(a) may, unless the superintendent determines after notice and an
opportunity to be heard that such activity poses a hazard to the
insurer, its policyholders or to the public, continue to write financial
guaranties (except guaranties of municipal bonds) of the types
authorized by subsection (b) of section six thousand nine hundred four
of this article applicable to financial guaranty insurance corporations,
subject to the following conditions:
(1) For a transition period not to exceed sixty months from the
effective date of this article, if the insurer has and maintains surplus
to policyholders of at least seventy-five million dollars (for the
purpose of this paragraph, if the insurer is a foreign insurer, its
surplus to policyholders shall be computed as if it were a domestic
insurer); provided that:
(A) during the sixty month transition period, the amount of surplus to
policyholders needed to meet the single and aggregate risk limitations
imposed by this article must be less than four percent of the insurer's
surplus to policyholders;
(B) within nine months of the effective date of this article, the
insurer shall file a reasonable plan of operation, acceptable to the
superintendent, which shall contain:
(i) a reasonable timetable and appropriate procedures to implement
that timetable to make a determination as to whether or not the insurer
will make application to organize a financial guaranty insurance
corporation during the aforesaid sixty month period;
(ii) the types and projected diversification of guaranties that will
be issued during the transition period;
(iii) the underwriting procedures that will be followed;
(iv) oversight methods;
(v) investment policies; and
(vi) such other matters as may be prescribed by the superintendent.
The plan of operation shall be deemed acceptable unless, within sixty
days of its filing, the superintendent notifies the insurer of any
specific objections to such plan. The plan shall be updated in the event
of a material change with respect to the foregoing and at least
annually;
(C) if the insurer has determined that it will not organize a
financial guaranty insurance corporation, within thirty days after that
determination it shall notify the superintendent, cease writing policies
of financial guaranty insurance and comply with the provisions of
paragraph four of this subsection; and
(D) the insurer shall file such additional statements or reports as
may be required by the superintendent.
(2) For a transition period not to exceed ninety-six months from the
effective date of this article, if the insurer has and maintains surplus
to policyholders of at least one hundred fifty million dollars (for the
purpose of this section, surplus to policyholders means the aggregate
surplus to policyholders of said insurer and other member companies of
an inter-company pool, and if the insurer is a foreign insurer its
surplus to policyholders shall be computed as if it were a domestic
insurer) and the aggregate financial guaranty written premium of said
insurer and other member companies of an inter-company pool shall have
been at least one million dollars in any one of the five years ending
December thirty-first, nineteen hundred eighty-eight, provided that:
(A) during the first sixty months of the transition period, the amount
of surplus to policyholders needed to meet the aggregate risk
limitations imposed by this article must be less than four percent of
the insurer's surplus to policyholders. After such sixty month period,
provided the insurer complies with subparagraph (D) of this paragraph,
the amount of surplus to policyholders needed to meet such aggregate
risk limitations must be less than five percent of the insurer's surplus
to policyholders for the succeeding twelve month period and less than
six percent for the next succeeding twenty-four month period;
(B) during the transition period, the amount of surplus to
policyholders needed to meet the single risk limitations imposed by
paragraphs two through five of subsection (d) of section six thousand
nine hundred four of this article must be less than twenty percent of
the insurer's surplus to policyholders, except that the single risk
limitation with respect to investment grade obligations under such
paragraph five shall be the lesser of eighty million dollars or seven
percent of the insurer's surplus to policyholders;
(C) during the transition period, notwithstanding the last sentence of
paragraph one of subsection (b) of section six thousand nine hundred
four, industrial development bonds shall not be included in the
investment grade requirements set forth in such sentence.
(D) during the transition period, reinsurance in the form of
intercompany pooling agreements, shall not be subject to subparagraphs
(C), (D), (E) and (F) of paragraph two of subsection (a) of section six
thousand nine hundred six of this article, if such intercompany pooling
agreements were in effect on January first, nineteen hundred
eighty-nine, and reinsurance placed with insurers which are subject to
the provisions of paragraph two of subsection (a) of section six
thousand nine hundred six and are not members of the ceding company's
intercompany pooling agreement may not exceed sixty percent of the total
exposures insured net of collateral remaining after deducting any
reinsurance placed with another financial guaranty insurance corporation
or an insurer writing only financial guaranty insurance as is or would
be permitted by this article;
(E) within sixty months of the effective date of this article, the
insurer shall file a reasonable plan of operation, acceptable to the
superintendent, which shall contain:
(i) a reasonable timetable and appropriate procedures to implement
that timetable to make a determination as to whether or not the insurer
will make application to organize a financial guaranty insurance
corporation during the aforesaid ninety-six month period;
(ii) the types and projected diversification of guaranties that will
be issued during the transition period;
(iii) the underwriting procedures that will be followed;
(iv) oversight methods;
(v) investment policies; and
(vi) such other matters as may be prescribed by the superintendent.
The plan of operation shall be deemed acceptable unless, within sixty
days of its filing, the superintendent notifies the insurer of any
specific objections to such plan. The plan shall be updated in the event
of a material change with respect to the foregoing and at least
annually;
(F) if the insurer has determined that it will not organize a
financial guaranty insurance corporation, within thirty days after that
determination it shall notify the superintendent, cease writing policies
of financial guaranty insurance and comply with the provisions of
paragraph four of this subsection; and
(G) the insurer shall file such additional statements or reports as
may be required by the superintendent.
(3) For a transition period not to exceed twelve months from the
effective date of this article, in the case of an insurer transacting
only financial guaranty insurance prior to the effective date of this
article and which qualifies for licensing as a financial guaranty
insurance corporation under section six thousand nine hundred two of
this article, provided that it makes application to amend its current
license to that of a financial guaranty insurance corporation licensed
to transact only those kinds of insurance permitted pursuant to section
six thousand nine hundred two of this article within sixty days of the
effective date of this article, and provided that, for purposes of this
paragraph, an insurer shall be deemed to be transacting only financial
guaranty insurance prior to the effective date of this article if, with
the approval of the superintendent, it has reinsured all of any other
insurance liabilities with one or more authorized insurers or has
otherwise made provision for such liabilities.
(4) For a transition period not to exceed nine months, in the case of
an insurer that does not qualify under either paragraph one, two or
three of this subsection or does not file a plan of operation pursuant
to paragraph one or two of this subsection, such insurer shall cease
writing any new financial guaranty insurance business and may:
(A) reinsure its net in force business with a licensed financial
guaranty insurance corporation; or
(B) subject to the prior approval of its domiciliary commissioner,
reinsure all or part of its net in force business in accordance with the
requirements of paragraph two of subsection (a) of section six thousand
nine hundred six of this article, except that subparagraphs (D), (E) and
(F) of paragraph two of such subsection shall not be applicable. The
assuming insurer shall maintain reserves of such reinsured business in
the manner applicable to the ceding insurer under this paragraph; or
(C) thereafter continue the risks then in force and, with thirty days
prior written notice to its domiciliary commissioner, issue new
financial guaranty policies, provided that the issuing of such policies
is reasonably prudent to mitigate either the amount of or possibility of
loss in connection with business transacted prior to the effective date
of this article. Provided, however, an insurer must receive the prior
approval of its domiciliary commissioner before issuing any new
financial guaranty insurance policies that would have the effect of
increasing its risk of loss;
(b) shall, for all guaranties in force prior to the effective date of
this article, including those which fall under the definition of
financial guaranty insurance contained in subsection (a) of section six
thousand nine hundred one of this article, be subject to the reserve
requirements applicable for municipal bond guaranties in effect prior to
the effective date of this article. To the extent that the insurer's
contingency reserves maintained as of the effective date of this article
are less than those required for municipal bond guaranties, the insurer
shall have three years to bring its reserves into compliance, except
that a part of the reserve may be released proportional to the reduction
in aggregate net liability resulting from reinsurance, provided that the
reinsurer shall, on the effective date of the reinsurance, establish a
reserve in an amount equal to the amount released and, in addition, a
part of the reserve may be released with the approval of the
superintendent upon demonstration that the amount carried is excessive
in relation to the corporation's outstanding obligations; and
(c) shall be subject to the reserve requirements specified in section
six thousand nine hundred three of this article for all policies of
financial guaranty insurance issued on or after the effective date of
this article.