HHHC/HB 398
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AN ACT
RELATING TO INSURANCE; AMENDING THE INSURANCE HOLDING COMPANY
LAW; ADDING DEFINITIONS; PROVIDING FOR GROUP CAPITAL
CALCULATION REPORTS AND LIQUIDITY STRESS TESTS; AMENDING THE
HEALTH MAINTENANCE ORGANIZATION LAW TO MODIFY THE TIME LINE
FOR EXAMINATIONS OF HEALTH MAINTENANCE ORGANIZATIONS AND
CONTRACT PROVIDERS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 59A-37-2 NMSA 1978 (being Laws 1984,
Chapter 127, Section 617, as amended) is amended to read:
"59A-37-2. DEFINITIONS.--As used in the Insurance
Holding Company Law:
A. "acquire" means to come into possession or
control of, and "acquisition" means any agreement,
arrangement or activity the consummation of which results in
a person acquiring directly or indirectly the control of
another person and includes the acquisition of voting
securities or assets, bulk reinsurance and mergers;
B. "affiliate" means a person that directly or
indirectly is controlled by, is under common control with or
controls another person;
C. "association" means the national association of
insurance commissioners;
D. "commissioner" means an insurance regulation HHHC/HB 398
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department of another state or the chief regulator or the
regulator's deputy of another state;
E. "control" means the possession of the power to
direct or cause the direction of the management and policies
of a person, whether directly or indirectly, through the
ownership of voting securities, through licensing or
franchise agreements, by contract other than a commercial
contract for goods or nonmanagement services, or otherwise,
unless the power is the result of an official position with
or corporate office held by an individual. Control shall be
presumed to exist if any person, directly or indirectly,
owns, controls, holds with the power to vote or holds proxies
representing ten or more percent of the voting securities of
any other person. This presumption may be rebutted by a
showing, in the manner provided by Section 59A-37-19 NMSA
1978, that control does not in fact exist. The
superintendent may determine, after furnishing all persons in
interest notice and an opportunity to be heard, that control
exists in fact, notwithstanding the absence of a presumption
to that effect; provided that the determination is based on
specific findings of fact in its support;
F. "enterprise risk" means an activity, a
circumstance, an event or a series of events involving one or
more affiliates of an insurer that, if not remedied promptly,
is likely to have a material adverse effect upon the HHHC/HB 398
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financial condition or liquidity of the insurer or its whole
insurance holding company system and includes a situation
that would cause a company action level event as defined in
Section 59A-5A-4 NMSA 1978 or would cause the insurer to be
in a hazardous financial condition as defined in Section 59A-
41-24 NMSA 1978;
G. "group-wide supervisor" means the regulatory
official authorized to conduct and coordinate group-wide
supervision activities who is determined or acknowledged by
the superintendent to have sufficient significant contacts
with the internationally active insurance group as described
in the National Association of Insurance Commissioners Model
Laws, Regulations, Guidelines and Other Resources 440-1;
H. "health maintenance organization" means a
person that undertakes to provide or arrange for the delivery
of basic health care services to enrollees on a prepaid
basis; provided that "prepaid basis" may include the payment
of copayments and deductibles by enrollees;
I. "insurance holding company" is a person that
controls an insurer; "insurance holding company system" means
a combination of two or more affiliated persons, at least one
of which is an insurer;
J. "insurer" means a person that undertakes, under
contract, to indemnify a person against loss, damage or
liability arising from an unknown or contingent future event. HHHC/HB 398
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The term does not include agencies, authorities or
instrumentalities of the United States, its possessions or
territories, the commonwealth of Puerto Rico, the District of
Columbia, a state or any of its political subdivisions or a
fraternal benefit society;
K. "internationally active insurance group" means
an insurance holding company system that includes an insurer
registered pursuant to Section 59A-37-12 NMSA 1978 that:
(1) writes premiums in at least three
counties;
(2) produces gross premiums written outside
of the United States of at least ten percent of the insurance
holding company system's gross written premiums; and
(3) has total assets of at least fifty
billion dollars ($50,000,000,000) based on a three-year
rolling average or has total gross written premiums of at
least ten billion dollars ($10,000,000,000);
L. "large life insurance company" means a person,
as defined by the association, that contracts with a policy
owner to guarantee to pay a sum of money to one or more named
beneficiaries when an insured person dies;
M. "liquidity stress test framework" means the
publication adopted or amended by the association that
includes the scope criteria for a specific data year and the
liquidity stress test instructions and reporting templates HHHC/HB 398
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for a specific data year;
N. "person" means an individual, corporation,
association, partnership, joint stock company, trust,
unincorporated organization or any similar entity or
combination of entities;
O. "scope criteria" means the designated exposure
bases and minimum magnitudes for a specified data year as
detailed by the association used to establish a preliminary
list of insurers scoped into the liquidity stress test
framework for a data year;
P. "securityholder" means the owner of any
security of a person, including common stock, preferred
stock, debt obligations and any other security convertible
into or evidencing the right to acquire any of the foregoing;
Q. "subsidiary" means an affiliate of a person
controlled by the person either directly or indirectly
through one or more intermediaries; and
R. "voting security" means a certificate
evidencing the ownership or indebtedness of a person, to
which is attached a right to vote on the management or
policymaking of that person and includes any security
convertible into or evidencing a right to acquire such a
voting security."
SECTION 2. Section 59A-37-30 NMSA 1978 (being Laws
2014, Chapter 59, Section 44) is amended to read: HHHC/HB 398
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"59A-37-30. ENTERPRISE RISK FILING.--The ultimate
controlling person of every insurer that is subject to
registration shall file an enterprise risk report each year.
The report shall reflect that person's knowledge and belief
of the material risks within the insurance holding company
system that pose enterprise risk to the insurer. The report
shall be filed with the lead state insurance supervisory
official of the insurance holding company system and in
compliance with the relevant procedures outlined in the
financial analysis handbook adopted by the association."
SECTION 3. Section 59A-37-32 NMSA 1978 (being Laws
2014, Chapter 59, Section 46) is amended to read:
"59A-37-32. SUPERVISORY COLLEGES.--
A. In order to determine compliance with the
Insurance Holding Company Law by an insurer registered
pursuant to Section 59A-37-11 NMSA 1978, the superintendent
may participate in a supervisory college for a domestic
insurer that is part of an insurance holding company system
with international operations. Concerning a supervisory
college, the superintendent may:
(1) initiate its establishment;
(2) clarify its membership and the
participation of other supervisors;
(3) clarify its functions and the role of
other regulators, including the establishment of a group-wide HHHC/HB 398
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supervisor;
(4) coordinate its ongoing activities,
including planning meetings, supervision and processes for
information sharing; and
(5) establish a crisis management plan.
B. A registered insurer subject to this section
shall pay the reasonable expenses, including for travel,
associated with the superintendent's participation in a
supervisory college pursuant to Subsection C of this section.
A supervisory college may be convened as a temporary or
permanent forum for communication and cooperation between the
regulators charged with the supervision of the insurer or its
affiliates. The superintendent may establish a regular
assessment to the insurer for the payment of these expenses.
C. In order to assess the business strategy,
financial position, legal and regulatory position, risk
exposure, risk management and governance processes of an
insurer, and as part of the examination of individual
insurers pursuant to Section 59A-37-23 NMSA 1978, the
superintendent may participate in a supervisory college with
other regulators charged with the supervision of the insurer
or its affiliates, including other state, federal and
international regulatory agencies. The superintendent may
enter into agreements in accordance with Subsection C of
Section 59A-37-24 NMSA 1978 that provide the basis for HHHC/HB 398
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cooperation between the superintendent and the other
regulatory agencies and the activities of the supervisory
college. Nothing in this section shall delegate to the
supervisory college the authority of the superintendent to
regulate or supervise the insurer or its affiliates within
its jurisdiction.
D. The superintendent may act as the group-wide
supervisor for an internationally active insurance group and
may also acknowledge another commissioner as the group-wide
supervisor when the internationally active insurance group:
(1) does not have substantial insurance
operations in the United States;
(2) has substantial insurance operations in
the United States, but not in New Mexico; or
(3) has substantial operations in the United
States, including in New Mexico, but the superintendent has
determined that another commissioner is the appropriate
group-wide supervisor.
E. An insurance holding company system that does
not qualify as an internationally active insurance group may
request that the superintendent make a determination as to a
group-wide supervisor.
F. The superintendent shall identify a single
group-wide supervisor for an internationally active insurance
group in cooperation with other state, federal and HHHC/HB 398
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international regulatory agencies.
G. The superintendent may determine that the
superintendent is the appropriate group-wide supervisor for
an internationally active insurance group that conducts
substantial insurance operations conducted in New Mexico.
H. The superintendent may acknowledge that a
commissioner from another jurisdiction is the appropriate
group-wide supervisor. In making this determination, the
superintendent shall consider the following factors:
(1) the place of domicile of the insurers
within the internationally active insurance group that holds
the largest share of the group's written premiums, assets or
liabilities;
(2) the place of domicile of the top-tiered
insurers in the insurance holding company's system of the
internationally active insurance group;
(3) the location of the executive offices or
largest operational offices of the internationally active
insurance group;
(4) whether another commissioner is acting
or seeking to act as the group-wide supervisor under a
regulatory system that the superintendent determines to be
substantially similar to New Mexico's system of regulation or
otherwise sufficient in terms of providing for group-wide
supervision, enterprise risk analysis and cooperation with HHHC/HB 398
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other regulatory officials; and
(5) whether the commissioner acting or
seeking to act as the group-wide supervisor provides the
superintendent with reasonably reciprocal recognition and
cooperation.
I. Another commissioner identified as the
group-wide supervisor may determine that it is appropriate to
acknowledge another supervisor to serve as the group-wide
supervisor after considering the factors in Subsection H of
this section. Such acknowledgment shall be made in
cooperation with the subject of the acknowledgment, the
internationally active insurance group and other
commissioners involved with supervision of members of the
internationally active insurance group.
J. Notwithstanding any other provision of law,
when another commissioner is acting as the group-wide
supervisor of an internationally active insurance group, the
superintendent shall acknowledge that commissioner as the
group-wide supervisor."
SECTION 4. A new section of the Insurance Holding
Company Law is enacted to read:
"GROUP CAPITAL CALCULATION.--
A. Except as provided below, the ultimate
controlling person of an insurer subject to registration
pursuant to the provisions of the Insurance Code shall also HHHC/HB 398
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file an annual group capital calculation report in accordance
with the group capital calculation instructions in the
financial analysis handbook adopted by the association as
directed by the superintendent.
B. The following insurance holding company systems
shall be exempt from filing the group capital calculation
report:
(1) an insurance holding company system that
has only one insurer within its holding company structure,
only writes business and is licensed in its domestic state
and assumes no business from any other insurer;
(2) an insurance holding company system that
is required to perform a group capital calculation as
specified by the United States federal reserve board;
(3) an insurance holding company system
whose non-United States group-wide supervisor is located in a
reciprocal jurisdiction that recognizes the United States
regulatory approach to group supervision and group capital;
and
(4) an insurance holding company system:
(a) that provides information to a lead
state that meets the association's accreditation requirements
and financial standards; and
(b) whose non-United States group-wide
supervisor recognizes and accepts the world-wide capital HHHC/HB 398
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assessment for United States insurance groups that operate in
that jurisdiction.
C. If an insurance holding company system is
required to perform a group capital calculation with the
United States federal reserve board, the superintendent shall
request the calculation from the United States federal
reserve board. If the United States federal reserve board
cannot share the calculation, the insurance holding company
system is not exempt from the group capital calculation
report.
D. Notwithstanding any other provisions of this
section, a lead state regulator shall require a group capital
calculation for United States operation of any non-United
States-based insurance holding company system where, after
any necessary consultation with other commissioners, it is
deemed appropriate by the lead state regulator for prudential
oversight and solvency monitoring purposes or for ensuring a
competitive insurance marketplace.
E. Notwithstanding the filing exemptions provided
in this section, the superintendent may exempt the ultimate
controlling person from filing that annual group capital
calculation and accept a limited group capital calculation
report in accordance with criteria specified by the
superintendent in regulation.
F. If the superintendent determines that an HHHC/HB 398
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insurance holding company system no longer meets the
requirements for an exemption, the insurance holding company
system shall file the group capital calculation at the next
annual filing date unless given an extension by the
superintendent based on reasonable grounds shown."
SECTION 5. A new section of the Insurance Holding
Company Law is enacted to read:
"LIQUIDITY STRESS TEST.--
A. A large life insurance company subject to
registration pursuant to the provisions of the Insurance Code
shall file the results of a specific year's liquidity stress
test in accordance with the instructions in the financial
analysis handbook adopted by the association as directed by
the superintendent.
B. A change to the association's liquidity stress
test framework or to the data year for which the scope
criteria are to be measured shall be effective on January 1
of the year following the calendar year when the change was
adopted.
C. A large life insurance company that meets the
requirements of the scope criteria is considered scoped into
the association's liquidity stress test framework for that
data year. A large life insurance company that does not meet
the requirements of the scope criteria is considered scoped
out of the association's liquidity stress test framework for HHHC/HB 398
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that data year, unless the superintendent, in consultation
with the association's financial stability task force or its
successor, determines that the large life insurance company
should be scoped into the liquidity stress test framework for
that year.
D. The superintendent shall, in consultation with
the association's financial stability task force or its
successor, assess the concerns of the superintendent's wishes
to avoid having insurers scoped in and out of the
association's liquidity stress test framework.
E. The superintendent shall comply with the
association's liquidity stress test framework instruction and
reporting templates and shall file the results of a specific
year's determinations.
F. A large life insurance company subject to
registration pursuant to the provisions of the Insurance Code
shall file the results of a specific year's liquidity stress
test in accordance with the instructions in the financial
analysis handbook adopted by the association as directed by
the superintendent.
G. A change to the association's liquidity stress
test framework or to the data year for which the scope
criteria are to be measured shall be effective on January 1
of the year following the calendar year when the change was
adopted." HHHC/HB 398
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SECTION 6. Section 59A-46-19 NMSA 1978 (being Laws
1993, Chapter 266, Section 19) is amended to read:
"59A-46-19. EXAMINATIONS.--
A. The superintendent may make an examination of
the affairs of any health maintenance organization and
providers with whom the health maintenance organization has
contracts, agreements or other arrangements as often as is
reasonably necessary for the protection of the interests of
the people of this state, but not less frequently than once
every five years.
B. The superintendent may make or request the
secretary of health to make an examination concerning the
quality assurance program of the health maintenance
organization and of any providers with whom the health
maintenance organization has contracts, agreements or other
arrangements as often as is reasonably necessary for the
protection of the interests of the people of this state.
C. Every health maintenance organization and
provider shall submit its books and records for examinations
and in every way facilitate the completion of the
examination. Medical records of individuals and contract
providers shall not be subject to examination. For the
purpose of examinations, the superintendent and the secretary
of health may administer oaths to and examine the officers
and agents of the health maintenance organization and the HHHC/HB 398
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principals of the providers concerning their business.
D. The expenses of examinations under this section
shall be assessed against the health maintenance organization
being examined and remitted to the superintendent.
E. In lieu of examination, the superintendent may
accept the report of an examination made by the
superintendent or secretary of health of another state.
F. Examination procedures shall be governed by the
applicable provisions of Chapter 59A, Article 4 NMSA 1978."