Current through Register Vol. 46, No. 39, September 25, 2024
(a)
(1) The insurer shall submit a derivative use
plan, or amendment thereto, to the superintendent for prior approval. The
derivative use plan or the amendment thereto will be referred to as "the plan"
hereinafter. The filing shall include a certified copy of the authorization by
the insurer's board of directors, or a committee thereof charged with the
responsibility for supervising investments, pursuant to section
1410
(b)(3)(A) of the Insurance Law. When
submitting its plan, the insurer shall also provide to the superintendent:
(i) in the event the plan is adopted by a
committee of the insurer's board of directors, information with respect to the
composition, in terms of title and position, of such committee; and
(ii) the name and title of the senior most
investment person responsible for derivative transactions; a description of his
or her duties and responsibilities, as well as a curriculum vitae or equivalent
document.
Such information shall be updated and provided to the
superintendent as changes occur. The superintendent shall, in writing, either
approve the plan, request any additional information needed to approve the plan
or deny the plan within ninety days of receipt of the plan; otherwise the plan
shall be deemed approved.
(2) If the superintendent requests additional
information and the insurer does not provide such information within 45 days of
receipt of such request, then such plan shall be deemed denied. In the event
that an insurer properly submits the additional information requested by the
superintendent, then the plan shall be deemed approved 60 days after the
receipt of the information by the superintendent, unless the insurer is
notified in writing prior to such date that the filing has been
denied.
(3) A filing will be deemed
to be incomplete and fail to comply with regulatory requirements if the filing
fails to include: the requisite resolution evidencing approval by the board of
directors, or a committee thereof charged with the responsibility for
supervising investments, required pursuant to paragraph (a)(1) of this section;
a section on management oversight standards as required by section
178.4 of this Part; a section on
internal controls and reporting as required by section
178.5 of this Part; and a section
on documentation and reporting requirements as required by section
178.6 of this Part. In such case
the superintendent shall return the plan within 60 days of receipt notifying
the insurer that no action is being taken and that the period for the
superintendent's review has not commenced.
(b) The plan shall contain written guidelines
to be followed in engaging in derivative transactions. The guidelines shall
include or address:
(1) the type, maturity
and diversification of derivative instruments;
(2) the limitation on counterparty exposures,
including limitations based on credit ratings;
(3) the limitations on the use of
derivatives;
(4) asset/liability
management practices with respect to derivative transactions;
(5) the liquidity needs and the company's
capital and surplus as it relates to the derivative use plan;
(6) the policy objectives of management
specific enough to outline permissible derivative strategies;
(7) the relationship of the derivative
strategies to the insurer's operations;
(8) a requirement that management establishes
and executes management oversight standards as required by section
178.4 of this Part and a
description of these standards;
(9)
a requirement that management establishes and executes internal controls and
reporting standards as required by section
178.5 of this Part and a
description of these standards; and
(10) a requirement that management
establishes and executes documentation and reporting standards as required by
section 178.6 of this Part and a
description of these standards.
(c) The plan shall contain, to the extent
applicable to the specific derivative transactions authorized, guidelines for
the insurer's acceptable levels of basis risk, credit risk, foreign currency
risk, interest rate risk, market risk, operational risk and option risk. The
plan shall also provide that the board of directors, or a committee thereof
charged with the responsibility for supervising investments, and senior
management shall comply with risk oversight functions and adhere to laws,
rules, regulations, prescribed practices or ethical standards.
