A. A domestic insurer may without pledge of assets borrow money to defray expense of organization, provide surplus funds or for any purpose of its business, upon a written agreement that such money is required to be repaid only out of the insurer's surplus in excess of that stipulated in such agreement. The agreement may provide for interest on unpaid balance of principal at a reasonable rate approved by the superintendent, which interest shall or shall not constitute a liability of the insurer as to its funds other than such excess of surplus, as stipulated in the agreement. No commission or promotion expense shall be paid in connection with any such loan, except that if a public offering and sale is made of the loan securities the insurer may pay the reasonable costs thereof approved by the superintendent.

B. Money so borrowed, together with the interest thereon if so provided in the agreement, shall not be part of the insurer's legal liabilities except as to its surplus in excess of the amount of surplus stipulated in the agreement, or be basis of any setoff; but until repaid, financial statements filed or published by the insurer shall show as a footnote thereto the amount of the loan then unpaid together with any interest thereon accrued but unpaid.

C. Any such loan shall be subject to the superintendent's approval. The insurer, in advance of the loan, shall file with the superintendent a statement of the amount proposed to be so borrowed and the purposes thereof together with a copy of the proposed loan agreement. The loan and agreement shall be deemed approved unless within thirty (30) days after date of such filing the insurer is notified of the superintendent's disapproval and reasons therefor. The superintendent shall disapprove any proposed loan or agreement if he finds the loan unnecessary or excessive for purposes intended or that the terms of the agreement are not fair and equitable to the parties and to other similar lenders, if any, to the insurer, or that the information so filed by the insurer is inadequate.

D. Any such loan or substantial portion thereof shall be repaid by the insurer when no longer reasonably necessary for the purposes intended. No such repayment shall be made unless approved in advance by the superintendent upon his finding that repayment would not deprive the insurer of funds reasonably required for its operations or protection of its policyholders.

E. Such loan agreements when offered for purchase by the public shall for purposes of Article 35 [Chapter 59A, Article 35 NMSA 1978] (sale of insurance securities) of the Insurance Code be deemed to be securities.

F. This section does not apply to other kinds of loans obtained by the insurer in ordinary course of business, or to loans secured by pledge or mortgage of assets.

History: Laws 1984, ch. 127, § 569.