Bill Summary – FastDemocracy

SB 458
                       Department of Legislative Services
                               Maryland General Assembly
                                     2021 Session
                             FISCAL AND POLICY NOTE
                                   Third Reader
Senate Bill 458                   (Senator Feldman)
Finance                                                                     Economic Matters
                Insurance - Impaired Entities - Delinquency Proceedings
This bill makes various changes to the delinquency proceedings process for an impaired
insurer who is an insurer-member of a federal home loan bank (FHLB). The bill takes
effect June 1, 2021.
                                      Fiscal Summary
State Effect: The bill does not materially affect State operations or finances.
Local Effect: The bill does not affect local governmental operations or finances.
Small Business Effect: Minimal.
                                           Analysis
Bill Summary: “Insurer-member” means an insurer that is a member of an FHLB.
The bill prohibits the Insurance Commissioner, after the fourteenth day following the filing of
a delinquency proceeding for an insurer-member, from staying an FHLB or prohibiting it from
exercising its rights regarding collateral pledged by an insurer-member. An FHLB that
exercises its rights in such a manner must repurchase any outstanding capital stock as specified.
After the appointment of a receiver for an insurer and within 10 business days following a
request from the receiver, an FHLB must establish specified processes and timelines related
to the release of capital, repayment of fees, operation of deposits and other accounts, and
possible redemption or repurchase of stock.
If requested by the receiver for an insurer-member, the FHLB must provide any options
available to the insurer-member to renew or restructure a loan as specified. The receiver
for an insurer-member may not void any transfer of, or any obligation to transfer, money
or any other property arising under or in connection with (1) an FHLB security agreement;
(2) a pledge, a security, collateral, or a guarantee agreement; or (3) any other similar
arrangement or credit enhancement. The receiver may void a transfer if the transfer was
made with intent to hinder, delay, or defraud the insurer-member, the receiver, or existing
or future creditors.
The bill does not affect a receiver’s rights related to advances to an insurer-member in
delinquency proceedings under federal law.
Current Law: As the primary regulator of the insurance industry in the State, the
Maryland Insurance Administration (MIA) performs actuarial evaluations, financial audits,
financial examinations, and market conduct examinations to ensure that insurers remain
financially solvent and comply with State laws. Depending on numerous factors, including
the size of an insurer and the type of insurance it sells, an insurer domiciled in the State is
required to maintain specified reserves and capital assets based on the premiums it collects
and its outstanding policies, contracts, annuities, and benefit agreements.
MIA is authorized to require an insurer to take certain actions when it determines that the
insurer’s finances are at risk. For example, if the Insurance Commissioner determines that
an insurer is in a financially hazardous condition, it may require the insurer to reduce its
liability through reinsurance; the reduction, suspension, or limitation of business being
accepted or renewed; or the adoption of certain governance policies. Under some
circumstances, MIA is authorized to apply to the court for an order that conserves,
rehabilitates, or liquidates and dissolves an insurer.
                                 Additional Information
Prior Introductions: HB 782 of 2017, a similar bill, received a hearing in the
House Economic Matters Committee, but no further action was taken. Its cross file, SB 402
of 2017, received a hearing in the Senate Finance Committee, but no further action was
taken.
Cross File: HB 504 (Delegate Dumais) - Economic Matters.
Information Source(s): Maryland Insurance Administration; Judiciary (Administrative
Office of the Courts); Department of Legislative Services
SB 458/ Page 2
Fiscal Note History:   First Reader - January 26, 2021
an/jc                  Third Reader - February 25, 2021
Analysis by: Richard L. Duncan                    Direct Inquiries to:
                                                  (410) 946-5510
                                                  (301) 970-5510
SB 458/ Page 3
Statutes affected: 
Text - First - Insurance - Impaired Entities - Delinquency Proceedings: 9-201 Insurance, 9-215 Insurance, 9-221 Insurance
Text - Third - Insurance - Impaired Entities - Delinquency Proceedings: 9-201 Insurance, 9-215 Insurance, 9-221 Insurance