1Amending the act of May 17, 1921 (P.L.789, No.285), entitled, as
2amended, "An act relating to insurance; establishing an
3insurance department; and amending, revising, and
4consolidating the law relating to the licensing,
5qualification, regulation, examination, suspension, and
6dissolution of insurance companies, Lloyds associations,
7reciprocal and inter-insurance exchanges, and certain
8societies and orders, the examination and regulation of fire
9insurance rating bureaus, and the licensing and regulation of
10insurance agents and brokers; the service of legal process
11upon foreign insurance companies, associations or exchanges;
12providing penalties, and repealing existing laws," in
13suspension of business - involuntary dissolutions, further
14providing for definitions, for injunctions and orders, for
15fraudulent transfers prior to petition and for voidable
16preferences and liens.

17The General Assembly of the Commonwealth of Pennsylvania
18hereby enacts as follows:

19Section 1. Section 503 of the act of May 17, 1921 (P.L.789,
20No.285), known as The Insurance Department Act of 1921, is
21amended by adding definitions to read:

22Section 503. Definitions.--The following words and phrases
23when used in this act shall have, unless the context clearly
24indicates otherwise, the meanings given to them in this section:

25* * *

1"FHLBank" means a bank as defined in section 2(1)(A) of the
2Federal Home Loan Bank Act (47 Stat. 725, 12 U.S.C. § 1422(1)
3(A)).

4"Federal Home Loan Bank Act" means the Federal Home Loan Bank
5Act (47 Stat. 725, 12 U.S.C. § 1421 et seq.).

6"FHLBank security agreement" means any pledge, security,
7collateral or guarantee agreement or any similar arrangement or
8credit enhancement in favor of an FHLBank.

9* * *

10"Insurer-member" means an insurer that is a member of an
11FHLBank.

12* * *

13Section 2. Sections 505(b), 528(a) and 530(b), (c), (d) and
14(e) of the act, added December 14, 1977 (P.L.280, No.92), are
15amended to read:

16Section 505. Injunctions and Orders.--* * *

17(b) [The receiver may apply to any court outside of the
18Commonwealth for the relief described in subsection (a) or
19suspension of any insurance licenses issued by the
20commissioner.] Notwithstanding subsection (a) or any other 
21provision of this article to the contrary, no FHLBank shall be 
22stayed, enjoined or prohibited from exercising any right or 
23enforcing any obligation under an FHLBank security agreement, 
24relating to collateral pledged by an insurer-member to the 
25FHLBank.

26Section 528. Fraudulent Transfers Prior to Petition.--(a)
27Every transfer made or suffered and every obligation incurred by
28an insurer within one year prior to the filing of a successful
29petition for rehabilitation or liquidation under this article is
30fraudulent as to then existing and future creditors if made or

1incurred without fair consideration, or with actual intent to
2hinder, delay, or defraud either existing or future creditors. A
3transfer made or an obligation incurred by an insurer ordered to
4be rehabilitated or liquidated under this article, which is
5fraudulent under this section, may be avoided by the receiver,
6except as to a person who in good faith is a purchaser, lienor,
7or obligee for a present fair equivalent value, and except that
8any purchaser, lienor, or obligee, who in good faith has given a
9consideration less than fair for such transfer, lien, or
10obligation, may retain the property, lien or obligation as
11security for repayment. The court may, on due notice, order any
12such transfer or obligation to be preserved for the benefit of
13the estate, and in that event, the receiver shall succeed to and
14may enforce the rights of the purchaser, lienor, or obligee.
15Notwithstanding this subsection or any other provision of this 
16article to the contrary, a receiver shall not avoid a transfer 
17of money or other property arising under or in connection with 
18an FHLBank security agreement that is made before the 
19commencement of a formal delinquency proceeding under this 
20article in the ordinary course of business and in compliance 
21with the FHLBank security agreement unless such transfer was 
22made with actual intent to hinder, delay or defraud the insurer-
23member, the receiver appointed for the insurer-member or 
24existing or future creditors.

25* * *

26Section 530. Voidable Preferences and Liens.--* * *

27[(b) A transfer of property other than real property shall
28be deemed to be made or suffered when it becomes so far
29perfected that no subsequent lien obtainable by legal or
30equitable proceedings on a simple contract could become superior

1to the rights of the transferee.

2A transfer of real property shall be deemed to be made or
3suffered when it becomes so far perfected that no subsequent
4bona fide purchaser from the insurer could obtain rights
5superior to the rights of the transferee.

6A transfer which creates an equitable lien shall not be
7deemed to be perfected if there are available means by which a
8legal lien could be created.

9A transfer not perfected prior to the filing of a petition
10for liquidation shall be deemed to be made immediately before
11the filing of the successful petition.

12The provisions of this subsection apply whether or not there
13are or were creditors who might have obtained liens or persons
14who might have become bona fide purchasers.

15(c) A lien obtainable by legal or equitable proceedings upon
16a simple contract is one arising in the ordinary course of such
17proceedings upon the entry or docketing of a judgment or decree,
18or upon attachment, garnishment, execution, or like process,
19whether before, upon, or after judgment or decree and whether
20before or upon levy. It does not include liens which under
21applicable law are given a special priority over other liens
22which are prior in time.

23A lien obtainable by legal or equitable proceedings could
24become superior to the rights of a transferee, or a purchaser
25could obtain rights superior to the rights of a transferee
26within the meaning of subsection (b), if such consequences would
27follow only from the lien or purchase itself, or from the lien
28or purchase followed by any step wholly within the control of
29the respective lienholder or purchaser, with or without the aid
30of ministerial action by public officials. Such a lien could

1not, however, become superior and such a purchase could not
2create superior rights for the purpose of subsection (b) through
3any acts subsequent to the obtaining of such a lien or
4subsequent to such a purchase which require the agreement or
5concurrence of any third party or which require any further
6judicial action, or ruling.

7(d) A transfer of property for or on account of a new and
8contemporaneous consideration which is deemed under subsection
9(b) to be made or suffered after the transfer because of delay
10in perfecting it does not thereby become a transfer for or on
11account of an antecedent debt if any acts required by the
12applicable law to be performed in order to perfect the transfer
13as against liens or bona fide purchasers' rights are performed
14within twenty-one days or any period expressly allowed by the
15law, whichever is less. A transfer to secure a future loan, if
16such a loan is actually made, or a transfer which becomes
17security for a future loan, shall have the same effect as a
18transfer for or on account of a new and contemporaneous
19consideration.

20(e) If any lien deemed voidable under the second paragraph 
21of subsection (a) has been dissolved by the furnishing of a bond 
22or other obligation, the surety on which has been indemnified 
23directly or indirectly by the transfer of or the creation of a 
24lien upon any property of an insurer before the filing of a 
25petition under this article which results in a liquidation 
26order, the indemnifying transfer or lien shall also be deemed 
27voidable.] (b) Notwithstanding subsection (a) or any other 
28provision of this article to the contrary, (i) a receiver shall 
29not avoid a transfer of money or other property arising under or 
30in connection with an FHLBank security agreement that is made
 

1before the commencement of a formal proceeding under this 
2article in the ordinary course of business and in compliance 
3with the security agreement unless such transfer was made with 
4actual intent to hinder, delay or defraud the insurer-member, a 
5receiver appointed for the insurer-member or existing or future 
6creditors; and (ii) a receiver shall not void a redemption or 
7repurchase of any stock or equity securities which was made by 
8the FHLBank within four months of a formal commencement of the 
9delinquency proceedings or which received prior approval of the 
10receiver.

11(c) Following the appointment of a receiver for an insurer-
12member and upon request of the receiver, the FHLBank shall,
13within ten days of such request, provide a process and establish
14timing for all of the following:

15(1) The release of collateral that exceeds the lending
16value, as determined in accordance with the FHLBank security
17agreement, required to support secured obligations remaining
18after any repayment of advances.

19(2) The release of any collateral remaining in the FHLBank's
20possession following repayment of all outstanding secured
21obligations in full.

22(3) The payment of fees and the operation of deposits and
23other accounts with the FHLBank.

24(4) The possible redemption or repurchase of FHLBank stock
25or excess stock of any class that an insurer-member is required
26to own.

27(d) Upon the request of the receiver for an insurer-member,
28the FHLBank shall provide any available options for such
29insurer-member to renew or restructure an advance to defer
30associated prepayment fees, to the extent that market

1conditions, the terms of the advance outstanding to the insurer-
2member, the applicable policies of the FHLBank and compliance
3with the Federal Home Loan Bank Act and corresponding
4regulations permit.

5(e) Nothing in this section shall affect the receiver's
6rights pursuant to section 12 CFR § 1266.4 (relating to
7limitations on access to advances) regarding advances to an
8insurer-member in delinquency proceedings.

9* * *

10Section 3. This act shall take effect immediately.