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 COL10312014 CH. 12 ADMINISTRATION 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.”