2023 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.