An insurer is like a bank holding everyone's rainy-day money. The state does not wait for it to bounce checks: it watches the capital cushion and can step in fast.

An insurer is insolvent under §985 if either one is true: - Its required minimum "paid-in capital" is impaired, or - It cannot meet its financial obligations when they are due. These are alternative tests; either one is enough.

An insurer cannot escape insolvency just by being able to provide for all its liabilities and for reinsurance of its outstanding risks. It must also hold additional assets equal to the paid-in capital the Code requires. For a stock insurer, paid-in capital (§36) is the lower of (1) its assets over liabilities and reinsurance or (2) the par value of its issued shares. Example: required $8 million, par value $10 million, assets over liabilities and reinsurance $6 million. Paid-in capital is $6 million, so it is impaired and the insurer is insolvent. The outline cites §985(a)(1) and (2) for this rule; in the current Code it is in §985(b).

Conservation (§§1011, 1013, 1016): when the conditions in §1011 exist (they go beyond insolvency, such as refusing an inspection or a hazardous condition) or irreparable loss may occur unless the Commissioner acts at once, the Commissioner may take possession without notice and before going to court (§1013). If conservation would be futile, the Commissioner may seek liquidation (§1016).

Refusing to deliver books, records or assets to the Commissioner once a seizure order is in place is a misdemeanor: a fine up to $1,000, imprisonment up to one year, or both (§1013). The outline says "once a seizure order has been executed"; current §1013 says once it "has been issued" by the Commissioner.