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Texas Insurance Code - Section 425.121. Authorized Investments: Securities Lending, Repurchase, Reverse Repurchase, And Dollar Roll Transactions

Legal Research Home > Texas Lawyer > Insurance Code > Texas Insurance Code - Section 425.121. Authorized Investments: Securities Lending, Repurchase, Reverse Repurchase, And Dollar Roll Transactions

§ 425.121. AUTHORIZED INVESTMENTS:  SECURITIES LENDING, 
REPURCHASE, REVERSE REPURCHASE, AND DOLLAR ROLL TRANSACTIONS.  (a) 
In this section:
		(1)  "Dollar roll transaction" means two simultaneous 
transactions with settlement dates not more than 96 days apart, in 
one of which an insurance company sells to a business entity, and in 
the other of which the company is obligated to purchase from the 
same business entity, substantially similar securities that are:
			(A)  mortgage-backed securities issued, assumed, 
or guaranteed by the Government National Mortgage Association, the 
Federal National Mortgage Association, the Federal Home Loan 
Mortgage Corporation, or a successor to one of those organizations;  
or
			(B)  other mortgage-backed securities referred to 
in 15 U.S.C. Section 77r-1, as amended.
		(2)  "Repurchase transaction" means a transaction in 
which an insurance company purchases securities from a business 
entity that is obligated to repurchase the purchased securities or 
equivalent securities from the company at a specified price, either 
within a specified period or on demand.
		(3)  "Reverse repurchase transaction" means a 
transaction in which an insurance company sells securities to a 
business entity and is obligated to repurchase the sold securities 
or equivalent securities from the business entity at a specified 
price, either within a specified period or on demand.
		(4)  "Securities lending transaction" means a 
transaction in which an insurance company lends securities to a 
business entity that is obligated to return the loaned securities 
or equivalent securities to the company, either within a specified 
period or on demand.
	(b)  Subject to this section, an insurance company may engage 
in securities lending, repurchase, reverse repurchase, and dollar 
roll transactions.
	(c)  An insurance company must enter into a written agreement 
for each transaction under this section, other than a dollar roll 
transaction.  The agreement must require that the transaction 
terminate on or before the first anniversary of the transaction's 
inception.
	(d)  With respect to cash received in a transaction under 
this section, an insurance company shall:
		(1)  invest the cash in accordance with this subchapter 
and in a manner that recognizes the liquidity needs of the 
transaction;  or
		(2)  use the cash for the company's general corporate 
purposes.             
	(e)  While a transaction under this section is outstanding, 
the insurance company or the company's agent or custodian shall 
maintain, as to acceptable collateral received in the transaction, 
either physically or through the book-entry system of the Federal 
Reserve, Depository Trust Company, Participants Trust Company, or 
another securities depository approved by the commissioner:
		(1)  possession of the collateral;                                            
		(2)  a perfected security interest in the collateral;  
or                   
		(3)  in the case of a jurisdiction outside of the United 
States, title to, or rights of a secured creditor to, the 
collateral.
	(f)  The limitations of Sections 425.110 and 425.157(b) do 
not apply to the business entity counterparty exposure created by a 
transaction under this section.  An insurance company may not enter 
into a transaction under this section if, as a result of and after 
making the transaction:
		(1)  the aggregate amount of securities loaned or sold 
to or purchased from any one business entity counterparty under 
this section would exceed five percent of the company's assets;  or
		(2)  the aggregate amount of all securities loaned or 
sold to or purchased from all business entities under this section 
would exceed 40 percent of the company's assets.
	(g)  For purposes of Subsection (f)(1), in computing the 
amount sold to or purchased from a business entity counterparty 
under a repurchase or reverse repurchase transaction, effect may be 
given to netting provisions under a master written agreement.
	(h)  The amount of collateral required for securities 
lending, repurchase, and reverse repurchase transactions is the 
amount required under the Purposes and Procedures Manual of the 
securities valuation office or a successor publication.

Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.           

Last modified: August 11, 2007