Okla. Stat. tit. 36, § 36-1926.1

Contractual rights — Termination — Transfer.

A. As used in this section:

1. "Actual direct compensatory damages" means 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. Provided, actual direct compensatory

damages shall 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, Sunday, or

any day on which either the New York Stock Exchange or the Federal

Reserve Bank of New York is closed;

3. "Contractual right" means any right set forth in a rule or

bylaw of a derivatives clearing organization, a multilateral

clearing organization, a national securities exchange, a national

securities association, a securities clearing agency, a contract

market designated under the federal Commodity Exchange Act, a

derivatives transaction execution facility registered under the

federal Commodity Exchange Act, or a board of trade 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; and

4. "Walkaway clause" means a provision in a netting agreement

or a qualified financial contract which, 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. Notwithstanding any other provision of the Oklahoma

Insurance Code, including any other provision permitting the

modification of contracts, no person or entity shall be stayed or

prohibited from exercising:

1. A contractual right to cause termination, liquidation,

acceleration, or closeout of obligations under or in connection with

any netting agreement or qualified financial contract with an

insurer because of:

a. the insolvency, financial condition, or default of the

insurer at any time, provided the right is enforceable

under applicable law other than the provisions of this

act, or

Oklahoma Statutes - Title 36. Insurance Page 552

b. the commencement of a formal delinquency proceeding

under the provisions of this section;

2. Any right under a pledge, security, collateral,

reimbursement, guarantee agreement or arrangement, any other similar

security agreement or arrangement, or other credit enhancement

relating to one or more netting agreements or qualified financial

contracts;

3. Subject to any provision of Section 1928 of Title 36 of the

Oklahoma Statutes, any right to set off or net out any termination

value, payment amount, or other transfer obligation arising under or

in connection with one or more 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 (SVO) of the National Association of

Insurance Commissioners (NAIC) as eligible for netting; or

4. If a counterparty to a master netting agreement or a

qualified financial contract with an insurer subject to a proceeding

under this section terminates, liquidates, closes out, or

accelerates the agreement or contract, damages shall be measured as

of the date or dates of termination, liquidation, closeout, or

acceleration. The amount of a claim for damages shall be actual

direct compensatory damages calculated in accordance with subsection

G of this section.

C. 1. Upon termination of a netting agreement or qualified

financial contract, the net or settlement amount, if any, owed by a
agreement or contract, damages shall be measured as

of the date or dates of termination, liquidation, closeout, or

acceleration. The amount of a claim for damages shall be actual

direct compensatory damages calculated in accordance with subsection

G of this section.

C. 1. Upon termination of a netting agreement or qualified

financial contract, the net or settlement amount, if any, owed by a

non-defaulting party to an insurer against which an application or

petition has been filed under this section 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.

2. Any limited two-way payment or first method provision in a

netting agreement or qualified financial contract with an insurer

which 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 a general 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

section, the receiver shall either:

1. Transfer to one party, other than an insurer subject to a

proceeding under this section, all netting agreements and qualified

financial contracts between a counterparty or any affiliate of the

counterparty and the insurer which is the subject of the proceeding,

including:

Oklahoma Statutes - Title 36. Insurance Page 553

a. all rights and obligations of each party under each

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 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

1 of this subsection, with respect to the counterparty and any

affiliate of the counterparty.

E. If a receiver for an insurer makes a transfer of one or more

netting agreements or qualified financial contracts, then the

receiver shall use its best efforts to notify any person who is

party to the netting agreements or qualified financial contracts of

the transfer by twelve o'clock p.m. on the business day following

the transfer.

F. Notwithstanding any other provision of the Oklahoma

Insurance Code, a receiver shall not avoid a transfer of money or

other property arising under or in connection with a netting

agreement, 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 which is made before the

commencement of a formal delinquency proceeding under this Code.

Provided, however, a transfer may be avoided under Section 1926 of

Title 36 of the Oklahoma Statutes 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.

G. 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

which 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 the

person or any affiliate of the person or entity.
repudiate all netting agreements and

qualified financial contracts between a counterparty

or any affiliate of the counterparty and the insurer

which 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 the

person or any affiliate of the person or entity.

2. Notwithstanding any other provision of this Code, any claim

of a counterparty against the estate arising from the receiver's

disaffirmance or repudiation of a netting agreement or qualified

financial contract which has not been previously affirmed in the

liquidation or immediately preceding a conservation or

rehabilitation case shall be determined and shall be allowed or

Oklahoma Statutes - Title 36. Insurance Page 554

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.

H. The provisions of this section shall not apply to persons or

entities who are affiliates of the insurer which is the subject of

the proceeding.

I. All rights of counterparties under this Code 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 the separate account.