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| SPONSOR: | Leavell | DATE TYPED: | 02/05/01 | HB | |||
| SHORT TITLE: | Amend NM Insurance Code | SB | 274 | ||||
| ANALYST: | Wilson | ||||||
| Recurring
or Non-Rec |
Fund
Affected | ||||
| FY01 | FY02 | FY01 | FY02 | ||
|
NFI |
|||||
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
Public Regulation Commission ( PRC)
LFC files
SUMMARY
Synopsis of Bill
SB 274 allows domestic in-state insurers to invest an additional 5 percent of their assets in subsidiaries without obtaining prior approval of the Superintendent of Insurance.
Significant Issues
Current law allows insurers to invest the lesser of 5 percent of assets or 50 percent of surplus in subsidiaries without obtaining the prior approval of the Superintendent of Insurance. SB 274 would change the five percent of assets restriction to ten percent of assets.
Out-of-state companies do not have this restriction. SB 274 allows in-state to compete under the same set of rules.
TECHNICAL ISSUES
The PRC has written that in the interests of consistency the following should not be deleted:
1. "The lesser of ten percent of insurer's assets or", page 9, lines 2 and 3.
2. "The lesser of three percent of the insurer's admitted assets or", page 13, lines 7,8,22 and 23.
The above sections are notice requirement as opposed to prior approval requirements. The industry agrees with the PRC and would support the above suggestions.
OTHER SUBSTANTIVE ISSUES
Since much of an insurer's assets secure obligations of the insurer to policy holders and claimants, the assets must be invested to provide a high level of security and proper liquidity. Investments in subsidiaries provide less liquidity.
On the other hand, increasing the level of investments in subsidiaries possible without prior approval provides additional flexibility to insurance company management and allows the subsidiaries to compete equally with out-of-state companies and grow to their full potential.
SB274 increases the approval amount but still requires reporting to the Superintendent of Insurance of all transactions.
DW/ar