H.B. 965                                                 VETOES

(iii) The agreement shall be with the business entity counterparty,
but for securities lending transactions, the agreement may be with an agent acting on
behalf of the insurer, if the agent is a qualified business entity, and if the agreement:

1.       requires the agent to enter into separate agreements with
each counterparty that are consistent with the requirements of this section; and

2.       prohibits securities lending transactions under the
agreement with the agent or its affiliates.

(4)     (i) Cash received in a transaction under this subsection shall be
invested in accordance with this subtitle and in a manner that recognizes the
liquidity needs of the transaction or used by the insurer for its general corporate
purposes.

(ii) For so long as the transaction remains outstanding, the insurer,
its agent, or custodian shall maintain, as to acceptable collateral received in a
transaction under this subsection, either physically or through the book entry
systems of the Federal Reserve, Depository Trust Company, Participants Trust
Company, or other securities depositories approved by the Commissioner:

1.       possession of the acceptable collateral;

2.       a perfected security interest in the acceptable collateral; or

3.       in the case of a jurisdiction outside the United States, title
to, or rights of a secured creditor to, the acceptable collateral.

(5)     (i) The limitations of § 5-507 of this subtitle do not apply to the
business entity counterparty exposure created by transactions under this subsection.

(ii) For purposes of calculations made to determine compliance with
this subsection, no effect will be given to the insurer's future obligation to resell
securities, in the case of a repurchase transaction, or to repurchase securities, in the
case of a reverse repurchase transaction.

(iii) An insurer may not enter into a transaction under this
subsection if, as a result of and after giving effect to the transaction:

1.       A. the aggregate amount of securities then loaned, sold
to, or purchased from any one business entity counterparty under this subsection
would exceed 5% of its admitted assets; and

B. in calculating the amount sold to or purchased from a
business entity counterparty under repurchase or reverse repurchase transactions,
effect may be given to netting provisions under a master written agreement; or

2.       the aggregate amount of all securities then loaned, sold to,
or purchased from all business entities under this subsection would exceed 40% of its
admitted assets.

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