New Mexico Life Insurance Guaranty Association

Covered Contracts

§59A-42-4.D. Coverage shall be provided to the persons specified in Subsection A of this section for policies or contracts of direct, non-group life insurance, health insurance, which for the purposes of the Life and Health Insurance Guaranty Association Act includes health maintenance organization subscriber contracts and certificates, or annuities and supplemental contracts to any of these, for certificates under direct group policies and contracts and supplemental contracts to these and for unallocated annuity contracts issued by member insurers, except as limited by the Life and Health Insurance Guaranty Association Act. Annuity contracts and certificates under group annuity contracts include guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, annuities issued to or in connection with government lotteries and immediate or deferred annuity contracts.

Non-Covered Contracts

§59A-42-4.E. Coverage shall not be provided for: (1) a portion of a policy or contract not guaranteed by the member insurer or under which the risk is borne by the policy or contract owner; (2) a policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract; (3) a portion of a policy or contract, except for any portion of a policy or contract, including a rider, that provides long-term care or any other health insurance benefit, to the extent that the rate of interest on which it is based, or the interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (a) averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer pursuant to the Life and Health Insurance Guaranty Association Act, whichever is earlier, exceeds the rate of interest determined by subtracting two percentage points from Moody’s corporate bond yield average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under the Life and Health Insurance Guaranty Association Act, whichever is earlier; and (b) on and after the date on which the member insurer becomes an impaired or insolvent insurer pursuant to the Life and Health Insurance Guaranty Association Act, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody’s corporate bond yield average as most recently available; (4) a portion of a policy or contract issued to a plan or program of an employer, association or other person to provide life, health or annuity benefits to its employees, members or others, to the extent that the plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association or other person under: (a) a multiple employer welfare arrangement; (b) a minimum premium group insurance plan; (c) a stop-loss group insurance plan; or (d) an administrative services only contract; (5) a portion of a policy or contract to the extent that it provides for: (a) dividends or experience rating credits; (b) voting rights; or (c) payment of fees or allowances to a person, including the policy or contract owner, in connection with the service to or administration of the policy or contract; (6) a policy or contract issued in this state by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue the policy or contract in this state; (7) an unallocated annuity contract issued to or in connection with a benefit plan protected under the federal pension benefit guaranty corporation, regardless of whether that corporation has yet become liable to make payments with respect to the benefit plan; (8) a portion of an unallocated annuity contract that is not issued to or in connection with a specific employee, union or association of natural persons benefit plan or a government lottery; (9) a portion of a policy or contract to the extent that the assessments required by Section 59A-42-8 NMSA 1978 with respect to the policy or contract are preempted by federal or state law; (10) an obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner or policy owner, including without limitation: (a) claims based on marketing materials; (b) claims based on side letters, riders or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements; (c) misrepresentations of or regarding policy or contract benefits; (d) extra-contractual claims; or (e) a claim for penalties or consequential or incidental damages; (11) a contractual agreement that establishes the member insurer’s obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer; (12) a portion of a policy or contract to the extent that it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policy or contract owner’s rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer pursuant to the Life and Health Insurance Guaranty Association Act, whichever is earlier. If a policy or contract’s interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and that are not subject to forfeiture pursuant to this paragraph, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values were the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture; (13) a policy or contract providing hospital, medical, prescription drug or other health care benefits pursuant to Part C or Part D of Subchapter 18 of Chapter 7 of Title 42 of the United States Code, commonly known as medicare Parts C and D, or Subchapter 19 of Chapter 7 of Title 42 of the United States Code, commonly known as medicaid, or any regulations promulgated pursuant to those acts; or (14) structured settlement annuity benefits to which a payee or beneficiary has transferred the payee’s or beneficiary’s rights in a structured settlement factoring transaction.

Non-Resident Coverage

§59A-42-4(A)(2)(b) Coverage shall be provided to persons who are not residents, but only under the following conditions: 1) the member insurer that issued the policies or contracts is domiciled in this state; 2) the states in which the persons reside have associations similar to this state’s association; and 3) the persons are not eligible for coverage by an association in another state due to the fact that the member insurer or the health maintenance organization was not licensed in that state at the time specified in that state’s guaranty association law;

§59A-42-4.F. The benefits that the association may become obligated to cover shall in no event exceed the lesser of: (1) the contractual obligations for which the member insurer is liable or would have been liable if it were not an impaired or insolvent insurer; (2) with respect to one person’s life, regardless of the number of policies or contracts: (a) for life insurance death benefits, three hundred thousand dollars ($300,000) but not more than one hundred thousand dollars ($100,000) in net cash surrender and net cash withdrawal values; (b) for health insurance benefits: 1) one hundred thousand dollars ($100,000) for coverages not constituting disability income insurance, health benefit plans or long-term care insurance, including net cash surrender and net cash withdrawal values; 2) three hundred thousand dollars ($300,000) for disability income insurance; 3) three hundred thousand dollars ($300,000) for long-term care insurance as defined in Section 59A-23A-4 NMSA 1978; and 4) five hundred thousand dollars ($500,000) for health benefit plans; or (c) for annuity benefits, two hundred fifty thousand dollars ($250,000) in present value, including net cash surrender and net cash withdrawal values; (3) with respect to each individual participating in a governmental retirement benefit plan established pursuant to Section 401, 403(b) or 457 [26 U.S.C. §§ 401, 403(b) and 457] of the federal Internal Revenue Code of 1986 covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, two hundred fifty thousand dollars ($250,000) in present value annuity benefits, including net cash surrender and net cash withdrawal values; or (4) with respect to each payee of a structured settlement annuity, or beneficiary or beneficiaries of the payee if the payee is deceased, two hundred fifty thousand dollars ($250,000) in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any.

Discretionary Triggers

§59A-42-7.A. If a member insurer is an impaired insurer, the association may, in its discretion, and subject to conditions imposed by the association that do not impair the contractual obligations of the impaired insurer and that are approved by the superintendent: (1) guarantee, assume, reissue or reinsure, or cause to be guaranteed, assumed, reissued or reinsured, any or all of the policies or contracts of the impaired insurer; and (2) provide such money, pledges, loans, notes, guarantees or other means as are proper to effectuate Paragraph (1) of this subsection and assure payment of the contractual obligations of the impaired insurer pending action pursuant to Paragraph (1) of this subsection.

Mandatory Triggers

§59A-42-7.B. If a member insurer is an insolvent insurer, the association shall, in its discretion, either: (1) guarantee, assume, reissue or reinsure, or cause to be guaranteed, assumed, reissued or reinsured, the policies or contracts of the insolvent insurer, or assure payment of the contractual obligations of the insolvent insurer, and provide money, pledges, loans, notes, guarantees or other means reasonably necessary to discharge the association’s duties; or (2) provide benefits and coverages in accordance with the following provisions: (a) with respect to policies and contracts, assure payment of benefits that would have been payable under the policies or contracts of the insolvent insurer, for claims incurred: 1) with respect to group policies and contracts, not later than the earlier of the next renewal date under those policies or contracts or forty-five days, but in no event less than thirty days, from the date on which the association becomes obligated with respect to the policies and contracts; and 2) with respect to non-group policies, contracts and annuities, not later than the earlier of the next renewal date, if any, under the policies or contracts or one year, but in no event less than thirty days, from the date on which the association becomes obligated with respect to the policies or contracts; (b) make diligent efforts to provide all known insureds, enrollees or annuitants, for non-group policies and contracts, or group policy holders or contract owners with respect to group policies and contracts, thirty days’ notice of the termination, pursuant to Subparagraph (a) of this paragraph, of the benefits provided; (c) with respect to non-group policies or contracts covered by the association, and with respect to an individual formerly insured, enrolled or formerly an annuitant under a group policy or contract who is not eligible for replacement group coverage, make available to each known insured, enrollee or annuitant, or owner if other than the insured, enrollee or annuitant, substitute coverage on an individual basis in accordance with the provisions of Subparagraph (d) of this paragraph if the insureds, enrollees or annuitants had a right under law or the terminated policy, contract or annuity to convert coverage to individual coverage or to continue an individual policy, contract or annuity in force until a specified age or for a specified time, during which the insurer or health maintenance organization had no right unilaterally to make changes in any provision of the policy, contract or annuity or had a right only to make changes in premium by class; (d) in providing the substitute coverage required pursuant to Subparagraph (c) of this paragraph, the association may offer either to reissue the terminated coverage or to issue an alternative policy or contract at actuarially justified rates. Alternative or reissued policies or contracts shall be offered without requiring evidence of insurability and shall not provide for a waiting period or exclusion that would not have applied under the terminated policy or contract. The association may reinsure an alternative or reissued policy or contract; (e) alternative policies or contracts adopted by the association shall be subject to the approval of the superintendent. The association may adopt alternative policies or contracts of various types for future issuance without regard to a particular impairment or insolvency. Alternative policies or contracts shall contain at least the minimum statutory provisions required in this state and provide benefits that shall not be unreasonable in relation to the premium charged. The association shall set the premium in accordance with a table of rates that it shall adopt. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured but shall not reflect changes in the health of the insured after the original policy or contract was last underwritten. An alternative policy or contract issued by the association shall provide coverage of a type similar to that of the policy or contract issued by the impaired or insolvent insurer, as determined by the association; (f) if the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy or contract, the premium shall be actuarially justified and set by the association in accordance with the amount of insurance provided and the age and class of risk, subject to the approval of the superintendent; (g) the association’s obligations with respect to coverage under a policy or contract of the impaired or insolvent insurer or under a reissued or alternative policy or contract shall cease on the date the coverage or policy is replaced by another similar policy by the policy owner, contract owner, enrollee, the insured or the association; and (h) when proceeding under this subsection with respect to a policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with Paragraph (3) of Subsection E of Section 59A-42-4 NMSA 1978.

Foreign Triggers

No separate provision.

"Impaired Insurer"

§59A-42-3.L. “impaired insurer” means a member insurer that, after the effective date of the Life and Health Insurance Guaranty Association Act, is not an insolvent insurer and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction;

"Insolvent Insurer"

§59A-42-3.M. “insolvent insurer” means a member insurer that, after the effective date of the Life and Health Insurance Guaranty Association Act, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency;

"Member Insurer"

§ 59A-42-3.N. “member insurer” means an insurer or health maintenance organization that is licensed or that holds a certificate of authority to transact in this state any kind of insurance or health maintenance organization business for which coverage is provided pursuant to Section 59A-42-4 NMSA 1978 and includes an insurer or health maintenance organization whose license or certificate of authority in this state may have been suspended, revoked, not renewed or voluntarily withdrawn, but does not include: (1) a health care plan, whether profit or nonprofit; (2) a prepaid dental plan; (3) a fraternal benefit society; (4) a mandatory state pooling plan; (5) a mutual assessment company or other person that operates on an assessment basis; (6) an insurance exchange; (7) a charitable organization that is in good standing with the superintendent pursuant to Section 59A-1-16.1 NMSA 1978; (8) any insurer that was insolvent or unable to fulfill its contractual obligations as of April 9, 1975; or (9) an entity similar to any of the above;

§59A-42-5A .For purposes of assessment and administration, the association shall maintain two accounts: (1) the life insurance and annuity account, which includes the following subaccounts: (a) a life insurance account; (b) an annuity account, which includes annuity contracts owned by a governmental retirement benefit plan, or its trustee, established pursuant to Section 401, 403(b) or 457 [26 U.S.C. §§ 401, 403(b) and 457] of the federal Internal Revenue Code of 1986, but otherwise excludes unallocated annuities; and (c) an unallocated annuity account, which excludes contracts owned by a governmental retirement benefit plan, or its trustee, established pursuant to Section 401, 403(b) or 457 of the federal Internal Revenue Code of 1986; and (2) the health account.

Assessment Limits

§59A-42-8.G. Subject to the provisions of Subsection H of this section, the total of all assessments authorized by the association with respect to a member insurer for each subaccount of the life insurance and annuity account and for the health insurance account shall not in one calendar year exceed two percent of that member insurer's average annual premiums received in this state on the policies and contracts covered by the subaccount or account during the three calendar years preceding the year in which the insurer became an impaired or insolvent insurer. (Amended effective 7/1/12)

Assessment Classes

§59A-42-8.B. There shall be two classes of assessments as follows: (1) class A assessments shall be authorized and called for the purpose of meeting administrative and legal costs and other expenses. Class A assessments may be authorized and called whether or not related to a particular impaired or insolvent insurer; and (2) class B assessments shall be authorized and called to the extent necessary to carry out the powers and duties of the association with regard to an impaired or an insolvent insurer.

§59A-42-4.E.3 a portion of a policy or contract, except for any portion of a policy or contract, including a rider, that provides long-term care or any other health insurance benefit, to the extent that the rate of interest on which it is based, or the interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (a) averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer pursuant to the Life and Health Insurance Guaranty Association Act, whichever is earlier, exceeds the rate of interest determined by subtracting two percentage points from Moody’s corporate bond yield average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under the Life and Health Insurance Guaranty Association Act, whichever is earlier; and (b) on and after the date on which the member insurer becomes an impaired or insolvent insurer pursuant to the Life and Health Insurance Guaranty Association Act, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody’s corporate bond yield average as most recently available;

No provision.

§59A-42-3.Q. “premiums” means amounts or considerations, by whatever name used, received on covered policies or contracts less returned premiums, considerations and deposits and less dividends and experience credits. “Premiums” does not include: (1) amounts or considerations received for policies or contracts or for the portions of policies or contracts for which coverage is not provided pursuant to Subsection E of Section 59A-42-4 NMSA 1978, except that assessable premiums shall not be reduced on account of Paragraph (3) of Subsection E of Section 59A-42-4 NMSA 1978, relating to interest limitations, or Paragraph (2) of Subsection F of Section 59A-42-4 NMSA 1978, relating to limitations, with respect to one individual, one participant, one policy holder or one contract owner; (2) premiums in excess of five million dollars ($5,000,000) on an unallocated annuity contract not issued under a governmental retirement benefit plan, or its trustee, established pursuant to Section 401, 403(b) or 457 [26 U.S.C. §§ 401, 403(b) and 457] of the federal Internal Revenue Code of 1986; or (3) with respect to multiple non-group policies of life insurance owned by one owner, whether the policy holder or contract owner is an individual, firm, corporation or other person, and whether the persons insured are officers, managers, employees or other persons, premiums in excess of five million dollars ($5,000,000) with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner;

No person, including an insurer, agent or affiliate of an insurer, shall make, publish, disseminate, circulate or place before the public, or cause directly or indirectly to be made, published, disseminated, circulated or placed before the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over a radio station or television station, or in any other way, an advertisement, announcement or statement, written or oral, that uses the existence of the association for the purpose of sales, solicitation or inducement to purchase insurance covered by the Life and Health Insurance Guaranty Association Act. However, this subsection shall not apply to the association or any other entity that does not sell or solicit insurance.