Managing General Agents

NMSA 1978 ch. 59A, art. 12B

in effect

NMSA 1978, § 59A-12B-1 Short title

59A-12B-1. Short title Chapter 59A, Article 12B NMSA 1978 may be cited as the "Managing General Agents Law". 1978 Comp., § 59A-12B-1, enacted by Laws 1993, ch. 320, § 27.

NMSA 1978, § 59A-12B-2 Definitions

59A-12B-2. Definitions As used in the Managing General Agents Law: A. "actuary" means a person who is a member in good standing of the American academy of actuaries; B. "insurer" means any person, firm, association or corporation duly authorized in this state pursuant to the Insurance Code to transact the business of insurance; C. "managing general agent" means any person, firm, association or corporation who: (1) manages all or part of the insurance business of an insurer, including the management of a separate division, department or underwriting office; (2) acts as an insurance producer for such insurer whether known as a managing general agent, manager or other similar term, who, with or without the authority, either separately or together with affiliates, produces, directly or indirectly, and underwrites an amount of gross direct written premium equal to or more than five percent of the policyholder surplus as reported in the last annual statement of the insurer in any one quarter or year together with one or more of the following activities related to the business produced: (a) adjusts or pays claims in excess of an amount determined by the superintendent; or (b) negotiates reinsurance on behalf of the insurer; and (3) notwithstanding the above, the following persons shall not be considered as managing general agents for the purposes of the Managing General Agents Law: (a) an employee of the insurer; (b) a United States manager of the United States branch of an alien insurer; (c) an underwriting manager which, pursuant to contract, manages all or part of the insurance operations of the insurer, is under common control with the insurer, subject to the Insurance Holding Company Law [Chapter 59A, Article 37 NMSA 1978], and whose compensation is not based on the volume of premiums written; and (d) the attorney-in-fact authorized by and acting for the subscribers of a reciprocal insurer or inter-insurance exchange under powers of attorney; and D. "underwrite" means the authority to accept or reject risk on behalf of the insurer. 1978 Comp., § 59A-12B-2, enacted by Laws 1993, ch. 320, § 28; 2016, ch. 89, § 51.

NMSA 1978, § 59A-12B-3 Licensure

59A-12B-3. Licensure A. No person, firm, association or corporation shall act in the capacity of a managing general agent with respect to risks located in this state for an insurer authorized in this state unless such person is a licensed agent or broker in this state. B. No person, firm, association or corporation shall act in the capacity of a managing general agent representing an insurer domiciled in this state with respect to risks located outside this state unless such person is licensed as an agent or broker in this state pursuant to the provisions of the Managing General Agents Law. C. The superintendent may require a bond in an amount acceptable to him for the protection of the insurer. D. The superintendent may require the managing general agent to maintain an errors and omissions policy. 1978 Comp., § 59A-12B-3, enacted by Laws 1993, ch. 320, § 29; 1999, ch. 272, § 17; 1999, ch. 289, § 19.

NMSA 1978, § 59A-12B-4 Required contract provisions

59A-12B-4. Required contract provisions No person, firm, association or corporation acting in the capacity of a managing general agent shall place business with an insurer unless there is in force a written contract between the parties which sets forth the responsibilities of each party and where both parties share responsibility for a particular function, specifies the division of such responsibilities and which contains the following minimum provisions: A. the insurer may terminate the contract for cause upon written notice to the managing general agent. The insurer may suspend the underwriting authority of the managing general agent during the pendency of any dispute regarding the cause for termination; B. the managing general agent shall render accounts to the insurer detailing all transactions and remit all funds due under the contract to the insurer on not less than a monthly basis; C. all funds collected for the account of an insurer shall be held by the managing general agent in the fiduciary capacity in a bank which is a member of the federal reserve system. This account shall be used for all payments on behalf of the insurer. The managing general agent may retain no more than three months estimated claims payments and allocated loss adjustment expenses; D. every managing general agent shall maintain at its principal administrative office for the duration of the written agreement referred to in this section and seven years thereafter separate books and records of all transactions between it, insurers and insured persons. Such books and records shall be maintained in accordance with prudent standards of insurance recordkeeping. The superintendent shall have access to such books and records for the purpose of examination, audit and inspection. Any trade secrets contained therein, including but not limited to the identity and addresses of policyholders and certificate holders, shall be confidential, except that the superintendent may use such information in any proceedings instituted against the managing general agent or insurer. The insurer shall retain the right to continuing access to such books and records of the managing general agent sufficient to permit the insurer to fulfill all of its contractual obligations to insured persons, subject to any restrictions in the written agreement between the insurer and the managing general agent on the proprietary rights of the parties in such books and records not inconsistent with fulfilling those obligations; E. the contract may not be assigned in whole or part by the managing general agent; F. appropriate underwriting guidelines, including: (1) the maximum annual premium volume; (2) the basis of the rates to be charged; (3) the types of risks which may be written; (4) maximum limits of liability; (5) applicable exclusions; (6) territorial limitations; (7) policy cancellation provisions; and (8) the maximum policy period. The insurer shall have the right to cancel or non-renew any policy of insurance subject to the applicable laws and regulations concerning the cancellation and non-renewal of insurance policies; G. if the contract permits the managing general agent to settle claims on behalf of the insurer: (1) all claims must be reported to the company in a timely manner; (2) a copy of the claim file shall be sent to the insurer at its request or as soon as it becomes known that the claim: (a) has the potential to exceed an amount determined by the superintendent or exceeds the limit set by the company, whichever is less; (b) involves a coverage dispute; (c) may exceed the managing general agent's claims settlement authority; (d) is open for more than six months; or (e) is closed by payment of an amount set by the superintendent or an amount set by the company, whichever is less; (3) all claim files will be the joint property of the insurer and managing general agent. However, upon an order of liquidation of the insurer such files shall become the sole property of the insurer or its estate; the managing general agent shall have reasonable access to and the right to copy the files on a timely basis; and (4) any settlement authority granted to the managing general agent may be terminated for cause upon the insurer's written notice to the managing general agent or upon the termination of the contract. The insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination; H. where electronic claims files are in existence, the contract must address the timely transmission of the data; I. if the contract provides for a sharing of interim profits by the managing general agent, and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves or controlling claim payments, or in any other manner, interim profits shall not be paid to the managing general agent until one year after they are earned for property insurance business and five years after they are earned on casualty business and not until the profits have been verified pursuant to Section 59A-12B-5 NMSA 1978; and J. the managing general agent shall not: (1) bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines, including for both reinsurance assumed and ceded, a list of reinsures with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules; (2) commit the insurer to participate in insurance or reinsurance syndicates; (3) appoint any agent or broker without assuring that the agent or broker is lawfully licensed to transact the type of insurance for which he is appointed; (4) without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, which shall not exceed one percent of the insurer's policyholders' surplus as of December 31 of the last completed calendar year; (5) collect any payment from a reinsurer or commit the insurer to any claim settlement with a retainer, without prior approval of the insurer. If prior approval is given, a report must be promptly forwarded to the insurer; (6) permit its subagent or broker to serve on the insurer's board of directors; (7) jointly employ an individual who is employed with the insurer; or (8) appoint a sub-managing general agent. 1978 Comp., § 59A-12B-4, enacted by Laws 1993, ch. 320, § 30.

NMSA 1978, § 59A-12B-5 Duties of insurers

59A-12B-5. Duties of insurers A. The insurer shall have on file an independent financial examination, in a form acceptable to the superintendent, of each managing general agent with which it has done business. B. If a managing general agent establishes loss reserves, the insurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the managing general agent. This is in addition to any other required loss reserve certification. C. The insurer shall periodically, at least semiannually, conduct an on-site review of the underwriting and claims processing operations of the managing general agent. D. Binding authority for all reinsurance contracts or participation in insurance or reinsurance syndicates shall rest with an officer of the insurer, who shall not be affiliated with the managing general agent. E. Within thirty days of entering into or termination of a contract with a managing general agent, the insurer shall provide written notification of such appointment or termination to the superintendent. Notices of appointment of a managing general agent shall include a statement of duties which the applicant is expected to perform on behalf of the insurer, the lines of insurance for which the applicant is to be authorized to act, and any other information the superintendent may request. F. An insurer shall review its books and records each quarter to determine if any insurance producer has become a managing general agent. If the insurer determines that an insurance producer has become a managing general agent, the insurer shall promptly notify the insurance producer and the superintendent of such determination and the insurer and insurance producer must fully comply with the provisions of the Managing General Agents Law within thirty days. G. An insurer shall not appoint to its board of directors an officer, director, employee, insurance producer or controlling shareholder of its managing general agents. This subsection shall not apply to relationships governed by the Insurance Holding Company Law [Chapter 59A, Article 37 NMSA 1978] or, if applicable, the Broker Controlled Insurer Law [Chapter 59A, Article 12C NMSA 1978]. 1978 Comp., § 59A-12B-5, enacted by Laws 1993, ch. 320, § 31; 2016, ch. 89, § 52.

NMSA 1978, § 59A-12B-6 Examination authority

59A-12B-6. Examination authority The acts of the managing general agent are considered to be the acts of the insurer on whose behalf it is acting. A managing general agent may be examined as if it were the insurer. 1978 Comp., § 59A-12B-6, enacted by Laws 1993, ch. 320, § 32.

NMSA 1978, § 59A-12B-7 Penalties and liabilities

59A-12B-7. Penalties and liabilities A. If the superintendent determines that the managing general agent or any other person has not materially complied with the provisions of Chapter 59A, Article 12B NMSA 1978, or any rule or order promulgated thereunder, after notice and opportunity to be heard, the superintendent may order: (1) for each separate violation, a penalty in an amount not exceeding ten thousand dollars ($10,000); (2) revocation or suspension of the managing general agent's license; and (3) if it was found that because of such material noncompliance that the insurer has suffered any loss or damage, the superintendent may maintain a civil action brought by or on behalf of the insurer and its policyholders and creditors for recovery of compensatory damages for the benefit of the insurer and its policyholders and creditors or seek other appropriate relief. B. If an order of rehabilitation or liquidation of the insurer has been entered pursuant to Chapter 59A, Article 41 NMSA 1978, and the receiver appointed under that order determines that the managing general agent or any other person has not materially complied with the provisions of Chapter 59A, Article 12B NMSA 1978, or any regulation or order promulgated thereunder, and the insurer suffered any loss or damage, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the insurer. C. Nothing contained in this section shall affect the right of the superintendent to impose any other penalties provided for in the Insurance Code. D. Nothing contained in the Managing General Agents Law is intended to or shall in any manner limit or restrict the rights of policyholders, claimants or creditors. 1978 Comp., § 59A-12B-7, enacted by Laws 1993, ch. 320, § 33; 2016, ch. 89, § 53.

NMSA 1978, § 59A-12B-8 Effective date

59A-12B-8. Effective date No insurer may continue to utilize the services of a managing general agent on or after July 1, 1993, unless such utilization is in compliance with the Managing General Agents Law. 1978 Comp., § 59A-12B-8, enacted by Laws 1993, ch. 320, § 34.

Source: New Mexico Compilation Commission (nmonesource.com)URL: https://nmonesource.com/nmos/nmsa-unanno/en/item/18562/index.doFetched: 10/20/2026