Iowa Administrative Code › Agency 191 - Insurance Division › Viatical and Life Settlements › Chapter 49 - Financial Instruments Used in Hedging Transactions › Rule 191-49.2 - Definitions

Current through Register Vol. 47, No. 3, July 24, 2024
"Business entity"
means a sole
				  proprietorship, corporation, limited liability company, association,
				  partnership, joint stock company, joint venture, mutual fund, trust, joint
				  tenancy or other similar form of business organization, whether organized for
				  profit or not for profit.
"Counterparty exposure "
means the amount of
				  credit risk attributable to a derivative instrument entered into with a
				  business entity ("over-the-counter derivative instrument"). No counterparty
				  exposure shall be assigned to transactions involving a qualified exchange or
				  qualified foreign exchange or transactions cleared through a qualified
				  clearinghouse.
1. The amount of credit risk equals:
a. The market value of the over-the-counter derivative
				  instrument if the liquidation of the derivative instrument would result in a
				  final cash payment to the insurer; or
b. Zero if the liquidation of the derivative instrument would
				  not result in a final cash payment to the insurer.
2. If the over-the-counter derivative instruments are entered
				  into pursuant to a written master agreement which provides for netting of
				  payments owed by the respective parties, and the domicile of the counterparty
				  is either within the United States or, if not within the United States, within
				  a foreign jurisdiction listed in the Purposes and Procedures of the Securities
				  Valuation Office as eligible for netting, the net amount of credit risk shall
				  be the greater of zero or the net sum of:
a. The market value of the over-the-counter derivative
				  instruments entered into pursuant to the master agreement, the liquidation of
				  which would result in a final cash payment to the insurer; and
b. The market value of the over-the-counter derivative
				  instruments entered into pursuant to the master agreement, the liquidation of
				  which would result in a final cash payment by the insurer to the business
				  entity.
For any open transactions, market value shall be determined
				  at the end of the most recent quarter of the insurer's fiscal year and shall be
				  reduced by the market value of acceptable collateral held by the insurer or
				  placed in escrow for the benefit of the insurer by one or both parties.
"Derivative instrument used in a hedging transaction
				  "
means an agreement, option, instrument or a series or combination
				  thereof:
1. To make or take delivery of, or assume or relinquish, a
				  specified amount of one or more underlying interests, or to make a cash
				  settlement in lieu thereof; or
2. That has a price, performance, value or cash flow based
				  primarily upon the actual or expected price, level, performance, value or cash
				  flow of one or more underlying interests.
Derivative instruments include options, warrants used in a
				  hedging transaction and not attached to another financial instrument, caps,
				  floors, collars, swaps, forwards, futures and any other agreements, options or
				  instruments substantially similar thereto or any series or combination thereof.
				  Derivative instruments shall additionally include any agreements, options or
				  instruments permitted pursuant to Iowa Code section
				  511.8(22)
				  '%." Derivative instruments shall not include an investment authorized by Iowa
				  Code sections
				  511.8(1)
				   through
				  511.8(21).
"Financial instrument used in a hedging transaction
				  "
means a derivative instrument used in a hedging transaction.
"Qualified clearinghouse"
means a
				  clearinghouse for, and subject to the rules of, a qualified exchange or a
				  qualified foreign exchange, which provides clearing services, including acting
				  as a counterparty to each of the parties to a transaction such that the parties
				  no longer have credit risk as to each other.
"Qualified exchange "
means:
1. A securities exchange registered as a national securities
				  exchange, or a securities market regulated under the Securities Exchange Act of
				  1934 (15 U.S.C. §§ 78 et seq.);
2. A board of trade or commodities exchange designated as a
				  contract market by the Commodity Futures Trading Commission or any successor
				  thereof;
3. Private Offerings, Resales and Trading through Automated
				  Linkages (PORTAL);
4. A designated offshore securities market as defined in
				  Securities and Exchange Commission Regulation S, 17 CFR Part 230; or
5. A qualified foreign exchange.
"Qualified foreign exchange "
means a
				  foreign exchange, board of trade or contract market located outside the United
				  States, its territories or possessions:
1. That has received regulatory comparability relief pursuant
				  to Commodity Futures Trading Commission Rule 30.10 (as set forth in Appendix C
				  to Part 30 of the CFTC's regulations, 17 CFR Part 30);
2. That is, or its members are, subject to the jurisdiction
				  of a foreign futures authority that has received regulatory comparability
				  relief pursuant to Commodity Futures Trading Commission Rule 30.10 (as set
				  forth in Appendix C to Part 30 of the CFTC's regulations, 17 CFR Part 30) as to
				  futures transactions in the jurisdiction where the exchange, board of trade or
				  contract market is located; or
3. Upon which foreign stock index futures contracts are
				  listed that are the subject of no-action relief issued by the CFTC's Office of
				  General Counsel, but an exchange, board of trade or contract market that
				  qualifies as a "qualified foreign exchange" only under this paragraph shall
				  only be a "qualified foreign exchange" as to foreign stock index futures
				  contracts that are the subject of such no-action relief under this
				  paragraph.