N.Y. ISC Law § 6901 — New York Code / Act ISC / Article 69 / Section 6901
Definitions
Status: in_force

§ 6901. Definitions. As used in this article: (a) (1) "Financial\nguaranty insurance" means a surety bond, an insurance policy or, when\nissued by an insurer or any person doing an insurance business as\ndefined in paragraph one of subsection (b) of section one thousand one\nhundred one of this chapter, an indemnity contract, and any guaranty\nsimilar to the foregoing types, under which loss is payable, upon proof\nof occurrence of financial loss, to an insured claimant, obligee or\nindemnitee as a result of any of the following events:\n  (A) failure of any obligor on or issuer of any debt instrument or\nother monetary obligation (including equity securities guarantied under\na surety bond, insurance policy or indemnity contract) to pay when due\nto be paid by the obligor or scheduled at the time insured to be\nreceived by the holder of the obligation, principal, interest, premium,\ndividend or purchase price of or on, or other amounts due or payable\nwith respect to, such instrument or obligation, when such failure is the\nresult of a financial default or insolvency or, provided that such\npayment source is investment grade, any other failure to make payment,\nregardless of whether such obligation is incurred directly or as\nguarantor by or on behalf of another obligor that has also defaulted;\n  (B) changes in the levels of interest rates, whether short or long\nterm or the differential in interest rates between various markets or\nproducts;\n  (C) changes in the rate of exchange of currency;\n  (D) changes in the value of specific assets or commodities, financial\nor commodity indices, or price levels in general; or\n  (E) other events which the superintendent determines are substantially\nsimilar to any of the foregoing.\n  (2) Notwithstanding paragraph one of this subsection, "financial\nguaranty insurance" shall not include:\n  (A) insurance of any loss resulting from any event described in\nparagraph one of this subsection if the loss is payable only upon the\noccurrence of any of the following, as specified in a surety bond,\ninsurance policy or indemnity contract:\n  (i) a fortuitous physical event;\n  (ii) failure of or deficiency in the operation of equipment; or\n  (iii) an inability to extract or recover a natural resource;\n  (B) fidelity and surety insurance as defined in paragraph sixteen of\nsubsection (a) of section one thousand one hundred thirteen of this\nchapter;\n  (C) credit insurance as defined in paragraph seventeen of subsection\n(a) of section one thousand one hundred thirteen of this chapter;\n  (D) credit unemployment insurance as defined in paragraph twenty-four\nof subsection (a) of section one thousand one hundred thirteen of this\nchapter;\n  (E) residual value insurance as defined in paragraph twenty-two of\nsubsection (a) of section one thousand one hundred thirteen of this\nchapter;\n  (F) mortgage guaranty insurance as defined in paragraph twenty-three\nof subsection (a) of section one thousand one hundred thirteen of this\nchapter and as permitted to be written by a mortgage guaranty insurer\nunder article sixty-five of this chapter;\n  (G) guaranteed investment contracts issued by life insurance companies\nwhich provide that the life insurer itself will make specified payments\nin exchange for specific premiums or contributions;\n  (H) indemnity contracts or similar guaranties, to the extent that they\nare not otherwise limited or proscribed by this chapter:\n  (i) in which a life insurer or an insurer subject to article\nforty-three of this chapter guaranties its obligations or indebtedness\nor the obligations or indebtedness of a subsidiary (as defined in\nparagraph forty of subsection (a) of section one hundred seven of this\nchapter), other than a financial guaranty insurance corporation,\nprovided that:\n  (I) to the extent that any such obligations or indebtedness are backed\nby specific assets, such assets must at all times be owned by the\ninsurer or the subsidiary; and\n  (II) in the case of the guaranty of the obligations or indebtedness of\nthe subsidiary that are not backed by specific assets of such insurer,\nsuch guaranty terminates once the subsidiary ceases to be a subsidiary;\nor\n  (ii) in which a life insurer guaranties obligations or indebtedness\n(including the obligation to substitute assets where appropriate) with\nrespect to specific assets acquired by such life insurer in the course\nof its normal investment activities and not for the purpose of resale\nwith credit enhancement, or guaranties obligations or indebtedness\nacquired by its subsidiary, provided that the assets acquired pursuant\nto this item (ii) have been:\n  (I) acquired by a special purpose entity, whose sole purpose is to\nacquire specific assets of such life insurer or its subsidiary and issue\nsecurities or participation certificates backed by such assets; or\n  (II) sold to an independent third party; or\n  (iii) in which a life insurer guaranties obligations or indebtedness\nof an employee or insurance agent of such life insurer; or\n  (I) guarantees of higher education loans, unless written by a\nfinancial guaranty insurance corporation;\n  (J) guarantees of insurance contracts, except for:\n  (i) guarantees authorized pursuant to section one thousand one hundred\nfourteen of this chapter;\n  (ii) financial guaranty insurance policies insuring guaranteed\ninvestment contracts issued by life insurers, provided that:\n  (I) the obligations under such contracts are not dependent on the\ncontinuance of human life;\n  (II) the financial guaranty insurance policies do not guaranty death\nbenefits provided by such contracts;\n  (III) the obligations insured by the financial guaranty insurance\npolicies are investment grade based on the rating of the life insurers\nor, in the case of separate account guaranteed investment contracts,\nbased on the ratings of such separate accounts;\n  (IV) the financial guaranty insurance policies shall not condition or\ndelay payment of a claim with respect to such contracts upon the insured\nor beneficiary making a claim on the contracts with any insurance\nguaranty fund under this chapter or of any other jurisdiction; and\n  (V) the financial guaranty insurance policies provide that if, prior\nto payment by the insurer under the financial guaranty insurance\npolicies, the guaranty fund has paid a claim under such contracts for an\namount that, when added to the amount payable under the financial\nguaranty insurance policies, would exceed the amount owed under such\ncontracts, then the financial guaranty insurer shall pay the portion of\nthe amount payable in excess of the contract amounts to the guaranty\nfund instead of to the beneficiary under such contracts; or\n  (K) any other form of insurance covering risks which the\nsuperintendent determines to be substantially similar to any of the\nforegoing.\n  (b) "Financial guaranty insurance corporation" or "corporation" means\nan insurer licensed to transact the business of financial guaranty\ninsurance in this state.\n  (c) "Affiliate" means a person which, directly or indirectly, owns at\nleast ten percent but less than fifty percent of the financial guaranty\ninsurance corporation or which is at least ten percent but less than\nfifty percent, directly or indirectly, owned by a financial guaranty\ninsurance corporation.\n  (d) "Aggregate net liability" means the aggregate amount of insured\nunpaid principal, interest and other monetary payments, if any, of\nguarantied obligations insured or assumed, less reinsurance ceded and\nless collateral.\n  (e) "Asset-backed securities" mean:\n  (1) securities or other financial obligations of an issuer provided\nthat:\n  (A) the issuer is a special purpose corporation, trust or other\nentity, or (provided that the securities or other financial obligations\nconstitute an insurable risk) is a bank, trust company or other\nfinancial institution, deposits in which are insured by the Bank\nInsurance Fund or the Savings Insurance Fund (or any successor thereto);\nand\n  (B) a pool of assets:\n  (i) has been conveyed, pledged or otherwise transferred to or is\notherwise owned or acquired by the issuer;\n  (ii) such pool of assets backs the securities or other financial\nobligations issued; and\n  (iii) no asset in such pool, other than an asset directly payable by,\nguaranteed by or backed by the full faith and credit of the United\nStates government or that otherwise qualifies as collateral under\nparagraph one or two of subsection (g) of this section, has a value\nexceeding twenty percent of the pool's aggregate value; or\n  (2) a pool of credit default swaps or credit default swaps referencing\na pool of obligations, provided that:\n  (A) the swap counterparty whose obligations are insured under the\ncredit default swap is a special purpose corporation, special purpose\ntrust or other special purpose legal entity;\n  (B) no reference obligation in such pool, other than an obligation\ndirectly payable by, guaranteed by or backed by the full faith and\ncredit of the United States government or that otherwise qualifies as\ncollateral under paragraph two of subsection (g) of this section, has a\nnotional amount exceeding ten percent of the pool's aggregate notional\namount; and\n  (C) the insurer has the benefit of a deductible or other first loss\ncredit protection against claims under its insurance policy.\n  (f) "Average annual debt service" means the amount of insured unpaid\nprincipal and interest on an obligation, multiplied by the number of\nsuch insured obligations (assuming each obligation represents one\nthousand dollars par value), divided by the amount equal to the\naggregate life of all such obligations (assuming each obligation\nrepresents one thousand dollars par value). This definition, expressed\nas a formula in regard to bonds, is as follows:\n    Average Annual Debt Service = Total Debt Service x No. of Bonds\n                                  _________________________________\n                                              Bond Years\n        Total Debt Service = Insured Unpaid Principal + Interest\n               Number of Bonds = Total Insured Principal\n                                 _______________________\n                                         $1,000\n             Bond Years =  Number of Bonds x Term in Years\nTerm  in Years = Term to maturity based on scheduled amortization or, in\nthe absence of a scheduled amortization  in  the  case  of  asset-backed\nsecurities  or  other  obligations  lacking  a  scheduled  amortization,\nexpected amortization, in  each  case  determined  as  of  the  date  of\nissuance of the insurance policy based upon the amortization assumptions\nemployed  in  pricing  the insured obligations or  otherwise used by the\ninsurer to determine aggregate net liability.\n  (g) "Collateral" means:\n  (1) cash;\n  (2) the cash flow from specific obligations which are not callable and\nscheduled to be received based on expected prepayment speed on or prior\nto the date of scheduled debt service (including scheduled redemptions\nor prepayments) on the insured obligation provided that (i) such\nspecific obligations are directly payable by, guaranteed by or backed by\nthe full faith and credit of the United States government, (ii) in the\ncase of insured obligations denominated or payable in foreign currency\nas permitted under paragraph four of subsection (b) of section six\nthousand nine hundred four of this article, such specific obligations\nare directly payable by, guaranteed by or backed by the full faith and\ncredit of such foreign government or the central bank thereof, or (iii)\nsuch specific obligations are insured by the same insurer that insures\nthe obligations being collateralized, and the cash flows from such\nspecific obligations are sufficient to cover the insured scheduled\npayments on the obligations being collateralized;\n  (3) the market value of investment grade obligations, other than\nobligations evidencing an interest in the project or projects financed\nwith the proceeds of the insured obligations;\n  (4) the face amount of each letter of credit that:\n  (A) is irrevocable;\n  (B) provides for payment under the letter of credit in lieu of or as\nreimbursement to the insurer for payment required under a financial\nguaranty insurance policy;\n  (C) is issued, presentable and payable either:\n  (i) at an office of the letter of credit issuer in the United States;\nor\n  (ii) at an office of the letter of credit issuer located in the\njurisdiction in which the trustee or paying agent for the insured\nobligation is located;\n  (D) contains a statement that either:\n  (i) identifies the insurer and any successor by operation of law,\nincluding any liquidator, rehabilitator, receiver or conservator, as the\nbeneficiary; or\n  (ii) identifies the trustee or the paying agent for the insured\nobligation as the beneficiary;\n  (E) contains a statement to the effect that the obligation of the\nletter of credit issuer under the letter of credit is an individual\nobligation of such issuer and is in no way contingent upon reimbursement\nwith respect thereto;\n  (F) contains an issue date and a date of expiration;\n  (G) either:\n  (i) has a term at least as long as the shorter of the term of the\ninsured obligation or the term of the financial guaranty policy; or\n  (ii) provides that the letter of credit shall not expire without\nthirty days prior written notice to the beneficiary and allows for\ndrawing under the letter of credit in the event that, prior to\nexpiration, the letter of credit is not renewed or extended or a\nsubstitute letter of credit or alternate collateral meeting the\nrequirements of this subsection is not provided;\n  (H) states that it is governed by the laws of the state of New York or\nby the 1983 or 1993 Revision of the Uniform Customs and Practice for\nDocumentary Credits of the International Chamber of Commerce\n(Publication 400 or 500) or any successor Revision if approved by the\nsuperintendent, and contains a provision for an extension of time, of\nnot less than thirty days after resumption of business, to draw against\nthe letter of credit in the event that one or more of the occurrences\ndescribed in Article 19 of Publication 400 or 500 occurs; and\n  (I) is issued by a bank, trust company, or savings and loan\nassociation that:\n  (i) is organized and existing under the laws of the United States or\nany state thereof or, in the case of a non-domestic financial\ninstitution, has a branch or agency office licensed under the laws of\nthe United States or any state thereof and is domiciled in a member\ncountry of the Organisation for Economic Co-operation and Development\nhaving a sovereign rating in one of the top two generic lettered rating\nclassifications by a nationally recognized statistical rating\norganization acceptable to the superintendent;\n  (ii) has (or is the principal operating subsidiary of a financial\ninstitution holding company that has) a long-term debt rating of at\nleast investment grade; and\n  (iii) is not a parent, subsidiary or affiliate of the trustee or\npaying agent, if any, with respect to the insured obligation if such\ntrustee or paying agent is the named beneficiary of the letter of\ncredit; or\n  (5) the amount of credit protection available to the insurer (or its\nnominee) under each credit default swap that:\n  (A) may not be amended without the consent of the insurer and may only\nbe terminated: (i) at the option of the insurer; (ii) at the option of\nthe counterparty to the insurer (or its nominee), if the credit default\nswap provides for the payment of a termination amount equal to the\nreplacement cost of the terminated credit default swap determined with\nreference to standard documentation of the International Swap and\nDerivatives Association, Inc. or otherwise acceptable to the\nsuperintendent; or (iii) at the discretion of the superintendent acting\nas a rehabilitator, liquidator or receiver of the insurer upon payment\nby or on behalf of the insurer of any termination amount due from the\ninsurer;\n  (B) provides for payment under all instances in which payment under a\nfinancial guaranty insurance policy is required, except that payment\nunder the credit default swap may be on a first loss, excess of loss or\nother non-pro-rata basis and may apply on an aggregate basis to more\nthan one policy;\n  (C) is provided by:\n  (i) a counterparty whose obligations under the credit default swap are\ninsured by a financial guaranty insurance corporation licensed under\nthis article or guaranteed by a financial institution referred to in\nitems (ii) and (iii) of this subparagraph;\n  (ii) a financial institution satisfying the requirements of items (i)\nthrough (iii) of subparagraph (I) of paragraph four of this subsection;\nprovided that (A) obligations of such financial institution on parity\nwith its obligations under the credit default swap are investment grade\nand (B) if such financial institution is not organized under, or acting\nthrough a branch or agency office licensed under, the laws of the United\nStates or any state thereof, then such financial institution is required\nto collateralize the replacement cost of the credit default swap in the\nevent that it shall fail to maintain such rating; or\n  (iii) any other financial institution that the superintendent\ndetermines to be substantially similar to any of the foregoing.\n  Collateral must be deposited with the insurer; held in trust by a\ntrustee or custodian acceptable to the superintendent for the benefit of\nthe insurer; or held in trust pursuant to the bond indenture or other\ntrust arrangement, for the benefit of security holders in the form of\nfunds for the payment of insured obligations, sinking funds or other\nreserves which may be used for the payment of insured obligations and\ntrustee and other administrative fees on a first priority basis\nestablished and continually maintained pursuant to the bond indenture or\nother trust arrangement by a trustee acceptable to the superintendent.\nThe superintendent may promulgate regulations to limit the amount of\ncollateral provided by obligations, letters of credit or credit default\nswaps or to limit the amount of collateral provided by any single\nissuer, bank or counterparty as provided for in this subsection.\n  (h) "Commercial real estate" means income producing real property\nother than residential property consisting of less than five units.\n  (i) (1) "Consumer debt obligations" guaranties means financial\nguaranty insurance that indemnifies a purchaser or lender against loss\nor damage resulting from defaults on a pool of debts owed for extensions\nof credit (including in respect of installment purchase agreements and\nleases) to individuals, provided in the normal course of the purchaser's\nor lender's business, provided that (A) such pool meets the requirements\nof paragraph two of subsection (e) of this section and (B) such pool has\nbeen determined to be investment grade.\n  (2) Consumer debt obligations guaranty policies shall contain a\nprovision that all coverage under the policies terminates upon sale or\ntransfer of the underlying consumer debt obligation to any transferee\nnot insured by the same insurer under a similar policy.\n  (j) "Contingency reserve" means an additional liability reserve\nestablished to protect policyholders against the effects of adverse\neconomic developments or cycles or other unforeseen circumstances.\n  (j-1) "Credit default swap" means an agreement referencing the credit\nderivative definitions published from time to time by the International\nSwap and Derivatives Association, Inc. or otherwise acceptable to the\nsuperintendent, pursuant to which a party agrees to compensate another\nparty in the event of a payment default by, insolvency of, or other\nadverse credit event in respect of, an issuer of a specified security or\nother obligation; provided that such agreement does not constitute an\ninsurance contract and the making of such credit default swap does not\nconstitute the doing of an insurance business.\n  (k) "Governmental unit" means the United States of America, Canada, a\nmember country of the Organisation for Economic Co-operation and\nDevelopment having a sovereign rating in one of the top three generic\nlettered rating classifications by a nationally recognized statistical\nrating organization acceptable to the superintendent, a state, territory\nor possession of the United States of America, the District of Columbia,\na province of Canada, a municipality, or a political subdivision of any\nof the foregoing, or any public agency or instrumentality thereof.\n  (k-1) "Excess spread" means, with respect to any insured issue of\nasset-backed securities, the excess of (A) the scheduled cash flow on\nthe underlying assets that is reasonably projected to be available, over\nthe term of the insured securities after payment of the expenses\nassociated with the insured issue, to make debt service payments on the\ninsured securities over (B) the scheduled debt service requirements on\nthe insured securities, provided that such excess is held in the same\nmanner as collateral is required to be held under subsection (g) of this\nsection.\n  (l) "Industrial development bond" means any security or other\ninstrument, other than a utility first mortgage obligation, under which\na payment obligation is created, issued by or on behalf of a\ngovernmental unit, to finance a project serving a private industrial,\ncommercial or manufacturing purpose, and not payable or guarantied by a\ngovernmental unit.\n  (m) "Insurable risk" means, with respect to asset-backed securities,\nas defined in subsection (e) of this section, that such obligation on an\nuninsured basis has been determined to be not less than investment grade\nbased solely on the pool of assets backing the insured obligation or\nsecuring the insurer, without consideration of the creditworthiness of\nthe issuer.\n  (n) "Investment grade" means that:\n  (1) the obligation or parity obligation of the same issuer has been\ndetermined to be in one of the top four generic lettered rating\nclassifications by a nationally recognized statistical rating\norganization acceptable to the superintendent;\n  (2) the obligation or parity obligation of the same issuer has been\nidentified in writing by such nationally recognized statistical rating\norganization to be of investment grade quality; or\n  (3) if the obligation or parity obligation of the same issuer has not\nbeen submitted to any such nationally recognized statistical rating\norganization, the obligation is determined to be investment grade (as\nindicated by a rating in category 1 or 2) by the Securities Valuation\nOffice of the National Association of Insurance Commissioners.\n  (o) "Municipal bonds" means municipal obligation bonds and special\nrevenue bonds.\n  (p) "Municipal obligation bond" means any security or other\ninstrument, including a lease payable or guaranteed by the United States\nor another national government that qualifies as a governmental unit or\nany agency, department or instrumentality thereof, or by a state or an\nequivalent political subdivision of another national government that\nqualifies as a governmental unit, but not a lease of any other\ngovernmental unit, under which a payment obligation is created, issued\nby or on behalf of or payable or guaranteed by a governmental unit or\nissued by a special purpose corporation, special purpose trust or other\nspecial purpose legal entity to finance a project serving a substantial\npublic purpose, and which is:\n  (1) (A) payable from tax revenues, but not tax allocations, within the\njurisdiction of such governmental unit;\n  (B) payable or guaranteed by the United States or another national\ngovernment that qualifies as a governmental unit, or any agency,\ndepartment or instrumentality thereof, or by a housing agency of a state\nor an equivalent subdivision of another national government that\nqualifies as a governmental unit;\n  (C) payable from rates or charges (but not tolls) levied or collected\nin respect of a non-nuclear utility project, public transportation\nfacility (other than an airport), or public higher education facility;\nor\n  (D) with respect to lease obligations, payable from future\nappropriations; and\n  (2) provided that, in the case of obligations of a special purpose\ncorporation, special purpose trust or other special purpose legal\nentity, (A) such obligations are investment grade at the time of\nissuance; (B) such obligations are payable from sources enumerated in\nsubparagraph (A), (B), (C) or (D) of paragraph one of this subsection;\nand (C) the project being financed or the tolls, tariffs, usage fees or\nother similar rates or charges for its use are subject to regulation or\noversight by a governmental unit.\n  (q) "Reinsurance" means cessions qualifying for credit under section\nsix thousand nine hundred six of this article.\n  (r) "Special revenue bond" means any security or other instrument,\nunder which a payment obligation is created, issued by or on behalf of\nor payable or guaranteed by a governmental unit to finance a project\nserving a substantial public purpose, and not payable from any of the\nsources enumerated in subsection (p) of this section; or securities\nwhich are the functional equivalent of the foregoing issued by a\nnot-for-profit corporation or a special purpose corporation, special\npurpose trust or other special purpose legal entity; provided that, in\nthe case of obligations of a special purpose corporation, special\npurpose trust or other special purpose legal entity, (1) such\nobligations are investment grade at the time of issuance; (2) such\nobligations are not payable from the sources enumerated in subparagraph\n(A), (B), (C) or (D) of paragraph one of subsection (p) of this section;\nand (3) the project being financed or the tolls, tariffs, usage fees or\nother similar rates or charges for its use are subject to regulation or\noversight by a governmental unit.\n  (s) "Utility first mortgage obligation" means any obligation of an\nissuer secured by a first priority mortgage on utility property owned by\nor leased to an investor-owned or cooperative-owned utility company and\nlocated in the United States, Canada or a member country of the\nOrganisation for Economic Co-operation and Development having a\nsovereign rating in one of the top two generic lettered rating\nclassifications by a nationally recognized statistical rating\norganization acceptable to the superintendent; provided that the utility\nor utility property or the usage fees or other similar utility rates or\ncharges are subject to regulation or oversight by a governmental unit.\n