According to the Task Force, the model legislation will establish strong solvency and disclosure requirements for CDS. The legislation will be modeled on concepts in (1) New York State’s financial guaranty insurance statute (Article 69) and (2) New York Insurance Superintendent Eric Dinallo’s Circular Letter 19. In drafting the legislation, the Task Force will also review Virginia House Bill 2320, which is designed to regulate CDS.
Task Force Chair Assemblyman Joseph Morelle (NY) stated:
The lack of oversight, transparency, and public disclosure in the CDS market is now apparent to all . . . We will develop legislation that when adopted uniformly across the states can create first-rate CDS regulation. We believe that so-called ‘covered’ swaps can be considered a form of financial guaranty insurance, and as a species of insurance, should be subject to solvency protections insurable interest requirements, and other staples of insurance oversight.
For a copy of Article 69 of the New York Insurance Law, click here. For a copy of Circular Letter 19, click here. For a copy of Virginia House Bill 2320, click here.