[§431:6-602]  Securities lending,repurchase, reverse repurchase, and dollar roll; investment pools.  (a) For purposes of this section, "business entity" includes a soleproprietorship, corporation, limited liability company, association,partnership, joint stock company, joint venture, mutual fund, trust, jointtenancy, or other similar form of business organization, whether organizedfor-profit or not-for-profit.

(b)  This section is applicable to investmentpools under section 431:6-601.

(c)  An insurer may enter into securitieslending, repurchase, reverse repurchase, and dollar roll transactions withbusiness entities, subject to the requirements of this section.

(d)  The board of directors shall adopt awritten plan which shall include at least the following:

(1)  A description of how cash received will beinvested or used for general corporate purposes of the insurer;

(2)  Operational procedures to manage interest raterisk, counterparty default risk, the conditions under which proceeds from reverserepurchase transactions may be used in the ordinary course of business and theuse of acceptable collateral in a manner that reflects the liquidity needs ofthe transaction; and

(3)  The extent to which the insurer may engage inthese transactions.

(e)  The insurer shall enter into a writtenagreement for all transactions authorized in this section other than dollarroll transactions.  The written agreement shall require that each transactionterminate no more than one year from its inception or upon the earlier demandof the insurer.  The agreement shall be with the business entity counterparty,but for securities lending transactions, the agreement may be with an agentacting on behalf of the insurer, if the agent is a qualified business entity,and if the agreement:

(1)  Requires the agent to enter into separateagreements with each counterparty that are consistent with the requirements ofthis section; and

(2)  Prohibits securities lending transactions underthe agreement with the agent or its affiliates.

(f)  Cash received in a transaction under thissection shall be invested in accordance with section 431:6-601, and in a mannerthat recognizes the liquidity needs of the transaction or used by the insurerfor its general corporate purposes.  For so long as the transaction remainsoutstanding, the insurer, its agent, or custodian shall maintain acceptablecollateral received in a transaction under this section, either physically orthrough the book entry systems of the Federal Reserve, Depository TrustCompany, Participants Trust Company, or other securities depositories approvedby the commissioner.

(g)  In a securities lending transaction, theinsurer shall receive acceptable collateral having a market value as of thetransaction date, at least equal to one hundred two per cent of the marketvalue of the securities loaned by the insurer in the transaction as of thatdate.  If at any time the market value of the acceptable collateral is lessthan the market value of the loaned securities, the business entitycounterparty shall be obligated to deliver additional acceptable collateral,the market value of which, together with the market value of all acceptablecollateral then held in connection with the transaction, at least equals onehundred two per cent of the market value of the loaned securities.

(h)  In a reverse repurchase transaction, otherthan a dollar roll transaction, the insurer shall receive acceptable collateralhaving a market value as of the transaction date at least equal to ninety-five percent of the market value of the securities transferred by the insurer in thetransaction as of that date.  If at any time the market value of the acceptablecollateral is less than ninety-five per cent of the market value of thesecurities so transferred, the business entity counterparty shall be obligatedto deliver additional acceptable collateral, the market value of which,together with the market value of all acceptable collateral then held inconnection with the transaction, at least equals ninety-five per cent of themarket value of the transferred securities.

(i)  In a dollar roll transaction, the insurershall receive cash in the amount at least equal to the market value of thesecurities transferred by the insurer in the transaction as of the transactiondate.

(j)  In a repurchase transaction, the insurershall receive as acceptable collateral transferred securities having a marketvalue at least equal to one hundred two per cent of the purchase price paid bythe insurer for the securities.  If at any time the market value of theacceptable collateral is less than one hundred per cent of the purchase pricepaid by the insurer, the business entity counterparty shall be obligated toprovide additional acceptable collateral, the market value of which, togetherwith the market value of all acceptable collateral then held in connection withthe transaction, at least equals one hundred two per cent of the purchaseprice.  Securities acquired by an insurer in a repurchase transaction shall notbe sold in a reverse repurchase transaction, loaned in a securities lendingtransaction, or otherwise pledged. [L 1997, c 233, pt of §1]