Nebraska Administrative Code › Topic - INSURANCE, DEPARTMENT OF › Title 210 - NEBRASKA DEPARTMENT OF INSURANCE › Chapter 81 - CUSTODIAL AGREEMENTS AND THE USE OF CLEARING CORPORATIONS › Section 210-81-003 - Custody Agreements/Requirements

Current through June 17, 2024
003.01 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.
003.02 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:
003.02(a) Securities' certificates held by
				the custodian shall be held separate from the securities' certificates of the
				custodian and all of its other customers.
003.02(b) 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.
003.02(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.
003.02(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.
003.02(e) 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. The custodian's trust committee's annual reports of its review of the
				insurer' trust accounts shall also be provided to the insurer. Reports and
				verifications may be transmitted in electronic or paper form.
003.02(f) 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.
003.02(g) The custodian and its agents shall
				be required to send to the insurance company:
003.02(g)(i) All reports which they receive
				from a clearing corporation on their respective systems of internal accounting
				control, and
003.02(g)(ii) Reports
				prepared by outside auditors on the custodians or its agent's internal
				accounting control of custodied securities that the insurance company may
				reasonably request.
003.02(h) 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.
003.02(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,
				with respect to custodied securities.
003.02(j) 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 director may determine whether the type of insurance
				is appropriate and the amount of coverage is adequate.
003.02(k) The custodian shall be obligated to
				indemnity the insurance company for any loss of custodied securities, except
				that the custodian shall not be so obligated to the extent that the loss was
				caused by other than the negligence or dishonesty of the custodian.
003.02(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
				003.02(k), 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.
003.02(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.
003.02(n) 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 or Director 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.
003.02(o) 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% of the account assets
				in any one custody account have been withdrawn. This notification shall be
				remitted to the insurance commissioner within three (3) business days of
				receipt by the custodian of the insurer's written notice of termination or
				within three (3) business days of the withdrawal of 100% of the account
				assets.