Current through Register Vol. 35, No. 24, December 23, 2024
Section 13.2.8.21 - ADDITIONAL CONDITIONS APPLICABLE TO REINSURANCE AGREEMENTS FOR TRUST AGREEMENTS QUALIFIED UNDER SECTION 18 OF 13.2.8 NMACA. A reinsurance agreement may contain provisions that:(1) require the assuming insurer to enter into a trust agreement and to establish a trust account for the benefit of the ceding insurer, and specifying what the agreement is to cover;(2) require the assuming insurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may whenever necessary negotiate these assets without consent or signature from the assuming insurer or any other entity;(3) require that all settlements of account between the ceding insurer and the assuming insurer be made in cash or its equivalent; and(4) stipulate that the assuming insurer and the ceding insurer agree that the assets in the trust account, established pursuant to the provisions of the reinsurance agreement, may be withdrawn by the ceding insurer at any time, notwithstanding any other provisions in the reinsurance agreement, and shall be utilized and applied by the ceding insurer or its successors in interest by operation of law, including without limitation any liquidator, rehabilitator, receiver or conservator of such company, without diminution because of insolvency on the part of the ceding insurer or the assuming insurer, only for the following purposes: (a) to pay or reimburse the ceding insurer for:(i) the assuming insurer's share under the specific reinsurance agreement of premiums returned, but not yet recovered from the assuming insurer, to the owners of policies reinsured under the reinsurance agreement because of cancellations of such policies;(ii) the assuming insurer's share of surrenders and benefits or losses paid by the ceding insurer pursuant to the provisions of the policies reinsured under the reinsurance agreement; and(iii) any other amounts necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer;(b) to make payment to the assuming insurer of amounts held in the trust account in excess of the amount necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer.B. The reinsurance agreement also may contain provisions that:(1) give the assuming insurer the right to seek approval from the ceding insurer, which shall not be unreasonably or arbitrarily withheld, to withdraw from the trust account all or any part of the trust assets and transfer those assets to the assuming insurer, provided:(a) the assuming insurer shall, at the time of withdrawal, replace the withdrawn assets with other qualified assets having a current fair market value equal to the market value of the assets withdrawn so as to maintain at all times the deposit in the required amount; or(b) after withdrawal and transfer, the current fair market value of the trust account is no less than one hundred-two percent of the required amount.(2) provide for the return of any amount withdrawn in excess of the actual amounts required for Paragraph 4 of Subsection A of this section, and for interest payments at a rate not in excess of the prime rate of interest on such amounts;(3) permit the award by any arbitration panel or court of competent jurisdiction of:(a) interest at a rate different from that provided in Paragraph (2) of this subsection;(b) court or arbitration costs;(d) any other reasonable expenses.N.M. Admin. Code § 13.2.8.21
7/1/97; Recompiled 11/30/01, Adopted by New Mexico Register, Volume XXIX, Issue 14, July 24, 2018, eff. 7/24/2018, Adopted by New Mexico Register, Volume XXXIII, Issue 12, June 21, 2022, eff. 7/1/2022