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S.B. 763
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VETOES
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4. SALES OF COVERED CAPS OR FLOORS, IF THE INSURER
HOLDS IN ITS PORTFOLIO THE INVESTMENTS GENERATING THE CASH FLOW TO
MAKE THE REQUIRED PAYMENTS UNDER THE CAPS OR FLOORS DURING THE
COMPLETE TERM THAT THE CAP OR FLOOR IS OUTSTANDING.
(II) THE TRANSACTIONS DESCRIBED IN SUBPARAGRAPH (I) OF THIS
PARAGRAPH ARE SUBJECT TO THE FOLLOWING QUANTITATION LIMITS: 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 OR FLOORS,
PLUS THE FACE VALUE OF FIXED INCOME SECURITIES UNDERLYING A DERIVATIVE
INSTRUMENT SUBJECT TO CALL, PLUS THE AMOUNT OF THE PURCHASE
OBLIGATIONS UNDER THE PUTS, DOES NOT EXCEED 10% OF ITS ADMITTED ASSETS.
(5) (4) AN INSURER SHALL INCLUDE ALL COUNTERPARTY EXPOSURE
AMOUNTS IN DETERMINING COMPLIANCE WITH THE LIMITATIONS OF § 5-507 OF
THIS SUBTITLE.
(6) (I) IN ACCORDANCE WITH REGULATIONS ADOPTED UNDER THIS
SUBSECTION, THE COMMISSIONER MAY APPROVE ADDITIONAL TRANSACTIONS
INVOLVING THE USE OF DERIVATIVE INSTRUMENTS IN EXCESS OF THE LIMITS OF
PARAGRAPH (3) OF THIS SUBSECTION OR FOR OTHER RISK MANAGEMENT PURPOSES
UNDER REGULATIONS ADOPTED BY THE COMMISSIONER, BUT REPLICATION
TRANSACTIONS MAY NOT BE PERMITTED FOR OTHER THAN RISK MANAGEMENT
PURPOSES.
(II) AN INSURER MAY PURCHASE OR SELL ONE OR MORE
DERIVATIVE INSTRUMENTS TO OFFSET, IN WHOLE OR IN PART, ANY DERIVATIVE
INSTRUMENT PREVIOUSLY PURCHASED OR SOLD, AS THE CASE MAY BE, WITHOUT
REGARD TO THE QUANTITATIVE LIMITATIONS OF THIS SUBSECTION, PROVIDED
THAT THE OFFSETTING TRANSACTION UTILIZES THE SAME TYPE OF DERIVATIVE
INSTRUMENT AS THE DERIVATIVE INSTRUMENT BEING OFFSET.
(7) (5) EACH DERIVATIVE INSTRUMENT SHALL BE:
(I) TRADED ON A SECURITIES EXCHANGE;
(II) ENTERED INTO WITH, OR GUARANTEED BY, A BUSINESS
ENTITY;
(III) ISSUED OR WRITTEN BY OR ENTERED INTO WITH THE ISSUER
OF THE UNDERLYING INTEREST ON WHICH THE DERIVATIVE INSTRUMENT IS BASED;
OR
(IV) IN THE CASE OF FUTURES, TRADED THROUGH A BROKER THAT
IS REGISTERED AS A FUTURES COMMISSION MERCHANT UNDER THE COMMODITY
EXCHANGE ACT OR THAT HAS RECEIVED EXEMPTIVE RELIEF FROM REGISTRATION
UNDER RULE 30.10 ADOPTED UNDER THE COMMODITY EXCHANGE ACT.
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- 4142 -
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