New Mexico Life Insurance Guaranty Association

Contact Information

New Mexico Life Insurance Guaranty Association
PO Box 2880
Santa Fe, NM 87504-2880
(p) 505.820.7355 (f) 505.820.7356
Association Web site: http://www.nmlifega.org
State Insurance Department: http://www.osi.state.nm.us/

Law Summaries Report

[ Current as of January 01, 2020 ] ]

Coverages

Covered Contracts

§59A-42-4.D. Coverage shall be provided to the persons specified in Subsection A of this section for direct, non-group life, health or annuity policies or contracts 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 connec-tion with government lotteries and immediate or deferred annuity contracts. (Amended effective 7/1/12)

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 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 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 59–42–8 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 insurer to the 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 insurer without meeting applicable policy form filing or approval requirements; (c) misrepresentations of or regarding policy 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; or (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 or regulations promulgated pursuant to Part C or Part D. (Amended effective 7/1/12)

Non-Resident Coverage

§59A-42-4(2)(b) Yes, non residents covered, but only under the following conditions: 1) the 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 insurer was not licensed in that state at the time specified in that state's guaranty association law. (Amended effective 7/1/12)

Benefit Limits

§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 insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or (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 insurance or basic hospital, medical and surgical insurance or major medical insurance or long-term care insurance, including net cash surrender and net cash withdrawal values; 2) three hundred thousand dollars ($300,000) for disability 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 basic hospital, medical and surgical insurance or major medical insurance; 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 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. G. In no event shall the association be obligated to cover: (1) more than an aggregate of three hundred thousand dollars ($300,000) in benefits with respect to one person's life pursuant to Paragraphs (2), (3) and (4) of Subsection F of this section, except with respect to benefits for basic hospital, medical and surgical insurance and major medical insurance pursuant to Subparagraph (b) of Paragraph (2) of Subsection F of this section, in which case the aggregate liability of the association shall not exceed five hundred thousand dollars ($500,000) with respect to one person's life; or (2) with respect to one owner of multiple non-group policies of life insurance, whether the policy owner is an individual, firm, corporation or other person, and whether the persons insured are officers, managers, employees or other persons, more than five million dollars ($5,000,000) in benefits, regardless of the number of policies and con-tracts held by the owner. H. With respect to either one contract owner provided coverage pursuant to Subparagraph (b) of Paragraph (3) of Subsection A of this section or one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in Paragraph (3) of Subsection F of this section, the benefits the association may become obligated to cover shall not exceed five million dollars ($5,000,000) irrespective of the number of contracts with respect to the contract owner or plan sponsor. However, in the case where one or more unallocated annuity contracts are covered contracts pursuant to the Life and Health Insurance Guaranty Association Act and are owned by a trust or other entity for the benefit of two or more plan sponsors, coverage shall be afforded by the association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this state. In no event shall the association be obligated to cover more than five million dollars ($5,000,000) in benefits with respect to all of these unallocated contracts. I. The limitations set forth in Subsections F, G and H of this section are limitations on the benefits for which the association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association's obligations may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to its subrogation and assignment rights. (Amended effective 7/1/12)

Triggers

Discretionary Triggers

§59A-42-7.A. If a member insurer is an impaired insurer. (Amended effective 7/1/12)

Mandatory Triggers

§59A-42-7.B. If a member insurer is an impaired insurer. (Amended effective 7/1/12)

Foreign Triggers

No separate provision.

"Impaired Insurer"

§59A-42-3.K. “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; (Amended effective 7/1/12)

"Insolvent Insurer"

§59A-42-3.L. “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; (Amended effective 7/1/12)

"Member Insurer"

§ 59A-42-3.M. “member insurer” means an insurer that is licensed or that holds a certificate of authority to transact in this state insurance for which coverage is provided pursuant to Section 59A-42-4 NMSA 1978 and includes an insurer 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 health maintenance organization; (3) a prepaid dental plan; (4) a fraternal benefit society; (5) a mandatory state pooling plan; (6) a mutual assessment company or other person that operates on an assessment basis; (7) an insurance exchange; (8) a charitable organization that is in good standing with the superintendent pursuant to Section 59A-1-16.1 NMSA 1978; (9) any insurer that was insolvent or unable to fulfill its contractual obligations as of April 9, 1975; or (10) an entity similar to any of the above. (Amended effective 7.1.2014).

Account Structure

§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 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 insurance account. Amended effective 7/1/12)

Assessments

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. (Amended effective 7/1/12)

Interest Rate Adjustments

§59A-42-4.E.3 Guaranty Association excludes from coverage: a portion of a policy or contract 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. (Amended effecive 7/1/12)

Tax Offsets

No provision.

Definition of Premium

§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 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 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 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;

Advertising Prohibition

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. (Amended effective 7/1/12)

(To select more than one category, hold down the Ctrl key)

These "Law Summaries" are provided to NOLHGA's members and other authorized NOLHGA Website users solely for general reference purposes. This compilation of statutory provisions, although believed to be correct as of the date indicated, is comprised of the most current statutory materials available on-line to NOLHGA and is not intended as legal advice; no liability is assumed in connection with its use. Users should seek advice from a qualified attorney and should not rely on this compilation when considering any questions relating to guaranty association coverage or any other related legal matter. For further information regarding the intended distribution of this information, or any other information appearing on the NOLHGA Website, please see the "Terms of Use" on NOLHGA's home page.
© 2001-2020 All Rights Reserved.
National Organization of Life & Health Insurance Guaranty Associations
13873 Park Center Road, Suite 505, Herndon, VA 20171
Phone Number: 703.481.5206