Louisiana Administrative Code › Title 37 - INSURANCE › Part XIII - Regulations › Chapter 105 - Regulation Number 83-Domestic Insurer's Use of Custodial Agreements and the Use of Clearing Corporations › Section XIII-10503 - Custody Agreement; Requirements

Current through Register Vol. 50, No. 6, June 20, 2024
A. An insurance company may, by written
				agreement with a custodian, provide for the custody of its securities with that
				custodian. The securities that are the subject of the agreement may be held by
				the custodian or its agent or in a clearing corporation.
B. 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 of the board. The terms of the agreement
				shall comply with the following.
1.
				Securities' certificates held by the custodian shall be held separate from the
				securities' certificates of the custodian and of all of its other
				customers.
2. Securities held
				indirectly by the custodian and securities in a clearing corporation shall be
				separately identified on the custodian's official records as being owned by the
				insurance company. The records shall identify which securities are held by the
				custodian or by its agent and which securities are in a clearing corporation.
				If the securities are in a clearing corporation, 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.
3. 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.
4. 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 Section
				22:1021 of this insurance law shall, to the extent required by that Section, be
				under the control of the Louisiana Department of Insurance and shall not be
				withdrawn by the insurance company without the approval of the Louisiana
				Department of Insurance.
5. The
				custodian shall be required to send or cause to be sent 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 the insurance company with reports of holdings
				of custodied securities at times and containing information reasonably
				requested by the insurance company. If applicable, the custodian's trust
				committee's annual reports of its review of the insurer's trust accounts shall
				also be provided to the insurer. Reports and verifications may be transmitted
				in electronic or paper form.
6.
				During the course of the custodian's regular business hours, 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.
7. The
				custodian and its agents shall be required to maintain and make available to
				the insurance company as it may reasonably request:
a. reports which they receive from a clearing
				corporation on their respective systems of internal accounting control;
				and
b. reports prepared by outside
				auditors on the custodians or its agent's internal accounting control of
				custodied securities.
8.
				The custodian shall maintain records sufficient to determine and verify
				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.
9. 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, with respect to custodied securities.
10. A national bank, state bank or trust
				company shall secure and maintain insurance protection in an adequate amount
				covering the bank's or trust company'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 banking regulator. A
				broker/dealer shall secure and maintain insurance protection for each insurance
				company's custodied securities in excess of that provided by the Securities
				Investor Protection Corporation in an amount equal to or greater than the
				market value of each respective insurance company's custodied securities. The
				commissioner may determine whether the type of insurance is appropriate and the
				amount of coverage is adequate.
11.
				The custodian shall be obligated to indemnify the insurance company for any
				loss of custodied securities occasioned by the negligence or dishonesty of the
				custodian's officers or employees, or burglary, robbery, holdup, theft or
				mysterious disappearance, including loss by damage or destruction.
12. 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 11 above, the custodian shall
				promptly replace the securities or the value thereof and the value of any loss
				of rights or privileges resulting from the loss of securities. Such
				indemnification does not apply to nor protect against losses from any change in
				the market value of custodied securities.
13. 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.
14. In the event that the custodian gains
				entry in a clearing corporation 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.
15. The custodian shall
				provide written notification to the insurer's domiciliary commissioner if the
				custodial agreement with the insurer has been terminated or if 100 percent of
				the account assets in any one custody account have been withdrawn. This
				notification shall be remitted to the insurance commissioner within three
				business days of the receipt by the custodian of the insurer's written notice
				of termination or within three business days of the withdrawal of 100 percent
				of the account assets.