|
§6904
|
§6904 . Limitations.
|
|
§6904(a)
|
(a) Financial guaranty insurance may be transacted in this state only by a corporation licensed for such purpose pursuant to §6902 of this article.
|
|
§6904(b)
|
(b) Permissible guarantees. (1) The superintendent shall not permit the writing of financial guaranty insurance except as defined in subparagraph §6901(a)(1)(A) of this article, and a corporation may insure the timely payment of United States debt instruments, or other monetary obligations, only in the following categories:
|
|
§6904(b)
|
(A) municipal obligation bonds;
|
|
§6904(b)
|
(B) special revenue bonds;
|
|
§6904(b)
|
(C) industrial development bonds;
|
|
§6904(b)
|
(D) obligations of corporations, trusts or other similar entities established under applicable law;
|
|
§6904(b)
|
(E) partnership obligations;
|
|
§6904(b)
|
(F) asset-backed securities, trust certificates and trust obligations other than mortgage-backed securities secured by 1st mortgages on real property which are insurable by a mortgage guaranty insurer authorized under paragraph §1113(a)(23) of this chapter, unless:
|
|
§6904(b)
|
(i) such mortgages with loan-to-value ratios in excess of 80% are:
|
|
§6904(b)
|
(I) in the case of mortgages on property located in the state of New York, insured by mortgage guaranty insurers authorized under paragraph §1113(a)(23) of this chapter;
|
|
§6904(b)
|
(II) in the case of mortgages on property located in a state other than the state of New York, insured by mortgage guaranty insurers authorized to do business in such other state; or
|
|
§6904(b)
|
(III) in an aggregate principal amount less than the single risk limits prescribed in paragraph (this §)(d)(5) ; or
|
|
§6904(b)
|
(ii) additional mortgages with principal balances, other collateral with a market value, or (provided the insured risk is investment grade) excess spread in an amount, in each instance at least equal to the coverage that would otherwise be provided by such mortgage guaranty insurers in accordance with item (this sub¶)(i) are pledged as additional security for the asset-backed securities;
|
|
§6904(b)
|
(G) installment purchase agreements executed as a condition of sale;
|
|
§6904(b)
|
(H) consumer debt obligations;
|
|
§6904(b)
|
(I) utility 1st mortgage obligations; and
|
|
§6904(b)
|
(J) any other debt instrument or financial obligation that the superintendent determines to be substantially similar to any of the foregoing or shall otherwise be approved by the superintendent.
|
|
§6904(b)(2)
|
(2) An insurer may insure obligations enumerated in subparagraphs (this sub§)(1)(A) , (this sub§)(1)(B) , and (this sub§)(1)(C) that are not investment grade so long as at least 95% of the insurer's aggregate net liability on the kinds of obligations enumerated in subparagraphs (this sub§)(1)(A) , (this sub§)(1)(B) and (this sub§)(1)(C) shall be investment grade.
|
|
§6904(b)(3)
|
(3) A corporation may insure the timely payment of monetary obligations in any category designated in (this sub§) notwithstanding that such obligation may be insured by a financial guaranty insurance policy issued by another insurer. In the event that any obligation is insured by more than 1 financial guaranty insurance policy, then each such insurance policy may by its terms specify its priority of payment in the event of a default under the obligation insured or any other insurance policy; provided that an insurer shall be entitled to take into account payment under another policy insuring such obligation for purposes of establishing and maintaining loss reserves only to the extent that the policy issued by such insurer provides for payment only in the event of payment default under both such obligation and the other policy.
|
|
§6904(b)(4)
|
(4) A corporation may also write financial guaranty insurance as defined in subparagraph §6901(a)(1)(A) of this article to insure the timely payment of non-United States debt instruments or other monetary obligations denominated or payable in foreign currency, only for the categories listed in subparagraphs (this sub§)(1)(A) through (this sub§)(1)(J) ,provided that:
|
|
§6904(b)(4)(A)
|
(A) such currency is that of an Organisation for Economic Co-operation and Development country or such other country (i) whose sovereign rating is investment grade or (ii) as shall not otherwise be disapproved by the superintendent within 30 days following receipt of written notification. The superintendent shall not disapprove such notification upon demonstration that there is no undue risk associated with insuring the timely payment of such instruments or obligations. In making such a determination the superintendent shall take into consideration the corporation's outstanding liabilities on non-investment grade instruments and obligations in relation to its outstanding liabilities on all instruments and obligations and in relation to the amount of its surplus to policyholders;
|
|
§6904(b)(4)(B)
|
(B) reserves required pursuant to §6903 of this article in regard to such obligations shall be established and adjusted quarterly based upon the then current foreign exchange rates;
|
|
§6904(b)(4)(C)
|
(C) such obligations shall not exceed 25% of an insurer's aggregate net liability; and
|
|
§6904(b)(4)(D)
|
(D) the aggregate and single risk limitations prescribed by subsections (this §)(c) and (this §)(d) shall be determined by applying the then current foreign exchange rates.
|
|
§6904(c)
|
(c) Aggregate risk limits. The corporation must at all times maintain surplus to policyholders and contingency reserves in the aggregate no less than the sum of:
|
|
§6904(c)(1)
|
(1)
|
|
§6904(c)(1)(A)
|
(A) 0. 3333 or 1/300th of the aggregate net liability under guaranties of municipal bonds including obligations demonstrated to the satisfaction of the superintendent to be the functional equivalent thereof and investment grade utility 1st mortgage obligations; plus
|
|
§6904(c)(1)(B)
|
(B) 0. 6666 or 1/150th of the aggregate net liability under guaranties of investment grade asset-backed securities; plus
|
|
§6904(c)(1)(C)
|
(C) 1. 0 or 1/100th of the aggregate net liability under guaranties, secured by collateral or having a term of 7 years or less, of:
|
|
§6904(c)(1)(C)(i)
|
(i) investment grade industrial development bonds,
|
|
§6904(c)(1)(C)(ii)
|
(ii) other investment grade obligations; plus
|
|
§6904(c)(1)(D)
|
(D) 1. 5 or 1/66. 67th of the aggregate net liability under guaranties of other investment grade obligations; plus
|
|
§6904(c)(1)(E)
|
(E) 2. 0 or 1/50th of the aggregate net liability under guaranties of:
|
|
§6904(c)(1)(E)(i)
|
(i) non-investment grade consumer debt obligations, and
|
|
§6904(c)(1)(E)(ii)
|
(ii) non-investment grade asset-backed securities; plus
|
|
§6904(c)(1)(F)
|
(F) 2. 5 or 1/40th of the aggregate net liability under guaranties of non-investment grade obligations secured by 1st mortgages on commercial real estate and having loan-to-value ratios of 80% or less; plus
|
|
§6904(c)(1)(G)
|
(G) 4. 0 or 1/25th of the aggregate net liability under guaranties of other non-investment grade obligations; and
|
|
§6904(c)(1)(H)
|
(H) if the amount of collateral required by subparagraph (this ¶)(C) is no longer maintained, that proportion of the obligation insured which is not so collateralized shall be subject to the aggregate limits specified in subparagraph (this ¶)(D) ; and
|
|
§6904(c)(2)
|
(2) surplus to policyholders determined by the superintendent to be adequate to support the writing of residual value insurance, surety insurance and credit insurance, if the corporation has elected to transact such kinds of insurance pursuant to subsection §6902(a) of this article.
|
|
§6904(d)
|
(d) Single risk limits. A financial guaranty insurance corporation shall limit its exposure to loss on any 1 risk insured by policies providing financial guaranty insurance, net of collateral and reinsurance, as follows:
|
|
§6904(d)(1)
|
(1) for municipal obligation bonds, special revenue bonds, and obligations demonstrated to the satisfaction of the superintendent to be the functional equivalent thereof:
|
|
§6904(d)(1)(A)
|
(A) the insured average annual debt service with respect to a single entity and backed by a single revenue source shall not exceed 10% of the aggregate of the insurer's surplus to policyholders and contingency reserve; and
|
|
§6904(d)(1)(B)
|
(B) the insured unpaid principal issued by a single entity and backed by a single revenue source shall not exceed 75% of the aggregate of the insurer's surplus to policyholders and contingency reserve;
|
|
§6904(d)(2)
|
(2) for each issue of asset-backed securities issued by a single entity and for each pool of consumer debt obligations, the lesser of:
|
|
§6904(d)(2)(A)
|
(A) insured average annual debt service; or
|
|
§6904(d)(2)(B)
|
(B) insured unpaid principal (reduced by the extent to which the unpaid principal of the supporting assets and, provided the insured risk is investment grade, excess spread exceed the insured unpaid principal) divided by 9 ; shall not exceed 10% of the aggregate of the insurer's surplus to policyholders and contingency reserve, provided that no asset in the pool supporting the asset-backed securities exceeds the single risk limits prescribed in paragraph (this sub§)(5) ,if directly guaranteed; and provided further that, if the issuer of such insured asset-backed securities is a special purpose corporation, trust or other entity and such issuer shall have indebtedness outstanding with respect to any other pool of assets, either such other indebtedness shall be entitled to the benefits of a financial guaranty policy of the same insurer, or such other indebtedness shall: (i) be fully subordinated to the insured obligation, with respect to, or be non-recourse with respect to, the pool of assets that supports the insured obligation, (ii) be non-recourse to the issuer other than with respect to the asset pool securing such other indebtedness and proceeds in excess of the proceeds necessary to pay the insured obligation ("excess proceeds") and (iii) not constitute a claim against the issuer to the extent that the asset pool securing such other indebtedness or excess proceeds are insufficient to pay such other indebtedness;
|
|
§6904(d)(3)
|
(3) for obligations issued by a single entity and secured by commercial real estate, and not meeting the definition of asset-backed securities, the insured unpaid principal less 50% of the appraised value of the underlying real estate shall not exceed 10% of the aggregate of the insurer's surplus to policyholders and contingency reserve;
|
|
§6904(d)(4)
|
(4) for utility 1st mortgage obligations, the insured average annual debt service shall not exceed 10% of the aggregate of the insurer's surplus to policyholders and contingency reserve; and
|
|
§6904(d)(5)
|
(5) for all other policies providing financial guaranty insurance with respect to obligations issued by a single entity and backed by a single revenue source, the insured unpaid principal shall not exceed 10% of the aggregate of the insurer's surplus to policyholders and contingency reserve.
|
|
§6904(e)
|
(e) Except as provided in subsection (this §)(f) ,if an insurer at any time exceeds any limitation prescribed by subsection (this §)(c) or (this §)(d) or the last sentence of paragraph (this §)(b)(1) ,the insurer shall within 30 days after the limitations are breached, submit a written plan to the superintendent detailing the steps that it will take or has taken to reduce its exposure to loss to no more than the permitted amounts, and if after notice and hearing the superintendent determines that an insurer has exceeded any limitation prescribed by (this §) ,he may order such insurer to cease transacting any new financial guaranty insurance business until its exposure to loss no longer exceeds said limitations or with respect to the limitations prescribed in the last sentence of paragraph (this §)(b)(1) ,may order such insurer to limit its writing of the types of guaranties permitted under subparagraphs (this §)(b)(1)(A) , (this §)(b)(1)(B) and (this §)(b)(1)(C) to investment grade obligations until such time as it shall be in compliance with such limitations.
|
|
§6904(f)
|
(f) An insurer shall not be deemed in violation of any limitation prescribed by subsection (this §)(d) with respect to any financial guaranty insurance outstanding prior to the effective date of this article, if the insurer was in compliance with the applicable single risk limit in effect in this state at the time that the financial guaranty insurance policy was issued. If the insurer was not so in compliance, such financial guaranty insurance shall comply with the limitations prescribed by subsection (this §)(d) no later than 3 years after the effective date of this article.
|
|
§6904(g)
|
(g) No insurer authorized to transact the business of financial guaranty insurance shall pay any commission or make any gift of money, property or other valuable thing to any employee, agent or representative of any potential purchaser of a financial guaranty insurance policy, as an inducement to the purchase of such a policy, and no such employee, agent or representative of such potential purchaser shall receive any such payment or gift. Violation of the provisions of (this §) shall not, however, have the effect of rendering void the insurance policy issued by the insurer. Source Data downloaded: 2009-04-09 15: 46: 32; Processed: 2009-05-08 15: 36: 28
|