3 AAC 21.360. Foreign investments and foreign currency exposure for a property and casualty insurer

(a) Subject to the limitations in 3 AAC 21.325, a property and casualty insurer may acquire, hold, or invest in a foreign investment or engage in an investment practice with a person of or in a foreign jurisdiction, if

(1) the investment is of substantially the same type that a property and casualty insurer is permitted to acquire, hold, or invest in under 3 AAC 21.201 - 3 AAC 21.399, other than of the type permitted under 3 AAC 21.335; and

(2) as a result of and after giving effect to the investment, the aggregate amount of foreign investments then held by the property and casualty insurer under this subsection

(A) does not exceed 20 percent of the property and casualty insurer's admitted assets; and

(B) in a single foreign jurisdiction does not exceed

(i) 10 percent of the property and casualty insurer's admitted assets if that foreign jurisdiction has a sovereign debt rating of one from the securities valuation office; or

(ii) five percent of the property and casualty insurer's admitted assets, if that foreign jurisdiction is not one described in (i) of this subparagraph.

(b) Subject to the limitations in 3 AAC 21.325, a property and casualty insurer may acquire, hold, or make an investment, or engage in an investment practice denominated in foreign currency, regardless of whether the investment is acquired under (a) of this section, or acquire additional foreign currency exposure as a result of the termination or expiration of a hedging transaction with respect to an investment denominated in a foreign currency, if as a result of and after giving effect to the investment, the aggregate amount of investments then held by the property and casualty insurer under this subsection and denominated in

(1) all foreign currencies does not exceed 15 percent of the property and casualty insurer's admitted assets; and

(2) the foreign currency of a single foreign jurisdiction does not exceed

(A) 10 percent of the property and casualty insurer's admitted assets, if that foreign jurisdiction has a sovereign debt rating of one from the securities valuation office; or

(B) five percent of the property and casualty insurer's admitted assets, if that foreign jurisdiction is not one described in (A) of this paragraph.

(c) An investment will not be considered denominated in a foreign currency if the acquiring property and casualty insurer enters into one or more contracts in transactions permitted under 3 AAC 21.365 and the business entity counterparty agrees, under the contract or contracts, to exchange all payments made on the foreign currency denominated investment for United States currency at a rate that effectively insulates the investment cash flows against future changes in currency exchange rates during the period the contract or contracts are in effect.

(d) In addition to an investment permitted under (a) or (b) of this section, a property and casualty insurer, subject to the limitations in 3 AAC 21.325, may acquire a foreign investment respecting a foreign jurisdiction and may acquire an investment denominated in foreign currency of that jurisdiction, if the property and casualty insurer is authorized to do business in that foreign jurisdiction, and has outstanding insurance, annuity, or reinsurance contracts, denominated in foreign currency of that jurisdiction, and issued on lives or risks resident or located in that foreign jurisdiction. An investment made under this subsection in an obligation of a foreign government, political subdivision of a foreign government, or government-sponsored enterprise of a foreign government is not subject to the limitations of 3 AAC 21.325 if the investment carries a securities valuation office rating of one or two. The aggregate amount of investments acquired by the property and casualty insurer under this subsection may not exceed the greater of

(1) the amount the property and casualty insurer is required by the law of the foreign jurisdiction to invest in the foreign jurisdiction; or

(2) 125 percent of the amount of the property and casualty insurer's reserves, net of reinsurance, and other obligations under the contracts on lives or risks resident or located in the foreign jurisdiction.

(e) In addition to an investment permitted under (a) or (b) of this section, a property and casualty insurer that is not authorized to do business in a foreign jurisdiction may acquire, subject to the limitations in 3 AAC 21.325, a foreign investment respecting a foreign jurisdiction and may acquire, subject to the limitations in 3 AAC 21.325, an investment denominated in foreign currency of that jurisdiction, if the insurer has outstanding insurance, annuity, or reinsurance contracts, denominated in foreign currency of that jurisdiction, and issued on lives or risks resident or located in that foreign jurisdiction. An investment made under this subsection in an obligation of a foreign government, political subdivision of a foreign government, or government-sponsored enterprise of a foreign government is not subject to the limitations of 3 AAC 21.325 if the investment carries a securities valuation office rating of one or two. The aggregate amount of investments acquired by the property and casualty insurer under this subsection may not exceed 105 percent of the amount of the property and casualty insurer's reserves, net of reinsurance, and other obligations under the contracts on lives or risks resident or located in the foreign jurisdiction.

(f) For purposes of determining compliance with the limitations, if any, contained in the other provisions of 3 AAC 21.201 - 3 AAC 21.399, a property and casualty shall aggregate investments permitted to be acquired under this section with investments of the same types made under other provisions of 3 AAC 21.201 - 3 AAC 21.399, and in a similar manner.

History: Eff. 12/28/2001, Register 160

Authority: AS 21.06.090

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