A. The deposit of acceptable securities shall be maintained under a custodian agreement acceptable to the Commissioner. If the deposit is made by a person other than the insurer, the Commissioner will require that person to also become a party to the custodian agreement.
B. The custodian shall be a bank located in Maryland, which has deposits insured by the Federal Deposit Insurance Corporation, and which is not affiliated with the insurer.
C. Not later than January 31 in each calendar year, the custodian shall give the accounting referred to in Regulation .03E(2) of this chapter to the Commissioner and to the insurer. At the Commissioner's request at any other time, the custodian also shall give an accounting to the Commissioner and to the insurer within 15 days of the Commissioner's request.
D. The expense of maintaining the deposit under the custodian agreement and of making the reports required of the custodian shall be borne by the insurer.
E. The custodian agreement shall provide that the custodian shall promptly return the deposit to the Commissioner at the Commissioner's request, or at the Commissioner's option the custodian shall sell all or a portion of the deposit and remit the net proceeds of the sale to the Commissioner.
Agency Note: A specimen acceptable form of custodian agreement is attached to these regulations as Exhibit A. Appropriate changes in this form will be required if the deposit is made on behalf of the insurer by another person.
This agreement is made and executed this ____ day of_____________ 20___, by and between the Insurance Commissioner of the State of Maryland (Commissioner), the XYZ Life Insurance Company, a Minnesota Corporation (Insurer), and the ABC Bank, a Maryland Corporation (Custodian).
In this agreement the term "securities" means only any one of, or a combination of:
(b) General obligations of, or obligations guaranteed by, the federal government,
(c) General obligations of, or obligations guaranteed by this State or any of its political subdivisions, or
(d) General obligations of the District of Columbia or of any state of the United States, provided in any case that the obligations are not in default as to payment of principal or interest at the time of deposit with the Commissioner.
WHEREAS the reinsurance of credit life and credit health insurance written in Maryland is prohibited unless the reinsurer is an authorized insurer or is an accredited reinsurer, or unless the reinsurer makes a deposit of securities with the Commissioner in accordance with Insurance Article, §13-116, Annotated Code of Maryland,
NOW, THEREFORE, in consideration of these covenants, the parties agree as follows:
1. The Insurer agrees to pledge securities and deliver them to the custodian as directed by the Commissioner in accordance with the provisions of Insurance Article, Annotated Code of Maryland.
The total value of the securities shall be not less than required by Insurance Article, §13-116, Annotated Code of Maryland, and by regulations under COMAR 31.13.02.
The insurer has assigned, transferred, and delivered to the Commissioner, and the Commissioner has received securities which have been accepted and approved by the Commissioner to the aggregate amount in value prescribed by the Commissioner, which are to be held by the custodian for the Commissioner in accordance with Insurance Article, Annotated Code of Maryland, the securities being as follows:
2. The custodian agrees, at the expense of the insurer, to hold all of the securities received by it from the insurer in accordance with the terms of this agreement. The custodian also agrees not later than January 31 in each calendar year to give a proper accounting of the securities as of the preceding December 31 to the Commissioner and to the insurer, and to give an accounting to the Commissioner and to the insurer at other times at the Commissioner's request within 15 days of the request. The accounting shall include a listing of the securities on deposit, showing the par value and the market value of each, together with a statement as to whether any are in default.
3. The custodian assumes no responsibility for the character of the securities held by it under this agreement nor for the sufficiency of the value of the securities.
4. The insurer shall have the right, from time to time, to deliver to the custodian additional securities as prescribed by Insurance Article, §13-116, Annotated Code of Maryland, and by regulations under COMAR 31.13.02 to be held by the custodian, subject to the terms of this agreement and to substitute other securities in the place and stead of the securities then held by the custodian, provided that every addition, substitution, or withdrawal shall first be approved in writing by the Commissioner.
5. The insurer shall be entitled to all interest which may become due and payable on the securities, and the custodian shall permit the insurer to remove and withdraw the interest unless otherwise directed by the Commissioner.
6. If the insurer becomes insolvent, or, if for any reason the Commissioner determines that the rights of policyholders, certificate holders, authorized insurers, or creditors may be in jeopardy, the Commissioner may issue a written order briefly stating his determination and directing the custodian immediately to deliver to the Commissioner the securities then held by the custodian under the terms of this agreement. This order shall be effective upon delivery to the custodian. A copy of the order shall also be delivered to the insurer. Upon receipt of the order, the custodian shall promptly deliver to the Commissioner the securities then held by the custodian under the terms of this agreement.
7. Instead of requesting that the securities be delivered to him, the Commissioner may direct the custodian to sell, assign and deliver all or any portion of the securities at any public or private sale within or without the State of Maryland. If the custodian is directed by the Commissioner to sell securities, the custodian is authorized to deduct from the proceeds of the sale the amount necessary for the payment of costs and expenses incident to the sale. The custodian shall promptly pay the balance of the proceeds of the sale to the Commissioner.
8. This agreement may be terminated by either the insurer or the custodian 60 days following delivery of written notice of intention to terminate to each of the other parties, including the Commissioner, provided, however, that the custodian may not release or return to the insurer any of the securities held by it under this agreement without first having received written authority from the Commissioner to do so.
9. The Commissioner may at any time terminate this agreement by written notice to each of the other parties. Upon receipt of the notice, the custodian shall immediately deliver all securities held under this agreement to the Commissioner.
IN WITNESS WHEREOF, the Insurance Commissioner of the State of Maryland has affixed his hand and seal, and XYZ Life Insurance Company and ABC Bank have caused this agreement to be executed on their behalf by their president or vice president and have caused their corporate seals to be affixed, and duly attested, all as of the day and year first above written.
State of Maryland