HF 2212 (LSB 5230HV (1) 88)

HOUSE FILE 2212

BY  COMMITTEE ON COMMERCE

(SUCCESSOR TO HSB 515)

A BILL FOR

An Act relating to the legal reserve requirements of life insurance companies.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 511.8, subsection 22, paragraph i, subparagraph (2), Code 2020, is amended to read as follows:
   (2)  Securities pledged as collateral for financial instruments used in highly effective hedging transactions as defined in the national association of insurance commissioners’ statement of statutory accounting principles no. 86 or the national association of insurance commissioners’ statement of statutory accounting principles no. 108, together with securities pledged to a counterparty, clearing organization, or clearinghouse on an upfront basis in the form of initial margin, independent amount, or other securities pledged as a precondition of entering into highly effective hedging transactions pursuant to subparagraph (1), are not eligible in excess of ten percent of the legal reserve of the life insurance company or association, less any financial instruments used in hedging transactions held in the legal reserve under this subsection and less any securities included under subparagraph (3).
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   Life insurance companies may invest in, among other things, certain financial instruments used in hedging transactions to satisfy their legal reserve requirements. A maximum of 10 percent of a life insurance company’s legal reserve may be held in the form of securities pledged as collateral in highly effective hedging transactions. Currently, the term “highly effective hedging transaction” is defined in Code section 511.8 by reference to the definition contained in the national association of insurance commissioners’ statement of statutory accounting principles no. 86. This bill modifies the definition of “highly effective hedging transaction” to also include the definition of highly effective hedging transaction contained in the national association of insurance commissioners’ statement of statutory account principles no. 108.