NY Ins L § 7437 (2021)
2021 New York Laws ISC - Insurance Article 74 - Rehabilitation, Liquidation, Conservation and Dissolution of Insurers 7437 - Qualified Financial Contracts.

§ 7437. Qualified financial contracts. (a) As used in this section:  (1) "Actual direct compensatory damages" means and includes normal and reasonable  costs  of  cover  or  other  reasonable  measures of damages utilized in the derivatives, securities or other market for the contract and agreement claims but does not include punitive or exemplary damages, damages for lost profit or lost opportunity  or  damages  for  pain  and suffering.  (2)  "Business day" means a day other than a Saturday, a Sunday or any day on which either the New York stock exchange or the  Federal  Reserve Bank of New York is closed.  (3)  "Commodity  contract"  means:  (A) a contract for the purchase or sale of a commodity for future delivery on, or subject to the rules  of, a  board of trade or contract market under the Commodity Exchange Act (7 U.S.C. § 1, et seq.) or a board of trade outside the United States;  (B) an  agreement  that  is  subject  to  regulation under section 19 of the Commodity Exchange Act (7 U.S.C. § 1, et  seq.)  and  that  is  commonly known  to  the  commodities  trade as a margin account, margin contract, leverage account or leverage contract; (C) an agreement  or  transaction that  is  subject  to  regulation  under  section 4c(b) of the Commodity Exchange Act (7 U.S.C. § 1, et seq.) and that is commonly known  to  the commodities  trade  as  a  commodity  option; (D) any combination of the agreements or transactions referred to in this paragraph; (E) any option to enter into an agreement or transaction referred to in this paragraph; or (F) any other contract that is  included  from  time  to  time  as  a commodity  contract  as defined in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).  (4) "Contractual right" means and includes any right set  forth  in  a rule  or bylaw of a derivatives clearing organization (as defined in the Commodity  Exchange  Act),  a  multilateral  clearing  organization  (as defined  in the Federal Deposit Insurance Corporation Improvement Act of 1991),  a  national   securities   exchange,   a   national   securities association,  a securities clearing agency, a contract market designated under the Commodity Exchange Act, a  derivatives  transaction  execution facility  registered  under  the  Commodity  Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a  resolution  of the  governing  board thereof and any right, whether or not evidenced in writing, arising under statutory or common law, or under  law  merchant, or by reason of normal business practice.  (5) "Forward contract" shall have the meaning set forth in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).  (6)  "Netting agreement" means: (A) a contract or agreement (including the terms and conditions incorporated by reference in  such  agreement), including  a master agreement (which master agreement, together with all schedules,  confirmations,   definitions   and   addenda   thereto   and transactions  under  any  thereof,  shall  be  treated  as  one  netting agreement), that documents one or more transactions between the  parties to  the  agreement  for  or  involving  one  or more qualified financial contracts and  that  provides  for  the  netting,  offset,  liquidation, termination,  acceleration or close out, under or in connection with one or more qualified financial contracts or present or  future  payment  or delivery  obligations  or  payment  or  delivery entitlements thereunder (including liquidation or close-out values relating to such  obligations or  entitlements)  among  the  parties to the netting agreement; (B) any master agreement or bridge agreement for one or more  master  agreements described  in  subparagraph  (A)  of this paragraph; or (C) any security arrangement related to one or more contracts or agreements described  in subparagraph (A) or (B) of this paragraph; provided that any contract or agreement  described  in  subparagraph  (A)  or  (B)  of  this paragraph  relating to agreements or transactions that are not qualified  financial contracts shall be deemed to be a netting agreement only with respect to those agreements or transactions that are qualified financial contracts.  (7)  "Qualified  financial  contract"  means  any  commodity contract, forward  contract,  repurchase  agreement,  securities  contract,   swap agreement  and  any similar agreement that the superintendent determines by regulation to be a qualified financial contract for the  purposes  of this article.  (8)  "Repurchase  agreement"  shall  have the meaning set forth in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).  (9) "Securities contract" shall have the  meaning  set  forth  in  the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).  (10)   "Security   arrangement"   means   any  security  agreement  or arrangement or other credit enhancement or  guarantee  or  reimbursement obligation,  including  a  pledge,  security,  collateral  or  guarantee agreement or credit support document.  (11) "Separate account"  means  an  account  established  pursuant  to section four thousand two hundred forty of this chapter.  (12)  "Swap agreement" shall have the meaning set forth in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).  (13) "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 non-defaulting party.  (b) (1) Notwithstanding any other provision of this article, including any  other  provision  of  this  article  permitting the modification of contracts, or other law of this state, no  person  shall  be  stayed  or prohibited  from  exercising:  (A)  a  contractual  right  to  cause the termination, liquidation, acceleration or close out  of  any  obligation under  or  in connection with a netting agreement or qualified financial contract with an insurer,  other  than  an  insurer  licensed  to  write financial  guaranty insurance, because of: (i) the insolvency, financial condition or default of the insurer at any time, provided that the right is enforceable under applicable law other than this article; or (ii) the commencement of any proceeding under this article; (B) any right under a security arrangement relating to  one  or  more  netting  agreements  or qualified  financial  contracts,  other  than a right against an insurer licensed to write financial guaranty insurance; or (C)  subject  to  any provision  of  subsection  (b)  of  section  seven thousand four hundred twenty-seven of this article,  any  right  to  offset  or  net  out  any termination  value, payment amount, or other transfer obligation arising under or in connection with one or more qualified  financial  contracts, other  than  a  right  against  an  insurer  licensed to write financial guaranty insurance, where the counterparty or its guarantor is organized under the laws of the United States, a state, or a foreign  jurisdiction approved  by the Securities Valuation Office of the National Association of Insurance Commissioners as eligible for netting.  (2) If a counterparty to a master netting  agreement  or  a  qualified financial  contract  with  an insurer, other than an insurer licensed to write financial guaranty insurance, subject to a proceeding  under  this article  terminates, liquidates, closes out or accelerates the agreement or contract, damages shall be measured  as  of  the  date  or  dates  of termination,  liquidation,  close  out  or acceleration. The amount of a claim for damages shall be actual direct compensatory damages.  (c) Upon termination of a 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 has  been  filed  under this article, other than an insurer licensed to write financial guaranty insurance,   shall   be   transferred   to   or  on  the  order  of  the superintendent, as liquidator,  rehabilitator  or  conservator  for  the insurer,  even  if  the insurer is the defaulting party, notwithstanding any walkaway clause in the  netting  agreement  or  qualified  financial contract.  Any  limited  two-way  payment or first method provision in a netting agreement or qualified financial contract with an  insurer  that has  defaulted  shall  be  deemed to be a full two-way payment or second method provision as against the defaulting insurer. Any such property or amount shall, except to  the  extent  it  is  subject  to  one  or  more secondary  liens  or  encumbrances or rights of netting or setoff, be an asset of the insurer.  (d) In making  any  transfer  of  a  netting  agreement  or  qualified financial  contract  of  an  insurer  subject to a proceeding under this article, other than an insurer  licensed  to  write  financial  guaranty insurance,   the   superintendent,   as   liquidator,  rehabilitator  or conservator for the insurer, shall either:  (1) transfer to  one  party  (other  than  an  insurer  subject  to  a proceeding  under  this  article)  all  netting agreements and qualified financial contracts between a counterparty  or  any  affiliate  of  such counterparty  and  the  insurer  that  is the subject of the proceeding, including: (A) all rights and obligations of each party under each  such netting   agreement  and  qualified  financial  contract;  and  (B)  all property, including any guarantees or other credit enhancement, securing any claims of each party under each such netting agreement and qualified financial contract; or  (2) transfer none  of  the  netting  agreements,  qualified  financial contracts,  rights, obligations or property referred to in paragraph one of this subsection (with respect to such counterparty and any  affiliate of such counterparty).  (e) If the superintendent, as liquidator, rehabilitator or conservator for  an  insurer,  other  than  an  insurer  licensed to write financial guaranty insurance, makes a transfer of one or more  netting  agreements or  qualified financial contracts, then the superintendent shall use his or her best efforts to notify any person who is  party  to  the  netting agreements  or  qualified  financial  contracts of the transfer by 12:00 noon, New York time, on the business day following the transfer.  (f)  Notwithstanding  any  other  provision  of  this   article,   the superintendent,  as  liquidator,  rehabilitator  or  conservator  for an insurer, other than an insurer  licensed  to  write  financial  guaranty insurance,  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 security arrangement relating to a netting agreement or qualified  financial contract, that is made before the commencement of a liquidation,  rehabilitation  or  conservation  proceeding  under   this article,  except  that  a  transfer  may  be avoided under section seven thousand four hundred twenty-five of this article if  the  transfer  was made  with  actual  intent  to hinder, delay or defraud the insurer, the superintendent, as  liquidator,  rehabilitator  or  conservator  of  the insurer,  any  other  receiver appointed for the insurer, or existing or future creditors.  (g)(1) In exercising any rights of disaffirmance or repudiation  of  a liquidator,  rehabilitator  or  conservator  with respect to any netting agreement or qualified financial contract  to  which  an  insurer  is  a party,  other  than  an  insurer  licensed  to  write financial guaranty  insurance,  the  superintendent,   as   liquidator,   rehabilitator   or conservator for the insurer shall either: (A) disaffirm or repudiate all netting   agreements   and   qualified  financial  contracts  between  a counterparty  or any affiliate of such counterparty and the insurer that is the subject of the proceeding; or (B) disaffirm or repudiate none  of the  netting agreements and qualified financial contracts referred to in subparagraph (A) of this paragraph (with respect to such person  or  any affiliate of such person).  (2)  Notwithstanding any other provision of this article, any claim of a counterparty against the estate, other than the estate of  an  insurer licensed  to  write  financial  guaranty  insurance,  arising  from  the superintendent's disaffirmance or repudiation of a netting agreement  or qualified  financial  contract  that has not been previously affirmed in the   liquidation   proceeding   or   in   the   immediately   preceding rehabilitation  proceeding  shall  be determined and shall be allowed or disallowed: (A) as if the claim had arisen before the date of the filing of  the  application  for  liquidation;  or  (B)  if  a   rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen   before   the   date  of  the  filing  of  the  application  for rehabilitation.  (3) The amount of the  claim  identified  in  paragraph  two  of  this subsection shall be the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract.  (h)  All  rights of a counterparty under this article shall apply to a netting agreement and a qualified financial  contract  entered  into  on behalf  of  or  allocated to: (1) the general account of the insurer; or (2) a separate account of the insurer, other than an insurer licensed to write financial guaranty  insurance,  if  the  assets  of  the  separate account  are available only to a counterparty to a netting agreement and a qualified financial contract entered into on behalf of,  or  allocated to, that separate account.