged;
162
(2) the specific provision of this title, the rules
or regulations thereunder, or the rules of NARAB
which any such act or practice is deemed to violate;
and
(3) the sanction imposed and the reason there-
for.
(f) COMMISSION REVIEW OF DISCIPLINARY AC-
TION.—If NARAB orders any disciplinary action, it shall
promptly notify the Commission. Such disciplinary action
shall be subject to review by the Commission on its own
motion, or upon application by any person aggrieved
thereby filed within 30 days after the date such notice was
filed with the Commission and received by such aggrieved
person or within such longer period as the Commission
may determine. Application to the Commission for review,
or the institution of review by the Commission on its own
motion, shall not operate as a stay of disciplinary action
unless the Commission otherwise orders. In any proceed-
ing to review such action, after notice and the opportunity
for hearing, the Commission shall—
(1) determine whether the action should be
taken;
(2) affirm, modify, or rescind the disciplinary
sanction; or
(3) remand to NARAB for further proceedings.
163
The Commission shall also have the authority to dismiss
a proceeding to review disciplinary action if the Commis-
sion finds that the specific grounds on which the action
is based exist in fact; that the action is in accordance with
applicable rules and regulations; and that such rules and
regulations are, and were, applied in a manner consistent
with the purposes of this title.
SEC. 611. CONSULTATION WITH THE FEDERAL INSURANCE
SOLVENCY COMMISSION.
The Commission shall, as appropriate, consult with
NARAB concerning the regulation and activities of insur-
ance producers. The purpose of this consultation shall be
to provide the Commission the benefit of the expert views
of the NARAB on these matters.
SEC. 612. BORROWING AUTHORITY.
NARAB shall have the authority to borrow as nec-
essary and upon prior approval of the Board of Directors.
Any such borrowing shall be made upon such terms and
conditions as the board determines, except that any funds
so borrowed shall be repaid out of the assessments as col-
lected. To secure the payment of principal and interest
on any such borrowings the Corporation may pledge future
assessments.
164
SEC. 613. ASSESSMENTS.
All insurance producers that are members of NARAB
shall be subject to assessments for the costs of considering
their applications, on acceptance as members, and annu-
ally each year thereafter. Such assessments shall be set
by NARAB by rule and shall cover the costs of operation
of NARAB.
SEC. 614. FUNCTIONS OF THE FEDERAL INSURANCE SOL-
VENCY COMMISSION.
(a) ADMINISTRATIVE PROCEDURE.—Determinations
of the Commission, for purposes of making rules pursuant
to section 610, shall be made after appropriate notice and
opportunity for a hearing and for submission of views of
interested persons, in accordance with the rulemaking pro-
cedures specified in section 553 of title 5, United States
Code.
(b) EXAMINATIONS AND REPORTS.—
(1) The Commission may make such examina-
tions and inspections of NARAB and require
NARAB to furnish it with such reports and records
or copies thereof as the Commission may consider
necessary or appropriate in the public interest or to
effectuate the purposes of this title.
(2) As soon as practicable after the close of
each fiscal year, NARAB shall submit to the Com-
mission a written report relative to the conduct of
165
its business, and the exercise of the other rights and
powers granted by this title, during such fiscal year.
Such report shall include financial statements set-
ting forth the financial position of NARAB at the
end of such fiscal year and the results of its oper-
ations (including the source and application of its
funds) for such fiscal year. The financial statements
so included shall be examined by an independent ac-
countant in the same manner as for the financial re-
ports of federally certified insurers under this Act,
and shall be accompanied by the report thereon by
such accountant. The Commission shall transmit
such report to the President and the Congress with
such comment thereon as the Commission deter-
mines to be appropriate.
SEC. 615. LIABILITY OF NARAB AND ITS DIRECTORS, OFFI-
CERS, AND EMPLOYEES.
(a) IN GENERAL.—NARAB shall not be deemed to
be an insurer or insurance producer within the meaning
of any State law, rule, regulation, or order regulating or
taxing insurers, insurance producers, or other entities en-
gaged in the business of insurance, including provisions
imposing premium taxes, regulating insurer solvency or fi-
nancial condition, establishing guaranty funds and levying
assessments, or requiring claims settlement practices. The
166
Corporation additionally shall be exempt from all taxes,
assessments, or other levies imposed by any State, munici-
pal, county, or local government.
(b) LIABILITY OF NARAB, ITS DIRECTORS, OFFI-
CERS, AND EMPLOYEES.—Neither NARAB nor any of its
directors, officers, or employees shall have any liability to
any person for any action taken or omitted in good faith
under or in connection with any matter subject to this
title.
SEC. 616. RELATIONSHIP TO STATE LAW.
(a) IN GENERAL.—Except as set forth in subsection
(b), all State laws, regulations, provisions, or actions pur-
porting to regulate insurance producers shall remain in
full force and effect.
(b) PREEMPTION OF STATE LAWS.—State laws, reg-
ulations, provisions or actions purporting to regulate in-
surance producers shall be preempted in the following
instances:
(1) No State shall impede the activities of, take
any action against, or apply any provision of law or
regulation to, any insurance producers because that
insurance producer or any affiliates plan to become,
has applied to become, or is, a member of NARAB.
(2) No State shall impose any requirement
upon a member of NARAB that has the effect of
167
limiting that member’s activities because of its resi-
dence or place of operations including, but not lim-
ited to, any requirement that a licensed insurance
producer be a resident of a particular State or any
requirement that it comply with the conditions of a
counter-signature law.
(3) No State shall impose any requirement
upon a member of NARAB that is different than the
criteria for NARAB membership or renewal thereof.
(4) No State shall implement the procedures of
its system of licensing or renewing the licenses of in-
surance producers in a manner different than
NARAB authority, as set forth in section 617.
(c) PREEMPTION AUTHORITY.—The State laws, reg-
ulations, provisions, and actions enumerated in subsection
(b) shall be preempted on the date of the enactment of
this Act. Where it is unclear whether State laws or regula-
tions fall into the categories enumerated in subsection (b),
the Commission shall have the authority, by regulation,
to define those State laws and regulations that have been
preempted by this Act. The Commission shall also have
the authority to issue, after the opportunity for a hearing
on the record, an order that stays the effect of any State
law or regulation which is preempted until the Commission
168
can complete the issuance of a regulation defining such
preemption.
SEC. 617. COORDINATION WITH OTHER REGULATORS.
(a) COORDINATION WITH STATE INSURANCE REGU-
LATORS.—NARAB shall have the authority, subject to
Commission review, to—
(1) issue uniform insurance producer applica-
tions and renewal applications that may be used to
apply for the issuance or removal of State licenses,
while preserving the ability of each State to impose
such conditions on the issuance or renewal of a
license as are consistent with section 616,
(2) establish a central clearinghouse through
which NARAB members may apply for the issuance
or renewal of licenses in multiple States, and
(3) establish a national database for the collec-
tion of regulatory information concerning the activi-
ties of insurance producers.
(b) COORDINATION WITH THE NATIONAL ASSOCIA-
TION OF SECURITIES DEALERS.—NARAB shall coordi-
nate with the National Association of Securities Dealers
in order to ease any administrative burdens that fall on
persons that are members of both associations, consistent
with the purposes of this title and the Federal securities
laws.
169
SEC. 618. JUDICIAL REVIEW.
(a) JURISDICTION.—The appropriate United States
district court shall have exclusive jurisdiction over litiga-
tion involving NARAB, including disputes between
NARAB and its members that arise under this title. Suits
brought in State court involving NARAB shall be deemed
to have arisen under Federal law and therefore be subject
to jurisdiction in the appropriate United States district
court.
(b) EXHAUSTION OF REMEDIES.—An aggrieved per-
son must exhaust the administrative remedies before
NARAB before it may seek judicial review of the NARAB
decision.
TITLE VII—REHABILITATION
AND LIQUIDATION
SEC. 701. JURISDICTION.
(a) RECEIVERSHIP.—(1) The Commission shall act
as receiver of any federally certified insurer or reinsurer
for purposes of rehabilitation or liquidation and shall be
appointed as receiver in proceedings instituted in accord-
ance with this title.
(2) The appropriate State insurance regulator shall
act as receiver of any insurer or reinsurer which does not
have a Federal certificate. Such regulator may request the
Commission to act as receiver in its place.
170
(b) ADMINISTRATIVE INTERVENTION.—The Commis-
sion and the appropriate State insurance regulator shall
administratively seize an insurer or reinsurer under their
jurisdiction if the financial condition of such insurer or
reinsurer is substantially and imminently threatened and
the seizure is in accordance with this title.
(c) COURT.—The United States district courts shall
have exclusive jurisdiction of proceedings to appoint a re-
ceiver of an insurer or reinsurer and of disputes regarding
administrative intervention and, following appointment of
a receiver, to supervise a rehabilitation or liquidation in
conformity with this title.
SEC. 702. PETITION FOR APPOINTMENT.
(a) FILING OF PETITION.—A proceeding to appoint
the receiver shall be commenced by the filing of a petition,
by the Commission or by the appropriate State insurance
regulator, seeking such appointment in the appropriate
United States district court.
(b) RECOMMENDATION OF THE NATIONAL INSUR-
ANCE
PROTECTION
CORPORATION.—In 
determining
whether to file a petition for receivership as to a federally
certified insurer, the Commission may consult with NIPC
concerning the advisability of filing such petition, concern-
ing whether the petition should be for rehabilitation or
171
liquidation, and concerning such other matters as the
Commission determines appropriate.
SEC. 703. ORDER APPOINTING COMMISSION RECEIVER.
(a) IN GENERAL.—An order appointing a receiver as
provided by section 701 shall—
(1) specify whether the receiver is to act to re-
habilitate or to liquidate the insurer or reinsurer;
and
(2) require financial status reports which in-
clude a listing of all funds received or disbursed by
the receiver during the period covered by the report
to be filed within 6 months of the court order of
receivership and quarterly thereafter.
(b) STATE REGULATED INSURERS AND REINSUR-
ERS.—If the insurer or reinsurer holds a State insurance
license, a copy of the reports shall be served upon the in-
surance regulators of the State of the insurer or reinsur-
er’s domicile and of each State in which it is or was li-
censed or transacted any insurance business.
SEC. 704. EFFECT OF ORDER.
(a) TRANSFERS.—The order appointing the receiver
shall have the effect of immediately transferring to the re-
ceiver the possession and control and the unconditional
right to possession and control of all of the business, as-
sets, and affairs of the insurer or reinsurer.
172
(b) CONTRACTS.—The entry of an order appointing
a receiver shall not constitute an anticipatory breach of
any contract of the insurer or reinsurer or provide ground
for revocation or cancellation of any such contract other
than by the receiver.
(c) LEGAL REMEDIES.—The receiver is vested with
all rights of action—
(1) held by the insurer or reinsurer in receiver-
ship; and
(2) raised on behalf of policyholders and credi-
tors.
SEC. 705. APPLICABILITY OF RECEIVERSHIP TO FOREIGN
INSURERS AND REINSURERS.
The Commission shall be appointed as receiver under
this Act for a foreign insurer or reinsurer to the extent
of its assets, operations, and business in the United
States. To the extent that such assets are insufficient to
cover claims against a foreign insurer or reinsurer, the re-
ceiver may bring an action in the United States district
court with jurisdiction over the receivership to recover
amounts due and owing.
SEC. 706. INJUNCTIONS AND ORDERS.
The Commission may at any time apply for such re-
straining orders, preliminary and permanent injunctions,
and other orders as may be deemed necessary to prevent—
173
(1) the transaction of further business by or on
behalf of the insurer or reinsurer;
(2) the transfer of property of or on behalf of
the insurer or reinsurer;
(3) interference with the receiver or with a pro-
ceeding under this Act;
(4) waste of the assets of the insurer or rein-
surer;
(5) dissipation and transfer of bank accounts of
the insurer or reinsurer;
(6) the institution or further prosecution of any
actions or proceedings against the insurer or rein-
surer, the receiver, or any reinsurer of the insurer
or reinsurer except when such reinsurer has a valid
contractual obligation to pay reinsurance proceeds to
a party other than the insurer or reinsurer;
(7) the obtaining of preferences, judgments, at-
tachments, garnishments, or liens against the in-
surer or reinsurer or its assets;
(8) the levying of execution against the insurer
or reinsurer or its assets;
(9) the making of any sale or deed for
nonpayment of taxes or assessments that would less-
en the value of the assets of the insurer or reinsurer;
174
(10) the withholding from the receiver of books,
accounts, documents, or other records relating to the
business of the insurer or reinsurer; or
(11) any other threatened or contemplated ac-
tion that might lessen the value of the insurer’s or
reinsurer’s assets or prejudice the rights of policy-
holders, creditors, or shareholders, or the adminis-
tration of any proceeding under this Act.
The Court shall not require the receiver to submit a bond
or other security as a condition of issuing an order under
this section.
SEC. 707. ACTIONS BY AND AGAINST THE RECEIVER.
(a) AUTOMATIC STAY.—The entry of the order of the
district court appointing the receiver for an insurer or re-
insurer shall operate as a stay of—
(1) every action or proceeding in any State or
Federal court, and
(2) every administrative proceeding,
in which the insurer or reinsurer is a party, or is obligated
to defend a party, for 90 days to enable the receiver, guar-
anty associations, and insureds to obtain representation
and prepare for further proceedings. The district court,
upon application of the receiver, guaranty associations,
and insureds, shall grant injunctions and orders directed
to any and all courts, persons, and parties as necessary
175
to confirm or secure such stays of proceedings, or to ex-
tend any such stay upon a showing by the applicant that
additional time is necessary for it to participate com-
petently in the further conduct of the action or proceeding.
Any decision, verdict, or finding based on the default of
the insurer or reinsurer or on the failure of the receiver
or any guaranty association to defend an insured shall,
upon application by the receiver or guaranty association,
be set aside by the court or administrator that entered
such decision, verdict, or finding.
(b) PENDING LITIGATION.—The receiver shall take
such action respecting all pending litigation in which the
insurer or reinsurer is a party as it deems necessary in
the interests of justice for the protection of creditors,
policyholders, and the public.
(c) PRESERVATION OF ACTIONS.—No statute of limi-
tations or defense of laches shall run with respect to any
cause of action by or against an insurer or reinsurer be-
tween the filing of a petition for appointment of the re-
ceiver and the order granting or denying that petition. Any
action against the insurer or reinsurer that might have
been commenced when the petition was filed may be com-
menced within 90 days after the order appointing the re-
ceiver has been entered or the petition is denied. The re-
ceiver may within one year, or such longer time as applica-
176
ble law may permit, institute an action on behalf of an
insurer or reinsurer upon any cause of action against
which the period of limitation fixed by applicable law has
not expired at the time of the filing of the petition.
SEC. 708. JURISDICTION OVER ACTIONS BY AND AGAINST
RECEIVER; TRANSFER.
The appropriate district court of the United States
shall have exclusive jurisdiction over cases brought by the
receiver pursuant to this title. All cases pending or there-
after initiated against the estate of the insurer or rein-
surer or against the receiver shall be filed with or trans-
ferred to the district court with jurisdiction over the
receivership proceedings.
SEC. 709. EXPENSES OF ESTABLISHING RECEIVERSHIP.
(a) PAYMENT.—All expenses of the receiver or of any
person acting under its authority and direction—
(1) in the taking possession of the insurer or
reinsurer in receivership,
(2) of conducting the proceedings placing the
insurer or reinsurer in receivership,
(3) of obtaining the appointment of the re-
ceiver, and
(4) in the administration of the receivership
and in the conduct of all proceedings related to the
receivership,
177
shall be paid out of the funds or assets of the covered
entity as a Class 1 expense as described in section 743.
(b) EXPENSES.—In the event that the estate of the
entity does not contain sufficient cash or liquid assets to
defray the costs incurred, the receiver may pay the costs
so incurred from its general funds. Any amounts so ad-
vanced for expenses of establishing the receivership and
for its administration shall be repaid to the receiver as
administrative expenses when sufficient assets are
liquidated.
SEC. 710. PROCEEDINGS AGAINST CULPABLE PERSONS.
If it appears to the receiver in a rehabilitation or liq-
uidation proceeding that there has been criminal or
tortious conduct, or breach of any contractual or fiduciary
obligation detrimental to the insurer or reinsurer by any
officer, manager, agent, broker, employee or other person,
the receiver may pursue all appropriate legal remedies on
behalf of the insurer or reinsurer in receivership.
SEC. 711. SPECIAL DEPOSITS.
Any deposit of an insurer or reinsurer for which the
Commission is receiver and that is held by a State insur-
ance regulator shall be transferred to the Commission
upon entry of the receivership order.
178
SEC. 712. AUDITS.
Any insurer or reinsurer in receivership that has
more than $500,000 in assets shall be audited annually
by an independent outside certified public accountant ap-
proved by the court. The cost of the audit shall be paid
from the assets of the insurer or reinsurer in receivership.
SEC. 713. STANDING OF GUARANTY ASSOCIATIONS.
NIPC and any guaranty association shall have stand-
ing to appear in any court proceeding concerning the reha-
bilitation or liquidation of an insurer or reinsurer if such
association has paid guaranty obligations for which it has
not been reimbursed or is or may become liable for as
guarantor of obligations of the insurer or reinsurer in
rehabilitation or liquidation.
SEC. 714. PROHIBITED AND VOIDABLE TRANSFERS PRIOR
TO PETITION FOR RECEIVERSHIP.
(a) PROHIBITED TRANSFERS.—No insurer or rein-
surer shall make any transfer of its property with the ef-
fect of giving to or enabling any creditor or policyholder
to obtain a greater percentage of the creditor’s debt than
any other creditor of the same class.
(b) VOIDABLE TRANSFERS.—Any transfer of prop-
erty which gives or enables any creditor or policyholder
to obtain a greater percentage of the creditor’s debt than
any other creditor or policyholder in the same class may
180
any transfer prohibited by subsection (a) and every person
receiving any property of, or cash surrender from, such
insurer or reinsurer or the benefit thereof, as a result of
a transaction voidable under subsection (b) shall be jointly
and severally liable therefor and shall be bound to account
to the receiver.
(d) AVOIDANCE OF TRANSFERS.—The receiver may
avoid any transfer of the property of such insurer or rein-
surer which any creditor, stockholder, or member might
have avoided and may recover the property so transferred
or its value from the person to whom it was transferred
unless the transferee was a bona fide holder for value prior
to the date of the entry of the order of receivership. Such
property may be recovered or its value collected from
whomever may have received it except a bona fide holder
for value.
(e) REINSURANCE TRANSACTIONS.—Any transaction
which consists of the termination or reduction in coverage
or limits of a reinsurance contract that meets all of the
following conditions shall be voidable:
(1) The transaction was agreed upon or made
effective or executed prior to the expiration of 180
days from the date of which the reinsurance origi-
nally became effective.
181
(2) The transaction released the assuming rein-
surer, in whole or in part, from its obligation to pay
its originally specified share of those losses which
had occurred prior to the time of the transaction but
which had not been paid by the ceding insurer or
reinsurer.
(3) Any part of the transaction was effected
within 1 year prior to the filing of the petition for
receivership.
(4) The ceding insurer or reinsurer did not re-
ceive fair consideration for the transaction based on
information available to such insurer or reinsurer at
the time of the transaction.
The receiver or the court may avoid such transaction at
any time within 180 days after such application for receiv-
ership by tender to the assuming reinsurer of any money
or other consideration which passed to the ceding insurer
or reinsurer in connection with such transaction. If such
transaction has been avoided, the receiver or the court
may enforce the reinsurance contract as it existed prior
to such transaction, both as to losses prior to such trans-
action and as to losses occurring after such transaction
and prior to the appointment of the receiver. If the court
finds that such transaction was made in bad faith by the
assuming reinsurer, or with intent to obtain a preference
182
among creditors, or with knowledge that any sums or
other property paid in such transaction would not be ap-
plied to the use and benefit of the ceding insurer or rein-
surer or its policyholders, then the return tender shall not
be a condition to the avoidance of the transaction.
(f) PRESUMPTION.—For purposes of this section, the
insurer or reinsurer is presumed to be insolvent on and
during the 4-month period immediately preceding the date
of the filing of the petition for receivership.
(g) TRANSFERS COVERED.—For purposes of this sec-
tion, a transfer shall include a preference, lien, convey-
ance, assignment, or encumbrance.
(h) EXCEPTIONS.—The receiver may not avoid a
transfer under this section—
(1) to the extent that such a transfer was—
(A) intended by the insurer or reinsurer in
receivership and the creditor to or for the bene-
fit of which such transfer was made to be a
contemporaneous exchange for new value given
to such insurer or reinsurer; and
(B) in fact, a substantially contempora-
neous exchange; or
(2) to the extent that such transfer was—
183
(A) in payment of a debt incurred by such
insurer or reinsurer in the ordinary course of
business or financial affairs with the transferee;
(B) made in the ordinary course of busi-
ness or financial affairs with the transferee;
and
(C) made according to ordinary business
terms.
SEC. 715. VOIDABLE PREFERENCES TO CULPABLE OFFI-
CERS.
(a) VOIDABLE EXECUTIVE BENEFITS.—Any reim-
bursement of a fine related to the insurer or reinsurer in
receivership, or any payment of a fee or bonus or any pre-
payment of compensation or defense costs by such insurer
or reinsurer which are paid to or for the benefit of a cul-
pable executive officer of such insurer or reinsurer and
which are not in the ordinary course of business, shall be
voidable if paid within 4 months prior to the filing of a
complaint under this article.
(b) APPLICABILITY.—For purposes of subsection (a),
payment shall be in the ordinary course of business if it
is—
(1) part of the executive’s annual salary paid
not more than a month in advance or is compensa-
tion for valid travel and entertainment expenses;
184
(2) made pursuant to a retirement plan which
is qualified (or is intended to be qualified) under
section 401 of the Internal Revenue Code of 1986
or other nondiscriminatory benefit plan;
(3) made pursuant to a bona fide deferred com-
pensation or arrangement;
(4) made pursuant to a bona fide bonus plan
based on superior performance; or
(5) made by reason of the death or disability of
the officer.
(c) CULPABILITY.—An executive officer shall be cul-
pable if the receiver finds that such officer—
(1) is substantially responsible for the condition
which caused such insurer or reinsurer to be placed
in receivership;
(2) has committed a fraudulent act or omission,
or breach of trust or insider abuse with respect to
the insurer or reinsurer resulting in a material ad-
verse financial impact to such; or
(3) has materially violated applicable Federal or
State insurance laws or regulations and that such
violation has had an adverse material impact on the
financial condition of such insurer or reinsurer.
185
SEC. 716. FRAUDULENT TRANSFER AFTER PETITION FOR
RECEIVERSHIP.
(a) IN GENERAL.—Any transfer of real property of
an insurer or reinsurer made after the filing of a petition
for receivership to a person acting in good faith shall be
valid against the receiver if made for a present fair equiva-
lent value, or, if not made for a present fair equivalent
value, then to the extent of the present consideration actu-
ally paid therefor, for which amount the transferee shall
have a lien on the property so transferred. The commence-
ment of a receivership proceeding shall be constructive no-
tice upon the recording of a copy of the petition for or
order of receivership with the recorder of deeds in the
county where any real property in question is located. The
exercise by a court of the United States or any State or
jurisdiction to authorize or effect a judicial sale of real
property of the insurer or reinsurer in receivership within
any county in any State shall not be impaired by the pend-
ency of such a proceeding unless the copy is recorded in
the county before the consummation of the judicial sale.
(b) OTHER ACTIONS.—After a petition for receiver-
ship has been filed and before either the receiver takes
possession of the property of the insurer or reinsurer or
an order of receivership is granted—
(1) a transfer of any of the property of such in-
surer or reinsurer, other than real property, made to
186
a person acting in good faith shall be valid against
the receiver if made for a present fair equivalent
value, or, if not made for a present fair equivalent
value, then to the extent of the present consideration
actually paid therefor, for which amount the trans-
feree shall have a lien on the property so trans-
ferred;
(2) a person indebted to or holding property of
such insurer or reinsurer may, if acting in good
faith, pay the indebtedness or deliver the property,
or any part thereof, to such insurer or reinsurer or
upon its order, with the same effect as if the petition
were not pending; and
(3) a person having actual knowledge of the
pending receivership shall be deemed not to act in
good faith.
A person asserting the validity of a transfer under this
subsection shall have the burden of proof.
(c) LIABILITY.—Every person receiving any property
from an insurer or reinsurer in receivership or any benefit
thereof which is a fraudulent transfer under subsection (a)
shall be personally liable therefor and shall be bound to
account to the receiver.
187
(d) CONSTRUCTION.—Nothing in this title shall im-
pair the negotiability of currency or negotiable instru-
ments.
SEC. 717. CLAIMS OF HOLDERS OF VOIDABLE TRANSFERS.
(a) IN GENERAL.—No claims of a creditor which has
received or acquired a voidable preference, lien, convey-
ance, transfer, assignment, or encumbrance shall be al-
lowed unless the creditor surrenders the preference, lien,
conveyance, transfer, assignment, or encumbrance. If the
avoidance is effected by a proceeding in which a final judg-
ment has been entered, the claim shall not be allowed un-
less the money is paid or the property is delivered to the
receiver within 30 days from the date of the entering of
the final judgment, except that the court having jurisdic-
tion over the receivership may allow further time if there
is an appeal or other continuation of the proceeding.
(b) FILING.—A claim allowable under subsection (a)
by reason of the avoidance, whether voluntary or involun-
tary, of a preference, lien, conveyance, transfer, assign-
ment, or encumbrance, may be filed as an excused late
filing under section 736 if filed within 30 days from the
date of the avoidance or within the further time allowed
by the court under subsection (a).
188
SEC. 718. COOPERATION OF AN INSURER’S OR REINSUR-
ER’S OFFICERS, OWNERS, AND EMPLOYEES.
(a) COOPERATION.—Any officer, manager, director,
trustee, owner, employee, or agent of any insurer or rein-
surer in receivership, or any other person with authority
over or in charge of any segment of such insurer or rein-
surer’s affairs, shall cooperate with the receiver in any
proceeding under this Act or any investigation preliminary
to such proceeding.
(b) CONSTRUCTION.—This section shall not be con-
strued to abridge otherwise existing legal rights, including
the right to resist a petition for rehabilitation or liquida-
tion.
(c) PENALTIES.—
(1) Any person who fails to cooperate with the
Commission in violation of subsection (a) is subject
to the imposition of a civil penalty not to exceed
$10,000, and shall be subject to the suspension or
revocation of any insurance certificate issued by the
Commission. Such fine, suspension, or revocation
may be imposed only after the person has had an
opportunity for a hearing on the record. The Com-
mission may recommend to any State insurance reg-
ulator the suspension or revocation of any insurance
license issued by such State as a further penalty for
violation of this section.
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(2) If the receiver is a State insurance regu-
lator, such regulator may, in addition to any author-
ity under State law to impose penalties, petition the
Commission for the imposition of a penalty under
this section for failure to cooperate with such regu-
lator.
(d) DEFINITIONS.—For purposes of this section—
(1) the term ‘‘person’’ includes any person or
entity who exercises control, directly or indirectly
over activities of the insurer or reinsurer through
any holding company or other affiliate of the insurer
or reinsurer; and
(2) the term ‘‘to cooperate’’ includes—
(A) replying promptly in writing to any in-
quiry from the receiver requesting such a reply;
and
(B) making available to the receiver any
books, accounts, documents, or other records or
information or property of or pertaining to the
insurer or reinsurer and in its possession, cus-
tody, or control.
SEC. 719. ADMINISTRATIVE SEIZURE.
(a) IN GENERAL.—The receiver may issue an admin-
istrative order to seize an insurer or reinsurer when the
receiver has reason to believe that—
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(1) there exists any ground that would justify
a court order for receivership against the insurer or
reinsurer; and
(2) the interests of policyholders, creditors, or
the public will be endangered by delay.
(b) EFFECT OF ORDER.—Upon issuance of the ad-
ministrative seizure order by the receiver, it shall take pos-
session and control of all the property, books, accounts,
documents, and other records of the insurer or reinsurer,
and the premises it occupies. The receiver may, through
such order, enjoin the insurer or reinsurer, its officers, di-
rectors, managers, agents, and employees from disposition
of any property of the insurer or reinsurer and from the
further transaction of any business except upon written
consent of the receiver.
(c) DURATION OF ORDER.—The receiver shall specify
in its order the duration of the seizure, which shall be such
time as is necessary for the receiver to ascertain the actual
condition of the insurer or reinsurer, except that absent
approval by the district court, the order shall not extend
beyond 60 days. On its own initiative or upon request of
the insurer or reinsurer, the receiver may hold such hear-
ings as it deems necessary, after notice as it deems appro-
priate, and may extend, shorten, or modify the terms of
the order.
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(d) EFFECT
ON CONTRACTS.—Entry of an order
under this section shall not constitute an anticipatory
breach of any contract of the insurer or reinsurer.
(e) PETITION TO TERMINATE ORDER.—An insurer
or reinsurer subject to an order under this section may
petition the appropriate district court, at any time after
the issuance of the order, for a hearing and review of the
order. The district court shall hold such hearing to deter-
mine the reasonableness of the issuance and terms of the
order not more than 15 days after the filing of such peti-
tion. A hearing under this subsection shall be held pri-
vately, unless the court, after hearing argument from the
parties, orders otherwise.
(f) CONFIDENTIALITY OF ORDER.—The seizure and
judicial review thereof shall be confidential except as is
necessary for the receiver to obtain compliance with the
order. All records and documents of the insurer or rein-
surer and the receiver and all court records and docu-
ments, so far as they pertain to or are a part of the sei-
zure, or the judicial review thereof, shall remain confiden-
tial. The confidentiality of the seizure and judicial pro-
ceedings shall continue until the court, after hearing argu-
ments from the parties, shall order otherwise.
(g) DETERMINATION ON RECEIVERSHIP.—Prior to
termination of the order, the receiver shall determine
192
whether to proceed with a complaint for receivership or
release the insurer or reinsurer.
(h) ADMINISTRATIVE EXPENSES.—No order shall be
entered by the receiver or the district court releasing the
insurer or reinsurer unless the receiver’s expenses of the
seizure have been paid by the insurer or reinsurer or a
reasonable plan for repayment has been agreed upon.
SEC. 720. GROUNDS FOR REHABILITATION.
(a) IN GENERAL.—The Commission or the appro-
priate State insurance regulator may apply by petition to
the appropriate United States district court for an order
authorizing the rehabilitation of an insurer or reinsurer
on any one or more of the following grounds:
(1) The insurer or reinsurer is in such condition
that the further transaction of business would be
hazardous financially to its policyholders, creditors,
or the public.
(2) There is reasonable cause to believe that
there has been embezzlement from the insurer or re-
insurer, wrongful sequestration or diversion of its
assets, or forgery, fraud affecting it or other illegal
conduct in, by, or with respect to it that if estab-
lished would endanger assets in an amount threaten-
ing the solvency of the insurer or reinsurer.