Illinois Administrative Code
Title 50 - INSURANCE
Part 806 - DERIVATIVE INSTRUMENTS
Section 806.40 - Guidelines and Internal Control Procedures
Current through Register Vol. 48, No. 12, March 22, 2024
a) Before engaging in a derivative transaction, an insurer shall establish written guidelines that shall be used for effecting and maintaining the transactions. The guidelines shall:
b) An insurer shall have a system for determining whether a derivative instrument used for hedging has been effective. In so doing, a company shall set specific criteria at the inception of the hedge as to what will be considered "effective" in measuring the hedge and then apply those criteria in the ongoing assessment based on actual hedge results.
c) An insurer shall have a credit risk management system for over-the-counter derivative transactions that measures credit risk exposure using the counterparty exposure amount.
d) An insurer's board of directors shall, in accordance with Section 126.4 of the Code:
e) An insurer may use derivatives for replication transactions as permitted pursuant to Sections 126.18 and 126.31 of the Code. An insurer engaging in replication transactions shall:
AGENCY NOTE: For purposes of determining whether internal control procedures comply with this Part, the Department may consider, but is not limited to, the following items: that only board authorized individuals can effect derivative instrument transactions; that there is a separation of administrative functions from trading functions; that periodic reporting to a/the chief investment officer of open positions occurs; and that periodic assessing of effectiveness of hedging transaction is conducted by a designated person.