Transactions with affiliates.

A. Transactions within a holding company system to which an insurer subject to registration is a party shall be subject to the following standards: (1) the terms shall be fair and reasonable; (2) agreements for cost-sharing services and management shall include the provisions required by rule promulgated by the superintendent; (3) charges or fees for services performed shall be reasonable; (4) expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied; (5) the books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; and (6) the insurer's surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. B. The following transactions involving a domestic insurer and any person in its holding company system, including amendments and modifications of affiliate agreements previously filed pursuant to this section that are subject to the materiality standards of this subsection, may not be entered into unless the insurer has notified the superintendent in writing of its intention to enter into such transactions at least thirty days prior thereto, or such shorter period as the superintendent may permit, and the superintendent has not disapproved it within that period: (1) sales, purchases, exchanges, loans or extensions of credit, guarantees or investments, provided the transactions are equal to or exceed: (a) with respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders as of the most recent December 31; or (b) with respect to life insurers, three percent of the insurer's admitted assets as of the most recent December 31; (2) loans or extensions of credit to any person who is not an affiliate, where the insurer makes loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit, provided the transactions are equal to or exceed: (a) with respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders as of the most recent December 31; or (b) with respect to life insurers, three percent of the insurer's admitted assets as of December 31 next preceding; (3) reinsurance agreements or modifications to those agreements, including reinsurance pooling agreements or agreements in which the reinsurance premium or a change in the insurer's liabilities, or projected reinsurance premium or a change in the insurer's liabilities in any of the next three years, equals or exceeds five percent of the insurer's surplus as regards policyholders, as of the most recent December 31, including those agreements that may require as consideration the transfer of assets from an insurer to a non-affiliate, if an agreement or understanding exists between the insurer and non-affiliate that any portion of such assets will be transferred to one or more affiliates of the insurer; (4) all management agreements, service contracts, tax allocation agreements, guarantees and cost-sharing arrangements; (5) guarantees made by a domestic insurer if the amount of the guarantee can be quantified and is greater than one-half of one percent of the insurer's admitted assets or ten percent of surplus as regards policyholders as of the most recent December 31, whichever is less. A guarantee whose amount cannot be quantified is subject to the notice requirements of this subsection; (6) direct or indirect acquisitions or investments in a person who controls the insurer or in an affiliate of the insurer in an amount that, together with its present holdings in the investments, exceeds two and one-half percent of the insurer's surplus as regards policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to Section 59A-37-3 NMSA 1978 or that are authorized pursuant to another section of the Insurance Code or in nonsubsidiary insurance affiliates that are subject to the provisions of the Insurance Holding Company Law are exempt from this requirement; and (7) any material transactions specified by regulation that the superintendent determines may adversely affect the interests of the insurer's policyholders. Notice to the superintendent for amendments or modifications shall provide the reasons for the change and a description of the change's financial impact on the domestic insurer. Within thirty days after the termination of a previously filed agreement, a person shall notify the superintendent of that event. The superintendent shall respond by indicating the type of filing, if any, that the person must file. Nothing contained in this subsection shall be deemed to authorize or permit any transactions that, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law. C. A domestic insurer may not enter into transactions that are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the superintendent determines that such separate transactions were entered into over any twelve-month period for that purpose, the superintendent may exercise authority under Section 59A-37-26 NMSA 1978. D. The superintendent, in reviewing transactions pursuant to Subsection B of this section, shall consider whether the transactions comply with the standards set forth in Subsection A of this section and whether they may adversely affect the interests of policyholders. E. The superintendent shall be notified within thirty days of any investment of the domestic insurer in any one corporation if the total investment in the corporation by the insurance holding company system exceeds ten percent of the corporation's voting securities.