N.M. Admin. Code § 13.2.7.6

Current through Register Vol. 35, No. 24, December 23, 2024

Section 13.2.7.6 - OBJECTIVE

The superintendent recognizes that licensed insurers routinely enter into reinsurance agreements that yield legitimate relief to the ceding insurer from strain to surplus. However, it is improper for a licensed insurer, in the capacity of ceding insurer, to enter into reinsurance agreements for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, if all of the significant risks inherent in the business being reinsured are not transferred. In substance or effect, the expected potential liability to the ceding insurer remains basically unchanged by the reinsurance transaction, notwithstanding certain risk elements in the reinsurance agreement, such as catastrophic mortality or extraordinary survival. The objective of this rule is to prevent:

A. violation of Section 59A-16-8 NMSA 1978 relating to financial statements which do not properly reflect the financial condition of the ceding insurer;

B. violation of Sections 59A-7-11 and 59A-8-3 NMSA 1978 relating to reinsurance reserve credits, thus resulting in a ceding insurer improperly reducing liabilities or establishing assets for reinsurance ceded; and

C. creation of a situation that may be hazardous to policyholders and the people of this state as defined in Section 59A-41-24 NMSA 1978.

N.M. Admin. Code § 13.2.7.6

1/1/94; Recompiled 11/30/01