2018 New Mexico Statutes
Chapter 59A - Insurance Code
Article 20 - Life Insurance and Annuity Contracts
Section 59A-20-10 - Policy loan interest rates.

A. For purposes of this section the "published monthly average" means:

(1) the Moody's Corporate Bond Yield Average - Monthly Average Corporates as published by Moody's Investors Service, Inc. or any successor thereto; or

(2) if such publication is no longer published, a substantially similar average established by regulations of the superintendent.

B. Maximum rate of interest on policy loans.

(1) Policies issued on or after April 7, 1983 shall provide for policy loan interest rates as follows:

(a) a provision permitting a maximum interest rate of not more than eight percent per annum; or

(b) a provision permitting an adjustable maximum interest rate established from time to time by the insurer as permitted by this section.

(2) The rate of interest charged under Subparagraph (1)(b) of this subsection shall not exceed the higher of the following:

(a) the published monthly average for the calendar month ending two (2) months before the date on which the rate is determined; or

(b) the rate used to compute the cash surrender values under the policy during the applicable period plus one percent per annum.

(3) If the maximum rate of interest is determined pursuant to Subparagraph (1)(b) of this subsection, the policy shall contain a provision stating the frequency at which the rate is to be determined for that policy.

(4) The maximum rate for each policy shall be determined at regular intervals at least once every twelve (12) months, but not more frequently than once in any three (3) month period. At the intervals specified in the policy:

(a) the rate being charged may be increased whenever such increase as determined under paragraph (2) of this Subsection B would increase the rate by one-half percent or more per annum; and

(b) the rate charged must be reduced whenever such reduction as determined under such paragraph (2) of this Subsection B would decrease that rate by one-half percent or more per annum.

(5) The insurer shall:

(a) notify the policyholder at the time a cash loan is made of the initial rate of interest on the loan;

(b) notify the policyholder of the initial rate of interest on the loan as soon as reasonably practical after making the initial loan. Notice need not be given to the policyholder when a further premium loan is added, except as provided in (c) below;

(c) send to policyholders with loans reasonable advance notice of any increase in the interest rate; and

(d) include in the notices required above the substance of the pertinent provisions of Paragraphs (1) and (3) of this Subsection B.

(6) The loan value of the policy shall be determined in accordance with Section 374 [59A-20-9 NMSA 1978] (policy loans) of this article, but no policy shall terminate in a policy year as the sole result of change in the interest rate during that policy year, and the insurer shall maintain coverage during that policy year until the time at which it would otherwise have terminated if there had been no change during that policy year.

(7) The substance of the pertinent provisions of Paragraphs (1) and (3) of this Subsection B shall be set forth in the policies to which they apply.

(8) For the purposes of this Subsection B:

(a) the rate of interest on policy loans permitted under this Subsection B includes the interest rate charged on reinstatement of policy loans for the period during and after any lapse of a policy;

(b) "policy loan" includes any premium loan made under a policy to pay one or more premiums that were not paid to the insurer as they fell due;

(c) "policyholder" includes the owner of the policy or person designated to pay premiums as shown by the records of the insurer; and

(d) "policy" includes certificates issued by a fraternal benefit society and annuity contracts which provide for policy loans.

(9) No other provision of law shall apply to policy loan interest rates unless made specifically applicable to such rates.

C. This section shall not apply to any insurance contract issued before April 7, 1983 unless the policyholder agrees in writing to the applicability of such provisions.

History: Laws 1984, ch. 127, § 375.