17B:32-59. Mutual debts, credits

29. a. Mutual debts or mutual credits, whether arising out of one or more contracts between the insurer and another person in connection with any action or proceeding under this act, shall be set off and the balance only shall be allowed or paid, except as provided in subsections b., c. and d. of this section and section 32 of this act.

b. No setoff shall be allowed in favor of any person if:

(1) The obligation of the insurer to the person would not at the date of the filing of a petition for liquidation entitle the person to share as a claimant in the assets of the insurer; or

(2) The obligation of the insurer to the person was purchased by or transferred to the person with a view to its being used as a setoff; or

(3) The obligation of the insurer is owed to an affiliate of such person, or any other entity or association other than the person; or

(4) The obligation of the person is owed to an affiliate of the insurer, or any other entity or association other than the insurer; or

(5) The obligation of the person is to pay an assessment levied against the members or subscribers of the insurer, or is to pay a balance upon a subscription to the capital stock of the insurer, or is in any other way in the nature of a capital contribution; or

(6) The obligations between the person and the insurer arise from business which is both ceded to and assumed from the insurer except that the rehabilitator may, with regard to such business, allow certain setoffs in rehabilitation if he finds the allowance of said setoffs appropriate.

c. The liquidator shall provide persons that assumed business from the insurer with accounting statements identifying debts which are currently due and payable. Such persons may set off against such debts only mutual credits which are currently due and payable by the insurer to such persons for the period covered by the accounting statement.

d. A person that ceded business to the insurer may set off debts due the insurer against only those mutual credits which the person has paid or which have been allowed in the insurer's delinquency proceedings.

e. Notwithstanding the foregoing, a setoff of sums due on obligations in the nature of those set forth in paragraph (6) of subsection b. of this section shall be allowed for those sums accruing from business written if: the contracts were entered into, renewed or extended with the express written approval of the commissioner or other insurance regulator of the state of domicile of the insolvent insurer, when in the judgment of that commissioner or regulator it was necessary to provide reinsurance in order to prevent or mitigate a threatened impairment or insolvency of a domiciliary insurer in connection with the exercise of the commissioner's or regulator's regulatory responsibilities.

f. The provisions of this section shall become effective on the 180th day following the effective date of this act and shall apply to all contracts entered into, renewed, extended or amended on or after that 180th day, and to debts or credits arising from any business written or transactions occurring after that 180th day pursuant to any contract, including any contract in existence prior to that 180th day, and shall supersede any agreements or contractual provisions which might be construed to enlarge the setoff rights of any person under any contract with the insurer. For purposes of this section, any change in the terms of, or consideration for, any such contract shall be deemed an amendment.

L.1992,c.65,s.29.