South Dakota § 58-27-81 - Securities lending, repurchase, reverse repurchase and dollar roll transactions--Agreement required.

§ 58-27-81. Securities lending, repurchase, reverse repurchase and dollar roll transactions--Agreement required.

An insurer may enter into securities lending, repurchase, reverse repurchase, and dollar roll transactions subject to the following requirements:

(1)    A written plan or investment policy that specifies guidelines and objectives relating to such transactions shall be adopted by the insurer's board of directors or a committee authorized and charged by such board with the supervision or making of investments or loans;

(2)    All transactions entered into pursuant to this section, other than dollar roll transactions, shall be subject to a written agreement, including a master agreement for a series of transactions or an agreement with an agent acting on behalf of the insurer, which provides that:

(a)    Transactions authorized in this section shall be fully collateralized by cash or eligible securities as permitted or authorized under chapter 58-27 excluding any investments acquired under § 58-27-51.1 or 58-27-51.2;

(b)    The collateral shall be marked to market each business day and adjusted as needed to comply with subsection (a) of this subdivision;

(c)    For purposes of this agreement, market value shall include accrued interest; and

(d)    The insurer may retain the collateral or use the collateral to purchase investments equivalent to the loaned securities if the borrower defaults under the terms of the agreement and the borrower remains liable for any losses and expenses incurred by the insurer due to default that are not covered by the collateral;

(3)    Any transaction entered into pursuant to this section may be terminated at a specified time or upon the earlier demand of the insurer;

(4)    Any cash received by an insurer in a transaction under this section shall be invested in accordance with chapter 58-27 and in a manner that recognizes the liquidity needs of the transaction or used by the insurer for its general corporate purposes;

(5)    An insurer is limited to no more than five percent of its admitted assets being subject to securities lending, repurchase, or reverse repurchase transactions outstanding with any one institution under this section;

(6)    No more than forty percent of an insurer's admitted assets in the aggregate may be subject to securities lending, repurchase, and reverse repurchase transactions.

The director of the Division of Insurance may promulgate rules pursuant to chapter 1-26 to establish financial solvency standards, valuation standards, and reporting requirements for investments and transactions under this section.

Source: SL 1983, ch 377, § 4; SL 1997, ch 294, § 21.