(a) A provider must maintain financial security to ensure the faithful performance of a provider's obligations to its service contract holders and for the benefit of those service contract holders who suffer actual financial loss due to the provider's failure to perform those obligations.
(b) A provider must submit in a manner prescribed by the Department proof of one of the forms of financial security that meets the requirements of Texas Occupations Code §1304.151 and/or §1304.152:
  (1) a reimbursement insurance policy;
  (2) a funded reserve account and a security deposit; or
  (3) net worth of at least $100 million.
(c) A provider of a residential service contract electing to provide financial security with a reimbursement insurance policy may use a policy issued by a captive insurance company in accordance with Texas Occupations Code §1304.157(c). A provider so electing must also maintain the funded reserve required by that section.
(d) Whichever form of financial security the provider uses must be maintained by the provider during the entire time the provider continues to do business in this state or is registered to do business in this state and until the provider has performed or otherwise satisfied all liabilities and obligations to its service contract holders in this state.
(e) If any form of financial security is canceled or lapses during the term of the provider's registration, the provider may not sell or issue a new service contract after the effective date of the cancellation or lapse, unless and until the provider files with the executive director a new form of financial security that meets the financial security requirements provided by Texas Occupations Code, Chapter 1304 and this chapter.
(f) Cancellation or lapse of the financial security does not affect the provider's liability for a service contract sold or issued by the provider before or after the effective date of the cancellation or lapse.

Source Note: The provisions of this §77.40 adopted to be effective November 16, 2009, 34 TexReg 7791; amended to be effective October 15, 2010, 35 TexReg 9083; amended to be effective March 1, 2012, 37 TexReg 1319; amended to be effective June 13, 2024, 49 TexReg 4035