A recent letter issued by the New York State Insurance Department has clarified an important point of insurance law for those issuers who may be looking to get out of their current bond insurance policy.

The letter, dated May 9 and posted May 13, says that in the event a contract has a "non-cancellation" provision, the policy can be canceled only if all parties to the insurance policy - the bond insurer, issuer, and bondholders - agree. If the parties do not agree, and the policy contains a "non-cancellation" clause, then the policy should remain, the department advised. The regulators also suggested that in the case that all parties do agree, the policy should be canceled in a considered manner that evaluates the merits of the termination.

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