§ 6901. Definitions. As used in this article: (a) (1) "Financial
guaranty insurance" means a surety bond, an insurance policy or, when
issued by an insurer or any person doing an insurance business as
defined in paragraph one of subsection (b) of section one thousand one
hundred one of this chapter, 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:

(A) failure of any obligor on or issuer of any debt instrument or
other monetary obligation (including equity securities guarantied under
a surety bond, insurance policy or indemnity contract) to pay when due
to be paid by the obligor or scheduled at the time insured to be
received by the holder of the obligation, principal, interest, premium,
dividend or purchase price of or on, or other amounts due or payable
with respect to, such instrument or obligation, when such failure is the
result of a financial default or insolvency or, provided that such
payment source is investment grade, any other failure to make payment,
regardless of whether such obligation is incurred directly or as
guarantor by or on behalf of another obligor that has also defaulted;

(B) changes in the levels of interest rates, whether short or long
term or the differential in interest rates between various markets or
products;

(C) changes in the rate of exchange of currency;

(D) changes in the value of specific assets or commodities, financial
or commodity indices, or price levels in general; or

(E) other events which the superintendent determines are substantially
similar to any of the foregoing.

(2) Notwithstanding paragraph one of this subsection, "financial
guaranty insurance" shall not include:

(A) insurance of any loss resulting from any event described in
paragraph one of this subsection 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:

(i) a fortuitous physical event;

(ii) failure of or deficiency in the operation of equipment; or

(iii) an inability to extract or recover a natural resource;

(B) fidelity and surety insurance as defined in paragraph sixteen of
subsection (a) of section one thousand one hundred thirteen of this
chapter;

(C) credit insurance as defined in paragraph seventeen of subsection
(a) of section one thousand one hundred thirteen of this chapter;

(D) credit unemployment insurance as defined in paragraph twenty-four
of subsection (a) of section one thousand one hundred thirteen of this
chapter;

(E) residual value insurance as defined in paragraph twenty-two of
subsection (a) of section one thousand one hundred thirteen of this
chapter;

(F) mortgage guaranty insurance as defined in paragraph twenty-three
of subsection (a) of section one thousand one hundred thirteen of this
chapter and as permitted to be written by a mortgage guaranty insurer
under article sixty-five of this chapter;

(G) guaranteed investment contracts issued by life insurance companies
which provide that the life insurer itself will make specified payments
in exchange for specific premiums or contributions;

(H) indemnity contracts or similar guaranties, to the extent that they
are not otherwise limited or proscribed by this chapter:

(i) in which a life insurer or an insurer subject to article
forty-three of this chapter guaranties its obligations or indebtedness
or the obligations or indebtedness of a subsidiary (as defined in
paragraph forty of subsection (a) of section one hundred seven of this
chapter), other than a financial guaranty insurance corporation,
provided that:

(I) to the extent that any such obligations or indebtedness are backed
by specific assets, such assets must at all times be owned by the
insurer or the subsidiary; and

(II) in the case of the guaranty of the obligations or indebtedness of
the subsidiary that are not backed by specific assets of such insurer,
such guaranty terminates once the subsidiary ceases to be a subsidiary;
or

(ii) in which a life insurer guaranties obligations or indebtedness
(including the obligation to substitute assets where appropriate) with
respect to specific assets acquired by such life insurer in the course
of its normal investment activities and not for the purpose of resale
with credit enhancement, or guaranties obligations or indebtedness
acquired by its subsidiary, provided that the assets acquired pursuant
to this item (ii) have been:

(I) acquired by a special purpose entity, whose sole purpose is to
acquire specific assets of such life insurer or its subsidiary and issue
securities or participation certificates backed by such assets; or

(II) sold to an independent third party; or

(iii) in which a life insurer guaranties obligations or indebtedness
of an employee or insurance agent of such life insurer; or

(I) guarantees of higher education loans, unless written by a
financial guaranty insurance corporation;

(J) guarantees of insurance contracts, except for:

(i) guarantees authorized pursuant to section one thousand one hundred
fourteen of this chapter;

(ii) financial guaranty insurance policies insuring guaranteed
investment contracts issued by life insurers, provided that:

(I) the obligations under such contracts are not dependent on the
continuance of human life;

(II) the financial guaranty insurance policies do not guaranty death
benefits provided by such contracts;

(III) the obligations insured by the financial guaranty insurance
policies are investment grade based on the rating of the life insurers
or, in the case of separate account guaranteed investment contracts,
based on the ratings of such separate accounts;

(IV) the financial guaranty insurance policies shall not condition or
delay payment of a claim with respect to such contracts upon the insured
or beneficiary making a claim on the contracts with any insurance
guaranty fund under this chapter or of any other jurisdiction; and

(V) the financial guaranty insurance policies provide that if, prior
to payment by the insurer under the financial guaranty insurance
policies, the guaranty fund has paid a claim under such contracts for an
amount that, when added to the amount payable under the financial
guaranty insurance policies, would exceed the amount owed under such
contracts, then the financial guaranty insurer shall pay the portion of
the amount payable in excess of the contract amounts to the guaranty
fund instead of to the beneficiary under such contracts; or

(K) any other form of insurance covering risks which the
superintendent determines to be substantially similar to any of the
foregoing.

(b) "Financial guaranty insurance corporation" or "corporation" means
an insurer licensed to transact the business of financial guaranty
insurance in this state.

(c) "Affiliate" means a person which, directly or indirectly, owns at
least ten percent but less than fifty percent of the financial guaranty
insurance corporation or which is at least ten percent but less than
fifty percent, directly or indirectly, owned by a financial guaranty
insurance corporation.

(d) "Aggregate net liability" means the aggregate amount of insured
unpaid principal, interest and other monetary payments, if any, of
guarantied obligations insured or assumed, less reinsurance ceded and
less collateral.

(e) "Asset-backed securities" mean:

(1) securities or other financial obligations of an issuer provided
that:

(A) the issuer is a special purpose corporation, trust or other
entity, or (provided that the securities or other financial obligations
constitute an insurable risk) is a bank, trust company or other
financial institution, deposits in which are insured by the Bank
Insurance Fund or the Savings Insurance Fund (or any successor thereto);
and

(B) a pool of assets:

(i) has been conveyed, pledged or otherwise transferred to or is
otherwise owned or acquired by the issuer;

(ii) such pool of assets backs the securities or other financial
obligations issued; and

(iii) no asset in such pool, other than an asset directly payable by,
guaranteed by or backed by the full faith and credit of the United
States government or that otherwise qualifies as collateral under
paragraph one or two of subsection (g) of this section, has a value
exceeding twenty percent of the pool's aggregate value; or

(2) a pool of credit default swaps or credit default swaps referencing
a pool of obligations, provided that:

(A) the swap counterparty whose obligations are insured under the
credit default swap is a special purpose corporation, special purpose
trust or other special purpose legal entity;

(B) no reference obligation in such pool, other than an obligation
directly payable by, guaranteed by or backed by the full faith and
credit of the United States government or that otherwise qualifies as
collateral under paragraph two of subsection (g) of this section, has a
notional amount exceeding ten percent of the pool's aggregate notional
amount; and

(C) the insurer has the benefit of a deductible or other first loss
credit protection against claims under its insurance policy.

(f) "Average annual debt service" means the amount of insured unpaid
principal and interest on an obligation, multiplied by the number of
such insured obligations (assuming each obligation represents one
thousand dollars par value), divided by the amount equal to the
aggregate life of all such obligations (assuming each obligation
represents one thousand dollars par value). This definition, expressed
as a formula in regard to bonds, is as follows:

Average Annual Debt Service = Total Debt Service x No. of Bonds

_________________________________

Bond Years

Total Debt Service = Insured Unpaid Principal + Interest

Number of Bonds = Total Insured Principal

_______________________

$1,000

Bond Years = Number of Bonds x Term in Years
Term in Years = Term to maturity based on scheduled amortization or, in
the absence of a scheduled amortization in the case of asset-backed
securities or other obligations lacking a scheduled amortization,
expected amortization, in each case determined as of the date of
issuance of the insurance policy based upon the amortization assumptions
employed in pricing the insured obligations or otherwise used by the
insurer to determine aggregate net liability.

(g) "Collateral" means:

(1) cash;

(2) the cash flow from specific obligations which are not callable and
scheduled to be received based on expected prepayment speed on or prior
to the date of scheduled debt service (including scheduled redemptions
or prepayments) on the insured obligation provided that (i) such
specific obligations are directly payable by, guaranteed by or backed by
the full faith and credit of the United States government, (ii) in the
case of insured obligations denominated or payable in foreign currency
as permitted under paragraph four of subsection (b) of section six
thousand nine hundred four of this article, such specific obligations
are directly payable by, guaranteed by or backed by the full faith and
credit of such foreign government or the central bank thereof, or (iii)
such specific obligations are insured by the same insurer that insures
the obligations being collateralized, and the cash flows from such
specific obligations are sufficient to cover the insured scheduled
payments on the obligations being collateralized;

(3) the market value of investment grade obligations, other than
obligations evidencing an interest in the project or projects financed
with the proceeds of the insured obligations;

(4) the face amount of each letter of credit that:

(A) is irrevocable;

(B) provides for payment under the letter of credit in lieu of or as
reimbursement to the insurer for payment required under a financial
guaranty insurance policy;

(C) is issued, presentable and payable either:

(i) at an office of the letter of credit issuer in the United States;
or

(ii) at an office of the letter of credit issuer located in the
jurisdiction in which the trustee or paying agent for the insured
obligation is located;

(D) contains a statement that either:

(i) identifies the insurer and any successor by operation of law,
including any liquidator, rehabilitator, receiver or conservator, as the
beneficiary; or

(ii) identifies the trustee or the paying agent for the insured
obligation as the beneficiary;

(E) contains a statement to the effect that the obligation of the
letter of credit issuer under the letter of credit is an individual
obligation of such issuer and is in no way contingent upon reimbursement
with respect thereto;

(F) contains an issue date and a date of expiration;

(G) either:

(i) has a term at least as long as the shorter of the term of the
insured obligation or the term of the financial guaranty policy; or

(ii) provides that the letter of credit shall not expire without
thirty days prior written notice to the beneficiary and allows for
drawing under the letter of credit in the event that, prior to
expiration, the letter of credit is not renewed or extended or a
substitute letter of credit or alternate collateral meeting the
requirements of this subsection is not provided;

(H) states that it is governed by the laws of the state of New York or
by the 1983 or 1993 Revision of the Uniform Customs and Practice for
Documentary Credits of the International Chamber of Commerce
(Publication 400 or 500) or any successor Revision if approved by the
superintendent, and contains a provision for an extension of time, of
not less than thirty days after resumption of business, to draw against
the letter of credit in the event that one or more of the occurrences
described in Article 19 of Publication 400 or 500 occurs; and

(I) is issued by a bank, trust company, or savings and loan
association that:

(i) is organized and existing under the laws of the United States or
any state thereof or, in the case of a non-domestic financial
institution, has a branch or agency office licensed under the laws of
the United States or any state thereof and is domiciled in a member
country of the Organisation for Economic Co-operation and Development
having a sovereign rating in one of the top two generic lettered rating
classifications by a nationally recognized statistical rating
organization acceptable to the superintendent;

(ii) has (or is the principal operating subsidiary of a financial
institution holding company that has) a long-term debt rating of at
least investment grade; and

(iii) is not a parent, subsidiary or affiliate of the trustee or
paying agent, if any, with respect to the insured obligation if such
trustee or paying agent is the named beneficiary of the letter of
credit; or

(5) the amount of credit protection available to the insurer (or its
nominee) under each credit default swap that:

(A) may not be amended without the consent of the insurer and may only
be terminated: (i) at the option of the insurer; (ii) at the option of
the counterparty to the insurer (or its nominee), if the credit default
swap provides for the payment of a termination amount equal to the
replacement cost of the terminated credit default swap determined with
reference to standard documentation of the International Swap and
Derivatives Association, Inc. or otherwise acceptable to the
superintendent; or (iii) at the discretion of the superintendent acting
as a rehabilitator, liquidator or receiver of the insurer upon payment
by or on behalf of the insurer of any termination amount due from the
insurer;

(B) provides for payment under all instances in which payment under a
financial guaranty insurance policy is required, except that payment
under the credit default swap may be on a first loss, excess of loss or
other non-pro-rata basis and may apply on an aggregate basis to more
than one policy;

(C) is provided by:

(i) a counterparty whose obligations under the credit default swap are
insured by a financial guaranty insurance corporation licensed under
this article or guaranteed by a financial institution referred to in
items (ii) and (iii) of this subparagraph;

(ii) a financial institution satisfying the requirements of items (i)
through (iii) of subparagraph (I) of paragraph four of this subsection;
provided that (A) obligations of such financial institution on parity
with its obligations under the credit default swap are investment grade
and (B) if such financial institution is not organized under, or acting
through a branch or agency office licensed under, the laws of the United
States or any state thereof, then such financial institution is required
to collateralize the replacement cost of the credit default swap in the
event that it shall fail to maintain such rating; or

(iii) any other financial institution that the superintendent
determines to be substantially similar to any of the foregoing.

Collateral must be deposited with the insurer; held in trust by a
trustee or custodian acceptable to the superintendent for the benefit of
the insurer; or held in trust pursuant to the bond indenture or other
trust arrangement, for the benefit of security holders in the form of
funds for the payment of insured obligations, sinking funds or other
reserves which may be used for the payment of insured obligations and
trustee and other administrative fees on a first priority basis
established and continually maintained pursuant to the bond indenture or
other trust arrangement by a trustee acceptable to the superintendent.
The superintendent may promulgate regulations to limit the amount of
collateral provided by obligations, letters of credit or credit default
swaps or to limit the amount of collateral provided by any single
issuer, bank or counterparty as provided for in this subsection.

(h) "Commercial real estate" means income producing real property
other than residential property consisting of less than five units.

(i) (1) "Consumer debt obligations" guaranties means financial
guaranty insurance that indemnifies a purchaser or lender against loss
or damage resulting from defaults on a pool of debts owed for extensions
of credit (including in respect of installment purchase agreements and
leases) to individuals, provided in the normal course of the purchaser's
or lender's business, provided that (A) such pool meets the requirements
of paragraph two of subsection (e) of this section and (B) such pool has
been determined to be investment grade.

(2) Consumer debt obligations guaranty policies shall contain a
provision that all coverage under the policies terminates upon sale or
transfer of the underlying consumer debt obligation to any transferee
not insured by the same insurer under a similar policy.

(j) "Contingency reserve" means an additional liability reserve
established to protect policyholders against the effects of adverse
economic developments or cycles or other unforeseen circumstances.

(j-1) "Credit default swap" means an agreement referencing the credit
derivative definitions published from time to time by the International
Swap and Derivatives Association, Inc. or otherwise acceptable to the
superintendent, pursuant to which a party agrees to compensate another
party in the event of a payment default by, insolvency of, or other
adverse credit event in respect of, an issuer of a specified security or
other obligation; provided that such agreement does not constitute an
insurance contract and the making of such credit default swap does not
constitute the doing of an insurance business.

(k) "Governmental unit" means the United States of America, Canada, a
member country of the Organisation for Economic Co-operation and
Development having a sovereign rating in one of the top three generic
lettered rating classifications by a nationally recognized statistical
rating organization acceptable to the superintendent, a state, territory
or possession of the United States of America, the District of Columbia,
a province of Canada, a municipality, or a political subdivision of any
of the foregoing, or any public agency or instrumentality thereof.

(k-1) "Excess spread" means, with respect to any insured issue of
asset-backed securities, the excess of (A) the scheduled cash flow on
the underlying assets that is reasonably projected to be available, over
the term of the insured securities after payment of the expenses
associated with the insured issue, to make debt service payments on the
insured securities over (B) the scheduled debt service requirements on
the insured securities, provided that such excess is held in the same
manner as collateral is required to be held under subsection (g) of this
section.

(l) "Industrial development bond" means any security or other
instrument, other than a utility first mortgage obligation, under which
a payment obligation is created, issued by or on behalf of a
governmental unit, to finance a project serving a private industrial,
commercial or manufacturing purpose, and not payable or guarantied by a
governmental unit.

(m) "Insurable risk" means, with respect to asset-backed securities,
as defined in subsection (e) of this section, that such obligation on an
uninsured basis has been determined to be not less than investment grade
based solely on the pool of assets backing the insured obligation or
securing the insurer, without consideration of the creditworthiness of
the issuer.

(n) "Investment grade" means that:

(1) the obligation or parity obligation of the same issuer has been
determined to be in one of the top four generic lettered rating
classifications by a nationally recognized statistical rating
organization acceptable to the superintendent;

(2) the obligation or parity obligation of the same issuer has been
identified in writing by such nationally recognized statistical rating
organization to be of investment grade quality; or

(3) if the obligation or parity obligation of the same issuer has not
been submitted to any such nationally recognized statistical rating
organization, the obligation is determined to be investment grade (as
indicated by a rating in category 1 or 2) by the Securities Valuation
Office of the National Association of Insurance Commissioners.

(o) "Municipal bonds" means municipal obligation bonds and special
revenue bonds.

(p) "Municipal obligation bond" means any security or other
instrument, including a lease payable or guaranteed by the United States
or another national government that qualifies as a governmental unit or
any agency, department or instrumentality thereof, or by a state or an
equivalent political subdivision of another national government that
qualifies as a governmental unit, but not a lease of any other
governmental unit, under which a payment obligation is created, issued
by or on behalf of or payable or guaranteed by a governmental unit or
issued by a special purpose corporation, special purpose trust or other
special purpose legal entity to finance a project serving a substantial
public purpose, and which is:

(1) (A) payable from tax revenues, but not tax allocations, within the
jurisdiction of such governmental unit;

(B) payable or guaranteed by the United States or another national
government that qualifies as a governmental unit, or any agency,
department or instrumentality thereof, or by a housing agency of a state
or an equivalent subdivision of another national government that
qualifies as a governmental unit;

(C) payable from rates or charges (but not tolls) levied or collected
in respect of a non-nuclear utility project, public transportation
facility (other than an airport), or public higher education facility;
or

(D) with respect to lease obligations, payable from future
appropriations; and

(2) provided that, in the case of obligations of a special purpose
corporation, special purpose trust or other special purpose legal
entity, (A) such obligations are investment grade at the time of
issuance; (B) such obligations are payable from sources enumerated in
subparagraph (A), (B), (C) or (D) of paragraph one of this subsection;
and (C) the project being financed or the tolls, tariffs, usage fees or
other similar rates or charges for its use are subject to regulation or
oversight by a governmental unit.

(q) "Reinsurance" means cessions qualifying for credit under section
six thousand nine hundred six of this article.

(r) "Special revenue bond" means any security or other instrument,
under which a payment obligation is created, issued by or on behalf of
or payable or guaranteed by a governmental unit to finance a project
serving a substantial public purpose, and not payable from any of the
sources enumerated in subsection (p) of this section; or securities
which are the functional equivalent of the foregoing issued by a
not-for-profit corporation or a special purpose corporation, special
purpose trust or other special purpose legal entity; provided that, in
the case of obligations of a special purpose corporation, special
purpose trust or other special purpose legal entity, (1) such
obligations are investment grade at the time of issuance; (2) such
obligations are not payable from the sources enumerated in subparagraph
(A), (B), (C) or (D) of paragraph one of subsection (p) of this section;
and (3) the project being financed or the tolls, tariffs, usage fees or
other similar rates or charges for its use are subject to regulation or
oversight by a governmental unit.

(s) "Utility first mortgage obligation" means any obligation of an
issuer secured by a first priority mortgage on utility property owned by
or leased to an investor-owned or cooperative-owned utility company and
located in the United States, Canada or a member country of the
Organisation for Economic Co-operation and Development having a
sovereign rating in one of the top two generic lettered rating
classifications by a nationally recognized statistical rating
organization acceptable to the superintendent; provided that the utility
or utility property or the usage fees or other similar utility rates or
charges are subject to regulation or oversight by a governmental unit.