The purpose of section 3 of the proposed bill is to reduce the amount of surety bonds required of brokers from $5,000 to $1,000. Experience under the Fire and Casualty Act approved October 9, 1940, has demonstrated that the amount of the bond there required is excessive and imposes unnecessary hardships upon licensed brokers. Because of the excessive amount of the bond those who ordinarily would obtain a broker's license are operating under some other form of license. The reduced amount of the bond is more nearly in line with requirements in other jurisdictions. It is believed that if the amount of the bond were reduced, more brokers' licenses would be issued, resulting in some increase in revenues from this source.

The amendment contained in section 4 of the proposed bill is for the purpose of more clearly defining the provisions of the Fire and Casualty Act relating to the authority of licensees to procure policies from companies not authorized to do business in the District of Columbia. The Fire and Casualty Act gives preference to authorized companies and agents of authorized companies. The majority of these authorized companies are domiciled in the States. Section 40 of the Fire and Casualty Act was intended to accommodate persons who, because of some peculiar circumstance, are unable to obtain insurance from companies authorized in the District. The suggested amendment more clearly defines the authority in respect of agents who may assist in diverting normal business from companies authorized in the District of Columbia which are subject to local jurisdiction. You are advised that the proposed legislation has been submitted to the Bureau of the Budget and no objection has been made to the presentation of the bill to the Congress.

Respectfully,

JOHN RUSSELL YOUNG,

President, Board of Commissioners, District of Columbia.

In compliance with paragraph 2a of rule XIII of the Rules of the House of Representatives the changes proposed by this bill are set out as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, existing law in which no change is proposed is shown in roman):

CHAPTER II-POWERS AND DUTIES OF SUPERINTENDENT GENERAL PROVISIONS

SECTION 1. RECORDS OF INSURANCE DEPARTMENT; POWER TO MAKE Rules.— The office of the Superintendent shall be a public office, and the records, books, and papers thereof on file therein shall be public records of the District, except as the Superintendent for good reason may decide otherwise, or except as it may be provided otherwise herein.

The Superintendent shall have authority to make and enforce such reasonable rules and regulations as may be necessary in making effective the provisions of this Act, but such rules and regulations shall not be contrary to nor inconsistent with the provisions of this Act.

SEC. 2. CERTIFICATE OF AUTHORITY.-It shall be the duty of the Superintendent to issue a certificate of authority to a company when it shall have complied with the requirements of the laws of the District so as to be entitled to do business therein. The Superintendent may, however, satisfy himself by such investigation as he may deem proper or necessary that such company is duly qualified under the laws of the District to transact business therein, and may refuse to issue or renew any such certificate to a company if the issuance or renewal of such certificate would adversely affect the public interest. In each case the certificate shall be issued under the seal of the Superintendent authorizing and empowering the company to transact the kind or kinds of business specified in the certificate, and each such certificate shall be made to expire on the 30th day of April next succeeding the date of its issuance. No company shall transact any business in or from the District until it shall have received a certificate of authority as authorized by this section, and no company shall transact any business not specified in such certificate of authority. No domestic mutual company shall transact any business in the District until it has bona fide applications for insurance covering not less than two hundred separate risks in not less than twenty policies to be issued to not less than twenty members, and has received the cash premium therefor, and has a surplus of not less than the amount provided under sections 12 and 13 of chapter II of this Act.

SEC. 3. REVOCATION AND SUSPENSION OF CERTIFICATE OF AUTHORITY.-The Superintendent shall have power to revoke or suspend the certificate of authority to transact business in the District of any company which has failed or refused to comply with any provision or requirement of this Act, or which

(a) Is impaired in capital or surplus;

(b) Is insolvent;

(c) Is in such a condition that its further transaction of business in the District would be hazardous to its policyholders or creditors in the District, or to the public;

(d) Has refused or neglected to pay a valid final judgment against such company within thirty days after such judgment shall have become final either by expiration without appeal within the time when such appeal might have been perfected, or by final affirmance on appeal;

(e) Has violated any law of the District or has in the District violated its charter or exceeded its corporate powers;

(f) Has refused to submit its books, papers, accounts, records, or affairs to the reasonable inspection or examination of the Superintendent, his deputies, or duly appointed examiners;

(g) Has an officer who has refused upon reasonable demand to be examined under oath touching its affairs;

(h) Fails to file with the Superintendent a copy of an amendment to its charter or articles of association within thirty days after the effective date of such amendment;

(i) Has had its corporate existence dissolved or its certificate of authority revoked in the State in which it was organized; or

(j) Has had all its risks reinsured in their entirety in another company, without prior approval of the Superintendent.

The Superintendent shall not revoke or suspend the certificate of authority of any company until he has given the company not less than thirty days' notice of the proposed revocation or suspension and of the grounds alleged therefor, and has afforded the company an opportunity for a full hearing: Provided, however, That if the Superintendent shall find upon examination that the further transaction of business by the company would be hazardous to the public or to the policyholders or creditors of the company in the District, he may suspend such authority without giving notice as herein required[]: Provided further, That, in lieu of revoking or suspending the certificate of authority of any company for causes enumerated in this section after hearing as herein provided, the Superintendent may subject such company to a penalty of not more than $200 when in his judgment he finds that public interest would be best served by the continued operation of the company. The amount of any such penalty shall be paid by the company through the office of the Superintendent to the collector of taxes, District of Columbia.

SEC. 4. WHEN COMPANY HAS CEASED BUSINESS. If a company shall cease to do business in the District, it shall thereupon make report to the Superintendent of the taxable premiums collected which have not been reported prior to the date of the cessation of business, and shall forthwith pay to the collector of taxes of the District, through the Superintendent, a tax thereon computed according to law. If a company fails or refuses to make such a report or to pay the tax imposed upon it as required by law, it shall be liable to the District for the amount of such taxes, plus a penalty of 8 per centum per month for each month or part thereof during which such taxes remain unpaid.

SEC. 5. RECEIVERSHIP PROCEEDINGS.-The Superintendent may, through the corporation counsel of the District, apply to the district court of the United States for the District for a rule directing any company organized under the laws of the District or any company in the course of organization to show why the Superintendent should not take possession of its property and conduct its business as the nature of the case and the interests of the policyholders, creditors, stockholders, or the public may require, whenever any such company is

(a) Insolvent; or

(b) Has neglected or refused to observe a lawful order of the Superintendent to make good any deficiency in its capital or surplus; or

(c) Has by contract of reinsurance or otherwise transferred or attempted to transfer substantially its entire property or business, or has entered into any transaction, the effect of which is to merge substantially its entire property or business in the property or business of any other company, without having first obtained the written approval of the Superintendent; or

(d) Is found after an examination by the Superintendent to be in such condition that its further transaction of business would be hazardous to its policyholders; or

(e) Has violated its charter; or

(f) Is carrying on activities against public policy.

Upon such application, such court may, in its discretion, issue an injunction restraining such company from the transaction of its business or disposition of its property pending further order of the court. On the return of such rule to show cause, the court shall hear, try, and determine the issues forthwith, and shall either deny the application or direct the Superintendent to take possession of the property and conduct the business of such company and retain such possession and conduct such business until on the application either of the Superintendent, the corporation counsel representing him, or the company, it shall, after a like hearing, appear to the court that the ground for the order directing the Superintendent to take possession has been removed, and that the company can properly resume the possession of its property, and the conduct of its business. If on the like application and rule to show cause, and after a hearing, the court shall order the liquidation of the business of such company, such liquidation shall be made by and under the direction of the Superintendent, who may deal with the property and business of such company in his own name as Superintendent, or in the name of the company, as the court may direct, and shall be vested by operation of law with title to all of the property, contracts, and rights of action of such company as of the date of the order so directing him to liquidate. The filing or recording of such order in the office of the recorder of deeds for the District shall impart the same notice that a deed, bill of sale, or other evidence of title duly filed or recorded by such company would have imparted. For the purpose of this section, the Superintendent shall have power to appoint under his hand and official seal one or more special deputy superintendents, and to employ clerks and assistants as may by him be deemed necessary. The fair and reasonable compensation of such special deputies, clerks, and assistants, and all the expenses of taking possession of and conducting the business of any such company shall, subject to the approval of the court, be paid out of the funds or assets of such company. The court may require a corporate surety bond or bonds from the Superintendent in such amount as it may deem necessary.

SEC. 6. WHEN COMPANY TO BE DEEMED INSOLVENT.-Any insurance company whose assets are not sufficient to reinsure its outstanding risks in a solvent insurance company shall be deemed insolvent, and may be proceeded against as provided in this Act.

SEC. 7. WHEN CAPITAL OR SURPLUS OF COMPANY DEEMED IMPAIRED.-Any company whose capital has been reduced to an amount less than that required by this Act, or whose surplus of admitted assets in excess of all liabilities is less than the amount required by this Act, shall be deemed to be impaired in capital or surplus, and may be proceeded against as provided in this Act.

SEC. 8. ANNUAL STATEMENT.-Every company doing business in the District shall file with the Superintendent before March 1 in each year a financial statement for the year ending December 31 immediately preceding on forms furnished by the Superintendent. The Superintendent shall have authority to extend the time for filing such statement by any company for reasons which he shall deem good and sufficient. Such statement shall be verified by the oath of the president and secretary of the company, or, in their absence, by two other principal officers. The Superintendent shall annually in the month of December furnish to each of the companies authorized to do business in the District blanks necessary for the filing of the statement herein required. Such blanks shall conform substantially to the form of statement adopted by the National Association of Insurance Commissioners. The Superintendent shall have power to make such modifications and additions in said blank forms of statement as he may deem desirable and necessary to ascertain the condition and affairs of the company. The Superintendent shall also have power to require that at least once in the month of March in each year a summary of such annual statement shall be published by the company in a daily newspaper published in the District.

SEC. 9. PENALTY FOR FALSE STATEMENT.-Any director, officer, agent, or employee of any company who subscribes to, makes or concurs in making or publishing any annual or other statement required by law, knowing the same to contain any material statement which is false, shall be fined not more than $5,000 or imprisoned for not more than five years, or both.

SEC. 10. EXAMINATIONS.-The Superintendent may examine the books, papers, property, and affairs of any agent or company organized or doing business in the District and of any company engaged in or professing to be engaged in organizing,

promoting, or soliciting stock or capital contributions to or aiding in the formation of any company, or any company which holds the capital stock of another company for the purpose of controlling the management thereof as voting trustee or otherwise. The Superintendent, his deputy, or any examiner designated by the Superintendent, may examine under oath the officers and agents of such company, and all persons deemed to have material information regarding the company's property or business. Every such company, its officers, and agents shall produce at the home office of the company at the time designated by the Superintendent its books of original entry, and all records and papers in its or their possession relating to its or their business or affairs. The officers and agents of such company shall facilitate such examination insofar as it is in their power to do so. The expense of such examination shall be paid by the company examined. Any officer, director, agent, or employee of any company who makes or causes to be made any false entry in any book, report, or statement of such company with intent to injure or defraud such company or any other company or person, or to deceive any officer of such company, or the Superintendent, and any person who with like intent aids or abets any officer, director, agent, or employee in any violation of this Act shall be fined not more than $1,000, or shall be imprisoned for not more than five years, or both. The Superintendent may, in lieu of such examination of a foreign or alien company, accept the report on the examination of such company made by the Insurance Department or other insurance supervising official in any other State or any government outside the United States.

SEC. 11. CLASSIFICATION OF INSURANCE. Any company authorized to do business in the District may, when empowered by its charter, make all or any one or more of the kinds of insurance and reinsurance comprised in either or both of the following classes, subject to and in accordance with the provisions of this Act:

(1) FIRE AND MARINE.-On houses, buildings, and all other kinds of property against loss, damage, or damages by fire, lightning, or storm; to insure against loss or damage by water to any goods or premises arising from the breakage or leakage of sprinklers or water pipes; and to make all kinds of insurance against loss of or damage to goods, merchandise, or other property caused by fire, risks of transportation, or navigation, the action of the elements or adverse manifestations of nature, as well as all and every, risk or peril to which the subject of insurance may be exposed, against which it is not contrary to public policy to insure, including every insurable interest therein or in the use thereof, or profit or income therefrom, or legal liability therefor, but not to include injury to the person nor loss caused by breach of trust.

(2) CASUALTY. (a) Upon the health of persons, or against injury, disablement, or death of persons resulting from traveling or general accidents by land or water, and against liability of the assured for injuries to employees or other persons; (b) against liability of the assured for loss or destruction of or damage to property; (c) upon the lives of domestic animals; (d) against loss of or damage to glass and its appurtenances; (e) against loss of or damage to any property resulting from the explosion of or injury to any boiler, heater, unfired pressure vessel, pipes or containers connected therewith, any engine, turbine, compressor, pump or wheel or any apparatus generating, transmitting or using electricity, or any other machine or apparatus connected with or operated by any of the previously named boilers, vessels or machines; and including the incidental power to make inspections of and to issue certificates of inspection upon, any such boilers, apparatus and machinery, whether insured or otherwise; (f) against loss by burglary or theft, or both, and against loss of or damage to moneys and securities; (g) to guarantee and indemnify merchants, traders, and those engaged in business and giving credit, from loss and damage by reason of giving and extending credit to their customers and those dealing with them; (h) against loss or damage by water or other fluid or substance to any property resulting from the breakage or leakage of sprinklers or water pipes; (i) to insure against any other casualty risk which may lawfully be the subject of insurance, and which it is not contrary to public policy to insure: Provided, That this section shall not be construed as having any effect whatever upon the right or authority of any solvent company to make contracts of fidelity or surety.

SEC. 12. LIMITATION OF RISK.-No company other than a mutual or reciprocal company doing business in the District shall expose itself to any loss on any one risk or hazard in the District to an amount exceeding 10 per centum of the sum of its capital stock and surplus without the written prior consent of the Superintendent. No mutual or reciprocal company shall expose itself to any loss on any one risk or hazard in the District to an amount exceeding 10 per centum of

its surplus without written prior consent of the Superintendent. No portion of any such risk or hazard which shall have been reinsured in a company authorized to do business in the District shall be included in determining limitation of risk: Provided, That the provisions of this section shall not apply to the insurance of workmen's compensation, employers' liability, marine, or inland marine risks.

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 $150,000, and a surplus of not less than $150,000. Every domestic mutual company and every domestic reciprocal company shall have and shall at all times maintain a surplus of not less than $150,000, 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 $200,000.

SEC. 14. CORPORATIONS HERETOFORE FORMED.-No company shall be exempt from the provisions of this Act by reason of its having been incorporated in the District or elsewhere prior to the effective date of this Act, except that, in the case of companies authorized in the District on the date of approval of this Act, and continuously authorized 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 laws of the District heretofore applicable shall not be increased by this Act, 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. 15. DOMESTIC COMPANIES.-Any domestic stock, mutual, or reciprocal company desiring to transact business in the District shall, after complying with the general laws of the District governing the formation of companies or corporations, file with the Superintendent copies of its articles of incorporation, bylaws, charter, proposed forms of policies, and such other information as may be necessary to manifest and explain the organization, objects, and purposes of the company, and to satisfy the Superintendent that such company has complied with the laws of the District regarding the formation of companies. Thereafter, upon application made to the Superintendent upon such forms as the Superintendent shall prescribe, the Superintendent, subject to the provisions of chapter II, section 2, of this Act, shall issue to the company a certificate of authority to transact business in the District.

SEC. 16. DOMESTIC COMPANY REAL ESTATE HOLDINGS.-A domestic company may acquire, hold, and convey real estate for the purpose and in the manner only following:

(1) The building in which it has its principal office and the land on which it stands.

(2) Such as shall be requisite for its convenient accommodation in the transaction of its business.

(3) Such as shall have been acquired for the accommodation of its business. (4) Such as shall have been mortgaged to it in good faith by way of security for loans previously contracted or for money due.

(5) Such as shall have been conveyed to it in satisfaction of debts, previously contracted, in the course of its dealings.

(6) Such as it shall have purchased at sales on judgments, decrees, or mortgages obtained or made for such debts.

All such real estate specified in paragraphs (3), (4), (5), and (6) of this section, which shall not be necessary for its accommodation in the convenient transaction of its business, shall be sold by the company and disposed of within five years after it shall have acquired the title to the same, or within five years after the same shall have ceased to be necessary for the accommodation of its business, unless the company procure the certificate of the Superintendent that its interests will suffer materially by a forced sale thereof, in which event the time for the sale may be extended to such time as the Superintendent shall direct in such certificate.

SEC. 17. MUTUAL COMPANY'S SURPLUS FUND-POWER TO BORROW.-A domestic mutual company may borrow or assume liability for the repayment of a sum of money sufficient to defray the reasonable expenses of its organization or to enable it to comply with any requirement of law or as a surplus fund upon agreement which shall first be submitted to and approved by the Superintendent that such loan or advance with interest at a rate not exceeding 6 per centum per annum shall be repaid only with the approval of the Superintendent whenever in his judgment the company shall be in possession of sufficient surplus in excess of a surplus equal