Utah Administrative Code
Topic - Insurance
Title R590 - Administration
Rule R590-114 - Letters of Credit
Section R590-114-4 - Rule
Universal Citation: UT Admin Code R 590-114-4
Current through Bulletin 2024-06, March 15, 2024
(1) A letter of credit issued to comply with Subsection 31A-17-404(10)(c)(ii) shall meet the requirements in this section.
(2) A letter of credit that takes the form of the Model Letter of Credit, available upon request from the department, complies with this rule.
(3) A letter of credit shall:
(a) be issued by a
bank or trust company that is a member of the Federal Reserve system;
(b) name the ceding insurer as the sole
beneficiary;
(c) be
clean;
(d) be unconditional and not
subject to any qualifications outside the letter of credit;
(e) be irrevocable;
(f) contain an evergreen clause;
(g) have a term of not less than one
year;
(h) be automatically extended
for not less than one additional year, unless the issuer notifies the ceding
insurer and the reinsurer that the letter will not be renewed at least 30 days
before the letter expires;
(i)
state that a bank's obligation is not contingent upon reimbursement;
(j) state whether the letter of credit is
subject to the laws of this state; and
(k) provide that any drafts drawn be
presentable at a bank office in the United States.
(4) A letter of credit may not:
(a) contain references to any other
agreement, document, or entity; or
(b) be reduced or revoked without the written
consent of the beneficiary.
(5)
(a) A
letter of credit may contain a boxed reference section with the applicant's
name and other appropriate information for internal identification.
(b) The information contained in the boxed
reference section may not affect the terms of the letter or the obligations of
the bank.
(6) When a letter of credit is not renewed or is withdrawn, the ceding insurer may:
(a) withdraw the balance of the letter of
credit; and
(b) place the resulting
sum in trust to secure continuing obligations under the reinsurance contract
until the ceding insurer receives the following:
(i) a renewal letter of credit; or
(ii) an alternative form of security that
complies with this rule and Title 31A, Insurance Code.
(7) A letter of credit used as security under this rule shall be available for inspection by the commissioner or the commissioner's designee upon request.
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