Compilation of Rules and Regulations of the State of Georgia
Department 120 - OFFICE OF COMMISSIONER OF INSURANCE, SAFETY FIRE COMMISSIONER AND INDUSTRIAL LOAN COMMISSIONER
Chapter 120-2 - RULES OF COMMISSIONER OF INSURANCE
Subject 120-2-69 - REQUIREMENTS FOR INSURANCE COMPANY CUSTODIAL ACCOUNTS
Rule 120-2-69-.03 - Custody Agreements; Requirements

(a) Certificated securities held by the custodian shall be held either separate from the securities of the custodian and all of its other customers or in a fungible bulk of securities as part of a Filing of Securities by Issue (FOSBI) arrangement;

(b) Securities held in fungible bulk by the custodian and securities in a clearing corporation or in the Federal Reserve book-entry system shall be separately identified on the custodian's official records as being owned by the insurance company. The records shall identify which custodied securities are held by the custodian or by its agent and which securities are in a clearing corporation or in the Federal Reserve book-entry system. If the securities are in a clearing corporation or in the Federal Reserve book-entry system, the records shall also identify where the securities are and if in a clearing corporation, the name of the clearing corporation and if through an agent, the name of the agent;

(c) All custodied securities that are registered shall be registered in the name of the company or in the name of a nominee of the company or in the name of the custodian or its nominee or, if in a clearing corporation, in the name of the clearing corporation or its nominee;

(d) Custodied securities shall be held subject to the instructions of the insurance company and shall be withdrawable upon the demand of the insurance company, except that custodied securities used to meet the deposit requirements set forth in Chapter 12 of the Georgia Insurance Code shall, to the extent required by that section, be under the control of the Georgia Insurance Department and shall not be withdrawn by the insurance company without the express written approval of the Georgia Insurance Department. Nothing in this section, however, shall prohibit an insurance company from effecting a valid substitution of securities to maintain compliance with Chapter 12 of the Georgia Insurance Code;

(e) The custodian shall be required to send or cause or make available to the insurance company a confirmation of all transfers of custodied securities to or from the account of the insurance company. In addition, the custodian shall be required to furnish no less than monthly to the insurance company reports of holdings of custodied securities at times and containing information reasonably requested by the insurance company;

(f) During the course of the custodian's regular business hours, and upon reasonable notice, an officer or employee of the insurance company, an independent accountant selected by the insurance company, and a representative of an appropriate regulatory body shall be entitled to examine, on the premises of the custodian, the custodian's records relating to custodied securities, but only upon furnishing the custodian with written instructions to that effect from an appropriate officer of the insurance company;

(g) The custodian and its agents shall be required to send to the insurance company:

(h) The custodian shall maintain records sufficient to provide identifying information relating to custodied securities that may be reported in the insurance company's annual statement and supporting schedules and information required in an audit of the financial statements of the insurance company;

(i) the custodian shall provide, upon written request from an appropriate officer of the insurance company, the appropriate affidavits, substantially in the form attached to this Regulation Chapter, with respect to custodied securities;

(j) The custodian shall secure and maintain insurance protection in an adequate amount covering the custodian's duties and activities as custodian for the insurer's assets, and shall state in the custody agreement that protection is in compliance with the requirements of the custodian's banning regulator. The Commissioner may determine whether the type of insurance is appropriate and the amount of coverage is adequate;

(k) The custodian shall be obligated to indemnify the insurance company for any loss of custodied securities, except that the custodian shall not be required by this regulation to be so obligated to the extent that the loss was caused by other than the negligence or dishonesty of the custodian;

(l) In the event that there is a loss of custodied securities for which the custodian shall be obligated to indemnify the insurance company as provided in Paragraph (k) above, the custodian shall promptly replace the securities or the value thereof and the value of any direct loss of rights or privileges resulting from the loss of securities;

(m) The agreement may provide that the custodian will not be liable for a failure to take an action required under the agreement in the event and to the extent that the taking of the action is prevented or delayed by war (whether declared or not and including existing wars), revolution, insurrection, riot, civil commotion, act of God, accident, fire, explosion, stoppage of labor, strikes or other differences with employees, laws, regulations, orders or other acts of any governmental authority, or any other cause whatever beyond its reasonable control;

(n) In the event that the custodian gains entry in a clearing corporation or in the Federal Reserve book-entry system through an agent, there shall be an agreement between the custodian and the agent under which the agent shall be subject to the same liability for loss of custodied securities as the custodian. However, if the agent shall be subject to regulation under the laws of a jurisdiction that is different from the jurisdiction the laws of which regulate the custodian, the Commissioner of Insurance of the state of domicile of the insurance company may accept a standard of liability applicable to the agent that is different from the standard of liability applicable to the custodian.