P.R. Laws tit. 26, § 660
(1) An insurer may use hedging instruments such as options, futures and other transactions, to protect interest rates solely for the following purposes: (a) to reduce the risk of its other investments, and (b) to improve the income of its other investments. The use of options, futures and other hedging instruments for said purposes shall be known as hedging strategies.
(2) The use of hedges options, futures or instruments for the purpose of speculating in financial markets is hereby prohibited. At the request of the Commissioner, an insurer must be able to explain, at any time, the nature of the hedging being used and the continued effectiveness of said hedge strategies using cash flow analysis or other appropriate analysis.
(3) The sum of the declared book value and the potential aggregate exposure of the financial instruments used by the insurer in its hedging strategies shall not exceed three percent (3%) of the allowed assets of the insurer.
(4) For purposes of this section, the term “option” means an agreement that grants to the buyer a call option (the right to purchase or receive) or a put option (the right to sell, execute, conclude or carry out a cash transaction) based on real or expected price, level, behavior or value of one or more underlying interests.
History —Ins. Code, added as § 6.140 on May 16, 2003, No. 130, § 1.