2013 New York Consolidated Laws
ISC - Insurance
Article 74 - (7401 - 7437) REHABILITATION, LIQUIDATION, CONSERVATION AND DISSOLUTION OF INSURERS
7437 - Qualified financial contracts.

 
    § 7437. Qualified financial contracts. (a) As used in this section:
    (1) "Actual direct compensatory damages" means and includes normal and
  reasonable  costs  of  cover  or  other  reasonable  measures of damages
  utilized in the derivatives, securities or other market for the contract
  and agreement claims but does not include punitive or exemplary damages,
  damages for lost profit or lost opportunity  or  damages  for  pain  and
  suffering.
    (2)  "Business day" means a day other than a Saturday, a Sunday or any
  day on which either the New York stock exchange or the  Federal  Reserve
  Bank of New York is closed.
    (3)  "Commodity  contract"  means:  (A) a contract for the purchase or
  sale of a commodity for future delivery on, or subject to the rules  of,
  a  board of trade or contract market under the Commodity Exchange Act (7
  U.S.C. § 1, et seq.) or a board of trade outside the United States;  (B)
  an  agreement  that  is  subject  to  regulation under section 19 of the
  Commodity Exchange Act (7 U.S.C. § 1, et  seq.)  and  that  is  commonly
  known  to  the  commodities  trade as a margin account, margin contract,
  leverage account or leverage contract; (C) an agreement  or  transaction
  that  is  subject  to  regulation  under  section 4c(b) of the Commodity
  Exchange Act (7 U.S.C. § 1, et seq.) and that is commonly known  to  the
  commodities  trade  as  a  commodity  option; (D) any combination of the
  agreements or transactions referred to in this paragraph; (E) any option
  to enter into an agreement or transaction referred to in this paragraph;
  or (F) any other contract that is  included  from  time  to  time  as  a
  commodity  contract  as defined in the Federal Deposit Insurance Act, 12
  U.S.C. § 1821(e)(8)(D).
    (4) "Contractual right" means and includes any right set  forth  in  a
  rule  or bylaw of a derivatives clearing organization (as defined in the
  Commodity  Exchange  Act),  a  multilateral  clearing  organization  (as
  defined  in the Federal Deposit Insurance Corporation Improvement Act of
  1991),  a  national   securities   exchange,   a   national   securities
  association,  a securities clearing agency, a contract market designated
  under the Commodity Exchange Act, a  derivatives  transaction  execution
  facility  registered  under  the  Commodity  Exchange Act, or a board of
  trade (as defined in the Commodity Exchange Act) or in a  resolution  of
  the  governing  board thereof and any right, whether or not evidenced in
  writing, arising under statutory or common law, or under  law  merchant,
  or by reason of normal business practice.
    (5) "Forward contract" shall have the meaning set forth in the Federal
  Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).
    (6)  "Netting agreement" means: (A) a contract or agreement (including
  the terms and conditions incorporated by reference in  such  agreement),
  including  a master agreement (which master agreement, together with all
  schedules,  confirmations,   definitions   and   addenda   thereto   and
  transactions  under  any  thereof,  shall  be  treated  as  one  netting
  agreement), that documents one or more transactions between the  parties
  to  the  agreement  for  or  involving  one  or more qualified financial
  contracts and  that  provides  for  the  netting,  offset,  liquidation,
  termination,  acceleration or close out, under or in connection with one
  or more qualified financial contracts or present or  future  payment  or
  delivery  obligations  or  payment  or  delivery entitlements thereunder
  (including liquidation or close-out values relating to such  obligations
  or  entitlements)  among  the  parties to the netting agreement; (B) any
  master agreement or bridge agreement for one or more  master  agreements
  described  in  subparagraph  (A)  of this paragraph; or (C) any security
  arrangement related to one or more contracts or agreements described  in
  subparagraph (A) or (B) of this paragraph; provided that any contract or
  agreement  described  in  subparagraph  (A)  or  (B)  of  this paragraph

  relating to agreements or transactions that are not qualified  financial
  contracts shall be deemed to be a netting agreement only with respect to
  those agreements or transactions that are qualified financial contracts.
    (7)  "Qualified  financial  contract"  means  any  commodity contract,
  forward  contract,  repurchase  agreement,  securities  contract,   swap
  agreement  and  any similar agreement that the superintendent determines
  by regulation to be a qualified financial contract for the  purposes  of
  this article.
    (8)  "Repurchase  agreement"  shall  have the meaning set forth in the
  Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).
    (9) "Securities contract" shall have the  meaning  set  forth  in  the
  Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).
    (10)   "Security   arrangement"   means   any  security  agreement  or
  arrangement or other credit enhancement or  guarantee  or  reimbursement
  obligation,  including  a  pledge,  security,  collateral  or  guarantee
  agreement or credit support document.
    (11) "Separate account"  means  an  account  established  pursuant  to
  section four thousand two hundred forty of this chapter.
    (12)  "Swap agreement" shall have the meaning set forth in the Federal
  Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).
    (13) "Walkaway clause" means a provision in a netting agreement  or  a
  qualified  financial  contract  that,  after calculation of a value of a
  party's position or an amount due to or  from  one  of  the  parties  in
  accordance  with its terms upon termination, liquidation or acceleration
  of the netting agreement or qualified financial  contract,  either  does
  not  create  a  payment  obligation of a party or extinguishes a payment
  obligation of a party in whole or in part solely because of the  party's
  status as a non-defaulting party.
    (b) (1) Notwithstanding any other provision of this article, including
  any  other  provision  of  this  article  permitting the modification of
  contracts, or other law of this state, no  person  shall  be  stayed  or
  prohibited  from  exercising:  (A)  a  contractual  right  to  cause the
  termination, liquidation, acceleration or close out  of  any  obligation
  under  or  in connection with a netting agreement or qualified financial
  contract with an insurer,  other  than  an  insurer  licensed  to  write
  financial  guaranty insurance, because of: (i) the insolvency, financial
  condition or default of the insurer at any time, provided that the right
  is enforceable under applicable law other than this article; or (ii) the
  commencement of any proceeding under this article; (B) any right under a
  security arrangement relating to  one  or  more  netting  agreements  or
  qualified  financial  contracts,  other  than a right against an insurer
  licensed to write financial guaranty insurance; or (C)  subject  to  any
  provision  of  subsection  (b)  of  section  seven thousand four hundred
  twenty-seven of this article,  any  right  to  offset  or  net  out  any
  termination  value, payment amount, or other transfer obligation arising
  under or in connection with one or more qualified  financial  contracts,
  other  than  a  right  against  an  insurer  licensed to write financial
  guaranty insurance, where the counterparty or its guarantor is organized
  under the laws of the United States, a state, or a foreign  jurisdiction
  approved  by the Securities Valuation Office of the National Association
  of Insurance Commissioners as eligible for netting.
    (2) If a counterparty to a master netting  agreement  or  a  qualified
  financial  contract  with  an insurer, other than an insurer licensed to
  write financial guaranty insurance, subject to a proceeding  under  this
  article  terminates, liquidates, closes out or accelerates the agreement
  or contract, damages shall be measured  as  of  the  date  or  dates  of
  termination,  liquidation,  close  out  or acceleration. The amount of a
  claim for damages shall be actual direct compensatory damages.

    (c) Upon termination of a netting  agreement  or  qualified  financial
  contract,  the net or settlement amount, if any, owed by a nondefaulting
  party to an insurer against which an application has  been  filed  under
  this article, other than an insurer licensed to write financial guaranty
  insurance,   shall   be   transferred   to   or  on  the  order  of  the
  superintendent, as liquidator,  rehabilitator  or  conservator  for  the
  insurer,  even  if  the insurer is the defaulting party, notwithstanding
  any walkaway clause in the  netting  agreement  or  qualified  financial
  contract.  Any  limited  two-way  payment or first method provision in a
  netting agreement or qualified financial contract with an  insurer  that
  has  defaulted  shall  be  deemed to be a full two-way payment or second
  method provision as against the defaulting insurer. Any such property or
  amount shall, except to  the  extent  it  is  subject  to  one  or  more
  secondary  liens  or  encumbrances or rights of netting or setoff, be an
  asset of the insurer.
    (d) In making  any  transfer  of  a  netting  agreement  or  qualified
  financial  contract  of  an  insurer  subject to a proceeding under this
  article, other than an insurer  licensed  to  write  financial  guaranty
  insurance,   the   superintendent,   as   liquidator,  rehabilitator  or
  conservator for the insurer, shall either:
    (1) transfer to  one  party  (other  than  an  insurer  subject  to  a
  proceeding  under  this  article)  all  netting agreements and qualified
  financial contracts between a counterparty  or  any  affiliate  of  such
  counterparty  and  the  insurer  that  is the subject of the proceeding,
  including: (A) all rights and obligations of each party under each  such
  netting   agreement  and  qualified  financial  contract;  and  (B)  all
  property, including any guarantees or other credit enhancement, securing
  any claims of each party under each such netting agreement and qualified
  financial contract; or
    (2) transfer none  of  the  netting  agreements,  qualified  financial
  contracts,  rights, obligations or property referred to in paragraph one
  of this subsection (with respect to such counterparty and any  affiliate
  of such counterparty).
    (e) If the superintendent, as liquidator, rehabilitator or conservator
  for  an  insurer,  other  than  an  insurer  licensed to write financial
  guaranty insurance, makes a transfer of one or more  netting  agreements
  or  qualified financial contracts, then the superintendent shall use his
  or her best efforts to notify any person who is  party  to  the  netting
  agreements  or  qualified  financial  contracts of the transfer by 12:00
  noon, New York time, on the business day following the transfer.
    (f)  Notwithstanding  any  other  provision  of  this   article,   the
  superintendent,  as  liquidator,  rehabilitator  or  conservator  for an
  insurer, other than an insurer  licensed  to  write  financial  guaranty
  insurance,  may  not avoid a transfer of money or other property arising
  under or in connection with a netting agreement or  qualified  financial
  contract, or any security arrangement relating to a netting agreement or
  qualified  financial contract, that is made before the commencement of a
  liquidation,  rehabilitation  or  conservation  proceeding  under   this
  article,  except  that  a  transfer  may  be avoided under section seven
  thousand four hundred twenty-five of this article if  the  transfer  was
  made  with  actual  intent  to hinder, delay or defraud the insurer, the
  superintendent, as  liquidator,  rehabilitator  or  conservator  of  the
  insurer,  any  other  receiver appointed for the insurer, or existing or
  future creditors.
    (g)(1) In exercising any rights of disaffirmance or repudiation  of  a
  liquidator,  rehabilitator  or  conservator  with respect to any netting
  agreement or qualified financial contract  to  which  an  insurer  is  a
  party,  other  than  an  insurer  licensed  to  write financial guaranty

  insurance,  the  superintendent,   as   liquidator,   rehabilitator   or
  conservator for the insurer shall either: (A) disaffirm or repudiate all
  netting   agreements   and   qualified  financial  contracts  between  a
  counterparty  or any affiliate of such counterparty and the insurer that
  is the subject of the proceeding; or (B) disaffirm or repudiate none  of
  the  netting agreements and qualified financial contracts referred to in
  subparagraph (A) of this paragraph (with respect to such person  or  any
  affiliate of such person).
    (2)  Notwithstanding any other provision of this article, any claim of
  a counterparty against the estate, other than the estate of  an  insurer
  licensed  to  write  financial  guaranty  insurance,  arising  from  the
  superintendent's disaffirmance or repudiation of a netting agreement  or
  qualified  financial  contract  that has not been previously affirmed in
  the   liquidation   proceeding   or   in   the   immediately   preceding
  rehabilitation  proceeding  shall  be determined and shall be allowed or
  disallowed: (A) as if the claim had arisen before the date of the filing
  of  the  application  for  liquidation;  or  (B)  if  a   rehabilitation
  proceeding is converted to a liquidation proceeding, as if the claim had
  arisen   before   the   date  of  the  filing  of  the  application  for
  rehabilitation.
    (3) The amount of the  claim  identified  in  paragraph  two  of  this
  subsection shall be the actual direct compensatory damages determined as
  of the date of the disaffirmance or repudiation of the netting agreement
  or qualified financial contract.
    (h)  All  rights of a counterparty under this article shall apply to a
  netting agreement and a qualified financial  contract  entered  into  on
  behalf  of  or  allocated to: (1) the general account of the insurer; or
  (2) a separate account of the insurer, other than an insurer licensed to
  write financial guaranty  insurance,  if  the  assets  of  the  separate
  account  are available only to a counterparty to a netting agreement and
  a qualified financial contract entered into on behalf of,  or  allocated
  to, that separate account.