Montana Code 33-12-109. Credit risk attributable to derivative statement
33-12-109. Credit risk attributable to derivative statement. (1) The amount of credit risk equals:
Terms Used In Montana Code 33-12-109
- Acceptable collateral: means :
(a)(i) as to securities lending transactions and for the purpose of calculating the counterparty exposure amount, cash, cash equivalents, letters of credit, or direct obligations of or securities that are fully guaranteed as to principal and interest by the government of the United States, by any agency of the United States, by the federal national mortgage association, or by the federal home loan mortgage corporation; and
(ii)as to lending foreign securities, sovereign debt rated 1 by the SVO;
(b)as to repurchase transactions, cash, cash equivalents, and direct obligations of or securities that are fully guaranteed as to principal and interest by the government of the United States, by an agency of the United States, by the federal national mortgage association, or by the federal home loan mortgage corporation; and
(c)as to reverse repurchase transactions, cash and cash equivalents. See Montana Code 33-12-102
- Business entity: includes 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. See Montana Code 33-12-102
- Derivative instrument: means an agreement, an option, an instrument, or a series or combination of agreements, options, or instruments:
(i)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 of delivery; or
(ii)that has a price, level, 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. See Montana Code 33-12-102
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
- Foreign jurisdiction: means a jurisdiction other than a domestic jurisdiction. See Montana Code 33-12-102
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Market value: means :
(a)as to cash and letters of credit, the amounts of cash or a letter of credit; and
(b)as to a security, as of any date, the price for the security on that date obtained from a generally recognized source or the most recent quotation from a generally recognized source or, to the extent that a generally recognized source does not exist, the price for the security as determined in good faith by the parties to a transaction, plus accrued but unpaid income on a security to the extent not included in the price as of that date. See Montana Code 33-12-102
- United States: includes the District of Columbia and the territories. See Montana Code 1-1-201
(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 over-the-counter derivative instruments are entered into under a written master agreement that provides for netting of payments owed by the respective parties and the domiciliary jurisdiction 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 must be the greater of zero or the net sum of:
(a)the market value of the over-the-counter derivative instruments entered into under the 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 under the agreement, the liquidation of which would result in a final cash payment by the insurer to the business entity.
(3)For open transactions, market value must be determined at the end of the most recent quarter of the insurer’s fiscal year and must be reduced by the market value of acceptable collateral held by the insurer or placed in escrow by one or both parties.