§ 507C.28A — Qualified financial contracts

Iowa § 507C.28A

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 507C: INSURERS SUPERVISION, REHABILITATION, AND LIQUIDATION

Text

1. Notwithstandinganyotherprovisionofthischaptertothecontrary, includinganyother
provision of this chapter permitting the modification of contracts, or other law of a state, a
person shall not be stayed or prohibited from exercising any of the following:
a. A contractual right to terminate, liquidate, or close out any netting agreement or
qualified financial contract with an insurer because of any of the following:
(1) The insolvency, financial condition, or default of the insurer at any time, provided that
the right is enforceable under applicable law other than this chapter.
(2) The commencement of a formal delinquency proceeding under this chapter.
b. 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.
c. Subject to any provision of section 507C.30, subsection 2, 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 or the national association of
insurance commissioners as eligible for netting.
2. 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 this chapter 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
amountduetothedefaultingpartyupontermination. Anylimitedtwo-waypaymentprovision
inanettingagreementwithaninsurerthathasdefaultedshallbedeemedtobeafulltwo-way
payment provision as against the defaulting insurer. Any such amount shall, except to the
extent it is subject to one or more secondary liens or encumbrances, be a general asset of the
insurer.
3. In making any transfer of a netting agreement or qualified financial contract of an
insurersubjecttoaproceedingunderthischapter,thereceivershalldoeitherofthefollowing:
§507C.28A, INSURERS SUPERVISION, REHABILITATION, AND LIQUIDATION 24
a. Transfer to one party, other than an insurer subject to a proceeding under this chapter,
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
all of the following:
(1) All rights and obligations of each party under each such netting agreement and
qualified financial contract.
(2) All property, including any guarantees or credit support documents, securing any
claims of each party under each such netting agreement and qualified financial contract.
b. Transfer none of the netting agreements, qualified financial contracts, rights,
obligations, or property referred to in paragraph “a” with respect to the counterparty and
any affiliate of the counterparty.
4. If a receiver for an insurer makes a transfer of one or more netting agreements or
qualified financial contracts, the receiver shall use the receiver’s best efforts to notify any
person who is a party to the netting agreements or qualified financial contracts of the transfer
by noon of 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.
5. Notwithstanding any other provision of this chapter to the contrary, a receiver shall 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 this chapter. However, a transfer may be avoided
under section 507C.28 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.
6. In exercising any of its powers under this chapter to disaffirm or repudiate a netting
agreement or qualified financial contract, the receiver must take action with respect to
each netting agreement or qualified financial contract and all transactions entered into in
connection therewith, in its entirety. Notwithstanding any other provision of this chapter
to the contrary, 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 in the immediately preceding rehabilitation
case shall be determined and shall be allowed or disallowed as if the claim had 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 filing 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. The term “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.
7. The term “contractual right” as used in this section 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.
8. Thissectionshallnotapplytopersonswhoareaffiliatesoftheinsurerthatisthesubject
of the proceeding.
9. All rights of a counterparty under this chapter shall apply to netting agreements
and qualified financial contracts entered into on behalf of the general account or
separate accounts, provided that the assets of each separate account are available only to
counterparties to netting agreements and qualified financial contracts entered into on behalf
of that separate account.
10. Notwithstanding any other provision of this chapter to the contrary, the receiver for
an insurer-member shall not void any transfer of, or any obligation to transfer, money or
25 INSURERS SUPERVISION, REHABILITATION, AND LIQUIDATION, §507C.31
any other property arising under or in connection with any federal home loan bank security
agreement, or any pledge, security, collateral, or guarantee agreement, or any other similar
arrangement or credit enhancement relating to a federal home loan bank security agreement
made in the ordinary course of business and in compliance with the applicable federal home
loan bank agreement. However, a transfer may be avoided under this subsection if the
transfer was made with intent to hinder, delay, or defraud the insurer-member, the receiver
for the insurer-member, or existing or future creditors. This subsection shall not affect
a receiver’s rights regarding advances to an insurer-member in delinquency proceedings
pursuant to 12 C.F.R. §1266.4.