Section 760 IAC 1-56-11 - Letters of credit qualified under section 9 of this ruleAuthority: IC 27-1-3-7; IC 27-6-10.1-5
Affected: IC 27-6-10.1-4
Sec. 11.
(a) The letter of credit must be clean, irrevocable, and unconditional and issued or confirmed by a qualified United States financial institution as defined in IC 27-6-10.1-4. The letter of credit shall:(1) contain an issue date and date of expiration;(2) 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; and(3) 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, except as provided in subsection (i)(1). As used in this section, "beneficiary" means the domestic insurer 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).
(b) 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 shall be clearly marked to indicate that such information is for internal identification purposes only.(c) 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.(d) The term of the letter of credit shall be for at least one (1) 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 a thirty (30) day notice prior to expiry date or nonrenewal.(e) 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 (UCP 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.(f) If the letter of credit is made subject to the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce (Publication 500), or any successor publication, then the letter of credit shall specifically address and make provisions for an extension of time to draw against the letter of credit in the event that one (1) or more of the occurrences specified in Article 17 of Publication 500, or any successor publication, occur.(g) The letter of credit shall be issued or confirmed by a qualified United States financial institution authorized to issue letters of credit under IC 27-6-10.1-4.(h) If the letter of credit is issued by a qualified United States financial institution authorized to issue letters of credit, other than a qualified United States financial institution as described in subsection (g), then the following additional requirements shall be met: (1) The issuing qualified United States financial institution shall formally designate the confirming qualified United States financial institution as its agent for the receipt and payment of the drafts.(2) The evergreen clause shall provide for a thirty (30) day notice prior to expiration date for nonrenewal.(i) Reinsurance agreement provisions shall be as follows: (1) The reinsurance agreement in conjunction with which the letter of credit is obtained may contain provisions that do the following:(A) Require the assuming insurer to provide letters of credit to the ceding insurer and specify what they are to cover.(B) Stipulate that the assuming insurer and the ceding insurer agree that the letter of credit provided by the assuming insurer pursuant to the provisions of the reinsurance agreement may be drawn upon at any time, notwithstanding any other provision in the agreement, and shall be utilized by the ceding insurer or its successors in interest only for one (1) or more of the following reasons: (i) To reimburse the ceding insurer for the assuming insurer's share of premiums returned to the owners of policies reinsured under the reinsurance agreement on account of cancellations of such policies.(ii) To reimburse the ceding insurer for the assuming insurer's share of surrenders and benefits or losses paid by the ceding insurer under the terms and provisions of the policies reinsured under the reinsurance agreement. (iii) To pay any other amounts necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer.(iv) Where the letter of credit will expire without renewal or be reduced or replaced by a letter of credit for a reduced amount and where the assuming insurer's entire obligations under the reinsurance agreement remain unliquidated and undischarged ten (10) days prior to the termination date, to withdraw amounts equal to the assuming insurer's share of the liabilities, to the extent that the liabilities have not yet been funded by the assuming insurer and exceed the amount of any reduced or replacement letter of credit, and deposit those amounts in a separate account in the name of the ceding insurer in a qualified U.S. financial institution apart from its general assets, in trust for such uses and purposes specified in items (i) through (iii) as may remain after withdrawal and for any period after the termination date.(C) This subdivision shall be applied without diminution because of insolvency on the part of the ceding insurer or assuming insurer.(2) Nothing contained in subdivision (1) shall preclude the ceding insurer and assuming insurer from providing for either or both of the following: (A) An interest payment, at a rate not in excess of the prime rate of interest, on the amounts held under subdivision (1)(B).(B) The return of any amounts drawn down on the letters of credit in excess of the actual amounts required in subdivision (1)(B) or any amounts that are subsequently determined not to be due.Department of Insurance; 760 IAC 1-56-11; filed Nov 14, 1994, 9:50 a.m.: 18 IR 876; errata filed Mar 9, 1995, 3:00 p.m.: 18 IR 1837; readopted filed Sep 14, 2001, 12:22 p.m.: 25 IR 531; readopted filed Nov 27, 2007, 4:01 p.m.: 20071226-IR-760070717RFA; readopted filed Nov 26, 2013, 3:43 p.m.: 20131225-IR-760130479RFA; filed Dec 16, 2013, 9:14 a.m.: 20140115-IR-760130006FRAReadopted filed 11/19/2019, 9:18 a.m.: 20191218-IR-760190497RFAFiled 6/2/2022, 3:33 p.m.: 20220629-IR-760210519FRA