02-031 C.M.R. ch. 570, § 5 - Satisfactory terms and standards

No Line of Credit may take effect until a copy of the contract between the issuer(s) and the Association has been filed with and approved by the Superintendent of Insurance. The contract must contain, at a minimum, the following provisions:

A. A provision that the Line of Credit is irrevocable until it expires or is terminated in a manner consistent with this Rule and 24-A M.R.S.A. §4440(3)(B) or 4609(2)(D), as amended, and that no discretionary termination or nonrenewal may take effect without 30 days' advance notice to the Association and the Superintendent of Insurance.

B. Specific language clearly setting forth all requirements for the Association or its authorized representatives to access a Line of Credit, including, but not limited to, votes of directors to levy an assessment, the time frame within which demand for funds must be honored by an issuer of a Credit, terms of debt service and retirement undertaken by the Association, and conditions pursuant to which a Line of Credit may be withdrawn;

C. Any limitations that will be prospectively imposed regarding value and access conditions of the Line of Credit;

D. Any restrictions upon use of assets, pledge of assets, or assignments of recovery to be imposed respecting the Association's future revenues or other rights;

E. A provision that prohibits the diversion of funds for any purpose other than administration of the Association's obligation to claimants. The agreement shall identify those persons who shall have authority to negotiate or draw on the Credit;

F. Any requirement regarding financial condition to be maintained by the Association when the Line of Credit is to be drawn upon, including repayment terms and schedule(s) to service the debt;

G. If the Line of Credit is convertible or any other instrument may be substituted as an alternate form of debt obligation, the terms of any applicable side agreements;

H. A provision allowing the Association to access funds under the credit within one business day after receipt by the issuer of satisfactory written evidence of a vote of the Association's director authorizing a draw on the Credit upon notice of an insolvent insurer by the Superintendent of Insurance, without further documentary evidence;

I. Conditions and limitations, respecting suspension of the Issuer's obligation to make funds available under the Line of Credit, due to noncompliance by the Association with its obligations or other good and sufficient cause, which are satisfactory to the Superintendent of Insurance;

J. Procedures, if any, for a resolution of disputes between the issuer(s) and the Association.

Notes

02-031 C.M.R. ch. 570, § 5