Michigan Laws 500.4725 – SPFC; duty to ensure contracts fulfill certain requirements
Current as of: 2023 | Check for updates
|
Other versions
Terms Used In Michigan Laws 500.4725
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Commissioner: means the director. See Michigan Laws 500.102
- Contract: A legal written agreement that becomes binding when signed.
- Counterparty: means an SPFC's parent or affiliated company, or, subject to the prior approval of the director, a nonaffiliated company as ceding insurer to the SPFC contract. See Michigan Laws 500.4701
- Fair value: means the following:
(i) For cash, the amount of the cash. See Michigan Laws 500.4701Fiduciary: A trustee, executor, or administrator. Fraud: Intentional deception resulting in injury to another. Insurance securitization: means a package of related risk transfer instruments, capital market offerings, and facilitating administrative agreements by which all of the following apply:
(i) The proceeds of the sale of SPFC securities are obtained, in a transaction that complies with applicable securities laws, by an SPFC directly through the issuance of the SPFC securities by the SPFC or indirectly through the issuance of preferred securities by the SPFC in exchange for some or all of the proceeds of the sale of SPFC securities by the SPFC's parent, an affiliated company of the SPFC, a counterparty, or a captive LLC. See Michigan Laws 500.4701Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity. Management: means the board of directors, managing board, or other individual or individuals vested with overall responsibility for the management of the affairs of the SPFC, including the election and appointment of officers or other agents to act on behalf of the SPFC. See Michigan Laws 500.4701 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: may extend and be applied to bodies politic and corporate, as well as to individuals. See Michigan Laws 8.3l Preferred securities: means securities, whether stock or debt, issued by an SPFC to the issuer of the SPFC securities in exchange for some or all of the proceeds of the issuance of the SPFC securities. See Michigan Laws 500.4701 Securities: means those different types of debt obligations, equity, surplus certificates, surplus notes, funding agreements, derivatives, and other legal forms of financial instruments. See Michigan Laws 500.4701 SPFC contract: means a contract between the SPFC and the counterparty pursuant to which the SPFC agrees to provide insurance or reinsurance protection to the counterparty for risks associated with the counterparty's insurance or reinsurance business. See Michigan Laws 500.4701 SPFC securities: means the securities issued pursuant to an insurance securitization, the proceeds of which are used in the manner described in subdivision (i). See Michigan Laws 500.4701 state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories belonging to the United States; and the words "United States" shall be construed to include the district and territories. See Michigan Laws 8.3o Third party: means a person unrelated to an SPFC or its counterparty, or both, that has been aggrieved by a decision of a director regarding that SPFC or its activities. See Michigan Laws 500.4701 Trustee: A person or institution holding and administering property in trust.
In fulfilling its function, the SPFC shall adhere to the following and, to the extent of its powers, shall ensure that contracts obligating other parties to perform certain functions incident to its operations are substantively and materially consistent with all of the following:
(a) The assets of an SPFC shall be preserved and administered by or on behalf of the SPFC to satisfy the liabilities and obligations of the SPFC incident to the SPFC contract with the counterparty, the issuance of preferred securities, or the insurance securitization and other related agreements.
(b) Assets held by an SPFC in trust shall be valued at their fair value.
(c) The proceeds from the sale of SPFC securities pursuant to the insurance securitization shall be deposited with the trustee to the extent required to secure the obligations of the SPFC under the SPFC contract as provided by this chapter and shall be held or invested by the trustee pursuant to section 4727 and an asset management agreement, if any.
(d) Assets of the SPFC, other than those held in trust for the counterparty, and income on trust assets received by the SPFC may be used to pay interest or other consideration on any SPFC securities or other securities or outstanding debt or payments on preferred securities or other obligation of the SPFC. Nothing in this chapter shall be construed or interpreted to prevent an SPFC from entering into a swap agreement or other asset management transaction that has the effect of hedging or guaranteeing the fixed or floating interest rate returns paid on the assets in trust or required for the securities issued by the SPFC generated from or other consideration or payment flows in the transaction.
(e) In the SPFC insurance securitization, the contracts or other relating documentation shall contain provisions identifying the SPFC.
(f) Unless otherwise approved by the commissioner, an SPFC shall not do any of the following:
(i) Issue or otherwise administer primary insurance policies.
(ii) Enter into an SPFC contract with a person that is not licensed or otherwise authorized to transact the business of insurance or reinsurance in at least its state or country of domicile.
(iii) Assume or retain exposure to insurance or reinsurance losses for its own account that is not funded by proceeds from an SPFC insurance securitization that meets the provisions of this chapter. However, the SPFC may wholly or partially reinsure or retrocede the risks assumed to a third party reinsurer.
(g) An SPFC shall not do any of the following:
(i) Have any direct obligation to the policyholders or reinsureds of the counterparty.
(ii) Lend or otherwise invest, or place in custody, trust, or under management any of its assets with, or to borrow money or receive a loan from, other than by issuance of the securities pursuant to an insurance securitization, or advance from, anyone convicted of a felony, anyone who is untrustworthy or of known bad character, or anyone convicted of a criminal offense involving the conversion or misappropriation of fiduciary funds or insurance accounts, theft, deceit, fraud, misrepresentation, or corruption.