(a) To ensure the faithful performance of a provider's obligations to its service contract holders, a provider shall either

(1) obtain from an insurer or risk retention group authorized to transact the business of insurance in the state insurance that either reimburses the provider for obligations arising from a provider's motor vehicle service contract issued in the state or, if the provider fails to perform its obligations under a motor vehicle service contract issued in the state, pays to the service contract holder the provider's covered contractual obligations under the terms of the service contract on behalf of the provider; an insurer issuing a policy under this paragraph must satisfy one of the following:

(A) maintain surplus as to policyholders and paid-in capital of at least $15,000,000 and annually file with the director copies of the provider's financial statements, its annual statement to the National Association of Insurance Commissioners, and the statement of actuarial opinion and opinion summary required by and filed in the provider's state of domicile; or

(B) maintain surplus as to policyholders and paid-in capital at least equal to $10,000,000, but not more than $15,000,000, and demonstrate to the satisfaction of the director that the company maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not greater than 3 to 1 and annually files with the director copies of the provider's audited financial statements, its annual statement to the National Association of Insurance Commissioners, and the statement of actuarial opinion and opinion summary required by and filed in the provider's state of domicile; or

(2) maintain, solely or together with the parent company, a net worth or stockholders' equity of $100,000,000 and, upon request by the director, provide the director with a copy of the provider's or the parent company's most recent annual report filed with the United States Securities and Exchange Commission within the last calendar year or, if the company does not file with the United States Securities and Exchange Commission, a copy of the company's audited financial statements, which show a net worth of the provider or its parent company of at least $100,000,000; if the parent company's annual report or financial statements are filed to meet the provider's financial stability requirement, then the parent company shall agree to guarantee the obligations of the provider relating to motor vehicle service contracts sold by the provider in this state.

(b) A motor vehicle service contract provider that has obtained insurance under this section shall state the name and address of the provider and include a statement in substantially the following form: “Performance or payment of the obligations of the provider under this service contract are insured.” If the provider has not obtained insurance under this section, the service contract shall contain a statement in substantially the following form: “Obligations of the provider under this service contract are not insured and are guaranteed only by the assets of the provider.”

(c) If the provider fails to provide a covered service under the terms of the motor vehicle service contract within 30 days after the service contract holder notifies the provider of the claim, the service contract holder is entitled to apply directly to the insurer for payment of the provider's obligation.