Sec. 09.01.09.06. Financial Security Requirements for New Home Warranty Security Plan

A. Approval of a new home warranty security plan shall continue only if the operator of the plan remains financially able to pay all valid claims.

B. The operator shall demonstrate financial responsibility from time to time to the Secretary in the following manner:

(1) The operator shall maintain and file with the Secretary a surety bond from an authorized insurer or an irrevocable letter of credit from a federally insured financial institution to ensure that the operator is able to meet its contractual obligations under the plan to the buyers. The amount of the bond or letter of credit is $100,000 unless a greater amount is required by the Secretary. The bond or letter of credit is in addition to any insurance or risk retention plan coverage the operator maintains to meet liability claims.

(2) At such time as it appears to the Secretary that a bond or letter of credit in the amount of $100,000 is not adequate to meet potential new home warranty security plan claims, the Secretary shall require:

(a) A bond or letter of credit in a higher amount;

(b) The establishment by the operator of a reserve fund; or

(c) Other measures to ensure financial responsibility.

(3) The operator shall furnish such information and reports, and grant such access to its records, as the Secretary from time to time requires.