Current through February 24, 2025
(a) A property and
casualty insurer may enter into a securities lending, repurchase, reverse
repurchase, or dollar roll transaction with a business entity if the property
and casualty 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 property and casualty
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 property and
casualty insurer may engage in these transactions.
(b) A property and casualty 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 property and casualty 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 property and casualty 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 property and casualty
insurer shall use cash received in a transaction under this section for a
general corporate purpose of the property and casualty 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 property and casualty 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 property and casualty 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 21.325 and
3
AAC 21.360 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 property
and casualty insurer may not give effect to the property and casualty 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 property and casualty 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 property and
casualty 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 property and casualty 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 property and casualty insurer's admitted assets; however, the
limitation of this paragraph does not apply to reverse repurchase transactions
if the borrowing is used only to ensure operational liquidity under an
emergency investment plan that is necessitated by an officially declared
catastrophe and that is approved by the director.
(e) A property and casualty insurer may not
engage in a
(1) security lending transaction
unless the property and casualty 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 property and casualty 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
property and casualty 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 property and casualty 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
property and casualty insurer receives cash in an amount at least equal to the
market value of the securities transferred by the property and casualty insurer
in the transaction as of the transaction date; or
(4) repurchase transaction unless the
property and casualty insurer receives as acceptable collateral transferred
securities having a market value at least equal to 102 percent of the purchase
price paid by the property and casualty 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 property and casualty 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 property and casualty 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
