Financial Guaranty Model Act Revision (E) Working Group
June 21, 2007

The Financial Guaranty Model Act Revision (E) Working Group held an e-mail vote on June 21, 2007. During this vote, the Working Group:

• Adopted revisions to the NAIC model on Financial Guaranty Insurance (Model #626), but as previously reported to this Committee, adopted the revised product in the form of a guideline. The Working Group had previously determined that the model law, and its revisions, did not meet the new criteria for adoption as a model law.

• As you will recall, work on this project began in March 2007, with the intent of updating the NAIC model. This model was originally adopted by the NAIC in 1986, and had not been updated by the NAIC since that time. Since 1986, New York and California have made changes to their financial guaranty statutes to strengthen their laws. The changes to the model that were discussed on the interim calls largely incorporate the changes that were made to the New York and California statutes.

• Some of the more significant changes discussed during the calls include changes to the definitions of financial guaranty insurance for clarification; allowing the use of credit default swaps as collateral; strengthening the contingency reserve requirements as well as the limitations included in the model; inclusion of transitional language for those states currently without a financial guaranty statute and with licensed multi-line insurers writing financial guaranty insurance.

• The guideline as adopted by the Working Group was forwarded to the E Committee, and on Wednesday September 5, 2007, was e-mailed to the Committee, its representatives, interested regulators, and interested parties, with indication that the Working Group would request the Committee to adopt the product at this meeting.

Action Items:

• Adopted the Financial Guaranty Insurance Guideline.