General Assembly Raised Bill No. 5232
February Session, 2016 LCO No. 466
*00466_______INS*
Referred to Committee on INSURANCE AND REAL ESTATE
Introduced by:
(INS)
General Assembly
Raised Bill No. 5232
February Session, 2016
LCO No. 466
*00466_______INS*
Referred to Committee on INSURANCE AND REAL ESTATE
Introduced by:
(INS)
AN ACT CONCERNING THE INSURERS REHABILITATION AND LIQUIDATION ACT.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. (NEW) (Effective October 1, 2016) (a) The provisions of this section shall apply in accordance with Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203, as amended from time to time, with respect to an insurer that is a covered financial company, as defined in 12 USC 5381, as amended from time to time.
(b) The Insurance Commissioner may file a petition with the clerk of the superior court for the judicial district of Hartford for an order authorizing the commissioner to rehabilitate or liquidate a domestic insurer on any one or more of the following grounds:
(1) (A) The Secretary of the Treasury of the United States, in consultation with the President of the United States, has determined that the insurer is a financial company that satisfies the requirements of 12 USC 5383(b), as amended from time to time, (B) such insurer has been notified by said Secretary of such determination, and (C) the board of directors or similar governing body of such insurer acquiesces or consents to the appointment of a receiver pursuant to 12 USC 5382(a)(1)(A)(i), as amended from time to time. Such acquiescence or consent shall be deemed to be consent to an order of rehabilitation or liquidation;
(2) The United States District Court for the District of Columbia has issued an order pursuant to 12 USC 5382(a)(1)(A)(iv)(I), as amended from time to time, granting the petition of said Secretary to appoint a receiver of such insurer under 12 USC 5382(a)(1)(A)(i), as amended from time to time; or
(3) A petition by said Secretary concerning such insurer has been granted by operation of law pursuant to 12 USC 5382(a)(1)(A)(v), as amended from time to time.
(c) Notwithstanding any other provision of chapter 704 of the general statutes, the superior court for the judicial district of Hartford may grant an order of rehabilitation or liquidation under subsection (b) of this section, after notifying such insurer, within twenty-four hours after the commissioner has filed the petition for such order. The filing of the petition shall satisfy the notice requirement to the insurer. The administrative judge of said district shall appoint a single judge to handle the petition and order.
(d) (1) If said court does not make a determination on such petition filed by the commissioner within twenty-four hours after such filing, the order of rehabilitation or liquidation shall be deemed granted at the expiration of such twenty-four-hour period. At the time such order is deemed granted under this subdivision, the provisions of chapter 704c of the general statutes shall be deemed to be in effect and the commissioner shall be deemed to be appointed as the receiver and have all applicable powers under chapter 704c of the general statutes, regardless of whether said court has entered an order of rehabilitation or liquidation.
(2) Said court shall expeditiously enter, if an order for rehabilitation or liquidation is deemed granted pursuant to subdivision (1) of this subsection, an order for rehabilitation or liquidation that (A) is effective as of the date such order is deemed granted pursuant to subdivision (1) of this subsection, and (B) conforms to the provisions for rehabilitation or liquidation, as applicable, under chapter 704c of the general statutes.
(e) No order of rehabilitation or liquidation under this section shall be subject to any stay or injunction pending appeal.
(f) Nothing in this section shall be construed to supersede or impair any other power or authority of the commissioner or the Superior Court under sections 38a-903 to 38a-961 inclusive, of the general statutes.
Sec. 2. Subsection (a) of section 38a-930 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):
(a) (1) A preference is a transfer of any of the property of an insurer to or for the benefit of a creditor, for or on account of an antecedent debt, made or suffered by the insurer within one year before the filing of a successful petition for liquidation under sections 38a-903 to 38a-961, inclusive, the effect of which transfer may be to enable the creditor to obtain a greater percentage of this debt than another creditor of the same class would receive. If a liquidation order is entered while the insurer is already subject to a rehabilitation order, then such transfers shall be deemed preferences if made or suffered within one year before the filing of the successful petition for rehabilitation, or within two years before the filing of the successful petition for liquidation, whichever time is shorter.
(2) Any preference may be avoided by the liquidator if: (A) The insurer was insolvent at the time of the transfer; (B) the transfer was made within four months before the filing of the petition; (C) the creditor receiving it or to be benefited thereby or [his] such creditor's agent acting with reference thereto had, at the time when the transfer was made, reasonable cause to believe that the insurer was insolvent or was about to become insolvent; or (D) the creditor receiving it was an officer, or any employee or attorney or other person who was in fact in a position of comparable influence in the insurer to an officer whether or not [he] such employee, attorney or other person held such position, or any shareholder holding directly or indirectly more than five per [centum] cent of any class of any equity security issued by the insurer, or any other person, firm, corporation, association, or aggregation of persons with whom the insurer did not deal at arm's length.
(3) Where the preference is voidable, the liquidator may recover the property, or if it has been converted, its value from any person who has received or converted the property, except where a bona fide purchaser or lienor has given less than fair equivalent value, [he] such purchaser or lienor shall have a lien upon the property to the extent of the consideration actually given by [him] such purchaser or lienor. Where a preference by way of lien or security title is voidable, the court may on due notice order the lien or title to be preserved for the benefit of the estate, in which event the lien or title shall pass to the liquidator.
(4) Notwithstanding subdivisions (1) to (3), inclusive, of this subsection, a transfer pursuant to a commutation of a reinsurance agreement that is approved by the commissioner or the commissioner's designated appointee under section 38a-962d shall not be voidable as a preference. For the purposes of this subdivision, a commutation of a reinsurance agreement is the elimination of all present and future obligations between the parties, arising from the reinsurance agreement, in exchange for a current consideration.
Sec. 3. Subsection (a) of section 38a-944a of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):
(a) (1) Notwithstanding any provision of sections 38a-903 to 38a-961, inclusive, including any provision permitting the modification of contracts, or other law of a state, and subject to the provisions of subdivision (2) of this subsection, no person shall be stayed or prohibited from exercising: [(1)] (i) A contractual right to terminate, liquidate, accelerate or close out any netting agreement or qualified financial contract with an insurer because of: [(A)] (i) The insolvency, financial condition or default of the insurer at any time, provided that the right is enforceable under applicable law other than sections 38a-903 to 38a-961, inclusive, or [(B)] (ii) the commencement of a formal delinquency proceeding under sections 38a-903 to 38a-961, inclusive; [. (2) Any] (B) any right under a 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; [. (3) Subject] (C) subject to any provision of subsection (b) of section 38a-932, any right to set off or net out any termination value, payment amount [,] or other transfer obligation arising under or in connection with a netting agreement or qualified financial contract where the counterparty or its guarantor is organized under the laws of the United States or a state or foreign jurisdiction approved by the Securities Valuation Office of the National Association of Insurance Commissioners as eligible for netting.
(2) No person who is a party to a netting agreement or qualified financial contract with an insurer that is the subject of an insolvency proceeding may exercise any contractual right to terminate, liquidate, accelerate or close out the obligations with respect to such agreement or contract because of the insolvency, financial condition or default of the insurer, or by the commencement of a formal delinquency proceeding under sections 38a-903 to 38a-961, inclusive, (A) until five o'clock p.m., eastern standard time, on the business day following the date of appointment of a receiver, or (B) after such person has received notice that such agreement or contract has been transferred pursuant to the provisions of this section.
Sec. 4. Subsection (b) of section 38a-140 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):
(b) Whenever it appears to the commissioner that any person has committed a violation of sections 38a-129 to 38a-l40, inclusive, that so impairs the financial condition of a domestic insurance company as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, securityholders or the public, the commissioner may proceed as provided in [section 38a-18] chapter 704c to take possession of the property of such domestic insurance company and to conduct the business thereof.
Sec. 5. Section 38a-18 of the general statutes is repealed. (Effective October 1, 2016)
This act shall take effect as follows and shall amend the following sections:
Section 1 October 1, 2016 New section
Sec. 2 October 1, 2016 38a-930(a)
Sec. 3 October 1, 2016 38a-944a(a)
Sec. 4 October 1, 2016 38a-140(b)
Sec. 5 October 1, 2016 Repealer section
This act shall take effect as follows and shall amend the following sections:
Section 1
October 1, 2016
New section
Sec. 2
October 1, 2016
38a-930(a)
Sec. 3
October 1, 2016
38a-944a(a)
Sec. 4
October 1, 2016
38a-140(b)
Sec. 5
October 1, 2016
Repealer section
Statement of Purpose:
To (1) update the Insurers Rehabilitation and Liquidation Act to reflect provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, (2) provide that a transfer pursuant to a commutation of a reinsurance agreement shall not be voidable as a preference, (3) specify limits on when a party to a netting agreement or qualified financial contract with an insolvent insurer may exercise such party's right to terminate, liquidate, accelerate or close out obligations with respect to such agreement or contract, and (4) delete an obsolete provision concerning insurer receivership and make a conforming change.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]