California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 3 - Insurers › Article 9.5 - Workers' Compensation Insurance Deposits › Section 2509.17 - Form of Agreement

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
DEPOSITORY AGREEMENT
THIS AGREEMENT is made and entered into at
					 _________________________, California, on
					 ____________________,20_______________,by and among
					 ______________________________(Insurer), an insurer authorized to write
					 workers' compensation insurance in the State of California, hereinafter called
					 "Insurer," ______________________________ (Name of Bank, Savings and Loan
					 Association or Trust Company) ______________________________(Address)
					 authorized to carry on business in the State of California, hereinafter called
					 "Depository" and the Insurance Commissioner of the State of California,
					 hereinafter called "Commissioner."
WHEREAS, workers' compensation insurers writing such
					 insurance in the State of California are authorized to establish a deposit and
					 enter into a depository agreement with a bank, savings and loan association or
					 trust company under Section
					 11691 of
					 the Insurance Code and regulations set forth in Article 9.5, Subchapter 3,
					 Chapter 5, Title 10, of the California Administrative Code, and
WHEREAS, said deposit placed pursuant to the requirements
					 set forth in Sections
					 2509.1 through
					 2509.21, Title 10, of the
					 California Administrative Code, may be retained by a bank, savings and loan
					 association or trust company duly-licensed in California, and
WHEREAS, the Depository qualifies as such a bank, savings
					 and loan association or trust company and is duly-licensed in
					 California.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE I
DEPOSIT
Insurer deposits with Depository and Depository accepts the
					 securities set forth in Schedule "A," attached hereto and made a part hereof,
					 hereinafter called "deposit." In accepting said deposit, Insurer and Depository
					 agree to abide by the terms herein, the California Insurance Code, and Article
					 9.5, Subchapter 3, Chapter 5, Title 10, of the California Administrative
					 Code.
ARTICLE II
DUTIES AND POWERS
A. Depository
				  agrees to render to the Commissioner a report, as of December 31st, and at any
				  time upon the request of the Commissioner, but in no event to exceed ten (10)
				  business days from the date of request, containing an accounting identifying
				  and listing the deposit. All accounting shall be certified to be true and
				  correct according to the best information and belief of the
				  Depository.
B. Current deposit
				  value for securities shall be the lower of par or market, except that preferred
				  stock and common stock are to be valued at market value. As respects promissory
				  notes which are placed on deposit, the Depository may rely, in good faith, upon
				  representations of the Insurer as to the deposit value of such notes. All
				  valuations must be made within thirty (30) days prior to submission of the
				  report. All accounting shall be certified to be true and correct according to
				  the best information and belief of the Depository.
C. The Depository shall indemnify the Insurer
				  for any loss, damage or injuries sustained by the Insurer with respect to any
				  securities deposited pursuant to this Agreement including loss occasioned by
				  employee dishonesty, burglary, robbery, theft or mysterious disappearance,
				  unless such loss should be caused by nuclear contamination from a cause other
				  than the industrial use of nuclear energy, expropriation by governmental
				  authority, war, insurrection or revolution. The Depository agrees that if there
				  is a loss of securities in its custody, the Depository will replace them or the
				  monetary value thereof, and the monetary value of any loss of rights or
				  privileges resulting from said loss of securities, within ten (10) business
				  days, unless, pursuant to an agreement with the Commissioner extra time is
				  granted, from the date that said securities cannot be accounted for by the
				  Depository. Also, immediately upon discovery, the Depository shall notify the
				  Commissioner of the loss and the proposed action to be taken by the Depository
				  in connection therewith.
D. The
				  Depository agrees to hold said deposits separate from its own assets and all of
				  the deposits held by it, except where it uses the Federal Reserve Bank
				  book-entry account, or, where it has its own internal FOSBI system (filing of
				  securities by issuer), or uses an outside depository trust company previously
				  approved by the Commissioner, which maintains its records and the insurer's
				  deposit in this State. In using such outside depository, the Depository herein
				  agrees to and is obligated to indemnify the Insurer for loss or damage based
				  upon the actual omissions of its agent (here the depository utilized by the
				  institutional Depository) so as to protect the Insurer's deposit in connection
				  with such transaction. The Depository agrees that it shall assume the same
				  responsibility and liability to the Insurer for the loss of such securities in
				  connection with the entrusting to and handling of the securities by the outside
				  depository, to the same extent that the Depository would be responsible for his
				  handling of the securities directly and exclusively. Insurer assigns its
				  rights, if any, to recover from the outside depository to the Depository in
				  return for this indemnification and agrees that it will provide reasonable
				  assistance to the Depository in order that the Depository may recover any loss
				  or liability from the outside depository.
E. (For use where ownership is evidenced by
				  credit on the books of account and records in the Federal Reserve Bank.) Said
				  Depository, in the exercise of its powers as such Depository, has caused to be
				  credited in its name on the books and records of the Federal Reserve Bank the
				  sum of $__________, representing the face amount of eligible United States
				  Government and Agency securities listed in Schedule "B" attached hereto and
				  made a part hereof, hereinafter called "deposit." The Depository represents to
				  all parties hereto that such schedule is a true and complete statement of the
				  eligible United States Government and Agency securities included among the
				  total of such securities held in a "General" book-entry account maintained in
				  the name of such Depository on the books and records of the Federal Reserve
				  Bank as of the close of business on___. The Depository undertakes to clearly
				  indicate in its books and records the purpose of this deposit.
F. Insurer shall submit and Depository shall
				  accept for deposit such securities, including preferred and common stock, only
				  in coupon or bearer form, negotiable form, registered to the Insurance
				  Commissioner, or in the name of the Depository, or in the name of a nominee of
				  such Depository, or its agent in accord with the laws of this State permitting
				  use of nominees. If registered in the Insurer's name, the securities must be
				  accompanied by a power of attorney and a board of directors' resolution on
				  forms approved by the Commissioner, as set forth in the Insurance
				  Commissioner's Securities Transactions Instructions, and as required by Section
				  2509.15, Title 10 of the
				  California Administrative Code.
G.
				  Insurer agrees to submit for deposit only such securities as are acceptable for
				  deposit pursuant to Article 9.5, Subchapter 3, Chapter 5, Title 10 of the
				  California Administrative Code.
H.
				  At any time, Insurer may substitute approved securities of at least equal value
				  for those held by the Depository or place additional securities on deposit in
				  accordance with the requirements set forth herein. Insurer shall certify that
				  the substituted or additional deposit is in compliance with Section
				  943,
				  944,
				  951 and
				  11691 of
				  the California Insurance Code and Article 9.5, Subchapter 3, Chapter 5, Title
				  10 of the California Administrative Code. The certification shall be signed by
				  two (2) authorized officers of the Insurer and submitted to the Depository.
				  Withdrawal without replacement is permitted only with the Commissioner's prior
				  written approval.
The Depository shall have no responsibilities with respect
					 to the investment and reinvestment of the property held by it under this
					 Agreement. All sales, purchases, exchanges or other transactions respecting
					 securities or other property which may be made by the Depository for the
					 account of the Insurer shall be made only pursuant to instructions of the
					 Insurer of the Insurer's designated representative except upon written request
					 of the Commissioner, pursuant to Article I, Chapter 3, Part 3, Division 2 of
					 the California Insurance Code to immediately assign and deliver to the
					 Commissioner upon demand any and all securities deposited or held under the
					 terms of this Agreement. Absent such instructions, the Depository shall have no
					 responsibility for the investment or reinvestment of such property nor
					 liability for any omission to act in the absence of instructions.
The Insurer and not the Depository shall be responsible for
					 all property held under this agreement paid and/or delivered to any broker or
					 other person specified by Insurer in such manner as Insurer may direct. The
					 Depository is directed to sell all fractional shares received by it unless
					 notified to the contrary by the Insurer. The Depository shall not vote proxies.
					 All proxies shall be forwarded to the Insurer.
The Depository shall either reinvest net income or
					 distribute it as Insurer may direct from time to time. The Depository shall
					 distribute principal cash as Insurer may direct from time to time. Securities
					 may likewise be withdrawn pursuant to such direction subject to qualification
					 that the Depository may retain such funds and securities as it determines to be
					 necessary to complete any pending buy or sell transactions. The Depository
					 shall prepare a monthly statement, in the usual form for accounts of this type
					 and shall deliver the same to The Insurer and to any representative designated
					 by Insurer.
I. The Insurer
				  shall furnish to the Commissioner and the Depository its determination of its
				  current deposit requirements under Sections
				  11690
				  through
				  11703 of
				  the California Insurance Code, prior to the effective date of this Agreement,
				  and thereafter on the same basis as reported to the Commissioner on Schedule P,
				  as of December 31st, of each year.
J. Written notice of the sale or substitution
				  of any security or the deposit of additional security as well as an accounting
				  which reflects a deposit value of the security being placed on deposit shall be
				  prepared by the Insurer and signed, sealed and dated by two (2) authorized
				  officers of the Depository and shall be provided to the Commissioner by the
				  Depository within ten (10) business days of the settlement or deposit
				  date.
K. Depository will, at all
				  times and without prior notice, make available its books and records of such
				  deposit held under this Agreement for audit, examination and inspection by the
				  Insurer or by the Commissioner.
L.
				  Insurer hereby directs and Depository agrees, upon written request of the
				  Commissioner, pursuant to Article I, Chapter 3, Part 3, Division 2 of the
				  California Insurance Code to immediately assign and deliver to the Commissioner
				  upon demand any and all securities deposited or held under the terms of this
				  Agreement.
M. Depository agrees
				  that it shall not and does not have the power to use, pledge, invest, encumber
				  or subject said deposit to any lien or claim by Depository.