Section 6907. Transition provisions

A licensed insurer writing financial
  guaranty insurance prior to the effective  date  of  this  article,  but
  which  is  not  authorized to write financial guaranty insurance in this
  state, shall be subject to all the provisions of  this  article,  except
  section six thousand nine hundred two of this article, and:
    (a)  may,  unless  the  superintendent  determines after notice and an
  opportunity to be heard  that  such  activity  poses  a  hazard  to  the
  insurer, its policyholders or to the public, continue to write financial
  guaranties   (except   guaranties  of  municipal  bonds)  of  the  types
  authorized by subsection (b) of section six thousand nine  hundred  four
  of this article applicable to financial guaranty insurance corporations,
  subject to the following conditions:
    (1)  For  a  transition  period  not  to  exceed sixty months from the
  effective date of this article, if the insurer has and maintains surplus
  to policyholders of at  least  seventy-five  million  dollars  (for  the
  purpose  of  this  paragraph,  if  the insurer is a foreign insurer, its
  surplus to policyholders shall be computed as  if  it  were  a  domestic
  insurer); provided that:
    (A) during the sixty month transition period, the amount of surplus to
  policyholders  needed  to meet the single and aggregate risk limitations
  imposed by this article must be less than four percent of the  insurer's
  surplus to policyholders;
    (B)  within  nine  months  of  the effective date of this article, the
  insurer shall file a reasonable plan of  operation,  acceptable  to  the
  superintendent, which shall contain:
    (i)  a  reasonable  timetable  and appropriate procedures to implement
  that timetable to make a determination as to whether or not the  insurer
  will  make  application  to  organize  a  financial  guaranty  insurance
  corporation during the aforesaid sixty month period;
    (ii) the types and projected diversification of guaranties  that  will
  be issued during the transition period;
    (iii) the underwriting procedures that will be followed;
    (iv) oversight methods;
    (v) investment policies; and
    (vi)  such  other  matters as may be prescribed by the superintendent.
  The plan of operation shall be deemed acceptable  unless,  within  sixty
  days  of  its  filing,  the  superintendent  notifies the insurer of any
  specific objections to such plan. The plan shall be updated in the event
  of a material  change  with  respect  to  the  foregoing  and  at  least
  annually;
    (C)  if  the  insurer  has  determined  that  it  will  not organize a
  financial guaranty insurance corporation, within thirty days after  that
  determination it shall notify the superintendent, cease writing policies
  of  financial  guaranty  insurance  and  comply  with  the provisions of
  paragraph four of this subsection; and
    (D) the insurer shall file such additional statements  or  reports  as
  may be required by the superintendent.
    (2)  For  a transition period not to exceed ninety-six months from the
  effective date of this article, if the insurer has and maintains surplus
  to policyholders of at least one hundred fifty million dollars (for  the
  purpose  of  this  section, surplus to policyholders means the aggregate
  surplus to policyholders of said insurer and other member  companies  of
  an  inter-company  pool,  and  if  the  insurer is a foreign insurer its
  surplus to policyholders shall be computed as  if  it  were  a  domestic
  insurer)  and  the  aggregate financial guaranty written premium of said
  insurer and other member companies of an inter-company pool  shall  have
  been  at  least  one million dollars in any one of the five years ending
  December thirty-first, nineteen hundred eighty-eight, provided that:

    (A) during the first sixty months of the transition period, the amount
  of  surplus  to  policyholders  needed  to  meet  the   aggregate   risk
  limitations  imposed  by  this article must be less than four percent of
  the insurer's surplus to policyholders. After such sixty  month  period,
  provided  the  insurer complies with subparagraph (D) of this paragraph,
  the amount of surplus to policyholders needed  to  meet  such  aggregate
  risk limitations must be less than five percent of the insurer's surplus
  to  policyholders  for  the succeeding twelve month period and less than
  six percent for the next succeeding twenty-four month period;
    (B)  during  the  transition  period,  the  amount   of   surplus   to
  policyholders  needed  to  meet  the  single risk limitations imposed by
  paragraphs two through five of subsection (d) of  section  six  thousand
  nine  hundred  four  of this article must be less than twenty percent of
  the insurer's surplus to policyholders,  except  that  the  single  risk
  limitation  with  respect  to  investment  grade  obligations under such
  paragraph five shall be the lesser of eighty million  dollars  or  seven
  percent of the insurer's surplus to policyholders;
    (C) during the transition period, notwithstanding the last sentence of
  paragraph  one  of  subsection  (b) of section six thousand nine hundred
  four,  industrial  development  bonds  shall  not  be  included  in  the
  investment grade requirements set forth in such sentence.
    (D)   during  the  transition  period,  reinsurance  in  the  form  of
  intercompany pooling agreements, shall not be subject  to  subparagraphs
  (C),  (D), (E) and (F) of paragraph two of subsection (a) of section six
  thousand nine hundred six of this article, if such intercompany  pooling
  agreements   were   in   effect   on  January  first,  nineteen  hundred
  eighty-nine, and reinsurance placed with insurers which are  subject  to
  the  provisions  of  paragraph  two  of  subsection  (a)  of section six
  thousand nine hundred six and are not members of  the  ceding  company's
  intercompany pooling agreement may not exceed sixty percent of the total
  exposures  insured  net  of  collateral  remaining  after  deducting any
  reinsurance placed with another financial guaranty insurance corporation
  or an insurer writing only financial guaranty insurance as is  or  would
  be permitted by this article;
    (E)  within  sixty  months  of the effective date of this article, the
  insurer shall file a reasonable plan of  operation,  acceptable  to  the
  superintendent, which shall contain:
    (i)  a  reasonable  timetable  and appropriate procedures to implement
  that timetable to make a determination as to whether or not the  insurer
  will  make  application  to  organize  a  financial  guaranty  insurance
  corporation during the aforesaid ninety-six month period;
    (ii) the types and projected diversification of guaranties  that  will
  be issued during the transition period;
    (iii) the underwriting procedures that will be followed;
    (iv) oversight methods;
    (v) investment policies; and
    (vi)  such  other  matters as may be prescribed by the superintendent.
  The plan of operation shall be deemed acceptable  unless,  within  sixty
  days  of  its  filing,  the  superintendent  notifies the insurer of any
  specific objections to such plan. The plan shall be updated in the event
  of a material  change  with  respect  to  the  foregoing  and  at  least
  annually;
    (F)  if  the  insurer  has  determined  that  it  will  not organize a
  financial guaranty insurance corporation, within thirty days after  that
  determination it shall notify the superintendent, cease writing policies
  of  financial  guaranty  insurance  and  comply  with  the provisions of
  paragraph four of this subsection; and

    (G) the insurer shall file such additional statements  or  reports  as
  may be required by the superintendent.
    (3)  For  a  transition  period  not  to exceed twelve months from the
  effective date of this article, in the case of  an  insurer  transacting
  only  financial  guaranty  insurance prior to the effective date of this
  article and which  qualifies  for  licensing  as  a  financial  guaranty
  insurance  corporation  under  section  six thousand nine hundred two of
  this article, provided that it makes application to  amend  its  current
  license  to  that of a financial guaranty insurance corporation licensed
  to transact only those kinds of insurance permitted pursuant to  section
  six  thousand  nine hundred two of this article within sixty days of the
  effective date of this article, and provided that, for purposes of  this
  paragraph,  an  insurer shall be deemed to be transacting only financial
  guaranty insurance prior to the effective date of this article if,  with
  the  approval  of  the superintendent, it has reinsured all of any other
  insurance liabilities with  one  or  more  authorized  insurers  or  has
  otherwise made provision for such liabilities.
    (4)  For a transition period not to exceed nine months, in the case of
  an insurer that does not qualify under  either  paragraph  one,  two  or
  three  of  this subsection or does not file a plan of operation pursuant
  to paragraph one or two of this subsection,  such  insurer  shall  cease
  writing any new financial guaranty insurance business and may:
    (A)  reinsure  its  net  in  force  business with a licensed financial
  guaranty insurance corporation; or
    (B) subject to the prior approval  of  its  domiciliary  commissioner,
  reinsure all or part of its net in force business in accordance with the
  requirements  of paragraph two of subsection (a) of section six thousand
  nine hundred six of this article, except that subparagraphs (D), (E) and
  (F) of paragraph two of such subsection shall  not  be  applicable.  The
  assuming  insurer  shall maintain reserves of such reinsured business in
  the manner applicable to the ceding insurer under this paragraph; or
    (C) thereafter continue the risks then in force and, with thirty  days
  prior   written  notice  to  its  domiciliary  commissioner,  issue  new
  financial guaranty policies, provided that the issuing of such  policies
  is reasonably prudent to mitigate either the amount of or possibility of
  loss  in connection with business transacted prior to the effective date
  of this article. Provided, however, an insurer must  receive  the  prior
  approval   of  its  domiciliary  commissioner  before  issuing  any  new
  financial guaranty insurance policies that  would  have  the  effect  of
  increasing its risk of loss;
    (b)  shall, for all guaranties in force prior to the effective date of
  this article,  including  those  which  fall  under  the  definition  of
  financial  guaranty insurance contained in subsection (a) of section six
  thousand nine hundred one of this article, be  subject  to  the  reserve
  requirements applicable for municipal bond guaranties in effect prior to
  the  effective  date  of this article.  To the extent that the insurer's
  contingency reserves maintained as of the effective date of this article
  are less than those required for municipal bond guaranties, the  insurer
  shall  have  three  years  to bring its reserves into compliance, except
  that a part of the reserve may be released proportional to the reduction
  in aggregate net liability resulting from reinsurance, provided that the
  reinsurer shall, on the effective date of the reinsurance,  establish  a
  reserve  in  an  amount equal to the amount released and, in addition, a
  part  of  the  reserve  may  be  released  with  the  approval  of   the
  superintendent  upon  demonstration that the amount carried is excessive
  in relation to the corporation's outstanding obligations; and
    (c) shall be subject to the reserve requirements specified in  section
  six  thousand  nine  hundred  three  of this article for all policies of

  financial guaranty insurance issued on or after the  effective  date  of
  this article.