J. MILLARD TAWES, Governor                     1119

254.    Formation of Mutual Insurers; Bond.

(a)   No person representing any mutual insurer, wherever incor-
porated, or in process of organization and not authorized to engage in
an insurance business in this State, shall be permitted to solicit ap-
plications or premiums for prospective policies of such insurer in
this State unless and until such insurer has furnished the Commis-
sioner with full particulars as to the methods and proposed cost of
promotion. Before any such person shall solicit applications or
premiums for prospective policies in such insurer, he shall be re-
quired to secure a license from the Commissioner, who, prior to the
issuance of such license, shall investigate the record of the applicant
and if the applicant is honest and trustworthy, the Commissioner
shall issue a license to him.

(b)   The directors and officers of the insurer shall be required to
give the Commissioner a surety bond for ten thousand dollars
($10,000.00), or for not less than twenty-five per cent (25%) of the
minimum capital or assets required by section 48 or 253, for the
class of insurer proposed to be organized, whichever is greater, with
the directors and officers as principal and a duly authorized surety
insurer as surety. The bond shall be for the use and benefit of the
State of Maryland and all subscribers and creditors. The bond shall
be conditioned upon the payment of costs incurred by the State by
reason of any legal proceeding against such insurer and for the full
and complete accounting for all funds and property coming into the
possession of the insurer prior to the issuance of a certificate of
authority to such insurer.

(c)   In lieu of filing such bond, the directors and officers may de-
posit with the Commissioner cash or securities eligible for deposit
by insurers under section 50, having a market value at least equal
to the amount of such bond. The cash or securities so deposited shall
be held in trust by the Commissioner until a certificate of authority
is issued to the insurer, to indemnify the State of Maryland and all
subscribers and creditors of the insurer for the matters and things
set forth in this section as conditions of the bond.

255.    Additional Kinds of Insurance, Mutuals.

A mutual insurer, after being authorized to engage in one kind of
insurance business, may be authorized by the Commissioner to en-
gage in such additional kinds of insurance business as are permitted
under section 46, while otherwise in compliance with this article.

256.    Impairment of Required Surplus.

(a)   If the minimum surplus to be maintained under the require-
ments of section 49 becomes impaired, or the assets of a mutual
insurer are less than its liabilities and the minimum amount of
surplus required to be maintained by it under sections 252, 253,
or 255 for authority to engage in the kind or kinds of insurance
business being transacted, the Commissioner shall at once determine
the amount of deficiency and serve notice upon the insurer to make
good the deficiency within sixty days after service of such notice.

(b)   The deficiency may be made good in cash or in assets eligible
for the investment of the insurer's funds under subtitles 6 or 7; or
if a stock insurer, by reduction of the insurer's capital to an amount