ROBERT L. EHRLICH, JR., Governor

Ch. 193

(2) EACH DIRECTOR SHALL PERFORM THEIR DUTIES AS A DIRECTOR,
INCLUDING ANY DUTIES AS A MEMBER OF A COMMITTEE:

(I)      IN GOOD FAITH;

(II)     IN A MANNER REASONABLY BELIEVED TO BE IN THE BEST
INTERESTS OF THE INSURER; AND

(III)   WITH THAT DEGREE OF CARE THAT AN ORDINARILY PRUDENT
PERSON IN A LIKE POSITION WOULD USE UNDER SIMILAR CIRCUMSTANCES.

(F) IF A LIFE INSURER DOES NOT HAVE A BOARD, ALL REFERENCES TO THE
BOARD IN THIS SECTION SHALL BE DEEMED TO BE REFERENCES TO THE GOVERNING
BODY OF THE LIFE INSURER HAVING AUTHORITY EQUIVALENT TO THAT OF A BOARD.

5-511.

(a) (1) In this section and in § 5-509 of this subtitle the following words
have the meanings indicated.

(15)    "LOWER GRADE OBLIGATION INVESTMENT" MEANS AN INVESTMENT
OBLIGATION THAT IS RATED FOUR, FIVE, OR SIX BY THE SECURITIES VALUATION
OFFICE OF THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS.

(16)    "MEDIUM GRADE OBLIGATION INVESTMENT" MEANS AN
INVESTMENT OBLIGATION THAT IS RATED THREE BY THE SECURITIES VALUATION
OFFICE OF THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS.

[(15)] (17) "Qualified guarantor" means a guarantor against which an
insurer has a direct claim for full and timely payment, evidenced by a contractual
right for which an enforcement action can be brought in a domestic jurisdiction.

[(16)] (18) "Qualified primary credit source" means the credit source to
which an insurer looks for payment as to an investment and against which an insurer
has a direct claim for full and timely payment, evidenced by a contractual right for
which an enforcement action can be brought in a domestic jurisdiction.

(19) (I) "REPLICATION TRANSACTION" MEANS A DERIVATIVE
TRANSACTION THAT IS INTENDED TO REPLICATE THE PERFORMANCE OF ONE OR
MORE ASSETS THAT A LIFE INSURER IS AUTHORIZED TO ACQUIRE UNDER THIS
SECTION.

(II) "REPLICATION TRANSACTION" DOES NOT INCLUDE A
DERIVATIVE TRANSACTION ENTERED INTO AS A HEDGING TRANSACTION.

(d) (1) The reserve investments of a life insurer may include:

(vi) asset backed securities rated investment grade by at least one
of the nationally recognized statistical rating organizations, and which either trade
on a regulated nationally recognized exchange or are traded by a minimum of two
registered broker-dealers. To the extent necessary to satisfy the reserve requirements
of this subtitle, a life insurer may not have more than[:

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