Current through Register Vol. 46, No. 39, September 25, 2024
(a) A service contract provider that elects
to meet the requirements of section
7903
(c)(2) of the Insurance Law as the means to
assure the faithful performance of its obligations under service contracts
outstanding in this State shall, in accordance with the provisions of this
section:
(1) establish and maintain a funded
reserve account;
(2) place in trust
a financial security deposit with the superintendent; and
(3) file audited financial statements with
the superintendent.
(b)
Funded reserve account. The funded reserve account established in accordance
with section
7903
(c)(2)(A) of the Insurance Law shall comply
with the following:
(1) The account shall be
appropriately identified as a New York funded reserve account and shall be
maintained in:
(i) a qualified United States
financial institution; or
(ii) a
broker or dealer registered under the Securities Exchange Act of 1934, or any
act adopted in amendment thereof, with the Securities and Exchange Commission,
provided the registration remains in good standing.
(2) The funds in the account shall at all
times be not less than 40 percent of the gross consideration received upon the
sale of, less claims paid under, all its service contracts then in force, but
not less than zero.
(3) The account
shall be funded with cash or investments of the types, and subject to the
limitations, applicable to property/casualty insurance companies, specified in
section
1404
(a) of the Insurance Law.
(4) Cash and securities in the account shall
not be commingled with other property or cash.
(5) Withdrawals from the account are
permitted for the payment of claims resulting from covered losses under service
contracts and for the return of unearned provider fees on the contract. Other
withdrawals are permitted if the balance remaining in the account after the
withdrawal is sufficient to meet the reserve requirements of this Part and
article 79.
(6) More than one
account may be maintained if, in the aggregate, the accounts comply with the
provisions of this section.
(c) Financial security deposit. The financial
security deposit established in accordance with section
7903
(c)(2)(B) of the Insurance Law shall at all
times be at least equivalent to the amount required and comply with the
following:
(1) The surety bond allowed for
placement in trust with the superintendent in accordance with section
7903
(c)(2)(B)(i) of the Insurance Law shall be
issued by an insurer licensed in this State to write fidelity and surety
insurance under section
1113
(a)(16) of the Insurance Law.
(2)
(i) The
securities allowed for placement in trust with the superintendent in accordance
with section
7903
(c)(2)(B)(ii) of the Insurance Law shall
consist of securities specified in section
1402 (b)(1) and
(2) of the Insurance Law, estimated at an
amount not exceeding their current market value, but their total par value
shall not be less than the amount required.
(ii) If the service contract provider is
incorporated or principally headquartered in another state, the securities
allowed for placement in the trust may consist of direct obligations of that
state.
(iii) If the aggregate
market value of the securities in trust shall fall below the required amount,
the superintendent may require the service contract provider to deposit
additional securities of like character.
(3) The letter of credit allowed for
placement in trust with the superintendent in accordance with section
7903
(c)(2)(B)(iv) of the Insurance Law shall
comply with the requirements of sections
79.1,
79.2,
79.3,
79.4, and
79.9 of Part 79 of this Title
(Regulation 133). In applying such sections to this Part, the term "service
contract provider" shall be substituted for the term "insurer" when referring
to a beneficiary.
(d)
Audited financial statements.
(1) On or
before June 30th of each year, or 180 days after the end of the service
contract provider's fiscal year, whichever is later, the provider shall file
its audited financial statements for the prior calendar year with the
superintendent. The statements shall include an opinion of an independent
certified public accountant. The statements and opinion shall be mailed or
delivered to the superintendent at the following address:
New York State Insurance Department
Property Bureau--Service Contract Providers
25 Beaver Street
New York, NY 10004-2319
(2) The notes to the audited financial
statements shall show how the service contract provider meets the reserve and
trust requirements set forth in section
7903
(c)(2)(A) of the Insurance Law and in this
Part and how the assets in the account and trust meet the requirements set
forth in subdivisions (b) and (c) of this section.
(3) If, at any time, the certified public
accountant or the service contract provider determines that the provider has
materially misstated its financial condition as reported to the superintendent
or that the provider's funded reserve account does not meet the reserve
requirements set forth in the Insurance Law and this Part, the provider shall
submit the determination to the superintendent, in writing within 15 days
following the determination.
(e) If the service contract provider's
registration is suspended for more than 60 days, revoked, or otherwise
terminated for any reason, and it has service contracts that have been issued
and are outstanding in this State, the provider shall immediately transfer to
the superintendent the funded reserve account, in an amount equal to the
minimum required by paragraph (b)(2) of this section, for safekeeping and for
the use and protection of contract holders and administration of claims. The
contract provider shall submit a written affirmation to the superintendent at
the time of registration that it shall so transfer the funds.
