§ 4-114-104 - Requirements for doing business.
4-114-104. Requirements for doing business.
(a) A provider may appoint an administrator or other designee to be responsible for all or part of the administration of service contracts and compliance with this chapter.
(b) Service contracts shall not be issued, sold, or offered for sale in this state unless the provider or its designee has:
(1) Provided a receipt or other written evidence of the purchase of the service contract to the contract holder;
(2) Provided a copy of the service contract to the service contract holder within a reasonable period of time from the date of purchase; and
(3) Complied with this chapter.
(c) (1) Each provider of service contracts sold in this state shall file a registration with the Insurance Commissioner consisting of its name, full corporate address, telephone number and contact person, evidence of compliance with subsection (d) of this section, a designation of a person in this state for service of process, and any other information required to be submitted by rule of the commissioner.
(2) Each provider shall pay to the commissioner a fee in the amount of two hundred dollars ($200) upon initial registration and every year thereafter.
(3) The registration shall be updated by written notification to the commissioner if material changes occur in the registration.
(d) In order to assure the faithful performance of a provider's obligations to its contract holders, each provider that is contractually obligated to provide service under a service contract shall:
(1) Insure all service contracts under a reimbursement insurance policy issued by an insurer licensed, registered, or authorized to transact insurance in this state or a surplus lines insurer that is authorized under 23-65-310 and maintains statutory capital and surplus of at least fifteen million dollars ($15,000,000) at all times while the reimbursement insurance policy is in force;
(2) Do both of the following:
(A) (i) Maintain a funded reserve account for its obligations under its contracts issued and outstanding in this state.
(ii) The reserves shall not be less than forty percent (40%) of gross consideration received less claims paid on the sale of all unexpired service contracts.
(iii) The reserve account shall be subject to examination and review by the commissioner; and
(B) Place in trust with the commissioner a financial security deposit having a value of not less than five percent (5%) of the gross consideration received less claims paid on the sale of all unexpired service contracts, but not less than twenty-five thousand dollars ($25,000), consisting of a surety bond issued by an authorized surety; or
(3) (A) Maintain a net worth of one hundred million dollars ($100,000,000) on its own or together with its parent company if the parent company executes a parental guarantee in a form acceptable to the commissioner.
(B) Upon request, the provider shall provide the commissioner with a copy of the provider's financial statements or, if the provider's financial statements are consolidated with those of its parent company, the provider's parent company's most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission within the last calendar year, or if the company does not file with the Securities and Exchange Commission, a copy of the company's audited financial statements, which shows an independent net worth of the provider or its parent company of at least one hundred million dollars ($100,000,000).
(C) If the provider's parent company's Form 10-K, Form 20-F, or audited financial statements are filed to meet the provider's financial stability requirement, then the parent company shall agree to guarantee the obligations of the obligor relating to service contracts sold by the provider in this state.
(e) Except for the requirements specified in subsection (d) of this section, no other financial security requirements shall be required by the commissioner for a provider.
(f) (1) Provider fees collected on service contracts shall not be subject to premium taxes.
(2) Premiums for reimbursement insurance policies shall be subject to applicable taxes.
(g) Except for the registration requirements in subsection (c) of this section, persons marketing, selling, or offering to sell service contracts for providers that comply with this chapter are exempt from this state's licensing requirements.
(h) Providers complying with this chapter are not required to comply with other provisions of the Arkansas Insurance Code.