A financial guaranty insurance corporation licensed to transact financial guaranty insurance in this state shall limit its exposure to loss on any one risk, net of collateral and reinsurance, as follows:

(1) For municipal obligation bonds and special revenue bonds: (A) The insured average annual debt service with respect to any one entity and backed by a single revenue source may not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve, and (B) the insured unpaid principal issued by a single entity and backed by a single revenue source may not exceed seventy-five per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

(2) For each issue of asset-backed securities issued by a single entity the lesser of: (A) Insured average annual debt, or (B) the amount which is determined by dividing the insured unpaid principal, reduced by the extent to which the unpaid principal of the supporting assets and a reasonable projection of any excess spread exceeds the insured unpaid principal, by nine, shall not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve; provided no asset in the pool supporting the asset-backed securities exceeds the single risk limits described in subdivision (5) of this section if directly guaranteed, and provided further, if the issuer of such insured asset-backed securities is a special purpose corporation, trust or other entity and that issuer has indebtedness outstanding with respect to any other pool of assets, either such other indebtedness shall be entitled to the benefits of a financial guaranty policy of the same financial guaranty insurance corporation, or such other indebtedness shall (i) be fully subordinated to the insured obligation with respect to, or be nonrecourse with respect to the pool of assets that supports the insured obligation, (ii) be nonrecourse to the issuer other than with respect to the asset pool securing such other indebtedness and proceeds in excess of the proceeds necessary to pay the insured obligation, and (iii) not constitute a claim against the issuer to the extent that the asset pool securing such other indebtedness or excess proceeds are insufficient to pay such other indebtedness, and provided, if the issuer of the insured asset-backed security is in the business of issuing asset-backed securities for the purpose of acquiring pools of assets and each such pool is originated by a different entity, the single risk limits of this section shall apply with respect to each such pool that is sold to, conveyed or otherwise pledged to the issuer, rather than to the insured asset-backed security.

(3) For obligations issued by a single entity and secured by commercial real estate and not meeting the definition of asset-backed securities, the insured unpaid principal, less fifty per cent of the appraised value of the underlying real estate, shall not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

(4) For utility first mortgage obligations, the insured average annual debt service shall not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

(5) For all other financial guaranties, the insured unpaid principal for any one entity and backed by a single revenue source may not exceed ten per cent of the aggregate of the financial guaranty insurance corporation's capital, surplus and contingency reserve.

(6) When calculating the single risk limits provided by this section, the financial guaranty insurance corporation shall add to the insured exposure any investments of the financial guaranty insurance corporation in obligations issued by the same entity and payable solely from the same revenue source as the insured obligation except for obligations of a governmental unit of the United States government rated in one of the top two generic lettered rating classifications by a rating agency acceptable to the commissioner.

(7) A financial guaranty insurance corporation shall not be deemed in violation of any limitation prescribed by this section with respect to any financial guaranty insurance outstanding prior to October 1, 1993, if the financial guaranty insurance corporation was in compliance with the applicable single risk limit in effect in the state at the time that the financial guaranty insurance policy was issued. If the financial guaranty insurance corporation was not in compliance it shall comply with the limitations prescribed by this section not later than July 1, 1994.

(P.A. 93-136, S. 11.)