§ 7437. Qualified financial contracts. (a) As used in this section:

(1) "Actual direct compensatory damages" means and includes normal and
reasonable costs of cover or other reasonable measures of damages
utilized in the derivatives, securities or other market for the contract
and agreement claims but does not include punitive or exemplary damages,
damages for lost profit or lost opportunity or damages for pain and
suffering.

(2) "Business day" means a day other than a Saturday, a Sunday or any
day on which either the New York stock exchange or the Federal Reserve
Bank of New York is closed.

(3) "Commodity contract" means: (A) a contract for the purchase or
sale of a commodity for future delivery on, or subject to the rules of,
a board of trade or contract market under the Commodity Exchange Act (7
U.S.C. § 1, et seq.) or a board of trade outside the United States; (B)
an agreement that is subject to regulation under section 19 of the
Commodity Exchange Act (7 U.S.C. § 1, et seq.) and that is commonly
known to the commodities trade as a margin account, margin contract,
leverage account or leverage contract; (C) an agreement or transaction
that is subject to regulation under section 4c(b) of the Commodity
Exchange Act (7 U.S.C. § 1, et seq.) and that is commonly known to the
commodities trade as a commodity option; (D) any combination of the
agreements or transactions referred to in this paragraph; (E) any option
to enter into an agreement or transaction referred to in this paragraph;
or (F) any other contract that is included from time to time as a
commodity contract as defined in the Federal Deposit Insurance Act, 12
U.S.C. § 1821(e)(8)(D).

(4) "Contractual right" means and includes any right set forth in a
rule or bylaw of a derivatives clearing organization (as defined in the
Commodity Exchange Act), a multilateral clearing organization (as
defined in the Federal Deposit Insurance Corporation Improvement Act of
1991), a national securities exchange, a national securities
association, a securities clearing agency, a contract market designated
under the Commodity Exchange Act, a derivatives transaction execution
facility registered under the Commodity Exchange Act, or a board of
trade (as defined in the Commodity Exchange Act) or in a resolution of
the governing board thereof and any right, whether or not evidenced in
writing, arising under statutory or common law, or under law merchant,
or by reason of normal business practice.

(5) "Forward contract" shall have the meaning set forth in the Federal
Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).

(6) "Netting agreement" means: (A) a contract or agreement (including
the terms and conditions incorporated by reference in such agreement),
including a master agreement (which master agreement, together with all
schedules, confirmations, definitions and addenda thereto and
transactions under any thereof, shall be treated as one netting
agreement), that documents one or more transactions between the parties
to the agreement for or involving one or more qualified financial
contracts and that provides for the netting, offset, liquidation,
termination, acceleration or close out, under or in connection with one
or more qualified financial contracts or present or future payment or
delivery obligations or payment or delivery entitlements thereunder
(including liquidation or close-out values relating to such obligations
or entitlements) among the parties to the netting agreement; (B) any
master agreement or bridge agreement for one or more master agreements
described in subparagraph (A) of this paragraph; or (C) any security
arrangement related to one or more contracts or agreements described in
subparagraph (A) or (B) of this paragraph; provided that any contract or
agreement described in subparagraph (A) or (B) of this paragraph
relating to agreements or transactions that are not qualified financial
contracts shall be deemed to be a netting agreement only with respect to
those agreements or transactions that are qualified financial contracts.

(7) "Qualified financial contract" means any commodity contract,
forward contract, repurchase agreement, securities contract, swap
agreement and any similar agreement that the superintendent determines
by regulation to be a qualified financial contract for the purposes of
this article.

(8) "Repurchase agreement" shall have the meaning set forth in the
Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).

(9) "Securities contract" shall have the meaning set forth in the
Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).

(10) "Security arrangement" means any security agreement or
arrangement or other credit enhancement or guarantee or reimbursement
obligation, including a pledge, security, collateral or guarantee
agreement or credit support document.

(11) "Separate account" means an account established pursuant to
section four thousand two hundred forty of this chapter.

(12) "Swap agreement" shall have the meaning set forth in the Federal
Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D).

(13) "Walkaway clause" means a provision in a netting agreement or a
qualified financial contract that, after calculation of a value of a
party's position or an amount due to or from one of the parties in
accordance with its terms upon termination, liquidation or acceleration
of the netting agreement or qualified financial contract, either does
not create a payment obligation of a party or extinguishes a payment
obligation of a party in whole or in part solely because of the party's
status as a non-defaulting party.

(b) (1) Notwithstanding any other provision of this article, including
any other provision of this article permitting the modification of
contracts, or other law of this state, no person shall be stayed or
prohibited from exercising: (A) a contractual right to cause the
termination, liquidation, acceleration or close out of any obligation
under or in connection with a netting agreement or qualified financial
contract with an insurer, other than an insurer licensed to write
financial guaranty insurance, because of: (i) the insolvency, financial
condition or default of the insurer at any time, provided that the right
is enforceable under applicable law other than this article; or (ii) the
commencement of any proceeding under this article; (B) any right under a
security arrangement relating to one or more netting agreements or
qualified financial contracts, other than a right against an insurer
licensed to write financial guaranty insurance; or (C) subject to any
provision of subsection (b) of section seven thousand four hundred
twenty-seven of this article, any right to offset or net out any
termination value, payment amount, or other transfer obligation arising
under or in connection with one or more qualified financial contracts,
other than a right against an insurer licensed to write financial
guaranty insurance, where the counterparty or its guarantor is organized
under the laws of the United States, a state, or a foreign jurisdiction
approved by the Securities Valuation Office of the National Association
of Insurance Commissioners as eligible for netting.

(2) If a counterparty to a master netting agreement or a qualified
financial contract with an insurer, other than an insurer licensed to
write financial guaranty insurance, subject to a proceeding under this
article terminates, liquidates, closes out or accelerates the agreement
or contract, damages shall be measured as of the date or dates of
termination, liquidation, close out or acceleration. The amount of a
claim for damages shall be actual direct compensatory damages.

(c) Upon termination of a netting agreement or qualified financial
contract, the net or settlement amount, if any, owed by a nondefaulting
party to an insurer against which an application has been filed under
this article, other than an insurer licensed to write financial guaranty
insurance, shall be transferred to or on the order of the
superintendent, as liquidator, rehabilitator or conservator for the
insurer, even if the insurer is the defaulting party, notwithstanding
any walkaway clause in the netting agreement or qualified financial
contract. Any limited two-way payment or first method provision in a
netting agreement or qualified financial contract with an insurer that
has defaulted shall be deemed to be a full two-way payment or second
method provision as against the defaulting insurer. Any such property or
amount shall, except to the extent it is subject to one or more
secondary liens or encumbrances or rights of netting or setoff, be an
asset of the insurer.

(d) In making any transfer of a netting agreement or qualified
financial contract of an insurer subject to a proceeding under this
article, other than an insurer licensed to write financial guaranty
insurance, the superintendent, as liquidator, rehabilitator or
conservator for the insurer, shall either:

(1) transfer to one party (other than an insurer subject to a
proceeding under this article) all netting agreements and qualified
financial contracts between a counterparty or any affiliate of such
counterparty and the insurer that is the subject of the proceeding,
including: (A) all rights and obligations of each party under each such
netting agreement and qualified financial contract; and (B) all
property, including any guarantees or other credit enhancement, securing
any claims of each party under each such netting agreement and qualified
financial contract; or

(2) transfer none of the netting agreements, qualified financial
contracts, rights, obligations or property referred to in paragraph one
of this subsection (with respect to such counterparty and any affiliate
of such counterparty).

(e) If the superintendent, as liquidator, rehabilitator or conservator
for an insurer, other than an insurer licensed to write financial
guaranty insurance, makes a transfer of one or more netting agreements
or qualified financial contracts, then the superintendent shall use his
or her best efforts to notify any person who is party to the netting
agreements or qualified financial contracts of the transfer by 12:00
noon, New York time, on the business day following the transfer.

(f) Notwithstanding any other provision of this article, the
superintendent, as liquidator, rehabilitator or conservator for an
insurer, other than an insurer licensed to write financial guaranty
insurance, may not avoid a transfer of money or other property arising
under or in connection with a netting agreement or qualified financial
contract, or any security arrangement relating to a netting agreement or
qualified financial contract, that is made before the commencement of a
liquidation, rehabilitation or conservation proceeding under this
article, except that a transfer may be avoided under section seven
thousand four hundred twenty-five of this article if the transfer was
made with actual intent to hinder, delay or defraud the insurer, the
superintendent, as liquidator, rehabilitator or conservator of the
insurer, any other receiver appointed for the insurer, or existing or
future creditors.

(g)(1) In exercising any rights of disaffirmance or repudiation of a
liquidator, rehabilitator or conservator with respect to any netting
agreement or qualified financial contract to which an insurer is a
party, other than an insurer licensed to write financial guaranty
insurance, the superintendent, as liquidator, rehabilitator or
conservator for the insurer shall either: (A) disaffirm or repudiate all
netting agreements and qualified financial contracts between a
counterparty or any affiliate of such counterparty and the insurer that
is the subject of the proceeding; or (B) disaffirm or repudiate none of
the netting agreements and qualified financial contracts referred to in
subparagraph (A) of this paragraph (with respect to such person or any
affiliate of such person).

(2) Notwithstanding any other provision of this article, any claim of
a counterparty against the estate, other than the estate of an insurer
licensed to write financial guaranty insurance, arising from the
superintendent's disaffirmance or repudiation of a netting agreement or
qualified financial contract that has not been previously affirmed in
the liquidation proceeding or in the immediately preceding
rehabilitation proceeding shall be determined and shall be allowed or
disallowed: (A) as if the claim had arisen before the date of the filing
of the application for liquidation; or (B) if a rehabilitation
proceeding is converted to a liquidation proceeding, as if the claim had
arisen before the date of the filing of the application for
rehabilitation.

(3) The amount of the claim identified in paragraph two of this
subsection shall be the actual direct compensatory damages determined as
of the date of the disaffirmance or repudiation of the netting agreement
or qualified financial contract.

(h) All rights of a counterparty under this article shall apply to a
netting agreement and a qualified financial contract entered into on
behalf of or allocated to: (1) the general account of the insurer; or
(2) a separate account of the insurer, other than an insurer licensed to
write financial guaranty insurance, if the assets of the separate
account are available only to a counterparty to a netting agreement and
a qualified financial contract entered into on behalf of, or allocated
to, that separate account.