215 ILCS 5/126.16
2021 Illinois Compiled Statutes|Chapter 215 - INSURANCE|215 ILCS 5/ - Illinois Insurance Code.|Article VIII - Investments Of Domestic Companies

Sec. 126.16.         Securities lending and repurchase, reverse repurchase, and  dollar roll transactions.  An insurer may enter into securities lending, repurchase, reverse repurchase,  and dollar roll transactions with business entities, subject to the following  requirements:A. The insurer's board of directors shall adopt a written plan that is  consistent with  the requirements of the written plan in Section 126.4A that specifies  guidelines and objectives to be followed, such as:(1) A description of how cash received will be     invested or used for general corporate purposes of the insurer;(2) Operational procedures to manage interest rate     risk, counterparty default risk, the conditions under which proceeds from reverse repurchase transactions may be used in the ordinary course of business and the use of acceptable collateral in a manner that reflects the liquidity needs of the transaction; and(3) The extent to which the insurer may engage in     these transactions.B. The insurer shall enter into a written agreement for all transactions  authorized in this Section other than dollar roll transactions. The written  agreement shall require that each transaction terminate no more than one year  from its inception or upon  the earlier demand of the insurer. The agreement shall be with the business  entity counterparty, but for securities lending transactions, the agreement may  be with an agent acting on behalf of the insurer, if the agent is a qualified  business entity, and if the agreement:(1) Requires the agent to enter into separate     agreements with each counterparty that are consistent with the requirements of this Section; and(2) Prohibits securities lending transactions     pursuant to the agreement with the agent or its affiliates.C. Cash received in a transaction under this Section shall be invested in  accordance with this Article and in a manner that recognizes the liquidity  needs of the transaction or used by the insurer for its general corporate  purposes. For so long as the transaction remains outstanding, the insurer, its  agent or custodian shall  maintain, as to acceptable collateral received in a transaction under this  Section, either physically or through the book entry systems of the Federal  Reserve, Depository Trust Company, Participants Trust Company or other  securities depositories approved by the Director:(1) Possession of the acceptable collateral;(2) A perfected security interest in the acceptable     collateral; or(3) In the case of a jurisdiction outside of the     United States, title to, or rights of a secured creditor to, the acceptable collateral.D. The limitations of Sections 126.10 and 126.17 shall not apply to the  business entity counterparty exposure created by transactions under this  Section. For purposes of calculations made to determine compliance with this  subsection, no effect will be  given to the insurer's future obligation to resell securities, in the case of a  repurchase transaction, or to repurchase securities, in the case of a reverse  repurchase transaction. An insurer shall not enter into a transaction under  this Section if, as a result of and after giving effect to the transaction:(1) The aggregate amount of securities then loaned or     sold to, or purchased from, any one business entity counterparty under this Section would exceed 5% of its admitted assets. In calculating the amount sold to or purchased from a business entity counterparty under repurchase or reverse repurchase transactions, effect may be given to netting provisions under a master written agreement; or(2) The aggregate amount of all securities then     loaned, sold to or purchased from all business entities under this Section would exceed 40% of its admitted assets.E. In a dollar roll transaction, the insurer shall receive cash in an amount  at least equal to the market value of the securities transferred by the insurer  in the transaction as of the transaction date.F. The Director may promulgate reasonable rules for investments  and transactions under this Section including, but not limited to, rules  which impose financial solvency standards, valuation standards, and  reporting requirements.    (Source: P.A. 90-418, eff. 8-15-97.)