3 Colo. Code Regs. § 702-3-2-8-5

Current through Register Vol. 47, No. 24, December 25, 2024

Section 3 CCR 702-3-2-8-5 - Guidelines and Internal Control Procedures

A. Before engaging in a derivative transaction, an insurance company shall establish written guidelines, approved by the Commissioner which shall be used for effecting and maintaining derivative transactions. The guidelines shall:

1. Specify insurance company objectives for engaging in derivative transactions and derivative strategies and all applicable risk constraints, including credit risk limits;

2. Establish counterparty exposure limits and credit quality standards;

3. Identify permissible derivative transactions and the relationship of those transactions to insurer operations; for example, a precise identification of the risks being hedged by a derivative transaction; and

4. Require compliance with internal control procedures.

B. An insurer shall have a written methodology for determining whether a derivative instrument used for hedging has been effective.

C. An insurer shall have written policies and procedures describing the credit risk management process and a credit risk management system for over-the-counter derivative transactions that measures credit risk exposure using the counterparty exposure amount.

D. An insurer's board of directors shall:

1. Approve the written guidelines, methodology and policies and procedures required by subsection A, B, and C respectfully, of this section and the systems required by subsections B and C of this section; and

2. Determine whether the insurer has adequate professional personnel, technical expertise and systems to implement investment practices involving derivatives.

3. Review whether derivative transactions have been made in accordance with the approved guidelines and consistent with stated objectives.

4. Take action to correct any deficiencies in internal controls relative to derivative transactions.

3 CCR 702-3-2-8-5

37 CR 20, October 25,2014, effective 11/15/2014

37 CR 20, October 25,2014, effective 1/1/2015

37 CR 23, December 10, 2014, effective 1/1/2015

38 CR 17, September 10, 2015, effective 10/1/2015

39 CR 05, March 10, 2016, effective 4/1/2016

39 CR 14, July 25, 2016, effective 8/15/2016

39 CR 23, December 10, 2016, effective 1/1/2017

40 CR 03, February 10, 2017, effective 3/15/2017

40 CR 05, March 10, 2017, effective 4/1/2017

40 CR 13, July 10, 2017, effective 8/1/2017

40 CR 17, September 10, 2017, effective 11/1/2017

43 CR 06, March 25, 2020, effective 4/15/2020

44 CR 03, February 10, 2021, effective 3/15/2021

44 CR 23, December 10, 2021, effective 1/1/2022

46 CR 03, February 10, 2023, effective 3/2/2023