Sec. 31.05.10.06. Single Risk Limits

A financial guaranty insurer doing business in this State shall limit its exposure to loss, net of collateral and reinsurance, as follows:

A. For municipal obligation bonds, special revenue bonds, and obligations demonstrated to the satisfaction of the Commissioner to be the functional equivalent of municipal obligation bonds or special revenue bonds:

(1) The insured average annual debt service with respect to any one entity and backed by a single revenue source may not exceed 10 percent of the aggregate of the corporation's capital, surplus, and contingency reserve; and

(2) The insured unpaid principal issued by a single entity and backed by a single revenue source may not exceed 75 percent of the aggregate of the corporation's capital, surplus, and contingency reserve;

B. For each issue of asset-backed securities issued by a single entity and for each pool of consumer debt obligations, the lesser of:

(1) Insured average annual debt service; or

(2) Insured unpaid principal, reduced by the extent to which the unpaid principal of the supporting assets exceeds the insured unpaid principal, divided by nine, provided that:

(a) The insured unpaid principal, reduced by the extent to which the unpaid principal of the supporting assets exceeds the insured unpaid principal, divided by nine, does not exceed 10 percent of the aggregate of the corporation's capital, surplus, and contingency reserve;

(b) No asset in the pool supporting the asset-backed securities exceeds the single risk limits prescribed in §E of this regulation, if directly guaranteed; and

(c) If the issuer of the insured asset-backed securities is a special purpose corporation, trust, or other entity and the issuer has indebtedness outstanding with respect to any other pool of assets, either the other indebtedness shall be entitled to the benefits of a financial guaranty policy of the same insurer, or the other indebtedness:

(i) Shall be fully subordinated to the insured obligation, with respect to, or be non-recourse with respect to, the pool of assets that supports the insured obligation;

(ii) Shall be non-recourse to the issuer other than with respect to the asset pool securing the other indebtedness and excess proceeds; and

(iii) May not constitute a claim against the issuer to the extent that the asset pool securing the other indebtedness or excess proceeds is insufficient to pay the other indebtedness;

C. For obligations issued by a single entity and secured by commercial real estate, and not meeting the definition of asset-backed securities, the insured unpaid principal less 50 percent of the appraised value of the underlying real estate may not exceed 10 percent of the aggregate of the insurer's surplus to policyholders and contingency reserve;

D. For utility first mortgage obligations, the insured average annual debt service may not exceed 10 percent of the aggregate of the corporation's capital, surplus, and contingency reserve; and

E. For all other policies providing financial guaranty insurance with respect to obligations issued by a single entity and backed by a single revenue source, the insured unpaid principal may not exceed 10 percent of the aggregate of the financial guaranty insurer's capital, surplus, and contingency reserve.