Guam § 12204 - Financial Responsibility.

§ 12204. Financial Responsibility.

(a) Any service contract provider applying for a license shall be solvent

and shall meet the minimum requirements under this Section. If the financial

responsibility requirement under this Section is to be maintained by the

service contract provider’s parent company, the parent company shall

guarantee the service contract provider’s obligations under service contracts

sold by the service contract provider licensed under this Article.

(b) The service contract provider shall provide one of the following:

(1) provide both:

(A) maintain a funded reserve account for all obligations

under service contracts issued and in force on Guam. The reserves

shall not be less than forty percent (40%) of the gross

consideration received from the sale of the service contract, less

claims paid, for all in force contracts. The reserve account shall be

subject to examination by the Commissioner; and

(B) place in trust with the Commissioner, for all service

contracts issued and in force on Guam, a financial security deposit

having a value that is the larger of Forty Thousand Dollars

($40,000) or five percent (5%) of the gross consideration received,

less claims paid for the sale of the service contracts. The financial

security deposit shall consist of one of the following:

(i) a surety bond issued by an authorized surety;

(ii) securities of the type eligible for deposit by

authorized insurers on Guam;

(iii) cash or time certificate of deposit issued by a bank

that is licensed in Guam and is insured by the Federal

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Deposit Insurance Corporation (FDIC) or by the National

Credit Union Administration (NCUA);

(iv) a letter of credit issued by a qualified financial

institution; or

(v) another form of security authorized by the

Commissioner by rule, subject to the approval of I

Liheslaturan Guåhan.

Service contracts for those service contract providers that

provide the security in Subsections (A) and (B) of § 12204(b)(1)

shall contain a statement in substantially the same format:

“The service contract provider’s obligations

stated in this service contract are backed by the full

faith and credit of the service contract provider.”

(2) insure the performance for all service contracts issued by the

service contract provider by a reimbursement insurance policy issued

by an insurer holding a certificate of authority from the Commissioner,

and who is in good standing with the Commissioner. Service contracts

insured by a reimbursement insurance policy shall:

(A) conspicuously state the name and either the address or

contact information for the insurance company; and

(B) contain a statement in substantially the following format:

“The service contract provider’s obligations

stated in this service contract are covered by a

reimbursement insurance policy. If your service

contract provider fails to pay or provide service on

your claim, or a cancellation refund, or any other

covered obligation under this service contract

within sixty (60) days after that claim or request

has been made by you to this service contract

provider, you may then directly present your claim

or request for service or payment to your service

contract provider’s insurance company.”