Letter of Credit Requirements pursuant to NRS 681A.240

Bulletin 05-002 March 4, 2005 LETTER OF CREDIT REQUIREMENTS PURSUANT TO NRS 681A.240 The Department of Business and Industry, Division of Insurance (Division), has determined that paragraph b of subsection 1 of section 340 of the Nevada Administrative Code (NAC) needs to be clarified in order to be consistent with section 240 of chapter 681A of the Nevada Revised Statutes (NRS). • NRS 681A.240 requires that letters of credit issued for the purposes set forth in NRS 681A.240 be “[i]rrevocable, unconditional letters of credit . . . .” • NAC 681A.340(1)(b) indicates: 1. A letter of credit issued for the purposes of NRS 681A.240 must stipulate that: . . . ; (b) The letter is not subject to any conditions or qualifications outside of the letter of credit, except as provided in a reinsurance agreement in conjunction with which the letter of credit is obtained . . . ; CLARIFICATION: To the extent NAC 681A.340(1)(b) conflicts with NRS 681A.240, NAC 681A.340(1)(b) is a nullity. The Division cannot approve a letter of credit that conflicts with NRS 681A.240. Therefore, a letter of credit issued for the purposes of NRS 681A.240 must be unconditional and may not require reference to a document other than the letter of credit. ______________________________________ ALICE A. MOLASKY-ARMAN Commissioner of Insurance