.03 Scope of Certificate of Authority.

A. In General.

(1) A financial guaranty insurer that holds a certificate of authority for the purpose of transacting financial guaranty insurance may write financial guaranty insurance to insure debt instruments and other monetary obligations only in the following categories:

(a) Municipal obligation bonds;

(b) Special revenue bonds;

(c) Industrial development bonds;

(d) Corporate obligations;

(e) Limited partnership obligations;

(f) Asset-backed securities, trust certificates, and trust obligations other than mortgage-backed securities secured by first mortgages on real property that are insurable by a mortgage guaranty insurer, unless:

(i) The mortgages with loan-to-value ratios in excess of 80 percent are insured by mortgage guaranty insurers; or

(ii) Additional mortgages with principal balances, other collateral with a market value, or, if the insured risk is investment grade, excess spread in an amount, in each instance at least equal to the coverage that would otherwise be provided by the mortgage guaranty insurers in accordance with this subsection, are pledged as additional security for the asset-backed securities;

(g) Installment purchase agreements executed as a condition of sale;

(h) Subject to §A(2) of this regulation, consumer debt obligations;

(i) Utility first mortgage obligations; and

(j) Any other debt instrument or monetary obligation that the Commissioner determines to be substantially similar to any of the items listed in §A(1)(a)—(i) of this regulation.

(2) Any guaranties of consumer debt obligations shall contain a provision that all liability terminates on the sale or transfer of the underlying consumer debt obligation to any transferee that is not an insured of the financial guaranty insurer under a similar policy.

B. Foreign Instruments and Obligations. A financial guaranty insurer that holds a certificate of authority for the purpose of transacting financial guaranty insurance may write financial guaranty insurance to insure non-United States dollar debt instruments or other monetary obligations denominated or payable in foreign currency, only for the categories listed in §A of this regulation, if:

(1) The currency is that of an Organization of Economic Cooperation and Development country or another country:

(a) Whose sovereign rating is investment grade; or

(b) Which is not disapproved by the Commissioner, in accordance with the standards of §C of this regulation, within 30 days after receipt of written notification;

(2) Reserves required pursuant to Regulation .02 of this chapter in regard to these obligations are established and adjusted quarterly based on the then-current foreign exchange rates;

(3) The obligations do not exceed 25 percent of an insurer's aggregate net liability; and

(4) The aggregate and single risk limitations prescribed by Regulation .04B and C of this chapter are determined by applying the then-current foreign exchange rates.

C. Approval or Disapproval by Commissioner.

(1) The Commissioner may not disapprove the currency of a country under §B(1)(b) of this regulation if the financial guaranty insurer demonstrates that there is no undue risk associated with insuring the timely payment of the instruments or obligations.

(2) In making a determination, the Commissioner shall consider the financial guaranty insurer's outstanding liabilities on non-investment grade instruments and obligations in relation to:

(a) Its outstanding liabilities on all instruments and obligations; and

(b) The amount of its surplus to policyholders.

D. Disclosure Requirement. A financial guaranty insurer may issue a financial guaranty insurance policy only if any prospectus that makes mention of the insurance policy discloses that the insurance is not covered by the Property and Casualty Insurance Guaranty Corporation pursuant to Insurance Article, Title 9, Subtitle 3, Annotated Code of Maryland.