Texas § 425.128 RISK CONTROL TRANSACTIONS: OVERSIGHT BY COMMISSIONER.

Texas Statutes

§ 425.128 — RISK CONTROL TRANSACTIONS: OVERSIGHT BY COMMISSIONER.

Texas § 425.128

Code INInsurance Code

This text of Texas § 425.128 (RISK CONTROL TRANSACTIONS: OVERSIGHT BY COMMISSIONER.) is published on Counsel Stack Legal Research, covering Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Tex. Insurance Code Code Ann. § 425.128 (2026).

Text

Sec. 425.128. RISK CONTROL TRANSACTIONS: OVERSIGHT BY COMMISSIONER.

(a)An insurance company must be able to demonstrate to the commissioner on request the intended hedging characteristics and continuing effectiveness of a derivative transaction or combination of transactions through:

(1)cash flow testing;

(2)duration analysis; or

(3)other appropriate analysis.

(b)Ten days before entering into an initial hedging transaction, an insurance company shall notify the commissioner in writing that:

(1)the company's board of directors has adopted an investment plan that authorizes hedging transactions; and

(2)each hedging transaction will comply with Sections 425.124-425.132.

(c)After providing the notice under Subsection (b), the insurance company may enter into a hedging transaction under

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Sec. 425.128. RISK CONTROL TRANSACTIONS: OVERSIGHT BY COMMISSIONER. (a) An insurance company must be able to demonstrate to the commissioner on request the intended hedging characteristics and continuing effectiveness of a derivative transaction or combination of transactions through:
(1) cash flow testing;
(2) duration analysis; or
(3) other appropriate analysis.
(b) Ten days before entering into an initial hedging transaction, an insurance company shall notify the commissioner in writing that:
(1) the company's board of directors has adopted an investment plan that authorizes hedging transactions; and
(2) each hedging transaction will comply with Sections 425.124-425.132.
(c) After providing the notice under Subsection (b), the insurance company may enter into a hedging transaction under Section 425.124 if as a result of and after making the transaction:
(1) the aggregate statement value of all outstanding options other than collars, and of all caps, floors, swaptions, and warrants under Sections 425.124-425.132 not attached to another financial instrument purchased by the company does not exceed 7.5 percent of the company's assets;
(2) the aggregate statement value of all outstanding options other than collars, and of all caps, floors, swaptions, and warrants written by the company under Sections 425.124-425.132 does not exceed three percent of the company's assets; and
(3) the aggregate potential exposure of all outstanding collars, swaps, forwards, and futures entered into or acquired by the company under Sections 425.124-425.132 does not exceed 6.5 percent of the company's assets.
(d) If the hedging transaction does not comply with Sections 425.124-425.132, or if continuing the transaction may create a hazardous financial condition for the insurance company that affects the company's policyholders or creditors or the public, the commissioner may, after notice and an opportunity for a hearing, order the company to take action reasonably necessary to:
(1) remedy a hazardous financial condition; or
(2) prevent an impending hazardous financial condition from occurring.