NAC681A.290. Requirements of trust agreement for reduction from liability; insolvency of grantor of trust.

     1. A trust agreement established for the purposes of NRS 681A.240 must provide for the creation of a trust account for the deposit of assets.

     2. A trust agreement must be entered into between the beneficiary, the grantor and a trustee that is a qualified financial institution in the United States. The failure of a trust agreement to identify specifically the beneficiary does not affect any rights or actions which the Commissioner has or is authorized to take.

     3. Except as otherwise provided in this subsection, all assets in the trust account must be held by the trustee at an office of the trustee in the United States. A bank may apply to the Commissioner for permission to use a foreign branch office of the bank as trustee. If the Commissioner approves the use of a foreign branch office as trustee:

     (a) The written consent of the beneficiary must be obtained; and

     (b) The trust agreement must provide that the beneficiary may deliver the written notice described in paragraph (a) of subsection 4 to the trustee at the principal office of the trustee in the United States.

     4. A trust agreement must:

     (a) Authorize the beneficiary to withdraw assets from the trust account at any time without notice to the grantor, subject only to written notice by the beneficiary to the trustee;

     (b) Provide that no other statement or document is required to be presented to withdraw assets, except that the beneficiary may be required to acknowledge receipt of withdrawn assets;

     (c) Not be subject to any conditions or qualifications outside of the trust agreement, except in conjunction with a reinsurance agreement as set forth in NAC 681A.310;

     (d) Be established for the sole benefit of the beneficiary;

     (e) Require that notice of termination be delivered by the trustee to the beneficiary at least 30 days, but not more than 45 days, before termination of the trust account;

     (f) Be made subject to and governed by the laws of the state in which the trust is established;

     (g) Prohibit invasion of the trust corpus for the purpose of paying compensation to or reimbursing the expenses of the trustee; and

     (h) Make the trustee liable for its own negligence, willful misconduct or lack of good faith.

     5. A trust agreement must require the trustee to:

     (a) Receive and hold all assets in a safe place;

     (b) Determine that all assets are in such form that the beneficiary, or the trustee upon direction of the beneficiary, may negotiate any assets whenever necessary without the consent or signature of the grantor or any other person or entity;

     (c) Furnish to the grantor and beneficiary a statement of all assets in the trust account upon its creation and at intervals of not less than the end of each calendar quarter;

     (d) Notify the grantor and the beneficiary of any deposits to or withdrawals from the trust account within 10 days after the deposit or withdrawal is made;

     (e) Upon written demand of the beneficiary, immediately take all steps necessary to transfer absolutely and unequivocally to the beneficiary all right, title and interest in the assets held in the trust account and deliver physical custody of the assets to the beneficiary; and

     (f) Except as otherwise provided in subsection 6, allow no substitutions or withdrawals of assets from the trust account without written instructions from the beneficiary.

     6. The trustee may, upon call or maturity of any trust asset, withdraw the asset without the consent of the beneficiary if the proceeds are paid into the trust account and the beneficiary is notified.

     7. Notwithstanding any provision in the trust instrument to the contrary, if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the Commissioner with regulatory oversight over the trust or a court of competent jurisdiction directing the trustee to transfer to the Commissioner with regulatory oversight or other designated receiver all the assets of the trust fund. If the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation or similar proceedings under the laws of its state or country of domicile:

     (a) The assets must be applied in accordance with the priority statutes and other laws of the state in which the trust is domiciled applicable to the assets of insurance companies in liquidation; and

     (b) If the Commissioner with regulatory oversight over the trust or a similar authority determines that the assets of the trust, or any part thereof, are not necessary to satisfy claims of the beneficiaries of the trust in the United States, the assets or any part thereof must be returned to the trustee for distribution in accordance with the trust agreement.

     (Added to NAC by Comm’r of Insurance, eff. 6-28-96; A by R027-02, 5-31-2002)