I
103D CONGRESS
1ST SESSION
H. R. 1290
To ensure the financial soundness and solvency of insurers, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 10, 1993
Mr. DINGELL introduced the following bill; which was referred to the
Committee on Energy and Commerce
NOVEMBER 22, 1993
Additional sponsors: Ms. MARGOLIES-MEZVINSKY, Mr. DE LUGO, Mr. HAST-
INGS, Mr. COLEMAN, Mr. ROMERO-BARCELO´, and Miss COLLINS of
Michigan
A BILL
To ensure the financial soundness and solvency of insurers,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Federal Insurance Solvency Act of 1993’’.
(b) TABLE OF CONTENTS.—
TITLE I—ESTABLISHMENT OF FEDERAL INSURANCE SOLVENCY
COMMISSION
Sec. 101. Establishment.
Sec. 102. Duties of Commission.
Sec. 103. Membership.
Sec. 104. Staff of Commission; experts and consultants.
Sec. 105. Offices and place of meeting.
Sec. 106. Powers of commission.
Sec. 107. Evaluations of insolvent insurers and reinsurers.
Sec. 108. Referral to enforcement authorities; data base on violations.
Sec. 109. Reports.
Sec. 110. Federal Insurance Regulation Advisory Committee.
Sec. 111. Fees.
Sec. 112. Authorization of appropriations.
Sec. 113. Budget Act compliance.
TITLE II—NATIONAL STANDARDS FOR THE FINANCIAL CONDI-
TION OF INSURERS IN INTERSTATE COMMERCE AND FEDERAL
CERTIFICATES OF SOLVENCY FOR INSURERS
Sec. 201. National standards for the financial soundness and solvency of insur-
ers in interstate commerce.
Sec. 202. Authority to issue Federal certificates of solvency.
Sec. 203. Criteria for the national standards for financial soundness and sol-
vency.
Sec. 204. Surplus lines approval for federally certified insurers.–
Sec. 205. Membership in National Insurance Protection Corporation.
Sec. 206. Suspension and revocation of Federal certificate of solvency or State
insurance license.
Sec. 207. Relationship of federally certified insurers to State insurance regula-
tion.
TITLE III—FEDERAL CERTIFICATES TO PROVIDE REINSURANCE
Sec. 301. Federal Insurance Solvency Commission authority to certify providers
of reinsurance.
Sec. 302. Certification of professional reinsurers.
Sec. 303. Certificate for other providers of reinsurance.
Sec. 304. Suspension and revocation of Federal certificate to provide reinsur-
ance.
Sec. 305. Credit for reinsurance.
Sec. 306. Relationship to State law.
Sec. 307. Construction.
TITLE IV—REGULATORY ENFORCEMENT
Sec. 401. Authority to conduct financial examinations of insurers and reinsur-
ers.
Sec. 402. Procedures for financial examination of insurers and reinsurers.
Sec. 403. Accounting standards and independent accountants.
Sec. 404. Actuaries.
Sec. 405. Registration of insurers and reinsurers in holding companies.
Sec. 406. Acquisition of control of or merger with insurer or reinsurer.
Sec. 407. Special circumstances as to the acquisition of a federally certified in-
surer or reinsurer.
Sec. 408. Transactions within a holding company system that includes an in-
surer or reinsurer.
Sec. 409. Penalties and enforcement.
Sec. 410. Federal insurer and reinsurer employee protection remedy.
TITLE V—NATIONAL INSURANCE PROTECTION CORPORATION
Sec. 501. National Insurance Protection Corporation.
Sec. 502. Purpose.
Sec. 503. Relationship to the Federal Government.
Sec. 504. Membership.
Sec. 505. Corporate powers.
Sec. 506. Board of directors.
Sec. 507. Chairperson and vice chairperson.
Sec. 508. Officers.
Sec. 509. Meetings of Board.
Sec. 510. Bylaws and rules.
Sec. 511. Consultation with the Federal Insurance Solvency Commission.
Sec. 512. NIPC fund.
Sec. 513. Scope of guaranty.
Sec. 514. Assessments.
Sec. 515. Borrowing authority.
Sec. 516. Functions of the Federal Insurance Solvency Commission.
Sec. 517. Notice to Commission of changes in conditions in insurance markets.
Sec. 518. Liability of the member insurers.
Sec. 519. Liability of NIPC and its directors, officers, and employees.
Sec. 520. Advertising.
Sec. 521. Improvement of insolvency prevention and detection.
Sec. 522. Guarantee obligation of NIPC.
Sec. 523. Effect of paid claims.
Sec. 524. Nonduplication of payment of claims.
Sec. 525. Reports on payment of claims.
Sec. 526. Stay of proceedings.
Sec. 527. Judicial review.
TITLE VI—NATIONAL ASSOCIATION OF REGISTERED AGENTS
AND BROKERS
Sec. 601. National association of registered agents and brokers.
Sec. 602. Purpose.
Sec. 603. Relationship to the Federal Government.
Sec. 604. Membership.
Sec. 605. Corporate powers.
Sec. 606. Board of directors.
Sec. 607. Chairperson and vice chairperson.
Sec. 608. Officers.
Sec. 609. Meetings of Board.
Sec. 610. Bylaws, rules, and disciplinary action.
Sec. 611. Consultation with the Federal Insurance Solvency Commission.
Sec. 612. Borrowing authority.
Sec. 613. Assessments.
Sec. 614. Functions of the Federal Insurance Solvency Commission.
Sec. 615. Liability of narab and its directors, officers, and employees.
Sec. 616. Relationship to State law.
Sec. 617. Coordination with other regulators.
Sec. 618. Judicial review.
TITLE VII—REHABILITATION AND LIQUIDATION
Sec. 701. Jurisdiction.
Sec. 702. Petition for appointment.
Sec. 703. Order appointing commission receiver.
Sec. 704. Effect of order.
Sec. 705. Applicability of receivership to foreign insurers and reinsurers.
Sec. 706. Injunctions and orders.
Sec. 707. Actions by and against the receiver.
Sec. 708. Jurisdiction over actions by and against receiver; transfer.
Sec. 709. Expenses of establishing receivership.
Sec. 710. Proceedings against culpable persons.
Sec. 711. Special deposits.
Sec. 712. Audits.
Sec. 713. Standing of guaranty associations.
Sec. 714. Prohibited and voidable transfers prior to petition for receivership.
Sec. 715. Voidable preferences to culpable officers.
Sec. 716. Fraudulent transfer after petition for receivership.
Sec. 717. Claims of holders of voidable transfers.
Sec. 718. Cooperation of an insurer’s or reinsurer’s officers, owners, and em-
ployees.
Sec. 719. Administrative seizure.
Sec. 720. Grounds for rehabilitation.
Sec. 721. Rehabilitation orders.
Sec. 722. Powers and duties of the receiver in rehabilitation.
Sec. 723. Termination of rehabilitation.
Sec. 724. Grounds for liquidation.
Sec. 725. Liquidation orders.
Sec. 726. Continuance of coverage.
Sec. 727. Dissolution of an insurer or reinsurer.
Sec. 728. Powers of the liquidator.
Sec. 729. Notice to creditors and others.
Sec. 730. Duties of agents.
Sec. 731. Setoffs.
Sec. 732. Obligation of a reinsurer.
Sec. 733. Reinsurer’s liability.
Sec. 734. Recovery of premiums owed.
Sec. 735. Receiver’s proposal to distribute assets.
Sec. 736. Filing of claims.
Sec. 737. Proof of claim.
Sec. 738. Contingent and immature claims.
Sec. 739. Valuation of claims.
Sec. 740. Disputed claims.
Sec. 741. Claims of surety.
Sec. 742. Secured creditors’ claims.
Sec. 743. Priority of distribution.
Sec. 744. Receiver’s recommendations to the court.
Sec. 745. Distribution of assets.
Sec. 746. Unclaimed and withheld funds.
Sec. 747. Termination of proceedings.
Sec. 748. Disposition of records during and after termination of receivership.
Sec. 749. Transition period.
TITLE VIII—DEFINITIONS
Sec. 801. Definitions.
TITLE IX—TECHNICAL AND CONFORMING AMENDMENTS
Sec. 901. Executive schedule technical and conforming amendments.
TITLE 
I—ESTABLISHMENT 
OF
FEDERAL 
INSURANCE 
SOL-
VENCY COMMISSION
SEC. 101. ESTABLISHMENT.
There is established an independent regulatory agen-
cy to be known as the ‘‘Federal Insurance Solvency Com-
mission’’ (hereinafter in this Act referred to as the ‘‘Com-
mission’’).
SEC. 102. DUTIES OF COMMISSION.
The Commission shall—
(1) establish national, preemptive standards to
ensure the financial soundness and solvency of all in-
surers in interstate commerce;
(2) regulate insurers that obtain federal sol-
vency certificates for compliance with the national
standards for financial soundness and solvency es-
tablished under paragraph (1) and transmit to each
State such standards so that each State will apply
such standards to each insurer that is under its reg-
ulatory jurisdiction that is in interstate commerce
and that is not federally certified;
(3) establish procedures for financially sound
insurers to apply to the Commission for a Federal
(13) oversee the activities of the National Asso-
ciation of Registered Agents and Brokers, including
review of the Association’s bylaws and rules; and
(14) conduct, on an ongoing basis, studies and
research on any matter that may affect the financial
condition and solvency of the insurance industry in
the United States.
SEC. 103. MEMBERSHIP.
(a) NUMBER AND APPOINTMENT.—The Commission
shall be composed of 5 members appointed by the Presi-
dent by and with the advise and consent of the Senate.
(b) POLITICAL AFFILIATION.—Not more than 3
members appointed under subsection (a) may be of the
same political party.
(c) RESTRICTION
ON
OTHER
EMPLOYMENT.—A
Commissioner shall not engage in any business, vocation,
or employment other than serving as a Commissioner.
(d) TERMS.—
(1) IN GENERAL.—Each member shall be ap-
pointed for a term of 6 years except as provided in
paragraphs (2) and (3).
(2) TERMS OF INITIAL APPOINTEES.—As des-
ignated by the President at the time of appointment,
members first appointed shall be appointed as
follows:
(A) 1 shall be appointed for a term of 2
years.
(B) 2 shall be appointed for a term of 4
years.
(C) 2 shall be appointed for a term of 6
years.
(3) VACANCIES.—Any member appointed to fill
a vacancy occurring before the expiration of the
term for which the member’s predecessor was ap-
pointed shall be appointed only for the remainder of
that term. A member may serve after the expiration
of that member’s term until a successor has taken
office.
(e) QUORUM.—A majority of the members of the
Commission shall constitute a quorum but a lesser number
may hold hearings.
(f) CHAIRPERSON; VICE CHAIRPERSON.—The Chair-
person and Vice Chairperson of the Commission shall be
designated by the President at the time of the appoint-
ment or from among the sitting members of the Commis-
sion at such time as the post becomes vacant. The Chair-
person shall have executive authority within the Commis-
sion, including the authority to employ and direct the per-
sonnel of the Commission, other than personnel employed
regularly and full time in the immediate offices of commis-
sioners other than the chairperson.
(g) APPLICABILITY OF THE ADMINISTRATIVE PROCE-
DURE ACT.—The Commission shall be an agency of the
United States for purposes of subchapter II of chapter 5
and chapter 7 of title 5, United States Code.
SEC. 104. STAFF OF COMMISSION; EXPERTS AND CONSULT-
ANTS.
(a) STAFF.—The Commission is authorized to ap-
point and fix the compensation of such officers, attorneys,
examiners, and other experts as may be necessary for car-
rying out its functions under this chapter, and the Com-
mission may, subject to the civil service laws, appoint such
other officers and employees as are necessary in the execu-
tion of its functions and fix their salaries without regard
to chapter 51 and subchapter III of chapter 53 of title
5, United States Code.
(b) EXPERTS AND CONSULTANTS.—Subject to rules
prescribed by the Commission, the Commission may pro-
cure temporary and intermittent services under section
3109(b) of title 5, United States Code.
SEC. 105. OFFICES AND PLACE OF MEETING.
The principal office of the Commission shall be in the
city of Washington, District of Columbia, but it may meet
and exercise its powers in any other place.
SEC. 106. POWERS OF COMMISSION.
(a) IN GENERAL.—The Commission shall have the
power to carry out all duties and authority specifically
granted by this Act, and such incidental powers as shall
be necessary to carry out the powers so granted.
(b) RULES
AND REGULATIONS.—The Commission
shall promulgate rules and regulations under chapter 5 of
title 5, United States Code, necessary to carry out its re-
sponsibilities under this Act. The Commission is encour-
aged to follow the procedures of subchapter III of chapter
5 of title 5, United States Code (5 U.S.C. 561 et seq.),
where appropriate.
(c) HEARINGS AND PROCEEDINGS.—The Commission
may, for the purpose of carrying out this Act, hold hear-
ings, sit and act at times and places, take testimony, and
receive evidence as the Commission considers appropriate.
The Commission may administer oaths or affirmations to
witnesses appearing before it. Proceedings regarding cer-
tificates and penalties shall be conducted pursuant to sec-
tion 554 of chapter 5 of title 5, United States Code. The
Commission is encouraged to follow the procedures of sub-
chapter IV of title 5, United States Code (5 U.S.C. 571
et seq.), where appropriate.
(d) DELEGATION OF FUNCTIONS BY COMMISSION.—
(1) In addition to its existing authority, the Commission
shall have the authority to delegate, by published order
or rule, any of its functions to a division of the Commis-
sion, an individual Commissioner, an administrative law
judge, or an employee or employee board, including func-
tions with respect to hearing, determining, ordering, cer-
tifying, reporting, or otherwise acting as to any work,
business, or matter. Nothing in this subsection shall be
deemed to supersede section 556(b) of title 5 or to author-
ize the delegation of the function of rulemaking as defined
in subchapter II of chapter 5 of title 5, United States
Code, with reference to general rules as distinguished from
rules of particular applicability or of the making of any
rule pursuant to title V or VI of this Act.
(2) With respect to the delegation of any of its func-
tions, as provided in paragraph (1) of this subsection, the
Commission shall retain a discretionary right to review the
action of any such division of the Commission, individual
Commissioner, administrative law judge, employee, or em-
ployee board, upon its own initiative or upon petition of
a party to or an intervenor in such action, within such
time and in such manner as the Commission by rule shall
prescribe. The vote of 1 member of the Commission shall
be sufficient to bring any such action before the Commis-
sion for review. A person or party shall be entitled to re-
view by the Commission if such person or party is
adversely affected by action at a delegated level which
imposes a penalty or removes or refuses to grant a
certificate.
(3) If the right to exercise such review is declined,
or if no such review is sought within the time stated in
the rules promulgated by the Commission, then the action
of any such division of the Commission, individual Com-
missioner, administrative law judge, employee, or em-
ployee board, shall, for all purposes, including appeal or
review thereof, be deemed the action of the Commission.
(e) SUBPOENA POWER.—
(1) IN GENERAL.—The Commission may issue
subpoenas requiring the attendance and testimony of
witnesses and the production of any evidence relat-
ing to any matter under investigation by the Com-
mission. The attendance of witnesses and the pro-
duction of evidence may be required from any place
within the United States at any designated place of
hearing within the United States. The Commission
may not delegate this authority.
(2) ENFORCEMENT OF A SUBPOENA.—A sub-
poena issued by the Commission shall be subject to
enforcement pursuant to section 555 of title 5,
United States Code.
(3) SERVICE OF SUBPOENAS.—The subpoenas
of the Commission shall be served in the manner
SEC. 107. EVALUATIONS OF INSOLVENT INSURERS AND RE-
INSURERS.
The Commission shall investigate each insolvent in-
surer or reinsurer which holds a Federal certificate of sol-
vency to determine the causes of the insolvency. The Com-
mission may also investigate the insolvencies of any other
insurers if such are relevant to establishing standards for
sound financial condition and solvency by the Commission
or if they are relevant to the financial condition of the
insurance industry in the United States. These investiga-
tions shall include a review of the insurer’s or reinsurer’s
records, as well as interviews with persons having knowl-
edge of the operations of the insurer or reinsurer. The
Corporation shall issue a report on the causes of insolven-
cies at such times that it determines to be appropriate.
SEC. 108. REFERRAL TO ENFORCEMENT AUTHORITIES;
DATA BASE ON VIOLATIONS.
(a) REFERRALS.—The Commission shall refer to the
Department of Justice or to the appropriate State enforce-
ment authorities any information or matters which it de-
termines warrant investigation for possible civil or crimi-
nal enforcement action.
(b) DATA BASE.—The Commission shall establish, by
regulation, procedures and standards for creating a data
base for information regarding persons who have been
convicted of a crime or administratively disciplined for in-
surance related activity, or who have been senior officers
or directors of insolvent insurers or reinsurers. The Com-
mission shall maintain and regularly update this data
base. Information contained in this system shall be shared
with appropriate State and Federal regulators and law en-
forcement officials. Each federally certified insurer and re-
insurer shall, as a condition of continued certification,
fully cooperate with the Commission’s implementation of
the data base. Each insurer regulated for financial condi-
tion by a State shall, as a condition of obtaining a State
insurance license, similarly cooperate with the Commis-
sion.
SEC. 109. REPORTS.
(a) ANNUAL AND OTHER REPORTS.—The Commis-
sion shall submit to the President and the Congress an
annual report and such additional reports and rec-
ommendations as the Commission considers appropriate.
(b) BUDGET ESTIMATES AND REQUESTS.—Whenever
the Commission submits any budget estimate or request
to the President or the Office of Management and Budget,
it shall concurrently transmit a copy of that estimate or
request to Congress.
(c) LEGISLATIVE MATTERS.—Whenever the Commis-
sion submits any legislative recommendations, or testi-
mony or comments on legislation to the President or the
Office of Management and Budget, it shall concurrently
transmit a copy thereof to the Congress. No officer or
agency of the United States shall have any authority to
require the Commission to submit its legislative rec-
ommendations, or testimony or comments on legislation
to any officer or agency of the United States for approval,
comments, or review prior to the submission of such rec-
ommendations, testimony, or comments to the Congress.
SEC. 110. FEDERAL INSURANCE REGULATION ADVISORY
COMMITTEE.
(a) ESTABLISHMENT.—There is established the Fed-
eral Insurance Regulation Advisory Committee (herein-
after referred to in this section as the ‘‘Committee’’).
(b) MEMBERSHIP.—The Committee shall consist of
25 members appointed by the Commission. The Commis-
sion shall select those who can best represent the various
segments of the insurance industry and the interests of
the public and consumers so that the committee will pro-
vide a range of information and perspectives that will be
helpful to the Commission in carrying out its responsibil-
ities. Such members shall be appointed by the Commission
as follows:
(1) 5 members who are fairly representative of
the various types and sizes of certified insurers and
who adequately represent the significant segments of
the marketplace;
(2) 5 members who are fairly representative of
the types and sizes of certified reinsurers and who
adequately represent the significant segments of the
marketplace;
(3) 5 members who are fairly representative of
the types and sizes of insurance agents and brokers
and who adequately represent significant segments
of the marketplace;
(4) 5 members from among the State insurance
regulators; and
(5) 5 members from among individuals who
shall represent the public interest.
(c) VACANCIES.—Any vacancy on the Committee
shall be filled in the same manner in which the original
appointment was made.
(d) PAY AND EXPENSES.—Members of the Commit-
tee shall serve without pay, but each member shall be re-
imbursed, in such manner as the Commission shall pre-
scribe by regulation, for expenses incurred in connection
with attendance of such members at meetings of the
Committee.
(e) TERMS.—Members shall be appointed for terms
of 3 years.
(f) AUTHORITY OF THE COMMITTEE.—The Commit-
tee may select its Chairperson, Vice Chairperson, and Sec-
retary, and adopt methods of procedure, and shall have
power—
(1) to confer with the Commission on general
and special business conditions and regulatory and
other matters affecting insurance and reinsurance,
and
(2) to request information, and to make rec-
ommendations, with respect to matters within the
jurisdiction of the Commission.
(g) MEETINGS.—The Committee shall meet 2 times
each year, and more frequently if requested by the
Commission.
(h) REPORTS.—The Committee shall submit an an-
nual written report to the Commission and to the Commit-
tee on Energy and Commerce of the House and the Com-
mittee on 
of the Senate. Such report shall describe the
activities of the Committee for such annual period and
contain such recommendations as the Committee considers
appropriate. The Committee may submit such other re-
ports as it determines necessary.
(i) PROVISION OF STAFF AND OTHER RESOURCES.—
The Commission shall provide the Committee with the use
of such resources, including staff, as the Committee rea-
sonably shall require to carry out its duties, including the
preparation and submission of reports to Congress, under
this section.
(j) FEDERAL
ADVISORY
COMMITTEE
ACT.—The
Federal Advisory Committee Act shall apply to the
Committee.
SEC. 111. FEES.
(a) GENERAL AUTHORITY.—(1) The Commission, in
accordance with this section, shall assess and collect an
annual fee to be paid by applicants for certificates issued
by the Commission and by holders of such certificates to
recover the costs of such certification activities of the
Commission. It shall also assess and collect fees to cover
the costs of any specific other services and activities it pro-
vides to such applicants and to other persons.
(2) The total fees charged to a federally certified in-
surer or reinsurer or applicant for a Federal solvency cer-
tificate shall not exceed, on an annual basis—
(A) for insurers, 1⁄4 of one percent of the sum
of the net direct written premiums; or
(B) for reinsurers, 1⁄8 of one percent of net re-
insurance premium.
(3) Prior to establishing the fees described in para-
graph (1), the Commission shall obtain the views of feder-
ally certified insurers and reinsurers concerning the pro-
posed formula or method for calculating fees, the proposed
amount, and the proposed timing or schedule for assess-
ment.
(4) The commission shall ensure that the schedule for
fees allows small, financially sound insurers and reinsurers
to apply for and maintain Federal certificates of solvency.
(b) FEES CONTINGENT ON APPROPRIATIONS.—The
fees described in subsection (a) shall be collected only if,
and only in the total amounts provided in appropriation
Acts.
(c) ESTABLISHMENT AND ADJUSTMENT OF FEES.—
The fees assessed under subsection (a) shall be estab-
lished, in accordance with subsection (a)(2), at amounts
that will result in collection, during each fiscal year follow-
ing the first 2 years of operation of the Commission, of
an amount equal to the amount appropriated for such fis-
cal year for the performance of the activities described in
subsection (a).
(d) NOTICE TO CONGRESS.—The Commission shall
annually transmit to Congress a notification of the fees
assessed pursuant to subsection (a) not later than 90 days
before the effective date of such fees. This notification
shall include an explanation of the estimates and calcula-
tion upon which the fees are based and the management
plan of the Commission which shows that the fees will
produce sufficient revenue to support the cost of the activi-
ties for which they are assessed.
(e) PENALTIES FOR LATE PAYMENT.—
(1) IN GENERAL.—The Commission shall assess
as a penalty for late payment of fees required by
subsection (a) 25 percent of the amount of the
charge which was not paid in a timely manner.
(2) DISMISSAL
OF
APPLICATIONS
OR
FIL-
INGS.—The Commission may dismiss any applica-
tion or other filing for failure to pay in a timely
manner any fee or penalty assessed by the Commis-
sion.
(3) REVOCATIONS.—The Commission may re-
voke any certificate held by any insurer or reinsurer
that has failed to make payment of a fee or penalty
assessed pursuant to this section. Such revocation
action may be taken by the Commission after notice
of the Commission’s intent to take such action is
sent to the holder of the certificate by registered
mail, return receipt requested, at the insurer’s or re-
insurer’s last known address. The notice will provide
the entity at least 30 days to either pay the fee or
penalty or show cause why the fee or penalty does
not apply or should otherwise be waived or payment
deferred. The opportunity for a hearing on the
record is not required under this paragraph unless
the response presents a substantial and material
question of fact. Unless the insurer or reinsurer sub-
stantially prevails in the hearing, the Commission
may assess a fee for the costs of such hearing. Any
Commission order adopted pursuant to this sub-
section shall determine the amount due, if any, and
provide the insurer or reinsurer with at least 30
days to pay that amount or have its authorization
revoked. No order of revocation under this sub-
section shall become final until the insurer or rein-
surer has exhausted its right to judicial review of
such order under chapter 7 of title 5, United States
Code.
(f) COLLECTION OF DELINQUENT FEES AND PEN-
ALTIES.—
(1) IN
GENERAL.—The Commission may re-
cover the amount of any unpaid fee or penalty law-
fully payable to the Commission.
(2) STATUTE OF LIMITATIONS.—No action or
proceeding shall be brought for the recovery of any
fee or penalty due to the Commission, or for the re-
covery of any amount paid to the Commission, in ex-
cess of the amount due to it, unless such action or
proceeding shall have been brought within 5 years
after the right accrued for which the claim is made.
(g) WAIVER
AND DEFERMENT.—The Commission
may waive or defer payment of a fee in any specific in-
stance for good cause shown, where such action would pro-
mote the public interest.
(h) DEPOSIT
OF COLLECTIONS.—Moneys received
from fees established under this section shall be deposited
as an offsetting collection in, and credited to, the account
providing appropriations for the Commission, and shall re-
main available until expended. No fees may be so depos-
ited for any fiscal year unless funds are authorized to be
appropriated for such fiscal year pursuant to this Act.
(i) REGULATIONS.—
(1) IN GENERAL.—The Commission shall pre-
scribe appropriate regulations to carry out this sec-
tion.
(2) TIME
FOR
PAYMENT.—Such regulations
shall require the payment of fees at the beginning of
the fiscal year for which such fees are in effect or
at such other time during the fiscal year as the
Commission may determine in accordance with the
efficient operation of the Commission. Such regula-
tions shall permit payment by installments in the
case of fees in large amounts.
(3) MULTIPLE-YEAR PAYMENTS.—If the Com-
mission determines that, because of the small
amount of fee involved relative to the cost of annual
collection, it would be inefficient to collect any fee
each year, such regulations may also require the
payment of the fee in advance for a number of
years.
(j) LIMITATION ON JUDICIAL REVIEW.—The fees es-
tablished by the Commission under this section shall not
be subject to judicial review.
SEC. 112. AUTHORIZATION OF APPROPRIATIONS.
(a) IN GENERAL.—There is authorized to be appro-
priated for the operations and expenses of the Commission
for each of fiscal years 1994 through 1999 the sum of
$300,000,000 to carry out this Act.
(b) 
REHABILITATION
AND
LIQUIDATION
EX-
PENSES.—In addition to the sums authorized to be appro-
priated by subsection (a), there are authorized to be ap-
propriated such sums as may be necessary to carry out
the 
Commission’s 
responsibilities 
as 
receiver 
in
rehabilitations and liquidations under this Act. These
sums shall be repaid to the Commission from the estate
of the insurer or reinsurer as provided in this Act.
SEC. 113. BUDGET ACT COMPLIANCE.
Any spending authority (as defined in subparagraphs
(A) and (C) of section 401(c)(2) of the Congressional
Budget Act of 1974 (2 U.S.C. 651(c)(2)(A) and (C))) au-
thorized by this Act shall be effective only to such extent
and in such amounts as are provided in appropriation
Acts.
TITLE 
II—NATIONAL 
STAND-
ARDS FOR THE FINANCIAL
CONDITION OF INSURERS IN
INTERSTATE COMMERCE AND
FEDERAL CERTIFICATES OF
SOLVENCY FOR INSURERS
SEC. 201. NATIONAL STANDARDS FOR THE FINANCIAL
SOUNDNESS AND SOLVENCY OF INSURERS IN
INTERSTATE COMMERCE.
(a) AUTHORITY.—The Commission shall establish
national standards for the financial soundness and sol-
vency of all insurers in interstate commerce in accordance
with the criteria set forth in section 203.
(b) ENFORCEMENT.—
(1) IN GENERAL.—The Commission shall regu-
late the financial condition of insurers in interstate
commerce that obtain a Federal certificate of sol-
vency under the standards established under sub-
section (a). No State insurance regulatory agency
lems at the earliest possible stage and intervene to prevent
harm to policyholders and the public.
SEC. 203. CRITERIA FOR THE NATIONAL STANDARDS FOR
FINANCIAL SOUNDNESS AND SOLVENCY.
(a) CRITERIA FOR NATIONAL STANDARDS FOR DO-
MESTIC INSURERS.—
(1) IN GENERAL.—The Commission shall estab-
lish, by regulation, the criteria for the national
standards for financial soundness and solvency
which are to be established under section 201 and
which are to be met by domestic insurers, including
the United States branches of foreign insurers. Such
criteria shall include—
(A) net worth requirements and other fi-
nancial standards based on financial analysis
appropriate to maintaining reasonable net
worth for the various types of insurers and the
different types of risks;
(B) appropriate criteria for accounting and
valuation of investments, reserves, and other as-
sets and liabilities relating to net worth;
(C) limitations and controls on the use of
reinsurance, and standards for ceding, report-
ing on, and credit for such reinsurance;
(D) requirements governing the activities
of and transactions with managing general
agents and reinsurance intermediaries to the
extent that such transactions affect the finan-
cial conditions of insurers;
(E) limitations on the amount of risk that
may be retained on a single risk where such
limits are appropriate;
(F) accounting standards and actuarial
standards for the valuation of reserves for
losses and expenses that will promote the
strong and appropriate financial monitoring of
insurers;
(G) bonding, trust fund, and liquidity re-
quirements appropriate to the various kinds of
insurance operations;
(H) requirements for audits by independ-
ent accountants of the annual financial state-
ments reporting the financial position and the
financial activities of insurers;
(I) requirements for annual opinions by
appointed actuaries on the reasonableness of re-
serves, of reports of findings that support such
opinions, and of any internal management re-
ports the Commission determines necessary for
promoting financial soundness and solvency;
(J) regulation of financial transactions
within holding company systems;
(K) procedures for initial and special ex-
aminations of insurers, and for the annual fi-
nancial review of such insurers;
(L) procedures for ongoing monitoring and
enforcement of the compliance of insurers with
Commission standards;
(M) criteria as to the minimum qualifica-
tions of the management of insurers;
(N) criteria governing the fiduciary duties
of officers and directors of insurers;
(O) criteria for determining when insurers
are financially impaired, in a financially hazard-
ous condition, or insolvent;
(P) disclosure requirements, in addition to
those enumerated above, for information to be
provided to the Commission or the State insur-
ance regulator and the public; and
(Q) such other criteria as the Commission
determines to be necessary to evaluate and
maintain the sound financial condition of insur-
ers.
(2) GUIDELINES
FOR
ESTABLISHING
NET
WORTH
REQUIREMENTS
FOR
DOMESTIC
INSURERS
UNDER PARAGRAPH (1).—
(A) IN GENERAL.—The Commission, in es-
tablishing net worth requirements for domestic
insurers under paragraph (1), shall—
(i) establish requirements that recog-
nize differences in reserve, pricing, credit,
asset, and business risk among categories
of insurers in different lines of business;
(ii) address, to the extent appropriate,
factors that may substantially modify an
insurer’s capital requirements, including
size, growth rate, and age of the insurer,
degree of asset and liability mismatching,
degree of concentration of assets, overall
level of risk retention, and limitations on
various categories of investments; and
(iii) consider a range of methodolo-
gies, including one that incorporates risk-
based capital schemes, fixed dollar mini-
mums, and actuarial assessments.
(B) SMALL INSURERS.—To ensure that fi-
nancially sound small insurers may meet the
national standards established under paragraph
(1), the Commission shall not establish net
worth requirements that would automatically
exclude any insurer the net worth of which
equals at least $500,000.
(C) 
ADJUSTMENTS.—The 
Commission
shall adjust, for inflation, the dollar values es-
tablished under subparagraphs (A) and (B).
This adjustment shall be made every fifth year
unless for good cause the Commission deter-
mines that it should be adjusted more fre-
quently.
(b) CRITERIA FOR NATIONAL STANDARDS FOR FOR-
EIGN INSURERS.—The Commission shall establish, by reg-
ulation, criteria for the national standards for financial
soundness and solvency which are to be established under
section 201 and which are to be met by foreign insurers.
Such criteria shall include the following:
(1) AUTHORIZATION BY DOMICILIARY JURISDIC-
TION.—The insurer must be authorized by the laws
of its domiciliary jurisdiction to write insurance.
(2) 
INTEGRITY
AND
MANAGEMENT
EX-
PENSES.—The criteria shall require information that
demonstrates that the insurer has sufficient finan-
cial integrity and management experience to safe-
guard the public interest.
(3) TRUST FUND.—The insurer shall maintain
a trust fund meeting the requirements of paragraph
(2) for the payment of the valid claims of, and other
contractual obligations owed to, its United States
policyholders or their beneficiaries, assigns, and suc-
cessors in interest under such policies which trust
fund shall be in an amount not less than the re-
serves for claims and unearned premiums and other
actuarial reserves and liabilities of the insurer’s
United States policyholders plus an amount equal to
the net worth required for an insurer under para-
graph (1)(A) of subsection (a). The trust fund re-
quired by this paragraph shall meet the following
requirements:
(A) The trust fund shall be exclusively for
the purpose of securing the payment of valid
claims of, and other contractual obligations
owed to, the insurer’s United States policy-
holders and the claimants and their assigns,
beneficiaries, and successors in interest under
such policies.
(B) Assets may be held in trust by a quali-
fied financial institution the principal place of
business of which is outside the United States
if the insurer demonstrates that a beneficiary of
the trust can obtain immediate payment from a
United States branch, subsidiary, or representa-
tive office of the institution. The Commission
shall establish, by regulation, appropriate cri-
teria for a qualified financial institution to act
as a trustee. Foreign banks with a United
States presence may apply for acceptance.
(C) The trust fund shall be established in
a qualified financial institution that satisfies
criteria established by the Commission. The
Commission shall establish acceptable criteria
for assets held in trust, which shall include
cash; securities; bonds; commercial paper; clean,
irrevocable, unconditional, and automatically re-
newable letters of credit issued by a qualified fi-
nancial institution; or any other appropriate as-
sets, whether United States or non-United
States which provide the stability necessary for
adequate protection of the trust beneficiaries.
(D) The trust instrument shall provide for
the circumstances under which claims and other
contractual obligations shall be paid as provided
under the policies of the insurer. The insurer
may freely substitute and withdraw assets in
the trust so long as the value of the assets
maintained in the trust equals or exceeds the
amount set forth in paragraph (1).
(E) No later than the date set by the Com-
mission by regulation, the trustees of the trust
shall report annually to the Commission or the
State insurance regulator in writing, setting
forth the balance of the trust, listing the trust’s
investments at the preceding year’s end, and
certifying the date of termination of the trust
as to new business, if so planned, or certifying
that the trust shall not expire prior to the next
following December 31. The trust shall be sub-
ject to examination by the Commission or the
State insurance regulator and shall remain in
effect as long as the insurer has outstanding
obligations under the agreements to which the
trust pertains.
(F) The trust instrument shall provide
that, in the event the insurer is placed in super-
vision, rehabilitation, or liquidation, or its
equivalent by its State or country of domicile,
or if the Commission or State insurance regu-
lator determines, pursuant to regulations adopt-
ed by the Commission, that the condition of the
insurer is such that further transaction of busi-
ness will be hazardous to United States policy-
holders, creditors, or to the public, the Commis-
sion or State insurance regulator shall be au-
thorized to take control of the trust in the man-
ner described in this Act.
(4) OTHER REQUIREMENTS.—Any foreign in-
surer shall also—
(A) have been doing business in its country
or jurisdiction of domicile for at least 3 years,
or be an affiliate of an insurer which has been
doing business in a state, country, or jurisdic-
tion of domicile for at least 3 years, unless the
Commission or State insurance regulator, for
good cause shown, waives this 3-year operating
requirement;
(B) file an annual financial statement with
its domiciliary regulator and have established
satisfactory evidence of good repute and finan-
cial integrity;
(C) file with the Commission or State in-
surance regulator—
(i) a list identifying its officers and di-
rectors (or similar principals) along with a
biographical sketch for each, including a
description of their role in any financial
entity that was the subject of a bankruptcy
or receivership proceeding during their em-
ployment or within one year of the termi-
nation of such employment and a descrip-
tion of any criminal proceeding involving
financial misconduct to which they have
been subject;
(ii) a certification that such persons
have not been convicted of a felony involv-
ing financial misconduct; and
(iii) an annual update of the informa-
tion described in clauses (i) and (ii);
(D) file with the Commission or State in-
surance regulator, on an annual basis, a copy of
the financial statement filed with its domiciliary
regulator (which the Commission or State in-
surance regulator may require to be translated
from its original language) and a report show-
ing the volume of written premiums with regard
to United States policyholders in the past year;
(E) agree to allow the Commission or
State insurance regulator to examine its books
and records and to waive any protection it has
under any secrecy laws of its domiciliary juris-
diction, except that such examinations will only
take place upon the Commission’s or State in-
surance regulator’s showing of good cause for
concern about the financial condition of the
subject insurer;
(F) appoint an agent in the United States
upon whom may be served any lawful process in
any action, suit, or proceeding instituted by or
on behalf of any U.S. person, and agree that,
in the event such process may not be served
upon the appointed agent, process may be
served upon the Commission or State insurance
regulator;
(G) submit to the jurisdiction of any Unit-
ed States court or State court of competent ju-
risdiction for the resolution of any dispute aris-
ing out of an insurance policy or to respond to
any allegations or charges made against it by
any United States Government official or agen-
cy or State insurance regulator, except that
such requirement does not override any contrac-
tual agreement of the parties to a contract to
resolve disputes between them pursuant to
other procedures;
(H) provide the Commission, on an annual
basis, with—
(i) a statement from the appointed ac-
tuary that the reserves and liabilities re-
ferred to in paragraph (1)(B) of this sub-
section are reasonable to meet United
States contractual obligations and related
expenses and that, where appropriate, the
anticipated cash flows from the trust fund
are reasonable to meet obligations as they
come due, and
(ii) an accompanying statement from
the independent accountant that the trust
contains the assets referred to in such ac-
tuarial statement and such other assets as
are required to meet the Commission’s
standards.
(I) comply with the credit for reinsurance
requirements of section 305 and the single risk
limits of subsection (a)(1)(E); and
(J) respond to any disclosure requests
from the Commission or State insurance regu-
lator, in addition to those required in subpara-
graphs (C), (D), and (H).
(c) OPERATIONAL
AND
INVESTMENT
REQUIRE-
MENTS.—In establishing the criteria for national stand-
ards pursuant to subsections (a) and (b), the Commission
shall differentiate, as appropriate, to accommodate the dif-
ferent operational and investment requirements of prop-
erty and casualty insurers and life and health insurers.
(d) PROCEDURES FOR OBTAINING A FEDERAL CER-
TIFICATE OF SOLVENCY.—The Commission shall estab-
lish, by regulation, procedures by which an insurer in
interstate commerce that has met the standards adopted
pursuant to subsection (a) or (b) may obtain a Federal
certificate of solvency for compliance with these standards.
The Commission shall grant such a certificate only if it
has determined that an insurer has met the national
standards for financial soundness and solvency adopted
pursuant to subsection (a) or (b).
(e) ADDITIONAL REQUIREMENTS FOR FOREIGN IN-
SURERS.—A foreign insurer may transact the business of
insurance in the United States (subject to any applicable
Federal or State law, including this Act) only if such in-
surer has a Federal solvency certificate or is authorized
to write insurance pursuant to applicable State law. Any
foreign insurer that does not comply with the requirement
of this subsection shall be subject to penalties under this
Act in addition to any other penalties that may be imposed
under any State or Federal law. The Commission or the
State insurance regulator in any State in which the trans-
action allegedly occurred may bring an action for the im-
position of such penalties.
(f) ISSUANCE OF FEDERAL CERTIFICATE OF SOL-
VENCY.—Upon submission of an application in the form
prescribed by the Commission, the Commission shall ex-
amine the information submitted and may conduct such
further examination and investigation, as it finds nec-
essary, to determine whether the applicant satisfies the
national standards for financial soundness and solvency
established under subsection (a) or (b). Upon conclusion
of its examination and investigation, the Commission shall
publish its findings and determination. Upon a determina-
tion that the applicant for a Federal certificate of solvency
has satisfied such requirements, the Commission shall
issue such certificate.
(g) FORM AND CONTENT OF SUBMISSIONS BY INSUR-
ERS AND REINSURERS.—The Commission shall establish,
by regulation, the form and contents of the submissions
by insurers and reinsurers pursuant to this Act, includ-
ing—
(1) the initial and annual reports that shall be
submitted by each insurer to the Commission or
State insurance regulator, which shall provide a
complete report on the financial condition of the in-
surer;
(2) the quarterly filing of the update of signifi-
cant financial factors and ratios that will provide an
early indication of any significant change in the fi-
nancial condition of such insurer; and
(3) any other submission the Commission deter-
mines to be necessary for the appropriate monitoring
of the financial condition of insurers and reinsurers.
SEC. 204. SURPLUS LINES APPROVAL FOR FEDERALLY CER-
TIFIED INSURERS.–
(a) FEDERAL SURPLUS LINES APPROVAL.—
((1) The Commission may approve any domes-
tic or foreign insurer holding a Federal solvency cer-
tificate to write surplus lines insurance if such do-
mestic or foreign insurer meets the additional re-
quirements of this section. The Commission shall es-
tablish, by regulation, the standards for issuing such
approvals.
(2) Among the additional standards to be estab-
lished by the Commission for domestic insurers pur-
suant to paragraph (1) shall be a requirement that
the insurer have a net worth of not less than
$15,000,000. The net worth requirement set forth in
this paragraph shall be subject to periodic adjust-
ment for inflation pursuant to section 202(c)(2).
(3) A foreign insurer may obtain approval to
write surplus lines insurance in the same manner as
a domestic insurer or it may obtain this approval if
it meets all of the requirements for a certificate of
solvency under section 202, except that the trust
fund required of such insurer under section 202
shall be satisfied if it consists of no less than
$15,000,000. The Commission may, in its discretion,
require an amount higher than $15,000,000 if it de-
termines a higher amount is necessary to adequately
protect United States policy holders. In determining
what amount is adequate, the Commission shall con-
sider such factors as the types and amounts of cov-
erage which the insurer writes in the United States
and the assets which comprise the trust and their
valuation. The trust fund established pursuant to
this paragraph shall comply with the establishment,
management, and examination requirements of sec-
tion 202(d)(2).
(4) An insurance exchange established under
the laws of a State may obtain approval to write
surplus lines insurance if it is federally certified.
Such exchange must maintain a net worth of not
less than $50,000,000 in the aggregate. In addition,
each individual syndicate of such exchange seeking
to accept placement of surplus lines insurance must
meet either of the following requirements:
(A) For an insurance exchange which
maintains funds in the amount of at least
$12,000,000 for the protection of all exchange
policyholders, the syndicate shall maintain a
minimum 
net 
worth 
of 
not 
less 
than
$3,000,000.
(B) For an insurance exchange that does
not maintain funds in the amount of at least
$12,000,000 for the protection of all exchange
policyholders, the syndicate shall meet the mini-
mum net worth requirements set by the Com-
mission for qualification as a surplus lines in-
surer.
(5) Upon submission of an application for ap-
proval in the form prescribed by the Commission,
the Commission shall examine the information sub-
mitted and shall conduct such further examinations
and investigations, as it finds necessary, to deter-
mine whether the applicant satisfies the require-
ments of this section. Upon the conclusion of its ex-
amination and investigation, the Commission shall
publish its findings and determination and, if the
applicant has met such requirements, the Commis-
sion shall issue the surplus lines approval.
(6) The Commission may revoke or suspend its
approval of a surplus lines insurer in accordance
with section 206. The Commission may, in its dis-
cretion, suspend or revoke only the insurer’s ap-
proval as a surplus lines insurer or both such ap-
proval and the insurer’s certificate of solvency.
(7) A nonadmitted insurer holding a surplus
lines approval issued by the Commission shall be an
eligible surplus lines insurer under the laws of all
States but shall remain subject to applicable State
law on a nondiscriminatory basis as to the types of
insurance that may be provided in a surplus line’s
market and as to the procedures to be followed in
selling in this market.
(b) STANDARDS FOR SURPLUS LINES LICENSEES.—
(1) Any person licensed as a surplus lines li-
censee in the State where the insured or risk is lo-
cated may procure coverage for the insured or risk
from any nonadmitted insurer holding a Federal
surplus lines approval, notwithstanding any contrary
provisions in State laws.
(2) Any surplus lines licensee making a place-
ment with a federally certified insurer approved
under this section shall comply with all requirements
imposed upon such licensees under State law to the
same extent that such laws apply to the transaction
of surplus lines insurance placed with insurers eligi-
ble or approved under State law except to the extent
that such requirements are expressly preempted by
this Act.
(c) MISCELLANEOUS PROVISIONS.—
(1) Federally certified insurers approved pursu-
ant to this section to write insurance shall not par-
ticipate in any residual market mechanism or any
market assistance plan on the basis of insurance
provided under a Federal surplus lines approval.
(2) Coverages written by insurers approved pur-
suant to this section shall not be subject to restric-
tions or requirements imposed upon policy forms or
rates under State law.
(3) No insurance consumer in the United
States shall be required to seek coverage in any re-
sidual market mechanism as a precondition to seek-
ing coverage from an insurer approved pursuant to
this section.
(4) This section does not limit or in any way
restrict the ability of insurance consumers in the
United States to access surplus lines insurers pursu-
ant to alternative, established means recognized by
the United States Constitution and the law of the
several States. Without limiting the generality of the
foregoing, this section should not be construed as
limiting the ability of insurance consumers in the
United States to procure insurance from the surplus
lines insurer of the consumer’s choice pursuant to
any—
(A) industrial insured provision;
(B) aviation insurance exemption;
(C) railroad insurance exemption;
(D) wet marine and transportation insur-
ance exemption;
(E) direct placement provision; or
(F) any other similar exemption recognized
by the law of the State in which the risk is lo-
cated.
SEC. 205. MEMBERSHIP IN NATIONAL INSURANCE PROTEC-
TION CORPORATION.
Each federally certified insurer shall be a member of
the National Insurance Protection Corporation which is
established by section 501. These insurers shall be subject
to assessments by the Corporation. Federally certified in-
surers that are approved surplus lines insurers as provided
in section 204 shall not participate in the National Insur-
ance Protection Corporation for the purpose of business
written as a nonadmitted insurer pursuant to the surplus
lines law of any State.
SEC. 206. SUSPENSION AND REVOCATION OF FEDERAL
CERTIFICATE OF SOLVENCY OR STATE IN-
SURANCE LICENSE.
(a) SUSPENSION OR REVOCATION OF CERTIFICATE
OF SOLVENCY BY THE COMMISSION.—
(1) CERTIFICATE OF SOLVENCY.—The Commis-
sion shall suspend or revoke a Federal certificate of
solvency at any time the Commission determines the
standards for holding a certificate are no longer
being satisfied. The Commission shall provide the
opportunity for a hearing on the record before mak-
ing a determination to suspend or revoke such cer-
tification.
(2) EFFECT
OF
SUSPENSION
OR
REVOCA-
TION.—If the Commission suspends or revokes a
Federal certificate of solvency, an insurer will no
longer be a member of NIPC and will be prohibited
from selling insurance in the United States or its
territories.
(3) NOTICE
OF
SUSPENSION
OR
REVOCA-
TION.—The Commission shall notify the State or
country of domicile of a federally certified insurer of
the suspension or revocation of that insurer’s certifi-
cate of solvency. This notification shall be made at
the earliest possible date.
(b) SUSPENSION OR REVOCATION OF STATE INSUR-
ANCE LICENSE BY STATE INSURANCE REGULATOR.—The
State insurance regulator shall suspend or revoke the
State insurance license of any insurer subject to regulation
for financial condition and solvency by the regulator’s
State if such regulator determines the national standards
established by the Commission under section 201 are no
longer being satisfied by the insurer. The State insurance
regulator shall follow the procedures of applicable State
law in suspending or revoking such license.
SEC. 207. RELATIONSHIP OF FEDERALLY CERTIFIED IN-
SURERS TO STATE INSURANCE REGULATION.
(a) PERMISSIBLE STATE REGULATION.—Except as
otherwise provided in this Act, every federally certified in-
surer shall be subject to State laws, rules, regulations, or-
ders, or actions which regulate insurers, including the fol-
lowing:
(1) Regulation of rates and policy forms.
(2) Regulation of unfair insurance trade prac-
tices and unfair claims settlement practices.
(3) Participation in an assigned risk plan, joint
underwriting association, or any similar mechanism
designed to make insurance available to those unable
to obtain it in the voluntary market.
(4) Filing of copies of financial statements with
State insurance regulators. Each federally certified
insurer shall file with each State in which it trans-
acts the business of insurance a copy of the annual
and quarterly statements its files with the Commis-
sion. Such filings shall only be for information pur-
poses and shall not be used by any State for the
purpose of financial or solvency regulation.
(5) Liability for State taxes. No tax shall be ap-
plied to federally certified insurers on a basis that
discriminates between such insurers and insurers
regulated solely by a State. Assessments imposed on
federally certified insurers pursuant to title V shall
be credited against any State taxes levied against
such insurers, or shall be subject to recoupment
through rate filings, to the same extent that assess-
ments by State guaranty funds on insurers regulated
solely by a State are credited against State taxes or
recouped in rate filings.
(6) Regulation of insurance company incorpora-
tion, organization, corporate governance, voting
rights, and related matters by the insurer’s State of
domicile, including regulation pursuant to State cor-
poration laws of general applicability, except that
such regulation shall not include regulation of finan-
cial condition or solvency.
(7) Registration with and designation of the
State insurance regulator as its agent solely for or
the purpose of receiving service of legal documents
or process.
(8) Requirements that insurers that it licenses
shall obtain a Federal certificate of solvency.
(9) Regulation of insurance producers, as that
term is defined by the National Association of Reg-
istered Agents and Brokers, except as provided by
title VI.
(b) PREEMPTION OF STATE LAWS.—The following
shall apply with respect to State laws, rules, regulations,
orders, or actions purporting to regulate federally certified
insurers:
(1) No State shall apply its laws, rules, regula-
tions, orders, or actions to a federally certified in-
surer or an applicant for a Federal certificate, or an
affiliate of either, on any basis different from that
applied to insurers regulated solely at the State
level.
(2) No State shall apply any law, rule, regula-
tion, order, or action to any insurer or insurance
producer or any other intermediary procuring insur-
ance from or placing insurance with any federally
certified insurer, any applicant for a Federal certifi-
cate, or any affiliate of either, on a basis different
from that applied to insurers, insurance producers,
or intermediaries procuring insurance from or plac-
ing insurance with insurers that are regulated solely
at the State level.
(3) Federally certified insurers shall not be sub-
ject to any State regulation which pertains to sol-
vency or financial condition, including such regula-
tion exercised through the power to issue, suspend,
or revoke a license.
(4) Federally certified insurers shall remain
subject to State guaranty fund laws and assessments
to the extent provided by section 518(b).
(5) No State shall prevent or impede any feder-
ally certified insurer from withdrawing from any line
or subline of insurance, or from any market or terri-
tory, or from the entire State by threatening forfeit-
ure of licenses, certificates of authority, or other au-
thorizations to do business; limiting the cir-
cumstances under which withdrawal is permitted;
placing conditions on withdrawal; or otherwise; ex-
cept that where a State law, rule, regulation, order,
or action is preempted because it places conditions
on withdrawal intended to prevent undue disruption
of the applicable insurance market, the Commission
shall determine before the withdrawal occurs wheth-
er withdrawal actually would cause undue disruption
and, if so, may impose reasonable conditions on
withdrawal, such as a transition period for the wind-
ing down of an insurer’s business, so as to avoid
such undue disruption while permitting withdrawal
within a reasonable time frame.
(6) No State shall regulate any federally cer-
tified insurer in a manner which would place that in-
surer’s business in such State in the applicable line
or subline of insurance in an unsafe or unsound fi-
nancial condition or require that insurer to engage
in a practice relating to the applicable line or subline
of insurance that would be financially unsafe or un-
sound.
(7) A federally certified insurer applying for a
State license shall not be required to demonstrate
that it previously has been licensed or has done busi-
ness for any minimum period of time.
(c) PREEMPTION
AUTHORITY
OF
THE
COMMIS-
SION.—
(1) The Commission shall have authority, by
regulation or order, to specify the State laws, rules,
regulations, orders, and actions that are preempted
by this Act. Any federally certified insurer may peti-
tion the Commission for the issuance of such a regu-
lation or order. The Commission shall also have the
authority to stay the enforcement of any State law,
rule, regulation, order, or action until the Commis-
sion can determine whether there was a preemption
under this Act. Judicial review of any regulation,
order, or enforcement under this paragraph shall be
in the Court of Appeals for the District of Columbia
Circuit.
(2) When a State applies or threatens to apply
any law, rule, regulation, or order to a federally cer-
tified insurer, an applicant for a Federal certificate,
or any affiliate of either on any basis different than
that applied to insurers that are not so regulated, or
takes any action contrary to paragraphs (1) and (2)
of subsection (b), the Commission may stay the ap-
plication of that law, rule, regulation, order, or ac-
tion if the Commission determines that a federally
certified insurer is thereby subject to discrimination
by such State. Any federally certified insurer af-
fected by the application of such rule, regulation,
order, or action may petition the Commission for a
stay or statement of preemption therefrom. Judicial
review of any Commission determination or stay
under this paragraph shall be in the Court of Ap-
peals for the District of Columbia Circuit.
(d) HIGHLY
CAPITALIZED
COMMERCIAL
INSUR-
ERS.—
(1) Notwithstanding the authority of States to
require federally certified insurers to comply with
those laws and regulations specified in subsection
(a), a federally certified insurer that is designated as
highly capitalized by the Commission may provide
commercial insurance coverage to a large insurance
buyer, and in such circumstance, shall be exempt as
to that coverage from any State law or regulation
specified in paragraphs (1) and (2) of subsection
(a).
(2) The Commission shall be responsible for the
establishment, by regulation, of the standards appli-
cable to highly capitalized insurers in the issuance of
an insurance policy to a large insurance buyer and
the settlement of any claims related thereto.
(3) The Commission shall be the only Federal
Government agency with jurisdiction over complaints
related to the conduct of highly capitalized insurers
as to the issuance of an insurance policy to a large
insurance buyer and the settlement of any claims re-
lated hereto. Each such policy must state, in a for-
mat approved by the Commission, that complaints
regarding the insurer are to be directed to the Com-
mission.
TITLE 
III—FEDERAL 
CERTIFI-
CATES TO PROVIDE REINSUR-
ANCE
SEC. 301. FEDERAL INSURANCE SOLVENCY COMMISSION
AUTHORITY TO CERTIFY PROVIDERS OF RE-
INSURANCE.
(a) IN GENERAL.—The Commission shall have the
authority to establish, by regulation, the standards and
procedures for granting certificates for professional rein-
surers under section 302 and certificates to provide rein-
surance for other reinsurers and insurers under section
303.
(b) COMMISSION DETERMINATION.—Upon submis-
sion of an application, the Commission shall examine the
information submitted and conduct such further examina-
tion and investigation, as it finds necessary, to determine
whether the applicant satisfies the requirements for a pro-
fessional reinsurer certificate under section 302 or a cer-
tificate to provide reinsurance under section 303. Upon
conclusion of its examination and investigation, the Com-
mission shall publish its findings and determination. Upon
a determination that the applicant has satisfied the appli-
cable requirements of section 302 or 303, the Commission
shall issue the appropriate certificate.
(c) ANNUAL REPORTS.—The Commission shall re-
quire each holder of a certificate to submit an annual re-
port of its financial condition and an annual report on the
condition of any trust fund regulated under section
303(c).
(d) QUALIFIED FINANCIAL INSTITUTION.—The Com-
mission shall establish, by regulation, appropriate criteria
for becoming a qualified financial institution for purposes
of the establishment of a trust fund under section 303(c).
Foreign banks with a United States presence may apply
for acceptance.
SEC. 302. CERTIFICATION OF PROFESSIONAL REINSURERS.
(a) IN GENERAL.—The Commission is authorized to
certify and otherwise regulate professional reinsurers. A
professional reinsurer shall be subject to regulation solely
by the Commission as to the business of reinsurance in
the United States.
(b) ESTABLISHMENT OF STANDARDS.—The Commis-
sion shall, by regulation, establish standards and proce-
dures for the certification and regulation of professional
reinsurers. Such standards shall give due consideration to
the public interest in providing secure reinsurance capac-
ity in the United States and to the need for promptly col-
lectible reinsurance recoverables.
(c) STANDARDS.—Certification standards for profes-
sional reinsurers promulgated by the Commission under
subsection (b) shall include the following:
(1) Minimum net worth requirements, risk-
based or otherwise, appropriate to the nature of the
reinsurance written by the different types and sizes
of reinsurers, except that the Commission shall set
the minimum at an amount not less than
$50,000,000 and shall establish additional net worth
requirements for appropriate categories of profes-
sional reinsurers based upon their operations, in-
cluding such factors as premium volume, volatility,
and loss development characteristics of the types of
reinsurance provided by such reinsurers. The Com-
mission shall adjust such minimum for inflation
every fifth year unless for good cause the Commis-
sion determines that it should be adjusted more fre-
quently.
(2) Appropriate standards for investments, re-
serves, and asset valuations relating to minimum net
worth, including percentage limitations for various
categories of investments; except that investments in
excess of minimum net worth and reserves shall be
subject to the prudent person standard.
(3) Limitations on the net amount of exposure
that may be retained on a single risk, based on the
amount of net worth.
(4) Accounting standards and standards for re-
serve valuation that will promote strong and appro-
priate financial monitoring.
(5) Liquidity requirements appropriate to the
nature of the reinsurance written.
(6) Requirements for annual reports by inde-
pendent accountants of financial statements report-
ing financial condition and financial activities.
(7) Limitations and controls on the use of rein-
surance, and standards for ceding, reporting on, and
credit for such reinsurance.
(8) Requirements for certification of loss re-
serves by actuaries and reports of such certification.
(9) Disclosure of all subsidiary and affiliate re-
lationships and the identity of all persons which con-
trol the professional reinsurer.
(10) Regulation of financial transactions within
holding company systems.
(11) Procedures for initial and special examina-
tions and for the annual financial review of financial
statements.
(12) Regulations under which a foreign insurer
or reinsurer may establish a United States branch
which may become a certified professional reinsurer.
(13) Minimum security deposit requirements for
United States branches of foreign insurers or rein-
surers that apply to become professional reinsurers.
(14) Appointment of an agent in the United
States upon whom may be served any lawful process
in any action, suit, or proceeding instituted by or on
behalf of any U.S. person and agreement that, in
the event such process may not be served upon the
appointed agent, process may be served upon the
Commission.
(15) Agreement, by a foreign professional rein-
surer, to submit to the jurisdiction and be bound by
the final order or judgment of any court of com-
petent jurisdiction in the United States.
(16) Procedures for ongoing monitoring and en-
forcement of compliance with Commission standards.
(17) Minimum standards as to the qualifica-
tions of the management of professional reinsurers.
(18) Minimum standards governing the fidu-
ciary duties of officers and directors of professional
reinsurers.
(19) Submission of an outline of current and
projected operations in the United States dem-
onstrating that the methods of operation are reason-
able, prudent, and do not present an undue risk to
the public.
(20) Demonstration of sufficient data process-
ing capability and capacity to meet all data collec-
tion and reporting requirements of the Commission.
(21) Submission of biographical information,
which shall be updated annually, demonstrating that
all directors and senior officers possess sufficient ex-
perience and good character to manage business af-
fairs in a competent and trustworthy manner.
(22) Disclosure requirements, in addition to
those enumerated above, for information to be pro-
vided to the Commission and the public.
(23) Such other standards as the Commission
determines to be necessary to evaluate and maintain
the sound financial condition of federally certified
professional reinsurers.
SEC. 303. CERTIFICATE FOR OTHER PROVIDERS OF REIN-
SURANCE.
(a) IN GENERAL.—The Commission is authorized to
issue a reinsurance certificate to insurers and to any rein-
surer that does not seek certification as a professional re-
insurer under section 302.
(b) ESTABLISHMENT
OF
QUALIFICATIONS.—The
Commission shall establish, by regulation, standards and
procedures for certification under this section.
(c) QUALIFICATIONS FOR CERTIFICATE.—To qualify
for a reinsurance certificate, an insurer or reinsurer must
meet one of the following 3 standards:
(1) The insurer or reinsurer shall have met the
national standards established under section 201
and have a State license to transact the business of
insurance or have a certificate of solvency issued by
the Commission under title II; and either—
(A) maintain a net worth which is not less
than a minimum set by the Commission
which—
(i) shall be no less than $5,000,000;
(ii) shall establish additional net
worth requirements for appropriate cat-
egories of reinsurers based upon their op-
erations, including such factors as pre-
mium volume, volatility, and loss develop-
ment characteristics of the types of rein-
surance provided by such reinsurers; and
(iii) shall ensure that reinsurance obli-
gations will be met; or
(B) in the case of a financially sound ap-
plicant that does not meet the net worth dollar
standard of subparagraph (A), obtain a waiver
of this minimum dollar standard if the Commis-
sion concludes that the applicant is sufficiently
financially sound, is able to pay its reinsurance
obligations, and has sufficient expertise to pro-
vide the type of reinsurance that it intends to
offer.
An applicant with a State license must have been
doing business in its State of domicile for at least
3 years unless the Commission for good cause shown
waives such 3-year operating requirement. The Com-
mission shall adjust for inflation the minimum es-
tablished in subparagraph (A) every fifth year unless
the Commission determines for good cause that it
should be adjusted more frequently.
(2) The insurer or reinsurer shall be authorized
by the law of its domiciliary jurisdiction to assume
reinsurance; demonstrate to the Commission that it
has sufficient assets and management experience so
that it can operate safely in the United States rein-
surance market in a way that will protect the public
interest; and maintain a trust fund in a qualified fi-
nancial institution which includes a trusteed surplus
for the protection of United States ceding insurers
and which is—
(A) for a single company, an amount not
less than its United States reinsurance liabil-
ities arising from reinsurance contracts entered
into after the date of enactment of this Act plus
$20,000,000;
(B) for an established group of individual
unincorporated underwriters regulated as a
group by its State or country of domicile, an
amount not less than the group’s United States
reinsurance liabilities arising from reinsurance
contracts entered into after the date of enact-
ment of this Act plus $100,000,000; or
(C) for a group of incorporated insurers
under common administration, and which has
continuously transacted an insurance or rein-
surance business outside the United States for
at least 10 years, in an amount not less than
the group’s United States reinsurance liabilities
arising from reinsurance contracts entered into
after the date of enactment of this Act plus
$100,000,000.
The Commission shall require additional amounts to
be held in a trust established under this paragraph
as a condition for initial or continued certification if
the Commission determines that such additional
amounts are required for the protection of United
States ceding insurers.
(3) The insurer or reinsurer shall be authorized
by the laws of its domiciliary jurisdiction to assume
reinsurance and demonstrate to the Commission that
it has sufficient assets and management experience
so that it will operate safely in the United States re-
insurance market in a way that will protect the pub-
lic interest and in addition complies with the follow-
ing:
(A) Holders of certificates will be required
to fund their obligations to United States
ceding insurers pursuant to subsection (e) for
such ceding insurers to be able to count such
reinsurance as an asset or deduction from li-
abilities on the ceding insurer’s financial state-
ments.
(B) In the event the Commission deter-
mines that the funding required by subsection
clean, irrevocable, unconditional, and automatically
renewable letters of credit issued by a qualified fi-
nancial institution, or any other appropriate assets,
whether United States or non-United States, the fair
market value of which can be readily ascertained
and which provide the stability necessary for ade-
quate protection of the trust beneficiaries.
(3) Assets may be held in trust by a qualified
financial institution the principal place of business of
which is outside the United States if the holder of
the certificate demonstrates that a beneficiary of the
trust can obtain immediate payment from a United
States branch, subsidiary, or representative office of
the institution.
(4) The trust instrument shall provide that
claims shall be paid with the concurrence of the
holder of the certificate or upon final order of any
court of competent jurisdiction in the United States.
The holder of the certificate may freely substitute
and withdraw assets in the trust so long as the value
of the assets maintained in the trust equals or ex-
ceeds the amount set forth in paragraph (2) or (3)
of subsection (c).
(5) The trustees of the trust shall report annu-
ally to the Commission and to the insurance com-
missioner of each ceding insurer’s State of domicile,
in writing, setting forth the balance of the trust,
providing an actuary’s opinion as to the reasonable-
ness of the trust reserves, listing the trust’s invest-
ments at the preceding year end, and certifying the
date of termination of the trust if so planned, or cer-
tifying that the trust shall not expire as to new busi-
ness prior to the next following December 31. The
trust shall remain in effect as long as there are out-
standing obligations under the reinsurance agree-
ments to which the trust pertains.
(6) The trust instrument shall provide that, in
the event the holder of the certificate is placed in su-
pervision, rehabilitation, or liquidation, or its equiva-
lent by its State or country of domicile, or if the
Commission determines, pursuant to regulations
adopted by the Commission, that the condition of
the holder is such that further transaction of busi-
ness will be hazardous to United States creditors or
to the public, the Commission may take control of
the trust in the manner described in title VII.
(7) The trust shall be subject to annual review
and initial and special examination by the Commis-
sion in the same manner as the Commission may ex-
amine certified reinsurers.
(e) REQUIREMENTS FOR THE FORM OF FUNDING
UNDER SUBSECTION (c).—The funds required by sub-
section (c)(3) may be in the form of—
(1) cash under the control of the ceding in-
surer;
(2) a clean, irrevocable, unconditional, and
automatically renewable letter of credit issued by a
qualified financial institution and held by the ceding
insurer; or
(3) other funding acceptable to the Commission.
(f) PREVIOUS REINSURANCE OBLIGATIONS.—As a
pre-condition for obtaining a certificate to provide reinsur-
ance on the basis of meeting the requirements of para-
graph (2) or (3) of subsection (c), the applicant shall be
required to demonstrate to the Commission that it has
adequately secured its reinsurance liabilities in existence
at the time of certification. The adequacy of the funding
of such previous reinsurance liabilities shall be subject to
the requirements of sections 402, 403, and 404 and shall
be reviewed by the Commission in determining the finan-
cial condition of the reinsurer in each annual review.
(g) ADDITIONAL REQUIREMENTS FOR A FOREIGN
APPLICANT.—Any foreign insurer or reinsurer applying
under this section for a reinsurance certificate shall meet
the following additional requirements:
(1) Have been doing business in its country of
domicile for at least 3 years, or be an affiliate of an
insurer or reinsurer which has been doing business
in its country of domicile for at least 3 years, unless
the Commission, for good cause shown, waives this
3-year operating requirement.
(2) File an annual financial statement with its
domiciliary regulator and have established satisfac-
tory evidence of good repute and financial integrity.
(3) File annually with the Commission a copy
of the financial statement provided to its domiciliary
regulator (if appropriate, translated from its original
language) and a report showing the volume of writ-
ten premiums assumed from United States insurers
in the past year and such other information as the
Commission, in its sole discretion, requires.
(4) File with the Commission a list identifying
its officers and directors (or similar principals) along
with biographical information for each, and provide
an annual update of this information.
(5) Agree to allow the Commission to examine
its books and records and to waive any protection it
has under any secrecy laws of its domiciliary juris-
diction, except that such examinations will only take
place upon the Commission’s showing of good cause
for concern about the financial soundness or sol-
vency of the subject entity.
(6) Appoint an agent in the United States upon
whom may be served any lawful process in any ac-
tion, suit, or proceeding instituted by or on behalf
of a domestic ceding insurer, and agree that, in the
event such process may not be served upon the ap-
pointed agent, process may be served upon the Com-
mission.
(7) Submit to the jurisdiction of any United
States court of competent jurisdiction for the resolu-
tion of any dispute arising out of a reinsurance
agreement with a domestic ceding insurer or to re-
spond to any allegations or charges made against it
by any United States Government official or agency
except that this paragraph does not override any
contractual agreement of the parties to resolve dis-
putes between them pursuant to other procedures.
SEC. 304. SUSPENSION AND REVOCATION OF FEDERAL
CERTIFICATE TO PROVIDE REINSURANCE.
(a) IN GENERAL.—The Commission shall suspend or
revoke the certificate of a professional reinsurer issued
under section 302 or a reinsurance certificate issued under
section 303 at any time the Commission determines the
standards for holding such certificate are no longer satis-
fied. The Commission shall provide the opportunity for a
hearing on the record before making a determination to
suspend or revoke such certificate.
(b) NOTICE OF SUSPENSION OR REVOCATION.—
(1) The Commission shall notify the State or
country of domicile of a certified professional rein-
surer or holder of a reinsurance certificate that the
certificate has been suspended or revoked. Such no-
tification shall be made at the earliest possible date.
(2) The holder of a certificate that is suspended
or revoked under subsection (a) shall immediately
notify all insurers and reinsurers from which it has
accepted cessions of such suspension or revocation.
SEC. 305. CREDIT FOR REINSURANCE.
(a) IN GENERAL.—Notwithstanding any provision of
State law to the contrary, any insurer certified by the
Commission or regulated for financial condition by a State
may count reinsurance as an asset or a deduction from
its liabilities on its annual financial statement only if the
provider of reinsurance, at the time such statement is
filed—
(1) holds a Federal certificate as a professional
reinsurer under section 302;
(2) holds a State insurance license or a Federal
certificate of solvency and is certified pursuant to
section 303(c)(1);
(3) maintains a United States trust fund and is
certified pursuant to section 303(c)(2); or
(4) is certified pursuant to section 303(c)(3)
and funds its obligations to ceding insurers and rein-
surers as required in section 303(e).
(b) LIMITATION ON CREDIT.—With regard to a rein-
surer certified pursuant to section 303(c)(3), a ceding in-
surer may count as an asset or deduction from liabilities
only that portion of the reinsurance which meets the
standards for funding under section 303(e). Such ceding
insurer may also not count as such an asset or deduction
any reinsurance secured by letters of credit, trust funds,
or other collateral if such sources of security are not trans-
ferred to it when due.
(c) CREDIT PENDING CERTIFICATION.—A United
States insurer may take credit for reinsurance from a rein-
surer that does not hold a professional reinsurer certificate
issued pursuant to section 302 or a reinsurance certificate
issued pursuant to section 303 only if—
(1) the reinsurer submits to the Commission a
complete application for a certificate within 30 days
of the coverage being placed;
(2) the reinsurer places all premiums in trust in
a qualified financial institution pending consider-
ation of its application, and provides evidence to the
Commission that all premiums from United States
ceding insurers have been placed in such trust;
(3) the reinsurer funds any liabilities pursuant
to reinsurance assumed in a manner consistent with
the requirements of section 303(e) and submits to
the Commission proof of such funding;
(4) the reinsurance agreement expressly pro-
vides that it may be canceled from inception or at
any subsequent time at the request of the Commis-
sion if the provider’s application for a certificate is
denied;
(5) the reinsurer is authorized in its State or
country of domicile to do an insurance business and
either has been doing business in its State or coun-
try of domicile for at least 3 years or is an affiliate
of an insurer which has been doing business in its
State or country of domicile for at least 3 years, ex-
cept that this 3 year operating requirement may be
waived by the Commission for good cause; and
(6) the ceding insurer has not, within the pre-
vious 3 years, taken a credit for reinsurance ceded
to the reinsurer pursuant to this subsection.
(d) PREEMPTION.—No State shall regulate credit for
reinsurance whether purchased by federally certified insur-
ers or insurers regulated for financial condition by a State.
The Commission shall have exclusive jurisdiction to regu-
late such credit.
(e) EXCEPTIONS.—Notwithstanding any other provi-
sion of this section, a ceding insurer may count as an asset
or deduction from liabilities—
(1) reinsurance of risks located in jurisdictions
within or without the United States where such rein-
surance is required by applicable law of that juris-
diction;
(2) reinsurance ceded to a reinsurer which is li-
censed by one or more States and which is ceded
to—
(A) a member of the same holding com-
pany system as the ceding insurer; or
(B) an underwriting pool of which the
ceding insurer is a member;
(3) risks ceded to a pool authorized or per-
mitted by a statute, regulation, or policy of the
United States or under an arrangement approved by
the Federal or a State government;
(4) risks of a parent or affiliate ceded to a pure
or group captive insurer or reinsurer where the cap-
tive’s obligations are funded or collateralized as pro-
vided in subsection (d) or (e) of section 303; or
(5) risks ceded to a risk retention group au-
thorized by and operating pursuant to the Liability
Risk Retention Act of 1986 (15 U.S.C. 3901 et seq.)
if the risk retention group’s obligations are funded
or collateralized as provided in subsection (d) or (e)
of section 303.
(f) EFFECT OF LOSS OF CERTIFICATION.—In the
event that the Commission suspends or revokes a certifi-
cate issued pursuant to this title or such certificate is lost
for any other reason, a ceding insurer may not count rein-
surance as an asset or a deduction from its liabilities on
its annual financial statement for any cessions made after
the date the certification ceases. For those cessions before
the loss of certification under this Act—
(1) a ceding insurer may continue to count as
an asset or deduction any funds withheld from such
reinsurer; and
(2) a ceding insurer may also continue to count
as an asset or deduction any unfunded reinsurance
for 90 days or such longer period as approved by the
Commission.
(1) With respect to any State law requiring evi-
dence of insurance or of financial responsibility, re-
insurance contracts made by a professional reinsurer
certified pursuant to section 302 or by the holder of
a reinsurance certificate issued pursuant to section
303 shall be accorded the same treatment as is ac-
corded to such contracts issued by insurers subject
to regulation for financial condition by that State.
(2) No State shall revoke, suspend, refuse to
issue, or refuse to renew any license, privilege, char-
ter, certificate, franchise, or any other right con-
ferred, guaranteed, or protected by law because an
insurer or reinsurer obtains or maintains a certifi-
cate to provide reinsurance from the Commission.
No tax, fee, or assessment of any kind may be im-
posed on an insurer or reinsurer certified by the
Commission in any manner or on any basis different
from that applied to other insurers by that State.
No corporate charter or franchise issued to an in-
surer or reinsurer certified by the Commission shall
be rendered invalid or subject to revocation, lapse, or
forfeiture merely by reason of the failure of an in-
surer or reinsurer certified by the Commission to ob-
tain a license or certificate of authority issued by a
State in addition to the certificate issued by the
Commission.
SEC. 307. CONSTRUCTION.
Nothing in this title shall be construed to conflict
with or override the agreement of the parties to a reinsur-
ance agreement to arbitrate their disputes if such obliga-
tion is created in the reinsurance agreement and would
not impair the financial soundness of the holder of a rein-
surance certificate issued under this title.
TITLE IV—REGULATORY
ENFORCEMENT
SEC. 401. AUTHORITY TO CONDUCT FINANCIAL EXAMINA-
TIONS OF INSURERS AND REINSURERS
(a) FEDERALLY CERTIFIED INSURERS AND REIN-
SURERS.—The Commission shall conduct examinations of
federally certified insurers and reinsurers. In the case of
a certification or surplus lines approval granted on the
basis of a trust fund or funding, the examination shall
be of such trust fund or funding.
(b) INSURERS REGULATED FOR FINANCIAL CONDI-
TION BY A STATE.—The State insurance regulator shall
conduct the examination of insurers subject to State regu-
lation for financial condition.
SEC. 402. PROCEDURES FOR FINANCIAL EXAMINATION OF
INSURERS AND REINSURERS
(a) COMMISSION ESTABLISHMENT OF PROCEDURES
FOR FINANCIAL EXAMINATIONS.—The Commission shall
establish, by regulation, procedures for an effective system
of examining the activities, operations, financial condition,
and affairs of insurers and reinsurers. The Commission
shall follow such procedures for federally certified insurers
and reinsurers and the State insurance regulator shall fol-
low such procedures for the examination of insurers under
the regulator’s responsibility.
(b) INITIAL APPLICATION AND EXAMINATION.—The
Commission or State insurance regulator shall conduct an
initial examination of every insurer or reinsurer that ap-
plies for a Federal certificate of solvency or State insur-
ance license to determine if the applicant satisfies the na-
tional standards established under section 201.
(c) MANDATORY REVIEW OF FINANCIAL STATEMENT
AND QUARTERLY UPDATE.—The Commission or State in-
surance regulator shall conduct a review of the annual fi-
nancial statement of each insurer or reinsurer to deter-
mine if the insurer or reinsurer continues to meet the na-
tional standards established under section 201 or if there
is reason to conduct a special examination under sub-
section (d). On a quarterly basis, each such insurer and
reinsurer shall file an abbreviated update of the informa-
tion contained in its annual financial statement. Such
quarterly update shall be in the form established by the
Commission. The Commission shall require such informa-
tion to be included in the quarterly filing as will allow the
Commission or State insurance regulator to detect any sig-
nificant changes in the financial condition of the insurer
or reinsurer.
(d) SPECIAL EXAMINATIONS.—In addition to the
mandatory review of the financial statement and quarterly
updates under subsection (c), the Commission or State in-
surance regulatory shall conduct a special examination of
an insurer or reinsurer whenever the Commission or State
insurance regulator, in its sole discretion, determines that
the insurer or reinsurer may be financially impaired, in
a financially hazardous condition, or for any other reason.
In determining the need for such examination, the Com-
mission or State insurance regulator shall consider—
(1) whether the insurers’ or reinsurers’ capital
has fallen by a material amount;
(2) whether the results of the annual review or
a review of the quarterly filings under this Act show
that financial problems exist, such as reasonableness
of reserves and changes in rates of growth;
(3) whether the asset portfolio is of sufficient
value or liquidity to assure the insurer’s or reinsur-
er’s ability to meet its outstanding obligations as
they mature;
(4) whether a material affiliate, subsidiary, or
reinsurer is financially impaired or in a financially
hazardous condition;
(5) whether there are material amounts of over-
due reinsurance recoverables;
(6) whether management has knowingly failed
to respond to inquiries relative to the condition of
the insurer or has knowingly furnished inadequate,
false, or misleading information;
(7) a significant increase in net premiums writ-
ten or in the ratio of net premiums to net worth;
and
(8) any other matters that the Commission has
determined to be relevant.
(e) SCOPE OF EXAMINATIONS.—
(1)(A) The initial and special examinations pro-
vided for under subsection (c) and (d) shall be con-
ducted in accordance with procedures and standards
established by the Commission by regulation and
shall include an on site examination when, in the
Commission’s or State insurance regulator’s sole dis-
cretion, necessary to assure proper review. These
regulations shall provide for a review of all the fi-
nancial records of the insurer or reinsurer that are
relevant to determining the financial condition of the
insurer or reinsurer after the Federal certificate or
State insurance license has been obtained.
(B) In order to most efficiently conduct initial
examinations on applications for a Federal certifi-
cate of solvency, the Commission shall provide for an
expedited examination process if applicants show
strong financial condition based on the following
considerations:
(i) The financial history of applicants and,
if relevant, their holding companies, including
historical ability to sustain unforeseen losses.
(ii) The current financial ratings of appli-
cants, and, if relevant, their holding companies.
(iii) The level of capitalization and reserves
of applicants and, if relevant, their holding
companies.
(iv) Such other factors as the Commission
determines to be relevant.
(2) The annual review required under sub-
section (c) shall consist of a focused review of basic
financial information to ensure continuing compli-
ance with the national standards established under
section 201 and to ensure that the insurer or rein-
surer remains in good financial condition. The an-
nual review shall include—
(A) a review of the insurer’s or reinsurer’s
audited financial statements, actuarial reports
of reserves, and management discussion and
analysis statement;
(B) an analysis of unusual variations in
annual results or unusual financial ratios in
documents described in subparagraph (A); and
(C) a review of management’s explanation
of questions concerning the documents de-
scribed in subparagraph (A) and of the unusual
variations of ratios described in subparagraph
(B).
The annual review shall be completed within 3
months of the filing of the insurer’s or reinsurer’s
annual report, or, if the Commission or State insur-
ance regulator has requested the management to
provide an explanation under subparagraph (C),
within one month after the additional explanation is
provided. The Commission or State insurance regu-
lator may extend these dates for good cause shown.
(f) COOPERATION WITH EXAMINATIONS.—
(1) In the course of an examination, each in-
surer, reinsurer, its holding company or affiliate
from which information is sought, and its officers
and directors must provide to the Commission or
State insurance regulator timely access to all books,
records, accounts, papers, documents, and any or all
computer or other recordings relating to the prop-
erty, assets, liabilities, business, and operations of
the insurer or reinsurer being examined. The refusal
to submit to such examination or to provide such in-
formation shall be grounds for revocation or
nonrenewal of the Federal certificate or State license
involved. Any Commission proceedings for revocation
or nonrenewal of a certificate shall include the op-
portunity for a hearing on the record. A State insur-
ance regulator shall follow the appropriate proce-
dures of State law for revocation and non-renewal.
(2) After an examination is completed, the
Commission or State insurance regulator shall have
the authority to use and, if appropriate, to make
public any examination, report on the examination,
or any other information discovered or developed
during the course of any examination in the further-
ance of any legal or regulatory action which the
Commission or State insurance regulator may, in its
sole discretion, determine to be appropriate. Nothing
in this Act shall limit any protection from disclosure
of proprietary information consistent with Federal or
State law.
(g) EXAMINATION REPORTS.—
(1) No later than 30 days following completion
of an examination under subsection (d) or (e) or the
annual review under subsection (c), the Commission
or State insurance regulator shall transmit a report
on the results to the insurer or reinsurer, together
with a notice which shall afford the insurer or rein-
surer a reasonable opportunity of not more than 30
days to make a written submission or rebuttal with
respect to any matters contained in the report.
(2) Within 30 days of the end of the period al-
lowed for the receipt of written submissions or
rebuttals, the Commission or State insurance regu-
lator shall fully consider the report, together with
any written submissions or rebuttals and any rel-
evant portions of the examiner’s workpapers, and
adopt the report as filed or with modifications.
(3) The insurer or reinsurer shall take any ac-
tion required by the Commission or State insurance
regulator to meet the requirements of this section
and to correct material deficiencies identified in the
examination report.
SEC. 403. ACCOUNTING STANDARDS AND INDEPENDENT
ACCOUNTANTS.
(a) ACCOUNTING STANDARDS.—The financial state-
ments of insurers and reinsurers shall be prepared in con-
formity with generally accepted accounting principles. In-
surers and reinsurers that obtain and maintain certificates
of solvency or State insurance license on the basis of trust
fund or funding mechanisms shall prepare the financial
statements as to such trust funds or mechanisms in con-
formity with these principles. The Commission may estab-
lish, by regulation, additional disclosure requirements ap-
plicable to reports required to be filed with it.
(b) INDEPENDENT ACCOUNTANTS.—Every insurer
and reinsurer shall retain an independent certified public
accountant or, in the case of a foreign certified insurer
or reinsurer, another independent person who is qualified,
as determined by the Commission under subsection (k),
to audit the financial statements of such insurer or rein-
surer in accordance with generally accepted auditing
standards.
(c) CORPORATE FINANCIAL RECORDS AND ACCESS
OF INDEPENDENT ACCOUNTANTS.—Every insurer and re-
insurer shall keep its financial records pursuant to rules
and regulations adopted by the Commission under this
section. The insurer or reinsurer shall provide the inde-
pendent accountant full access to all books, records, and
accounts that are relevant to preparing and auditing fi-
nancial statements and reports the insurer or reinsurer
submits to the Commission or the State insurance regu-
lator.
(d) OBLIGATIONS OF THE ACCOUNTANT.—If, in the
course of conducting any audit pursuant to this title, the
independent accountant detects or otherwise becomes
aware of information that the financial statements of the
insurer or reinsurer—
(1) are materially affected by irregularities;
(2) reveal an illegal act (whether or not per-
ceived to have a material effect on the insurer’s or
reinsurer’s financial statements or condition) has
been committed; or
(3) show that there is substantial doubt of the
insurer’s or reinsurer’s ability to continue to operate
as a going concern over the ensuing fiscal year;
the accountant shall comply with subsection (e).
(e) REPORT TO CORPORATE OFFICERS.—If the inde-
pendent accountant detects or becomes aware of informa-
tion described in subsection (d), the accountant shall, as
soon as practicable, inform the appropriate level of the in-
surer’s or reinsurer’s management and assure that the in-
surer’s or reinsurer’s audit committee or board of direc-
tors in the absence of such a committee, is adequately in-
formed with respect to any condition described in sub-
section (d) that has been detected or otherwise come to
the attention of such accountant in the course of the audit,
unless the condition is clearly inconsequential.
(f) RESPONSE TO FAILURE TO TAKE REMEDIAL AC-
TION.—If, after 45 days, having first assured itself that
the audit committee or the board (in the absence of an
audit committee) is adequately informed with respect to
the condition described in subsection (d), the independent
accountant concludes that—
(1) any such condition has a material effect on
the financial statements of the insurer or reinsurer,
(2) senior management has not taken, and the
board of directors has not caused senior manage-
ment to take, timely and appropriate remedial ac-
tions with respect to such condition, and
(3) the failure to take remedial action is reason-
ably expected to warrant departure from a standard
auditor’s report, when made, or warrant resignation
from the audit engagement,
the independent accountant shall as soon as practicable
report its conclusions directly to the board of directors.
(g) NOTICE TO COMMISSION; RESPONSE TO FAILURE
TO NOTIFY.—An insurer or reinsurer the board of direc-
tors of which has received a report pursuant to subsection
(f) shall inform the Commission or the State insurance
regulator by notice within 5 business days of receipt of
such report and shall furnish the independent accountant
making such report with a copy of the notice furnished
the Commission or the State insurance regulator. If the
accountant making such report shall fail to receive a copy
of such notice within the required 5-business-day period,
the accountant shall—
(1) resign from the engagement; or
(2) furnish to the Commission or the State in-
surance regulator a copy of its report (or the docu-
mentation of any oral report given) within the 5
business days following such failure to receive notice.
(h) REPORT AFTER RESIGNATION.—An independent
accountant electing resignation shall, within the 10 busi-
ness days following a failure by an insurer or reinsurer
to notify the Commission or the State insurance regulator
under subsection (g), furnish to the Commission or the
State insurance regulator a copy of the accountant’s re-
port (or the documentation of any oral report given).
(i) RELIEF FROM CIVIL LIABILITY.—No independent
accountant shall be liable in a private action for any find-
ing, conclusion, or statement expressed in a report made
pursuant to subsection (g) or (h), including any rules pro-
mulgated by the Commission pursuant thereto.
(j) CIVIL PENALTIES IN CEASE-AND-DESIST PRO-
CEEDINGS.—If the Commission finds, after notice and op-
portunity for a hearing, that an independent accountant
has willfully violated subsection (g) or (h), the Commission
may impose a civil penalty against the accountant and any
other person that the Commission finds was a cause of
such violation. The State insurance regulator may take
such action as is authorized by State law.
(k) REGULATIONS AND STANDARDS.—
(1) The Commission shall establish, by regula-
tion, procedures to be followed by independent ac-
countants in complying with subsections (g) and (h).
(2) The Commission shall establish by regula-
tion, the standards and procedures by which a per-
son who is not a certified public accountant in the
United States may become qualified to act as an
independent accountant for a foreign insurer or rein-
surer under subsections (g) and (h). Such standards
shall be substantially similar or equivalent to those
for certified public accountants in the United States.
(3) Foreign insurers and reinsurers applying
for or holding a Federal certificate on the basis of
the trust fund or funding mechanisms of paragraphs
(2) and (3) of section 303(c), respectively, shall not
generally be required to reconstruct the financial
statements filed with their domestic regulators to
conform to generally accepted accounting principles
in the United States, although the Commission may
generally require explanations of the accounting
practices of foreign domiciliaries.
(l) DEFINITIONS.—As used in this section, the term
‘‘illegal act’’ means any action or omission to act that
might have an adverse material effect on the financial con-
dition of an insurer or reinsurer and that violates any law
or any rule or regulation having the force of law.
SEC. 404. ACTUARIES.
(a) REQUIREMENT TO USE QUALIFIED ACTUAR-
IES.—The Board of Directors of each insurer and rein-
surer shall appoint an actuary who is qualified to issue
an opinion on the reasonableness of the reserves of such
insurer or reinsurer. A qualified actuary is a person who
is a member in good standing of the American Academy
of Actuaries or someone who is otherwise qualified as de-
termined by the Commission. The Board of Directors of
the certified insurer or reinsurer shall notify the Commis-
sion or the State in
surance regulator of the name of
the appointed actuary at the time of the appointment and
shall notify the Commission or such regulator within 10
days when an appointed actuary is dismissed, resigns, or
otherwise leaves the position.
(b) STANDARDS FOR RESERVE ASSESSMENT.—Every
insurer and reinsurer shall have its actuarial liabilities
analyzed and its reserves, as defined by the Commission,
evaluated pursuant to rules and regulations adopted by
the Commission and shall file with its annual financial
statements a report describing the conclusions of the anal-
ysis. Such evaluation shall be done and such report of con-
clusions shall be written by the appointed actuary pursu-
ant to guidelines, standards, procedures, and forms to be
adopted by the Commission through its rulemaking proc-
ess. For an insurer or reinsurer certified or licensed on
the basis of a trust fund or funding mechanism, the actu-
ary’s report shall cover only those liabilities required to
be held within the trust funds or for the funding.
(c) ACCESS TO CORPORATE DOCUMENTS.—Every in-
surer or reinsurer shall provide its appointed actuary with
full access to all financial data of the insurer or reinsurer
that is relevant to evaluating reserves. The actuary shall
provide annually to the Board of Directors of the insurer
or reinsurer a written report of the actuarial analysis and
findings on which the evaluation of the reasonableness of
reserves was based. Such written report shall conform to
standards promulgated by the Actuarial Standards Board
and such other requirements as may be adopted through
rules of the Commission.
(d) REPORT TO CORPORATE OFFICERS.—If at any
time, in the opinion of the appointed actuary, reserves fall
below the range of reasonable estimates, then the actuary
shall, within 10 days, notify in writing the chief executive
officer and the Chairman or the Board of Directors of this
opinion.
(e) REPORT BY THE CORPORATION.—If the chief ex-
ecutive officer and chairman of the Board of Directors of
an insurer or reinsurer receive a notice from the appointed
actuary under subsection (d), such officer and chairman
shall, within 90 days, either correct the deficiency or ob-
tain an assessment from an independent qualified actuary
of the reasonableness of the appointed actuary’s opinion.
If the opinion of the independent actuary is that the re-
serves are deficient, the insurer or reinsurer, within 45
days after receipt of such assessments, shall implement
a plan to correct the reserve deficiency. The appointed ac-
tuary and the independent actuary shall be provided with
written notice of the corrective actions taken. If a remedial
plan is not implemented within such 45 days, the chief
executive officer and chairman of the Board of Directors
shall immediately notify the Commission or the State in-
surance regulator in writing of the deficiency and shall
furnish to the Commission or such regulator in writing
true and complete copies of all actuarial reports, opinions,
and assessments received by the insurer or reinsurer since
the last filed annual financial statement.
(f) REPORT BY THE ACTUARY.—If the chief executive
officer and chairman of the Board of Directors do not pro-
vide evidence to each actuary consulted that the remedial
plan has been implemented within the 135 days provided
in subsection (e), each such actuary shall immediately no-
tify the Commission or the State insurance regulator in
writing of the actuary’s opinion provided to the Board that
the reserves may be deficient.
(g) RELIEF FROM CIVIL LIABILITY.—An actuary
who in good faith complies with the reporting require-
ments of subsection (f) shall not be liable in any civil ac-
tion for damages attributable to such reporting.
(h) REGULATIONS.—The Commission shall issue reg-
ulations to be followed by property and casualty and life
and health insurers and reinsurers and by appointed actu-
aries in complying with this title.
SEC. 405. REGISTRATION OF INSURERS AND REINSURERS
IN HOLDING COMPANIES.
(a) REGISTRATION
OF HOLDING COMPANY STA-
TUS.—Each insurer or reinsurer that is incorporated or,
in the case of a United States branch of a foreign insurer
or reinsurer, established pursuant to the laws of the Unit-
ed States or any State thereof, and is part of a holding
company system shall file with the Commission, if the in-
surer or reinsurer is federally certified, or the State insur-
ance regulator, if the insurer or reinsurer is regulated for
financial condition by a State, information as to the struc-
ture and members of such system as provided by this sec-
tion. The Commission shall establish, by regulation, the
form and contents of the filings of such information.
(b) ALTERNATIVE REGISTRATION FOR FOREIGN IN-
SURERS OR REINSURERS.—Each foreign insurer or rein-
surer that is subject to holding company registration re-
quirements and standards adopted by statute or regula-
tion in the jurisdiction of its domicile which are substan-
tially similar to those established under this section shall
file with the Commission or State insurance regulator a
copy of its domiciliary registration. The Commission or
State insurance regulator shall determine if the foreign
registration requirements and standards of the jurisdiction
of domicile are substantially similar to those established
under subsection (a). If the Commission or State insur-
ance regulator determines that such filing is not substan-
tially similar, the foreign insurer or reinsurer shall file in-
formation as required by subsection (a).
(c) TIME OF REGISTRATION.—Any insurer or rein-
surer that is subject to registration under this section shall
register within 15 days after it becomes subject to reg-
istration, and shall update this registration annually
thereafter at the time it files its annual statement with
the Commission or the State insurance regulator. The
Commission or the State insurance regulator for good
cause may extend the time for registration.
SEC. 406. ACQUISITION OF CONTROL OF OR MERGER WITH
AN INSURER OR REINSURER.
(a) FEDERALLY CERTIFIED INSURERS AND REIN-
SURERS.—The Commission shall review any acquisition of
control over or merger with a federally certified insurer
or reinsurer. No such acquisition or merger shall be con-
summated without first obtaining the approval of the
Commission. Any such acquisition or merger shall be dis-
approved if it would threaten the financial stability, sound-
ness, or solvency of such insurer or reinsurer. In the event
of a change of control of a foreign insurer or reinsurer
certified on the basis of a trust fund or funding mecha-
nism, the existing certification shall become contingent
upon the review of the impact of the transaction upon the
ability of such insurer or reinsurer to continue to meet
the standards for certification.
(b) INSURERS REGULATED FOR FINANCIAL CONDI-
TION BY A STATE.—The State insurance regulator shall
review any acquisition of control over or merger with an
insurer or reinsurer subject to State regulation for finan-
cial condition. No such acquisition or merger shall be con-
summated without first obtaining the approval of the
State insurance regulator. Any such acquisition or merger
shall be disapproved if it would threaten the financial sta-
bility, soundness, and solvency of the insurer or reinsurer.
In the event of a change of control of a foreign insurer
or reinsurer licensed on the basis of a trust fund or fund-
ing mechanism, the existing license shall become contin-
gent upon the review of the impact of the transaction upon
the ability of such insurer or reinsurer to continue to meet
the standards for licensing
(c) PROCEDURES FOR REVIEW OF ACQUISITION AND
MERGER.—
(1) IN GENERAL.—The Commission shall estab-
lish, by regulation, the procedures and information
that must be provided to the Commission or the
State insurance regulator so that it may make a de-
cision as to the appropriateness of any acquisition or
merger. This information shall be provided to the
Commission or the State insurance regulator under
oath or affirmation.
(2) DISAPPROVAL.—In making a determination
to disapprove an acquisition or merger, the Commis-
sion or the State insurance regulator shall con-
sider—
(A) the financial condition of the acquiring
person;
(B) the trustworthiness of the acquiring
person or any of its officers or directors;
(C) a plan for the proper and effective con-
duct of the insurer’s or reinsurer’s operations;
(D) the source of the funds or asset for the
acquisition;
(E) the fairness of any exchange of shares,
assets, cash, or other consideration for the
shares or assets to be received; and
(F) whether the acquisition is likely to be
hazardous or prejudicial to the insurer’s policy-
holders or the insurer’s or reinsurer’s share-
holders.
(d) NOTICE
TO AFFECTED INSURER
OR REIN-
SURER.—If a person intends to make an offer or enter
into an agreement to acquire control of or merge with an
insurer or reinsurer, such person shall provide to the af-
fected insurer or reinsurer, at the same time it files with
the Commission or the State insurance regulator under
this section, a copy of such filing.
(e) FILING REQUIREMENTS.—Any person, other than
the issuer, that —
100
(1)(A) makes a tender offer for or a request or
invitation for tenders or a solicitation of proxies of
as to an insurer or reinsurer; or
(B) enters into any agreement to exchange se-
curities or, seeks to acquire, or acquires, in the open
market or otherwise, or solicits proxies for any vot-
ing security of an insurer or reinsurer when, after
the consummation thereof, such person would, di-
rectly or indirectly (or by conversion or by exercise
of any right to acquire) be in control of such insurer
or reinsurer; and
(2) intends to enter into an agreement to merge
with or otherwise to acquire control of an insurer or
reinsurer or any person with control thereof,
shall, at the time any such offer, request, or invitation is
made or any such agreement or merger is entered into,
or prior to the acquisition of such securities if no offer
or agreement is involved, file with the Commission or the
State insurance regulator the information required under
this section.
(f) APPROVAL OF ACQUISITION OR MERGER.—After
reviewing the information provided under this section, the
Commission or the State insurance regulator shall dis-
approve any acquisition or merger unless it finds, after
providing the opportunity for a hearing on the record, that