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Current as of January 01, 2024 | Updated by Findlaw Staff
An insurance company that enters into a derivative transaction shall establish written internal control procedures that provide for:
(1) a quarterly report to the board of directors that reviews:
(A) each derivative transaction entered into, outstanding, or closed out;
(B) the results and effectiveness of the derivatives program; and
(C) the credit risk exposure to each counterparty for over-the-counter derivative transactions based on the counterparty exposure amount;
(2) a system for determining whether hedging or replication strategies used have been effective;
(3) a system of regular reports, at least monthly, to management that include:
(A) a description of each derivative transaction entered into, outstanding, or closed out during the period since the last report;
(B) the purpose of each outstanding derivative transaction;
(C) a performance review of the derivative instrument program; and
(D) the counterparty exposure amount for each over-the-counter derivative transaction;
(4) a written authorization that identifies the responsibilities and limitations of authority of each person authorized to effect and maintain derivative transactions; and
(5) appropriate documentation for each transaction, including:
(A) the purpose of the transaction;
(B) the assets or liabilities to which the transaction relates;
(C) the specific derivative instrument used in the transaction;
(D) for an over-the-counter derivative transaction, the name of the counterparty and the counterparty exposure amount; and
(E) for an exchange-traded derivative instrument, the name of the exchange and the name of the firm that handled the transaction.
Cite this article: FindLaw.com - Texas Insurance Code - INS § 425.127. Risk Control Transactions: Internal Control Procedures - last updated January 01, 2024 | https://codes.findlaw.com/tx/insurance-code/ins-sect-425-127/
FindLaw Codes may not reflect the most recent version of the law in your jurisdiction. Please verify the status of the code you are researching with the state legislature before relying on it for your legal needs.
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