§ 38-90-600 — Conservation, rehabilitation, or liquidation of SPFC.

(A) Except as otherwise modified in this section, the terms and conditions set forth in Chapters 26 and 27 of this title pertaining to administrative supervision of insurers and the rehabilitation, receiverships, and liquidation of insurers apply in full to SPFCs or each of the SPFC's protected cells, independently, or both, without causing or otherwise effecting a conservation, rehabilitation, receivership, or liquidation of the SPFC or another protected cell. (B) Notwithstanding the provisions of Chapters 26 and 27, Title 38, and without causing or otherwise affecting the conservation or rehabilitation of an otherwise solvent protected cell of an SPFC and subject to the provisions of subsection (G)(5) of this section, the director may apply by petition to the circuit court for an order authorizing the director to conserve, rehabilitate, or liquidate a SPFC domiciled in this State on one or more of the following grounds: (1) there has been embezzlement, wrongful sequestration, dissipation, or diversion of the assets of the SPFC intended to be used to pay amounts owed to the counterparty or the holders of SPFC securities; or (2) the SPFC is insolvent and the holders of a majority in outstanding principal amount of each class of SPFC securities request or consent to conservation, rehabilitation, or liquidation pursuant to the provisions of this article. (C) Notwithstanding the provisions of Chapters 26 and 27, Title 38, the director may apply by petition to the circuit court for an order authorizing the director to conserve, rehabilitate, or liquidate one or more of a SPFC's protected cells, independently, without causing or otherwise effecting a conservation, rehabilitation, receivership, or liquidation of the SPFC generally or another of its protected cells, on one or more of the following grounds: (1) there has been embezzlement, wrongful sequestration, dissipation, or diversion of the assets of the SPFC attributable to the affected protected cell or cells intended to be used to pay amounts owed to the counterparty or the holders of SPFC securities of the affected protected cell or cells; or (2) the affected protected cell is insolvent and the holders of a majority in outstanding principal amount of each class of SPFC securities attributable to that particular protected cell request or consent to conservation, rehabilitation, or liquidation pursuant to the provisions of this article. (D) The court may not grant relief provided by subsection (B)(1) or subsection (C)(1) unless, after notice and a hearing, the director, who shall have the burden of proof, establishes by clear and convincing evidence that relief must be granted. The court's order may be made in respect of one or more protected cells by name, rather than the SPFC generally. (E) Notwithstanding another provision in this title, regulations promulgated under this title, or another applicable law or regulation, upon any order of conservation, rehabilitation, or liquidation of a SPFC, or one or more of the SPFC's protected cells, the receiver shall manage the assets and liabilities of the SPFC pursuant to the provisions of this article. The receiver shall ensure that the assets linked to one protected cell are not applied to the liabilities linked to another protected cell or to the SPFC generally, unless an asset or liability is linked to more than one protected cell, in which case the receiver shall deal with the asset or liability in accordance with the terms of any relevant governing instrument or contract. (F) With respect to amounts recoverable under a SPFC contract, the amount recoverable by the receiver must not be reduced or diminished as a result of the entry of an order of conservation, rehabilitation, or liquidation with respect to the counterparty, notwithstanding another provision in the contracts or other documentation governing the SPFC insurance securitization. (G) Notwithstanding the provisions of Chapters 26 and 27 of this title or other laws of this State: (1) an application or petition, or a temporary restraining order or injunction issued pursuant to the provisions of Chapters 26 and 27 of this title, with respect to a counterparty does not prohibit the transaction of a business by a SPFC, including any payment by a SPFC made pursuant to a SPFC security, or any action or proceeding against a SPFC or its assets; (2) the commencement of a summary proceeding or other interim proceeding commenced before a formal delinquency proceeding with respect to a SPFC, and any order issued by the court does not prohibit the payment by a SPFC made pursuant to a SPFC security or SPFC contract or the SPFC from taking any action required to make the payment; (3) a receiver of a counterparty may not void a nonfraudulent transfer by a counterparty to a SPFC of money or other property made pursuant to a SPFC contract; (4) a receiver of a SPFC may not void a nonfraudulent transfer by the SPFC of money or other property made to a counterparty pursuant to a SPFC contract or made to or for the benefit of any holder of a SPFC security on account of the SPFC security; and (5) the director may not seek to have a SPFC with protected cells declared insolvent as long as at least one of the SPFC's protected cells remains solvent, and in the case of such an insolvency, the receiver shall handle SPFC's assets in compliance with subsection (E) and other laws of this State. (H) Subsection (G) does not prohibit the director from taking any action permitted under Chapter 26 or 27 with respect only to the conservation or rehabilitation of a SPFC with protected cell or cells, provided the director would have had sufficient grounds to seek to declare the SPFC insolvent; subject to and without otherwise affecting the provisions of subsection (G)(5). In this case, with respect to the solvent protected cell or cells, the director may not prohibit payments made by the SPFC pursuant to the SPFC security, SPFC contract, or otherwise made under the insurance securitization transaction that are attributable to these protected cell or cells or prohibit the SPFC from taking any action required to make these payments. (I) With the exception of the fulfillment of the obligations under a SPFC contract, and notwithstanding another provision of this article or other laws of this State, the assets of a SPFC, including assets held in trust, must not be consolidated with or included in the estate of a counterparty in any delinquency proceeding against the counterparty pursuant to the provisions of this article for any purpose including, without limitation, distribution to creditors of the counterparty.

Legislative History

HISTORY: 2004 Act No. 291, SECTION 28, eff July 29, 2004; 2006 Act No. 332, SECTION 27, eff June 1, 2006.