Section 424.205 - Derivative Use Plan(a) Before an insurer enters into a derivative transaction, the insurer's board of directors must approve a derivative use plan as part of the insurer's investment plan otherwise required by law.(b) The derivative use plan must:(1) describe investment objectives and risk constraints, such as counterparty exposure amounts;(2) define permissible transactions, identifying the risks to be hedged and the assets or liabilities being replicated; and(3) require compliance with the insurer's internal control procedures established under Section 424.206.Added by Acts 2005, 79th Leg., Ch. 727, Sec. 1, eff. 4/1/2007.