§ 38a-944a — Additional rights. Netting agreements. Qualified financial contracts. Security arrangements.

Connecticut § 38a-944a

• Jurisdiction: Connecticut
• Title 38a: Insurance
• Ch. 704c: Insurers Rehabilitation and Liquidation Act and Termination of Domestic Life Insurance Companies

Text

(a) Notwithstanding any provision of sections 38a-903 to 38a-961, inclusive, including any provision permitting the modification of contracts, or other law of a state, no person shall be stayed or prohibited from exercising: (1) A contractual right to terminate, liquidate or close out any netting agreement or qualified financial contract with an insurer because of: (A) The insolvency, financial condition or default of the insurer at any time, provided the right is enforceable under applicable law other than sections 38a-903 to 38a-961, inclusive, or (B) the commencement of a formal delinquency proceeding under sections 38a-903 to 38a-961, inclusive; (2) any right under a pledge, security, collateral or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract; or (3) subject to any provision of subsection (b) of section 38a-932, any right to set off or net out any termination value, payment amount, or other transfer obligation arising under or in connection with a netting agreement or qualified financial contract where the counterparty or its guarantor is organized under the laws of the United States or a state or foreign jurisdiction approved by the Securities Valuation Office of the National Association of Insurance Commissioners as eligible for netting. (b) Upon termination of a netting agreement, the net or settlement amount, if any, owed by a nondefaulting party to an insurer against which an application or petition has been filed under sections 38a-903 to 38a-961 , inclusive, shall be transferred to or on the order of the receiver for the insurer, even if the insurer is the defaulting party, notwithstanding any provision in the netting agreement that may provide that the nondefaulting party is not required to pay any net or settlement amount due to the defaulting party upon termination. Any limited two-way payment provision in a netting agreement with an insurer that has defaulted shall be deemed to be a full two-way payment 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, be a general asset of the insurer. (c) In making any transfer of a netting agreement or qualified financial contract of an insurer subject to a delinquency proceeding, the receiver shall either: (1) Transfer to one party, other than an insurer subject to a delinquency proceeding, all netting agreements and qualified financial contracts between a counterparty or any affiliate of the 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 credit support documents, securing any claims of each party under 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 subdivision (1) of this subsection, with respect to such counterparty and any affiliate of such counterparty. (d) If a receiver for an insurer makes a transfer of one or more netting agreements or qualified financial contracts, then the receiver shall use its best efforts to notify any person who is a party to the netting agreements or qualified financial contracts of the transfer by twelve o'clock noon, the receiver's local time, on the business day following the transfer. For purposes of this subsection, “business day” means a day other than a Saturday, Sunday or any day on which either the New York Stock Exchange or the Federal Reserve Bank of New York is closed. (e) Notwithstanding any other provision of sections 38a-903 to 38a-961 , inclusive, a receiver 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 pledge, security, collateral or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract, that is made before the commencement of a formal delinquency proceeding under sections 38a-903 to 38a-961 , inclusive, except that a transfer may be avoided under subsection (a) of section 38a-928 if the transfer was made with actual intent to hinder, delay or defraud the insurer, a receiver appointed for the insurer or existing or future creditors. (f) Notwithstanding any other provision of sections 38a-903 to 38a-961 , inclusive, any claim of a counterparty against the estate arising from the receiver's disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the liquidation or immediately preceding rehabilitation case shall be determined and shall be allowed or disallowed as if the claim has arisen before the date of the filing of the petition for liquidation or, if a rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date of the filing of the petition for rehabilitation. The amount of the claim 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. “Actual direct compensatory damages” does not include punitive or exemplary damages, damages for lost profit or lost opportunity or damages for pain and suffering, but does include normal and reasonable costs of cover or other reasonable measures of damages utilized in the derivatives market for the contract and agreement claims. (g) As used in this section, “contractual right” includes any right, whether or not evidenced in writing, arising under statutory or common law, a rule or bylaw of a national securities exchange, national securities clearing organization or securities clearing agency, a rule or bylaw, or a resolution of the governing body, of a contract market or its clearing organization, or under law merchant. (h) The provisions of this section shall not apply to persons who are affiliates of the insurer that is the subject of the proceeding. (i) All rights of counterparties under sections 38a-903 to 38a-961 , inclusive, shall apply to netting agreements entered into on behalf of the general account or separate accounts if the assets of each separate account are available only to counterparties to netting agreements entered into on behalf of that separate account.

Legislative History

(P.A. 98-214, S. 22; P.A. 17-15, S. 92.) History: P.A. 17-15 made technical changes in Subsec. (a).