Vermont § 4249 - Proof of financial stability

§ 4249. Proof of financial stability

• (a) In order to ensure the performance of a provider’s obligations to its contract holders,
  each provider shall continue to possess and provide the Commissioner the following
  documents as proof of financial stability: (1)(A) a surety bond, securities of the type eligible for deposit by an authorized insurer
  in this State, cash, or letter of credit in a form acceptable to the Commissioner,
  which shall have at all times a value of not less than five percent of the gross annual
  consideration from all service contracts issued and in force, but in no case to be
  less than $25,000.00. Such bond, securities, cash, or letter of credit shall be maintained
  unimpaired as long as the provider continues to do business in this State. When the
  provider ceases to do business in this State and has furnished the Commissioner proof
  that it has discharged all its obligations to its service contract holders in this
  State, the Commissioner shall release said bond, cash, or letter of credit; and (B) a funded reserve account for its liability under its service contracts issued and
  outstanding in this State. Such reserve shall at all times be not less than 40 percent
  of all consideration received, less claims paid, on in force contracts. Such reserve
  accounts shall be subject to examination and review by the Commissioner upon a request;
  or (2) evidence that all of its service contracts are insured through the purchase of a service
  contract reimbursement policy issued by an insurer that files annually with the National
  Association of Insurance Commissioners a financial statement prepared in accordance
  with the accounting practices and procedures required or permitted by their domiciliary
  regulatory authority and a corresponding audit report that reflects: (A) capital and surplus of $5,000,000.00 or more; (B) written premiums not exceeding three times capital and surplus over the most recent
  five years; and (C) profitable operations over the most recent five years; or (3) a copy of the provider’s financial statement or, if the provider’s financial statement
  is consolidated with those of a parent company or affiliate, the provider’s parent
  company or affiliate’s financial statement, for the most recent calendar year which
  shows a net worth of the provider or its parent company or affiliate of at least $50
  million. The financial statement shall contain information relating to the general
  financial condition, ownership, and management of the provider and its controlling
  parent organization, the identity of the controlling entity, if applicable, and any
  reinsurance agreements covering all or substantially all of the ceded service contracts.
  A Form 10-K filed with the Securities and Exchange Commission within the last calendar
  year may be filed to meet the financial stability filing requirement. (b) If the provider’s parent or affiliate company’s financial statement is filed with
  the Commissioner pursuant to subdivision (a)(3) of this section as evidence of a net
  worth of at least $50 million, the parent or affiliate company shall agree, on a form
  prescribed by the Commissioner, to guarantee the provider’s obligations relating to
  service contracts sold by the provider in this State. (c) The Commissioner may, upon review of the business activities of a provider, determine
  that the amounts set forth in this section are inadequate for protection of the public,
  and may require additional assurances of financial stability. (d) In the event that the Department recovers funds from service contract providers, the
  Commissioner in his or her discretion may distribute such funds in a manner that he
  or she determines is equitable and cost-effective, giving due consideration to the
  amount of funds recovered, the estimated amounts due to consumers, and the costs of
  administering any distribution. Distributions may be allocated based on claims made,
  premiums, or the number of consumers affected. If the Commissioner determines that
  it would be prohibitively expensive or impossible to make restitution to consumers,
  the recovered funds will be remitted to the General Fund. (Added 1997, No. 109 (Adj. Sess.), § 2, eff. Sept. 1, 1998; amended 2005, No. 122 (Adj. Sess.), § 2.)