Compilation of Rules and Regulations of the State of Georgia › Department 120 - OFFICE OF COMMISSIONER OF INSURANCE, SAFETY FIRE COMMISSIONER AND INDUSTRIAL LOAN COMMISSIONER › Chapter 120-2 - RULES OF COMMISSIONER OF INSURANCE › Subject 120-2-69 - REQUIREMENTS FOR INSURANCE COMPANY CUSTODIAL ACCOUNTS › Rule 120-2-69-.03 - Custody Agreements; Requirements

Current through Rules and Regulations filed through June 27, 2024
(1) An insurance company may, by written
				agreement with a custodian, provide for the custody of its securities with a
				custodian. The securities may be held by the custodian or its agent or in a
				clearing corporation or in the Federal Reserve book-entry system. Securities so
				held, whether held by the custodian or its agent or in a clearing corporation
				or in the Federal Reserve book-entry system, are referred to herein as
				"custodied securities."
(2) The
				agreement shall be in writing and shall be authorized by a resolution of the
				board of directors of the insurance company or of an authorized committee
				thereof The terms of the agreement shall comply with the following:
(a) Certificated securities held by the
				custodian shall be held either separate from the securities of the custodian
				and all of its other customers or in a fungible bulk of securities as part of a
				Filing of Securities by Issue (FOSBI) arrangement;
(b) Securities held in fungible bulk by the
				custodian and securities in a clearing corporation or in the Federal Reserve
				book-entry system shall be separately identified on the custodian's official
				records as being owned by the insurance company. The records shall identify
				which custodied securities are held by the custodian or by its agent and which
				securities are in a clearing corporation or in the Federal Reserve book-entry
				system. If the securities are in a clearing corporation or in the Federal
				Reserve book-entry system, the records shall also identify where the securities
				are and if in a clearing corporation, the name of the clearing corporation and
				if through an agent, the name of the agent;
(c) All custodied securities that are
				registered shall be registered in the name of the company or in the name of a
				nominee of the company or in the name of the custodian or its nominee or, if in
				a clearing corporation, in the name of the clearing corporation or its
				nominee;
(d) Custodied securities
				shall be held subject to the instructions of the insurance company and shall be
				withdrawable upon the demand of the insurance company, except that custodied
				securities used to meet the deposit requirements set forth in Chapter 12 of the
				Georgia Insurance Code shall, to the extent required by that section, be under
				the control of the Georgia Insurance Department and shall not be withdrawn by
				the insurance company without the express written approval of the Georgia
				Insurance Department. Nothing in this section, however, shall prohibit an
				insurance company from effecting a valid substitution of securities to maintain
				compliance with Chapter 12 of the Georgia Insurance Code;
(e) The custodian shall be required to send
				or cause or make available to the insurance company a confirmation of all
				transfers of custodied securities to or from the account of the insurance
				company. In addition, the custodian shall be required to furnish no less than
				monthly to the insurance company reports of holdings of custodied securities at
				times and containing information reasonably requested by the insurance
				company;
(f) During the course of
				the custodian's regular business hours, and upon reasonable notice, an officer
				or employee of the insurance company, an independent accountant selected by the
				insurance company, and a representative of an appropriate regulatory body shall
				be entitled to examine, on the premises of the custodian, the custodian's
				records relating to custodied securities, but only upon furnishing the
				custodian with written instructions to that effect from an appropriate officer
				of the insurance company;
(g) The
				custodian and its agents shall be required to send to the insurance company:
1. All reports which they receive from a
				clearing corporation or the Federal Reserve book-entry system on their
				respective systems of internal accounting control, and
2. Reports prepared by outside auditors on
				the custodians or its agent's accounting control of custodied securities that
				the insurance company may reasonably request;
(h) The custodian shall maintain records
				sufficient to provide identifying information relating to custodied securities
				that may be reported in the insurance company's annual statement and supporting
				schedules and information required in an audit of the financial statements of
				the insurance company;
(i) the
				custodian shall provide, upon written request from an appropriate officer of
				the insurance company, the appropriate affidavits, substantially in the form
				attached to this Regulation Chapter, with respect to custodied
				securities;
(j) The custodian shall
				secure and maintain insurance protection in an adequate amount covering the
				custodian's duties and activities as custodian for the insurer's assets, and
				shall state in the custody agreement that protection is in compliance with the
				requirements of the custodian's banning regulator. The Commissioner may
				determine whether the type of insurance is appropriate and the amount of
				coverage is adequate;
(k) The
				custodian shall be obligated to indemnify the insurance company for any loss of
				custodied securities, except that the custodian shall not be required by this
				regulation to be so obligated to the extent that the loss was caused by other
				than the negligence or dishonesty of the custodian;
(l) In the event that there is a loss of
				custodied securities for which the custodian shall be obligated to indemnify
				the insurance company as provided in Paragraph (k) above, the custodian shall
				promptly replace the securities or the value thereof and the value of any
				direct loss of rights or privileges resulting from the loss of
				securities;
(m) The agreement may
				provide that the custodian will not be liable for a failure to take an action
				required under the agreement in the event and to the extent that the taking of
				the action is prevented or delayed by war (whether declared or not and
				including existing wars), revolution, insurrection, riot, civil commotion, act
				of God, accident, fire, explosion, stoppage of labor, strikes or other
				differences with employees, laws, regulations, orders or other acts of any
				governmental authority, or any other cause whatever beyond its reasonable
				control;
(n) In the event that the
				custodian gains entry in a clearing corporation or in the Federal Reserve
				book-entry system through an agent, there shall be an agreement between the
				custodian and the agent under which the agent shall be subject to the same
				liability for loss of custodied securities as the custodian. However, if the
				agent shall be subject to regulation under the laws of a jurisdiction that is
				different from the jurisdiction the laws of which regulate the custodian, the
				Commissioner of Insurance of the state of domicile of the insurance company may
				accept a standard of liability applicable to the agent that is different from
				the standard of liability applicable to the custodian.