Utah Admin. Code 590-114-4

Current through Bulletin 2024-19, October 1, 2024

Section R590-114-4 - Rule

(1) A letter of credit issued to comply with Subsection 31A-17-404(10)(c)(ii) shall meet the requirements in this section.

(2) A letter of credit that takes the form of the Model Letter of Credit, available upon request from the department, complies with this rule.

(3) A letter of credit shall:

(a) be issued by a bank or trust company that is a member of the Federal Reserve system;

(b) name the ceding insurer as the sole beneficiary;

(c) be clean;

(d) be unconditional and not subject to any qualifications outside the letter of credit;

(e) be irrevocable;

(f) contain an evergreen clause;

(g) have a term of not less than one year;

(h) be automatically extended for not less than one additional year, unless the issuer notifies the ceding insurer and the reinsurer that the letter will not be renewed at least 30 days before the letter expires;

(i) state that a bank's obligation is not contingent upon reimbursement;

(j) state whether the letter of credit is subject to the laws of this state; and

(k) provide that any drafts drawn be presentable at a bank office in the United States.

(4) A letter of credit may not:

(a) contain references to any other agreement, document, or entity; or

(b) be reduced or revoked without the written consent of the beneficiary.

(5)

(a) A letter of credit may contain a boxed reference section with the applicant's name and other appropriate information for internal identification.

(b) The information contained in the boxed reference section may not affect the terms of the letter or the obligations of the bank.

(6) When a letter of credit is not renewed or is withdrawn, the ceding insurer may:

(a) withdraw the balance of the letter of credit; and

(b) place the resulting sum in trust to secure continuing obligations under the reinsurance contract until the ceding insurer receives the following:

(i) a renewal letter of credit; or

(ii) an alternative form of security that complies with this rule and Title 31A, Insurance Code.

(7) A letter of credit used as security under this rule shall be available for inspection by the commissioner or the commissioner's designee upon request.

Utah Admin. Code R590-114-4

Amended by Utah State Bulletin Number 2021-22, effective 11/8/2021