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Reinsurance Security Agreement Template for Malaysia

This document is a legally binding agreement governed by Malaysian law that establishes the security arrangements between a reinsured entity and a reinsurer. It sets out the terms and conditions for providing, maintaining, and enforcing collateral arrangements to secure reinsurance obligations. The agreement complies with Bank Negara Malaysia's regulatory requirements and includes detailed provisions for collateral management, valuation methodologies, and enforcement mechanisms. It addresses risk mitigation requirements under Malaysian financial services legislation and provides a framework for protecting the reinsured's interests through secured collateral arrangements.

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What is a Reinsurance Security Agreement?

The Reinsurance Security Agreement is a crucial document used in the Malaysian insurance market when a reinsured entity requires collateral security from its reinsurer to secure the reinsurer's obligations. This requirement typically arises from regulatory requirements, credit rating considerations, or risk management policies. The agreement, governed by Malaysian law and regulated by Bank Negara Malaysia, provides detailed mechanisms for establishing, maintaining, and enforcing security arrangements. It includes specific provisions for acceptable types of collateral, valuation methods, top-up requirements, and enforcement rights. The document is essential for compliance with Malaysian regulatory requirements and ensures the reinsured has adequate security to cover potential claims or obligations under the reinsurance arrangement.

What sections should be included in a Reinsurance Security Agreement?

1. Parties: Identification of the reinsured, reinsurer, and any security trustee or custodian involved in the agreement

2. Background: Context of the reinsurance relationship and purpose of the security agreement

3. Definitions and Interpretation: Detailed definitions of terms used throughout the agreement and rules of interpretation

4. Security Creation: Provisions establishing the security interest and specifying the assets subject to security

5. Collateral Requirements: Details of required collateral amounts, types of acceptable collateral, and valuation methods

6. Maintenance of Security: Obligations regarding maintaining, topping up, or reducing collateral based on agreed triggers

7. Rights and Obligations: Specific rights and obligations of each party regarding the security arrangement

8. Events of Default: Circumstances constituting default and consequences thereof

9. Enforcement: Procedures and rights for enforcing security upon trigger events

10. Representations and Warranties: Standard and specific representations and warranties from each party

11. Covenants: Ongoing obligations and restrictions on parties

12. Costs and Expenses: Allocation of costs related to maintaining and enforcing the security arrangement

13. Notices: Communication procedures and contact details

14. Governing Law and Jurisdiction: Specification of Malaysian law as governing law and jurisdiction for disputes

15. General Provisions: Standard boilerplate clauses including severability, entire agreement, and amendments

What sections are optional to include in a Reinsurance Security Agreement?

1. Security Trustee Provisions: Required when a security trustee is appointed to hold collateral on behalf of the reinsured

2. Currency Provisions: Needed when security is provided in multiple currencies or currency conversion is required

3. Tax Provisions: Detailed tax clauses required when security arrangements have significant tax implications

4. Multiple Beneficiaries: Required when security is shared among multiple reinsureds

5. Investment Guidelines: Needed when collateral includes investment securities requiring specific management

6. Rating Trigger Events: Include when security requirements are linked to credit rating changes

7. Regulatory Compliance: Detailed compliance provisions when parties are subject to specific regulatory requirements

What schedules should be included in a Reinsurance Security Agreement?

1. Schedule 1 - Secured Reinsurance Agreements: List and details of underlying reinsurance agreements covered by the security arrangement

2. Schedule 2 - Collateral Specifications: Detailed requirements for acceptable collateral including types, ratings, and haircuts

3. Schedule 3 - Valuation Methodology: Detailed procedures for valuing collateral and calculating required amounts

4. Schedule 4 - Form of Notices: Standard forms for various notices required under the agreement

5. Schedule 5 - Security Account Details: Specifications of security accounts and custodian arrangements

6. Appendix A - Calculation of Security Amount: Formulae and procedures for calculating required security amounts

7. Appendix B - Reporting Requirements: Ƶ and procedures for regular reporting on security status

8. Appendix C - Operating Procedures: Detailed procedures for day-to-day operation of the security arrangement

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Malaysia

Publisher

Ƶ

Document Type

Security Agreement

Cost

Free to use

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