Ins. Code, § 12106

(a) An admitted financial guaranty insurance corporation’s investments in any one entity insured by that corporation shall not exceed 4 percent of its admitted assets as of the end of the prior calendar year, except that this limit shall not apply to investments payable or guarantied by a United States governmental unit or agency or the State of California if the investments payable or guarantied by the United States governmental unit or agency or the State of California shall be rated in one of the top two generic lettered rating classifications by a securities rating agency acceptable to the commissioner.

(b) In addition to any transaction that an insurer meeting the requirements of Section 1211 may effect and maintain under any other provision of this code, a financial guaranty insurance corporation may effect and maintain a transaction in contracts for the future delivery or receipt of the currency of a foreign country, interest rate options, credit default swaps under which the insurer is acquiring credit protection, and any other products included in the plan referred to in paragraph (7), if the following conditions are satisfied:

(1) The transaction is used for the purpose of limiting risk of loss under financial guaranty insurance policies or reinsurance contracts covering those policies due to fluctuations in interest rates or currency exchange rates or, in the case of credit default swaps, financial default, insolvency, or other credit events.

(2) The transaction does not exceed a duration of 12 months beyond the term of those policies or reinsurance contracts.

(3) The amount of foreign currencies to be purchased under the transaction does not exceed the amount guarantied under those policies or reinsurance contracts that is denominated in foreign currency.

(4) The amount that is subject to interest rate hedging transactions does not exceed the amount guarantied under those policies or reinsurance contracts that is subject to the risk of interest rate fluctuations.

(5) The counterparty to the transaction has, or is the principal operating subsidiary of a holding company that has, a long-term unsecured debt rating or claims-paying ability rating that is at least investment grade.

(6) The transaction is not conducted for arbitrage purposes.

(7) The transaction is entered into pursuant to a plan that has been approved by the board of directors of the financial guaranty insurance corporation and filed with and approved by the insurance department of the state of domicile of the financial guaranty insurance corporation.

(c) A transaction entered into pursuant to subdivision (b) shall be governed by the terms of this section and shall not be subject to Section 1211.