Current through February 24, 2025
(a) A life and
health insurer may enter into a securities lending, repurchase, reverse
repurchase, or dollar roll transaction with a business entity if the life and
health insurer's board of directors adopts a written plan that is consistent
with the requirements of the written plan in
3
AAC 21.211(a), and that specifies
guidelines and objectives to be followed, including
(1) a description of how cash received will
be invested or used for general corporate purposes of the life and health
insurer;
(2) operational procedures
to manage interest rate risk, counterparty default risk, the conditions under
which proceeds from a reverse repurchase transaction may be used in the
ordinary course of business, and the use of acceptable collateral in a manner
that reflects the liquidity needs of the transaction; and
(3) the extent to which the life and health
insurer may engage in these transactions.
(b) A life and health insurer shall enter
into a written agreement for each transaction authorized in this section other
than a dollar roll transaction. The written agreement must require that each
transaction terminate not more than one year from the transaction's inception
or upon the earlier demand of the life and health insurer. The agreement must
be with a business entity counterparty, except that, for a securities lending
transaction, the agreement may be with an agent acting on behalf of the life
and health insurer if the agent is a qualified business entity and if the
agreement
(1) requires the agent to enter
into a separate agreement with each counterparty that is consistent with the
requirements of this subsection; and
(2) prohibits a securities lending
transaction under the agreement with the agent or its affiliates.
(c) A life and health insurer
shall use cash received in a transaction under this section for a general
corporate purpose of the life and health insurer or shall invest it in
accordance with
3
AAC 21.201 -
3
AAC 21.399 and in a manner that recognizes the
liquidity needs of the transaction. For as long as the transaction remains
outstanding, acceptable collateral received by a life and health insurer in a
transaction under this section, either physically or through the book entry
systems of the Federal Reserve, Depository Trust Company, Participants Trust
Company, or another securities depository of comparable quality in the United
States and approved in advance by the director in writing, must be maintained
by the life and health insurer through
(1)
the possession of the acceptable collateral;
(2) a perfected security interest in the
acceptable collateral; or
(3) if
the collateral is located in a jurisdiction outside of the United States, the
title to or rights of a secured creditor to the acceptable
collateral.
(d) The
limitations of
3
AAC 21.231 and
3
AAC 21.266 do not apply to a business entity
counterparty exposure created by a transaction under this section. For purposes
of calculations made to determine compliance with this subsection, a life and
health insurer may not give effect to the life and health insurer's future
obligation, in the case of a repurchase transaction, to resell a security or,
in the case of a reverse repurchase transaction, to repurchase a security. A
life and health insurer may not enter into a transaction under this section if,
as a result of and after giving effect to the transaction, the aggregate amount
of
(1) securities then loaned to, sold to, or
purchased from any one business entity counterparty under this section would
exceed five percent of the life and health insurer's admitted assets, except
that, in calculating the amount sold to or purchased from a business entity
counterparty under a repurchase or reverse repurchase transaction, a life and
health insurer may give effect to the provisions under a master written
agreement with the business entity counterparty that provides for the net
settlement of all contracts between the insurer and the counterparty;
or
(2) all securities then loaned
to, sold to, or purchased from all business entities under this section would
exceed 40 percent of the life and health insurer's admitted assets.
(e) A life and health insurer may
not engage in a
(1) security lending
transaction unless the life and health insurer receives acceptable collateral
having a market value as of the transaction date at least equal to 102 percent
of the market value of the securities loaned by the life and health insurer in
the transaction as of that date; if, at any time, the market value of the
acceptable collateral is less than the market value of the loaned securities,
the business entity counterparty must be obligated under the transaction to
deliver additional acceptable collateral, the market value of which, together
with the market value of all acceptable collateral then held in connection with
the transaction, is at least equal to 102 percent of the market value of the
loaned securities;
(2) reverse
repurchase transaction, other than a dollar roll transaction, unless the life
and health insurer receives acceptable collateral having a market value as of
the transaction date at least equal to 95 percent of the market value of the
securities transferred by the life and health insurer in the transaction as of
that date; if, at any time, the market value of the acceptable collateral is
less than 95 percent of the market value of the securities transferred, the
business entity counterparty must be obligated under the transaction to deliver
additional acceptable collateral, the market value of which, together with the
market value of all acceptable collateral then held in connection with the
transaction, is at least equal to 95 percent of the market value of the
transferred securities;
(3) dollar
roll transaction unless the life and health insurer receives cash in an amount
at least equal to the market value of the securities transferred by the life
and health insurer in the transaction as of the transaction date; or
(4) repurchase transaction unless the life
and health insurer receives as acceptable collateral transferred securities
having a market value at least equal to 102 percent of the purchase price paid
by the life and health insurer for the securities; if, at any time, the market
value of the acceptable collateral is less than 100 percent of the purchase
price paid by the life and health insurer, the business entity counterparty
must be obligated under the transaction to provide additional acceptable
collateral, the market value of which, together with the market value of all
acceptable collateral then held in connection with the transaction is at least
equal to 102 percent of the purchase price; securities acquired by a life and
health insurer in a repurchase transaction may not be sold in a reverse
repurchase transaction, loaned in a securities lending transaction, or
otherwise pledged.
(f)
In this section, "acceptable collateral" has the meaning given in
3
AAC 21.399, except that "acceptable collateral"
includes a letter of credit only if it has an expiration date that is beyond
the term of the subject transaction.
Authority:AS
21.06.090
AS 21.18.010
AS 21.18.030
AS 21.18.040
AS 21.21.010
AS 21.21.020
AS 21.21.255
AS
21.21.420
