AN ACT AMENDING THE EXTENDED WARRANTY STATUTES.

This bill requires an insurer issuing an extended warranty reimbursement insurance policy in Connecticut to meet certain requirements when filing a policy form with the insurance commissioner and continuously thereafter.

1. maintain surplus and paid-in capital of at least $ 15 million;

2. demonstrate to the insurance commissioner's satisfaction that it maintains a ratio of net written premiums to surplus and paid-in capital that does not exceed three to one; and

3. annually file with the commissioner copies of (a) its audited financial statements, (b) the annual statement it files with the National Association of Insurance Commissioners, and (c) any actuarial certification that it must file with its domicile state.

*House Amendment “A” (1) decreases the required surplus and paid-in capital from $ 20 million to $ 15 million; (2) changes the required ratio of premiums to surplus and paid-in capital from two to one to three to one; and (3) clarifies that the provisions of the bill apply to insurance policy forms required by the commissioner for insurance policies and contracts, other than fidelity, surety or guaranty bonds, and any endorsement modifying such policies or contracts.

The law defines “extended warranty” as a contract or agreement to perform or indemnify a product's repair, replacement, or maintenance in case of an operational or structural failure that a defect in material, skill, or workmanship or normal wear and tear caused in exchange for a price separate from that charged for the product's lease or purchase price.

An “extended warranty reimbursement insurance policy” is an insurance policy covering an extended warranty provider's obligations and liabilities under an extended warranty the provider sold.

An “extended warranty provider” is a person who (1) issues, makes, provides, or offers an extended warranty to a buyer and (2) is contractually obligated under the warranty to provide service. It excludes a retail seller if (1) the seller, or its subsidiary, manufactured the product the warranty covers; (2) the extended warranty it offers or sells obligates the manufacturer or its subsidiary, distributor, or importer to provide the service or indemnity the warranty requires; or (3) under the warranty's terms, the seller performs at least 90% of the repair service.

Insurers must file insurance policies and contracts, other than fidelity, surety or guaranty bonds, and any endorsement modifying such policies or contracts with the insurance commissioner for his review prior to use (CGS § 38a-676(c)).

By law, an extended warranty cannot be issued, sold, or offered unless the extended warranty provider (1) is insured under an extended warranty reimbursement insurance policy an insurer authorized to do business in Connecticut issued or (2) can demonstrate that its claim reserves do not exceed 50% of its audited net worth. If they do, the provider must have an independent trustee hold the reserves in trust and an actuary annually certify their adequacy. The law does not apply to a home warranty contract or home warranty service agreement.

The law requires an extended warranty provider to file with the insurance commissioner a copy of its (1) extended warranty form and (2) extended warranty reimbursement insurance policy or certification from a certified public accountant attesting to the adequacy of its claim reserves.

Yea

Nay

(02/19/2009)