Current through Register Vol. 35, No. 6, March 26, 2024
A.
Assets deposited in trusts established pursuant to Subsections A and B of
Section 59A-12E-3 NMSA 1978 and this Section shall be valued according to their
current fair market value and shall consist only of cash in U.S. dollars,
certificates of deposit issued by a qualified U.S. financial institution as
defined in Paragraph (1) of Subsection E of Section 59A-12E-2 NMSA 1978, clean,
irrevocable, unconditional and "evergreen" letters of credit issued or
confirmed by such qualified U.S. financial institution, and investments of the
type specified in this subsection, but investments in or issued by an entity
controlling, controlled by or under common control with either the grantor or
beneficiary of the trust shall not exceed five percent of total investments. No
more than twenty percent of the total of the investments in the trust may be
foreign investments authorized under Subparagraph (e) of Paragraphs (1) or (3)
of this subsection or the equity interest requirements of Subsection B or
Subsection D of 13.2.8.12 NMAC, and no more than ten percent of the total of
the investments in the trust may be securities denominated in foreign
currencies. For purposes of applying the preceding sentence, a depository
receipt denominated in U.S. dollars and representing rights conferred by a
foreign security shall be classified as a foreign investment denominated in a
foreign currency. The assets of a trust established to satisfy the requirements
of Subsections A and B of Section 59A-12E-3 NMSA 1978 shall be invested only as
follows:
(1) Government obligations that are
not in default as to principal or interest, that are valid and legally
authorized and that are issued, assumed or guaranteed by:
(a) the U.S. or by any agency or
instrumentality of the U.S.;
(b) a
state of the U.S.;
(c) a territory,
possession or other governmental unit of the U.S.;
(d) an agency or instrumentality of a
governmental unit referred to in Subparagraphs (b) and (c) of this paragraph if
the obligations shall be by law (statutory or otherwise) payable, as to both
principal and interest, from taxes levied or by law required to be levied or
from adequate special revenues pledged or otherwise appropriated or by law
required to be provided for making these payments, but shall not be obligations
eligible for investment under this paragraph if payable solely out of special
assessments on properties benefited by local improvements; or
(e) the government of any other country that
is a member of the organization for economic cooperation and development and
whose government obligations are rated A or higher, or the equivalent, by a
rating agency recognized by the securities valuation office of the
NAIC.
(2) Obligations
that are issued in the U.S., or that are dollar denominated and issued in a
non-U.S. market, by a solvent U.S. institution (other than an insurance
company) or that are assumed or guaranteed by a solvent U.S. institution (other
than an insurance company) and that are not in default as to principal or
interest if the obligations:
(a) are rated A
or higher (or the equivalent) by a securities rating agency recognized by the
securities valuation office of the NAIC, or if not so rated, are similar in
structure and other material respects to other obligations of the same
institution that are so rated;
(b)
are insured by at least one authorized insurer (other than the investing
insurer or a parent, subsidiary or affiliate of the investing insurer) licensed
to insure obligations in this state and, after considering the insurance, are
rated AAA (or the equivalent) by a securities rating agency recognized by the
Securities Valuation Office of the NAIC; or
(c) have been designated as class one or
class two by the securities valuation office of the NAIC;
(3) Obligations issued, assumed or guaranteed
by a solvent non-U.S. institution chartered in a country that is a member of
the organization for economic cooperation and development or obligations of
U.S. corporations issued in a non-U.S. currency, provided that in either case
the obligations are rated A or higher, or the equivalent, by a rating agency
recognized by the securities valuation office of the NAIC.
(4) An investment made pursuant to the
provisions of Paragraph (1), (2) or (3) of this subsection shall be subject to
the following additional limitations:
(a) an
investment in or loan upon the obligations of an institution other than an
institution that issues mortgage-related securities shall not exceed five
percent of the assets of the trust;
(b) an investment in any one mortgage-related
security shall not exceed five percent of the assets of the trust;
(c) the aggregate total investment in
mortgage-related securities shall not exceed twenty- five percent of the assets
of the trust; and
(d) preferred or
guaranteed shares issued or guaranteed by a solvent U.S. institution are
permissible investments if all of the institution's obligations are eligible as
investments under Paragraphs (2)(a) and (2)(c) of this subsection but shall not
exceed two percent of the assets of the trust.
B. Equity Interests. Investments in common
shares or partnership interests of a solvent U.S. institution are permissible
if:
(1) its obligations and preferred shares,
if any, are eligible as investments under this Subsection; and
(2) the equity interests of the institution
(except an insurance company) are registered on a national securities exchange
as provided in the Securities Exchange Act of 1934,
15
U.S.C. §§
78a to
78kk
or otherwise registered pursuant to that Act, and if otherwise registered,
price quotations for them are furnished through a nationwide automated
quotations system approved by the financial industry regulatory authority, or
successor organization. A trust shall not invest in equity interests under this
paragraph an amount exceeding one percent of the assets of the trust even
though the equity interests are not so registered and are not issued by an
insurance company.
C.
Investments in common shares of a solvent institution organized under the laws
of a country that is a member of the organization for economic cooperation and
development are permissible, if:
(1) All its
obligations are rated A or higher, or the equivalent, by a rating agency
recognized by the Securities Valuation Office of the NAIC; and
(2) The equity interests of the institution
are registered on a securities exchange regulated by the government of a
country that is a member of the organization for economic cooperation and
development.
D. An
investment in or loan upon any one institution's outstanding equity interests
shall not exceed one percent of the assets of the trust. The cost of an
investment in equity interests made pursuant to this paragraph, when added to
the aggregate cost of other investments in equity interests then held pursuant
to this paragraph, shall not exceed ten percent of the assets in the
trust.
E. Obligations issued,
assumed or guaranteed by a multinational development bank, provided the
obligations are rated A or higher, or the equivalent, by a rating agency
recognized by the securities valuation office of the NAIC.
F.
Investment companies.
(1) Securities of an investment company
registered pursuant to the Investment Company Act of 1940, 15 U.S.C. §
80a, are permissible investments if the investment company:
(a) invests at least ninety percent of its
assets in the types of securities that qualify as an investment under
Paragraphs (1) through (3) of Subsection D of
13.2.8.11
NMAC or invests in securities that are determined by the superintendent to be
substantively similar to the types of securities set forth in Paragraphs (1)
through (3) of Subsection D of
13.2.8.11
NMAC; or
(b) invests at least
ninety percent of its assets in the types of equity interests that qualify as
an investment under Subsection (A) of this section.
(2) Investments made by a trust in investment
companies under this rule subsection shall not exceed the following
limitations:
(a) an investment in an
investment company qualifying under Subparagraph (1)(a) of this section shall
not exceed ten percent of the assets in the trust and the aggregate amount of
investment in qualifying investment companies shall not exceed twenty-five
percent of the assets in the trust; and
(b) an investment in an investment company
qualifying under Subparagraph (1)(b) of this section shall not exceed five
percent of the assets in the trust and the aggregate amount of investment in
qualifying investment companies shall be included when calculating the
permissible aggregate value of equity interests pursuant to Subsection A of
this section.
G.
Letters of credit.
(1) In order for a letter of credit to
qualify as an asset of the trust, the trustee shall have the right and the
obligation pursuant to the deed of trust or some other binding agreement (as
duly approved by the superintendent), to immediately draw down the full amount
of the letter of credit and hold the proceeds in trust for the beneficiaries of
the trust if the letter of credit will otherwise expire without being renewed
or replaced.
(2) The trust agreement
shall provide that the trustee shall be liable for its negligence, willful
misconduct or lack of good faith. The failure of the trustee to draw against
the letter of credit in circumstances where such draw would be required shall
be deemed to be negligence and/or willful misconduct.
H. A specific security provided to a ceding
insurer by an assuming insurer pursuant to
13.2.8.18
NMAC shall be applied, until exhausted, to the payment of liabilities of the
assuming insurer to the ceding insurer holding the specific security prior to,
and as a condition precedent for, presentation of a claim by the ceding insurer
for payment by a trustee of a trust established by the assuming insurer
pursuant to this Section.
