(1) Applicable standards of acceptability for issuers of letters of credit under 33-2-1217, MCA, include the following:

(a) The letter of credit must contain an issue date and date of expiration and must stipulate that the beneficiary need only draw a sight draft under the letter of credit and present it to obtain funds and that no other document need be presented.

(b) The letter of credit must indicate that it is not subject to any condition or qualifications outside of the letter of credit.

(c) The letter of credit itself must not contain reference to any other agreements, documents, or entities, except as provided in (9) below.

(2) The heading of the letter of credit may include a boxed section which contains the name of the applicant and other appropriate notations to provide a reference for the letter of credit. The boxed section must be clearly marked to indicate that such information is for internal identification purposes only.

(3) The letter of credit must contain a statement to the effect. that the obligation of the qualified United States financial institution under the letter of credit is in no way contingent upon reimbursement with respect thereto.

(4) The term of the letter of credit must be for at least one year and must contain a clause which prevents the expiration of the letter of credit without due notice from the issuer. Such clause must provide for a period of no less than 30 days' notice prior to expiration date or nonrenewal.

(5) The letter of credit must state whether it is subject to and governed by the laws of this state or the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce (Publication 400) , and whether all drafts drawn thereunder must be presentable at an office in the United States of a qualified United States financial institution.

(6) If the letter of credit is made subject to the Uniform Customs and Practice for Documentary Credits of the

International Chamber of Commerce (publication 400) , then the letter of credit must specifically address and make provision for an extension of time to draw against the letter of credit in the event that one or more of the occurrences specified in Article 19 of Publication 400 occur.

(7) The letter of credit must be issued or confirmed by a qualified United States financial institution authorized to issue letters of credit, pursuant to 33-2-1501, MCA.

(8) If the letter of credit is issued by a qualified United States financial institution authorized to issue letters of credit, other than a qualified United States financial institution as described in (7) then the following additional requirements must be met:

(a) The issuing qualified United States financial institution shall formally designate the confirming qualified United States financial institution as its agent for the receipt and payment of the drafts, and

(b) The clause preventing expiration without due notice from the issuer must provide for 30 days' notice prior to expiration date for nonrenewal.

(9) The reinsurance agreement in conjunction with which the letter of credit is obtained may contain provisions which:

(a) Require the assuming insurer to provide letters of credit to the ceding insurer and specify what they are to cover.

(b) Require the assuming insurer and ceding insurer to agree that the letter of credit provided by the assuming insurer pursuant to the provisions of the reinsurance agreement may be drawn upon at any time, notwithstanding any other provisions in the agreement, and shall be utilized by the ceding insurer or its successors in interest only for one or more of the following reasons:

(i) To reimburse the ceding insurer for the assuming insurer's share of premiums returned to the owners of policies reinsured under the reinsurance agreement on account of cancellations of such policies;

(ii) To reimburse the ceding insurer for the assuming insurer's share of surrenders and benefits or losses paid by the ceding insurer under the terms and provisions of the policies reinsured under the reinsurance agreement;

(iii) To fund an account with the ceding insurer in an amount at least equal to the deduction, for reinsurance ceded, from the ceding insurer's liabilities for policies ceded under the agreement (such amount shall include, but not be limited to, amounts for policy reserves, claims and losses incurred and unearned premium reserves) ; and

(iv) To pay any other amounts the ceding insurer claims are due under the reinsurance agreement.

(10) All of the foregoing provisions of (9) must be applied without diminution due to insolvency on the part of the ceding insurer or assuming insurer.

(11) Nothing contained in (9) precludes the ceding insurer and assuming insurer from providing for:

(a) An interest payment, at a rate not in excess of the prime rate of interest, on the amounts held pursuant to (9) (b) (iii) , and/or

(b) The return of any amounts drawn down on the letters of credit in excess of the actual amounts required for the above or, in the case of (9) (b) (iv) , any amounts that are subsequently determined not to be due.

(12) When a letter of credit is obtained in conjunction with a reinsurance agreement covering risks other than life, annuities and health, where it is the custom and practice to provide a letter of credit for a specific purpose, then the reinsurance agreement may, in lieu of (9) (b) require that the parties enter into a "Trust Agreement" which may be incorporated into the reinsurance agreement or be a separate document.