PURPOSE: This rule sets forth methods of disclosure, reserving for risk-based capital and determining the asset valuation reserve for derivative instruments used for replication transactions.

1. (1) An insurer may use derivatives for replication transactions as permitted pursuant to section 375.345, RSMo. An insurer engaging in replication transactions shall:

   1. (A) Comply with the following requirements:

      1. 1. The disclosure and annual and quar-

terly statement reporting of such replication transactions;

1. 2. The inclusion of such transaction in

the insurer’s Risk Based Capital (RBC) Report (as required by sections 375.1250– 375.1275, RSMo); and

1. 3. If applicable, the calculation and

reporting of the asset valuation reserve for such transaction;

1. (B) Comply with the filing requirements for Replication Synthetic Asset Transactions (RSATs) contained in the Purposes and Procedures Manual of the Securities Valuation Office of the National Association of Insurance Commissioners;
2. (C) File with the director of the Department of Commerce and Insurance a duplicate copy of all RSAT filings made with the Securities Valuation Office of the National Association of Insurance Commissioners; after June 1, 2004, the director may waive this duplicate filing requirement;
3. (D) Have a system for determining whether a replication transaction has been effective in replicating the intended investment position; and
4. (E) Include all replicated investment positions in calculating compliance with the limitations on investments contained in sections 20 CSR 200-1

376.300–376.305 and 379.080–379.082, RSMo; provided, that no replicated investment position shall be held pursuant to the additional investment authority contained in sections 376.307 and 379.080.1(2)(m) and (o), RSMo.

1. (2) Notwithstanding any provision of this regulation to the contrary, an insurer which is not required to file an RBC Report shall not use derivatives for replication transactions.

AUTHORITY: sections 374.045, RSMo 2000 and 375.345, RSMo Supp. 2005.* Original rule filed Dec. 15, 2005, effective June 30, 2006. Non-substantive change filed Sept. 11, 2019, published Oct. 31, 2019.

*Original authority: 374.045, RSMo 1967, amended 1993, 1995 and 375.345, RSMo 1985, amended 2002.