376.303. Lending and repurchase, permitted when.
Lending and repurchase, permitted when.
376.303. An insurer may enter into securities lending, repurchase,reverse repurchase, and dollar-roll transactions with business entitiessubject to the following requirements:
(1) The insurer's board of directors shall adopt a written plan that isconsistent with the requirements of the written plan under subdivision (1) ofsubsection 2 of section 376.293 that specifies guidelines and objectives to befollowed, such as:
(a) A description of how cash received will be invested or used forgeneral corporate purposes of the insurer;
(b) Operational procedures to manage interest rate risk, counterpartydefault risk, the conditions under which proceeds from reverse repurchasetransactions may be used in the ordinary course of business, and use ofacceptable collateral in a manner that reflects the liquidity needs of thetransaction; and
(c) The extent to which the insurer may engage in these transactions;
(2) The insurer shall enter into a written agreement for alltransactions authorized in this section other than dollar-roll transactions.The written agreement shall require that each transaction terminate no morethan one year from its inception or upon the earlier demand of the insurer.The agreement shall be with the business entity counterparty and the agreementmay be with an agent acting on behalf of the insurer if the agent is aqualified business entity and if the agreement:
(a) Requires the agent to enter into separate agreements with eachcounterparty that are consistent with the requirements of this section; and
(b) Prohibits securities lending transactions under the agreement withthe agent or its affiliates;
(3) Cash received in a transaction under this section shall be investedin accordance with this chapter and in a manner that recognizes the liquidityneeds of the transaction or used by the insurer for its general corporatepurpose. So long as the transaction remains outstanding, the insurer, itsagent, or custodian shall maintain as to acceptable collateral received in atransaction under this section either physically or through the book entrysystems of the Federal Reserve, Depository Trust Company, Participants TrustCompany, or other securities depositories approved by the director:
(a) Possession of the acceptable collateral;
(b) A perfected security interest in the acceptable collateral; or
(c) In the case of a jurisdiction outside of the United States, title toor rights of a secured creditor to the acceptable collateral;
(4) The limitations of sections 376.297 and 376.304 shall not apply tothe business entity counterparty exposure created by transactions under thissection. For purposes of calculations made to determine compliance with thissubsection, no effect will be given to the insurer's future obligation toresell securities in the case of a repurchase transaction or to repurchasesecurities in the case of a reverse repurchase transaction. An insurer shallnot enter into a transaction under this section if as a result of and aftergiving effect to the transaction:
(a) The aggregate amount of securities then loaned, sold to, orpurchased from any one business entity counterparty under this section wouldexceed five percent of its admitted assets. In calculating the amount sold toor repurchased from a business entity counterparty under repurchase or reverserepurchase transactions, effect may be given to netting provisions under amaster written agreement; or
(b) The aggregate amount of all securities then loaned, sold to, orpurchased from all business entities under this section would exceed fortypercent of its admitted assets;
(5) In a dollar-roll transaction, the insurer shall receive cash in anamount at least equal to the market value of the securities transferred by theinsurer in the transaction as of the transaction date.
(L. 1955 p. 271 § 1, A.L. 1967 p. 516, A.L. 1971 H.B. 331, A.L. 1985 H.B. 589, A.L. 2007 S.B. 66)