Wash. Admin. Code § 284-13-920 - Derivative transactions
(1) An
insurer may, directly or indirectly through an investment subsidiary, only
engage in hedging and income generation derivative transactions. Use of
derivative instruments for replication, speculative or any other purpose is
prohibited.
(2) An insurer may
enter into hedging transactions under this section if, as a result of and after
giving effect to the transaction, the insurer can demonstrate to the
satisfaction of the commissioner the intended hedging characteristics and
ongoing effectiveness of the derivative transaction or combination of
transactions through cash flow testing or other appropriate analysis.
(3) An insurer may only enter into covered
income generation transactions if, as a result of and after giving effect to
the transactions, the aggregate statement value of the fixed income assets that
are subject to call or that generate the cash flows for payments under the caps
and floors, plus the face value of the fixed income securities underlying a
derivative instrument subject to call plus the amount of the purchase
obligations under the puts, does not exceed chapter 48.13 RCW
limitations.
(4) An insurer must
include all counterparty exposure amounts in determining compliance with
general diversification requirements and medium and low-grade investment
limitations under chapter 48.13 RCW.
(5) Side-letter or similar agreements that
directly or indirectly alter the original derivative transaction in any way are
prohibited.
Notes
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