§ 2509.18. Letter of Credit.

The Commissioner will accept, in lieu of deposited securities, a letter of credit acceptable to and filed with the Commissioner or his approved depository, which is in full compliance with the following:

(a) Two (2) originally signed copies must be submitted, one (1) of which will be returned to the issuing bank for verification of signature authorization;

(b) The issuer must be a member bank of the Federal Reserve System with an office in this State;

(c) The beneficiary must be the Insurance Commissioner of the State of California;

(d) It must be clean and irrevocable and comply with the following:

(1) It must be an unconditional letter requiring no documentation; the beneficiary must be able to realize funds simply by drawing a draft under the credit, limited only by the amount available, as set forth in the letter of credit; and

(2) It must be expressly stated that it is clean and irrevocable and that it cannot be modified or revoked without the consent of the beneficiary, once the beneficiary is established; and

(3) It must contain an “evergreen” clause which prevents expiration of the letter of credit without some affirmative action by the issuer; the letter must be for not less than one (1) year and must provide that it will be automatically extended for the period of time stated in the original letter if the notice of expiration is not complied with by the issuer; the Commissioner-beneficiary and the insurer-account holder must be given no less than forty-five (45) days prior notice of the expiration of such letter of credit.

HISTORY

1. Change without regulatory effect first paragraph and Note filed 4-28-2014 pursuant to section 100, title 1, California Code of Regulations (Register 2014, No. 18).

Note

Note: Authority cited: Section 11691, Insurance Code. Reference: Section 11691, Insurance Code.