Brief (1)
HB 2473, as amended, concerns the use of financial instruments to engage in hedging transactions and certain income generation transactions by domestic life insurance companies. The bill removes the current prohibition against the use of replication transactions and authorizes their use in accordance with the requirements established by the Securities Valuation Office of the National Association of Commissioners (NAIC).
"Replication transaction" means a financial instrument transaction or combination of financial instrument transactions effected either separately or in conjunction with cash market investments included in a life insurance company's investment portfolio in order to replicate the investment characteristic of another authorized transaction, investment, or instrument or operate as a substitute for cash market transactions.
House Committee amendments include conforming terms to Kansas statutory usage and making replication transactions subject to NAIC procedures and approval.
Background
HB 2473 was requested by the Security Benefit Life Insurance Company whose representatives explained that the bill provides additional flexibility for domestic insurers to manage their investment portfolios. The NAIC recently approved a regulatory framework for replication transactions and the Insurance Commissioner supports HB 2473 with the amendments incorporating that regulatory framework.
The fiscal note prepared by the Division of the Budget indicates these investments are complex and may require the Insurance Department to obtain the expertise of outside investment experts to assist present staff with analyzing these transactions. The Insurance Department is unable to estimate the effect on operations and expenditures necessary for implementation of HB 2473.
1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi