§ 23-63-1703 - Definitions.
23-63-1703. Definitions.
For the purposes of this subchapter:
(1) "Domestic insurer" means an insurer domiciled in the State of Arkansas;
(2) "Fully funded" means that, with respect to any exposure attributed to a protected cell, the fair value of the protected cell assets on the date on which the insurance securitization is effected equals or exceeds the maximum possible exposure attributable to the protected cell with respect to such exposures;
(3) "General account" means the assets and liabilities of a protected cell company other than protected cell assets and protected cell liabilities;
(4) "Indemnity trigger" means a transaction term by which relief of the issuer's obligation to repay investors is triggered by incurring a specified level of losses under its insurance or reinsurance contracts;
(5) (A) "Fair value" of an asset or liability means the amount at which that asset or liability could be bought, incurred, sold, or settled in a current transaction between willing parties that is not a forced or liquidation sale.
(B) (i) Quoted market prices in active markets are the best evidence of fair value and shall be used as the basis for the measurement, if available.
(ii) If a quoted market price is available, the fair value is the product of the number of trading units multiplied by the market price.
(iii) If quoted market prices are not available, the estimate of fair value shall be based on the best information available.
(iv) (a) The estimate of fair value shall consider prices for similar assets and liabilities and the results of valuation techniques to the extent available in the circumstances.
(b) Examples of valuation techniques include the present value of estimated expected future cash flows using a discount rate commensurate with the risks involved, option-pricing models, matrix pricing, option-adjusted spread models, and fundamental analysis.
(c) Valuation techniques for measuring financial assets and liabilities and for servicing assets and liabilities shall be consistent with the objective of measuring fair value. Those techniques shall incorporate assumptions that market participants would use in their estimates of values, future revenues, and future expenses, including assumptions about interest rates, default, prepayment, and volatility.
(d) In measuring financial liabilities and servicing liabilities at fair value by discounting estimated future cash flows, an objective is to use discount rates at which those liabilities could be settled in an arm's-length transaction.
(e) (1) Estimates of expected future cash flows, if used to estimate fair value, shall be the best estimate based on reasonable and supportable assumptions and projections.
(2) All available evidence shall be considered in developing estimates of expected future cash flows.
(3) The weight given to the evidence shall be commensurate with the extent to which the evidence can be verified objectively.
(4) If a range is estimated for either the amount or timing of possible cash flows, the likelihood of possible outcomes shall be considered in determining the best estimate of future cash flows;
(6) "Nonindemnity trigger" means a transaction term by which relief of the issuer's obligation to repay investors is triggered solely by some event or condition other than the individual protected cell company's incurring a specified level of losses under its insurance or reinsurance contracts;
(7) "Protected cell" means an identified pool of assets and liabilities of a protected cell company segregated and insulated by means of this subchapter from the remainder of the protected cell company's assets and liabilities;
(8) "Protected cell account" means a specifically identified bank or custodial account established by a protected cell company for the purpose of segregating the protected cell assets of one protected cell from the protected cell assets of other protected cells and from the assets of the protected cell company's general account;
(9) "Protected cell assets" means all assets, contract rights, and general intangibles identified with and attributable to a specific protected cell of a protected cell company;
(10) "Protected cell company" means a domestic insurer that has one (1) or more protected cells;
(11) "Protected cell company insurance securitization" means:
(A) The issuance of debt instruments by a protected cell company from which the proceeds support the exposures attributed to the protected cell; and
(B) The repayment of principal or interest, or both, to investors under the transaction terms is contingent upon the occurrence or nonoccurrence of an event which exposes the protected cell company to loss under insurance or reinsurance contracts it has issued; and
(12) "Protected cell liabilities" means all liabilities and other obligations identified with and attributable to a specific protected cell of a protected cell company.