Section 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  securities  rating  agency  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.