Ala. Code § 8-37A-4

Current through the 2024 Regular Session.

Section 8-37A-4 - Provider's duties

In order to assure the faithful performance of the obligations of a provider to its contract holders, the provider shall comply with one of the following:

(1)

a. Insure all of its motor vehicle value protection agreements under an insurance policy that pays or reimburses the obligations of a provider under any motor vehicle value protection agreements of the provider in the event the provider fails to perform its obligations. The insurance policy shall be issued by an insurer licensed, registered, or otherwise authorized to do business in this state at the time the policy is filed with the Commissioner of Insurance and continuously thereafter, that meets one of the following criteria:

1. Has a surplus as to policyholders and paid-in capital of at least fifteen million dollars ($15,000,000).

2. Has a surplus as to policyholders and paid-in capital of not less than ten million dollars ($10,000,000), and evidence to the satisfaction of the commissioner that the company maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not greater than three to one.

b. In addition, the insurer shall annually file with the commissioner copies of the insurer's audited financial statements, its NAIC Annual Statement, and the actuarial certification required by and filed in the insurer's state of domicile.

(2)

a. Maintain a funded reserve account for its obligations under its contracts issued and outstanding in this state. The reserves shall not be less than 40 percent of gross consideration received, less claims paid, on the sale of the motor vehicle value protection agreement for all in-force contracts. The reserve account shall be subject to examination and review by the Superintendent of Banks; and

b. Place in trust with the superintendent a financial security deposit, having a value of not less than five percent of the gross consideration received, less claims paid, on the sale of the motor vehicle value protection agreements for all agreements issued and in force, but not less than twenty-five thousand dollars ($25,000) consisting of one of the following:

1. A surety bond issued by an authorized surety.

2. Securities of the type eligible for deposit by authorized insurers in this state.

3. Cash.

4. A letter of credit issued by a qualified financial institution.

5. Another form of security prescribed by regulations issued by the superintendent.

(3)

a. Maintain, or together with its parent company maintain, a net worth or stockholders' equity of one hundred million dollars ($100,000,000); and

b. Upon request, provide the Superintendent of Banks with a copy of the provider's or the provider's parent company's most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission (SEC) within the last calendar year, or if the company does not file with the SEC, a copy of the company's audited financial statements that shows a net worth of the provider or its parent company of at least one hundred million dollars ($100,000,000). If the provider's parent company's Form 10-K, Form 20-F, or financial statements are filed to meet the provider's financial security requirement, then the parent company shall agree to guarantee the obligations of the provider relating to motor vehicle value protection agreements sold by the provider in this state.

Ala. Code § 8-37A-4 (1975)

Amended by Act 2023-325,§ 1, eff. 5/30/2023.

Added by Act 2022-179,§ 2, eff. 1/1/2023.