Current through Register Vol. 46, No. 12, March 20, 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.
