P.R. Laws tit. 26, § 2126
(1) No service contract shall be issued, sold or offered for sale in Puerto Rico, unless the provider has:
(a) Provided a receipt for the acquisition of the service contract to the holder of the contract;
(b) provided a copy of the service contract to the holder of the contract within a reasonable period of time from the date of acquisition, and
(c) complied with the provisions of this subchapter.
(2) Every provider who wishes to issue service contracts in Puerto Rico shall be registered with the Commissioner using the forms prescribed by the latter, and shall pay the Commissioner the sum of five hundred dollars ($500) a year, no later than June 30th of each year.
(3) In order to ensure the faithful compliance of the obligations to the contract holders, each provider shall comply with at least one of the following requirements:
(a) Insure every contract issued under a reimbursement insurance policy.
(b) Maintain an adequately backed reserve, to satisfy all obligations in effect under service contracts issued in Puerto Rico. Said reserve shall not be less than forty percent (40%) of the gross fees received for all contracts, and shall be deposited in a trust constituted under the laws of Puerto Rico with the prior approval of the Commissioner. Said deposit shall be made in installments due forty-five (45) days after the close of each quarter in which the provider issues service contracts in Puerto Rico. The trust shall accredit to its funds the income received from the investment of its assets, which shall be carried out pursuant to the same standards that apply to the investments of the insurers of the country under this Code. The trustee in charge of the administration of the trust shall also be approved by the Commissioner, and shall be domiciled in Puerto Rico and shall operate the trust from this jurisdiction. Commissioner shall establish, through regulations, the norms for the use or withdrawal of funds from the trust, as well as for its liquidation if experience shows that the reserve of a provider is inadequate, the Commissioner shall require it to be increased in the amount needed to make it adequate. In addition to said reserve, provided the option in this clause is used, the provider shall fiducially deposit a financial guaranty with the Commissioner, in the amount of one hundred thousand dollars ($100,000), using one of the following options:
(i) Post and keep in effect a financial security bond, issued by a licensed insurer in Puerto Rico, with the prior approval of the Commissioner. Said bond shall not be subject to cancellation, unless the Commissioner is given written notice, not less than sixty (60) days prior to the canceling thereof.
(ii) Deposit assets eligible for deposit of the same type allowed to insurers, in the amount of the financial guarantee.
(iii) Deposit a certificate of deposit issued by a commercial bank authorized to do business in Puerto Rico.
(iv) Deposit a clear, unconditional and irrevocable letter of credit issued by an acceptable financial institution. A “clear, unconditional and irrevocable letter of credit” is one that is not conditioned to any other agreement, document or contract; that the sole presentation of a sight draft is sufficient to draw funds against it; and it cannot be modified without [t]he consent of the provider. An “acceptable financial institution” is one that is organized under the laws of Puerto Rico, the United States or any of its states; that is supervised and examined by state and federal entities that have regulatory authority over financial institutions, and is not a subsidiary or affiliate owner of the provider.
(c) Maintain, or the parent company shall maintain a net worth of one hundred million dollars ($100,000,000), and if required by the Commissioner, furnish the Commissioner a copy of the most recent Form 10-K or Form 20-F filed before the Security [sic] Exchange Commission (SEC), a copy of the financial statement of the provider, or of its parent company, certified by a certified public accountant that shows that the net worth of the provider or of the parent company is not less than one hundred million dollars ($100,000,000). Provided that the said forms 10-K or 20-F, or the audited financial statements of the parent company are used to show that it complies with the requirement established herein, the parent company shall agree to secure all the obligations of the provider related to the service contracts sold by it in Puerto Rico.
(4) The fees shall not be subject to premium taxes. Notwithstanding the above, if the provider acquires an insurance reimbursement policy, the corresponding premium shall be subject to the premium tax that applies to it pursuant to this Code.
(5) Every authorized provider shall be liable for the acts or omissions of the persons or entities that act in representation of the provider, provided that said acts and omissions are related to the promotion, sale and offering of the service contracts of the provider.
(6) No provider shall issue, deliver or use any service contract form, or application form or other addenda, unless it has first been presented to, and approved by the Commissioner; no person shall issue, nor deliver any form whatsoever that has not thus been presented to, and approved by him/her.
(7) The provisions of §§ 1102, 1103, 1105, 1106, 1108, 1109, 1110, 1112, 1113, 1114, 1115, 1116, 1117, 1118, 1120, 1123, 1124, 1125, 1126, 1128, 1136 and 1137 of this title related to the service contracts, shall be applicable to the service contracts, in the measure that they are compatible, except with regard to those instances in which there is a more specific provision in this subchapter.
History —Ins. Code, added as § 21.260 on Sept. 8, 2000, No. 392, § 3.