S. 4772 2
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. S 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 ASSOCI-
ATION, 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 GOVERN-
ING 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. S 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 TRANS-
ACTIONS 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, ACCEL-
ERATION 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 TRAN-
SACTIONS THAT ARE QUALIFIED FINANCIAL CONTRACTS.
(7) "QUALIFIED FINANCIAL CONTRACT" MEANS ANY COMMODITY CONTRACT,
FORWARD CONTRACT, REPURCHASE AGREEMENT, SECURITIES CONTRACT, SWAP AGREE-
MENT 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. S 1821(E)(8)(D).
(9) "SECURITIES CONTRACT" SHALL HAVE THE MEANING SET FORTH IN THE
FEDERAL DEPOSIT INSURANCE ACT, 12 U.S.C. S 1821(E)(8)(D).
(10) "SECURITY ARRANGEMENT" MEANS ANY SECURITY AGREEMENT OR ARRANGE-
MENT OR OTHER CREDIT ENHANCEMENT OR GUARANTEE OR REIMBURSEMENT OBLI-
GATION, 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. S 1821(E)(8)(D).
S. 4772 3
(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 TERMI-
NATION, LIQUIDATION, ACCELERATION OR CLOSE OUT OF ANY OBLIGATION UNDER
OR IN CONNECTION WITH A NETTING AGREEMENT OR QUALIFIED FINANCIAL
CONTRACT WITH AN INSURER 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 QUAL-
IFIED FINANCIAL CONTRACTS; OR (C) SUBJECT TO ANY PROVISION OF SUBSECTION
(B) OF SECTION SEVEN THOUSAND FOUR HUNDRED TWENTY-SEVEN OF THIS CHAPTER,
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 WHERE THE COUNTERPARTY OR ITS GUARAN-
TOR 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 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 TERMI-
NATION, 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 SHALL BE TRANSFERRED TO OR ON THE ORDER OF THE SUPERINTEN-
DENT, 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 FINAN-
CIAL CONTRACT OF AN INSURER SUBJECT TO A PROCEEDING UNDER THIS ARTICLE,
THE SUPERINTENDENT, AS LIQUIDATOR, REHABILITATOR OR CONSERVATOR FOR THE
INSURER, SHALL EITHER:
(1) TRANSFER TO ONE PARTY (OTHER THAN AN INSURER SUBJECT TO A PROCEED-
ING 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 AGREE-
MENT AND QUALIFIED FINANCIAL CONTRACT; AND (B) ALL PROPERTY, INCLUDING
S. 4772 4
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, 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 AGREE-
MENTS 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 SUPER-
INTENDENT, AS LIQUIDATOR, REHABILITATOR OR CONSERVATOR FOR AN INSURER,
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 LIQUI-
DATION, REHABILITATION OR CONSERVATION PROCEEDING UNDER THIS ARTICLE,
EXCEPT THAT A TRANSFER MAY BE AVOIDED UNDER SECTION SEVEN THOUSAND FOUR
HUNDRED TWENTY-FIVE OF THIS CHAPTER 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, 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 ARISING FROM THE SUPERINTENDENT'S
DISAFFIRMANCE OR REPUDIATION OF A NETTING AGREEMENT OR QUALIFIED FINAN-
CIAL 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 IF THE ASSETS OF THE SEPARATE
ACCOUNT ARE AVAILABLE ONLY TO A COUNTERPARTY TO A NETTING AGREEMENT AND
S. 4772 5
A QUALIFIED FINANCIAL CONTRACT ENTERED INTO ON BEHALF OF, OR ALLOCATED
TO, THAT SEPARATE ACCOUNT.
S 2. Subsection (e) of section 7709 of the insurance law, as added by
chapter 802 of the laws of 1985, is amended to read as follows:
(e) (1) The total assessment against all member insurers for all
impairments and insolvencies, less the amount of refunds (not including
interest) to member insurers pursuant to subsection (f) of this section,
shall not exceed [five hundred million] ONE BILLION dollars.
(2) The total of all assessments upon a member insurer for each
account shall not in any one calendar year exceed two percent of such
insurer's premiums received in this state during the calendar year
preceding the assessment on the policies covered by the account. If the
maximum assessment, together with the other assets of the corporation in
either account, does not provide in any one year in either account an
amount sufficient to carry out the responsibilities of the corporation,
the necessary additional funds shall be assessed as soon thereafter as
permitted by this article.
(3) EFFECTIVE FEBRUARY FIRST, TWO THOUSAND ELEVEN, THE TOTAL ASSESS-
MENT MAXIMUM SET FORTH IN PARAGRAPH ONE OF THIS SUBSECTION SHALL BE
ADJUSTED ANNUALLY BASED ON THE INCREASE IN THE CONSUMER PRICE INDEX FOR
ALL URBAN CONSUMERS, PUBLISHED BY THE U.S. DEPARTMENT OF LABOR, BUREAU
OF LABOR STATISTICS, FOR THE MOST RECENT ONE-YEAR PERIOD ENDING ON
DECEMBER THIRTY-FIRST PRECEDING THE ADJUSTMENT, WITH EACH ADJUSTED
AMOUNT ROUNDED TO THE NEAREST MILLION DOLLARS, EXCEPT THAT NO ADJUSTMENT
SHALL BE MADE IF, ON THE DECEMBER THIRTY-FIRST PRECEDING THE DATE ON
WHICH THE ADJUSTMENT OTHERWISE WOULD OCCUR, THE TOTAL ASSESSMENT AGAINST
ALL MEMBER INSURERS FOR ALL IMPAIRMENTS AND INSOLVENCIES, LESS THE
AMOUNT OF REFUNDS (NOT INCLUDING INTEREST) TO MEMBER INSURERS PURSUANT
TO SUBSECTION (F) OF THIS SECTION, WAS EQUAL TO THE MAXIMUM SET FORTH IN
PARAGRAPH ONE OF THIS SUBSECTION, AFTER TAKING INTO ACCOUNT ANY PRIOR
ADJUSTMENT PURSUANT TO THIS PARAGRAPH. IN NO EVENT SHALL AN ANNUAL
ADJUSTMENT RESULT IN A REDUCTION FROM THE PRECEDING YEAR IN THE TOTAL
ASSESSMENT MAXIMUM.
S 3. This act shall take effect immediately; provided, however, the
provisions of section 7437 of the insurance law, as added by section one
of this act shall only apply to a liquidation, rehabilitation or conser-
vation proceeding that commences under article 74 of the insurance law
on or after such effective date.