Oregon Administrative Rules
Chapter 836 - DEPARTMENT OF CONSUMER AND BUSINESS SERVICES, INSURANCE REGULATION
Division 27 - DOMESTIC INSURERS; ORGANIZATION; CORPORATE PROCEDURES
Section 836-027-0330 - Agreement with Borrower

(1) All loans must terminate not more than one year from the date of origination or upon the earlier demand of the insurer. The insurer must have the right to terminate the loan in a maximum of the normal settlement time for the loaned security.

(2) At the termination of the loan, the borrower must be obligated to return equivalent securities.

(3) The insurer must be entitled to receive from the borrower all distributions made by the issuer of the loaned securities during the duration of the loan, including cash dividends, stock dividends, stock splits and interest distributions of any kind declared, granted or made by the issuer, or any affiliate thereof, and rights to purchase or subscribe for additional securities.

(4) At the inception of the loan, the borrower must provide acceptable collateral. If the acceptable collateral is in the form of cash or cash equivalents, it must be in an amount specified in this section. If the acceptable collateral is in the form of a letter of credit, it must be an irrevocable letter of credit drawn on a bank acceptable to the insurer and in an amount specified in this section. If the acceptable collateral is in the form of direct obligations of, or securities that are fully guaranteed as to principal and interest by, the government of the United States or any agency of the United States, or by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation or in the form of sovereign debt rated 1 by the Securities Valuation Office of the National Association of Insurance Commissioners or any successor office established by the National Association of Insurance Commissioners, such securities must have a market value in an amount specified in this section. For purposes of this section:

(5) If the amount or market value of the collateral provided by the borrower at any time is less than the applicable amount or market value specified in section (4) of this rule, the borrower must immediately provide additional collateral as follows:

(6) If the collateral is an irrevocable letter of credit, a replacement letter of credit replacing the existing letter of credit must be in the possession of the insurer a minimum of the normal settlement time for the security loaned plus four business days before the expiration date of the existing letter of credit. If a replacement letter of credit is not in the possession of the insurer by the required time, the insurer must perfect its rights under the existing letter of credit. The release of a letter of credit by the insurer before its expiration date must be conditioned upon the actual return of the loaned securities to the insurer.

(7) The insurer must have and exercise the right to use the collateral to purchase securities of the same issue in the principal market where the securities are traded should the borrower fail to return the loaned securities as required or requested. The agreement between the insurer and the borrower must detail how to handle excess collateral, or a deficiency, after such purchase.