AN ACT

 

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," further
13providing for definitions, for injunctions and order, for
14fraudulent transfers prior to petition and for voidable
15preferences and liens.

16The General Assembly of the Commonwealth of Pennsylvania
17hereby enacts as follows:

18Section 1. Section 503 of act of May 17, 1921 (P.L.789,
19No.285), known as The Insurance Department Act of 1921, is
20amended by adding a definitions to read:

21Section 503. Definitions.--The following words and phrases
22when used in this act shall have, unless the context clearly
23indicates otherwise, the meanings given to them in this section:

24* * *

25"Federal Home Loan Bank" means a bank as defined in section

11422 of the Home Owners' Loan Act (48 Stat. 128, 12 U.S.C. §
21422).

3"Federal Home Loan Bank Act" means the Home Owners' Loan Act
4(48 Stat. 128, 12 U.S.C. § 1422).

5"Federal Home Loan Bank Security Agreement" means a pledge,
6security, collateral or guarantee or a similar arrangement or
7credit enhancement in favor of a Federal Home Loan Bank.

8* * *

9"Insurer member" means an insurer that is a member of a
10Federal Home Loan Bank.

11* * *

12Section 2. Section 505 of the act is amended by adding a
13subsection to read:

14Section 505. Injunctions and Orders.--* * *

15(a.1) Notwithstanding subsection (a) or any other provision
16of this article to the contrary, no Federal Home Loan Bank may
17be stayed, enjoined or prohibited from exercising a right or
18enforcing an obligation under a Federal Home Loan Bank Security
19Agreement relating to collateral pledged by an insurer member to
20the Federal Home Loan Bank.

21* * *

22Section 3. Section 528(a) of the act, added December 14,
231977 (P.L.280, No.92), is amended to read:

24Section 528. Fraudulent Transfers Prior to Petition.--(a)
25Every transfer made or suffered and every obligation incurred by
26an insurer within one year prior to the filing of a successful
27petition for rehabilitation or liquidation under this article is
28fraudulent as to then existing and future creditors if made or
29incurred without fair consideration, or with actual intent to
30hinder, delay, or defraud either existing or future creditors. A

1transfer made or an obligation incurred by an insurer ordered to
2be rehabilitated or liquidated under this article, which is
3fraudulent under this section, may be avoided by the receiver,
4except as to a person who in good faith is a purchaser, lienor,
5or obligee for a present fair equivalent value, and except that
6any purchaser, lienor, or obligee, who in good faith has given a
7consideration less than fair for such transfer, lien, or
8obligation, may retain the property, lien or obligation as
9security for repayment. The court may, on due notice, order any
10such transfer or obligation to be preserved for the benefit of
11the estate, and in that event, the receiver shall succeed to and
12may enforce the rights of the purchaser, lienor, or obligee.
13Notwithstanding the foregoing or any other provision of this 
14article to the contrary, a receiver may not avoid a transfer of 
15money or other property arising under or in connection with a 
16Federal Home Loan Bank Security Agreement that is made before 
17the commencement of a formal delinquency proceeding under this 
18article, in the ordinary course of business and in compliance 
19with the Federal Home Loan Bank Security Agreement unless the 
20transfer was made with actual intent to hinder, delay or defraud 
21the insurer member, the receiver appointed for the insurer 
22member or existing or future creditors.

23* * *

24Section 4. Section 530(a) of the act, added December 14,
251977 (P.L.280, No.92), is amended and the section is amended by
26adding subsections to read:

27Section 530. Voidable Preferences and Liens.--(a) A
28preference is a transfer of any of the property of an insurer to
29or for the benefit of a creditor, for or on account of an
30antecedent debt, made or suffered by the insurer within one year

1before the filing of a successful petition for liquidation under
2this article the effect of which transfer may be to enable the
3creditor to obtain a greater percentage of this debt than
4another creditor of the same class would receive. If a
5liquidation order is entered while the insurer is already
6subject to a rehabilitation order, then transfers otherwise
7qualifying shall be deemed preferences if made or suffered
8within one year before the filing of the successful petition for
9rehabilitation or within two years before the filing of the
10successful petition for liquidation, whichever time is shorter.

11Any preference may be avoided by the liquidator, if (i) the
12insurer was insolvent at the time of the transfer; (ii) the
13transfer was made within four months before the filing of the
14petition; (iii) the creditor receiving it or to be benefited
15thereby or his agent acting with reference thereto had, at the
16time when the transfer was made, reasonable cause to believe
17that the insurer was insolvent or was about to become insolvent;
18or (iv) the creditor receiving it was an officer, any employe or
19attorney or other person who was in fact in a position of
20comparable influence in the insurer to an officer whether or not
21he held such position, or any shareholder holding directly or
22indirectly more than five per centum of any class of any equity
23security issued by the insurer, or any other person, firm,
24corporation, association, or aggregation of persons with whom
25the insurer did not deal at arm's length. [Where the preference
26is voidable, the liquidator may recover the property or, if it
27has been converted, its value from any person who has received
28or converted the property, except where a bona fide purchaser or
29lienor has given less than fair equivalent value, he shall have
30a lien upon the property to the extent of the consideration

1actually given by him. Where a preference by way of lien or
2security title is voidable, the court may on due notice order
3the lien or title to be preserved for the benefit of the estate,
4in which event the lien or title shall pass to the liquidator.]

5(a.1) Notwithstanding subsection (a) or any other provision
6of this act to the contrary, (i) a receiver may not avoid a
7transfer of money or other property arising under or in
8connection with a Federal Home Loan Bank Security Agreement that
9is made before the commencement of a formal proceeding under
10this article in the ordinary course of business and in
11compliance with the Federal Home Loan Bank Security Agreement
12unless the transfer was made with the intent to hinder, delay or
13defraud the insurer member, a receiver appointed for the insurer
14member or existing or future creditors; and (ii) a receiver
15shall not void a redemption or repurchase of a stock or equity
16security which was made by the Federal Home Loan Bank within
17four months of a formal commencement of the delinquency
18proceedings which received prior approval of the receiver.

19(a.2) Following the appointment of a receiver for an insurer
20member and upon request of the receiver, the Federal Home Loan
21Bank shall, within ten days of the request, provide a process
22and establish timing for (i) the release of collateral that
23exceeds the lending value as determined in accordance with the
24Federal Home Loan Bank Security Agreement required to support
25secured obligations remaining after repayment of any advances;
26(ii) the release of collateral remaining in the Federal Home
27Loan Bank's possession following repayment of all outstanding
28secured obligations in full; (iii) the payment of fees and the
29operation of deposits and other accounts with the Federal Home
30Loan Bank; and (iv) the possible redemption or repurchase of the

1Federal Home Loan Bank stock or excess stock of any class that
2an insurer member is required to own.

3(a.3) Upon the request of the receiver for an insurer
4member, the Federal Home Loan Bank shall provide available
5options for the insurer member to renew or restructure an
6advance to defer associated prepayment fees, to the extent that
7the market conditions, the terms of the advance outstanding to
8the insurer member, the applicable policies of the Federal Home
9Loan Bank and compliance with the Federal Home Loan Bank Act and
10corresponding regulations permit.

11(a.4) Nothing in this section shall affect the receiver's
12rights pursuant to 12 C.F.R. § 1266.4 (relating to limitations
13on access to advances).

14* * *

15Section 5. This act shall take effect in 60 days.