(3) revoke the designation of any servicing facility if he finds claims are being handled unsatisfactorily.

(c) All final orders or decisions of the Commissioner made under this Act shall be subject to review by the District of Columbia Court of Appeals under section 11-742 of the District of Columbia Code.

SEC. 110. (a) Any person recovering under this title shall be deemed to have assigned his rights under the policy to the Association to the extent of his recovery from the Association. Every insured or claimant seeking the protection of this title shall cooperate with the Association to the same extent as such person would have been required to cooperate with the insolvent insurer. The Association shall have no cause of action against the insured of the insolvent insurer for any sums it has paid out except such causes of action as the insolvent insurer would have had if such sums had been paid by the insolvent insurer. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the Association shall not operate to reduce the insured's liability to the receiver, liquidator, or statutory successor for unpaid assessments.

(b) The receiver, liquidator, or statutory successor of an insolvent insurer shall be bound by settlements of covered claims by the Association or a similar organization in another State. The Court having jurisdiction shall grant such claims priority equal to that which the claimant would have been entitled in the absence of this title against the assets of the insolvent insurer.

(c) The Association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the Association which shall preserve the rights of the Association against the assets of the insolvent insurer.

SEC. 111. (a) Any person having a claim against an insurer under any provision in an insurance policy, other than a policy of an insolvent insurer which is also a covered claim, shall be required to exhaust first his right under such policy. Any amount payable on a covered claim under this title shall be reduced by the amount of any recovery under such insurance policy.

(b) Any person having a claim which may be recovered under more than one insurance guaranty association or its equivalent shall seek recovery first from the association of the place of residence of the insured except that if it is a first party claim for damage to property with a permanent location, he shall seek recovery first from the association of the location of the property, and if it is a workmen's compensation claim, he shall seek recovery first from the association of the residence of the claimant. Any recovery under this title shall be reduced by the amount of recovery from any other insurance guaranty association or its equivalent.

SEC. 112. To aid in the detection and prevention of insurer insolvencies(a) it shall be the duty of the Board of Directors, upon majority vote, to notify the Commissioner of any information indicating any member insurer may be insolvent or in a financial condition hazardous to the policyholders or the public;

(b) the Board of Directors may, upon majority vote, request that the Commissioner order an examination of any member insurer which the Board in good faith believes may be in a financial condition hazardous to the policyholders or the public. The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by such persons as the Commissioner designates. The cost of such examination shall be paid by the Association and the examination report shall be treated as are other examination reports. In no event shall such examination report be released to the Board of Directors prior to its release to the public, but this shall not preclude the Commissioner from complying with subsection (c) of this section. The Commissioner shall notify the Board of Directors when the examination is completed. The request for an examination shall be kept on file by the Commissioner but it shall not be open to public inspection prior to the release of the examination report to the public; (c) it shall be the duty of the Commissioner to report to the Board of Directors when he has reasonable cause to believe that any member insurer examined or being examined at the request of the Board of Directors may be insolvent or in a financial condition hazardous to the policyholders or the public;

(d) the Board of Directors may, upon majority vote, make reports and recommendations to the Commissioner upon any matter germane to the solvency, liquidation, rehabilitation or conservation of any member insurer. Such reports and recommendations shall not be considered public documents;

(e) the Board of Directors may, upon majority vote, make recommendations to the Commissioner for the detection and prevention of insurer insolvencies; and

(f) the Board of Directors shall, at the conclusion of any insurer insolvency in which the Association was obligated to pay covered claims, prepare a report on the history and causes of such insolvency, based on the information available to the Association, and submit such report to the the Commissioner.

SEC. 113. The Association shall be subject to examination and regulation by the Commissioner. The Board of Directors shall submit, not later than March 30 of each year, a financial report for the preceding calendar year on a form approved by the Commissioner.

SEC. 114. The Association shall be exempt from payment of all fees and all taxes levied by the District of Columbia, except taxes levied on real or personal property.

SEC. 115. The rates and premiums charged for insurance policies to which this title applies shall include amounts sufficient to recoup a sum equal to the amounts paid to the Association by the member insurer less any amounts returned to the member insurer by the Association and such rates shall not be deemed excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer.

SEC. 116. There shall be no liability on the part of, and no cause of action of any nature shall arise against, any member insurer, the Association or its agents or employees, the Board of Directors, or the Commissioner or his representatives for any action taken by them in the performance of their powers and duties under this title.

SEC. 117. All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in the District shall be stayed for 60 days from the date the insolvency is determined to permit proper defense by the Association of all pending causes of action. As to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the insolvent insurer or its failure to defend an insured, the Association either on its own behalf or on behalf of such insured may apply to have such judgment, order, decision, verdict or finding set aside by the same court or administrator that made such judgment, order, decision, verdict or finding and shall be permitted to defend against such claim on the merits.

SEC. 118. (a) The Commissioner shall by order terminate the operation of the District of Columbia Insurance Guaranty Association as to any kind of insurance afforded by property or casualty insurance policies with respect to which he has found, after hearing, that there is in effect a statutory or voluntary plan which:

(1) is a permanent plan which is adequately funded or for which adequate funding is provided; and

(2) extends or will extend to District of Columbia policyholders and residents protection and benefits with respect to insolvent insurers not substantially less favorable and effective to such policyholders and residents and the protection and benefits provided with respect to such kind of insurance under this title.

(b) The Commissioner shall by the same such order authorize discontinuance of future payments by insurers to the District of Columbia Insurance Guaranty Association with respect to the same kinds of insurance: Provided, That assessments and payments shall continue, as necessary, to liquidate covered claims of insurers adjudged insolvent prior to said order and the related expenses not covered by such other plan.

(c) In the event the operation of any account of the District of Columbia Insurance Guaranty Association shall be so terminated as to all kinds of insurance otherwise within its scope, the Association as soon as possible thereafter shall distribute the balance of moneys and assets remaining in said account

(after discharge of the functions of the Association with respect to prior insurer insolvencies not covered by such other plan, together with related expenses) to the insurers which are then writing in the District policies of the kinds of insurance covered by such account, and which had made payments into such account, prorata upon the basis of the aggregate of such payments made by the respective insurers to such account during the period of five (5) years next preceding the date of such order. Upon completion of such distribution with respect to all of the accounts specified in section 105, this title shall be deemed to have expired.

SEC. 119. The Commissioner is authorized to delegate any of the functions vested in him by this title.

TITLE II-AMENDMENT OF THE LIFE INSURANCE ACT OF THE DIS. TRICT OF COLUMBIA TO INCREASE CAPITAL REQUIREMENTS OF LIFE INSURANCE COMPANIES

SEC. 201. Section 8, chapter III of the Life Insurance Act (48 Stat. 1145) as amended (D.C. Code, sec. 35–508 (a)), is amended by striking out the figure "$200,000" in the first sentence thereof and inserting in lieu thereof the figure "$1,000,000".

SEC. 202. (a) Subsection (10) (b) (ii) of section 35 of chapter III of the Life Insurance Act of the District of Columbia (48 Stat. 1145) as amended (D.C. Code, sec. 35-535 (10) (b) (ii)), is amended by striking out the figure "$300,000" and inserting in lieu thereof the figure "$1,500,000".

(b) Subsection (15) (ii) of section 35 of chapter III of such Act, as amended (D.C. Code, sec. 35–535 (15) (ii)), is amended by striking out the figure "$300,000" and inserting in lieu thereof the figure "$1,500,000".

SEC. 203. This title shall take effect thirty days after its enactment. TITLE III-AMENDMENT OF THE LIFE INSURANCE ACT OF THE DISTRICT OF COLUMBIA TO INCREASE GROUP TERM LIFE INSURANCE AMOUNT LIMITATIONS

SEC. 301. Sections 10(1) (d), 10(3)(d), 10(4)(d), 10(6)(d), and 10(9)(d) of chapter V of the Life Insurance Act 48 Stat. 1145, as amended D.C. Code, secs. 35-710(1)(d), (3)(d), (4)(d), (6)(d), and (9)(d)), are amended (1) by striking out the figure "$20,000" and inserting in lieu thereof the figure "$25,000"; (2) by striking out the figure "$40,000" and inserting in lieu thereof the figure "$75,000"; and (3) by striking out the figure "150" and inserting in lieu thereof the figure "300".

TITLE IV-AMENDMENT OF THE FIRE AND CASUALITY ACT REGULATING THE BUSINESS OF FIRE, MARINE, AND CASUALTY INSURANCE IN THE DISTRICT OF COLUMBIA

SEC. 401. Sections 13 and 14 of chapter II of the Fire and Casualty Act (54 Stat. 1070) as amended (D.C. Code, secs. 35-1316 and 35-1317), are amended to read as follows:

"SEC. 13. MINIMUM CAPITAL AND SURPLUS REQUIREMENT. Every stock company authorized to do business in the District shall have and shall at all times maintain a paid-up capital stock of not less than $300,000, and a surplus of not less than $300,000. Every domestic mutual company and every domestic reciprocal company shall have and shall at all times maintain a surplus of not less than $300,000, and every foreign or alien mutual company and every foreign or alien reciprocal company shall have and shall at all times maintain a surplus of not less than $400,000.

"SEC. 14. CORPORATIONS HERETOFORE FORMED. No company shall be exempt from the provisions of this subsection by reason of its having been incorporated in the District or elsewhere prior to the effective date of this subsection, except that, in the case of companies authorized in the District on the date of approval of this subsection, and continuously thereafter without any increase of authority, the minimum capital and surplus required of a stock company, and the minimum

surplus required of a mutual or reciprocal company, or of a Lloyd's organization by the District heretofore applicable shall not be increased by this subsection, and provided also that in the case of such continuously authorized companies the provisions of section 24 relating to the names of companies, and the provisions of section 25 relating to the amount of surplus necessary to the issuance of policies having no provision for contingent liability, shall not be applicable." SEC. 402. Section 25 of chapter II of the Fire and Casualty Act (54 Stat. 1070; D.C. Code, sec. 35-1329) is amended by striking out the figure "$300,000" and inserting in lieu thereof the figure "$600,000".

TITLE V-AMENDMENT OF AMOUNT OF CONTRACT WITH THE GOVERNMENT OF THE DISTRICT OF COLUMBIA FOR WHICH A SURETY BOND IS REQUIRED

SEC. 501. The Act approved June 28, 1906 (34 Stat. 546), as amended (D.C. Code, sec. 1-805), is amended by striking out the figure "$2,000" wherever it appears therein and inserting in lieu thereof the figure “$10,000”.

Mr. WATT. S. 2208 would close certain gaps that now exist in the regulation of insurance in the District. Most importantly, title I of the bill would establish a fund to protect District residents in the event their insurance company becomes insolvent. The provisions of title I are based on a model law developed by the National Association of Insurance Commissioners which has been adopted in some form in all but seven States.

Title I creates a District of Columbia insurance guaranty association which would have the same rights, duties, and obligations in regard to adjusting and settling claims that an individual company would have had if it had not become insolvent. The association would provide a means for prompt payment of outstanding claims to individuals in the event of a company insolvency. The association's insolvency fund would be financed through assessments levied on all the licensed insurers in the District. The District of Columbia association, under the provisions of S. 2208, would be terminated in the event legislation is enacted creating a national guaranty fund with comparable protection for the insured.

We feel this legislation is a necessary safeguard to assure that District residents have the same protection against financial loss as residents of other States.

As an additional protection against the possibility of company insolvency, titles II and IV of S. 2208 increase the amount of capital and surplus requirements of life insurance companies and fire and casualty companies operating in the District. Since submission of this legislation, we have again reviewed capital and surplus requirements in other States and have found they have increased substantially. I would recommend, therefore, that S. 2208 be modified to bring the bill in line with other jurisdictions and I have attached to my statement the technical amendments to accomplish such a result. I have also attached charts showing the comparison between the District's present and proposed requirements and those in other States.

Title III of S. 2208 would increase the amount of coverage available under group term life policies. Again, the change brings the District into line with other States.

In an insurance-related matter, title V would increase to $10,000 the amount of a contract for which a contractor with the District government is required to obtain a surety bond.

The present law requires that the contractor obtain bonds in all contracts with the District over $2,000. Surety bonds are a device to protect the party for whom the work is being done, in this case the District government, but from the time of the original statute in 1906 the law has always allowed for a minimum under which no bond is required. In order to maintain the degree of flexibility envisioned in the original statute and to compensate for the effects of inflation, we are proposing an increase to $10,000. This more realistic figure will also allow the District greater latitude in dealing with small contractors for whom bonding is sometimes difficult to obtain.

Thank you.

(The attachments follow:)