Mich. Admin. Code R. 500.1124 - Letters of credit under section 1105 of the code, MCL 500.1105
Rule 4.
(1) A letter
of credit used to reduce any liability for reinsurance ceded to an unauthorized
reinsurer under section 1105 of the code, MCL 500.1105, must be clean,
irrevocable, unconditional, and issued or confirmed by a qualified United
States financial institution. The letter of credit must contain an issue date
and date of expiration and stipulate that the beneficiary need only draw a
sight draft under the letter of credit and present it to obtain funds and that
no other document needs to be presented. The letter of credit must also
indicate that it is not subject to any condition or qualifications outside of
the letter of credit. In addition, the letter of credit itself must not contain
reference to any other agreements, documents, or entities, except as provided
in
R
500.1125(1).
(2) The heading of the letter of credit may
include a boxed section that contains the name of the applicant and other
appropriate notations to provide a reference for the letter of credit. The
boxed section must be clearly marked to indicate that the information is for
internal identification purposes only.
(3) The letter of credit must contain a
statement to the effect that the obligation of the qualified United States
financial institution under the letter of credit is not contingent upon
reimbursement with respect thereto.
(4) The term of the letter of credit must be
for at least 1 year and contain an "evergreen clause" that prevents the
expiration of the letter of credit without due notice from the issuer. The
"evergreen clause" must provide for a period of not less than 30 days' notice
before the expiration date or nonrenewal of the letter of credit.
(5) The letter of credit must state whether
it is subject to and governed by the laws of this state, publication 600 of the
International Chamber of Commerce entitled the Uniform Customs and Practice for
Documentary Credits (UCP 600), or publication 590 of the International Chamber
of Commerce entitled International Standby Practices (ISP 98), or any successor
publication, and all drafts drawn thereunder must be presentable at an office
in the United States of a qualified United States financial
institution.
(6) If the letter of
credit is made subject to publication 600 of the International Chamber of
Commerce entitled the Uniform Customs and Practice for Documentary Credits (UCP
600), or publication 590 of the International Chamber of Commerce entitled
International Standby Practices (ISP 98), or any successor publication, then
the letter of credit must specifically address and make provision for an
extension of time to draw against the letter of credit if 1 or more of the
occurrences specified in article 36 of publication 600, or any successor
publication, occur.
(7) If the
letter of credit is issued by a financial institution authorized to issue
letters of credit, other than a qualified United States financial institution
as described in subrule (1) of this rule, then both of the following additional
requirements must be met:
(a) The issuing
financial institution shall formally designate the confirming qualified United
States financial institution as its agent for the receipt and payment of the
drafts.
(b) The "evergreen clause"
must provide for 30 days' notice before the expiration date or nonrenewal of
the letter of credit.
Notes
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