As used in this part: (1)(a) “Financial guaranty insurance” means a surety bond, insurance policy, an indemnity contract issued by an insurer, or any similar guaranty, under which loss is payable upon proof of occurrence of financial loss to an insured claimant, obligee, or indemnitee as a result of:
1. The failure of an obligor on a debt instrument or other monetary obligation, including common or preferred stock guaranteed under a surety bond, insurance policy, or indemnity contract, to make principal, interest, premium, dividend, or purchase price payments when due, if the failure is the result of a financial default or insolvency, whether such obligation is incurred directly or as guarantor by or on behalf of another obligor who also defaulted;
2. Changes in the levels of interest rates or the differential in interest rates between various markets or products;
3. Changes in the rate of exchange of currency;
4. Changes in the value of specific assets or commodities, financial or commodity indices, or price levels in general; or
5. Other events which the office determines are substantially similar to any of the foregoing.
(b) However, “financial guaranty insurance” does not include: 1. Insurance of a loss resulting from an event described in paragraph (a), if the loss is payable only upon the occurrence of any of the following, as specified in a surety bond, insurance policy, or indemnity contract:
a. A fortuitous physical event;
b. A failure of or deficiency in the operation of equipment; or
c. An inability to extract or recover a natural resource;
2. An individual or schedule public official bond;
3. A court bond required in connection with judicial, probate, bankruptcy, or equity proceedings, including a waiver, probate, open estate, or life tenant bond;
4. A bond running to a federal, state, county, municipal government, or other political subdivision, as a condition precedent to the granting of a license to engage in a particular business or of a permit to exercise a particular privilege;
5. A loss security bond or utility payment indemnity bond running to a governmental unit, railroad, or charitable organization;
6. A lease, purchase and sale, or concessionaire surety bond;
7. Credit unemployment insurance on a debtor in connection with a specific loan or other credit transaction, to provide payments to a creditor in the event of unemployment of the debtor for the installments or other periodic payments becoming due while a debtor is unemployed;
8. Credit insurance indemnifying a manufacturer, merchant, or educational institution which extends credit against loss or damage resulting from nonpayment of debts owed to her or him for goods or services provided in the normal course of her or his business;
9. Guaranteed investment contracts that are issued by life insurance companies and that provide that the life insurer will make specified payments in exchange for specific premiums or contributions;
10. Mortgage guaranty insurance as defined in s. 635.011(1) or s. 635.021; 11. Indemnity contracts or similar guaranties, to the extent that they are not otherwise limited or proscribed by this part, in which a life insurer guarantees: a. Its obligations or indebtedness or the obligations or indebtedness of a subsidiary of which it owns more than 50 percent, other than a financial guaranty insurance corporation, if:
(I) For any such obligations or indebtedness that are backed by specific assets, such assets are at all times owned by the insurer or the subsidiary; and
(II) For the obligations or indebtedness of the subsidiary that are not backed by specific assets of the life insurer, the guaranty terminates once the subsidiary ceases to be a subsidiary; or
b. The obligations or indebtedness, including the obligation to substitute assets where appropriate, with respect to specific assets acquired by a life insurer in the course of normal investment activities and not for the purpose of resale with credit enhancement, or guarantees obligations or indebtedness acquired by its subsidiary, provided that the assets so acquired have been:
(I) Acquired by a special purpose entity where the sole purpose is to acquire specific assets of the life insurer or the subsidiary and issue securities or participation certificates backed by such assets; or
(II) Sold to an independent third party; or
c. The obligations or indebtedness of an employee or agent of the life insurer;
12. Any form of surety insurance as defined in s. 624.606; or
13. Any other form of insurance covering risks which the office determines to be substantially similar to any of the foregoing.
(2) “Affiliate” means a person that, directly or indirectly, owns at least 10 percent but less than 25 percent of the financial guaranty insurance corporation or that is at least 10 percent but less than 25 percent, directly or indirectly, owned by a financial guaranty insurance corporation.
(3) “Average annual debt service” means the amount of insured unpaid principal and interest on an issue of obligations, multiplied by the number of the insured obligations in the issue, each obligation representing a $1,000 par value, divided by an amount equal to the aggregate life of all the obligations in the issue. The formula for bonds is:
|Average Annual Debt Service =|
|Total Debt Service x Number of Bonds|
|Total Debt Service =||Insured Unpaid Principal + Interest due over the remaining life of the bond|
|Number of Bonds =||Total Insured Principal|
Bond Years = Number of Bonds x Term in Years
(4) “Collateral” means:
(b) The market value of investment grade securities, other than securities evidencing an interest in the projects financed with the proceeds of the insured obligations;
(c) The scheduled cash flow from investment grade obligations scheduled to be received on or prior to the date of scheduled debt service on the insured obligation;
(d) A conveyance or mortgage of real property; or
(e) A letter of credit;
if deposited with or held by the corporation; held in trust by a trustee, acceptable to the office, for the benefit of the corporation; or held in trust, pursuant to the bond indenture, by a trustee acceptable to the office, for the benefit of bondholders in the form of sinking funds or other reserves which may be used solely for the payment of debt service.
(5) “Contingency reserve” means an additional liability reserve established to protect policyholders against the effects of adverse economic cycles or other unforeseen circumstances.
(6) “Financial guaranty insurance corporation” means a stock insurer licensed to transact financial guaranty insurance business in this state.
(7) “Governmental unit” means the United States, Canada, a state, territory, or possession of the United States, the District of Columbia, a province of Canada, a municipality, or a political subdivision of any of the foregoing, or any public agency or instrumentality thereof.
(8) “Guaranties of consumer debt obligations” means insurance policies indemnifying against loss or damage resulting from nonpayment of debts owed for extensions of credit to individuals for nonbusiness purposes. Such extensions of credit include guaranties of securities backed by obligations of individuals. Policies that provide this coverage must contain a provision that all liability terminates upon the sale or transfer of the underlying obligation to any transferee which is not an insured of the financial guaranty insurance corporation under a similar policy.
(9) “Industrial development bond” means any security, or other instrument under which a payment obligation is created, issued by or on behalf of a governmental unit to finance a project serving a private industrial, commercial, or manufacturing purpose and payable from the revenues of the project or by any private, for-profit entity.
(10) An “investment grade obligation” means an obligation that:
(a) Has been determined to be in one of the top four generic lettered rating classifications by a securities rating agency acceptable to the office;
(b) Has been identified in writing by such a rating agency as an insurable risk deemed to be of investment grade quality for purposes of insurance;
(c) Has received a “yes” rating by the Securities Valuation Office of the National Association of Insurance Commissioners; or
(d) Has been submitted for review to the appropriate rating agency or Securities Valuation Office and will be qualified pursuant to paragraph (a), paragraph (b), or paragraph (c).
(11) “Letter of credit” means:
(a) The stated amount of a clean unconditional, irrevocable letter of credit issued by a bank or trust company whose debt rating applicable to the term of the insured obligation is in one of the two highest generic lettered rating classifications by a securities rating agency acceptable to the office; or
(b) Fifty percent of the stated amount of a clean unconditional, irrevocable letter of credit issued by a bank or trust company whose debt rating applicable to the term of the insured obligation is in a rating classification other than as set forth in paragraph (a).
(c) An issuing or confirming bank referred to in paragraph (a) or paragraph (b) shall be:
1. Determined by the Securities Valuation office of the National Association of Insurance Commissioners to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of banks and trust companies whose letters of credit shall be acceptable to insurance regulatory authorities; provided, that the letter of credit is issued for the full term of the insured obligation, or the insured obligation is subject to mandatory call and redemption from the proceeds of the letter of credit if the letter of credit is not renewed or replaced; and
2.a. A member of the federal reserve system or chartered by a state of the United States; or
b. Organized and existing under the laws of a foreign country whose sovereign debt is rated in the highest major rating classification by a securities rating agency acceptable to the office; and which has been licensed as a domestic branch or agency by the Federal Government or a state of the United States; and which is regulated, supervised, and examined by United States federal or state authorities having regulatory authority over banks and trust companies.
(12) “Municipal bonds” means municipal obligation bonds and industrial development bonds.
(13) “Municipal obligation bond” means any security or other instrument, including a lease, under which a payment obligation is created, other than an industrial development bond, which is issued by or on behalf of or payable or guaranteed by a governmental unit, including certificates of participation evidencing proportionate ownership in payments to be made by a governmental unit, or issued by an entity other than a governmental unit if such security or instrument is eligible for issuance by a governmental unit but would not be an industrial development bond if so issued.
(14) “Reinsurance” means cessions qualifying for credit under s. 627.975.
(15) “Total liability of an insurer transacting financial guaranty insurance” means the aggregate amount of insured unpaid principal, interest, and other monetary payments, if any, of guaranteed obligations insured or assumed, less reinsurance and collateral. However, for guaranteed obligations insured or assumed where acceleration of payment of such obligation is at the sole option of the insurer, such total liability means the aggregate amount of the discounted present value of insured unpaid principal and unpaid interest up to the point of acceleration and other monetary payments, if any, of guaranteed obligations insured or assumed, less reinsurance and collateral. The discount rate to be applied shall be the average rate of return on the admitted assets of the insurer at the time of computation or the face rate of interest of the guaranteed obligation, whichever is less.