(a) Notwithstanding any other provision of this Article, including any other provision of this Article permitting the modification of contracts, or other law of a state, no person shall be stayed or prohibited from exercising:
         (1) a contractual right to cause the termination,
    
liquidation, acceleration, or close out of obligations under or in connection with any netting agreement or qualified financial contract with an insurer because of:
            (A) the insolvency, financial condition, or
        
default of the insurer at any time, provided that the right is enforceable under an applicable law other than this Code; or
            (B) the commencement of a formal delinquency
        
proceeding under this Code;
        (2) any right under a pledge, security, collateral,
    
reimbursement or guarantee agreement or arrangement, any other similar security agreement or arrangement, or other credit enhancement relating to one or more netting agreements or qualified financial contracts;
        (3) subject to any provision of Section 206 of this
    
Article, any right to set off or net out any termination value, payment amount, or other transfer obligation arising under or in connection with one or more qualified financial contracts where the counterparty or its guarantor is organized under the laws of the United States or a state or a foreign jurisdiction approved by the Securities Valuation Office of the National Association of Insurance Commissioners as eligible for netting; or
        (4) if a counterparty to a master netting agreement
    
or a qualified financial contract with an insurer subject to a proceeding under this Article terminates, liquidates, closes out or accelerates the agreement or contract, then damages shall be measured as of the date or dates of termination, liquidation, close out, or acceleration; the amount of a claim for damages shall be actual direct compensatory damages calculated in accordance with subsection (f) of this Section.
    (b) Upon termination of a netting agreement or qualified financial contract, the net or settlement amount, if any, owed by a nondefaulting party to an insurer against which an application or petition has been filed under this Code shall be transferred to or on the order of the receiver for the insurer, even if the insurer is the defaulting party, notwithstanding any walkaway clause in the netting agreement or qualified financial contract.

Terms Used In Illinois Compiled Statutes 215 ILCS 5/206.1

  • affiliate: as used in this Article means a person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the person specified. See Illinois Compiled Statutes 215 ILCS 5/187
  • Affirmed: In the practice of the appellate courts, the decree or order is declared valid and will stand as rendered in the lower court.
  • Common law: The legal system that originated in England and is now in use in the United States. It is based on judicial decisions rather than legislative action.
  • Contract: A legal written agreement that becomes binding when signed.
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
  • Guarantor: A party who agrees to be responsible for the payment of another party's debts should that party default. Source: OCC
  • Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
  • Netting agreement: as used in this Article , means (a) a contract or agreement (including terms and conditions incorporated by reference therein), including a master agreement (which master agreement, together with all schedules, confirmations, definitions, and addenda thereto and transactions under any thereof, shall be treated as one netting agreement), that documents one or more transactions between the parties to the agreement for or involving one or more qualified financial contracts and that provides for the netting, liquidation, setoff, termination, acceleration, or close out under or in connection with one or more qualified financial contracts or present or future payment or delivery obligations or payment or delivery entitlements thereunder (including liquidation or close-out values relating to such obligations or entitlements) among the parties to the netting agreement; (b) any master agreement or bridge agreement for one or more master agreements described in paragraph (a) of this subsection (8); or (c) any security agreement or arrangement or other credit enhancement or guarantee or reimbursement obligation related to any contract or agreement described in paragraph (a) or (b) of this subsection (8); provided that any contract or agreement described in paragraphs (a) or (b) of this subsection (8) relating to agreements or transactions that are not qualified financial contracts shall be deemed to be a netting agreement only with respect to those agreements or transactions that are qualified financial contracts. See Illinois Compiled Statutes 215 ILCS 5/187
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • person: as used in this Article means an individual, an aggregation of individuals, a partnership, or a corporation. See Illinois Compiled Statutes 215 ILCS 5/187
  • Qualified financial contract: means any commodity contract, forward contract, repurchase agreement, securities contract, swap agreement, or any similar agreement that the Director determines by regulation, resolution, or order to be a qualified financial contract for the purposes of this Act. See Illinois Compiled Statutes 215 ILCS 5/187
  • Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
  • State: when applied to different parts of the United States, may be construed to include the District of Columbia and the several territories, and the words "United States" may be construed to include the said district and territories. See Illinois Compiled Statutes 5 ILCS 70/1.14
  • United States: may be construed to include the said district and territories. See Illinois Compiled Statutes 5 ILCS 70/1.14

     For the purposes of this subsection (b), the term “walkaway clause” means a provision in a netting agreement or a qualified financial contract that, after calculation of a value of a party’s position or an amount due to or from one of the parties in accordance with its terms upon termination, liquidation, or acceleration of the netting agreement or qualified financial contract, either does not create a payment obligation of a party or extinguishes a payment obligation of a party in whole or in part solely because of the party’s status as a nondefaulting party. Any limited 2-way payment or first method provision in a netting agreement or qualified financial contract with an insurer that has defaulted shall be deemed to be a full 2-way payment or second method provision as against the defaulting insurer. Any such property or amount shall, except to the extent that it is subject to one or more secondary liens or encumbrances or rights of netting or setoff, be a general asset of the insurer.
     (c) In making any transfer of a netting agreement or qualified financial contract of an insurer subject to a proceeding under this Code, the receiver shall either:
         (1) transfer to one party (other than an insurer
    
subject to a proceeding under this Article) all netting agreements and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer that is the subject of the proceeding, including:
            (A) all rights and obligations of each party
        
under each netting agreement and qualified financial contract; and
            (B) all property, including any guarantees or
        
other credit enhancement, securing any claims of each party under each netting agreement and qualified financial contract; or
        (2) transfer none of the netting agreements,
    
qualified financial contracts, rights, obligations, or property referred to in paragraph (1) of this subsection (c) (with respect to the counterparty and any affiliate of the counterparty).
    (d) If a receiver for an insurer makes a transfer of one or more netting agreements or qualified financial contracts, then the receiver shall use its best efforts to notify any person who is party to the netting agreements or qualified financial contracts of the transfer by 12:00 noon (the receiver’s local time) on the business day following the transfer. For the purposes of this subsection (d), “business day” means a day other than a Saturday, Sunday, or any day on which either the New York Stock Exchange or the Federal Reserve Bank of New York is closed.
     (e) Notwithstanding any other provision of this Article, a receiver may not avoid a transfer of money or other property arising under or in connection with a netting agreement or qualified financial contract (or any pledge, security, collateral, or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract) that is made before the commencement of a formal delinquency proceeding under this Article.
     (f) The following provisions shall apply concerning disaffirmance and repudiation:
         (1) In exercising the rights of disaffirmance or
    
repudiation of a receiver with respect to any netting agreement or qualified financial contract to which an insurer is a party, the receiver for the insurer shall either:
            (A) disaffirm or repudiate all netting agreements
        
and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer that is the subject of the proceeding; or
            (B) disaffirm or repudiate none of the netting
        
agreements and qualified financial contracts referred to in subparagraph (A) (with respect to the person or any affiliate of the person).
        (2) Notwithstanding any other provision of this
    
Article, any claim of a counterparty against the estate arising from the receiver’s disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the liquidation or immediately preceding a conservation or rehabilitation case shall be determined and shall be allowed or disallowed as if the claim had arisen before the date of the filing of the petition for liquidation or, if a conservation or rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date of the filing of the petition for conservation or rehabilitation. The amount of the claim shall be the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract. The term “actual direct compensatory damages” does not include punitive or exemplary damages, damages for lost profit or lost opportunity, or damages for pain and suffering, but does include normal and reasonable costs of cover or other reasonable measures of damages utilized in the derivatives, securities, or other market for the contract and agreement claims.
    (g) The term “contractual right”, as used in this Section, includes any right set forth in a rule or bylaw of a derivatives clearing organization, as defined in the Commodity Exchange Act; a multilateral clearing organization, as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991; a national securities exchange; a national securities association; a securities clearing agency; a contract market designated under the Commodity Exchange Act; a derivatives transaction execution facility registered under the Commodity Exchange Act; or a board of trade, as defined in the Commodity Exchange Act or in a resolution of the governing board thereof and any right, whether or not evidenced in writing, arising under statutory or common law or under law merchant or by reason of normal business practice.
     (h) The provisions of this Section shall not apply to persons who are affiliates of the insurer that is the subject of the proceeding.
     (i) All rights of counterparties under this Article shall apply to netting agreements and qualified financial contracts entered into on behalf of the general account or separate accounts if the assets of each separate account are available only to counterparties to netting agreements and qualified financial contracts entered into on behalf of that separate account.
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