A contract or agreement, or terms and conditions in a contract or agreement, including a master agreement together with all schedules, confirmations, definitions, and addenda, that documents one or more transactions between the parties to the agreement for, or involving, one or more qualified financial contracts and that provides for either the netting, liquidation, setoff, termination, acceleration, or close-out under, or in connection with, one or more qualified financial contracts or present or future payment or delivery obligations or entitlements, including related liquidation or close-out values, among the parties to the netting agreement.
Any master agreement or bridge agreement for one or more master agreements described in subd. 1.
Any security agreement or arrangement or other credit enhancement or guarantee or reimbursement obligation related to any contract or agreement described in subd. 1.
“Qualified financial contract" means a commodity contract, forward contract, repurchase agreement, securities contract, swap agreement, or any similar agreement that the commissioner determines by rule or order to be a qualified financial contract.
“Second-method provision" means a contract provision requiring a nondefaulting party to pay if a net or settlement amount is owed to the defaulting party.
“Two-way payment provision" means a contract provision under which both parties to the contract may have payment obligations to each other.
“Walkaway clause" means a provision in a netting agreement or a qualified financial contract that, after calculation of a value of a party's position or an amount due to or from one of the parties in accordance with its terms upon termination, liquidation, or acceleration of the netting agreement or qualified financial contract, either does not create a payment obligation of a party or extinguishes a payment obligation of a party, in whole or in part, solely because of the party's status as a nondefaulting party.
Notwithstanding any other provision of this chapter, including any other provision permitting the modification of contracts, no person may be stayed or prohibited from exercising any of the following rights:
A contractual right to cause the termination, liquidation, acceleration, or close-out of obligations under, or in connection with, any netting agreement or qualified financial contract with an insurer on account of any of the following:
The insolvency, financial condition, or default of the insurer at any time, if the right is enforceable under applicable law other than this chapter.
The commencement of a formal delinquency proceeding under this chapter.
Any right under a pledge, security, collateral, reimbursement, or guarantee agreement or arrangement, or any other similar security agreement or arrangement or other credit enhancement, relating to one or more netting agreements or qualified financial contracts.
Subject to s. 645.56 (2)
, any right to set-off or net-out any termination value, payment amount, or other transfer obligation arising under, or in connection with, one or more qualified financial contracts in which the counterparty or its guarantor is organized under the laws of the United States or a state or foreign jurisdiction approved by the National Association of Insurance Commissioners office responsible for securities validation as eligible for netting.
If a counterparty to a master netting agreement or a qualified financial contract with an insurer subject to a proceeding under this chapter terminates, liquidates, closes-out, or accelerates the agreement or contract, damages will be measured as of the date of the termination, liquidation, close-out, or acceleration. The amount of a claim for damages is the actual direct compensatory damages calculated in accordance with sub. (6)
Upon termination of a netting agreement or qualified financial contract, notwithstanding any walkaway clause in the netting agreement or qualified financial contract, the net or settlement amount, if any, owed by a nondefaulting party to an insurer against which an application or petition has been filed under this chapter shall be transferred to the receiver of the insurer or as directed by the receiver of the insurer, even if the insurer is the defaulting party. Any limited 2-way payment provision or first-method provision in a netting agreement or qualified financial contract with an insurer that has defaulted shall be considered to be a full 2-way payment provision or 2nd-method provision as against the defaulting insurer. Any such property or amount is a general asset of the insurer, except to the extent that it is subject to one or more secondary liens or encumbrances or rights of netting or setoff.
With respect to transferring a netting agreement or qualified financial contract of an insurer that is the subject of a proceeding under this chapter, the receiver of the insurer shall do one of the following:
Transfer to one party, other than an insurer subject to a proceeding under this chapter, all netting agreements and qualified financial contracts between the counterparty and the insurer that is subject to a proceeding under this chapter, including all of the following:
All rights and obligations of each party under each netting agreement and qualified financial contract.
All property, including any guarantee or other credit enhancement, securing any claims of each party under each netting agreement and qualified financial contract.
Transfer none of the netting agreements, qualified financial contracts, rights, obligations, or property referred to in subd. 1.
with respect to the counterparty.
If a receiver of an insurer transfers a netting agreement or qualified financial contract, the receiver shall use its best efforts to notify any person who is a party to the netting agreement or qualified financial contract of the transfer by noon, central time, on the business day following the transfer.
Notwithstanding s. 645.52
, a receiver may not avoid a transfer of money or other property arising under or in connection with a netting agreement or qualified financial contract, or any pledge, security, collateral, or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract, that is made before the commencement of a formal delinquency proceeding under this chapter.
In exercising the rights of disaffirmance or repudiation with respect to a netting agreement or qualified financial contract between a counterparty and an insurer that is the subject of a proceeding under this chapter, the receiver of the insurer shall do one of the following:
Disaffirm or repudiate all netting agreements and qualified financial contracts between the counterparty and the insurer.
Disaffirm or repudiate none of the netting agreements or qualified financial contracts between the counterparty and the insurer.
Notwithstanding any provision of this section to the contrary, any claim of a counterparty against the estate arising from the receiver's disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the liquidation or immediately preceding conservation or rehabilitation case shall be determined and shall be allowed or disallowed as if the claim had arisen before the date on which the petition for liquidation was filed or, if a conservation or rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date on which the petition for conservation or rehabilitation was filed. The amount of the claim is the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract.
All rights of counterparties under this chapter that apply to netting agreements and qualified financial contracts entered into on behalf of a general account are available only to counterparties of netting agreements and qualified financial contracts entered into on behalf of that general account. All rights of counterparties under this chapter that apply to netting agreements and qualified financial contracts entered into on behalf of a separate account are available only to counterparties of netting agreements and qualified financial contracts entered into on behalf of that separate account.
This section does not apply to persons who are affiliates of an insurer subject to a proceeding under this chapter.
This section does not apply to qualified financial contracts entered into with an insurer authorized to write financial guaranty insurance.
History: 2015 a. 90
Order of distribution.
The order of distribution of claims from the insurer's estate shall be as stated in this section. The first $50 of the amount allowed on each claim in the classes under subs. (3)
, except for claims of the federal government under subs. (3)
, shall be deducted from the claim and included in the class under sub. (8)
. Claims may not be cumulated by assignment to avoid application of the $50 deductible provision. Subject to the $50 deductible provision, every claim in each class shall be paid in full or adequate funds retained for the payment before the members of the next class receive any payment. No subclasses shall be established within any class. That portion of any loss for which indemnification is provided by other benefits or advantages recovered or recoverable by the claimant shall not be included in the classes under subs. (3)
, other than benefits or advantages recovered or recoverable in discharge of familial obligations of support or by way of succession at death or as proceeds of life insurance, or as gratuities. No payment made by an employer to an employee shall be treated as a gratuity. The claims described in s. 645.69
are among the claims not subject to subs. (3)
The costs and expenses of administration, including but not limited to the following: the actual and necessary costs of preserving or recovering the assets of the insurer; compensation for all services rendered in the liquidation; any necessary filing fees; the fees and mileage payable to witnesses; and reasonable attorney fees.
All claims under policies for losses incurred, including 3rd-party claims and federal, state, and local government claims, except the first $200 of losses otherwise payable to any claimant under this subsection other than the federal government. All claims under life insurance and annuity policies, whether for death proceeds, annuity proceeds, or investment values, shall be treated as loss claims. All amounts payable under funding agreements, as defined in s. 632.66 (2) (a)
, whether for principal or interest, shall be treated as loss claims. Claims may not be cumulated by assignment to avoid application of the $200 deductible provision.
Federal government claims and interest.
Claims of the federal government not included under sub. (3)
, and interest at the legal rate compounded annually on all claims in the class under this subsection, and on all claims of the federal government in the class under sub. (3)
, from the date of the petition for liquidation or the date on which the claim becomes due, whichever is later, until the date on which the dividend is declared.
Certain injury claims.
Claims against the insurer that are not under policies and that are for liability for bodily injury or for injury to or destruction of tangible property.
Debts due to employees for services performed, not to exceed $1,000 to each employee which have been earned within one year before the filing of the petition for liquidation. Officers shall not be entitled to the benefit of this priority.
Such priority shall be in lieu of any other similar priority authorized by law as to wages or compensation of employees.
Notwithstanding pars. (a)
and subs. (3)
, if there are no claims of the federal government, the claims in the class under this subsection shall have priority over all claims in the classes under subs. (3)
Unearned premiums and small loss claims.
Claims under nonassessable policies for unearned premiums or other premium refunds and the first $200 of loss excepted by the deductible provision in sub. (3)
All other claims, including claims of any state or local government, not falling within other classes under this section and claims described in s. 645.69
. Claims, including those of any state or local governmental body, for a penalty or forfeiture, shall be allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby. The remainder of such claims shall be postponed to the class of claims under sub. (8)
Claims based solely on judgments. If a claimant files a claim and bases it both on the judgment and on the underlying facts, the claim shall be considered by the liquidator who shall give the judgment such weight as he or she deems appropriate. The claim as allowed shall receive the priority it would receive in the absence of the judgment. If the judgment is larger than the allowance on the underlying claim, the remaining portion of the judgment shall be treated as if it were a claim based solely on a judgment.
Interest on claims already paid.
Interest at the legal rate compounded annually on all claims in the classes under subs. (1)
, except for claims of the federal government in the classes under subs. (3)
, from the date of the petition for liquidation or the date on which the claim becomes due, whichever is later, until the date on which the dividend is declared. The liquidator, with the approval of the court, may make reasonable classifications of claims for purposes of computing interest, may make approximate computations and may ignore certain classifications and time periods that are trifling.
Miscellaneous subordinated claims.
The remaining claims or portions of claims not already paid, with interest as in sub. (7)
Except for claims of the federal government under subs. (3)
, the first $50 of each claim in the classes under subs. (3)
subordinated under this section.
Claims or portions of claims payment of which is provided by other benefits or advantages recovered or recoverable by the claimant.
The claims of shareholders or other owners, including policyholders of a mutual insurance corporation within the limits of s. 645.72 (2)
The priority system set forth in this section provides inflexible and cumbersome rules concerning the order of distribution of claims, and therefore, requiring its application to insurer rehabilitation would be contrary to the stated purpose of rehabilitation proceedings. Applying well-established principles of statutory construction, this section cannot be reasonably interpreted to apply to insurer rehabilitation proceedings. Nickel v. Wells Fargo Bank, 2013 WI App 129
, 351 Wis. 2d 539
, 841 N.W.2d 482
Claims for certain health care costs.
Unless a lower class is applicable, a claim is included among the claims that are subject to the classification under s. 645.68 (5)
if the claim is any of the following:
A claim against a health maintenance organization insurer or an insurer described in s. 609.91 (1m)
for health care costs, as defined in s. 609.01 (1j)
, for which an enrollee, as defined in s. 609.01 (1d)
, policyholder or insured of the health maintenance organization insurer or other insurer is not liable under ss. 609.91
A claim for health care costs, as defined in s. 609.01 (1j)
, for which an enrollee, as defined in s. 609.01 (1d)
, or policyholder of a health maintenance organization is not liable for any reason.
Liquidator's recommendations to the court. 645.71(1)(1)
The liquidator shall review all claims duly filed in the liquidation and shall make all further investigation deemed necessary by the liquidator. The liquidator may compound, compromise or in any other manner negotiate the amount for which claims will be recommended to the court. Unresolved disputes shall be determined under s. 645.65
. As often as practicable, the liquidator shall present to the court reports of claims against the insurer with his or her recommendations. The liquidator shall notify claimants of the liquidator's recommendations. The reports shall include the name and address of each claimant, the particulars of the claim and the amount of the claim finally recommended, if any. As soon as reasonably possible after the last day for filing claims, the liquidator shall present a list of all claims not already reported. If the insurer has issued annuities or life insurance policies, the liquidator shall report the persons to whom, according to the records of the insurer, amounts are owed as cash surrender values or other investment values and the amounts owed. If the insurer has issued policies on the advance premium plan, the liquidator shall report the persons to whom, according to the records of the insurer, unearned premiums are owed and the amounts owed.
Allowance of claims.
The court may approve, disapprove or modify any report on claims by the liquidator, except that the liquidator's agreements with other parties shall be final and binding on the court on claims of any size settled for $500 or less. No claim under a policy of insurance may be allowed for an amount in excess of the applicable policy limits.
History: 1979 c. 93
Distribution of assets. 645.72(1)(1)
Payments to creditors.
Subject to ch. 646
and under the direction of the court, the liquidator shall pay dividends as promptly as possible to security funds under sub. (2)
and to other creditors in a manner that will assure the proper recognition of priorities and a reasonable balance between the expeditious completion of the liquidation and the protection of unliquidated and undetermined claims, including 3rd-party claims. Distribution of assets in kind may be made at valuations set by agreement between the liquidator and the creditor and approved by the court.
Payment of dividends to security funds.
The liquidator shall pay dividends to security funds under sub. (1)
to satisfy their subrogation claims under s. 646.33
or similar laws of other states, if the claims have been filed pursuant to rules established under s. 645.61 (4)
. The total dividends to security funds paid under this subsection may not exceed the total of the claims properly made by the funds under s. 645.61 (4)
. The liquidator shall pay dividends as frequently as practicable and in sums as large as possible without sacrificing of asset values by untimely disposition or inequitable allocation of available assets among the subrogated funds. The liquidator may protect against inequitable allocations by making payments to funds subject to binding agreements by the funds to repay any portions of the dividends found later to be in excess of an equitable allocation. If assets are available, the liquidator may also lend to security funds, subject to court approval.
Reports to the court.
The liquidator shall report to the court within 120 days after the issuance of the liquidation order under s. 645.42
, and every 3 months thereafter, on the status of the assets and the payment of dividends and loans under sub. (2)
. The court may order the liquidator to pay dividends to security funds under sub. (2)
more expeditiously to minimize the need for assessments under s. 646.51
Upon liquidation of a domestic mutual insurance company, any assets held in excess of its liabilities and the amounts which may be paid to its members as provided under sub. (4) (b)
shall be paid into the state treasury to the credit of the common school fund.
The maximum amount payable upon liquidation to any member for and on account of his or her membership in a domestic mutual insurance company, in addition to the insurance benefits promised in the policy, shall be the total of all premium payments made by the member with interest at the legal rate compounded annually.
Unclaimed and withheld funds. 645.73(1)(1)
The liquidator, as provided in ch. 177
, shall report and deliver to the secretary of revenue all unclaimed funds subject to distribution remaining in the liquidator's hands when he or she is ready to apply to the court for discharge, including the amount distributable to any creditor, shareholder, member or other person who is unknown or cannot be found or who is under disability with no person legally competent to receive a distributive share.
All funds withheld under s. 645.64
and not distributed shall upon discharge of the liquidator be deposited with the secretary of revenue and paid by the secretary in accordance with s. 645.64
. Any sums remaining which under s. 645.64
would revert to the undistributed assets of the insurer shall be transferred to the secretary of revenue and become the property of the state under sub. (1)
, unless the commissioner petitions the court to reopen the liquidation under s. 645.75
Termination of proceedings. 645.74(1)(1)
When all assets justifying the expense of collection and distribution have been collected and distributed under this chapter, the liquidator shall apply to the court for discharge. The court may grant the discharge and make any other orders deemed appropriate, including an order to transfer to the state treasury for the common school fund any remaining funds that are uneconomic to distribute.
Application by others.
Any other person may apply to the court at any time for an order under sub. (1)
. If the application is denied, the applicant shall pay the costs and expenses of the liquidator in resisting the application, including a reasonable attorney's fee.
After the liquidation proceeding has been terminated and the liquidator discharged, the commissioner or other interested party may at any time petition the court to reopen the proceedings for good cause, including the discovery of additional assets. If the court is satisfied that there is justification for reopening, it shall so order.
Disposition of records during and after termination of liquidation.
Records of any insurer in the process of liquidation or completely liquidated under this chapter shall be disposed of by the public records board in the same manner as state records under s. 16.61