Or. Admin. Code § 410-141-5065 - FINANCIAL SOLVENCY REGULATION: Letters of Credit; Other Security
(1) A letter of
credit for purposes of OAR
410-141-5055 must be clean,
irrevocable, unconditional and issued or confirmed by a Qualified United States
Financial Institution. The letter of credit shall contain an issue date and
date of expiration and shall 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 need be presented.
(2) The letter of credit shall 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 shall not contain reference
to any other agreements, documents or entities.
(3) As used in this section, "beneficiary"
means the CCO for whose benefit the letter of credit has been established and
any successor of the beneficiary by operation of law. If a court of law
appoints a successor in interest to the named beneficiary, then the named
beneficiary includes and is limited to the court-appointed domiciliary receiver
(including conservator, rehabilitator or liquidator).
(4) The heading of the letter of credit may
include a boxed section containing the name of the applicant and other
appropriate notations to provide a reference for the letter of credit. The
boxed section shall be clearly marked to indicate that such information is for
internal identification purposes only.
(5) The letter of credit shall contain a
statement to the effect that the obligation of the Qualified United States
Financial Institution under the letter of credit is in no way contingent upon
reimbursement with respect thereto.
(6) The term of the letter of credit shall be
for at least one year and shall contain an "evergreen clause" that prevents the
expiration of the letter of credit without due notice from the issuer. The
"evergreen clause" shall provide for a period of not less than 30 days' notice
prior to expiration date or nonrenewal.
(7) The letter of credit shall state whether
it is subject to and governed by the laws of this state or the Uniform Customs
and Practice for Documentary Credits of the International Chamber of Commerce
(Publication 600), or International Standby Practices of the International
Chamber of Commerce Publication 590 (ISP98), or any successor publication, and
all drafts drawn thereunder shall be presentable at an office in the United
States of a Qualified United States Financial Institution.
(8) If the letter of credit is made subject
to the Uniform Customs and Practice for Documentary Credits of the
International Chamber of Commerce (Publication 600), or any successor
publication, the letter of credit shall specifically address and provide for an
extension of time to draw against the letter of credit in the event that one or
more of the occurrences specified in Article 17 of Publication 600, or any
successor publication, occur.
(9)
The letter of credit shall be issued or confirmed by a Qualified United States
Financial Institution authorized to issue letters of credit.
(10) The following apply to reinsurance
agreement provisions:
(a) The reinsurance
agreement in conjunction with which the letter of credit is obtained may
contain provisions described in this subsection. All of the provisions of this
subsection must be applied without diminution because of insolvency on the part
of the cedent CCO or reinsurer. The provisions are as follows:
(A) A provision requiring the reinsurer to
provide letters of credit to the cedent CCO and specify what they are to
cover.
(B) A provision stipulating
that the reinsurer and cedent CCO agree that the letter of credit provided by
the reinsurer pursuant to the provisions of the reinsurance agreement may be
drawn upon at any time, notwithstanding any other provisions in the agreement,
and must be used by the cedent CCO or its successors in interest only for one
or more of the following reasons:
(i) To pay
or reimburse the cedent CCO for:
(I) The
reinsurer's share under the specific reinsurance agreement of unearned
capitated revenue returned, but not yet recovered from the
reinsurers;
(II) The reinsurer's
share, under the specific reinsurance agreement, of benefits or losses paid by
the cedent CCO, but not yet recovered from the reinsurers, under the terms and
provisions of the CCO Contracts reinsured under the reinsurance agreement;
and
(III) Any other amounts
necessary to secure the credit or reduction from liability for reinsurance
taken by the cedent CCO.
(ii) When the letter of credit will expire
without renewal or be reduced or replaced by a letter of credit for a reduced
amount and when the reinsurer's entire obligations under the specific
reinsurance remain unliquidated and undischarged ten days prior to the
termination date, to withdraw amounts equal to the reinsurer's share of the
liabilities, to the extent that the liabilities have not yet been funded by the
reinsurer and exceed the amount of any reduced or replacement letter of credit,
and deposit those amount in a separate account in the name of the cedent CCO in
a Qualified United States Financial Institution apart from its general assets,
in trust for such uses and purposes specified in subparagraph (i) of this
paragraph as may remain after withdrawal and for any period after the
termination date.
(b) Nothing contained in subsection (10)(a)
shall preclude the cedent CCO and reinsurer from providing for:
(A) An interest payment, at a rate not in
excess of the prime rate of interest, on the amounts held pursuant to
subsection (10)(a)(B); or
(B) The
return of any amounts drawn down on the letters of credit in excess of the
actual amounts required for the above or any amounts that are subsequently
determined not to be due.
(11) A cedent CCO may take credit for
unencumbered funds withheld by the cedent CCO in the United States subject to
withdrawal solely by the cedent CCO and under its exclusive control.
Notes
Statutory/Other Authority: ORS 413.042, 414.572, 414.591 & 414.605
Statutes/Other Implemented: ORS 414.570-414.686 & 415.001-415.430
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