N.Y. ISC Law § 7437 — New York Code / Act ISC / Article 74 / Section 7437
Qualified financial contracts
Status: in_force

§ 7437. Qualified financial contracts. (a) As used in this section:\n  (1) "Actual direct compensatory damages" means and includes normal and\nreasonable costs of cover or other reasonable measures of damages\nutilized in the derivatives, securities or other market for the contract\nand agreement claims but does not include punitive or exemplary damages,\ndamages for lost profit or lost opportunity or damages for pain and\nsuffering.\n  (2) "Business day" means a day other than a Saturday, a Sunday or any\nday on which either the New York stock exchange or the Federal Reserve\nBank of New York is closed.\n  (3) "Commodity contract" means: (A) a contract for the purchase or\nsale of a commodity for future delivery on, or subject to the rules of,\na board of trade or contract market under the Commodity Exchange Act (7\nU.S.C. § 1, et seq.) or a board of trade outside the United States; (B)\nan agreement that is subject to regulation under section 19 of the\nCommodity Exchange Act (7 U.S.C. § 1, et seq.) and that is commonly\nknown to the commodities trade as a margin account, margin contract,\nleverage account or leverage contract; (C) an agreement or transaction\nthat is subject to regulation under section 4c(b) of the Commodity\nExchange Act (7 U.S.C. § 1, et seq.) and that is commonly known to the\ncommodities trade as a commodity option; (D) any combination of the\nagreements or transactions referred to in this paragraph; (E) any option\nto enter into an agreement or transaction referred to in this paragraph;\nor (F) any other contract that is included from time to time as a\ncommodity contract as defined in the Federal Deposit Insurance Act, 12\nU.S.C. § 1821(e)(8)(D).\n  (4) "Contractual right" means and includes any right set forth in a\nrule or bylaw of a derivatives clearing organization (as defined in the\nCommodity Exchange Act), a multilateral clearing organization (as\ndefined in the Federal Deposit Insurance Corporation Improvement Act of\n1991), a national securities exchange, a national securities\nassociation, a securities clearing agency, a contract market designated\nunder the Commodity Exchange Act, a derivatives transaction execution\nfacility registered under the Commodity Exchange Act, or a board of\ntrade (as defined in the Commodity Exchange Act) or in a resolution of\nthe governing board thereof and any right, whether or not evidenced in\nwriting, arising under statutory or common law, or under law merchant,\nor by reason of normal business practice.\n  (5) "Forward contract" shall have the meaning set forth in the Federal\nDeposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).\n  (6) "Netting agreement" means: (A) a contract or agreement (including\nthe terms and conditions incorporated by reference in such agreement),\nincluding a master agreement (which master agreement, together with all\nschedules, confirmations, definitions and addenda thereto and\ntransactions under any thereof, shall be treated as one netting\nagreement), that documents one or more transactions between the parties\nto the agreement for or involving one or more qualified financial\ncontracts and that provides for the netting, offset, liquidation,\ntermination, acceleration or close out, under or in connection with one\nor more qualified financial contracts or present or future payment or\ndelivery obligations or payment or delivery entitlements thereunder\n(including liquidation or close-out values relating to such obligations\nor entitlements) among the parties to the netting agreement; (B) any\nmaster agreement or bridge agreement for one or more master agreements\ndescribed in subparagraph (A) of this paragraph; or (C) any security\narrangement related to one or more contracts or agreements described in\nsubparagraph (A) or (B) of this paragraph; provided that any contract or\nagreement described in subparagraph (A) or (B) of this paragraph\nrelating to agreements or transactions that are not qualified financial\ncontracts shall be deemed to be a netting agreement only with respect to\nthose agreements or transactions that are qualified financial contracts.\n  (7) "Qualified financial contract" means any commodity contract,\nforward contract, repurchase agreement, securities contract, swap\nagreement and any similar agreement that the superintendent determines\nby regulation to be a qualified financial contract for the purposes of\nthis article.\n  (8) "Repurchase agreement" shall have the meaning set forth in the\nFederal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).\n  (9) "Securities contract" shall have the meaning set forth in the\nFederal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).\n  (10) "Security arrangement" means any security agreement or\narrangement or other credit enhancement or guarantee or reimbursement\nobligation, including a pledge, security, collateral or guarantee\nagreement or credit support document.\n  (11) "Separate account" means an account established pursuant to\nsection four thousand two hundred forty of this chapter.\n  (12) "Swap agreement" shall have the meaning set forth in the Federal\nDeposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).\n  (13) "Walkaway clause" means a provision in a netting agreement or a\nqualified financial contract that, after calculation of a value of a\nparty's position or an amount due to or from one of the parties in\naccordance with its terms upon termination, liquidation or acceleration\nof the netting agreement or qualified financial contract, either does\nnot create a payment obligation of a party or extinguishes a payment\nobligation of a party in whole or in part solely because of the party's\nstatus as a non-defaulting party.\n  (b) (1) Notwithstanding any other provision of this article, including\nany other provision of this article permitting the modification of\ncontracts, or other law of this state, no person shall be stayed or\nprohibited from exercising: (A) a contractual right to cause the\ntermination, liquidation, acceleration or close out of any obligation\nunder or in connection with a netting agreement or qualified financial\ncontract with an insurer, other than an insurer licensed to write\nfinancial guaranty insurance, because of: (i) the insolvency, financial\ncondition or default of the insurer at any time, provided that the right\nis enforceable under applicable law other than this article; or (ii) the\ncommencement of any proceeding under this article; (B) any right under a\nsecurity arrangement relating to one or more netting agreements or\nqualified financial contracts, other than a right against an insurer\nlicensed to write financial guaranty insurance; or (C) subject to any\nprovision of subsection (b) of section seven thousand four hundred\ntwenty-seven of this article, any right to offset or net out any\ntermination value, payment amount, or other transfer obligation arising\nunder or in connection with one or more qualified financial contracts,\nother than a right against an insurer licensed to write financial\nguaranty insurance, where the counterparty or its guarantor is organized\nunder the laws of the United States, a state, or a foreign jurisdiction\napproved by the Securities Valuation Office of the National Association\nof Insurance Commissioners as eligible for netting.\n  (2) If a counterparty to a master netting agreement or a qualified\nfinancial contract with an insurer, other than an insurer licensed to\nwrite financial guaranty insurance, subject to a proceeding under this\narticle terminates, liquidates, closes out or accelerates the agreement\nor contract, damages shall be measured as of the date or dates of\ntermination, liquidation, close out or acceleration. The amount of a\nclaim for damages shall be actual direct compensatory damages.\n  (c) Upon termination of a netting agreement or qualified financial\ncontract, the net or settlement amount, if any, owed by a nondefaulting\nparty to an insurer against which an application has been filed under\nthis article, other than an insurer licensed to write financial guaranty\ninsurance, shall be transferred to or on the order of the\nsuperintendent, as liquidator, rehabilitator or conservator for the\ninsurer, even if the insurer is the defaulting party, notwithstanding\nany walkaway clause in the netting agreement or qualified financial\ncontract. Any limited two-way payment or first method provision in a\nnetting agreement or qualified financial contract with an insurer that\nhas defaulted shall be deemed to be a full two-way payment or second\nmethod provision as against the defaulting insurer. Any such property or\namount shall, except to the extent it is subject to one or more\nsecondary liens or encumbrances or rights of netting or setoff, be an\nasset of the insurer.\n  (d) In making any transfer of a netting agreement or qualified\nfinancial contract of an insurer subject to a proceeding under this\narticle, other than an insurer licensed to write financial guaranty\ninsurance, the superintendent, as liquidator, rehabilitator or\nconservator for the insurer, shall either:\n  (1) transfer to one party (other than an insurer subject to a\nproceeding under this article) all netting agreements and qualified\nfinancial contracts between a counterparty or any affiliate of such\ncounterparty and the insurer that is the subject of the proceeding,\nincluding: (A) all rights and obligations of each party under each such\nnetting agreement and qualified financial contract; and (B) all\nproperty, including any guarantees or other credit enhancement, securing\nany claims of each party under each such netting agreement and qualified\nfinancial contract; or\n  (2) transfer none of the netting agreements, qualified financial\ncontracts, rights, obligations or property referred to in paragraph one\nof this subsection (with respect to such counterparty and any affiliate\nof such counterparty).\n  (e) If the superintendent, as liquidator, rehabilitator or conservator\nfor an insurer, other than an insurer licensed to write financial\nguaranty insurance, makes a transfer of one or more netting agreements\nor qualified financial contracts, then the superintendent shall use his\nor her best efforts to notify any person who is party to the netting\nagreements or qualified financial contracts of the transfer by 12:00\nnoon, New York time, on the business day following the transfer.\n  (f) Notwithstanding any other provision of this article, the\nsuperintendent, as liquidator, rehabilitator or conservator for an\ninsurer, other than an insurer licensed to write financial guaranty\ninsurance, may not avoid a transfer of money or other property arising\nunder or in connection with a netting agreement or qualified financial\ncontract, or any security arrangement relating to a netting agreement or\nqualified financial contract, that is made before the commencement of a\nliquidation, rehabilitation or conservation proceeding under this\narticle, except that a transfer may be avoided under section seven\nthousand four hundred twenty-five of this article if the transfer was\nmade with actual intent to hinder, delay or defraud the insurer, the\nsuperintendent, as liquidator, rehabilitator or conservator of the\ninsurer, any other receiver appointed for the insurer, or existing or\nfuture creditors.\n  (g)(1) In exercising any rights of disaffirmance or repudiation of a\nliquidator, rehabilitator or conservator with respect to any netting\nagreement or qualified financial contract to which an insurer is a\nparty, other than an insurer licensed to write financial guaranty\ninsurance, the superintendent, as liquidator, rehabilitator or\nconservator for the insurer shall either: (A) disaffirm or repudiate all\nnetting agreements and qualified financial contracts between a\ncounterparty or any affiliate of such counterparty and the insurer that\nis the subject of the proceeding; or (B) disaffirm or repudiate none of\nthe netting agreements and qualified financial contracts referred to in\nsubparagraph (A) of this paragraph (with respect to such person or any\naffiliate of such person).\n  (2) Notwithstanding any other provision of this article, any claim of\na counterparty against the estate, other than the estate of an insurer\nlicensed to write financial guaranty insurance, arising from the\nsuperintendent's disaffirmance or repudiation of a netting agreement or\nqualified financial contract that has not been previously affirmed in\nthe liquidation proceeding or in the immediately preceding\nrehabilitation proceeding shall be determined and shall be allowed or\ndisallowed: (A) as if the claim had arisen before the date of the filing\nof the application for liquidation; or (B) if a rehabilitation\nproceeding is converted to a liquidation proceeding, as if the claim had\narisen before the date of the filing of the application for\nrehabilitation.\n  (3) The amount of the claim identified in paragraph two of this\nsubsection shall be the actual direct compensatory damages determined as\nof the date of the disaffirmance or repudiation of the netting agreement\nor qualified financial contract.\n  (h) All rights of a counterparty under this article shall apply to a\nnetting agreement and a qualified financial contract entered into on\nbehalf of or allocated to: (1) the general account of the insurer; or\n(2) a separate account of the insurer, other than an insurer licensed to\nwrite financial guaranty insurance, if the assets of the separate\naccount are available only to a counterparty to a netting agreement and\na qualified financial contract entered into on behalf of, or allocated\nto, that separate account.\n