§ 5901 Definitions [For application of this section, see 79 Del. Laws, c. 207, § 3]
For the purpose of this chapter:
(1) "Impairment" or "insolvency." The capital of a stock insurer or the surplus of a mutual or reciprocal insurer shall be deemed to be impaired, and the insurer shall be deemed to be insolvent, when such insurer is not possessed of assets at least equal to all liabilities and required reserves together with its total issued and outstanding capital stock, if a stock insurer, or the minimum surplus if a mutual or reciprocal insurer, required by this title to be maintained for the kind or kinds of insurance it is then authorized to transact.
(2) "Insurer" means any person, firm, corporation, association or aggregation of persons doing an insurance business and subject to the insurance supervisory authority of or to liquidation, rehabilitation, reorganization or conservation by the Commissioner or the equivalent insurance supervisory official of another state.
(3) "Delinquency proceeding" means any proceeding commenced against an insurer pursuant to this chapter for the purpose of liquidating, rehabilitating, reorganizing or conserving such insurer.
(4) "State" means any state of the United States and also the District of Columbia and the Commonwealth of Puerto Rico.
(5) "Foreign country" means territory not in any state.
(6) "Domiciliary state" means the state in which an insurer is incorporated or organized or, in the case of an insurer incorporated or organized in a foreign country, the state in which such insurer, having become authorized to do business in such state, has at the commencement of delinquency proceedings the largest amount of its assets held in trust and assets held on deposit for the benefit of its policyholders or policyholders and creditors in the United States, and any such insurer is deemed to be domiciled in such state.
(7) "Ancillary state" means any state other than a domiciliary state.
(8) "Reciprocal state" means any state other than this State in which in substance and effect the provisions of the Uniform Insurers Liquidation Act, as defined in § 5920 of this title, are in force, including the provisions requiring that the Commissioner of Insurance or equivalent insurance supervisory official be the receiver of a delinquent insurer.
(9) "General assets" means all property, real, personal or otherwise, not specifically mortgaged, pledged, deposited or otherwise encumbered for the security or benefit of specified persons or a limited class or classes of persons, and as to such specifically encumbered property, the term includes all such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and assets held on deposit for the security or benefit of all policyholders or all policyholders and creditors in the United States shall be deemed general assets.
(10) "Preferred claim" means any claim with respect to which the law of the state or of the United States accords priority of payments from the general assets of the insurer.
(11) "Special deposit claim" means any claim secured by a deposit made pursuant to statute for the security or benefit of a limited class or classes of persons but not including any general assets.
(12) "Secured claim" means any claim secured by mortgage, trust deed, pledge, deposit as security, escrow or otherwise but not including special deposit claim or claims against general assets. The term also includes claims which more than 4 months prior to the commencement of delinquency proceedings in the state of the insurer's domicile have become liens upon specific assets by reason of judicial process.
(13) "Receiver" means receiver, liquidator, rehabilitator or conservator as the context may require.
(14) "Affiliate" shall have the same meaning as set forth in § 5001(1) of this title.
(15) "Commodity contract" means any of the following:
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 designated as a contract market by the commodity futures trading commission under the federal 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 § 23 of the federal 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 § 6c(b) of the federal 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.
(16) "Creditor" or "claimant" is a person having any claim against an insurer, whether the claim is matured or not, liquidated or unliquidated, secured or unsecured, absolute, fixed or contingent.
(17) "Formal delinquency proceeding" means any conservation, rehabilitation or liquidation proceeding; provided, however, that the term "formal delinquency proceeding" shall not include a supervision under § 5942 of this title.
(18) "Forward contract" shall have the meaning set forth in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D), as amended from time to time.
(19) "Netting agreement" means:
a. A contract or agreement (including terms and conditions incorporated by reference therein), 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 1 netting agreement), that documents one or more transactions between the parties to the agreement for or involving 1 or more qualified financial contracts and that provides for the netting, liquidation, setoff, termination, acceleration or close out under or in connection with 1 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 1 or more master agreements described in paragraph (19)a. of this section; or
c. Any security agreement or arrangement or other credit enhancement or guarantee or reimbursement obligation related to any contract or agreement described in paragraph (19)a. or b. of this section; provided that any contract or agreement described in paragraph (19)a. or b. of this section 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.
(20) "Qualified financial contract" means any commodity contract, forward contract, repurchase agreement, securities contract, swap agreement and any similar agreement that the commissioner determines by regulation, rule or order to be a qualified financial contract for the purposes of this chapter.
(21) "Repurchase agreement" shall have the meaning set forth in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D), as amended from time to time. The term repurchase agreement also applies to a reverse repurchase agreement.
(22) "Securities contract" shall have the meaning set forth in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D), as amended from time to time.
(23) "Swap agreement" shall have the meaning set forth in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D), as amended from time to time.
(24) "Transfer" shall include the sale and every other and different mode, direct or indirect, of disposing of or of parting with property or with an interest therein, including a setoff, or with the possession thereof or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily or involuntarily, by or without judicial proceedings. The retention of a security title in property delivered to an insurer and foreclosure of the insurer's equity of redemption shall be deemed a transfer suffered by the insurer.
(25) "Federal home loan bank" or "FHLBank" shall mean a bank as defined in 12 U.S.C. § 1422(1)(A).
(26) "Federal Home Loan Bank Act" or "FHLBank Act" shall mean 12 U.S.C. § 1421 et seq.
(27) "Insurer-member" means an insurer that is a member of a federal home loan bank.
§ 5902 Jurisdiction of delinquency proceedings; venue; change of venue; exclusiveness of remedy; appeal.
(a) The Court of Chancery shall have original jurisdiction of delinquency proceedings under this chapter, and any court with jurisdiction is authorized to make all necessary or proper orders to carry out the purposes of this chapter.
(b) The venue of delinquency proceedings against a domestic insurer shall be in the county of the insurer's principal place of business. The venue of such proceedings against foreign and alien insurers shall be in any county in this State selected by the Commissioner for the purpose.
(c) At any time after the commencement of a proceeding under this chapter the Commissioner may apply to the court for an order changing the venue of and removing the proceeding to any other county of this State in which the Commissioner deems that such proceeding may be most economically and efficiently conducted.
(d) Delinquency proceedings pursuant to this chapter shall constitute the sole and exclusive method of liquidating, rehabilitating, reorganizing or conserving an insurer, and no court shall entertain a petition for the commencement of such proceedings unless the same has been filed in the name of the State on the relation of the Commissioner.
(e) An appeal shall lie to the Supreme Court from an order granting or refusing rehabilitation, liquidation or conservation and from every order in delinquency proceedings having the character of a final order as to the particular portion of the proceedings embraced therein.
§ 5903 Commencement of delinquency proceedings.
The Commissioner shall commence any such proceedings by application to the court for an order directing the insurer to show cause why the Commissioner should not have the relief prayed for. On the return of such order to show cause and after a full hearing, the court shall either deny the application or grant the application, together with such other relief as the nature of the case and the interests of the policyholders, creditors, stockholders, members, subscribers or the public may require.
18 Del. C. 1953, § 5903; 56 Del. Laws, c. 380, § 1.;
§ 5904 Injunctions [For application of this section, see 79 Del. Laws, c. 207, § 3]
(a) Upon application by the Commissioner for such an order to show cause, or at any time thereafter, the court may without notice issue an injunction restraining the insurer, its officers, directors, stockholders, members, subscribers, agents and all other persons from the transaction of its business or the waste or disposition of its property until the further order of the court.
(b) The court may at any time during a proceeding under this chapter issue such other injunctions or orders as may be deemed necessary to prevent interference with the Commissioner or the proceeding or waste of the assets of the insurer or the commencement or prosecution of any actions or the obtaining of preferences, judgments, attachments or other liens or the making of any levy against the insurer or against its assets or any part thereof.
(c) Notwithstanding any other provision of law, no bond shall be required of the Commissioner as a prerequisite for the issuance of any injunction or restraining order pursuant to this section.
(d) Notwithstanding subsection (a) of this section above, or any other provision of this chapter to the contrary, the commencement of a delinquency proceeding with respect to an insurer-member shall not operate as a stay, injunction or prohibition of the exercise by an FHLBank of its rights regarding collateral pledged by such insurer-member.
§ 5904A Proceedings against bank insurance division.
(a) The Commissioner may in the Commissioner's discretion forthwith take possession of the business and property, including the books and records, of any division of a bank or trust company acting as an insurer whenever it shall appear that such division:
(1) Is conducting its business in an unauthorized or unsafe manner;
(2) Is in an unsound or unsafe condition to transact its business; or
(3) Cannot with safety and expediency continue business as a result of any cause whatsoever.
(b) The Commissioner may require an examination of a bank or trust company, which bank or trust company has established and operates a division pursuant to § 767 of Title 5, by the Bank Commissioner as authorized under § 122 of Title 5, and a report of such examination shall be furnished to the Commissioner pursuant to § 124 of Title 5.
(c) After taking possession of the division of a bank or trust company acting as an insurer, the Commissioner shall take such steps to conserve or rehabilitate the business and property of such division as the Commissioner deems practicable or desirable, or if in the judgment of the Commissioner such conservation or rehabilitation is not practicable or desirable, the Commissioner may proceed to liquidate such business and property. All proceedings of the Commissioner for the conservation, rehabilitation, or liquidation of a division of a bank or trust company acting as an insurer shall be in accordance with the provisions of this title applicable to the conservation, rehabilitation or liquidation of insurers by the Commissioner.
§ 5905 Grounds for rehabilitation; domestic insurers.
The Commissioner may apply to the court for an order appointing the Commissioner as receiver of and directing the Commissioner to rehabilitate a domestic insurer upon one or more of the following grounds, if the insurer:
(1) Is impaired or insolvent or is in unsound condition or in such condition or using such methods and practices in the conduct of its business as to render its further transaction of insurance presently or prospectively hazardous to its policyholders;
(2) Has refused to submit any of its books, records, accounts or affairs to reasonable examination by the Commissioner;
(3) Has concealed or removed records or assets;
(4) Has failed to comply with an order of the Commissioner to make good an impairment of capital or surplus or both;
(5) Has transferred or attempted to transfer substantially its entire property or business or has entered into any transaction the effect of which is to merge substantially its entire property or business in that of any other insurer without having first obtained the written approval of the Commissioner;
(6) Has wilfully violated its charter or certificate of incorporation or any law of this State;
(7) Has an officer, director or manager who has refused to be examined under oath concerning its affairs, for which purposes the Commissioner is hereby authorized to conduct and to enforce by all appropriate and available means any such examination under oath in any other state or territory of the United States in which any such officer, director or manager may then presently be to the full extent permitted by the laws of such other state or territory, this special authorization considered;
(8) Has been or is the subject of an application for the appointment of a receiver, trustee, custodian or sequestrator of the insurer or its property otherwise than pursuant to the provisions of this title, but only if such appointment has been made or is imminent and its effect is or would be to oust the courts of this State of jurisdiction hereunder;
(9) Has consented to such an order through a majority of the directors, stockholders, members or subscribers; and
(10) Has failed to pay a final judgment rendered against it in this State upon any insurance contract issued or assumed by it within 30 days after the judgment became final or within 30 days after the time for taking an appeal has expired or within 30 days after dismissal of an appeal before final termination, whichever date is the later.
§ 5906 Grounds for liquidation.
The Commissioner may apply to the court for an order appointing the Commissioner as receiver (if the Commissioner appointment as receiver shall not be then in effect) and directing the Commissioner to liquidate the business of a domestic insurer or of the United States branch of an alien insurer having trusteed assets in this State, regardless of whether or not there has been a prior order directing the Commissioner to rehabilitate such insurer, upon any of the grounds specified in § 5905 of this title or if such insurer:
(1) Has ceased transacting business for a period of 1 year, or
(2) Is an insolvent insurer and has commenced voluntary liquidation or dissolution or attempts to commence or prosecute any action or proceeding to liquidate its business or affairs or to dissolve its corporate charter or to procure the appointment of a receiver, trustee, custodian or sequestrator under any law except this title.
§ 5907 Grounds for conservation; foreign insurers.
The Commissioner may apply to the court for an order appointing the Commissioner as receiver or ancillary receiver and directing him to conserve the assets within this State, of a foreign insurer upon any of the following grounds:
(1) Upon any of the grounds specified in § 5905 or § 5906 of this title, or
(2) Upon the ground that its property has been sequestrated in its domiciliary sovereignty or in any other sovereignty.
§ 5908 Same — Alien insurers.
The Commissioner may apply to the court for an order appointing the Commissioner as receiver or ancillary receiver and directing the Commissioner to conserve the assets within this State of any alien insurer upon any of the following grounds:
(1) Upon any of the grounds specified in § 5905 or § 5906 of this title;
(2) Upon the ground that the insurer has failed to comply within the time designated by the Commissioner with an order made by the Commissioner to make good an impairment of its trusteed funds; or
(3) Upon the ground that the property of the insurer has been sequestrated in its domiciliary sovereignty or elsewhere.
§ 5909 Grounds for ancillary liquidation; foreign insurers.
The Commissioner may apply to the court for an order appointing the Commissioner as ancillary receiver of and directing the Commissioner to liquidate the business of a foreign insurer having assets, business or claims in this State upon the appointment in the domiciliary state of such insurer of a receiver, liquidator, conservator, rehabilitator or other officer by whatever name called for the purpose of liquidating the business of such insurer.
§ 5910 Order of rehabilitation; termination.
(a) An order to rehabilitate a domestic insurer shall direct the Commissioner forthwith to take possession of the property of the insurer and to conduct the business thereof and to take such steps toward removal of the causes and conditions which have made rehabilitation necessary as the court may direct.
(b) If at any time the Commissioner deems that further efforts to rehabilitate the insurer would be useless, the Commissioner may apply to the court for an order of liquidation.
(c) The Commissioner or any interested person upon due notice to the Commissioner at any time may apply to the court for an order terminating the rehabilitation proceedings and permitting the insurer to resume possession of its property and the conduct of its business, but, no such order shall be made or entered except when, after a hearing, the Court has determined that the purposes of the proceeding have been fully accomplished.
§ 5911 Order of liquidation; domestic insurers; insolvent insurer's assets.
(a) An order to liquidate the business of a domestic insurer shall direct the Commissioner forthwith to take possession of the property of the insurer, to liquidate its business, to deal with the insurer's property and business in the Commissioner's own name as Insurance Commissioner or in the name of the insurer, as the court may direct, and to give notice to all creditors who may have claims against the insurer to present such claims.
(b) The Commissioner may apply for and secure an order dissolving the corporate existence of a domestic insurer or the United States branch of an alien insurer domiciled in this State upon the Commissioner's application for an order of liquidation of such insurer or at any time after such order has been granted. The court may order dissolution of the corporation upon petition by the Commissioner upon or after the granting of a liquidation order. If the dissolution has not previously been ordered, it shall be effected by operation of law upon the discharge of the liquidator if the insurer is insolvent. However, dissolution may be ordered by the court upon the discharge of the liquidator if the insurer is under a liquidation order for some other reason. Notwithstanding the above, upon application by the Commissioner and following notice as prescribed by the court and a hearing, the court may sell the corporation as an entity, together with any of its licenses to do business, despite the entry of an order of liquidation. The sale may be made on terms and conditions the court deems appropriate. The court may permit the sale of such corporate existence upon or after the granting of a liquidation order. The proceeds from the sale of the corporation shall become a part of the general assets of the estate in liquidation, and the corporate entity and its licenses shall thereafter be free and clear from the claims or interest of all claimants, creditors, policyholders and stockholders of the corporation under liquidation. If permission to sell the corporation is not granted prior to discharge of the liquidator, the court shall order dissolution of the corporation if the insurer is insolvent, and the court may order dissolution of the corporation if the insurer is under a liquidation order for some other reason.
(c)(1) Within 120 days of a final determination of insolvency of a company, the Commissioner shall apply for a proposed order to disburse assets out of such company's marshalled assets, from time to time as such assets become available to the Delaware Insurance Guaranty Association and to any entity or person performing a similar function in another jurisdiction having substantially the same provisions of law.
(2) Such proposed order shall at least include provision for:
a. Reserving amounts for the payment of expenses to administration and the payment of claims of secured creditors (to the extent the value of the security held) and claims falling within the priorities established in §§ 5915-5919, 5924-5927 and 5929 of this title;
b. Disbursement of the assets marshalled to date and subsequent disbursements of assets as they become available;
c. Equitable allocation disbursements to the Delaware Insurance Guaranty Association and similar entities entitled thereto;
d. The securing by the Commissioner as receiver in each of the associations entitled to disbursement pursuant to this section of an agreement to return to the receiver such assets previously disbursed as may be required to pay claims of secured creditors and claims falling within the priorities established in §§ 5915-5919, 5924-5927 and 5929 of this title in accordance with such priorities. No bond shall be required of any such association;
e. A full report to be made by the association to the receiver accounting for all assets so disbursed to the association, all disbursements made therefrom, any interest earned by the association on such assets and any matter as the court may direct.
(3) The Commissioner's proposed order shall provide for disbursements to the Delaware Insurance Guaranty Association and any entity or person performing a similar function in another jurisdiction in amounts estimated at least equal to the claim payments made or to be made thereby for which such associations could assert a claim against the Commissioner as receiver, and shall further provide that if the assets available for disbursement from time to time do not equal nor exceed the amount of such claim payments made or to be made by the Delaware Insurance Guaranty Association in a similar entity in another jurisdiction, then disbursements shall be in the amount of available assets.
(4) Notice of such proposed order shall be given to the Delaware Insurance Guaranty Association and the commissioners of insurance of each state and the District of Columbia. Any such notice shall be deemed to have been given when deposited in the United States certified mails, first-class postage prepaid, at least 30 days prior to the submission of such application to the court. Action on the proposed order may be taken by the court provided the above required notice has been given and provided further that the Commissioner's proposed order complies with subparagraphs a. and d. of paragraph (2) of this subsection.
§ 5912 Order of conservation or ancillary liquidation of foreign or alien insurers.
(a) An order to conserve the assets of a foreign or alien insurer shall require the Commissioner forthwith to take possession of the property of the insurer within this State and to conserve it, subject to the further direction of the court.
(b) An order to liquidate the assets in this State of a foreign insurer shall require the Commissioner forthwith to take possession of the property of the insurer within this State and to liquidate it subject to the orders of the court and with due regard to the rights and powers of the domiciliary receiver, as provided in this chapter.
18 Del. C. 1953, § 5912; 56 Del. Laws, c. 380, § 1.;
§ 5913 Conduct of delinquent proceedings against domestic and alien insurers.
(a) Whenever under this chapter a receiver is to be appointed in delinquency proceedings for an insurer, the court shall appoint the Commissioner as such receiver. The court shall order the Commissioner forthwith to take possession of the assets of the insurer and to administer the same under the orders of the court.
(b) As a domiciliary receiver, the Commissioner shall be vested by operation of law with the title to all of the property, contracts and rights of action and all of the books and records of the insurer, wherever located, as of the date of entry of the order directing the Commissioner to rehabilitate or liquidate a domestic insurer or to liquidate the United States branch of an alien insurer domiciled in this State, and the Commissioner shall have the right to recover the same and reduce the same to possession, except that ancillary receivers in reciprocal states shall have, as to assets located in their respective states, the rights and powers which are herein prescribed for ancillary receivers appointed in this State as to assets located in this State.
(c) The filing or recording of the order directing possession to be taken, or a certified copy thereof, in any office where instruments affecting title to property are required to be filed or recorded shall impart the same notice as would be imparted by a deed, bill of sale or other evidence of title duly filed or recorded.
(d) The Commissioner as domiciliary receiver shall be responsible for the proper administration of all assets coming into the Commissioner's possession or control. The court may at any time require a bond from the Commissioner or the Commissioner's deputies if deemed desirable for the protection of such assets.
(e) Upon taking possession of the assets of an insurer, the domiciliary receiver shall, subject to the direction of the court, immediately proceed to conduct the business of the insurer or to take such steps as are authorized by this chapter for the purpose of rehabilitating, liquidating or conserving the affairs or assets of the insurer.
(f) In connection with delinquency proceedings, the Commissioner may appoint 1 or more special deputy commissioners to act for the Commissioner, and the Commissioner may employ such counsel, clerks and assistants as necessary. The compensation of the special deputies, counsel, clerks or assistants and all expenses of taking possession of the insurer and of conducting the proceedings shall be fixed by the receiver, subject to the approval of the court, and shall be paid out of the funds or assets of the insurer. Within the limits of duties imposed upon them, special deputies shall possess all the powers given to and, in the exercise of those powers, shall be subject to all of the duties imposed upon the receiver with respect to such proceedings.
§ 5914 Conduct of delinquency proceedings against foreign insurers.
(a) Whenever under this chapter an ancillary receiver is to be appointed in delinquency proceedings for an insurer not domiciled in this State, the court shall appoint the Commissioner as ancillary receiver. The Commissioner shall file a petition requesting the appointment on the grounds set forth in § 5909 of this title:
(1) If the Commissioner finds that there are sufficient assets of the insurer located in this State to justify the appointment of an ancillary receiver, or
(2) If 10 or more persons resident in this State having claims against such insurer file a petition with the Commissioner requesting the appointment of such ancillary receiver.
(b) The domiciliary receiver for the purpose of liquidating an insurer domiciled in a reciprocal state shall be vested by operation of law with the title to all of the property, contracts and rights of action and all of the books and records of the insurer located in this State, and such receiver shall have the immediate right to recover balances due from local agents and to obtain possession of any books and records of the insurer found in this State. The domiciliary receiver shall also be entitled to recover the other assets of the insurer located in this State, except that upon the appointment of an ancillary receiver in this State, the ancillary receiver shall during the ancillary receivership proceedings have the sole right to recover such other assets. The ancillary receiver shall, as soon as practicable, liquidate from their respective securities those special deposit claims and secured claims which are proved and allowed in the ancillary proceedings in this State and shall pay the necessary expenses of the proceedings. All remaining assets shall promptly transfer to the domiciliary receiver. Subject to the foregoing provisions, the ancillary receiver and the ancillary receiver's deputies shall have the same powers and be subject to the same duties with respect to the administration of such assets as a receiver of an insurer domiciled in this State.
(c) The domiciliary receiver of an insurer domiciled in a reciprocal state may sue in this State to recover any assets of such insurer to which the domiciliary receiver may be entitled under the laws of this State.
§ 5915 Claims of nonresidents against domestic insurers.
(a) In a delinquency proceeding begun in this State against a domestic insurer, claimants residing in reciprocal states may file claims either with the ancillary receivers, if any, in their respective states, or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceedings.
(b)(1) Controverted claims belonging to claimants residing in reciprocal states may either:
a. Be proved in this State; or
b. If ancillary proceedings have been commenced in such reciprocal states may be proved in those proceedings.
(2) In the event a claimant elects to prove a claim in ancillary proceedings, if notice of the claim and opportunity to appear and be heard is afforded the domiciliary receiver of this State, as provided in § 5916 of this title with respect to ancillary proceedings in this State, the final allowance of such claim by the courts in the ancillary state shall be accepted in this State as conclusive as to its amount and shall also be accepted as conclusive as to its priority, if any, against special deposits or other security located within the ancillary state.
§ 5916 Claims against foreign insurers.
(a) In a delinquency proceeding in a reciprocal state against an insurer domiciled in that state, claimants against such insurer who reside within this State may file claims either with the ancillary receiver, if any, appointed in this State or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceedings.
(b)(1) Controverted claims belonging to claimants residing in this State may either:
a. Be proved in the domiciliary state as provided by the law of that state; or
b. If ancillary proceedings have been commenced in this State, be proved in those proceedings.
(2) In the event that any such claimant elects to prove a claim in this State, such claimant shall file a claim with the ancillary receiver and shall give notice in writing to the receiver in the domiciliary state, either by registered or certified mail or by personal service at least 40 days prior to the date set for hearing. The notice shall contain a concise statement of the amount of the claim, the facts on which the claim is based and the priorities asserted, if any. If the domiciliary receiver within 30 days after the giving of such notice shall give notice in writing to the ancillary receiver and to the claimant, either by registered or certified mail or by personal service, of the domiciliary receiver's intention to contest such claim, the domiciliary receiver shall be entitled to appear or to be represented in any proceeding in this State involving adjudication of the claim. The final allowance of the claim by the courts of this State shall be accepted as conclusive as to its amount and shall also be accepted as conclusive as to its priority, if any, against special deposits or other security located within this State.
§ 5917 Form of claim; notice; hearing.
(a) All claims against an insurer against which delinquency proceedings have been begun shall set forth in reasonable detail the amount of the claim or the basis upon which such amount can be ascertained, the facts upon which the claim is based and the priorities asserted, if any. All such claims shall be verified by the affidavit of the claimant or someone authorized to act on the claimant's behalf and having knowledge of the facts and shall be supported by such documents as may be material thereto.
(b) All claims filed in this State shall be filed with the receiver, whether domiciliary or ancillary, in this State on or before the last date for filing as specified in this chapter.
(c) Within 10 days of the receipt of any claim or within such further period as the court may fix for good cause shown, the receiver shall report the claim to the court, specifying in such report the receiver's recommendation with respect to the action to be taken thereon. Upon receipt of such report, the court shall fix a time for hearing the claim and shall direct that the claimant or the receiver, as the court shall specify, shall give such notice as the court shall determine to such persons as shall appear to the court to be interested therein. All such notices shall specify the time and place of the hearing and shall concisely state the amount and nature of the claim, the priorities asserted, if any, and the recommendation of the receiver with reference thereto.
(d) At the hearing, all persons interested shall be entitled to appear and the court shall enter an order allowing, allowing in part, or disallowing the claim. Any such order shall be deemed to be an appealable order.
§ 5918 Priority of certain claims.
(a) In a delinquency proceeding against an insurer domiciled in this State, claims owing to residents of ancillary states shall be preferred claims if like claims are preferred under the laws of this State. All such claims owing to residents or nonresidents shall be given equal priority of payment from general assets regardless of where such assets are located.
(b) In a delinquency proceeding against an insurer domiciled in a reciprocal state, claims owing to residents of this State shall be preferred if like claims are preferred by the laws of that state.
(c) The owners of special deposit claims against an insurer for which a receiver is appointed in this or any other state shall be given priority against their several special deposits in accordance with the provisions of the statutes governing the creation and maintenance of such deposits. If there is a deficiency in any such deposit so that the claims secured thereby are not fully discharged therefrom, the claimants may share in the general assets, but such sharing shall be deferred until general creditors and also claimants against other special deposits who have received smaller percentages from their respective special deposits have been paid percentages of their claims equal to the percentage paid from the special deposit.
(d) The owner of a secured claim against an insurer for which a receiver has been appointed in this or any other state may surrender his/her security and file a claim as a general creditor, or the claim may be discharged by resort to the security, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors. If the amount of the deficiency has been adjudicated in ancillary proceedings as provided in this chapter or if it has been adjudicated by a court of competent jurisdiction in proceedings in which the domiciliary receiver has had notice and opportunity to be heard, such amounts shall be conclusive, otherwise, the amount shall be determined in the delinquency proceeding in the domiciliary state.
(e) The priority of distribution of claims from the insurer's general assets shall be in accordance with the order in which each class of claims is herein set forth. Every claim in each class shall be paid in full or adequate funds retained for such payment before the members of the next class shall receive any payment. No subclasses shall be established within any class. No claim by a shareholder, policyholder or other creditor shall be permitted to circumvent the priority classes through the use of equitable remedies. The order of distribution shall be:
(1) Class I. — The costs and expenses of administration expressly approved by the receiver, including but not limited to the following:
a. The receiver's actual and necessary costs of taking possession of the insurer, preserving or recovering the assets of the insurer, and otherwise complying with this chapter;
b. Reasonable compensation for all services rendered at the request of and on behalf of the receiver, or that receiver's appointed deputy receiver or receivers, in the liquidation by the receivership's employees and its retained attorneys, accountants, actuaries, claims adjusters, expert witnesses and other consultants; and
c. All expenses incurred by the Department in supervising the receivership proceedings of the insurer;
(2) Class II. — The reasonable and necessary administrative expenses of the Delaware Insurance Guaranty Association or the Delaware Life and Health Insurance Guaranty Association or as the case may be, and any similar organization in another state. If the receiver determines that the assets of the estate will be sufficient to pay all Class I claims in full, Class II claims shall be paid currently, provided that the receiver shall secure from each of the associations receiving disbursements pursuant to this section an agreement to return to the receiver such disbursement, together with investment income actually earned on such disbursement, as may be required to pay Class I claims.
(3) Class III. — Claims by policyholders, beneficiaries and insureds, including the federal or any state or local government if such government is a named policyholder, beneficiary or insured under the policy, arising from and within the coverage of and not in excess of the applicable limits of insurance policies and insurance contracts issued by the company; liability claims, including liability claims of the federal or any state or local government, against insureds which claims are within the coverage of and not in excess of the applicable limits of insurance policies and insurance contracts issued by the company, including claims for reasonable attorneys' fees incurred by the policyholder to defend against the liability claim if such attorneys' fees are covered under the policy, but only to the extent covered; policyholder's claims for refunds of unearned premium; and claims of the Delaware Insurance Guaranty Association or the Delaware Life and Health Insurance Guaranty Association, as the case may be, and any similar organization in another state for coverage of policy benefits as required by statute; provided, however, that this paragraph shall not apply to the following claims:
a. Claims arising under reinsurance contracts, including any claims for reinsurance premium due;
b. Claims of insurers, insurance pools or underwriting associations for contribution, indemnity or subrogation, equitable or otherwise.
Interest shall not be allowed or paid on Class III claims, except that the value assigned to Class III claims arising from valid preliquidation judgments, other than judgments by default or collusion, may include prejudgment and postjudgment interest up to the date of liquidation if such interest is required by law or contract.
(4) Class IV. — Taxes owed to the United States and other debts owed to the United States which by the laws of the United States are entitled to priority over the claims in Classes V through IX below and which claims of the United States are not already included in Class III above.
(5) Class V. — Claims of employees, other than officers or directors, of the insurer for compensation actually owing to such employees for services rendered to the insurer within 3 months prior to the commencement of a proceeding against the insurer under this chapter but not exceeding $1,000 for each employee. Such priority shall be in lieu of any other similar priority which may be authorized by law as to wages or compensation of such employees.
(6) Class VI. — Claims of general creditors including, but not limited to, claims of ceding and assuming insurers in their capacity as such, and claims of insurers, insurance pools or underwriting associations for contribution, indemnity or subrogation, equitable or otherwise. This class shall include any claims of the guaranty associations, federal or any state or local government to the extent such claims are not otherwise included in Class II, Class III, Class IV or Class V in paragraphs (e)(2) through (5) of this section.
(7) Class VII. — Claims which would otherwise qualify for classification under the classes enumerated above, but which are not filed with the receiver on or before the bar date and which are not excused from such bar date by the liquidation court.
(8) Class VIII. — Surplus or contribution notes, or similar obligations.
(9) Class IX. — The claims of shareholders or other owners arising out of such capacity.
§ 5919 Attachment and garnishment of assets.
During the pendency of delinquency proceedings in this or any reciprocal state, no action or proceeding in the nature of an attachment, garnishment or execution shall be commenced or maintained in the courts of this State against the delinquent insurer or its assets. Any lien obtained by any such action or proceeding within 4 months prior to the commencement of any such delinquency proceeding or at any time thereafter shall be void as against any rights arising in such delinquency proceeding.
18 Del. C. 1953, § 5919; 56 Del. Laws, c. 380, § 1.;
§ 5920 Uniform Insurers Liquidation Act.
(a) Paragraphs (2)-(13) inclusive of § 5901, together with §§ 5902, 5903 and 5913-5920 of this title constitute and may be referred to as the Uniform Insurers Liquidation Act.
(b) The Uniform Insurers Liquidation Act shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states that enact it. To the extent that its provisions when applicable conflict with other provisions of this chapter, the provisions of such act shall control.
18 Del. C. 1953, § 5920; 56 Del. Laws, c. 380, § 1.;
§ 5921 Deposit of moneys collected.
The moneys collected by the Commissioner in a proceeding under this chapter shall be from time to time deposited in 1 or more state or national banks, savings banks or trust companies, and in the case of the insolvency or voluntary or involuntary liquidation of any such depositary which is an institution organized and supervised under the laws of this State, such deposits shall be entitled to priority of payment on an equality with any other priority given by the banking laws of this State. The Commissioner may in his or her discretion deposit such moneys or any part thereof in a national bank or trust company as a trust fund.
§ 5922 Exemption from fees.
The Commissioner shall not be required to pay any fee to any public officer in this State for filing, recording, issuing a transcript or certificate authenticating any paper or instrument pertaining to the exercise by the Commissioner of any of the powers or duties conferred upon the Commissioner under this chapter, whether or not such paper or instrument is executed by the Commissioner or the Commissioner's deputies, employees or attorneys of record and whether or not it is connected with the commencement of any action or proceeding by or against the Commissioner or with the subsequent conduct of such action or proceeding.
§ 5923 Borrowing on pledge of assets.
For the purpose of facilitating the rehabilitation, liquidation, conservation or dissolution of an insurer pursuant to this chapter, the Commissioner may, subject to the approval of the court, borrow money and execute, acknowledge and deliver notes or other evidences of indebtedness therefor and secure the repayment of the same by the mortgage, pledge, assignment, transfer in trust or hypothecation of any or all of the property, whether real, personal or mixed, of such insurer; and the Commissioner, subject to the approval of the court, shall have power to take any and all other action necessary and proper to consummate any such loan and to provide for the repayment thereof. The Commissioner shall be under no obligation personally or in an official capacity to repay any loan made pursuant to this section.
§ 5924 Date rights fixed on liquidation.
The rights and liabilities of the insurer and of its creditors, policyholders, stockholders, members, subscribers and all other persons interested in its estate shall, unless otherwise directed by the court, be fixed as of the date on which the order directing the liquidation of the insurer is filed in the office of the clerk of the court which made the order, subject to the provisions of this chapter with respect to the rights of claimants holding contingent claims.
18 Del. C. 1953, § 5924; 56 Del. Laws, c. 380, § 1.;
§ 5925 Voidable transfers [For application of this section, see 79 Del. Laws, c. 207, § 3]
(a) Any transfer of or lien upon the property of an insurer which is made or created within 4 months prior to the granting of an order to show cause, under this chapter, with the intent of giving to any creditor a preference or of enabling the creditor to obtain a greater percentage of such creditor's debt than any other creditor of the same class and which is accepted by such creditor having reasonable cause to believe that such preference will occur, shall be voidable.
(b) Every director, officer, employee, stockholder, member, subscriber and any other person acting on behalf of such insurer who shall be concerned in any such act or deed and every person receiving thereby any property of such insurer of the benefit thereof shall be personally liable therefor and shall be bound to account to the Commissioner.
(c) The Commissioner, as receiver in any proceeding under this chapter, may avoid any transfer of or lien upon the property of an insurer which any creditor, stockholder, subscriber or member of such insurer might have avoided and may recover the property so transferred unless such person was a bona fide holder for value prior to the date of the entering of an order to show cause under this chapter. Such property or its value may be recovered from anyone who has received it except a bona fide holder for value as herein specified.
(d)(1) Notwithstanding subsection (a) of this section above, or any other provision of this chapter to the contrary, the receiver for an insurer-member subject to a delinquency proceeding shall not void a transfer made to an FHLBank in the ordinary course of business and in compliance with the advance agreement with such FHLBank. The receiver shall not void a redemption or repurchase of any stock or equity securities made by the FHLBank within 4 months of the commencement of the delinquency proceedings or which received prior approval of the receiver. However, a transfer may be avoided under subsection (c) of this section if the transfer was made with actual intent to hinder, delay or defraud the insurer-member, a receiver appointed for the insurer-member or existing or future creditors.
(2) Following the appointment of a receiver for an insurer-member and upon request of the receiver, the FHLBank shall, within 10 days of such request, provide a process and establish timing for:
a. The release of collateral that exceeds the lending value (as determined in accordance with the advance agreement with the FHLBank) required to support secured obligations remaining after any repayment of advances;
b. The release of any collateral remaining in the FHLBank's possession following repayment of all outstanding secured obligations in full;
c. The payment of fees and the operation of deposits and other accounts with the FHLBank; and
d. The possible redemption or repurchase of FHLBank stock or excess stock of any class that an insurer-member is required to own.
(3) Upon the request of the receiver for an insurer-member, the FHLBank shall provide any available options for such insurer-member to renew or restructure an advance to defer associated prepayment fees, to the extent that market conditions, the terms of the advance outstanding to the insurer-member, the applicable policies of the FHLBank and compliance with the FHLBank Act and corresponding regulations permit.
(4) Nothing in § 5904(d) of this title or this subsection shall affect the receiver's rights pursuant to 12 C.F.R. § 1266.4 regarding advances to an insurer-member in delinquency proceedings.
§ 5926 Priority of claims for compensation.
§ 5927 Offsets.
(a) In all cases of mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under this chapter, such credits and debts shall be set off and the balance only shall be allowed or paid, except as provided in subsection (b) below.
(b) No offset shall be allowed in favor of any such person where:
(1) The obligation of the insurer to such person would not at the date of the entry of any liquidation order or otherwise, as provided in § 5924 of this title, entitle such person to share as a claimant in the assets of the insurer; or
(2) The obligation of the insurer to such person was purchased by or transferred to such person with a view of its being used as an offset; or
(3) The obligation of such person is to pay an assessment levied against the members of a mutual insurer or against the subscribers of a reciprocal insurer or is to pay a balance upon the subscription to the capital stock of a stock insurer.
§ 5928 Allowance of certain claims.
(a) No contingent and unliquidated claim shall share in a distribution of the assets of an insurer which has been adjudicated to be insolvent by an order made pursuant to this chapter, except that such claim shall be considered, if properly presented, and may be allowed to share where:
(1) Such claim becomes absolute against the insurer on or before the last day for filing claims against the assets of such insurer; or
(2) There is a surplus and the liquidation is thereafter conducted upon the basis that such insurer is solvent.
(b) Where an insurer has been so adjudicated to be insolvent, any person who has a cause of action against an insured of such insurer under a liability insurance policy issued by such insurer shall have the right to file a claim in the liquidation proceeding, regardless of the fact that such claim may be contingent, and such claim may be allowed:
(1) If it may be reasonably inferred from the proof presented upon such claim that such person would be able to obtain a judgment upon such cause of action against such insured;
(2) If such person shall furnish suitable proof, unless the court for good cause shown shall otherwise direct, that no further valid claim against such insurer arising out of his cause of action other than those already presented can be made; and
(3) If the total liability of such insurer to all claimants arising out of the same act of its insured shall be no greater than its maximum liability would be were it not in liquidation.
(c) No judgment against such an insured taken after the date of entry of the liquidation order shall be considered in the liquidation proceedings as evidence of liability or of the amount of damages, and no judgment against an insured taken by default or by collusion prior to the entry of the liquidation order shall be considered as conclusive evidence in the liquidation proceedings, either of the liability of such insured to such person upon such cause of action or of the amount of damages to which such person is therein entitled.
(d) No claim of any secured claimant shall be allowed at a sum greater than the difference between the value of the claim without security and the value of the security itself as of the date of the entry of the order of liquidation or such other date set by the court for determining rights and liabilities as provided in § 5924 of this title unless the claimant surrenders the security to the Commissioner, in which event the claim shall be allowed in the full amount for which it is valued.
§ 5929 Order of insolvency; time to file claims.
(a) If, upon the entry of an order of liquidation under this chapter or at any time thereafter during liquidation proceedings the insurer is not clearly solvent, the court shall, upon hearing after such notice it deems proper, make and enter an order adjudging the insurer to be insolvent.
(b) After the entry of the order of insolvency, regardless of any prior notice that may have been given to creditors, the Commissioner shall notify all persons who may have claims against the insurer to file such claims with the Commissioner, at a place and within the time specified in the notice, or such claims shall be forever barred. The time specified in the notice shall be as fixed by the court for filing of claims and which shall be not less than 6 months after the entry of the order of insolvency. The notice shall be given in such manner and for such reasonable period of time as may be ordered by the court.
§ 5930 Report and petition for assessment.
Within 3 years after the date of the entry of an order of rehabilitation or liquidation of a domestic mutual insurer or a domestic reciprocal insurer, the Commissioner may make and file a report and petition to the court setting forth:
(1) The reasonable value of the assets of the insurer;
(2) The liabilities of the insurer to the extent thus far ascertained by the Commissioner;
(3) The aggregate amount of the assessment, if any, which the Commissioner deems reasonably necessary to pay all claims, the costs and expenses of the collection of the assessments and the costs and expenses of the delinquency proceedings in full;
(4) Any other information relative to the affairs or property of the insurer that the Commissioner deems material.
§ 5931 Order and levy of assessments.
(a) Upon the filing and reading of the report and petition provided for in § 5930 of this title, the court, ex parte, may order the Commissioner to assess all members or subscribers of the insurer who may be subject to such an assessment, in such an aggregate amount as the court finds reasonably necessary to pay all valid claims as may be timely filed and proved in the delinquency proceedings, together with the costs and expenses of levying and collecting assessments and the costs and expenses of the delinquency proceedings in full. Any such order shall require the Commissioner to assess each such member or subscriber for such member or subscriber's proportion of the aggregate assessment, according to such reasonable classification of such members or subscribers and formula as may be made by the Commissioner and approved by the court.
(b) The court may order additional assessments upon the filing and reading of any amendment or supplement to the report and petition referred to in (a) above, if such amendment or supplement is filed within 3 years after the date of the entry of the order of rehabilitation or liquidation.
(c) After the entry of the order to levy and assess members or subscribers of an insurer referred to in (a) or (b) above, the Commissioner shall levy and assess members or subscribers in accordance with the order.
(d) The total of all assessments against any member or subscriber with respect to any policy, whether levied pursuant to this chapter or pursuant to any other provision of this title, shall be for no greater amount than that specified in the policy or policies of the member or subscriber and as limited under this title, except as to any policy which was issued at a rate of premium below the minimum rate lawfully permitted for the risk insured, in which event the assessment against any such policyholder shall be upon the basis of the minimum rate for such risk.
(e) No assessment shall be levied against any member or subscriber with respect to any nonassessable policy issued in accordance with this title.
§ 5932 Assessment prima facie correct; notice; payment; proceedings to collect.
(a) Any assessment of a subscriber or member of an insurer made by the Commissioner, pursuant to the order of court fixing the aggregate amount of the assessment against all members or subscribers and approving the classification and formula made by the Commissioner under § 5931(a) of this title, shall be prima facie correct.
(b) Each member or subscriber shall be notified of the amount of assessment to be paid by written notice mailed to the address of the member or subscriber last of record with the insurer. Failure of the member or subscriber to receive the notice so mailed, within the time specified therein or at all, shall be no defense in any proceeding to collect the assessment.
(c) If any such member or subscriber fails to pay the assessment within the period specified in the notice, which period shall not be less than 20 days after mailing, the Commissioner may obtain an order in the delinquency proceedings requiring the member or subscriber to show cause at a time and place fixed by the court why judgment should not be entered against such member or subscriber for the amount of the assessment together with all costs, and a copy of the order and a copy of the petition therefor shall be served upon the member or subscriber within the time and in the manner designated in the order.
(d) If the subscriber or member after due service of a copy of the order and petition referred to in subsection (c) above is made:
(1) Fails to appear at the time and place specified in the order, judgment shall be entered against such subscriber or member as prayed for in the petition; or
(2) Appears in the manner and form required by law in response to the order, the court shall hear and determine the matter and enter a judgment in accordance with its decision.
(e) The Commissioner may collect any such assessment through any other lawful means.
§ 5933 Qualified financial contracts.
(a) Notwithstanding any other provision of this chapter to the contrary, including any other provision of this chapter permitting the modification of contracts, or other law of a state, no person shall be stayed, enjoined or prohibited from exercising any of the following:
(1) A contractual right to terminate, liquidate, accelerate or close out, or cause the termination, liquidation, acceleration or close out of obligations, under or in connection with any netting agreement or qualified financial contract with an insurer because of any of the following:
a. The insolvency, financial condition or default of the insurer at any time, provided that the right is enforceable under applicable law other than this chapter; or
b. The commencement of a formal delinquency proceeding under this chapter;
(2) Any right under a pledge, security, collateral, reimbursement or guarantee agreement or arrangement or any other similar security arrangement or other credit enhancement relating to 1 or more netting agreements or qualified financial contracts; or
(3) Subject to any provision of § 5927(b) of this title, any right to set off or net out any termination value, payment amount or other transfer obligation arising under or in connection with 1 or more netting agreements or qualified financial contracts where the counterparty or its guarantor is organized under the laws of the United States or a state or a foreign jurisdiction approved by the Securities Valuation Office of the National Association of Insurance Commissioners as eligible for netting.
(4) If a counterparty to a master netting agreement or a qualified financial contract with an insurer subject to a formal delinquency proceeding under this chapter 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 calculated in accordance with subsection (f) of this section.
(b) 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 or petition has been filed under this chapter shall be transferred to or on the order of the receiver for the insurer, even if the insurer is the defaulting party, notwithstanding any walkaway clause in the netting agreement or qualified financial contract. For purposes of this subsection, the term "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 1 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 nondefaulting party. Any limited 2-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 2-way payment or second method provision as against the defaulting insurer. Any such net or settlement amount shall, except to the extent it is subject to 1 or more secondary liens or encumbrances or rights of netting or setoff, be a general asset of the insurer.
(c) In making any transfer of a netting agreement or qualified financial contract of an insurer subject to a formal delinquency proceeding under this chapter, the receiver shall do either of the following:
(1) Transfer to 1 party (other than an insurer subject to a proceeding under this chapter) 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 formal delinquency proceeding, including all of the following:
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 (c)(1) of this section (with respect to the counterparty and any affiliate of such counterparty).
(d) If a receiver for an insurer makes a transfer of 1 or more netting agreements or qualified financial contracts, then the receiver shall use its best efforts to notify any person who is a party to the netting agreements or qualified financial contracts of the transfer by 12:00 noon (the receiver's local time) on the business day following the transfer. For purposes of this subsection, "business day" means a day other than a Saturday, Sunday or any day on which either the New York Stock Exchange or the Federal Reserve Bank of New York is closed.
(e) Notwithstanding any other provision of this chapter to the contrary, a receiver shall not avoid a transfer of money or other property arising under or in connection with a netting agreement or qualified financial contract (or any pledge, security, collateral or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract) that is made before the commencement of a formal delinquency proceeding under this chapter. However, a transfer may be avoided under § 5925(c) of this title if the transfer was made with actual intent to hinder, delay or defraud the insurer, a receiver appointed for the insurer or existing or future creditors.
(f)(1) In exercising the rights of disaffirmance or repudiation of a receiver with respect to any netting agreement or qualified financial contract to which an insurer is a party, the receiver for the insurer shall either:
a. Disaffirm or repudiate all netting agreements and qualified financial contracts between a counterparty or any affiliate of the 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 paragraph (f)(1)a. of this section (with respect to the person or any affiliate of the person).
(2) Notwithstanding any other provision of this chapter, any claim of a counterparty against the estate arising from the receiver's disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the liquidation or immediately preceding conservation or rehabilitation case shall be determined and shall be allowed or disallowed as if the claim had arisen before the date of the filing of the petition for liquidation or, if a conservation or rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date of the filing of the petition for conservation or rehabilitation. The amount of the claim 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. The term "actual direct compensatory damages" does not include punitive or exemplary damages, damages for lost profit or lost opportunity or damages for pain and suffering, but does include 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.
(g) The term "contractual right" as used in this section includes any right, whether or not evidenced in writing, arising under statutory or common law, a rule or bylaw of a national securities exchange, national securities clearing organization or securities clearing agency, a rule or bylaw or a resolution of the governing body of a contract market or its clearing organization, or under law merchant.
(h) The provisions of this section shall not apply to persons who are affiliates of the insurer that is the subject of the formal delinquency proceeding, unless the Commissioner has previously approved the application of this section to a particular affiliate, which approval may not be unreasonably or arbitrarily withheld.
(i) All rights of counterparties under this chapter shall apply to netting agreements and qualified financial contracts entered into on behalf of the general account or separate accounts if the assets of each separate account are available only to counterparties to netting agreements and qualified financial contracts entered into on behalf of that separate account.