(1) Notwithstanding any other provision of this section, including any other provision of this section permitting the modification of contracts, or other law of a state, a person shall not be stayed or prohibited from exercising: (a) A contractual right to cause the termination, liquidation, acceleration, or close-out of obligations under or in connection with any netting agreement or qualified financial contract with an insurer because of: (I) The insolvency, financial condition, or default of the insurer at any time, if the right is enforceable under applicable law other than this part 5; or (II) The commencement of a formal delinquency proceeding under this part 5; (b) Any right under a pledge, security, collateral, reimbursement, or guarantee agreement or arrangement or any other similar security agreement or arrangement or other credit enhancement relating to one or more netting agreements or qualified financial contracts; (c) (I) Subject to subparagraph (II) of this paragraph (c), any right to set off or net out any termination value, payment amount, or other transfer obligation arising under or in connection with one or more qualified financial contracts where the counterparty or its guarantor is organized under the laws of the United States or a state or a foreign jurisdiction approved by the securities valuation office of the national association of insurance commissioners as eligible for netting. (II) No setoff shall be allowed after the commencement of a delinquency proceeding under part 4 of this article in favor of any person if: (A) The claim against the insurer is disallowed; (B) The claim against the insurer was purchased by or transferred to the person on or after the filing of the receivership petition or within one hundred twenty days preceding the filing of the receivership petition; (C) The obligation of the insurer is owed to an affiliate of the person or an entity other than the person, absent written assignment of the obligation made more than one hundred twenty days before the filing of the petition for receivership; (D) The obligation of the person is owed to an affiliate of the insurer or an entity other than the insurer, absent written assignment of the obligation made more than one hundred twenty days before the filing of the petition for receivership; (E) The obligation of the person is to pay an assessment levied against the members or subscribers of the insurer, is to pay a balance upon a subscription to the capital stock of the insurer, or is in any other way in the nature of a capital contribution; (F) The obligations between the person and the insurer arise out of transactions by which either the person or the insurer has assumed risks and obligations from the other party and then has ceded back to that party substantially the same risks and obligations. Notwithstanding this sub-subparagraph (F), the receiver may permit setoffs if, in the receiver's discretion, a setoff is appropriate because of specific circumstances relating to a transaction. (G) The obligation of the person arises out of any avoidance action taken by the receiver; or (H) The obligation of the insured is for the payment of earned premiums or retrospectively rated earned premiums. (2) (a) If a counterparty to a master netting agreement or a qualified financial contract with an insurer subject to a proceeding under this section terminates, liquidates, closes out, or accelerates the agreement or contract, damages shall be measured as of the date or dates of termination, liquidation, close-out, or acceleration. The amount of a claim for damages must be actual direct compensatory damages calculated in accordance with subsection (6) of this section. (b) Upon termination of a netting agreement or qualified financial contract, the net or settlement amount, if any, owed by a nondefaulting party to an insurer against which an application or petition has been filed under this section shall be transferred to or on the order of the receiver for the insurer, even if the insurer is the defaulting party, notwithstanding any provision in the netting agreement or qualified financial contract that provides that the nondefaulting party is not required to pay any net or settlement amount due to the defaulting party upon termination. Any limited two-way payment or first method provision in a netting agreement or qualified financial contract with an insurer that has defaulted shall be deemed to be a full two-way payment or second method provision as against the defaulting insurer. Any such property or amount is, except to the extent it is subject to one or more secondary liens or encumbrances or rights of netting or setoff, a general asset of the insurer. (3) In making any transfer of a netting agreement or qualified financial contract of an insurer subject to a proceeding under this part 5, the receiver shall either: (a) Transfer to one party, other than an insurer subject to a proceeding under this part 5, all netting agreements and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer that is the subject of the proceeding, including: (I) All rights and obligations of each party under each netting agreement and qualified financial contract; and (II) All property, including any guarantees or other credit enhancement, securing any claims of each party under each netting agreement and qualified financial contract; or (b) Transfer none of the netting agreements, qualified financial contracts, rights, obligations, or property referred to in paragraph (a) of this subsection (3) with respect to the counterparty and any affiliate of the counterparty. (4) If a receiver for an insurer makes a transfer of one or more netting agreements or qualified financial contracts, the receiver shall use its best efforts to notify any person who is party to the netting agreements or qualified financial contracts of the transfer by 12 noon of the receiver's local time on the business day following the transfer. For purposes of this subsection (4), "business day" means a day other than a Saturday, Sunday, or any day on which either the New York stock exchange or the federal reserve bank of New York is closed. (5) Notwithstanding any other provision of this part 5, a receiver shall not avoid a transfer of money or other property arising under or in connection with a netting agreement or qualified financial contract or any 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, that is made before the commencement of a formal delinquency proceeding under this part 5. However, a transfer may be avoided under section 10-3-525 (1) if the transfer was made with actual intent to hinder, delay, or defraud the insurer, a receiver appointed for the insurer, or existing or future creditors. (6) (a) In exercising the rights of disaffirmance or repudiation of a receiver with respect to any netting agreement or qualified financial contract to which an insurer is a party, the receiver for the insurer shall either: (I) Disaffirm or repudiate all netting agreements and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer that is the subject of the proceeding; or (II) Disaffirm or repudiate none of the netting agreements and qualified financial contracts referred to in subparagraph (I) of this paragraph (a) with respect to the person or any affiliate of the person. (b) Notwithstanding any other provision of this part 5, any claim of a counterparty against the estate arising from the receiver's disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the liquidation or immediately preceding conservation or rehabilitation case shall be determined and shall be allowed or disallowed as if the claim had arisen before the date of the filing of the petition for liquidation or, if a conservation or rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date of the filing of the petition for conservation or rehabilitation. The amount of the claim is the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract. The term "actual direct compensatory damages" does not include punitive or exemplary damages, damages for lost profit or lost opportunity, or damages for pain and suffering, but does include normal and reasonable costs of cover or other reasonable measures of damages utilized in the derivatives, securities, or other market for the contract and agreement claims. (7) As used in this section: (a) "Contractual right" includes any right set forth in a rule or bylaw of a derivatives clearing organization, as defined in the federal "Commodity Exchange Act", 7 U.S.C. sec. 1 et seq., a multilateral clearing organization, as defined in the "Federal Deposit Insurance Corporation Improvement Act of 1991", Pub.L. 102-242, a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the federal "Commodity Exchange Act", a derivatives transaction execution facility registered under the federal "Commodity Exchange Act", or a board of trade as defined in the federal "Commodity Exchange Act", or in a resolution of the governing board of any of these entities and any right, whether or not evidenced in writing, arising under statutory or common law, under law merchant, or by reason of normal business practice. (b) (I) "Qualified financial contract" means any commodity contract, forward contract, repurchase agreement, securities contract, swap agreement, and any similar agreement that the commissioner determines by rule or order to be a qualified financial contract for the purposes of this section. (II) "Commodity contract" means: (A) A contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a board of trade or contract market under the federal "Commodity Exchange Act", 7 U.S.C. sec. 1 et seq., or a board of trade outside the United States; (B) An agreement that is subject to regulation under section 19 of the federal "Commodity Exchange Act", 7 U.S.C. sec. 1 et seq., and that is commonly known to the commodities trade as a margin account, margin contract, leverage account, or leverage contract; (C) An agreement or transaction that is subject to regulation under section 4c (b) of the federal "Commodity Exchange Act", 7 U.S.C. sec. 1 et seq., and that is commonly known to the commodities trade as a commodity option; (D) Any combination of the agreements or transactions referred to in this subparagraph (II); or (E) Any option to enter into an agreement or transaction referred to in this subparagraph (II). (III) "Forward contract", "repurchase agreement", "securities contract", and "swap agreement" have the meanings set forth in the "Federal Deposit Insurance Act", 12 U.S.C. sec. 1821 (e)(8)(D), as amended from time to time. (8) This section does not apply to persons who are affiliates of the insurer that is the subject of the proceeding. (9) All rights of counterparties under this part 5 apply to netting agreements and qualified financial contracts entered into on behalf of the general account or separate accounts if the assets of each separate account are available only to counterparties to netting agreements and qualified financial contracts entered into on behalf of that separate account.
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