Marvin Mandel, Governor                        1497

(c)    "Covered claim" means an unpaid claim, including one of
unearned premiums, which arises out of and is within the coverage,
and not in excess of the applicable limits of an insurance policy to
which this Act applies, issued by an insurer, if such insurer becomes
an insolvent insurer after the effective date of this Act and (1)
the claimant or insured is a resident of this state at the time of the
insured event; or (2) the property from which the claim arises is
permanently located in this State. "Covered claim" shall not include
any amount due any reinsurer, insurer, insurance pool, or under-
writing association, as subrogation recoveries or otherwise.

(d)    "Insolvent insurer" means (1) an insurer authorized to trans-
act insurance in this state either at the time the policy was issued
or when the insured event occurred, and (2) is determined to be
insolvent by a court of competent jurisdiction.

(e)    "Member insurer" means any insurer which (1) writes any
kind of insurance to which this Act applies under Section 504 in-
cluding the exchange of reciprocal or inter-insurance contracts and
(2) is licensed to transact insurance in this state.

(f)    "Net direct written premiums" means direct gross premiums
written in this state on insurance policies to which this Act applies,
less return premiums thereon and dividends paid or credited to
policyholders on such direct business. "Net direct written premiums"
does not include premiums on contracts between insurers or rein-
surers, or premiums received by insurers under the Maryland Prop-
erty Insurance Availability Act.

506.    Creation of the Association.

There is created a non-profit unincorporated legal entity to be
known as the Maryland Insurance Guaranty Association. All in-
surers defined as member insurers in Section 505(e) shall be and
remain members of the Association as a condition of their authority
to transact insurance in this state. The Association shall perform
its functions under a plan of operation established and approved
under Section 509 and shall exercise its powers through a board of
directors established under Section 507. For purposes of adminis-
tration and assessment, the Association shall be divided into three
separate accounts: (1) the Title insurance account; (2) the Surety
insurance account; and (3) (3) WET MARINE AND TRANS-
PORTATION INSURANCE ACCOUNT; AND (4) the account for
all other insurance to which the Act applies.

507.    Board of Directors.

(a) The board of directors of the Association shall consist of not
less than five (5) nor more than nine (9) persons serving terms as
established in the plan of operation. The Commissioner shall be and
remain a member of the Board and shall be its Chairman. The mem-

bers of the board, other than the Commissioner, shall be selected

by member insurers subject to the approval of the Commissioner.
THE COMMISSIONER SHALL APPOINT THE MEMBERS OF
THE BOARD FROM MEMBER INSURERS. Vacancies of the
board shall be filled for the remaining period of the term in the
same manner as initial appointments. If no members are selected
within 60 days after the effective date of this Act, the Commissioner
may appoint the initial members of the board of directors.