An insurer may, directly or indirectly through an investment subsidiary, engage in derivative transactions as described in NRS 682A.560 to 682A.568, inclusive, pursuant to the following conditions:

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1.  An insurer may use derivative instruments under NRS 682A.560 to 682A.568, inclusive, to engage in hedging transactions and certain income generation transactions, as these terms may be further defined in regulations adopted by the Commissioner pursuant to NRS 682A.388; and

2.  An insurer must be able to demonstrate to the Commissioner the intended hedging characteristics and the ongoing effectiveness of the derivative transaction or combination of transactions through cash flow testing or other appropriate analyses.