Senate Bill No. 404
               Senate Bill No. 404

               PUBLIC ACT NO. 98-60


AN ACT CONCERNING THE HYPOTHECATION OF ASSETS.


    Be it enacted  by  the  Senate  and  House  of
Representatives in General Assembly convened:
    Section  38a-55 of  the  general  statutes  is
repealed and the  following is substituted in lieu
thereof:
    (a)  No [licensed]  DOMESTIC  insurer,  health
care  center  or  fraternal  benefit  society  may
pledge,  hypothecate  or  otherwise  encumber  its
assets to secure the debt, guaranty or obligations
of any other  person  without  the  prior  written
consent  of  the   Insurance   Commissioner.  This
prohibition [does] SHALL  not apply to obligations
of the insurer  under  surety  bonds  or insurance
contracts  issued  in   the   regular   course  of
business.
    (b)  (1)  NO  DOMESTIC  INSURER,  HEALTH  CARE
CENTER OR FRATERNAL  BENEFIT  SOCIETY MAY, WITHOUT
THE  PRIOR  WRITTEN   CONSENT   OF  THE  INSURANCE
COMMISSIONER,  PLEDGE,  HYPOTHECATE  OR  OTHERWISE
ENCUMBER  ITS  ASSETS  TO  SECURE  ITS  OWN  DEBT,
GUARANTY  OR OBLIGATIONS  IF  THE  AMOUNT  OF  THE
ASSETS   PLEDGED,   HYPOTHECATED    OR   OTHERWISE
ENCUMBERED,  WHEN  THE  PLEDGE,  HYPOTHECATION  OR
ENCUMBRANCE IS MADE,  TOGETHER  WITH THE AGGREGATE
AMOUNT   OF  ASSETS   PLEDGED,   HYPOTHECATED   OR
ENCUMBERED TO SECURE  ALL  SUCH  DEBTS, GUARANTEES
AND OBLIGATIONS, EXCEEDS  THE  LESSER  OF FIVE PER
CENT OF ADMITTED ASSETS OR TWENTY-FIVE PER CENT OF
SURPLUS AS REGARDS  POLICYHOLDERS  AS  REPORTED IN
ITS  LAST  FINANCIAL   STATEMENT  FILED  WITH  THE
COMMISSIONER  PURSUANT  TO   SECTION   38a-53   OR
38a-614.
    (2)  NOTHING  IN   THIS  SUBSECTION  SHALL  BE
CONSTRUED  AS  PROHIBITING   A  DOMESTIC  INSURER,
HEALTH CARE CENTER  OR  FRATERNAL  BENEFIT SOCIETY
FROM PLEDGING, HYPOTHECATING  OR  ENCUMBERING  ANY
ASSETS IN CONNECTION WITH: (A) TRANSACTIONS IN THE
ORDINARY COURSE OF  BUSINESS,  INCLUDING,  BUT NOT
LIMITED  TO:  (i)  COMPLYING  WITH  ANY  STATUTORY
REQUIREMENT,    (ii)   REINSURANCE    TRANSACTIONS
OTHERWISE IN COMPLIANCE  WITH APPLICABLE STATUTORY
REQUIREMENTS, OR (iii)  INVESTMENTS  OR INVESTMENT
PRACTICES OTHERWISE IN  COMPLIANCE WITH APPLICABLE
STATUTORY REQUIREMENTS, INCLUDING, BUT NOT LIMITED
TO, SECURITIES LENDING,  REPURCHASE  TRANSACTIONS,
REVERSE REPURCHASE TRANSACTIONS, SWAP, FUTURES AND
OPTIONS TRANSACTIONS, AND  ANY  OTHER TRANSACTIONS
WHICH ARE NOT PROHIBITED BY THE INVESTMENT LAW AND
REGULATIONS  OF  THIS   STATE;   (B)  TRANSACTIONS
SUBJECT TO THE  PROVISIONS  OF SECTIONS 38a-129 TO
38a-140, INCLUSIVE; OR  (C)  ANY OTHER TRANSACTION
DEEMED  EXCLUDED BY  THE  INSURANCE  COMMISSIONER.
ASSETS   PLEDGED,   HYPOTHECATED   OR   ENCUMBERED
PURSUANT TO SUBPARAGRAPH  (A),  (B) OR (C) OF THIS
SUBSECTION,  SHALL  NOT  BE  CHARGED  AGAINST  THE
LIMITS  SET  FORTH  IN  SUBDIVISION  (1)  OF  THIS
SUBSECTION.
    (3) IN THE  CASE  OF A DOMESTIC LIFE INSURANCE
COMPANY, THE PROVISIONS  OF  THIS SUBSECTION SHALL
APPLY TO A  SEPARATE  ACCOUNT  ONLY  TO THE EXTENT
THAT RESERVES FOR  GUARANTEES  WITH RESPECT TO (A)
BENEFITS  GUARANTEED  AS   TO  DOLLAR  AMOUNT  AND
DURATION OR (B)  FUNDS  GUARANTEED AS TO PRINCIPAL
AMOUNT OR STATED  RATE  OF  INTEREST ARE HELD IN A
SEPARATE ACCOUNT IN  ACCORDANCE  WITH  SUBDIVISION
(iii) OF SUBSECTION (a) OF SECTION 38a-433.

Approved May 19, 1998