As used in this chapter: (1) "Derivative instrument" means an asset appropriately reported in Schedule DB or a Schedule DC of an insurer's statutory financial statement or successor schedules, in accordance with applicable annual statement instructions or statutory accounting guidelines. (2) "Derivative transaction" means a transaction involving the use of one or more derivative instruments. (3) "Income generation" means a derivative transaction involving the writing of covered options, caps, or floors that is intended to generate income or enhance return. (4) "Lower grade investment" means a rated credit instrument or debt-like preferred stock rated 4, 5, or 6 by the Securities Valuation Office of the NAIC or any successor office. (5) "Medium grade investment" means a rated credit instrument or debt-like preferred stock rated 3 by the Securities Valuation Office of the NAIC or any successor office. (6) "Minimum asset requirement" means the sum of an insurer's liabilities and the insurer's minimum financial security benchmark. (7) "Minimum financial security benchmark" means the amount of financial security an insurer is required to have under Section 31A-18-102. (8) "Modern Portfolio Theory" means a mathematical framework for assembling a portfolio of assets to maximize the expected return for a given level of risk, taking into consideration a portfolio's overall risk and return. (9) "NAIC" means the National Association of Insurance Commissioners. (10) "Replication" means a derivative transaction in which at least one derivative instrument is used to modify the cash flow characteristics of one or more investments held by an insurer so that the aggregate cash flow of the derivative instruments and investments reproduce the cash flow of another investment that has a higher risk-based capital charge than the risk-based capital charge of the original investment or investments. (11) "Securities valuation office listed mutual fund" means a money market mutual fund or short- term bond fund that: (a) is registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940; and (b) the NAIC's Securities Valuation Office deems eligible for special reserve and reporting treatment other than as common stock. Repealed and Re-enacted by Chapter 368, 2025 General Session
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