Any refusal to issue a certificate hereunder shall be by a written order issued by the Commission, which order shall specify the factual conclusions and legal authority on which the refusal is based.

(2) At any time within the ninety-day period or extension specified in paragraph (1)(A) of this subsection, the Commission may, upon notice of not less than ten days, hold a hearing in the manner provided in section 206 (f) not less than thirty days nor more than ninety days after such notice inquiring into the financial condition of such applicant or any affiliated or related person or upon the fitness of such applicant to receive a certificate, and notice of such hearing shall stay the running of the time specified in paragraph (1). Such notice shall specify explicitly the matters to be considered and the persons to be examined at such hearing. Failure of the applicant or any affiliated or related person to whom notice was provided to appear at such hearing may be deemed to be an abandonment of the application for a certificate.

(i) (1) The Commission may revoke or suspend a certificate granted hereunder

(A) upon the request of the federally guaranteed insurer;

(B) because of the insurer's willful or persistent violation of law or regulation; or

(C) for any reason which, had it existed or been known, would have justified the Commission's refusal to issue the certificate originally.

(2) A revocation or suspension of a certificate shall be effected by a written order issued by the Commission, and served upon the federally guaranteed insurer, which order shall set forth the factual conclusions and legal authority upon which the revocation or suspension is based.

(3) The Corporation shall give any federally guaranteed insurer thirty days written notice of its intention to revoke or suspend its certificate and provide an opportunity to correct the deficiencies in its operation which are stated in the notice as grounds for revocation or suspension. Any federally guaranteed insurer, prior to or after revocation or suspension of its certificate, shall, upon request, be granted an opportunity for a hearing, which shall be conducted in accord with the provisions set forth in section 206 (f), to contest such decision.

(4) (A) Upon the revocation or suspension of a certificate as provided herein, or upon its surrender by a federally guaranteed insurer, all policy obligations of the insurer on policies issued or renewed while the license was in force shall cease to be guaranteed on the earliest of the following dates:

(i) the next renewal date;

(ii) the policy anniversary date;

(iii) the effective date of cancellation of the policy; or

(iv) one year from the effective date of the revocation, suspension, or surrender of the Federal guaranty certificate.

(B) The policyholder of any policy guaranteed hereunder shall be given written notice not less than sixty days prior to the loss of guaranty status on its policy. (j) (201) Investments of a federally guaranteed insurer, other than an insurer chartered under section 201, shall be regulated, in general, by the laws and regulations of such insurer's State of domicile and the laws and regulations of the States in which it transacts insurance unless the Commission shall determine, after hearing, that the laws or regulations of such State or States fail to require that the minimum policyholders' surplus and reserve liabilities, including the loss reserves, unearned premium reserve, and mortality and morbidity reserve, of such insurer be covered, to a reasonable degree, by admissible assets of sufficient integrity and stability, or that any such insurer is not required to comply with, and does not comply with, the current investment laws or regulations of its State of domicile. Upon making such finding, the Commission shall issue such order as is necessary to bring the insurer's investments into compliance with the standards established by this section within a reasonable length of time or to terminate its status as a federally guaranteed insurer for its failure to do so. For the purpose of carrying out its functions under this section, the Commission is authorized to issue a subpena requiring the insolvent insurer to furnish such books, records, or other materials as it deems necessary, and in the event of a refusal to comply therewith, the Commission may invoke the aid of any United States district court having jurisdiction of a district in which the insurer can be found. Refusal of insurer to obey any court order issued pursuant to any proceeding hereunder may be punished by the court as a contempt thereof.

(k) A federally guaranteed insurer shall be exempt from the provisions of

the laws of any State which require the participation of insurers in any State insolvency guaranty plan whereby such insurers are required to assume obligations of other insurers in the event of the insolvency or other financial impairment of such other insurers.

SATISFACTION OF GUARANTEED OBLIGATIONS

SEC. 104. (a) Whenever any federally guaranteed insurer has been adjudicated an insolvent insurer, the Commission shall, through its own facilities, through the facilities of a State supervisory authority or through the facilities of independent contractors retained by the Commission, satisfy all valid guaranteed obligations in the following manner:

(1) The Commission shall investigate, examine, adjust, compromise, or settle all claims arising from guaranteed obligations as quickly as possible in order to provide the public the insurance protection that would have been available but for the liquidation.

(2) Any defense against any claim under this section which was available to the insolvent insurer shall be available to the Commission.

(3) The Commission is authorized to defend any action pending or brought against the policyholder or the insured of the insolvent federally guaranteed insurer for an insurable event occurring before or fifteen days after the date of issuance of the liquidation order.

(b) The Commission shall be entitled to any valid claim against the liquidator up to an amount equal to the liabilities of such insurer paid by the Commission plus the expenses of discharging the federally guaranteed insurer's obligations under guaranteed policies. Payment of such claim shall follow the normal order of distribution of the liquidation laws of the State.

(c) The Commission shall, to the maximum extent practicable, pay any valid guaranteed claim through other insurers to which the policies giving rise to the claim have been assigned.

PROCEDURES TO AVOID DEFAULT OR TO FACILITATE THE MERGER OR CONSOLIDATION OF A FEDERALLY GUARANTEED INSURER

SEC. 105. (a) Whenever in the judgment of the Commission, such action will reduce the risk or avert a threatened loss to the Federal Insurance Guaranty Fund and will facilitate a merger or consolidation of a federally guaranteed insurer with another such insurer, or will facilitate the sale of the assets of the insurer to and the assumption of its liabilities by another such insurer, or will help to avoid the default of such an insurer, the Commission may, upon such terms and conditions as it may prescribe, make loans secured in whole or in part by assets of such insurer, which loans may be subordinated to the rights of policyholders and other creditors, or the Commission may purchase any such assets or guarantee any other such insurer against loss by reason of its assuming the liabilities in purchasing the assets of such insurer. Any such insurer or the receiver thereof is authorized to contract for such sales or loans and to pledge any such assets to secure such loans.

(b) Any agreement entered into by a federally guaranteed insurer which tends to diminish or defeat the right, title, or interest of the Commission in any asset acquired by it under this section either as security for a loan or by purchase shall be valid against the Commission only if such agreement—

(1) is in writing;

(2) was executed by the insurer and the person claiming an interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the insurer;

(3) was approved by the board of directors of the insurer which approval must be reflected in the minutes of such board; and

(4) was continuously, from the time of its execution, an official record of the insurer.

PROCEDURES FOR REHABILITATION, REORGANIZATION, OR DISSOLUTION OF A FEDERALLY

GUARANTEED INSURER

SEC. 106. (a) The Commission may institute proceedings under this section to provide for the rehabilitation, reorganization, or dissolution of a federally guaranteed insurer whenever it determines that the insurer is unable, or is reason

ably likely to become unable, to fulfill its obligations when due. Upon such determination, the Commission may, after notice to the federally guaranteed insurer, apply to the appropriate United States district court for its appointment as a receiver to administer the affairs of the insurer with respect to which the determination was made. If within three business days after the filing of an application under this section, or such other period as the court may order, the federally guaranteed insurer consents to the appointment of a receiver or fails to show why a receiver should not be appointed, the court may grant the application and appoint a receiver to administer the affairs of the insurer in accordance with the provisions of this Act and the charter of the insurer, except that the United States district court may immediately appoint a receiver upon the request of the Commission when the court finds that such action is necessary to preserve the financial integrity of the insurer, but any such insurer may request a hearing, upon a petition filed with the court not later than three days after such an appointment, with respect to such appointment.

(b) Any receiver appointed under this section shall be subject to the same duties as a trustee appointed under section 47 of the Bankruptcy Act, and shall conduct its business and the affairs of the insurer consistent with the provisions applicable to a proceeding under chapter X of the Bankruptcy Act, except that claims of policyholders which arose prior to the insurer's default shall have a priority over all other claims.

(c) If the Commission has issued a notice under this section to an insurer chartered under section 201 of this Act, and has determined at any time thereafter that the charter of that insurer should be revoked, it may, after notice to the insurer, apply to the appropriate United States district court for a decree adjudicating that the charter must be revoked in order to protect the interests of the policyholders or to avoid any further increase in the liability of the Federal Insurance Guaranty Fund. If any receiver appointed under subsection (a) disagrees with the determination of the Commission under the preceding sentence, it may intervene in the proceeding relating to the application for the to the insurer, apply to the appropriate United State district court for a decree itself. Upon the issuance of such a decree, the court shall authorize the receiver (or appoint a receiver and so authorize him, if necessary), to wind up the affairs of the insurer in accordance with the provisions of this section. If the receiver and the Commission agree that the affairs of the insurer should be wound up and the charter surrendered and to the appointment of a receiver without proceedings pursuant to this section (other than this sentence), the receiver shall have the power to take such actions as may be necessary to wind up the affairs of the insurer promptly.

REGULATORY AUTHORITY

SEC. 107. (a) In order to insure the financial stability of federally guaranteed insurers, the Commission is authorized to prescribe such rules and regulations as may be necessary to carry out its responsibilities under the provisions of this Act. Such rules and regulations shall require that

(1) each such insurer shall pay the guaranty fee established by the Commission under section 102 of this Act or any other applicable fee or charge provided by law or regulation;

(2) each such insurer shall compute and maintain its reserve liabilities as the Commission may, from time to time, provide by regulation;

(3) each such insurer shall not sell, transfer, assign, pledge, or otherwise dispose of or relinquish control over more than 25 per centum of its funds, assets, or investments within any twelve-month period except as provided by regulation unless at least thirty days' prior notice has been provided to the Commission and it has not disapproved ;

(4) each such insurer shall furnish to the Commission such files, books, reports, documents, or other records of the insurer or any affiliated or related entity as the Commission shall prescribe and shall make available to the Commission at such times and places as the Commission shall reasonably prescribe every such file, book, report, document, or other record for inspection, examination, or audit under the oath or affirmation of the person(s) having custody or control thereof; and

(5) each such insurer shall furnish under the oath or affirmation of its directors, or other members of its governing body, officers managers, or agents, such financial reports or records and at such times and in such de

tail as the Commission may, from time to time, prescribe, including tapes, punched cards, or other material processed through an electronic data processing system maintained by the insurer or any affiliated or related entity. (b) The Commission shall establish and maintain, either directly and solely or wholly or partially by contract with State insurance regulatory authorities or officials or an association made up of such authorities or officials, or with other appropriate organizations or associations, and "early warning system" meaning a system for the early detection of financial conditions of insurers which if not corrected render reasonably probable the insolvency, impairment, or inability of the insurer to fulfill, when due, its contractual obligations to policyholders or claimants. In order to render possible comparison and to make available broad financial and statistical data, any such "early warning system" may include both federally guaranteed insurers and other insurers. Any insurer covered by such system may be required by the Commission to submit its financial reports or records including computer tapes or cards under its electronic data processing system. The system established under this subsection shall contain such criteria and the weight to be accorded such criteria as the Commission, after consultation with the National Association of Insurance Commissioners and such other groups as are considered by the Commission to have experience in these matters.

(c) It shall be unlawful for any federally guaranteed insurer to

(1) refuse to insure any individual or group of individuals solely because of age, sex, race, religion, or national origin; and

(2) classify, or charge a rate or premium to, any individual or group of individuals with the purpose or effect of unfarily discriminating against such persons on account of age, sex, race, color, religion, or national origin: Provided, That such classifications or rates, or premiums shall not be unfairly discriminatory within the meaning of this provision if they can be supported by empirical evidence demonstrating that such classes, rates, or premiums are reasonably predictive of and significantly correlated to loss and expense experience.

SUPERVISORY AUTHORITY

SEC. 108. (a) If, in the opinion of the Commission, any federally guaranteed insurer or any director, officer, employee, agent, or other person participating in the conduct of affairs of such insurer is engaging or has engaged, or if the Commission has reasonable cause to believe that the insurer or any director, officer, employee, agent, or other person participating in the conduct of such affairs is about to engage, in any practice in connection with the affairs of the insurer which violates the provisions of this Act or of the regulations promulgated under this Act, or is violating or has violated, or the Commission has reasonable cause to believe that the insurer or any director, officer, employee, agent, or other person participating in the conduct of the affairs of the insurer is about to violate a law, rule, or regulation, or any condition imposed in writing by the Commission in connection with the granting of any benefit under this Act, the Commission may issue and serve upon the insurer or such director, officer, employee, agent, or other person a notice of charges in respect thereof. The notice shall contain a statement of the facts constituting the alleged violation or practice and shall fix a time and place at which a hearing will be held to determine whether an order to cease and desist thereform should be issued. Such hearing shall be fixed for a date not earlier than thirty days nor later than sixty days after service of notice unless an earlier or a later date is requested by the party so served and agreed to by the Commission. Failure of the party served to appear at such a hearing shall be deemed to indicate the consent of that party to issuance of the cease and desist order. In the event of such consent, or if, upon the record of any such hearing, the Commission finds that any violation or practice specified in the notice of charges has been established, the Commission may issue and serve upon the insurer, director, officer, employee, agent, or other person an order to cease and desist from any such violation or practice. Such order may, by provisions which may be mandatory or otherwise. require the insurer or its directors, officers, employees, agents or other person participating in the conduct of its affairs to cease and desist from the same, and to take affirmative action to correct the conditions resulting from any such violation or practice. An order under this subsection shall become effective at

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the expiration of thirty days after service, except in the case of a cease and desist order issued upon consent which shall become effective at the time specified therein, and shall remain effective and enforceable as provided therein except to such extent as the order may be stayed, modified terminated, amended, or set aside by action of the agency or any court.

(b) (1) Whenever the Commission determines that a violation or threatened violation or practice specified in the notice of charges served under subsection (a) or the continuation thereof is likely to cause insolvency or substantial dissipation of assets or earnings of the insurer, the Commission may issue a temporary order requiring the insurer or such director, officer, employee, agent, or other person to cease and desist from any such violation or practice. Such order shall become effective upon service upon insurer or such director, officer, employee, agent or other person participatin in the conduct of the affairs of such insurer and, unless set aside, limited, or suspended by a court in proceedings authorized by this subsection, shall remain effective and enforceable pending the completion of the administrative proceedings pursuant to such notice and until such time as the Commission shall dismiss the charges specified in such notice, or if a cease and desist order is issued against the insurer or such director, officer, employee, agent, or other person, until the effective date of such order. Within ten days after the insurer or any director, officer, employee, agent, or other person participating in the conduct of the affairs of such insurer has been served with a temporary cease and desist order, the insurer or such director, officer, employee, agent, or other person may apply to the United States district court or the United States court of any territory within the jurisdiction of which the principal place of business of the insurer is located, or the United States District Court for the District of Columbia, for an injunction setting aside, limiting, or suspending the enforcement, operation, or effectiveness of such order pending the completion of the administrative proceedings pursuant to the notice of charges served upon the insurer or such director, officer, employee, agent, or other person under subsection (a) of this section, and such court shall have jurisdiction to issue such injunction.

(2) In the case of a violation or threatened violation of or failure to obey a temporary cease and desist order issued pursuant to paragraph (1), the Commission may apply to the United States district court or the United States court of any territory within the jurisdiction of which the principal place of business of the insurer is located, for an injunction to enforce such order, and if the court shall determine that there has been such violation or threatened violation or failure to obey, it shall be the duty of the court to issue such injunction.

(c) (1) Whenever, in the opinion of the Commission, any director or officer of a federally guaranteed insurer has committed any violation of law, rule, or regulation or of a cease and desist order which has become final, or has engaged or participated in any unsafe or unsound practice in connection with the insurer, or has committed or engaged in any act, omission, or practice which constitutes a breach of his duty as such director or officer, and the Commission determines that the insurer has suffered or will probably suffer substantial financial loss or other damage or that the interests of its policyholders could be seriously prejudiced by reason of such violation or practice or breach of duty, and that such violation or practice or breach of duty is either one involving personal dishonesty on the part of such director or officer, or one which demonstrates his gross negligence in the operation or management of the insurer or a willful disregard for the safety or soundness of the insurer, the Commission may serve upon such director or officer a written notice of its intention to remove him from office.

(2) Whenever, in the opinion of the Commission, any director or officer of a federally guaranteed insurer, by conduct or practice with respect to any other business concern which resulted in substantial loss or other damages, has evidenced either his personal dishonesty or gross negligence in the operation or management of the business concern or a willful disregard for its safety and soundness, and, in addition, has evidenced his unfitness to continue as a director or officer, and whenever, in the opinion of the Commission, any other person participating in the conduct of the affairs of the insurer, by conduct or practice with respect to the insurer or any other business concern which resulted in substantial financial loss or other damages, has evidenced either his personal dishonesty