New Mexico Administrative Code › Title 13 - INSURANCE › Chapter 2 - INSURANCE COMPANY LICENSING AND OPERATION › Part 8 - CREDIT FOR REINSURANCE › Section 13.2.8.11 - CREDIT FOR REINSURANCE - REINSURERS MAINTAINING TRUST FUNDS

Current through Register Vol. 35, No. 13, July 16, 2024
A. Pursuant to
				Sections 59A-12E-3 and 59A-12E-4 NMSA 1978, the superintendent will allow
				credit for reinsurance ceded by a domestic insurer to an assuming insurer
				which, as of any date on which statutory financial statement credit for
				reinsurance is claimed, and thereafter for so long as credit for reinsurance is
				claimed, maintains a trust fund in an amount prescribed below in a qualified
				U.S. financial institution as defined in Subsection E of Section
				59A-12-2 NMSA 1978,
				for the payment of the valid claims of its U.S. domiciled ceding insurers,
				their assigns and successors in interest. The assuming insurer shall report
				annually to the superintendent substantially the same information as that
				required to be reported on the NAIC annual statement form by licensed insurers,
				to enable the superintendent to determine the sufficiency of the trust
				fund.
B. The following requirements
				apply to the following categories of assuming insurer:
(1) The trust fund for a single assuming
				insurer shall consist of funds in trust in an amount not less than the assuming
				insurer's liabilities attributable to reinsurance ceded by U.S. domiciled
				insurers, and in addition, the assuming insurer shall maintain a trusteed
				surplus of not less than $20,000,000, except as provided in Paragraph (2) of
				this subsection.
(2) At any time
				after the assuming insurer has permanently discontinued underwriting new
				business secured by the trust for at least three full years, the superintendent
				with principal regulatory oversight of the trust may authorize a reduction in
				the required trusteed surplus, but only after a finding, based on an assessment
				of the risk, that the new required surplus level is adequate for the protection
				of U.S. ceding insurers, policyholders and claimants in light of reasonably
				foreseeable adverse loss development. The risk assessment may involve an
				actuarial review, including an independent analysis of reserves and cash flows,
				and shall consider all material risk factors, including when applicable the
				lines of business involved, the stability of the incurred loss estimates and
				the effect of the surplus requirements on the assuming insurer's liquidity or
				solvency. The minimum required trusteed surplus may not be reduced to an amount
				less than thirty percent of the assuming insurer's liabilities attributable to
				reinsurance ceded by U.S. ceding insurers covered by the trust.
(3) The trust fund for a group including
				incorporated and individual unincorporated underwriters shall consist of:
(a) for reinsurance ceded under reinsurance
				agreements with an inception, amendment or renewal date on or after January 1,
				1993, funds in trust in an amount not less than the respective underwriters'
				several liabilities attributable to business ceded by U.S. domiciled ceding
				insurers to any underwriter of the group;
(b) for reinsurance ceded under reinsurance
				agreements with an inception date on or before December 31, 1992, and not
				amended or renewed after that date, notwithstanding the other provisions of
				this rule, funds in trust in an amount not less than the respective
				underwriters' several insurance and reinsurance liabilities attributable to
				business written in the U.S.; and
(c) In addition to these trusts, the group
				shall maintain a trusteed surplus of which $100,000,000 shall be held jointly
				for the benefit of the U.S. domiciled ceding insurers of any member of the
				group for all the years of account.
(4) The incorporated members of the group
				shall not be engaged in any business other than underwriting as a member of the
				group and shall be subject to the same level of rule and solvency control by
				the group's domiciliary regulator as are the unincorporated members. The group
				shall, within 90 days after its financial statements are due to be filed with
				the group's domiciliary regulator, provide to the superintendent:
(a) an annual certification by the group's
				domiciliary regulator of the solvency of each underwriter member of the group;
				or
(b) if a certification is
				unavailable, a financial statement, prepared by independent public accountants,
				of each underwriter member of the group.
(5) The trust fund for a group of
				incorporated insurers under common administration, whose members possess
				aggregate policyholders surplus of $10,000,000,000 (calculated and reported in
				substantially the same manner as prescribed by the annual statement
				instructions and Accounting Practices and Procedures Manual of the NAIC) and
				which has continuously transacted an insurance business outside the U.S. for at
				least three years immediately prior to making application for accreditation,
				shall:
(a) consist of funds in trust in an
				amount not less than the assuming insurers' several liabilities attributable to
				business ceded by U.S. domiciled ceding insurers to any members of the group
				pursuant to reinsurance contracts issued in the name of such group;
(b) maintain a joint trusteed surplus of
				which $100,000,000 shall be held jointly for the benefit of U.S. domiciled
				ceding insurers of any member of the group; and
(c) file a properly executed Form AR-1 as
				evidence of the submission to this state's authority to examine the books and
				records of any of its members and shall certify that any member examined will
				bear the expense of any such examination.
(6) Within 90 days after the statements are
				due to be filed with the group's domiciliary regulator, the group shall file
				with the superintendent an annual certification of each underwriter member's
				solvency by the member's domiciliary regulators, and financial statements,
				prepared by independent public accountants, of each underwriter member of the
				group.