2023 Oklahoma Statutes › Title 36. Insurance › §36-1926.1. Netting agreements or qualified financial contracts — Contractual rights — Termination — Transfer.

A. As used in this section:
1. "Actual direct compensatory damages" means 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. Provided, actual direct compensatory damages shall 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, Sunday, or any day on which either the New York Stock Exchange or the Federal Reserve Bank of New York is closed;
3. "Contractual right" means any right set forth in a rule or bylaw of a derivatives clearing organization, a multilateral clearing organization, a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the federal Commodity Exchange Act, a derivatives transaction execution facility registered under the federal Commodity Exchange Act, or a board of trade 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; and
4. "Walkaway clause" means a provision in a netting agreement or a qualified financial contract which, 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. Notwithstanding any other provision of the Oklahoma Insurance Code, including any other provision permitting the modification of contracts, no person or entity shall be stayed or prohibited from exercising:
1. A contractual right to cause termination, liquidation, acceleration, or closeout of obligations under or in connection with any netting agreement or qualified financial contract with an insurer because of:
a.
the insolvency, financial condition, or default of the insurer at any time, provided the right is enforceable under applicable law other than the provisions of this act, or
b.
the commencement of a formal delinquency proceeding under the provisions of this section;
2. Any right under a pledge, security, collateral, reimbursement, guarantee agreement or arrangement, 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 any provision of Section 1928 of Title 36 of the Oklahoma Statutes, 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 where the counterparty or its guarantor is organized under the laws of the United States or a state or a foreign jurisdiction approved by the Securities Valuation Office (SVO) of the National Association of Insurance Commissioners (NAIC) as eligible for netting; or
4. If a counterparty to a master netting agreement or a qualified financial contract with an insurer subject to a proceeding under this section terminates, liquidates, closes out, or accelerates the agreement or contract, damages shall be measured as of the date or dates of termination, liquidation, closeout, or acceleration. The amount of a claim for damages shall be actual direct compensatory damages calculated in accordance with subsection G of this section.
C. 1. Upon termination of a netting agreement or qualified financial contract, the net or settlement amount, if any, owed by a non-defaulting party to an insurer against which an application or petition has been filed under this section shall be transferred to or on the order of the receiver for the insurer, even if the insurer is the defaulting party, notwithstanding any walkaway clause in the netting agreement or qualified financial contract.
2. Any limited two-way payment or first method provision in a netting agreement or qualified financial contract with an insurer which 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 a general 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 section, the receiver shall either:
1. Transfer to one party, other than an insurer subject to a proceeding under this section, all netting agreements and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer which is the subject of the proceeding, including:
a.
all rights and obligations of each party under each 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 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 1 of this subsection, with respect to the counterparty and any affiliate of the counterparty.
E. If a receiver for an insurer makes a transfer of one or more netting agreements or qualified financial contracts, then the receiver shall use its best efforts to notify any person who is party to the netting agreements or qualified financial contracts of the transfer by twelve o'clock p.m. on the business day following the transfer.
F. Notwithstanding any other provision of the Oklahoma Insurance Code, a receiver shall not avoid a transfer of money or other property arising under or in connection with a netting agreement, 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 which is made before the commencement of a formal delinquency proceeding under this Code. Provided, however, a transfer may be avoided under Section 1926 of Title 36 of the Oklahoma Statutes if the transfer was made with actual intent to hinder, delay, or defraud the insurer, a receiver appointed for the insurer, or existing or future creditors.
G. 1. In exercising the rights of disaffirmance or repudiation of a receiver with respect to any netting agreement or qualified financial contract to which an insurer is a party, the receiver for the insurer shall either:
a.
disaffirm or repudiate all netting agreements and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer which 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 the person or any affiliate of the person or entity.
2. Notwithstanding any other provision of this Code, any claim of a counterparty against the estate arising from the receiver's disaffirmance or repudiation of a netting agreement or qualified financial contract which has not been previously affirmed in the liquidation or immediately preceding a conservation or rehabilitation case shall be determined and shall be allowed or disallowed as if the claim had arisen before the date of the filing of the petition for liquidation or, if a conservation or rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date of the filing of the petition for conservation or rehabilitation. The amount of the claim 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. The provisions of this section shall not apply to persons or entities who are affiliates of the insurer which is the subject of the proceeding.
I. All rights of counterparties under this Code shall apply to netting agreements and qualified financial contracts entered into on behalf of the general account or separate accounts if the assets of each separate account are available only to counterparties to netting agreements and qualified financial contracts entered into on behalf of the separate account.
Added by Laws 2023, c. 371, § 2, eff. Nov. 1, 2023.