Texas Insurance Code - Section 425.128. Risk Control Transactions: Oversight By Commissioner
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§ 425.128. RISK CONTROL TRANSACTIONS: OVERSIGHT BY
COMMISSIONER. (a) An insurance company must be able to
demonstrate to the commissioner on request the intended hedging
characteristics and continuing effectiveness of a derivative
transaction or combination of transactions through:
(1) cash flow testing;
(2) duration analysis; or
(3) other appropriate analysis.
(b) Ten days before entering into an initial hedging
transaction, an insurance company shall notify the commissioner in
writing that:
(1) the company's board of directors has adopted an
investment plan that authorizes hedging transactions; and
(2) each hedging transaction will comply with Sections
425.124-425.132.
(c) After providing the notice under Subsection (b), the
insurance company may enter into a hedging transaction under
Section 425.124 if as a result of and after making the transaction:
(1) the aggregate statement value of all outstanding
options other than collars, and of all caps, floors, swaptions, and
warrants under Sections 425. 124-425.132 not attached to another
financial instrument purchased by the company does not exceed 7.5
percent of the company's assets;
(2) the aggregate statement value of all outstanding
options other than collars, and of all caps, floors, swaptions, and
warrants written by the company under Sections 425.124-425.132 does
not exceed three percent of the company's assets; and
(3) the aggregate potential exposure of all
outstanding collars, swaps, forwards, and futures entered into or
acquired by the company under Sections 425.124-425.132 does not
exceed 6.5 percent of the company's assets.
(d) If the hedging transaction does not comply with Sections
425.124-425.132, or if continuing the transaction may create a
hazardous financial condition for the insurance company that
affects the company's policyholders or creditors or the public, the
commissioner may, after notice and an opportunity for a hearing,
order the company to take action reasonably necessary to:
(1) remedy a hazardous financial condition; or
(2) prevent an impending hazardous financial
condition from occurring.
Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.
Section: 425.121 425.122 425.123 425.124 425.125 425.126 425.127 425.128 425.129 425.130 425.131 425.132 425.151 425.152 425.153
Last modified: August 11, 2007
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