CHL CMF issued draft modifications to the regulations on derivatives investments in portfolios of insurance companies, to strengthen the supervision of financial risks.
Proposal Highlights
The proposal would modify to General Standard No. 200, on financial risk hedging operations, investment in financial derivative products and share loan operations.
Also would modify Circular 1512, which provides instructions on technical reserves and valuation of assets and liabilities in relation to the matching of assets and liabilities.
Adjusts methodology for calculating counterparty credit risk exposure in derivatives.
Migrating from approach based on the contract size (notional) to risk-based approach.
Measuring exposure through the credit equivalent (CE); modifies the limit per counterparty for hedging derivatives, differentiating it based on type of counterparty.
Also creating incentives for companies to use more robust market infrastructures.
Would allow adequate mitigation of counterparty risk; allow the use of CLP/UF hedging derivatives for use in the estimation of matching in accordance with Circular 1.512.
Adding a test of effectiveness of financial risk coverage with derivative instruments.
Consultation
Comments on the draft regulations under consultation accepted until Apr. 8, 2024.
Nov. 2024 CHL CMF Final Rules
On Nov. 6, 2024, CHL CMF issued final rules on derivatives investments in portfolios.
