Thus far in 2011, six additional states have enacted the provisions from the National Association of Insurance Commissioners’ Insurer Receivership Model Act (“IRMA”) that govern the treatment of “qualified financial contracts” and “netting agreements.”
The IRMA provisions, which are modelled on the U.S. Bankruptcy Code, allow a party that has entered into a swap transaction with an insurer to exercise certain netting, collateral realization and termination rights without being precluded by the automatic stay that is imposed if the insurer becomes insolvent.
The IRMA provisions have now been enacted in 16 states and will apply to the insolvencies of insurers that are domiciled in those states. States that have added the IRMA provisions thus far in 2011 are Arizona, Delaware, Indiana, Maine, Nebraska and Virginia. They join the four states that enacted similar legislation in 2010 (Illinois, Massachusetts, Minnesota and Missouri) and the six states that had adopted the IRMA provisions prior to 2010 (Connecticut, Iowa, Maryland, Michigan, Texas, and Utah). The New York and Ohio legislatures are currently considering similar bills.