An Act To Permit Special Purpose Reinsurance Vehicles
Maine Legislature, Session 121, LD 1553
Committee: Insurance and Financial Services
Sponsors: LaFOUNTAIN, YOUNG
Amends: 24-A MRSA §731-B

Legislative Document 
No. 1553 
S.P.522 
In Senate, April 10, 2003 
An Act To Permit Special Purpose Reinsurance Vehicles 
Submitted by the Department of Professional and Financial Regulation pursuant to Joint 
Rule 204. 
Reference to the Committee on Insurance and Financial Services suggested and ordered 
printed. 
Presented by Senator LaFOUNTAIN of York. 
Cosponsored by Representative YOUNG of Limestone. 
Princed on recycled paper 
JOY J. O'BRIEN 
Secretary of the Senate 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 24-A MRSA §731-B, sub-§I, ,A, as amended by PL 1991, 
c. 828, §16, is further amended to read: 
A. 
Is licensed to transact insurance or reinsurance in this 
State, provided the assuming insurer maintains surplus as 
regards policyholders in an amount not less than the sum of 
paid-in capital stock, if any, 
and surplus as otherwise 
required for a certificate of authority for the kinds and 
amount of insurance and assumed reinsurance the insurer has 
in force net of any applicable ceded reinsurance. 
If the 
assuming 
insurer 
is 
licensed 
as 
a 
special 
purpose 
reinsurance vehicle pursuant to section 782 and maintains 
capital and surplus in accordance with the requirements of 
section 787, credit for reinsurance under a special purpose 
reinsurance vehicle contract. 
as defined in section 781. 
subsection 15. is allowed only to the extent that: 
(1) 
The fair value of the assets held in trust for the 
benefit of the ceding insurer equals or exceeds the 
obligations due and payable to the ceding insurer by 
the 
special 
purpose 
reinsurance 
vehicle 
under 
the 
special purpose reinsurance vehicle contract: 
(2) 
The assets are held in trust in accordance with 
the requirements in subchapter 6; 
(3) 
The assets are administered in the manner 
and 
pursuant to arrangements under subchapter 6: 
(4) 
The assets are held or invested in one or more of 
the forms allowed in section 795: and 
(5) 
The 
contract complies with all other relevant 
requirements of subchapter 6; 
Sec. 2. 24-A MRSA c. 9, sub-c. 6 is enacted to read: 
SUBCllAPTER 6 
SPECIAL POHPQSE REIHSJIRABCE VEHICLE 
§781. 
Definitions 
As 
used in this subchapter. unless the context otherwise 
indicates, the following terms have the following meanings. 
Page l-LR19l5(1) 
• 
1. 
Aggregate limit. 
"Aggregate limit" means the maximum 
sum 
payable 
to 
the 
ceding insurer 
under 
a 
special 
purpose 
reinsurance vehicle contract. 
2. 
Catastro;ehe 
excess 
Of 
loss 
propert% 
reinsurance. 
"Catastrophe excess of loss property reinsurance" means excess of 
loss 
reinsurance 
for 
a 
catastrophe 
layer 
of 
a 
reinsurance 
program, written on either a per occurrence or aggregate basis. 
3. 
CatastrQ,Phe life or health reinsurance. 
"Catastrophe 
life or health reinsurance" means reinsurance of life, health or 
annuity products that transfers mortality, morbidity, survival or 
other 
related 
risks 
in 
excess 
of 
existing proportional 
or 
nonproportional automatic and facultative treaties newly placed 
or in force on the Same risks. 
4. 
Ceding insurer. 
"Ceding insurer" means an insurer that 
enters into a special purpose reinsurance vehicle contract with a 
special purpose 
reinsurance vehicle and includes 
a 
reinsurer 
retroceding assumed reinsurance to a special purpose reinsurance 
vehicle. 
A group of affiliated insurers under common control 
entering into a special purpose reinsurance vehicle contract on a 
coordinated basis is considered a single ceding insurer. 
5. 
Control. 
"ControL" including the terms "controlling, " 
"controlled by" and "under common controL" means the possession, 
direct or indirect, of the power to direct or cause the direction 
of the management and policies of a person, whether through the 
ownership 
of 
voting 
securities, 
by 
contract 
other 
than 
a 
commercial 
contract for 
goods 
or 
nonmanagement 
services, 
or 
otherwise, unless the power is the result of an official position 
with or corporate office held by the person. 
Control is presumed 
to exist if any person, directly or indirectly, owns, controls, 
holds with the power to vote or holds proxies representing 10% or 
more 
of 
the 
voting 
securities 
of 
any 
other 
person. 
This 
presumption may be rebutted by a showing that control does not 
exist. 
Notwithstanding this subsection, for the purposes of this 
subchapter, the fact that a special purpose reinsurance vehicle 
exclusively provides reinsurance to 
a 
ceding insurer under 
a 
special purpose reinsurance vehicle contract is not by itself 
sufficient grounds for a finding that the reinsurance vehicle or 
the special purpose reinsurance vehicle organizer or owner is 
controlled by or under common control with the ceding insurer. 
6. 
Fair value. 
"Fair value" means; 
A. 
As to cash, the amount of cash; and 
B. 
A§ tQ !:!,n 
!:!,§§~t Qth~r thgn !;;!:!,§h; 
(1) 
The amount at which that asset could be bought or 
sold in 
a 
current transaction between 
arms-length, 
willing parties; 
(2) 
The quoted market price for the asset in active 
markets must be used if available; and 
(3) 
If quoted market prices are not available, a value 
determined 
using 
the 
best 
information 
available 
considering values of like assets and other valuation 
methods, such as present value of future cash flows, 
historical value of the 
Same 
or similar assets or 
comparison to values of other asset classes the value 
of which have been historically related to the subject 
asset. 
7. 
Fully funded. 
"Fully funded" means, with respect to a 
special purpose reinsurance vehicle contract, that the fair value 
of the assets held in trust by or on behalf of the special 
purpose reinsurance vehicle under the special purpose reinsurance 
vehicle 
contract 
on 
the 
date 
on 
which 
the 
special 
purpose 
reinsurance vehicle contract is effected, equals or exceeds the 
aggregate limit as defined in this subchapter. 
8. 
Indemnity 
trigger. 
"Indemnity 
trigger" 
means 
a 
transaction 
term 
by 
which 
the 
special 
purpose 
reinsurance 
vehicle's obligation to pay the ceding insurer for losses covered 
by a special purpose reinsurance vehicle contract is triggered by 
the ceding insurer incurring a specified level of losses. 
9. 
Insolvency. 
"Insolvency" or "insolvent" means that the 
special 
purpose 
reinsurance 
vehicle 
is 
unable 
to 
pay 
its 
obligations when they are due unless the obligations are the 
subject of a bona fide dispute. 
10. 
Nonindeumity trigger. 
"Nonindemnity trigger" means a 
transaction 
term 
by 
which 
the 
special 
purpose 
reinsurance 
vehicle's obligation to pay the ceding insurer under a special 
purpose reinsurance vehicle contract arises from the occurrence 
or existence of some event or condition other than the ceding 
insurer incurring a specified level of losses under its insurance 
or reinsurance contracts. 
11. 
Permitted investments. 
"Permitted investments" means 
those investments that meet the qualifications under section 795. 
12. 
Qualified 
United 
States 
financial 
institution. 
"Qualified 
United 
States 
financial 
institution" 
means 
for 
purposes of meeting the requirements of a trustee as specified in 
,. 
section 784 a financial institution that is eligible to act as a 
fiduciary of a trust and; 
A. 
Is organized or, in the case of a United States branch 
or 
agency office of 
a 
foreign banking organization, 
is 
licensed under the laws of the United States or any state; 
~ 
B. 
Is regulated, 
supervised and examined by federal or 
state authorities haying regulatory authority over banks and 
trust companies. 
13. 
Reinsurance vehicle. 
"Reinsurance vehicle" 
means 
a 
special purpose reinsurance vehicle. 
14. 
Special purpose reinsurance vehicle. 
"Special purpose 
reinsurance vehicle" means an entity domiciled in and organized 
under 
the 
laws 
of this State that has 
received 
a 
limited 
certificate of 
authority 
from 
the 
superintendent 
under 
this 
subchapter exclusively for the limited purpose of entering into 
and effectuating special purpose reinsurance vehicle insurance 
securitizations, 
special purpose reinsurance yehicle contracts 
and other related transactions permitted by this subchapter. 
15. 
Special 
purpose 
reinsurance 
vehicle 
contract; 
contract. 
"Special 
purpose 
reinsurance 
vehicle 
contract" 
or 
"contract" 
means 
a 
contract 
between 
the 
special 
purpose 
reinsurance vehicle and the ceding insurer pursuant to which the 
special purpose reinsurance vehicle agrees to pay the ceding 
insurer an agreed amount upon the occurrence of a 
triggering 
event. 
16. 
Special 
purpose 
reinsurance 
vehicle 
insurance 
securitization; 
insurance 
securitization. 
"Special 
purpose 
reinsurance 
vehicle 
insurance 
securitization" 
or 
"insurance 
securitization" 
means 
a 
package 
of 
related 
risk 
transfer 
instruments and facilitating administrative agreements by which 
proceeds are obtained by a special purpose reinsurance vehicle 
through the issuance of securities and are held in trust pursuant 
to the requirements of this subchapter to secure the obligations 
of 
the 
special 
purpose 
reinsurance 
vehicle 
under 
a 
special 
purpose reinsurance vehicle contract with one or more 
ceding 
insurers, and in which the special purpose reinsurance vehicle's 
obligation to return the full initial inyestment to the holders 
of 
such 
securities 
pursuant 
to 
the 
transaction 
terms 
is 
contingent upon the funds not being used to pay the obligations 
of the special purpose reinsurance vehicle to the ceding insurers 
under the special purpose reinsurance yehicle contract. 
17. 
Special 
puxpose 
reinsurance 
vehicle 
organizer; 
organizer. 
"Special purpose reinsurance vehicle organizer" or 
"organizer" means one or more persons that have organized or 
intend to organize a special purpose reinsurance vehicle under 
authority obtained as specified in this subchapter. 
18. 
Special 
pu~se 
reinsurance 
vehicle 
securities; 
securities. 
"Special purpose reinsurance vehicle securities" or 
"securities" means the securities issued by a special purpose 
reinsurance vehicle. 
19. 
Triggering event. 
"Triggering event" means an event or 
condition that if and when it occurs or exists obligates the 
special purpose reinsurance vehicle to make 
a 
payment to the 
ceding 
insurer 
under 
the 
provisions 
of 
a 
special 
purpose 
reinsurance vehicle contract. 
§782. 
Limited certificate of authority required 
1. 
Limited 
certificate 
of 
authority. 
In 
order 
to 
securitize one or more ceding insurers I 
risks, a special purpose 
reinsurance 
vehicle 
shall 
obtain 
a 
limited 
certificate 
of 
authority from the superintendent according to the provisions of 
this section. 
2. 
Application. 
A 
special 
purpose 
reinsurance 
vehicle 
organizer seeking to obtain a limited certificate of authority 
for 
a 
special 
purpose 
reinsurance 
vehicle 
shall 
file 
an 
application for 
a 
limited certificate of authority with the 
superintendent and pay the application fee specified in section 
601, 
subsection 1. 
A complete application must 
include 
the 
following: 
A. 
An affidavit verifying that each prospective organizer 
meets the requirements of this subchapter; 
B. 
A representation that the prospective organizer intends 
to form a special purpose reinsurance vehicle that operates 
in accordance with the requirements under this subchapter; 
c. 
The proposed name of the special purpose reinsurance 
vehicle; 
D. 
Biographical affidavits of all organizers setting forth 
their legal names, any names under which they have conducted 
or are conducting their affairs and any names of any person 
affiliated, as defined in section 222, with any organizer, 
together with such other biographical information as the 
superintendent may request; 
J 
• 
E. 
The 
source 
and 
form 
of 
the 
m~n~mum capital to 
be 
contributed to the special purpose reinsurance vehicle: 
F. 
Any persons with which the special purpose reinsurance 
vehicle is or upon formation will be affiliated as defined 
in section 222: 
G. 
The names and biographical affidavits of the proposed 
members of the board of directors and principal officers of 
the special purpose reinsurance vehicle pursuant to section 
, setting forth their legal names, any names under which 
they have conducted or are conducting their affairs and any 
names of any person affiliated, as defined in section 222, 
with any proposed director or officer, together with such 
other biographical 
information as 
the superintendent may 
reguest; 
H. 
A plan of operation, consisting of a description of the 
contemplated insurance securitization, the special purpose 
reinsurance vehicle contract and related transactions, which 
must include; 
(1) 
Draft documentation or at the discretion of the 
superintendent 
a 
written 
summary 
of 
all 
material 
agreements that are planned in order to effectuate the 
insurance 
securitization 
and 
the 
related 
contract, 
including the names of the ceding insurers, the nature 
of the risks being assumed and the maximum amounts, 
purpose and nature and the interrelationships of the 
various 
transactions 
reguired 
to 
effectuate 
the 
insurance securitization; 
(2) 
The investment strategy of the special purpose 
reinsurance 
vehicle 
and 
a 
representation 
that 
the 
investment 
strategy 
complies 
with 
the 
investment 
reguirements set forth in this subchapter and that the 
strategy 
includes 
investment 
practices 
or 
other 
provisions to preserve asset values that facilitate 
attainment of full 
funding during the 
term of 
the 
insurance 
securitization 
with 
assets 
that 
can 
be 
monetized in response to a triggering event without a 
substantial loss in value; 
(3) 
A description of 
the 
method 
by 
which 
losses 
covered by the contract that may develop after the 
termination of the contract period are to be addressed 
under the provisions of the contract; and 
(4) 
A representation that the trust agreement under 
section 784, subsection 2, paragraph E and the trusts 
holding assets 
that 
secure 
the 
obligations 
of 
the 
special purpose reinsurance vehicle under the contract 
and the contract with the ceding insurers in connection 
with 
the 
contemplated 
insurance 
securitization 
are 
structured in accordance with the requirements under 
this subchapter. 
3. 
Additional information. 
The superintendent shall notify 
the 
special 
purpose 
reinsurance 
vehicle 
organizer 
if 
any 
additional 
information 
is 
needed 
in 
order 
to 
review 
the 
application and shall approve or deny the application wi thin 60 
days after determining that the application is complete. 
A. 
The superintendent shall approve the application and 
issue a limited certificate of authority under this section 
if the superintendent finds that: 
( 1) 
The 
proposed 
plan 
of 
operation 
provides 
a 
reasonable expectation of a successful operation; 
(2) 
The terms of the contract and related transactions 
comply with this subchapter and any applicable rules 
adopted by the superintendent; 
(3) 
The proposed plan of operation is not hazardous to 
any ceding insurer or to policyholders; and 
(4) 
The insurance regulator of the state of domicile 
of each ceding insurer has notified the superintendent 
in 
writing 
that 
it 
has 
not 
disapproved 
the 
transaction. 
The 
superintendent 
may 
waive 
this 
requirement 
for 
a 
ceding 
insurer 
whose 
domiciliary 
state does not have a substantially similar law if the 
superintendent finds that the domiciliary regulator has 
had 
notice 
and 
adequate 
opportunity 
to 
review 
the 
proposal and has not objected. 
B. 
In evaluating the expectation of a successful operation, 
the 
superintendent 
shall 
consider, 
among 
other 
factors, 
whether the proposed organizer, directors and officers of 
the proposed special purpose reinsurance vehicle are of good 
character and not 
reasonably believed to be affiliated, 
directly 
or 
indirectly, 
through 
ownership, 
control, 
management. reinsurance transactions or other insurance or 
business 
relations, 
with any person 
known 
to 
have 
been 
involved in the improper manipulation of assets, accounts or 
reinsurance. 
C. 
If the superintendent denies the application or if the 
superintendent withholds consent to a proposed transaction 
involving a domestic ceding insurer under a similar law of 
another 
jurisdiction 
the 
proposed 
organizer 
or 
ceding 
insurer has the right to a hearing upon a timely request 
filed pursuant to section 229. 
4. 
Approval. 
Upon 
approval of the application by the 
superintendent 
and 
the 
issuance of 
a 
limited certificate of 
authority, 
the 
special 
purpose 
reinsurance 
vehicle 
may 
be 
acquired or formed and, in accordance with the approved plan of 
operation, the special purpose reinsurance vehicle may enter into 
contracts and conduct other activities within the scope of the 
filed plan of operation. 
5. 
Reinsurance activities. 
The 
limited certificate of 
authority 
must 
state 
that 
the 
special 
purpose 
reinsurance 
vehicle's 
authorization 
to 
be 
involved 
in 
the 
business 
of 
insurance is limited only to the reinsurance activities that the 
special 
purpose 
reinsurance 
vehicle 
is 
allowed 
to 
conduct 
pursuant to this subchapter. 
6. 
Documentation of insurance securitization. 
The special 
purpose reinsurance vehicle organizer shall provide a 
complete 
set of the documentation of the insurance securitization to the 
superintendent upon closing of any transactions, 
including an 
opinion of legal counsel with respect to compliance with this 
subchapter and any other applicable laws as of the effective date 
of any transaction. 
Any material change to the special purpose 
reinsurance 
vehicle's 
plan 
of 
operation 
filed 
pursuant 
to 
subsection 2, including, but not limited to, the issuance of new 
securities to continue the insurance securitization activities of 
the 
special 
purpose 
reinsurance 
vehicle 
pursuant 
to 
this 
subchapter after expiration and full satisfaction of the initial 
securitization 
transactions, 
requires 
prior 
approval 
of 
the 
superintendent. 
A 
change 
in 
the 
counterparty 
to 
swap 
transactions for an existing insurance securitization as allowed 
under this subchapter is not considered a material change unless 
the special purpose reinsurance vehicle's managers know or should 
know that the new counterparty presents a substantial risk of 
default. 
§783. 
Limited purpose of special purpose reinsurance vehicle 
Special purpose reinsurance vehicles authorized under this 
subchapter are created for the limited purpose of entering into 
insurance securitization transactions with investors and related 
agreements to pay one or more ceding insurers agreed-upon amounts 
under a special purpose reinsurance vehicle contract upon the 
occurrence of triggering events related to the insurance business 
of the ceding insurer. 
A special purpose reinsurance vehicle may 
not issue a contract for assumption of risk or indemnification of 
loss other than a special purpose reinsurance vehicle contract. 
§184. 
APRroyed traps actions and QJ?eration of special. pur.pose 
reipsurance vehicles 
1. 
Contracts. 
Special 
purpose 
reinsurance 
vehicles 
authorized under this subchapter may enter into and effectuate 
special purpose reinsurance vehicle contracts with one or more 
ceding insurers as long as the contracts: 
A. 
Obligate the reinsurance vehicle to indemnify the ceding 
insurer for losses: 
B. 
Are securitized in full through a single special purpose 
reinsurance vehicle insurance securitization: and 
C. 
Are fully funded and secured with assets held in trust 
in accordance with the requirements of this section pursuant 
to agreements proposed under this subchapter, and invested 
in a manner that meets the criteria set forth in section 795. 
2. 
Eligible 
lines 
of 
business. 
A 
special 
purpose 
reinsurance vehicle contract may only provide catastrophe excess 
of loss property reinsurance coverage or catastrophe life or 
health reinsurance coverage, 
unless the superintendent adopts 
rules pursuant to section 797 
specifying additional lines of 
business that may be reinsured by a special purpose reinsurance 
vehicle. 
3. 
Multiple 
ceding 
insurers. 
A 
special 
purpose 
reinsurance vehicle may enter into contracts with multiple ceding 
insurers only if: 
A. 
The special purpose reinsurance vehicle reinsures no 
more than 10 ceding insurers: and 
B. 
Each ceding insurer has no more than $50,000,000 in 
surplus as reported in its most recent financial statement 
filed with its domiciliary regulator, as of the date the 
special purpose reinsurance vehicle is licensed. 
A group of 
ceding insurers under common control may elect to be treated 
as separate insurers for purposes of this subsection, but 
only if each insurer in the group that is reinsured by the 
same 
special 
purpose 
reinsurance 
vehicle 
is 
counted 
separately for purposes of the 10-cedent limit. 
4. 
TermS of operation. 
A special purpose 
reinsurance 
vehicle may enter into agreements with 3rd parties and conduct 
business necessary to fulfill its obligations and administrative 
.. 
duties incident to the insurance securitization and the special 
purpose reinsurance vehicle contract. 
The agreements may include 
entering into swap agreements or other transactions that have the 
objective of leveling timing differences in funding upfront or 
ongoing transaction expenses or managing credit or interest rate 
risk of the investments in trust to ensure that the assets held 
in trust are sufficient to satisfy payment or repayment of the 
securities 
issued 
pursuant 
to 
an 
insurance 
securitization 
transaction or the obligations of the special purpose reinsurance 
vehicle under the contract. 
In fulfilling its function, 
the 
special purpose reinsurance vehicle shall adhere to the following 
requirements and shall, to the extent of its powers, ensure that 
contracts obligating other parties to perform certain functions 
incident to its operations 
are 
substantively 
and materially 
consistent with the following requirements and guidelines. 
A. 
A special 
purpose 
reinsurance 
vehicle 
must 
have 
a 
distinct name, which must include the designation "SPRV" or 
"Special Purpose Reinsurance Vehicle." 
The 
name 
of the 
reinsurance vehicle may not be deceptively similar to, or 
likely to be 
confused with or mistaken for, 
any other 
existing business name registered in this State. 
B. 
Unless otherwise provided in the plan of operation, the 
principal place of business and office of any reinsurance 
vehicle organized under this subchapter must be located in 
this State. 
C. 
The assets of a reinsurance vehicle must be preserved 
and administered by or on behalf of the reinsurance vehicle 
to 
satisfy 
the 
liabilities 
and 
obligations 
of 
the 
reinsurance vehicle incident to the insurance securitization 
and other related agreements including the contract. 
D. 
Assets of the reinsurance vehicle that are pledged to 
secure obligations of the reinsurance vehicle to a ceding 
insurer 
under 
a 
contract 
must 
be 
held 
in 
trust 
and 
administered 
by 
a 
qualified 
United 
States 
financial 
institution serving as trustee. 
The qualified United States 
financial institution may not controL be controlled by or 
be under common control with the reinsurance vehicle or any 
ceding insurer. 
E. 
The agreement governing the trust described in paragraph 
D must create one or more trust accounts into which all 
pledged assets must be deposited and held until distributed 
in accordance with the trust agreement. 
The pledged assets 
must be held by the trustee at the trustee I s office in the 
United States and may be held in certificated or electronic 
form. 
F. 
The provisions for withdrawal by ceding insurers of 
funds 
from 
the trust must 
be 
clean 
and 
unconditional, 
subject only to the following requirements: 
(1) 
The 
ceding insurer has 
the right to withdraw 
assets 
from 
the trust account at any 
time without 
notice 
to 
the 
reinsurance 
vehicle 
subject 
only 
to 
written notice to the trustee from the ceding insurer 
that funds in the amount requested are due and payable 
by the reinsurance vehicle: 
(2) 
No other statement or document need be presented 
in order to withdraw assets, except that the ceding 
insurer 
may 
be 
required to 
acknowledge 
receipt 
of 
withdrawn assets: 
(3) 
The trust agreement described in paragraph E must 
indicate that it is not subject to any conditions or 
qualifications outside of the trust agreement: 
(4) 
The trust agreement described in paragraph E may 
not 
contain 
references 
to 
any 
other 
agreements 
or 
documents: and 
(5) 
Reference may not be made to the fact that these 
funds may represent reinsurance premiums or that the 
funds have been deposited for any specific purpose. 
G. 
The trust agreement described in paragraph E must be 
established for the sole use 
and benefit of the ceding 
insurer at least to the full extent of the reinsurance 
vehicle's 
obligations 
to 
the 
ceding 
insurer 
under 
the 
contract. 
In the case of more than one ceding insurer , 
a 
separate trust agreement must be entered into with each 
ceding 
insurer 
and 
a 
separate 
trust 
account 
must 
be 
maintained for each ceding insurer. 
H. 
The 
trust 
agreement 
described 
in paragraph 
E 
must 
provide for the trustee to: 
(1) 
Receive assets and hold all assets in a safe place: 
(2) 
Determine that all assets are in a form that the 
ceding insurer or the trustee, upon direction by the 
ceding insurer, 
may whenever necessary negotiate the 
assets, 
without 
consent 
or 
signature 
from 
the 
reinsurance vehicle or any other person or entity; 
Page ll-LR1915(1) 
(3) 
Furnish 
to 
the 
reinsurance 
vehicle. 
the 
superintendent and the ceding insurer a statement of 
all 
assets 
in 
the 
trust 
account 
referred 
to 
in 
paragraph E reported at fair value upon its inception 
and at intervals no less freguent than the end of each 
calendar guarter: 
(4) 
Notify the 
reinsurance vehicle 
and the ceding 
insurer 
within 
days 
of 
any 
deposits 
to 
or 
withdrawals 
from 
the trust account 
referred 
to 
in 
paragraph E: 
(5) 
Upon 
written 
demand 
of 
the 
ceding 
insurer. 
immediately take steps necessary to transfer absolutely 
all right. title and interest in the assets held in the 
trust account referred to in paragraph E to the ceding 
insurer and deliver physical custody of the assets to 
the ceding insurer: and 
(6) 
Allow no substitutions or withdrawals of assets 
from 
the trust account referred to in paragraph 
E 
except on written instructions from the ceding insurer. 
I. 
The 
trust 
agreement 
described 
in paragraph E 
must 
provide that at least 30 days but not more than 45 days 
before termination of the trust account written notification 
of termination must be delivered by the 3rd party to the 
ceding insurer. 
J. 
The trust agreement described in paragraph E may be made 
subject to and governed by the laws of any state in addition 
to 
the 
reguirements 
for 
the trust as provided in this 
subchapter as long as the state is disclosed in the plan of 
operation filed with and approved by the superintendent. 
K. 
The 
trust agreement 
described 
in paragraph 
E 
must 
prohibit 
invasion of 
the 
trust 
account 
referred to 
in 
paragraph E for the purpose of paying compensation to or 
reimbursing the expenses of the trustee. 
L. 
The 
trust 
agreement 
described 
in paragraph 
E 
must 
provide that the trustee be liable for the trustee' sown 
negligence. willful misconduct or lack of good faith. 
(1) 
Notwithstanding the provisions of paragraph F, 
subparagraphs (3) to (5) and paragraph M. 
subparagraph 
(5). when a trust agreement described in paragraph E is 
established in conjunction with a contract. then the 
trust agreement may provide that the ceding insurer 
shall undertake to use and apply any amounts drawn upon 
the trust account without diminution because of the 
insolvency of the ceding insurer or the reinsurance 
vehicle for the following purposes: 
(a) 
To 
payor 
reimburse 
the 
ceding 
insurer 
amounts 
due 
to 
the 
ceding 
insurer 
under 
the 
contract, including, but not limited to, unearned 
premiums 
due 
to 
the 
ceding 
insurer 
if 
not 
otherwise 
paid 
by 
the 
reinsurance 
vehicle 
in 
accordance with the terms of that trust agreement: 
QI 
(b) 
When 
the 
ceding 
insurer 
has 
received 
notification of termination of the trust account 
referred to in paragraph E and when some or all of 
the reinsurance vehicle's obligations under 
the 
specific 
contract 
remain 
unliquidated 
and 
undischarged 10 days before the termination date, 
to 
withdraw 
amounts 
equal 
to 
the 
undischarged 
obligations and deposit the amounts in a separate 
account in the name of the ceding insurer in any 
qualified 
United 
States 
financial 
institution 
apart from its general assets in trust for the 
sole 
purpose 
of 
discharging 
any 
contractual 
obligations of the reinsurance vehicle that may 
remain executory after the withdrawal and for any 
period after the termination date. 
Assets so held 
must revert to the reinsurance vehicle when they 
are no longer necessary to secure the obligations 
of the reinsurance vehicle and may not exceed the 
sum of the following amounts as determined in good 
faith by the ceding insurer: 
(1) 
Losses and loss expenses paid by the 
ceding insurer but not recovered from 
the 
reinsurance vehicle: 
(ii) 
Reserves 
for 
losses 
reported 
and 
outstanding; 
(iii) 
Reserves for losses incurred but not 
reported: 
(iv) 
Reserves for loss expenses: 
(v) 
Reserves for unearned premiums: and 
(vi) 
Any 
additional 
amount 
necessary 
to 
maintain full funding of the aggregate limit 
remaining under the contract if the period of 
(2) 
The 
agreement 
paragraph 
contract. 
coverage or the agreed-upon period of loss 
development has yet to expire. 
provisions 
to 
be 
included 
in 
the 
trust 
described in paragraph E pursuant to this 
may instead be included in the underlying 
M. 
A special purpose reinsurance vehicle contract must 
contain provisions that: 
(1) 
Require the reinsurance vehicle to enter into a 
trust 
agreement 
described 
in 
paragraph 
E 
and 
to 
establish a trust account referred to in paragraph E 
for the benefit of the ceding insurer and specifying 
what 
recoverables 
or 
reserves 
or 
both 
the 
trust 
agreement is to cover; 
(2) 
Stipulate that assets 
deposited in 
the 
trust 
account be valued according to their current fair value 
and may consist only of permitted investments; 
(3) 
Require the reinsurance vehicle, before depositing 
assets with the trustee, 
to execute assignments or 
endorsements in blank or to transfer legal title to the 
trustee of all shares, obligations or any other assets 
requiring assignments in order that the ceding insurer 
or the trustee upon the direction of the ceding insurer 
may 
whenever 
necessary 
negotiate 
any 
such 
assets 
without 
consent 
or 
signature 
from 
the 
reinsurance 
vehicle or any other entity; 
(4) 
Require that all settlements of account between 
the ceding insurer and the reinsurance vehicle be made 
in cash or its equivalent; and 
(5) 
Stipulate that the reinsurance vehicle and the 
ceding insurer agree that the assets in the trust 
account referred to in paragraph E 
and established 
pursuant to the 
prov~s~ons of the contract may 
be 
withdrawn 
by 
the 
ceding 
insurer 
at 
any 
time 
notwithstanding any other 
prov~s~ons in the contract 
and must be used and applied by the ceding insurer or 
any 
successor 
by 
operation 
of 
law 
of 
the 
ceding 
insurer, including, but not limited to, and subject to 
the 
provisions 
of 
section 
793, 
any 
liquidator, 
rehabilitator, receiver or conservator of the ceding 
insurer, without diminution because of insolvency on 
the part of the ceding insurer or the reinsurance 
vehicle, only for the following purposes: 
(a) 
To transfer all such assets into one or more 
trust accounts pursuant to Paragraph L for the 
benefit of the 
ceding insurer pursuant to the 
terms of the contract and in compliance with this 
subchapter; and 
(b) 
To pay any other amounts that the ceding 
insurer claims are due under the contract. 
N. 
The contract entered into by the reinsurance vehicle may 
contain proY1s1ons that give the reinsurance vehicle the 
right to seek approval from the ceding insurer to withdraw 
from the trust account referred to in paragraph E all or 
part of the assets contained in the trust account and to 
transfer the assets to the reinsurance yehicle as long as: 
(1) 
The reinsurance vehicle shall at the time of the 
withdrawal 
replace 
the 
withdrawn 
assets 
with other 
gualified assets haying a fair value egual to the fair 
value 
of 
the 
assets 
withdrawn 
and 
that 
meet 
the 
reguirements of section 795; and 
(2) 
After the withdrawals and transfer, the fair value 
of the assets in the trust account referred to in 
paragraph 
E 
securing 
the 
obligations 
of 
the 
reinsurance vehicle under the contract is no less than 
an 
amount 
needed 
to 
satisfy 
the 
full 
funding 
reguirement of the contract. 
The ceding insurer has 
the 
sole 
discretion 
to 
determine 
whether 
these 
provisions have been satisfied but may not unreasonably 
nor arbitrarily withhold its approyal. 
O. 
The 
contract 
must 
provide 
that 
investors 
in 
the 
reinsurance yehicle 
agree 
that 
any 
obligation to 
repay 
principal, interest or dividends on the securities issued by 
the reinsurance vehicle must be reduced upon the occurrence 
of a triggering eyent, to the extent that the assets of the 
reinsurance vehicle held in trust for the benefit of the 
ceding 
insurer 
are 
remitted 
to 
the 
ceding 
insurer 
in 
fulfillment of the obligations of the reinsurance vehicle 
under the contract. 
P. 
Assets held by a reinsurance yehicle in trust must be 
valued at their fair yalue. 
o. 
The 
proceeds 
from 
the 
sale 
of 
securities 
by 
the 
reinsurance vehicle to investors must be deposited with the 
trustee as described in this subchapter and must be held or 
invested by the trustee in accordance with the requirements 
of section 795. 
R. 
A reinsurance vehicle organized under this subchapter 
may engage only in fully funded contracts to support in full 
the ceding insurer I s exposures assumed by the reinsurance 
vehicle. 
A contract must be indemnity-triggered unless the 
superintendent 
adopts 
rules 
pursuant 
to 
section 
authorizing nonindemnity-triggered contracts and addressing 
the 
treatment 
of 
the 
portion 
of 
the 
risk 
that 
is 
nonindemnity-based, 
including 
accounting, 
disclosure, 
risk-based capital treatment and the manner in which risks 
associated 
with 
a 
nonindemnity-based 
contract 
may 
be 
evaluated and managed. 
Assets of the reinsurance vehicle 
may be used to pay interest or other consideration on any 
outstanding debt or other obligation of the reinsurance 
vehicle and nothing in this paragraph may be construed or 
interpreted to prevent a reinsurance vehicle from entering 
into a 
swap agreement or other transaction that has the 
effect of guaranteeing interest or other consideration. 
S. 
In the special purpose reinsurance vehicle insurance 
securitization, 
the 
contracts 
or 
other 
relating 
documentation 
must 
contain 
provisions 
identifying 
the 
reinsurance 
vehicle 
that 
enters 
into 
the 
reinsurance 
securitization and the contracts or other documentation must 
clearly disclose that the assets of the reinsurance vehicle 
and only those assets are available to pay the obligations 
of 
that 
reinsurance 
vehicle. 
Notwithstanding 
this 
paragraph, and subject to the provisions of this subchapter 
and any other applicable law, the failure to include such 
language in the contracts or other documentation may not be 
used as the sole basis by creditors, reinsurers or other 
claimants to circumvent the provisions of this subchapter. 
T. 
A reinsurance vehicle is not authorized to: 
(1) 
Issue or otherwise administer primary insurance 
policies; 
(2) 
Have 
any 
obligation 
to 
the 
policyholders 
or 
reinsureds of the ceding insurer; 
(3) 
Enter into a contract with a person that is not 
licensed 
or 
otherwise 
authorized 
to 
conduct 
the 
business of insurance or reinsurance in at least its 
state or country of domicile; or 
( 4) 
Assume 
or 
retain 
exposure 
to 
insurance 
or 
reinsurance losses for its own 
account that is not 
initially fully funded by proceeds from an insurance 
securitization that meets 
the 
requirements 
of 
this 
subchapter. 
U. 
At the cessation of business of a reinsurance vehicle, 
the 
limited 
certificate 
of 
authority 
granted 
by 
the 
superintendent under section 782 expires and the reinsurance 
vehicle may no longer be authorized to conduct activities 
pursuant to this subchapter until 
a 
new certificate of 
authority is issued pursuant to a new filing in accordance 
with section 782. 
V. 
It is unlawful for a reinsurance vehicle to lend or 
otherwise 
invest 
or 
place 
in 
custody, 
trust 
or 
under 
management any of its assets with or to borrow money or 
receive a loan or advance from, other than by issuance of 
the securities pursuant to an insurance securitization, from 
anyone convicted of a felony, anyone who is untrustworthy or 
of known bad character or anyone convicted of a criminal 
offense 
involving 
the 
conversion or misappropriation of 
fiduciary funds or insurance accounts, theft, deceit, fraud, 
misrepresentation or corruption. 
§185. 
Powers 
1. 
Povers. 
A 
special 
purpose 
reinsurance 
vehicle 
authorized under this subchapter has the powers to enter into 
contracts and to conduct other commercial activities necessary to 
fulfill the purposes of this subchapter. 
These activities may 
include, but are not limited to, entering into contracts, issuing 
securities 
of 
the 
special 
purpose 
reinsurance 
vehicle 
and 
complying with the terms of the contracts, entering into trust 
agreements, swap agreements and any other agreements necessary to 
effectuate an insurance securitization in compliance with the 
limitations 
and 
pursuant 
to 
the 
authorities granted 
to 
the 
reinsurance 
vehicle 
under 
this 
subchapter 
or 
the 
plan 
of 
operation approved by the superintendent. 
2. 
By1avs. 
A special purpose reinsurance vehicle organized 
or doing business under this subchapter is capable of suing or 
being sued and may make or enforce contracts in relation to the 
business of the reinsurance vehicle; may have and use a common 
seal and in the name of the reinsurance vehicle or by a trustee 
chosen 
by 
the 
board 
of 
directors 
is 
capable 
of 
taking, 
purchasing, holding and disposing of real and personal property 
for carrying into effect the purposes of its organization; and 
may by its board of directors, trustees, officers or managers 
make bylaws and amendments to the bylaws not inconsistent with 
the laws or the constitution of this State or of the United 
States. 
The bylaws must define the manner of electing directors, 
trustees or managers and officers of the reinsurance vehicle, 
together with their qualifications, duties and term of office. 
§786. 
Affiliation 
Notwithstanding the provisions of section 222, the special 
purpose 
reinsurance vehicle, 
the 
special 
purpose 
reinsurance 
vehicle organizer or subsequent debt or equity investors in 
special purpose reinsurance vehicle securities are not deemed 
affiliates of the ceding insurer by virtue of the special purpose 
reinsurance vehicle contract between the ceding insurer and the 
reinsurance vehicle, the securities of the reinsurance vehicle or 
related agreements necessary to implement the special purpose 
reinsurance vehicle insurance securitization. 
The 
reinsurance 
vehicle may not be controlled by, may not control and may not be 
under common control with any ceding insurer that is a party to a 
contract. 
§787. 
Capitalization 
A special purpose 
reinsurance vehicle must 
have 
minimum 
initial capital of not less than $5,000. 
All of the initial 
capital must be received by the reinsurance vehicle in cash. 
The 
minimum initial capital required and all other funds 
of the 
reinsurance vehicle in excess of its minimum initial capitaL 
including funds held in trust to secure the obligations of the 
reinsurance vehicle pursuant to its special purpose reinsurance 
vehicle contracts, must be invested as provided in section 795. 
§788. 
Dividends 
The special purpose reinsurance vehicle may not declare or 
pay dividends in any form to its owners unless the dividends do 
not decrease the capital of the reinsurance vehicle below $5,000 
and, after giving effect to the dividends, the assets of the 
reinsurance vehicle, including assets held in trust pursuant to 
the terms of the insurance securitization, must be sufficient to 
meet its obligations. 
Except for dividends specifically provided 
for 
in 
the 
approved 
plan 
of 
operation 
under 
section 
782, 
subsection 
2, 
paragraph 
H, 
the 
prior 
approval 
of 
the 
superintendent is required for any dividend paid during the term 
of coverage or while the reinsurance vehicle has undischarged 
obligations to the ceding insurer. 
The dividends may be declared 
by the board of directors of the reinsurance vehicle if the 
dividends would not violate the provisions of this subchapter or 
the approved plan of operation and would not jeopardize the 
fulfillment of the obligations of the reinsurance vehicle or the 
trustee pursuant to 
the 
special 
purpose 
reinsurance vehicle 
insurance securitization, the special purpose reinsurance vehicle 
Page l8-LR1915{l) 
contract or any related transaction. 
The provisions of section 
222, subsections 11-A and 11-B do not apply to such dividends. 
§789. 
Records and financial reports 
1. 
Records. 
The records of the special purpose reinsurance 
vehicle must be maintained in this State and must be available 
for examination by the superintendent at any time. 
No later than 
months after the end of the fiscal year of the reinsurance 
vehicle, 
the 
reinsurance 
vehicle 
shall 
file 
with 
the 
superintendent an audit by a certified public accounting firm of 
the financial statements of the reinsurance vehicle and the trust 
accounts referred to in section 784, subsection 2, paragraph E. 
2. 
Statement 
of 
operation. 
Each 
special 
purpose 
reinsurance vehicle organized under this subchapter shall file 
with the superintendent no later than March 1st of each year a 
statement of operations, 
including a 
statement of 
income, 
a 
balance 
sheet 
and 
a 
detailed 
listing 
of 
invested 
assets, 
including identification of assets held in trust to secure the 
reinsurance 
vehicle's 
obligations 
under 
the 
special 
purpose 
reinsurance vehicle contract, 
for 
the year 
ending the prior 
December 31st. 
The statements must be prepared in accordance 
with 
statutory accounting principles consistent with 
section 
90l-A on forms required by the superintendent. 
3. 
Financial statement. 
The special purpose reinsurance 
vehicle shall keep its books and records in such manner that its 
financial condition, affairs and operations can be ascertained 
and 
so 
that 
its 
financial 
statements 
filed 
with 
the 
superintendent can be readily verified and its compliance with 
the provisions of this subchapter determined. 
The 
books 
and 
records may be photographed, 
reproduced on film or stored and 
reproduced electronically. 
4. 
Preservation. 
All books, records, documents, accounts 
and vouchers must be preserved and kept available in this State 
for the purpose of examination and until authority to destroy or 
otherwise 
dispose 
of 
the 
records 
is 
secured 
from 
the 
superi_ntendent. 
The original records may, however, be kept and 
maintained outside this State if, according to a plan adopted by 
the special purpose reinsurance vehicle's board of directors and 
approved by the superintendent, it maintains suitable records in 
lieu of the original records. 
§790. 
Officers and directors 
The directors of a special purpose reinsurance vehicle shall 
elect officers that they consider necessary to carry out the 
purposes of the reinsurance vehicle pursuant to this subchapter. 
The 
provisions 
of 
Title 
13-C, 
section 
apply 
to 
the 
indemnification of officers and directors of reinsurance vehicles 
organized under this subchapter. 
1. 
Appointment; 
election of officers; directors. 
Each 
special purpose reinsurance vehicle authorized to do business in 
this State shall notify the superintendent within 30 days after 
the appointment or election of any new officers or directors. 
2. 
ReDIOval of officer; director. 
When the superintendent 
determines 
that 
an 
officer 
or 
director 
does 
not 
meet 
the 
standards set forth in this section, the superintendent shall, 
after notice and opportunity for hearing afforded to the officer 
or director, and after a finding that the officer or director is 
incompetent or untrustworthy or of known bad character, order the 
removal of the person. 
If the reinsurance vehicle does not 
comply with a removal order wi thin 30 days, the superintendent 
may suspend that reinsurance vehicle's limited certificate of 
authority until such time as the order is complied with. 
3. 
Loans with affiliate. 
The reinsurance vehicle may make 
no loans to any special purpose reinsurance vehicle organizer, 
owner, director, officer, manager or affiliate of the reinsurance 
vehicle. 
§191. 
Fees and taxes 
A special 
purpose 
reinsurance 
vehicle 
application 
under 
section 782, 
subsection 2 is subject to the application fee 
specified in section 601, subsection 1. 
A reinsurance vehicle is 
also responsible for expenses and costs incurred by the bureau in 
accordance with section 228. 
The 
reinsurance vehicle is not 
subject to state 
premium 
or 
other 
taxes 
incidental 
to 
the 
operation of its business as long as the business remains within 
the limitations of this subchapter. 
§192. 
Dissolution 
A special purpose reinsurance vehicle operating under this 
subchapter 
may 
be 
dissolved at any 
time 
by 
a 
vote 
of its 
directors 
under 
section 
and 
after the 
action has 
been 
approved by the superintendent. 
Voluntary dissolution may not be 
effected or allowed until and unless all of the obligations of 
the reinsurance vehicle pursuant to the insurance securitization 
have been fully and finally satisfied pursuant to their terms. 
In the case of voluntary dissolution, 
the disposition of the 
affairs of the reinsurance vehicle, including the settlement of 
all outstanding obligations, must be made by the officers or 
directors of the reinsurance vehicle and when the liquidation has 
been completed and a final statement in acceptable form has been 
filed with and approved by the superintendent the provisions for 
voluntary dissolution under section 3484 must be followed to 
dissolve the reinsurance vehicle. 
§793. 
Conservation. rehabilitation or liqyidation 
1. 
Authorized 
insurer. 
A 
special 
purpose 
reinsurance 
vehicle is considered an authorized insurer for 
purposes 
of 
section 4351, subsection 1 and the provisions of chapter 57 
a~~ly 
to a reinsurance vehicle except to the extent modified by this 
section. 
2. 
Grounds for action. 
Notwithstanding the provisions of 
sections 4356 and 4357, the 
Su~erior Court may issue an order 
authorizing 
the 
superintendent 
to 
conserve, 
rehabilitate 
or 
liguidate a special purpose reinsurance vehicle domiciled in this 
State only if the superintendent ~roves by clear and convincing 
evidence or the reinsurance vehicle 
sti~ulates after notice and 
o~~ortunity for hearing that: 
this 
A. 
There has 
been embezzlement, 
wrongful 
sequestration, 
dissi~ation or diversion of the assets of the reinsurance 
vehicle intended to be used to pay amounts 
owed to the 
ceding insurer or the holders of special purpose reinsurance 
vehicle securities: or 
B. 
The reinsurance vehicle is insolvent and the holders of 
a majority in outstanding principal amount of each class of 
special purpose reinsurance vehicle securities request or 
consent to conservation, rehabilitation or liquidation under 
this subchapter. 
3. 
Receiver. 
Notwithstanding any contrary provision of 
Ti tle, 
rules 
adopted 
under 
this 
Title 
or 
any 
other 
applicable law, upon any order of conservation, rehabilitation or 
liquidation 
of 
the 
special 
purpose 
reinsurance 
vehicle, 
a 
receiver is bound to deal with the reinsurance vehicle's assets 
and liabilities in accordance with the requirements under this 
subchapter. 
4. 
Recoverable 
amounts. 
With 
respect 
to 
amounts 
recoverable under a special purpose reinsurance vehicle contract, 
the amount recoverable by the receiver may not be reduced or 
diminished as a result of the entry of an order of conservation, 
rehabilitation or liguidation with respect to the ceding insurer, 
notwithstanding any provisions to the contrary in the contracts 
or other documentation governing the special purpose reinsurance 
vehicle insurance securitization. 
A. 
Notwithstanding 
the 
provisions 
of 
chapter 
57, 
an 
application 
or 
petition 
in 
any 
delinquency 
proceeding 
relating to a ceding insurer or any temporary restraining 
order or injunction issued in any such proceeding may not 
prohibit the transaction of any business by a reinsurance 
vehicle, including any payment by a reinsurance vehicle made 
pursuant to a special purpose reinsurance vehicle security 
or any action or proceeding against a reinsurance vehicle or 
its assets. 
B. 
Notwithstanding the prov~s~ons of chapter 57, subchapter 
2, the commencement of a summary proceeding or other interim 
proceeding 
commenced 
prior 
to 
a 
formal 
delinquency 
proceeding with respect to a reinsurance vehicle and any 
order 
issued by 
the 
court in 
such proceeding 
may 
not 
prohibit 
a 
reinsurance 
vehicle 
from 
making 
a 
payment 
pursuant to a special purpose reinsurance vehicle security 
or contract or from taking any action required to make the 
payment. 
5. 
Bonfraudulent 
transfer. 
Notwithstanding 
any 
other 
provision of chapter 57 or other state law: 
A. 
A 
receiver 
of 
a 
ceding 
insurer 
may 
not 
avoid 
a 
nonfraudulent transfer by 
a 
ceding insurer to a 
special 
purpose reinsurance vehicle of money or other property made 
pursuant to a special purpose reinsurance vehicle contract; 
and 
B. 
A receiver of a special purpose reinsurance vehicle may 
not void a nonfraudulent transfer by the reinsurance vehicle 
of money or other property made to a ceding insurer pursuant 
to a special purpose reinsurance vehicle contract or made to 
or for the benefit of any holder of a 
special purpose 
reinsurance 
vehicle 
security 
on 
account 
of 
the 
special 
purpose reinsurance vehicle security. 
6. 
Fulfillment of obligations. 
With the exception of the 
fulfillment 
of 
the 
obligations 
under 
a 
special 
purpose 
reinsurance 
vehicle 
contract 
and 
notwithstanding 
any 
other 
provisions of this subchapter or other law of this State to the 
contrary the assets of 
a 
special purpose reinsurance vehicle 
including assets held in trust may not be consolidated with or 
included in the estate of a ceding insurer in any delinquency 
proceeding against the ceding insurer under this subchapter for 
any 
purpose, 
including, 
without 
limitation, 
distribution 
to 
creditors of the ceding insurer. 
. 
Domiciliary 
receiver. 
Notwithstanding 
any 
other 
provision of this subchapter: 
A. 
The 
domiciliary 
receiver 
of 
a 
special 
purpose 
reinsurance vehicle domiciled in another state is vested by 
operation of law with the title to all of the assets, 
property, contracts and rights of action and all of the 
books, accounts and other records of the reinsurance vehicle 
located in this State. 
The domiciliary receiver has the 
immediate right to recover all such vested property, assets 
and causes of action of the reinsurance vehicle located in 
this State. 
B. 
An 
ancillary 
proceeding 
may 
not 
be 
commenced 
or 
prosecuted 
in 
this 
State 
against 
a 
special 
purpose 
reinsurance vehicle domiciled in another state. 
§794. 
Not subject to guaranty funds: residual market or similar 
arrangements 
1. 
Guaranty funds. 
The special purpose reinsurance vehicle 
or 
the 
activities, 
assets 
and 
obligations 
relating 
to 
the 
reinsurance vehicle are not subject to the provisions of chapter 
57, subchapter 3 or chapter 62 and a reinsurance vehicle may not 
be assessed by or otherwise be required to contribute to any 
guaranty fund or guaranty association in this State with respect 
to the activities, assets or obligations of a reinsurance vehicle 
or the ceding insurer. 
2. 
Residual 
market. 
The 
special 
purpose 
reinsurance 
vehicle may 
not be 
required 
to participate in any residual 
market, so-called "FAIR" plan or other similar plan to provide 
insurance coverage, take out policies, assume risks, make capital 
contributions, payor be otherwise obligated for assessments, 
surcharges or fees or otherwise support or participate in such 
plans or arrangements. 
§795. 
Asset and investment limitations 
1. 
Assets. 
Assets 
of 
the 
special 
purpose 
reinsurance 
vehicle held in trust to secure obligations under the special 
purpose reinsurance vehicle contract must at all times be held in: 
A. 
Cash and cash equivalents; 
B. 
Securities listed by the Securities Valuation Office of 
the National Association of Commissioners or its successor 
organization 
and 
qualifying 
as 
admitted 
assets 
under 
statutory accounting principles pursuant to section 90l-A; or 
C. 
Any 
other 
form 
of 
security 
acceptable 
to 
the 
superintendent. 
2. 
Investment practices. 
In addition, the special purpose 
reinsurance vehicle may 
enter into 
swap 
agreements or other 
transactions 
that 
have 
the 
objective 
of 
leveling 
timing 
differences in funding of upfront or ongoing transaction expenses 
or managing credit or interest rate risk of the investments in 
the trust to ensure that the investments are sufficient to ensure 
payment or repayment of the secur ities and related interest or 
principal 
payments 
issued 
pursuant 
to 
a 
special 
purpose 
reinsurance vehicle insurance securitization transaction or the 
reinsurance 
vehicle's 
obligations 
under 
the 
special 
purpose 
reinsurance vehicle contract. 
§796. 
No transaction of insurance business by investors in 
securities 
The securities issued by the special purpose reinsurance 
vehicle 
pursuant 
to 
a 
special 
purpose 
reinsurance 
vehicle 
insurance securitization are 
not 
deemed 
to 
be 
insurance 
or 
reinsurance contracts. 
An investor in such securities issued 
pursuant 
to 
insurance 
securitization or 
any holder 
of 
such 
securities may not by sole means of this investment or holding be 
deemed to be transacting an insurance business in this State. 
The underwriters or selling agents and their partners, directors, 
off icers, members, managers, employees < 
agents, representatives 
and advisors involved in an insurance securitization are not 
deemed to be 
conducting an 
insurance or reinsurance 
agency, 
brokerage, 
intermediary, 
advisory 
or 
consulting 
business 
by 
virtue of their activities in connection with the special purpose 
reinsurance vehicle or with the insurance securitization. 
§797. 
Authority to adopt rules 
The superintendent may adopt rules necessary to effectuate 
the purposes of this subchapter. 
Any rules so adopted do not 
affect 
a 
special 
purpose 
reinsurance 
vehicle 
insurance 
securitization in effect at the time of adoption. 
Rules adopted 
pursuant 
to 
this 
subchapter 
are 
routine 
technical 
rules 
as 
defined in Title 5, chapter 375, subchapter 2-A. 
§798. 
Exemption from insurance laws within limitations 
1. 
Titles 
consistent. 
A 
vehicle is subject to 
chapters 
consistent with this subchapter. 
special 
purpose 
1, 
and 
to 
reinsurance 
the extent 
2. 
Provisions not applicable. 
No other provisions of this 
Title are applicable to a special purpose reinsurance vehicle 
organized under this subchapter, except as expressly provided in 
this 
subchapter 
or 
in 
rules 
adopted 
by 
the 
superintendent 
pursuant to section 797. 
SUMMARY 
This 
bill 
permits 
establishment 
of 
special 
purpose 
reinsurance vehicles and establishes a regulatory framework for 
the 
oversight 
of 
activities 
related 
to 
special 
purpose 
reinsurance 
vehicles. 
Special 
purpose 
reinsurance 
vehicles 
provide insurers an option other than standard reinsurance as a 
possible method of transferring risk at a time when insurers are 
facing significant increases in reinsurance costs. 
The bill is 
substantially similar to the National Association of Insurance 
Commissioners' Special Purpose Reinsurance Vehicle Model Act and 
would 
permit 
insurers 
access 
to 
special 
purpose 
reinsurance 
vehicles in a marketplace other than those offshore insurance 
markets where special purpose reinsurance vehicles are already 
permitted. 
A 
special 
purpose 
reinsurance 
vehicle 
is 
an 
entity 
established 
for 
the 
exclusive 
purpose 
of 
facilitating 
the 
securitization of the risk of one or more ceding insurers as a 
means of accessing alternative sources of capital and achieving 
the 
benefits 
of 
securitization. 
Investors 
in 
fully 
funded 
insurance 
securitization transactions 
provide 
funds 
that 
are 
available to the special purpose reinsurance vehicle to secure 
the aggregate limit under a special purpose reinsurance vehicle 
contract that provides 
coverage 
against the occurrence of 
a 
triggering event. 
The creation of special purpose reinsurance 
vehicles 
is 
intended 
to 
achieve 
greater 
efficiencies 
in 
conducting insurance securi tizations, to diversify and broaden 
insurers' access to sources of risk-bearing capital and to make 
insurance securitization generally available on reasonable terms 
to as many insurers as possible.