MISSISSIPPI LEGISLATURE

1999 Regular Session

To: Insurance

By: Representative Stevens

AN ACT TO AMEND SECTION 83-57-13, MISSISSIPPI CODE OF 1972, TO REQUIRE THAT ASSETS AND INVESTMENTS OF A HOME WARRANTY ASSOCIATION MUST BE MAINTAINED IN ACCORDANCE WITH THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ACCOUNTING PRACTICES AND PROCEDURES MANUAL; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 83-57-13, Mississippi Code of 1972, is amended as follows:

83-57-13. (1) An association licensed under this chapter

shall maintain a funded, unearned premium reserve account, consisting of unencumbered assets, equal to a minimum of twenty-five percent (25%) of the gross written premiums received by it from all warranty contracts in force. Such assets shall be held in the form of cash or invested in approved securities for investments.

(2) An association shall maintain, at a minimum, net assets equal to one-sixth (1/6) of the written premiums it receives for the issuance and delivery of any binder or warranty in force. Net assets may be less than one-sixth (1/6) of the premiums written provided the association has net assets of not less than Five Hundred Thousand Dollars ($500,000.00) and maintains a funded, unearned premium reserve account consisting of unencumbered assets equal to a minimum of forty percent (40%) of the gross written premiums received by it from all warranty contracts in force which shall be held in the form of cash or invested in securities for investments.

(3) In computing the net asset requirement, goodwill, franchises, customer lists, patents or trademarks, receivables from or advances to officers, directors, employees, salesmen or affiliated companies, assets deposited outside the United States and any other assets that are nonadmitted in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual shall be deducted from the net assets of the association.

(4) An association shall not be required to set up an unearned premium reserve if it has purchased contractual liability insurance which demonstrates to the satisfaction of the department that one hundred percent (100%) of its claim exposure is covered by such insurance. Such contractual liability insurance shall be obtained from an insurer that holds a certificate of authority to do business within the state or from an insurer approved by the department as financially capable of meeting the obligations incurred pursuant to the policy. For purposes of this subsection, the contractual liability policy shall contain the following provisions:

(a) If the home warranty association is unable to fulfill its obligation under its contracts issued in this state for any reason, including insolvency, bankruptcy, or dissolution, the contractual liability insurer will pay losses and unearned premiums under such plans directly to persons making claims under such contracts.

(b) The insurer issuing the policy shall assume full responsibility for the administration of claims in the event of the inability of the association to do so.

(c) The policy may not be canceled or not renewed by either the insurer or the association unless sixty (60) days' written notice thereof has been given to the department by the insurer before the date of such cancellation or nonrenewal.

(5) An association that purchases contractual liability insurance on the warranties that it issues shall provide the department with claim statistics required to be filed by associations not purchasing such insurance.

SECTION 2. This act shall take effect and be in force from and after July 1, 1999.