N.Y. Comp. Codes R. & Regs. Tit. 11 § 178.3 - Derivative use plan

(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.

Notes

N.Y. Comp. Codes R. & Regs. Tit. 11 § 178.3