{"data":{"id":"us-ky/krs-304.33-055","jurisdiction":"us-ky","citation":"KRS 304.33-055","heading":"Rights and requirements of netting agreements and qualified financial","body":"contracts.\nNotwithstanding any other provision of this subtitle or statute to the contrary:\n(1) As used in this section:\n(a) 1. \"Netting agreement\":\na. Means an agreemen t, including a master agreement or bridge\nagreement for one (1) or more master agreements, that:\ni. Documents one (1) or more transactions between parties to\nthe agreement for or involving one (1) or more qualified\nfinancial contracts; and\nii. Provides for the netting or liquidation of qualified financial\ncontracts among the parties to the agreement; and\nb. Except as provided in subparagraph 2. of this paragraph, includes\nany security agreement or arrangement or other credit\nenhancement or guarantee or reim bursement obligation related to\nany contract or agreement described in this paragraph.\n2. Any contract or agreement described in this paragraph relating to\nagreements or transactions that are not qualified financial contracts shall\nbe deemed a netting agreement only with respect to those agreements or\ntransactions that are qualified financial contracts.\n3. A master agreement, or bridge agreement for one (1) or more master\nagreements, together with all schedules, confirmations, definitions,\naddenda thereto, and transactions under any thereof, shall be treated as\none (1) agreement.\n4. As used in this paragraph:\na. \"Agreement\" includes any terms and conditions incorporated by\nreference in the agreement; and\nb. \"Netting or liquidation of qualified financial contracts\" includes\nnetting or liquidation of:\ni. Present or future payment obligations or payment\nentitlements under qualified financial contracts; and\nii. Liquidation or closeout values relating to present or future\npayment obligations or payment entitlements under qualified\nfinancial contracts; and\n(b) \"Qualified financial contract\" means any:\n1. Commodity contract;\n2. Forward contract;\n3. Repurchase agreement;\n4. Securities contract;\n5. Swap agreement; or\n6. Similar agreement specified by the commissioner in an administrative\nregulation promulgated in accordance with KRS Chapter 13A;\n(2) A person shall not b e stayed or prohibited from exercising any of the following\nrights:\n(a) 1. A contractual right to terminate, liquidate, close out, or accelerate any\nnetting agreement or qualified financial contract with an insurer due to:\na. The insolvency, financial cond ition, or default of the insurer, if\nsuch right is enforceable under applicable law other than this\nsubtitle; or\nb. The commencement of a formal delinquency proceeding under this\nsubtitle.\n2. As used in this paragraph, \"contractual right\" includes any righ t arising\nunder:\na. Statutory or common law;\nb. Rules or bylaws of a national securities exchange, clearing\norganization, or securities clearing agency;\nc. Rules, bylaws, or resolutions of the governing body of a swap\nexecution facility, designated contrac t market, board of trade, or\nany clearing organization relating to any of the foregoing; or\nd. The law merchant;\n(b) The right to enforce any pledge, security, collateral, guarantee agreement, or\nother credit support document related to a netting agreement  or qualified\nfinancial contract; or\n(c) Subject to subsection (3) of this section, the right to setoff or net any\ntermination value, payment amount, or other transfer obligation arising under\na netting agreement or qualified financial contract if the coun terparty or its\nguarantor is organized under the laws of the United States, a state of the\nUnited States, or a foreign jurisdiction approved by the Securities Valuation\nOffice of the National Association of Insurance Commissioners as eligible for\nnetting;\n(3) (a) Upon termination of a netting agreement or qualified financial contract:\n1. The net or settlement amount owed by a nondefaulting party to an\ninsurer against which a delinquency proceeding has been initiated shall\nbe transferred to, or on the order of, the receiver, even if the insurer is\nthe defaulting party;\n2. Any limited two -way payment provision in a netting agreement or\nqualified financial contract with an insurer that has defaulted shall be\ndeemed a full two -way payment provision as against th e defaulting\ninsurer; and\n3. Any amount referenced in subparagraph 1. of this paragraph, except to\nthe extent it is subject to secondary liens or encumbrances, shall be\nconsidered a general asset of the insurer.\n(b) If a counterparty to a netting agreement  or a qualified financial contract with\nan insurer against which a delinquency proceeding has been initiated\nterminates, liquidates, closes out, or accelerates the agreement or contract:\n1. Damages shall be measured as of the date or dates of termination,\nliquidation, close out, or acceleration; and\n2. The amount of the claim for damages shall be actual direct\ncompensatory damages calculated in accordance with subsection (7) of\nthis section;\n(4) A receiver shall not transfer a netting agreement or qualified financial contract of an\ninsurer unless the receiver transfers to one (1) counterparty, other than an insurer\nsubject to a delinquency proceeding, all:\n(a) Netting agreements and qualified financial contracts between that\ncounterparty, or any affiliate of the counterparty, and the insurer; and\n(b) Rights, obligations, guarantees, collateral, and credit support documents\nrelated to the agreements and contracts referenced in paragraph (a) of this\nsubsection;\n(5) (a) If a receiver transfers a netting agreemen t or qualified financial contract, the\nreceiver shall make best efforts to notify all counterparties to the agreement or\ncontract by noon, local time, of the next business day following the transfer.\n(b) As used in this subsection, \"business day\" means any  day that is not a\nSaturday, a Sunday, or a day on which the New York Stock Exchange or the\nFederal Reserve Bank of New York is closed;\n(6) (a) Except as provided in paragraph (b) of this subsection, a transfer of money or\nother property made under a netti ng agreement or qualified financial contract,\nincluding under any pledge, security, collateral, guarantee arrangement, or\nother similar security arrangement or credit support document relating to a\nnetting agreement or qualified financial contract, before the commencement\nof a delinquency proceeding shall not be:\n1. Deemed fraudulent under this subtitle; or\n2. Avoided by the receiver.\n(b) A transfer may be deemed fraudulent and may be avoided by the receiver\nunder KRS 304.33 -290 if the transfer is made with  actual intent to hinder,\ndelay, or defraud the insurer, the receiver, or any creditor;\n(7) (a) If a receiver elects to disavow, reject, or repudiate a netting agreement or\nqualified financial contract of an insurer under KRS 304.33 -240 or any other\nsection of this subtitle, the receiver shall disavow, reject, or repudiate the\nentire netting agreement or qualified financial contract between the insurer\nand a counterparty, or any affiliate of the counterparty, including all related\ntransactions in their entirety.\n(b) If the receiver disavows, rejects, or repudiates a netting agreement or qualified\nfinancial contract, a counterparty's claim against the estate of the insurer shall\nbe:\n1. Determined as if the claim arose before the date of:\na. Except as provided  in subdivision b. of this subparagraph, the\npetition for liquidation; or\nb. If a rehabilitation proceeding was converted to a liquidation, the\npetition for rehabilitation; and\n2. Limited to actual direct compensatory damages, determined as of the\ndate of disavowal, rejection, or repudiation.\n(c) As used in paragraph (b) of this subsection, \"actual direct compensatory\ndamages\":\n1. Includes normal and reasonable costs of cover or industry -standard\ndamages calculations that are applicable in the derivatives, securities, or\nother applicable market; and\n2. Does not include punitive damages, lost profits, lost opportunities, or\npain and suffering;\n(8) This section shall not apply to netting agreements and qualified financial contracts\nbetween an insurer and any of its affiliates; and\n(9) All rights of a counterparty under this section shall apply to netting agreements and\nqualified financial contracts entered into on behalf of:\n(a) The general account of the insurer; and\n(b) Any separate account of the insurer, if the assets of the separate account are\navailable only to a counterparty to the netting agreements and qualified\nfinancial contracts entered into on behalf of that separate account.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=56201","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:57:54Z","sha256":"a776ba1c190dcc2eca981f82155fbaa006adeae04f296e6e399c81d49f2d85a9","source_id":"us-ky","stale":false,"prev":"us-ky/krs-304.33-052","next":"us-ky/krs-304.33-060"},"notice":"GroundRules: Original legal text. Not legal advice."}