Wis. Stat. § 645.675 — WI Code / Chapter 645 / Section 645.675
Section 645.675
Status: in_force

(s) “Two-way payment provision” means a contract provision under which both parties to the contract may have payment obligations to each other.

(t) “Walkaway clause” means a provision in a netting agreement or a qualified financial contract that, after calculation of a value of a party’s position or an amount due to or from one of the parties in accordance with its terms upon termination, liquidation, or acceleration of the netting agreement or qualified financial contract, either does not create a payment obligation of a party or extinguishes a payment obligation of a party, in whole or in part, solely because of the party’s status as a nondefaulting party.

(2)

(a) Notwithstanding any other provision of this chapter, including any other provision permitting the modification of contracts, no person may be stayed or prohibited from exercising any of the following rights:

1. A contractual right to cause the termination, liquidation, acceleration, or close-out of obligations under, or in connection with, any netting agreement or qualified financial contract with an insurer on account of any of the following:

a. The insolvency, financial condition, or default of the insurer at any time, if the right is enforceable under applicable law other than this chapter.

b. The commencement of a formal delinquency proceeding under this chapter.

2. Any right under a pledge, security, collateral, reimbursement, or guarantee agreement or arrangement, or any other similar security agreement or arrangement or other credit enhancement, relating to one or more netting agreements or qualified financial contracts.

3. Subject to s. 645.56 (2) , any right to set-off or net-out any termination value, payment amount, or other transfer obligation arising under, or in connection with, one or more qualified financial contracts in which the counterparty or its guarantor is organized under the laws of the United States or a state or foreign jurisdiction approved by the National Association of Insurance Commissioners office responsible for securities validation as eligible for netting.

(b) If a counterparty to a master netting agreement or a qualified financial contract with an insurer subject to a proceeding under this chapter terminates, liquidates, closes-out, or accelerates the agreement or contract, damages will be measured as of the date of the termination, liquidation, close-out, or acceleration. The amount of a claim for damages is the actual direct compensatory damages calculated in accordance with sub. (6) .

(3) Upon termination of a netting agreement or qualified financial contract, notwithstanding any walkaway clause in the netting agreement or qualified financial contract, 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 the receiver of the insurer or as directed by the receiver of the insurer, even if the insurer is the defaulting party. Any limited 2-way payment provision or first-method provision in a netting agreement or qualified financial contract with an insurer that has defaulted shall be considered to be a full 2-way payment provision or 2nd-method provision as against the defaulting insurer. Any such property or amount is a general asset of the insurer, except to the extent that it is subject to one or more secondary liens or encumbrances or rights of netting or setoff.

(4)

(a) With respect to transferring a netting agreement or qualified financial contract of an insurer that is the subject of a proceeding under this chapter, the receiver of the insurer shall do one of the following:

1. Transfer to one party, other than an insurer subject to a proceeding under this chapter, all netting agreements and qualified financial contracts between the counterparty and the insurer that is subject to a proceeding under this chapter, including all of the following:

a. All rights and obligations of each party under each netting agreement and qualified financial contract.

b. All property, including any guarantee or other credit enhancement, securing any claims of each party under each netting agreement and qualified financial contract.

2. Transfer none of the netting agreements, qualified financial contracts, rights, obligations, or property referred to in subd. 1. with respect to the counterparty.

(b) If a receiver of an insurer transfers a netting agreement or qualified financial contract, the receiver shall use its best efforts to notify any person who is a party to the netting agreement or qualified financial contract of the transfer by noon, central time, on the business day following the transfer.

(5) Notwithstanding s. 645.52 or 645.54 , 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 this chapter.

(6)

(a) In exercising the rights of disaffirmance or repudiation with respect to a netting agreement or qualified financial contract between a counterparty and an insurer that is the subject of a proceeding under this chapter, the receiver of the insurer shall do one of the following:

1. Disaffirm or repudiate all netting agreements and qualified financial contracts between the counterparty and the insurer.

2. Disaffirm or repudiate none of the netting agreements or qualified financial contracts between the counterparty and the insurer.

(b) Notwithstanding any provision of this section 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 immediately preceding conservation or rehabilitation case shall be determined and shall be allowed or disallowed as if the claim had arisen before the date on which the petition for liquidation was filed or, if a conservation or rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date on which the petition for conservation or rehabilitation was filed. The amount of the claim is the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract.

(7) All rights of counterparties under this chapter that apply to netting agreements and qualified financial contracts entered into on behalf of a general account are available only to counterparties of netting agreements and qualified financial contracts entered into on behalf of that general account. All rights of counterparties under this chapter that apply to netting agreements and qualified financial contracts entered into on behalf of a separate account are available only to counterparties of netting agreements and qualified financial contracts entered into on behalf of that separate account.

(8)

(a) This section does not apply to persons who are affiliates of an insurer subject to a proceeding under this chapter.

(b) This section does not apply to qualified financial contracts entered into with an insurer authorized to write financial guaranty insurance.

History: 2015 a. 90 , 326 .