2011 New Mexico Statutes
Chapter 59A: Insurance Code
Article 41: Conservation, Rehabilitation and Liquidation, 59A-41-1 through 59A-41-57
Section 59A-41-24: Hazardous financial condition, determination.

59A-41-24. Hazardous financial condition, determination.

A. For the purposes of Sections 59A-41-25 and 59A-41-26 NMSA 1978, an insurer may be deemed to be in a hazardous financial condition when the superintendent has determined, after notice and hearing, that the loss experience of the insurer, when reviewed in conjunction with the kinds and characteristics of risks insured, or the insurer's financial condition, or its ownership, or the ratio of its annual premium volume in relation to its policyholders' surplus, would make further assumption of risks by the insurer hazardous to those persons doing business with the insurer or to the general public.

B. The following items may be considered by the superintendent to determine whether the continued operation of any insurer transacting an insurance business in this state is hazardous to the policyholders, creditors or the general public:

(1) findings reported in financial condition and market conduct examination reports;

(2) the national association of insurance commissioners insurance regulatory information system and its related reports;

(3) ratios of commission expense, general insurance expense, policy benefits and reserve increases to annual premium and net investment income;

(4) the value, liquidity or diversity of the insurer's asset portfolio when viewed in light of current economic conditions with regard to assuring the company's ability to meet its outstanding obligations as they mature;

(5) the adequacy, reliability and soundness of the insurer's reinsurance program as well as the financial condition of the assuming reinsurer and the ability of the assuming reinsurer to perform under its reinsurance agreements;

(6) the insurer's operating loss in the last twelve-month period or any shorter period of time, including net capital gain or loss, change in non-admitted assets, and cash dividends paid to shareholders, in comparison to such insurer's remaining surplus as regards policyholders in excess of the minimum required;

(7) whether any affiliate, subsidiary or reinsurer is insolvent, threatened with insolvency or delinquent in payment of its monetary or other obligation;

(8) contingent liabilities, pledges or guaranties which may affect the solvency of the insurer;

(9) whether any person having control of an insurer is delinquent in transmitting or paying net premiums to such insurer;

(10) the age and collectibility of receivables;

(11) whether the management of an insurer, including officers, directors or any other person who directly or indirectly controls the operation of such insurer, fails to possess and demonstrate the competence, fitness and reputation deemed necessary to serve the insurer in such position;

(12) whether management of an insurer has failed to respond to inquiries relative to the condition of the insurer or has furnished false or misleading information concerning an inquiry;

(13) whether management of an insurer has filed with any regulatory authority or released to lending institutions or to the general public any false or misleading financial statements, or has made a false or misleading entry or has omitted an entry of material amount in the books of the insurer;

(14) whether the insurer has grown so rapidly and to such an extent that it lacks adequate financial and administrative capacity to meet its obligations in a timely manner;

(15) whether the company has experienced or will experience in the foreseeable future cash flow or liquidity problems;

(16) risk-based capital reports and other information obtained pursuant to the Risk-Based Capital Act [Chapter 59A, Article 5A NMSA 1978]; or

(17) such other material information and data as the superintendent may deem relevant.

C. For the purposes of making a determination of an insurer's financial condition under this section, the superintendent may:

(1) disregard any credit or amount receivable resulting from transactions with a reinsurer which is insolvent, impaired or otherwise subject to a delinquency proceeding;

(2) make appropriate adjustments to asset values attributable to investments in or transactions with parents, subsidiaries or affiliates;

(3) refuse to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor; or

(4) increase the insurer's liability in an amount equal to any contingent liability, pledge or guarantee not otherwise included if there is a substantial risk that the insurer will be called upon to meet the obligation undertaken within the next twelve-month period.