NAC681A.340. Requirements of letter of credit.

     1. A letter of credit issued for the purposes of NRS 681A.240 must stipulate that:

     (a) To obtain money the beneficiary need only draw and present a sight draft under the letter of credit;

     (b) The letter is not subject to any conditions or qualifications outside of the letter of credit, except as provided in a reinsurance agreement in conjunction with which the letter of credit is obtained; and

     (c) The obligation of the qualified financial institution in the United States under the letter of credit is not contingent upon reimbursement with respect thereto.

     2. A letter of credit must be clean, irrevocable, unconditional and issued or confirmed by a qualified financial institution in the United States, as described in NRS 681A.240, which is authorized to issue letters of credit. If a letter of credit is issued by a financial institution other than a qualified financial institution in the United States:

     (a) The financial institution shall formally designate a qualified financial institution in the United States to confirm the letter of credit and to act as an agent for the receipt and payment of drafts; and

     (b) The letter of credit must comply with the provisions of this section.

     3. A letter of credit must contain a date of issuance and a date of expiration. The term of a letter of credit must be for at least 1 year. A letter of credit must contain a clause which prevents the expiration of the letter of credit without due notice from the issuer. The clause must require at least 30 days’ notice before the expiration or nonrenewal of the letter of credit.

     4. A letter of credit must state whether it is subject to and governed by the laws of this State or Publication 500 of the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce, and all drafts drawn thereunder must be presentable at an office in the United States of a qualified financial institution in the United States. A copy of Publication 500 may be obtained from the International Chamber of Commerce Publishing, Inc., 156 Fifth Avenue, Suite 417, New York, New York 10010, for the price of $14.95.

     5. If a letter of credit is made subject to Publication 500 of the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce, the letter of credit must provide for an extension of time to draw against the letter of credit if one or more of the events specified in Article 19 of Publication 500 occurs.

     6. A letter of credit may be used to reduce any liability for reinsurance ceded to an unauthorized assuming insurer in financial statements required to be filed with the Division, if an acceptable letter of credit with the ceding insurer as beneficiary has been issued on or before the date the financial statement of the ceding insurer is filed. The allowable reduction for the letter of credit is the amount available under the letter of credit, except that the reduction may not exceed the specific obligation under the reinsurance agreement which the letter of credit was intended to secure.

     7. A letter of credit must not contain a reference to any other agreements, documents or entities except as otherwise provided in NAC 681A.350. The heading of a letter of credit may include a boxed section containing the name of the applicant and other appropriate notations to provide a reference for the letter of credit. Such a boxed section must be clearly marked to indicate that the information contained within the boxed section is for internal identification purposes only.

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