A BILL TO BE ENTITLED
AN ACT to clarify that insurance maintained by warranty companies and motor vehicle and home appliance service agreement companies must be provided by either a licensed insurer or an eligible surplus lines insurer, to authorize a study, and to appropriate funds.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 58‑1‑36(a) reads as rewritten:
"(a)	Each company or person subject to this section shall maintain contractual liability insurance or service agreement reimbursement insurance with either an insurer, as defined in G.S 58‑3‑165(a)(6), or an eligible surplus lines insurer, as defined in G.S. 58‑21‑10(3), for one hundred percent (100%) of claims exposure, including reported and incurred but not reported claims and claims expenses, on business written in this State unless the company or person:
(1)	Maintains an audited net worth of one hundred million dollars ($100,000,000);(2)	Has offered service agreement contracts or warranties, as applicable to the respective company, its parent company, or person, for at least the preceding 10 years; and(3)	Either is required to file and has filed an SEC Form 10K or Form 20‑F with the Securities and Exchange Commission (SEC) within the last calendar year or, if the company does not file with the SEC, can produce, upon request, a copy of the company's audited financial statements, which show a net worth of the company or person of at least one hundred million dollars ($100,000,000). A company or person may utilize its parent company's Form 10‑K, Form 20‑F, or audited financial statements to satisfy this requirement if the parent company agrees to guarantee the obligations of the company or person relating to service agreement contracts or warranties, as applicable to the respective company or person, sold by the company or person in this State."
SECTION 2.  The Department of Insurance shall study the issue of the appropriate and effective regulation of warranties and service agreements. The study shall include consideration of:
(1)	The need for the regulation of motor vehicle protection product warranty agreements and of persons who are contractually obligated to warranty holders under those agreements. 
(2)	The most effective means of providing meaningful regulatory oversight of warranty and service agreements and the entities that issue the agreements.
(3)	Any other issue related to warranty and service agreement companies deemed appropriate by the Department.
The Department shall report its findings, including any legislative recommendations, to the 2006 Regular Session of the 2005 General Assembly.
SECTION 3.  There is appropriated from the General Fund to the Department of Insurance the sum of fifty thousand dollars ($50,000) for the 2005‑2006 fiscal year to carry out the provisions of this act.
SECTION 4.  Section 1 of this act becomes effective January 1, 2006. Sections 2 and 3 of this act become effective July 1, 2005. The remainder of this act is effective when it becomes law.