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judgment entered in any State if the court in which
such judgment was entered had jurisdiction over
such subject matter, except that such nonpayment
shall not be a ground until 60 days after any good
faith effort by the entity to contest the obligation
has been terminated, whether it is before the Com-
mission, the appropriate State insurance regulator
or in the courts, or the insurer or reinsurer has sys-
tematically attempted to compromise or renegotiate
previously agreed settlements with its creditors on
the ground that is financially unable to pay its obli-
gations in full.
(10) The insurer or reinsurer has failed to file
its annual report or other financial report required
by statute within the time allowed by law and, after
written demand by the Commission or appropriate
State insurance regulator, has failed to give an ade-
quate explanation immediately.
(11) The board of directors or the holders of a
majority of the shares of the insurer or reinsurer
which are entitled to vote, or a majority of those in-
dividuals entitled to the control of it, request or con-
sent to rehabilitation under this title.
(12) The insurer or reinsurer has concealed, re-
moved, altered, destroyed, or failed to establish and
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maintain books, records, documents, accounts,
vouchers, or other pertinent materials adequate for
the determination of its financial condition by exam-
ination or has failed to properly administer claims
and to maintain claim records which are adequate
for the determination of its outstanding claims liabil-
ity.
(13) The insurer or reinsurer has neglected or
refused to comply with an order of the Commission
or the appropriate State insurance regulator to
make good within the time prescribed by law any de-
ficiency, whenever its capital and minimum required
surplus, if a stock company, or its required surplus,
if a company other than stock, has become impaired.
(14) The insurer or reinsurer is found to be in
such condition that it could not meet the require-
ments for organization and authorization as required
by applicable law, except as to the amount of the
original surplus required of a stock company and ex-
cept as to the amount of the surplus required of a
mutual company in excess of the minimum surplus
required to be maintained.
(15) The insurer or reinsurer has not organized
and obtained a certificate authorizing it to com-
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mence the transaction of its business within the pe-
riod of time prescribed by applicable statute.
(16) The insurer’s or reinsurer’s certificate of
authority has been revoked or none was ever issued.
(b) DETERMINATION TO SEEK REHABILITATION.—
The Commission shall file a petition for rehabilitation
rather than liquidation only if it determines, in its sole
discretion, that there is a realistic probability that the in-
surer or reinsurer involved can be rehabilitated.
SEC. 721. REHABILITATION ORDERS.
An order to rehabilitate an insurer or reinsurer shall
direct the receiver forthwith to take possession of the as-
sets of the entity and to administer them under the gen-
eral supervision of the United States district court which
ordered the rehabilitation. The filing or recording of the
order with the clerk of the court or recorder of deeds of
the county in which the principal business of the insurer
or reinsurer is conducted, or the county in which its prin-
cipal office or place of business is located, shall impart
the same notice as a deed, bill of sale, or other evidence
of title duly filed or recorded with the recorder of deeds
would have imparted.
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SEC. 722. POWERS AND DUTIES OF THE RECEIVER IN REHA-
BILITATION.
(a) POWERS.—The receiver may take such action as
it deems necessary or appropriate to reform and rehabili-
tate the insurer or reinsurer for which it has been ap-
pointed receiver in rehabilitation. The receiver shall have
all the powers of the directors, officers, and managers,
whose authority shall be suspended except as they are re-
delegated by the receiver. The receiver shall have full
power to direct and manage, hire, and discharge employ-
ees subject to any contract rights they may have and to
deal with the property and business of the insurer or rein-
surer and to carry on its business.
(b) PLAN.—If the receiver determines that reorga-
nization, consolidation, conversion, reinsurance, merger,
or other transformation of the insurer or reinsurer is ap-
propriate, the receiver shall prepare a plan to effect such
changes. Upon application of the receiver for approval of
the plan, and after such notice and hearings as the court
may prescribe, the United States district court which pre-
sided over the rehabilitation may either approve or dis-
approve the plan proposed or may modify it and approve
it as modified. Any plan approved under this subsection
shall be, in the judgment of the court, fair and equitable
to all parties concerned. If the plan is approved, the re-
ceiver shall carry out the plan.
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(c) ADVISORY COMMITTEE.—The receiver may, with
the approval of the court, appoint an advisory committee
of policyholders, claimants, or other creditors, including,
as appropriate, NIPC and any guaranty associations
which have standing under section 713, if the receiver de-
termines such a committee to be necessary. If an advisory
committee is appointed for a federally certified insurer, it
shall include NIPC. Such committee shall serve at the
pleasure of the receiver and shall serve without compensa-
tion other than reimbursement for reasonable travel and
per diem living expenses incurred in attending meetings
for such committee.
SEC. 723. TERMINATION OF REHABILITATION.
(a) TERMINATION
OF REHABILITATION.—The re-
ceiver or the directors of an insurer or reinsurer in reha-
bilitation may at any time petition the court for an order
terminating the rehabilitation on the ground that the in-
surer or reinsurer is rehabilitated and may safely
recommence the transaction of an insurance or reinsur-
ance business. If any such petition by the directors is de-
nied, another such petition may not be made by the direc-
tors for at least 6 months. The court may order payment
from the estate of the insurer or reinsurer of such costs
and other expenses of such petition and rehabilitation as
justice may require. If the court finds that—
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(1) rehabilitation has been accomplished,
(2) grounds for rehabilitation no longer exist,
and
(3) the insurer or reinsurer may safely
recommence the transaction of an insurance or rein-
surance business,
the court shall order that the insurer or reinsurer be re-
stored to possession of its property and the control of its
business. The court may also make such finding and issue
such order at any time upon its own motion.
(b) TERMINATION OF REHABILITATION TO INITIATE
LIQUIDATION.—
(1) If the payment of policy obligations of an
insurer is suspended in substantial part for a period
of 6 months at any time after the appointment of
the receiver for rehabilitation of the insurer and the
receiver has not filed an application for approval of
a plan under section 720(b), the receiver shall peti-
tion the court for an order of liquidation on grounds
of insolvency.
(2) Whenever the receiver believes further at-
tempts to rehabilitate an insurer or reinsurer would
not be in the best interests of its creditors, policy-
holders, or the public, or would be futile, the receiver
may petition the court for an order of liquidation.
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The court shall permit the directors of the insurer
or reinsurer to take such actions as are reasonably
necessary to defend against the petition and may
order payment from the estate of such costs and
other expenses of defense as justice may require.
SEC. 724. GROUNDS FOR LIQUIDATION.
The Commission or State insurance regulator may
petition the appropriate United States district court for
an order directing the liquidation of an insurer or rein-
surer at any time, including during or at the termination
of the rehabilitation under section 723, on the basis that—
(1) one or more of the conditions for rehabilita-
tion set forth in section 720 exists; and
(2) the Commission or State insurance regu-
lator determines that an effort at rehabilitation
would not be in the best interests of its policy-
holders, creditors, and the public or that an effort
at rehabilitation would be futile.
SEC. 725. LIQUIDATION ORDERS.
(a) IN GENERAL.—If a receiver is ordered to liq-
uidate an insurer or reinsurer, it shall have possession and
control over all of the assets, property, contracts, and
rights of action of such insurer or reinsurer and all of its
books and records, wherever located. The filing or record-
ing of the order with the clerk of the court and the re-
202
corder of deeds of the county in which the insurer or rein-
surer’s principal office or place or business is located, or,
in the case of real estate, with the recorder of deeds of
the county where the property is located, shall impart the
same notice as a deed, bill of sale, or other evidence of
title duly filed or recorded with that recorder of deeds
would have imparted.
(b) FIXING OF RIGHTS AND LIABILITIES.—Upon is-
suance of the order, the rights and liabilities of the insurer
or reinsurer in liquidation and of its creditors, policy-
holders, shareholders, members, and all other persons in-
terested in its estate shall become fixed as of the date of
entry of the order of liquidation, except as provided in sec-
tions 726 and 738 or as otherwise provided by the court
for good cause shown.
(c) FOREIGN INSURER OR REINSURER.—An order to
liquidate the business of a foreign insurer or reinsurer
shall be in the same terms and have the same legal effect
as an order to liquidate an insurer or reinsurer licensed
in the United States, except that the assets, operations,
and business in the United States shall be the only assets,
operations, and business included in the order.
(d) INSOLVENCY.—At the time of petitioning for an
order of liquidation, or at any time thereafter, the receiver
may petition the court for a judicial declaration of insol-
203
vency. After providing such notice and hearing as it deems
proper, the court may make the declaration.
(e) PLAN.—
(1) Within 5 days of the appointment of the re-
ceiver or, if the appointment is appealed, within 5
days after the initiation of an appeal of an order of
liquidation, which order has not been stayed, the re-
ceiver shall present for the court’s approval a plan
for the continued performance of the insurer’s policy
claims obligations, including the duty to defend
insureds under liability insurance policies, during the
pendency of an appeal. Such plan shall provide for
the continued performance and payment of policy
claims obligations in the normal course of events,
notwithstanding the grounds alleged in support of
the order of liquidation, including the ground of in-
solvency. In the event the insurer’s financial condi-
tion will not, in the judgment of the receiver, sup-
port the full performance of all policy claims obliga-
tions during the pendency of the appeal, the plan
may, on the basis of hardship, prefer the claims of
certain policyholders and claimants over creditors
and interested parties as well as other policyholders
and claimants, as the receiver finds to be fair and
equitable considering the relative circumstances of
204
such policyholders and claimants. The court shall ex-
amine the plan submitted by the receiver and if it
finds the plan to be in the best interests of the par-
ties, the court shall approve the plan. No action
shall lie against the receiver based on preference in
a plan approved by the court.
(2) The plan shall not supersede or affect the
obligations of NIPC or of any insurance guaranty
association.
(3) The plan shall provide for equitable adjust-
ments to be made by the receiver to any distribu-
tions of assets of the insurer or reinsurer to NIPC
to any guaranty associations if the receiver pays
claims from assets of its estate which would other-
wise be the obligations of NIPC or any particular
guaranty association so that NIPC and all guaranty
associations equally benefit on a pro rata basis from
the assets of such estate. In the event an order of
liquidation is set aside upon appeal, the insurer or
reinsurer shall not be released from liquidation pro-
ceedings unless and until all funds advanced by the
receiver, NIPC, and any guaranty association, in-
cluding reasonable administrative expenses relating
to obligations of the company, shall be repaid in full,
together with interest at the rate provided in section
205
3717 of title 31, United States Code, or until a re-
payment plan has been agreed to by the receiver and
any affected guaranty associations.
SEC. 726. CONTINUANCE OF COVERAGE.
(a) IN GENERAL.—Any policy, including bonds and
other noncancellable business, in effect at the time of issu-
ance of an order of liquidation shall continue in force only
for the earlier of—
(1) a period of 30 days from the date of entry
of the liquidation order;
(2) the date of expiration of the policy coverage;
(3) the date when the insured has replaced the
insurance coverage with equivalent insurance in an-
other insurer or otherwise terminated the policy;
(4) the effective date the receiver has effected
a transfer of the policy obligation; or
(5) the date proposed by the receiver and ap-
proved by the court to cancel coverage.
(b) TERMINATION.—An order of liquidation under
section 725 shall terminate coverages at the time specified
in subsection (a) for purposes of any statute.
(c) APPLICABILITY
TO POLICIES
OF LIFE
AND
HEALTH INSURANCE.—
(1) Policies of life or health insurance or annu-
ities shall continue in force for such period and
206
under such terms as are provided for by NIPC or
appropriate guaranty association.
(2) Policies of life or health insurance or annu-
ities or any period of coverage of such policies not
covered by NIPC or any guaranty association shall
terminate under subsections (a) and (b).
SEC. 727. DISSOLUTION OF AN INSURER OR REINSURER.
The receiver may petition for an order dissolving the
corporate existence of an insurer or reinsurer, or its Unit-
ed States branch in the case of a foreign insurer or rein-
surer, at the time the receiver applies for a liquidation
order. The court shall order dissolution of the insurer or
reinsurer upon petition by the receiver upon or after the
granting of a liquidation order.
SEC. 728. POWERS OF THE LIQUIDATOR.
(a) IN GENERAL.—The receiver shall have the follow-
ing powers in liquidation:
(1) To collect all assets, debts, and moneys due
and claims belonging to the insurer or reinsurer in
liquidation, wherever located, and for this purpose—
(A) to institute timely action in other juris-
dictions in order to forestall garnishment and
attachment proceedings against such debts;
(B) to do such other acts as are necessary
or expedient to collect, conserve, or protect its
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assets or property, including the power to sell,
compound, compromise, or assign debts for pur-
poses of collection upon such terms and condi-
tions as the receiver deems best; and
(C) to pursue any creditor’s remedies
available to enforce the receiver’s claims.
(2) To acquire, encumber, lease, improve, sell,
transfer, abandon, or otherwise dispose of or deal
with, any property of the insurer or reinsurer at its
market value or upon such terms and conditions as
are fair and reasonable.
(3) To execute, acknowledge, and deliver any
deed, assignment, release, and other instrument nec-
essary or proper to effectuate any sale of property
or other transaction in connection with the liquida-
tion.
(4) To conduct public and private sales of the
property of the insurer or reinsurer and to agree to
a merger with another insurer or reinsurer.
(5) To use assets of the estate under a liquida-
tion order to transfer policy obligations to a solvent
insurer or reinsurer if the transfer can be arranged
without prejudice to applicable priorities.
(6) To audit the books and records of the hold-
ing company (when applicable), affiliates, and all