(A) SPRVs authorized under this chapter may at any given time enter into and effectuate SPRV contracts with one or more ceding insurers, provided that the SPRV contracts obligate the SPRV to indemnify the ceding insurer for losses and that contingent obligations of the SPRV under the SPRV contracts are securitized in full through a single SPRV insurance securitization and are funded fully and secured with assets held in trust in accordance with the requirements of this chapter pursuant to agreements contemplated by this chapter and invested in a manner that meets the criteria set forth in § 38-14-170.

(B) A SPRV may enter into agreements with third parties and conduct business necessary to fulfill its obligations and administrative duties incident to the insurance securitization and the SPRV contract. The agreements may include entering into swap agreements or other transactions that have the objective of leveling timing differences in funding up-front or ongoing transaction expenses or managing credit or interest rate risk of the investments in trust to assure that the assets held in trust will be sufficient to satisfy payment or repayment of the securities issued pursuant to an insurance securitization transaction or the obligations of the SPRV under the SPRV contract. In fulfilling its function, the SPRV must adhere to the following requirements and must, to the extent of its powers, ensure that contracts obligating other parties to perform certain functions incident to its operations are substantively and materially consistent with the following requirements and guidelines:

(1) A SPRV must have a distinct name, which must include the designation " SPRV". The name of the SPRV must not be deceptively similar to, or likely to be confused with or mistaken for, any other existing business name registered in this State.

(2) Unless otherwise provided in the plan of operation, the principal place of business and office of any SPRV organized under this chapter must be located in this State.

(3) The assets of a SPRV must be preserved and administered by or on behalf of the SPRV to satisfy the liabilities and obligations of the SPRV incident to the insurance securitization and other related agreements, including the SPRV contract.

(4) Assets of the SPRV that are pledged to secure obligations of the SPRV to a ceding insurer under a SPRV contract must be held in trust and administered by a qualified United States financial institution. The qualified United States financial institution must not control, be controlled by, or be under common control with, the SPRV or the ceding insurers.

(5) The agreement governing any such trust must create one or more trust accounts into which all pledged assets must be deposited and held until distributed in accordance with the trust agreement. The pledged assets must be held by the trustee at the trustee’s office in the United States and may be held in certificated or electronic form.

(6) The provisions for withdrawal by ceding insurers of assets from the trust must be clean and unconditional, subject only to the following requirements:

(a) the ceding insurer must have the right to withdraw assets from the trust account at any time, without notice to the SPRV, subject only to written notice to the trustee from the ceding insurer that funds in the amount requested are due and payable by the SPRV;

(b) no other statement or document need be presented in order to withdraw assets, except the ceding insurer may be required to acknowledge receipt of withdrawn assets;

(c) the trust agreement must indicate that it is not subject to any conditions or qualifications outside of the trust agreement;

(d) the trust agreement must not contain references to any other agreements or documents; and

(e) no reference must be made to the fact that these funds may represent reinsurance premiums or that the funds have been deposited for any specific purpose.

(7) The trust agreement must be established for the sole use and benefit of the ceding insurer at least to the full extent of the SPRV’s obligations to the ceding insurer under the SPRV contract. In the case of more than one ceding insurer, a separate trust agreement must be entered into with each ceding insurer and a separate trust account must be maintained for each ceding insurer.

(8) The trust agreement must provide for the trustee to:

(a) receive assets and hold all assets in a safe place;

(b) determine that all assets are in a form that the ceding insurer or the trustee, upon direction by the ceding insurer may, whenever necessary, negotiate the assets, without consent or signature from the SPRV or any other person or entity;

(c) furnish to the SPRV, the director, or his designee, and the ceding insurer a statement of all assets in the trust account reported at fair value upon its inception and at intervals no less frequent than the end of each calendar quarter;

(d) notify the SPRV and the ceding insurer, within ten days, of any deposits to or withdrawals from the trust account;

(e) upon written demand of the ceding insurer, immediately take any and all steps necessary to transfer absolutely and unequivocally all right, title, and interest in the assets held in the trust account to the ceding insurer and deliver physical custody of the assets to the ceding insurer; and

(f) allow no substitutions or withdrawals of assets from the trust account, except on written instructions from the ceding insurer.

(9) The trust agreement must provide that at least thirty days, but not more than forty-five days, before termination of the trust account, written notification of termination must be delivered by the trustee to the ceding insurer.

(10) The trust agreement may be made subject to and governed by the laws of any state, in addition to the requirements for the trust as provided in this chapter, provided that the state is disclosed in the plan of operation filed with and approved, or deemed approved, by the director, or his designee, under § 38-14-40.

(11) The trust agreement must prohibit invasion of the trust corpus for the purpose of paying compensation to, or reimbursing the expenses of, the trustee.

(12) The trust agreement must provide that the trustee must be liable for its own negligence, wilful misconduct, or lack of good faith.

(13) Notwithstanding the provisions of item (6)(c), (d), and (e) or item 14(e) of this subsection, when a trust agreement is established in conjunction with a SPRV contract, then the trust agreement may provide that the ceding insurer must undertake to use and apply any amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the SPRV, for the following purposes:

(a) to pay or reimburse the ceding insurer amounts due to the ceding insurer under the specific SPRV contract including, but not limited to, unearned premiums due to the ceding insurer, if not otherwise paid by the SPRV in accordance with the terms of the agreement; or

(b) when the ceding insurer has received notification of termination of the trust account, and where the SPRV’s entire "obligations" under the specific SPRV contract remain unliquidated and undischarged ten days before the termination date, to withdraw amounts equal to the obligations and deposit the amounts in a separate account, in the name of the ceding insurer, in any qualified United States financial institution, apart from its general assets, in trust for those uses and purposes specified in subsubitem (i) of this subsection as may remain executory after the withdrawal and for any period after the termination date. " Obligations" within the meaning of this subparagraph may, without duplication, include:

(i) losses and loss expenses paid by the ceding insurer but not recovered from the SPRV;

(ii) reserves for losses reported and outstanding;

(iii) reserves for losses incurred but not reported;

(iv) reserves for loss expenses;

(v) reserves for unearned premiums; and

(vi) any other amounts that, together with subsubitems (i) to (v), represent the aggregate limit remaining under the SPRV contract if the period of coverage or the agreed upon period of loss development has yet to expire.

(c) the provisions to be included in the trust agreement pursuant to this item may be included instead in the underlying SPRV contract.

(14) A SPRV contract must contain provisions that:

(a) require the SPRV to enter into a trust agreement specifying what recoverables or reserves, or both, the agreement is to cover and to establish a trust account for the benefit of the ceding insurer;

(b) stipulate that assets deposited in the trust account must be valued according to their current fair value and must consist only of permitted investments;

(c) require the SPRV, before depositing assets with the trustee, to execute assignments, endorsements in blank, or to transfer legal title to the trustee of all shares, obligations, or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may whenever necessary negotiate any such assets without consent or signature from the SPRV or any other entity;

(d) require that all settlements of account between the ceding insurer and the SPRV be made in cash or its equivalent; and

(e) stipulate that the SPRV and the ceding insurer agree that the assets in the trust account, established pursuant to the provisions of the SPRV contract, may be withdrawn by the ceding insurer at any time, notwithstanding any other provisions in the SPRV contract, and must be utilized and applied by the ceding insurer or any successor by operation of law of the ceding insurer, including, subject to the provisions of § 38-14-160 , but without further limitation, any liquidator, rehabilitator, receiver, or conservator of the ceding insurer, without diminution because of insolvency on the part of the ceding insurer or the SPRV, only for the following purposes:

(i) to transfer all such assets into one or more trust accounts for the benefit of the ceding insurer pursuant to the terms of the SPRV contract and in compliance with this chapter; and

(ii) to pay any other amounts that the ceding insurer claims are due under the SPRV contract.

(15) The SPRV contract entered into by the SPRV may contain provisions that give the SPRV the right to seek approval from the ceding insurer to withdraw from the trust all or part of the assets contained in the trust and to transfer the assets to the SPRV, provided that:

(a) at the time of the withdrawal, the SPRV must replace the withdrawn assets with other qualified assets having a fair value equal to the fair value of the assets withdrawn and that meet the requirements of § 38-14-170; and

(b) after the withdrawals and transfer, the fair value of the assets in trust securing the obligations of the SPRV under the SPRV contract is no less than an amount needed to satisfy the fully funded requirement of the SPRV contract. The ceding insurer must be the sole judge as to the application of these provisions but must not unreasonably nor arbitrarily withhold its approval.

(16) The contract must provide that investors in the SPRV agree that any obligation to repay principal, interest, or dividends on the securities issued by the SPRV must be reduced upon the occurrence of a triggering event, to the extent that the assets of the SPRV held in trust for the benefit of the ceding insurer are remitted to the ceding insurer in fulfillment of the obligations of the SPRV under the SPRV contract.

(17) Assets held by a SPRV in trust must be valued at their fair value.

(18) The proceeds from the sale of securities by the SPRV to investors must be deposited with the trustee as contemplated by this chapter and must be held or invested by the trustee in accordance with the requirements of § 38-14-170.

(19) A SPRV organized under this chapter must engage only in fully funded indemnity triggered SPRV contracts to support in full the ceding insurers’ exposures assumed by the SPRV. However, a SPRV may engage in a SPRV contract that is nonindemnity triggered only after the director, or his designee, in accordance with the authority granted under § 38-14-200 of this chapter, adopts regulations addressing the treatment of the portion of the risk that is not indemnity based, to include accounting, disclosure, risk-based capital treatment, and the manner in which risks associated with a nonindemnity based SPRV contract may be evaluated and managed. At no time may a SPRV enter into a SPRV contract that is not fully funded, whether indemnity triggered or nonindemnity triggered. Assets of the SPRV may be used to pay interest or other consideration on any outstanding debt or other obligation of the SPRV, and nothing in this item must be construed or interpreted to prevent a SPRV from entering into a swap agreement or other transaction that has the effect of guaranteeing interest or other consideration.

(20) In the SPRV insurance securitization, the contracts or other relating documentation must contain provisions identifying the SPRV that will enter into the special purpose reinsurance securitization and the contracts or other documentation must clearly disclose that the assets of the SPRV, and only those assets, are available to pay the obligations of that SPRV. Notwithstanding the foregoing, and subject to the provisions of this chapter and any other applicable law or regulation, the failure to include such language in the contracts or other documentation must not be used as the sole basis by creditors, reinsurers, or other claimants to circumvent the provisions of this chapter.

(21) A SPRV is not authorized to:

(a) issue or otherwise administer primary insurance policies;

(b) have any obligation to the policyholders or reinsureds of the ceding insurer;

(c) enter into a SPRV contract with a person that is not licensed or otherwise authorized to conduct the business of insurance or reinsurance in at least its state or country of domicile; or

(d) assume or retain exposure to insurance or reinsurance losses for its own account that is not initially fully funded by proceeds from a SPRV securitization that meets the requirements of this chapter.

(22) At the cessation of business of a SPRV, the limited certificate of authority granted by the director, or his designee, must expire and the SPRV must no longer be authorized to conduct activities pursuant to this chapter unless and until a new certificate of authority is issued pursuant to a new filing in accordance with § 38-14-40.

(23) It is unlawful for a SPRV to lend or otherwise invest, or place in custody, trust, or under management any of its assets with, or to borrow money or receive a loan from (other than by issuance of the securities pursuant to an insurance securitization) or advance from, anyone convicted of a felony, anyone who is untrustworthy or of known bad character, or anyone convicted of a criminal offense involving the conversion or misappropriation of fiduciary funds or insurance accounts, theft, deceit, fraud, misrepresentation, or corruption.