Assets and Liabilities

NMSA 1978 ch. 59A, art. 8

in effect

NMSA 1978, § 59A-8-1 "Assets" defined

59A-8-1. "Assets" defined In determination of the financial condition of any insurer or fraternal benefit society or United States branch of an alien insurer there shall be allowed as assets only such assets as are owned by the insurer or society and which consist of: A. cash, including legal tender or equivalent thereof, in the principal or any branch office of the insurer or society or in transit under its control, and including the true balance of any deposit in a solvent bank or trust company; B. investments, securities, properties and loans acquired or held in accordance with the Insurance Code, and in connection therewith the following items: (1) interest due or accrued on any bond or evidence of indebtedness which is not in default and which is not valued on a basis including accrued interest; (2) declared and unpaid dividends on stock and shares, unless such amount has otherwise been allowed as an asset; (3) interest due or accrued upon a collateral loan in an amount not to exceed one year's interest thereon; (4) interest due or accrued on deposits in solvent banks and trust companies, and interest due or accrued on other assets, if such interest is, in the superintendent's judgment, a collectible asset; (5) interest due or accrued on a mortgage or deed of trust loan, in an amount not exceeding in any event the amount, if any, of the excess of the value of the property less delinquent taxes thereon over the unpaid principal; but in no event shall interest accrued for a period in excess of eighteen months be allowed as an asset; (6) rent due or accrued on real property if such rent is not in arrears for more than three months, and rent more than three months in arrears if the payment of such rent is adequately secured by property held in the name of the tenant and conveyed to the insurer or society as collateral; and (7) the unaccrued portion of taxes paid prior to the due date on real property; C. premium notes, policy loans and other policy assets and liens on policies and certificates of life insurance and annuity contracts and accrued interest thereon, in amount not exceeding the legal reserve and other policy liabilities carried on each individual policy or contract; D. the net amount of uncollected and deferred premiums and annuity considerations in the case of a life insurer or fraternal benefit society which carries the full mean tabular reserve liability; and in case of a fraternal benefit society which does not carry the full mean tabular reserve liability, premiums or assessments actually collected by subordinate branches of the society and not yet received by its home office; E. premiums in course of collection, other than for life insurance, not more than ninety days past due, less commissions payable thereon. This limitation as to ninety days shall not apply as to premiums payable directly or indirectly by the United States government or by any of its instrumentalities; nor shall it apply to reinsurance premiums receivable by an assuming insurer to the extent offset by amounts carried by the assuming insurer as liabilities for amounts due to the ceding insurer for unpaid losses or other mutual debts, but in no event shall reinsurance premiums more than ninety days past due be allowed in excess of ten percent of the assuming insurer's admitted assets as shown by its most recent annual statement on file with the superintendent; F. installment premiums other than life insurance or annuity premiums, to the extent of the unearned premium reserves carried on the policy or contract to which the premium applies; G. notes and like written obligations not past due, taken for premiums other than life insurance or annuity premiums, on policies and contracts permitted to be issued on such basis, to the extent of the unearned premium reserves carried thereon, except as otherwise prescribed by regulations of the superintendent; H. reinsurance recoverable by a ceding insurer to the extent credit is allowed under Section 59A-7-11 [repealed] of the Insurance Code; I. amounts receivable by an assuming insurer for funds withheld by a solvent ceding insurer under a reinsurance treaty, but not exceeding the amounts carried by the assuming insurer as liabilities for unpaid losses and reserves under such contracts; J. deposits or equities recoverable from underwriting associations, syndicates and reinsurance funds, or from suspended banking and other financial institutions, to the extent deemed by the superintendent available for payment of losses and claims and at values determined by the superintendent; K. all such assets, whether or not consistent with the other provisions of this section, as may be allowed pursuant to the annual statement form approved by the superintendent for the kinds of insurance to be reported upon therein; L. electronic and mechanical machines and related programs and equipment constituting a data processing, record keeping, accounting, word processing (excluding typewriters) or other electronic computer system in actual use, the cost of which shall be amortized in full over a period of not more than ten years. The aggregate amount invested in all such systems shall not exceed five percent of the insurer's or society's assets; M. as to title insurance, the title plant and equipment necessary for conduct of the abstract and title insurance business, at not to exceed the original cost thereof. The superintendent may also allow as assets as to title insurance, premiums and fees for title examination and title insurance not more than twelve months past due, less commissions payable thereon; and N. other assets, not inconsistent with the other provisions of this section, deemed by the superintendent to be available for payment of losses and claims, at values to be determined by the superintendent. Laws 1984, ch. 127, § 118; 1993, ch. 320, § 19.

NMSA 1978, § 59A-8-2 Assets not allowed

59A-8-2. Assets not allowed A. In addition to assets impliedly excluded by provisions of Section 118 [59A-8-1 NMSA 1978] of this article, the following expressly shall not be allowed as assets in any determination of the financial condition of any insurer or fraternal benefit society: (1) goodwill, trade names and other like intangible assets; (2) advances to directors, officers, employees and agents (other than policy loans) whether secured or not, and advances to other persons on personal security only; (3) stock of such insurer, owned by it, or any equity therein or loans secured thereby, or any proportionate interest in such stock acquired or held through ownership by the insurer of an interest in another corporation or business unit; (4) furniture, fixtures, furnishings, safes, vehicles, libraries, stationery, literature and supplies (other than data processing, recordkeeping, accounting, word processing and electronic computer systems authorized under Subsection L of Section 118 [59A-8-1 NMSA 1978] of this article) except: (a) in the case of title insurers such materials and plants as the insurer is expressly authorized to carry as an asset under Subsection M of Section 118 [59A-8-1 NMSA 1978] of this article; and (b) in the case of any insurer or fraternal benefit society, such personal property as it is permitted to hold pursuant to Article 9 (investments) [Chapter 59A, Article 9 NMSA 1978] of the Insurance Code, or which is reasonably necessary for the maintenance or operation of real property lawfully acquired and held, other than real property used for home office, branch office and similar purposes; (5) the amount, if any, by which the aggregate book value of investments as carried in ledger assets exceeds the aggregate value thereof as determined under the Insurance Code. B. All nonadmitted assets and all other assets of doubtful value or character included as ledger or nonledger assets in any statement by an insurer or fraternal benefit society to the superintendent, or in any examiner's report to the superintendent, shall be reported, to the extent of the value disallowed, as deductions from gross assets except where the superintendent permits a reserve to be carried among liabilities in lieu of any such deductions. Laws 1984, ch. 127, § 119.

NMSA 1978, § 59A-8-3 Disallowance of "wash" transactions

59A-8-3. Disallowance of "wash" transactions A. The superintendent shall disallow as an asset or as a credit against liabilities of an insurer, any sale or transfer of property or accounts or any reinsurance found by him after a hearing thereon to have been arranged for the purpose principally of an apparent but temporary betterment as to the transferor, vendor or ceding insurer's financial condition as of the date of any financial statement of the insurer. Without limiting the general purport of the foregoing provision, transfer, sale or reinsurance contracted for in fact within six (6) months prior to the date of any such financial statement and reversed or cancelled in fact within six (6) months after the date of such statement, or reinsurance under which the reinsurer bears no substantial insurance risk or chance of net loss to itself, shall prime [prima] facie be deemed to have been arranged principally for the purpose of such apparent betterment. B. The superintendent shall disallow as an asset any deposit, funds or other property of the insurer found by him after a hearing thereon: (1) not to be in good faith the property of the insurer; and (2) if other than a deposit required to be made and held under or pursuant to statute, not freely subject to withdrawal or liquidation by the insurer at any time for payment or discharge of claims or other obligations arising under its policies; and (3) to be resulting from arrangements made principally for the purpose of such apparent betterment as to the insurer's financial condition as at the date of any financial statement of the insurer. C. The superintendent may suspend or revoke the certificate of authority of any insurer which has knowingly been party to any such transaction or attempt thereat. Laws 1984, ch. 127, § 120.

NMSA 1978, § 59A-8-4 Liabilities, in general

59A-8-4. Liabilities, in general In any determination of the financial condition of an insurer, capital stock and liabilities to be charged against its assets shall include: A. the amount of its capital stock outstanding, if any; B. the amount, estimated to be consistent with the provisions of the Insurance Code, necessary to pay all of its unpaid losses and claims incurred on or prior to date of the statement whether reported or unreported, together with the expense of adjustment or settlement thereof; C. as to life insurance policies and annuity contracts, and disability and accidental death benefits in or supplemental thereto: (1) the amount of reserves on life insurance policies and annuity contracts in force, valued according to the tables of mortality, rates of interest and methods adopted pursuant to the Insurance Code which are applicable thereto; (2) reserves for disability benefits, for both active and disabled lives; (3) reserves for accidental death benefits; and (4) any additional reserves which may be required by the superintendent consistent with applicable customary and general practice in insurance accounting; D. as to health insurance policies, the reserves required under Section 59A-8-7 NMSA 1978; E. as to insurance other than referred to in Subsections C and D of this section, and other than title insurance, the amount of unearned premium reserves computed in accordance with Sections 59A-8-9 and 59A-8-10 NMSA 1978; F. taxes, expenses and other obligations due or accrued at date of the statement; and G. liability to agents for commissions contingent on collection of premium shall not be construed as a liability. Laws 1984, ch. 127, § 121; 1987, ch. 259, § 8.

NMSA 1978, § 59A-8-5 Standard valuation law, life insurance and annuities

59A-8-5. Standard valuation law, life insurance and annuities A. This subsection shall apply to only those policies and contracts issued prior to the operative date of Section 59A-20-31 NMSA 1978. The legal minimum standard for valuation of life insurance contracts issued before the first day of January, 1926, shall be the method and basis of valuation heretofore applied by the insurer in the valuation of such contracts, and for life insurance contracts issued on or after this date shall be the American experience table of mortality, with interest at the rate of three and one-half percent a year; or any other basis not producing a lower net value; provided, however, that the insurer may provide for not more than one-year preliminary term insurance by incorporating in the contracts a clause plainly showing that the first year's insurance under such policies is term insurance. Except as otherwise provided in Paragraphs (2), (3), (4) and (5) of Subsection B of this section and in Subsections C, D, and E of this section for group annuity and pure endowment contracts, the legal minimum standard for the valuation of annuities shall be the American experience table of mortality, with interest at the rate of five percent a year for group annuity and pure endowment contracts and four percent a year for other annuities. B. Subsections B, C, D and E of this section shall apply to only those policies and contracts issued on and after the operative date of Section 59A-20-31 NMSA 1978, except as otherwise provided in Paragraphs (2), (3), (4) and (5) of this subsection and in Subsections C, D and E of this section for group annuity and pure endowment contracts issued prior to such operative date. (1) Except as otherwise provided in Paragraphs (2), (3), (4) and (5) of this subsection and Subsections C, D, and E of this section, the minimum standard for the valuation of all such policies and contracts shall be the commissioners reserve valuation methods defined in Paragraphs (1) and (2) of Subsection E of this section, five percent interest for group annuity and pure endowment contracts and three and one-half percent interest for all other such policies and contracts, or in the case of life insurance policies and contracts, other than annuity and pure endowment contracts, issued on or after July 1, 1973, four percent interest for such policies issued prior to July 1, 1977, five and one-half percent interest for single premium life insurance policies and four and one-half percent interest for all other such policies issued on or after July 1, 1977, and the following tables: (a) for all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies - the commissioners 1941 standard ordinary mortality table for such policies issued prior to the operative date of Paragraph (1) of Subsection D of Section 59A-20-31 NMSA 1978 and the commissioners 1958 standard ordinary mortality table for such policies issued on or after the operative date of Paragraph (1) of Subsection D of Section 59A-20-31 NMSA 1978 and prior to the operative date of Subsection F of Section 59A-20-31 NMSA 1978, provided that for any category of such policies issued on female risks, all modified net premiums and present values referred to in Subsections B, C, D and E of this section may be calculated according to an age not more than six years younger than the actual age of the insured; and for such policies issued on or after the operative date of Subsection F of Section 59A-20-31 NMSA 1978: 1) the commissioners 1980 standard ordinary mortality table; or 2) at the election of the insurer for any one or more specified plans of life insurance, the commissioners 1980 standard ordinary mortality table with ten-year select mortality factors; or 3) any ordinary mortality table, adopted after 1980 by the national association of insurance commissioners, that is approved by regulation promulgated by the superintendent for use in determining the minimum standard of valuation for such policies; (b) for all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies - the 1941 standard industrial mortality table for such policies issued prior to the operative date of Subsection E of Section 59A-20-31 NMSA 1978, and for such policies issued on or after such operative date, the commissioners 1961 standard industrial mortality table or any industrial mortality table, adopted after 1980 by the national association of insurance commissioners, that is approved by regulation promulgated by the superintendent for use in determining the minimum standard of valuation for such policies; (c) for individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies - the 1937 standard annuity mortality table or, at the option of the insurer, the annuity mortality table for 1949, ultimate, or any modification of either of these tables approved by the superintendent; (d) for group annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies - the group annuity mortality table for 1951, any modification of such table approved by the superintendent, or, at the option of the insurer, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts; (e) for total and permanent disability benefits in or supplementary to ordinary policies or contracts: 1) for policies or contracts issued on or after January 1, 1966 the tables of period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 disability study of the society of actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates, adopted after 1980 by the national association of insurance commissioners, that are approved by regulation promulgated by the superintendent for use in determining the minimum standard of valuation for such policies; 2) for policies or contracts issued on or after January 1, 1961 and prior to January 1, 1966 either such tables or, at the option of the insurer, the class (3) disability table (1926); and 3) for policies issued prior to January 1, 1961 the class (3) disability table (1926). Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies; (f) for accidental death benefits in or supplementary to policies: 1) for policies issued on or after January 1, 1966, the 1959 accidental death benefits table or any accidental death benefits table, adopted after 1980 by the national association of insurance commissioners, that is approved by regulation promulgated by the superintendent for use in determining the minimum standard of valuation for such policies; 2) for policies issued on or after January 1, 1961 and prior to January 1, 1966, either such table or, at the option of the insurer, the intercompany double indemnity mortality table; and 3) for policies issued prior to January 1, 1961, the intercompany double indemnity mortality table. 4) Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies; and (g) for group life insurance, life insurance issued on the substandard basis and other special benefits - such tables as may be approved by the superintendent. (2) Except as provided in Paragraphs (3), (4) and (5) of this subsection and in Subsections C, D and E of this section, the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after the operative date of this paragraph, as defined herein, and for all annuities and pure endowments purchased on or after such operative date under group annuity and pure endowment contracts, shall be the commissioners reserve valuation methods defined in Paragraphs (1) and (2) of Subsection E of this section and the following tables and interest rates: (a) for individual annuity and pure endowment contracts issued prior to July 1, 1977, excluding any disability and accidental death benefits in such contracts, the 1971 individual annuity mortality table, or any modification of this table approved by the superintendent, and six percent interest for single premium immediate annuity contracts, and four percent interest for all other individual annuity and pure endowment contracts; (b) for individual single premium immediate annuity contracts issued on or after July 1, 1977, excluding any disability and accidental death benefits in such contracts - the 1971 individual annuity mortality table, or any individual annuity mortality table, adopted after 1980 by the national association of insurance commissioners, that is approved by regulation promulgated by the superintendent for use in determining the minimum standard of valuation for such contracts, or any modification of these tables approved by the superintendent, and seven and one-half percent interest; (c) for individual annuity and pure endowment contracts issued on or after July 1, 1977, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts - the 1971 individual annuity mortality table, or any individual annuity mortality table, adopted after 1980 by the national association of insurance commissioners, that is approved by regulation promulgated by the superintendent for use in determining the minimum standard of valuation for such contracts, or any modification of these tables approved by the superintendent, and five and one-half percent interest for single premium deferred annuity and pure endowment contracts and four and one-half percent interest for all other such individual annuity and pure endowment contracts; (d) for all annuities and pure endowments purchased prior to July 1, 1977, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts - the 1971 group annuity mortality table, or any modification of this table approved by the superintendent, and six percent interest; and (e) for all annuities and pure endowments purchased on or after July 1, 1977, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts - the 1971 group annuity mortality table, or any group annuity mortality table, adopted after 1980 by the national association of insurance commissioners, that is approved by regulation promulgated by the superintendent for use in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of this table approved by the superintendent, and seven and one-half percent interest. (f) After July 1, 1973, any insurer may file with the superintendent a written notice of its election to comply with the provisions of this paragraph after a specified date before January 1, 1979, which shall be the operative date of this paragraph for such insurer, provided that an insurer may elect a different operative date for individual annuity and pure endowment contracts from that elected for group annuity and pure endowment contracts. If an insurer makes no such election, the operative date of this paragraph for such insurer shall be January 1, 1979. (3) The interest rates used in determining the minimum standard for the valuation of: (a) all life insurance policies issued in a particular calendar year, on or after the operative date of Subsection F of Section 59A-20-31 NMSA 1978; (b) all individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982; (c) all annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982 under group annuity and pure endowment contracts; and (d) the net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts shall be the calendar year statutory valuation interest rates as defined in Paragraph (4) of this subsection. (4) The calendar year statutory valuation interest rates shall be determined as follows and the results rounded to the nearest one-quarter of one percent: (a) for life insurance, I =.03 + W (R1 -.03) + W/2 (R2 -.09); (b) for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and for guaranteed interest contracts with cash settlement options, I =.03 + W (R -.03) where R1 is the lesser of R and.09, R2 is the greater of R and.09, R is the reference interest rate defined in Subsection D of this section, and W is the weighting factor defined in Subsection C of this section; (c) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in Subparagraph (b) of this paragraph, the formula for life insurance stated in Subparagraph (a) of this paragraph shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of ten years and the formula for single premium immediate annuities stated in Subparagraph (b) of this paragraph shall apply to annuities and guaranteed interest contracts with guarantee duration of ten years or less; (d) for other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in Subparagraph (b) of this paragraph shall apply; and (e) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in Subparagraph (b) of this paragraph shall apply. (5) However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent, the calendar year statutory valuation interest rate for such life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980 (using the reference interest rate defined for 1979) and shall be determined for each subsequent calendar year regardless of when Subsection F of Section 59A-20-31 NMSA 1978 becomes operative. C. The weighting factors referred to in the formulas stated above are given in the following tables: (1) Weighting Factors for Life Insurance: Guarantee Duration Weighting (Years) Factors 10 or less.50 More than 10, but not more than 20.45 More than 20.35 Guarantee Duration Weighting (Years) Factors 10 or less .50 More than 10, but not more than 20 .45 More than 20 .35 For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy; (2) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options: .80 (3) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in Paragraph (2) of this subsection, shall be as specified in the tables set forth in Subparagraphs (a), (b) and (c) of this paragraph, according to the rules and definitions set forth in Subparagraphs (d), (e) and (f) of this paragraph: (a) For annuities and guaranteed interest contracts valued on an issue year basis: Guarantee Weighting Factor Duration for Plan Type (Years) A B C 5 or less:.80.60.50 More than 5, but not more than 10:.75.60.50 More than 10, but not more than 20:.65.50.45 More than 20:.45.35.35 Guarantee Weighting Factor Duration for Plan Type (Years) A B C 5 or less: .80 .60 .50 More than 5, but not more than 10: .75 .60 .50 More than 10, but not more than 20: .65 .50 .45 More than 20: .45 .35 .35 (b) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in the table set forth in Subparagraph (a) of this paragraph increased by: Plan Type A B C.15.25.05 Plan Type A B C .15 .25 .05 (c) For annuities and guaranteed interest contracts valued on an issue year basis (other than those with no cash settlement options) which do not guarantee interest on considerations received more than one year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on considerations received more than twelve months beyond the valuation date, the factors shown in the table set forth in Subparagraph (a) of this paragraph or derived as required in the table set forth in Subparagraph (b) of this paragraph increased by: Plan Type A B C.05.05.05 Plan Type A B C .05 .05 .05 (d) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of twenty years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence. (e) Plan type as used in the above tables is defined as follows: Plan Type A: At any time policyholder may withdraw funds only: with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer; or without such adjustment but in installments over five years or more; or as an immediate life annuity; or no withdrawal permitted. Plan Type B: Before expiration of the interest rate guarantee, policyholder may withdraw funds only: with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer; or without such adjustment but in installments over five years or more; or no withdrawal permitted. At the end of interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than five years. Plan Type C: Policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five years either: without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer; or subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund. (f) An insurer may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis. As used in Subsections B, C and D of this section, an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract, and the change in fund basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund. D. The reference interest rate referred to in Paragraph (4) of Subsection B of this section shall be defined as follows: (1) for all life insurance, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June 30 of the calendar year next preceding the year of issue, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated; (2) for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve months, ending on June 30 of the calendar year of issue or year of purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated; (3) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in Paragraph (2) of this subsection, with guarantee duration in excess of ten years, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated; (4) for other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in Paragraph (2) of this subsection, with guarantee duration of ten years or less, the average over a period of twelve months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated; (5) for other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of twelve months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated; (6) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in Paragraph (2) of this subsection, the average over a period of twelve months, ending on June 30 of the calendar year of the change in the fund, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated; and (7) in the event that the national association of insurance commissioners determines that the monthly average of the composite yield on seasoned corporate bonds, as published by Moody's investors service, incorporated is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate, which is adopted by the national association of insurance commissioners and approved by regulation promulgated by the superintendent may be substituted. E. The reserve valuation method shall be defined as follows: (1) Except as otherwise provided in this paragraph and Paragraph (2) of this subsection, reserves according to the national association of insurance commissioners reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of Subparagraph (a) over Subparagraph (b) of this paragraph, as follows: (a) a net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due; provided, however, that such net level annual premium shall not exceed the net level annual premium on the nineteen-year premium whole life plan for insurance of the same amount at an age of one year higher than the age at issue of such policy; and (b) a net one-year term premium for such benefits provided for in the first policy year. Provided that for any life insurance policy issued on or after January 1, 1985 for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium shall, except as otherwise provided in Subparagraph (e) of this paragraph, be the greater of the reserve as of such policy anniversary calculated as described previously in this paragraph and the reserve as of such policy anniversary calculated as previously described in this paragraph, but with: the value defined in Subparagraph (a) of this paragraph being reduced by fifteen percent of the amount of such excess first year premium; all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date; the policy being assumed to mature on such date as an endowment; and the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison the mortality and interest bases stated in Paragraphs (1), (3), (4) and (5) of Subsection B of this section and in Subsections C and D of this section shall be used. Reserves according to the commissioners reserve valuation method for: 1) life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums; 2) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended; 3) disability and accidental death benefits in all policies and contracts; and 4) all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the principles of this paragraph, except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums; (c) in no event shall an insurer's aggregate reserves for all life insurance policies excluding disability and accidental death benefits, be less than the aggregate reserves calculated in accordance with the methods set forth in this paragraph and Paragraph (2) of this subsection and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies; (d) reserves for any category of policies, contracts or benefits as established by the superintendent, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for therein. Any such insurer which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard herein provided may, with the approval of the superintendent, adopt any lower standard of valuation, but not lower than the minimum herein provided; but, for the purpose of this section, the holding of additional reserves previously determined by a qualified actuary to be necessary to render the opinion required by Section 59A-8-7 NMSA 1978 shall not be deemed to be the adoption of a higher standard of valuation; (e) if in any contract year the gross premium charged by any insurer on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this paragraph are those standards stated in Paragraphs (1), (3), (4) and (5) of Subsection B of this section. Provided that for any life insurance policy issued on or after January 1, 1985 for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the foregoing provisions of Subparagraph (e) of this paragraph shall be applied as if the method actually used in calculating the reserve for such policy were the method previously described in this paragraph ignoring the unnumbered paragraph immediately following Subparagraph (b) of this paragraph. The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with the method previously described in this paragraph, including the unnumbered paragraph immediately following Subparagraph (b), and the minimum reserve calculated in accordance with Subparagraph (e), of this paragraph; and (f) in the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurer based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of such a nature that the minimum reserves cannot be determined by the methods described in Paragraphs (1) and (2) of this subsection, the reserves which are held under any such plan must: 1) be appropriate in relation to the benefits and the pattern of premiums for that plan; and 2) be computed by a method which is consistent with the principles of this standard valuation law, as determined by regulations promulgated by the superintendent. (2) This paragraph shall apply to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended. Reserves according to the commissioners annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by such contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of such contract, that become payable prior to the end of such respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate or rates, specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values. Laws 1984, ch. 127, § 122; 1993, ch. 320, § 20.

NMSA 1978, § 59A-8-7.1 Continued liability after assumption reinsurance transactions

59A-8-7.1. Continued liability after assumption reinsurance transactions A ceding insurer shall remain jointly and severally liable with an unauthorized assuming insurer on ceded contracts or policies for which assumption certificates have been issued covering risks resident in this state until such time as: A. the assuming insurer obtains a certificate of authority to transact the applicable kind of insurance in this state; or B. the assuming insurer deposits with the superintendent a special deposit in an amount equal to the greater of: (1) one hundred thousand dollars ($100,000); or (2) twenty thousand dollars ($20,000) plus the statutory reserves required of an authorized insurer for the contracts assumed. 1978 Comp., § 59A-8-7.1, enacted by Laws 1993, ch. 320, § 23.

NMSA 1978, § 59A-8-8 Loss reserves

59A-8-8. Loss reserves A. Each authorized insurer shall maintain reserves in such amount as is requisite to cover losses and claims incurred and unpaid, together with related adjustment and settlement expense, whether reported or unreported as at financial statement date. In computing or approving such reserves the superintendent may estimate any portion which it is not practicable to compute accurately for [due to] failure to receive notice or otherwise. B. Whenever the loss and loss expense experience of an insurer shows that its loss reserves, however calculated, are inadequate, the superintendent may require the insurer to maintain additional reserves. Laws 1984, ch. 127, § 125.

NMSA 1978, § 59A-8-9 Unearned premium reserve, casualty, vehicle, property, marine and surety insurances

59A-8-9. Unearned premium reserve, casualty, vehicle, property, marine and surety insurances As to property, casualty, vehicle and surety insurance, and marine and transportation insurance other than as provided in Section 59A-8-10 NMSA 1978, the insurer shall maintain as a liability an unearned premium reserve on policies in force computed as follows: fifty percent of the gross premium in force on policies having one year or less to run and pro rata on those for longer periods, or pro rata for all premiums in force. Laws 1984, ch. 127, § 126; 1997, ch. 121, § 4.

NMSA 1978, § 59A-8-10 Unearned premium reserve, marine and transportation insurance

59A-8-10. Unearned premium reserve, marine and transportation insurance As to marine and transportation insurance, the entire amount of premiums on trip risks not terminated shall be deemed unearned; and the superintendent may require the insurer to carry a reserve equal to one hundred percent of premiums on trip risks written during the month ended as of the date of statement. Laws 1984, ch. 127, § 127.

NMSA 1978, § 59A-8-11 Title insurance reserves

59A-8-11. Title insurance reserves A. As to title insurance the insurer shall set up and maintain unearned premium reserves as follows: (1) as to guaranties and policies on property in this state issued prior to January 1, 1957, the insurer shall reserve initially a sum equal to ten percent of gross premiums therefor. The sum so accumulated may be reduced by five percent thereof at the end of each calendar year thereafter; (2) as to guaranties and policies on property in this state issued on and after January 1, 1957, the insurer shall reserve initially a sum equal to ten percent of the gross risk premium therefor. At end of each calendar year following the year in which the guaranty or policy was issued the insurer may reduce the sum so reserved by five percent thereof. B. The sums so reserved initially, or maintained thereafter, in accordance with the above provisions shall be considered unearned portions of the gross risk premiums on such guaranties or policies and shall be shown as a liability of the insurer in determining its financial condition. C. If a title insurer on withdrawing from the title insurance business in this state desires to reinsure with another title insurer all its title guaranties or policies in this state, the superintendent may require the reinsurer to increase its unearned premium reserve by an amount not greater than the unearned premium reserve required of the withdrawing insurer as to the guaranties and policies so reinsured. D. The term "gross risk premium" as used in this action [section] shall not include charges for abstracting, record searching, escrow and closing services and other related services which may be provided by the insurer, or costs and expenses of examinations of title, or premiums paid for reinsurance. Laws 1984, ch. 127, § 128.

NMSA 1978, § 59A-8-12 Mortgage guaranty contingency reserve

59A-8-12. Mortgage guaranty contingency reserve A. Casualty or surety insurers insuring real property mortgage or deed of trust lenders against loss by nonpayment of the indebtedness shall maintain a contingency reserve for protection of policyholders against the effects of adverse economic cycles. B. The insurer shall contribute to such contingency reserve fifty percent of net premiums (gross premiums less premiums returned to policyholders) written on such insurance remaining after establishment of the unearned premium reserve. C. Subject to the superintendent's approval, the contingency reserve shall be available for payment of losses only when the insurer's incurred losses in any one (1) calendar year exceed the rate formula expected losses by ten percent of the related earned premiums. Laws 1984, ch. 127, § 129.

NMSA 1978, § 59A-8-13 Valuation of bonds

59A-8-13. Valuation of bonds A. Subject to the provisions of Subsections B, C and D of this section, all bonds or other evidences of debt having a fixed term and rate of interest held by an insurer may, if amply secured and not in default as to principal or interest, be valued as follows: (1) if purchased at par, at the par value; and (2) if purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield in the meantime the effective rate of interest at which the purchase was made. B. The purchase price shall in no event be taken at a higher figure than actual market value at time of purchase, plus incidental costs of acquisition of the securities. C. No such security shall be carried at above the call price for the entire issue during any period within which the security may be so called, and premiums paid at purchase shall be amortized by the scientific method to the first call date at which the entire issue may be redeemed. D. Obligations subject to amortization under the published findings of the national association of insurance commissioners shall be carried at their amortized values. Obligations which do not qualify for amortization shall be reported at their market value or book value based upon an amortized computation, whichever is lower. Laws 1984, ch. 127, § 130; 1987, ch. 259, § 9; 1993, ch. 320, § 24.

NMSA 1978, § 59A-8-14 Valuation of other securities

59A-8-14. Valuation of other securities A. Common stocks shall be valued at their market value, as determined by customary method, or, at the option of the company, they may be carried at cost if cost is less than market value. If no publicly traded market quotation is available, the value of the stocks shall be based on the pro rata share of the issuing company's net worth as shown by its audited financial statements or, in the case of an insurance company, the pro rata share of its statutory net worth. B. Preferred stocks shall be valued in accordance with procedures promulgated periodically by the securities valuation office of the national association of insurance commissioners. C. Stock of an insurer's subsidiary shall be valued only on the basis of value of the assets of the subsidiary that would constitute lawful investments of the insurer if acquired or held directly by the insurer. 1978 Comp., § 59A-8-14, enacted by Laws 1993, ch. 320, § 25.

NMSA 1978, § 59A-8-15 Valuation of property

59A-8-15. Valuation of property A. Real property held by a company may be valued at not more than: its cost plus the cost of capitalized additions and permanent improvements, less depreciation, or its fair market value as determined by appraisal within the most recent three years, whichever is less. Depreciation shall be computed under the straight line method or, at the option of the company, under any other method resulting in larger accumulated depreciation at any given time. Depreciation of any buildings shall be based upon an estimated useful life of not more than fifty years. B. Property acquired in satisfaction of a debt shall be valued at its fair market value or the amount of the debt, including capitalized taxes and expenses, whichever amount is less. 1978 Comp., § 59A-8-15, enacted by Laws 1993, ch. 320, § 26.

NMSA 1978, § 59A-8-16 Valuation of purchase money mortgages

59A-8-16. Valuation of purchase money mortgages Purchase money mortgages or deeds of trust on real property referred to in Subsection A of Section 132 [59A-8-15 NMSA 1978] of this article shall be valued in an amount not exceeding acquisition cost of the real property covered thereby or ninety percent of the fair value of the real property, whichever is less. Laws 1984, ch. 127, § 133.

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