§ 6902. Organization; financial requirements. (a) A financial guaranty
insurance corporation may be organized and licensed in the manner
prescribed in section one thousand two hundred one of this chapter and a
foreign insurer may be licensed in the manner prescribed in section one
thousand one hundred six of this chapter, except as modified by the
following provisions:

(1) a corporation organized for the purpose of transacting financial
guaranty insurance may, subject to all the applicable provisions of this
chapter, be licensed to transact only the following additional kinds of
insurance:

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

(B) surety insurance, as defined in subparagraphs (C), (D), (E), (F),
(G), (H) and (I) of paragraph sixteen of subsection (a) of section one
thousand one hundred thirteen of this chapter; and

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

(2) a financial guaranty insurance corporation may only assume those
kinds of insurance for which it is licensed to write direct business;

(3) prior to the issuance of a license, unless a plan of operation has
been previously approved by the superintendent, a corporation shall
submit for the approval of the superintendent a plan of operation,
detailing the types and projected diversification of guaranties that
will be issued, the underwriting procedures that will be followed,
managerial oversight methods, investment policies, and such other
matters as may be prescribed by the superintendent; and

(4) a financial guaranty insurance corporation's investments in any
one entity insured by that corporation shall not exceed four percent of
its admitted assets at last year-end, except that this limit shall not
apply to investments payable or guaranteed by a United States
governmental unit or New York state if such investments payable or
guaranteed by the United States governmental unit or New York state
shall be rated in one of the top two generic lettered rating
classifications by a nationally recognized statistical rating
organization acceptable to the superintendent.

(5) in addition to any transaction that an insurer meeting the
requirements of subsection (c) of section one thousand four hundred
three of this chapter may effect and maintain under any other provision
of this chapter, a financial guaranty insurance corporation may effect
and maintain transactions in (A) contracts for the future delivery or
receipt of the currency of a foreign country, (B) interest rate options,
(C) credit default swaps under which the insurer is acquiring credit
protection and (D) other products included in the plan referred to in
clause (vii) of this subparagraph, in each case meeting the following
requirements:

(i) the transaction is used for the purpose of limiting risk of loss
under financial guaranty insurance policies or reinsurance contracts
covering such policies due to fluctuations in interest rates or currency
exchange rates or, in the case of credit default swaps, financial
default, insolvency or other credit events;

(ii) the transaction shall not exceed a duration of twelve months
beyond the term of such policies or reinsurance contracts;

(iii) the amount of foreign currencies to be purchased under the
transaction shall not exceed the amount guaranteed under such policies
or reinsurance contracts that is denominated in foreign currency;

(iv) the amount that is subject to interest rate hedging transactions
does not exceed the amount guaranteed under such policies or reinsurance
contracts that is subject to the risk of interest rate fluctuations;

(v) the counterparty to such transaction has (or is the principal
operating subsidiary of a holding company that has) a long term
unsecured debt rating or claims-paying ability rating that is at least
investment grade;

(vi) the transaction is not conducted for arbitrage purposes; and

(vii) the transaction is entered into pursuant to a plan that has been
approved by the board of directors of the financial guaranty insurance
corporation and filed with and approved by the superintendent.

(b) (1) A financial guaranty insurance corporation shall not transact
business unless it has paid-in capital of at least two million five
hundred thousand dollars and paid-in surplus of at least seventy-two
million five hundred thousand dollars, and shall at all times thereafter
maintain a minimum surplus to policyholders of at least sixty-five
million dollars.

(2) An insurer transacting only financial guaranty insurance prior to
the effective date of this article which has a paid-in capital of at
least two million five hundred thousand dollars and maintains surplus to
policyholders of at least forty-five million dollars shall have
thirty-six months from the effective date of this article to fully
comply with the surplus requirements set forth in paragraph one of this
subsection.

(3) A financial guaranty insurance company shall be deemed to be in
compliance with paragraphs one and two of subsection (b) of section one
thousand four hundred two of this chapter if not less than sixty percent
of the amount of the required minimum capital or minimum surplus to
policyholder investments shall consist of the types specified in
paragraphs one and two of subsection (b) of section one thousand four
hundred two of this chapter and direct government obligations of any
state of the United States or of any county, district or municipality
thereof, provided such government obligations have been given the
highest quality designation of the Securities Valuation Office of the
National Association of Insurance Commissioners. Before investing any
part of the required minimum capital or surplus in direct government
obligations of any other state of the United States or of any county,
district or municipality thereof, such financial guaranty insurance
company shall have invested at least ten percent of such required
minimum in government obligations of New York state or of any county,
district or municipality thereof. Only for purposes of meeting the
required investment in government obligations of New York state, the
insurer may count investments in any government obligation of New York
state, whether direct or otherwise.