Substitute House Bill No. 5465
Substitute House Bill No. 5465
PUBLIC ACT NO. 98-25
AN ACT CONCERNING SURETY INSURANCE.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Subdivision (1) of section 38a-92a of the
general statutes, as amended by section 3 of
public act 97-108, is repealed and the following
is substituted in lieu thereof:
(1) (A) "Financial guaranty insurance" means
a surety bond, an insurance policy or, when issued
by an insurer, an indemnity contract and any
guaranty similar to the foregoing types, under
which loss is payable upon proof of occurrence of
financial loss to an insured claimant, obligee or
indemnitee as a result of any of the following
events: Failure of any obligor on any debt
instrument or other monetary obligation, including
common or preferred stock guaranteed under a
surety bond, insurance policy or indemnity
contract, to pay when due principal, interest,
premium, dividend, purchase price of or on the
instrument or obligation or other monetary payment
when due when the failure is the result of a
financial default or insolvency, regardless of
whether the obligation is incurred directly or as
guarantor by or on behalf of another obligor that
has also defaulted, or any other failure to make
payment, provided the payment obligation or risk
which is insured is investment grade; changes in
the levels of interest rates, whether short or
long-term or the differential in interest rates
between various markets or products; changes in
the rate of exchange of currency; changes in the
value of financial or commodity indices or price
levels in general; or other events as determined
by the commissioner.
(B) "Financial guaranty insurance" shall not
include:
(i) Insurance of any loss resulting from any
event described in subparagraph (A) of this
subdivision if the loss is payable only upon the
occurrence of any of the following, as specified
in a surety bond, insurance policy or indemnity
contract: A fortuitous physical event; a failure
of or deficiency in the operation of equipment; or
an inability to extract or recover a natural
resource;
(ii) Surety insurance, defined as insurance:
Guaranteeing the fidelity of persons holding
positions of public or private trusts;
indemnifying financial institutions against loss
of moneys, securities, negotiable instruments and
other tangible items of personal property caused
by larceny, misplacement, destruction or other
stated perils; insuring against loss caused by
forgery of signatures on, or alterations of
specified documents, instruments and papers;
BECOMING SURETY ON OR GUARANTEEING THE PERFORMANCE
OF A BOND WHICH SHALL NOT EXCEED A PERIOD GREATER
THAN FIVE YEARS, THAT GUARANTEES THE PAYMENT OF A
PREMIUM, DEDUCTIBLE, OR SELF-INSURED RETENTION TO
AN INSURER ISSUING A WORKERS' COMPENSATION OR
LIABILITY POLICY; guaranteeing the performance of
contracts for services, including a bid, payment
or performance bond where the bond is guaranteeing
the execution of any contract other than a
contract of indebtedness or other monetary
obligation; and guaranteeing or otherwise becoming
surety for the performance of any lawful contract,
not specifically provided for in this subdivision,
except any insurance contract which constitutes
either mortgage guaranty insurance or financial
guaranty insurance, as defined in subparagraph (A)
of this [subsection] SUBDIVISION.
(iii) Credit unemployment insurance, defined
as insurance on a debtor in connection with a
specific loan or other credit transaction, to
provide payments to a creditor in the event of
unemployment of the debtor for the instalments or
other periodic payments becoming due while a
debtor is unemployed;
(iv) Credit insurance indemnifying a
manufacturer, merchant or educational institution
which extends credit against loss or damage
resulting from nonpayment of debts owed to such
entity for goods or services provided in the
normal course of business;
(v) Guaranteed investment contracts issued by
a life insurance company which provides that the
life insurer will make specified payments in
exchange for specific premiums or contributions;
(vi) Mortgage guaranty insurance, defined as
insurance against financial loss by reason of the
nonpayment of principal, interest and other sums
agreed to be paid under the terms of any note or
bond or other evidence of indebtedness secured by
a mortgage, deed of trust or other instrument
constituting a first lien or charge on residential
real estate consisting of less than five units;
(vii) Indemnity contracts or similar
guaranties, to the extent that they are not
otherwise limited or proscribed by sections 38a-92
to 38a-92n, inclusive, in which a life insurer
does any of the following: Guarantees its
obligations or indebtedness or the obligations or
indebtedness of a subsidiary, as defined in
section 38a-1, other than a financial guaranty
insurance corporation, provided: To the extent
that any such obligations or indebtedness are
backed by specific assets, those assets shall be
at all times owned by the life insurer or the
subsidiary, and in the case of the guaranty of the
obligations or indebtedness of the subsidiary that
are not backed by specific assets of the life
insurer, the guaranty terminates once the
subsidiary ceases to be a subsidiary; guarantees
obligations or indebtedness, including the
obligation to substitute assets where appropriate,
with respect to specific assets acquired by a life
insurer in the course of normal investment
activities and not for the purpose of resale with
credit enhancement or guarantees obligations or
indebtedness acquired by a subsidiary, provided
the assets acquired pursuant to this subparagraph
have been either acquired by a special purpose
entity, whose sole purpose is to acquire specific
assets of the life insurer or the subsidiary and
issue securities or participation certificates
backed by the assets, or sold to an independent
third party, or guarantees obligations or
indebtedness of an employee or agent of the life
insurer;
(viii) Any cramdown bond or mortgage
repurchase bond, as those phrases are used by
nationally recognized rating agencies in respect
to mortgage-backed securities;
(ix) Residual value insurance, defined as
insurance issued in connection with a lease or
contract which sets forth a specific termination
value at the end of the term of the lease or
contract for the property covered by the lease or
contract and which insures against loss of
economic value, other than loss due to physical
damage, of tangible personal property, real
property and improvements thereto;
(x) Any letter of credit or similar
transaction effected by a bank, trust company or
savings association;
(xi) Accumulation fund arrangements of any
life insurance contract or annuity contract made
pursuant to section 1 of [this act] PUBLIC ACT
97-108, or any funding agreements made pursuant to
section 38a-459, AS AMENDED; or
(xii) Any other form of insurance covering
risks that the commissioner determines to be
substantially similar to any of the foregoing.
Approved April 29, 1998