On and after October 1, 1993, any insurer transacting financial guaranty insurance in this state which is not licensed to transact financial guaranty insurance but which is otherwise licensed by the commissioner to transact insurance in this state, shall be subject to all of the provisions of sections 38a-92 to 38a-92n, inclusive, and:

(1) May continue to write financial guaranties of the type authorized by subsection (b) of section 38a-92g as follows: (A) For a period not to exceed five years from October 1, 1993, provided, by July 1, 1994, application shall be made to the commissioner to license a financial guaranty insurance corporation, controlled by or under common control with that insurer, which financial guaranty insurance corporation, once licensed, shall immediately assume all of the financial guaranty insurance in force on the books of the insurer which was written on or after October 1, 1993; or (B) in the case of an insurer transacting only financial guaranty insurance prior to October 1, 1993, which would comply with all of the requirements for licensing as a financial guaranty insurance corporation under sections 38a-92 to 38a-92n, inclusive, and which makes application not later than July 1, 1994, to become licensed to transact financial guaranty insurance business, such insurer may continue to write financial guaranty insurance until such time as the commissioner issues or denies the license application or the application is otherwise terminated;

(2) Shall, if it does not make application for a license to transact financial guaranty insurance pursuant to subsection (1) of this section, cease writing any new financial guaranty insurance not later than July 1, 1994. An insurer subject to this subsection may do one or more of the following: (A) Reinsure its net in force business with a licensed financial guaranty insurance corporation; (B) subject to the prior approval of its domiciliary commissioner and the commissioner of this state, reinsure all or part of its net in force business in accordance with the requirements of subdivision (2) of subsection (a) of section 38a-92m, except that subparagraph (B)(v) of said subdivision (2) shall not be applicable. The assuming insurer shall maintain reserves for the reinsured business in the manner applicable to the ceding insurer under sections 38a-92 to 38a-92n, inclusive; or (C) thereafter continue the risks then in force, and with thirty days prior written notice to its domiciliary commissioner, write new financial guaranty policies, provided the writing of the policies is reasonably prudent to mitigate either the amount of or possibility of loss in connection with business written prior to October 1, 1993. However, an insurer shall receive the prior approval of its domiciliary commissioner and the commissioner of this state before writing any new financial guaranty insurance policies that would have the effect of increasing its risk of loss;

(3) Shall, for all guaranties in force prior to October 1, 1993, including those that fall under the definition of financial guaranty insurance contained in subdivision (1) of section 38a-92a, be subject to the contingency reserve, reserves for loss and loss adjustment expenses and unearned premium reserve requirements applicable for municipal bond insurance policies which were in effect prior to July 1, 1989, or October 1, 1993, as appropriate. To the extent that the insurer's contingency reserves maintained as of October 1, 1993, are less than those required under subdivision (1) of subsection (b) of section 38a-92c, the insurer shall have until July 1, 1994, to bring its reserves into compliance, except that a part of the reserve may be released proportional to the reduction in net total liabilities resulting from reinsurance provided the reinsurer shall, on the effective date of the reinsurance, establish a reserve in an amount equal to the amount released and in addition, a part of the reserve may be released with the approval of the commissioner upon demonstration that the amount carried is excessive in relation to the corporation's outstanding obligations;

(4) Shall be subject to the reserve requirements applicable to financial guaranty insurance corporations, for business transacted on or after October 1, 1993.

(P.A. 93-136, S. 13.)