Interpretation ID: 20811.ztv

Mr. Robert N. Clemens
President
Automobile Consumer Service Corp.
2007 Poole Drive
Huntsville, AL 35810

Dear Mr. Clemens:

This is in reply to your letter of November 2, 1999, to Taylor Vinson of this Office, enclosing copies of "RI policy and Certificate of Insurance with an endorsement [by] National Warranty Insurance Group." You have asked for our approval, so that you may proceed to order the printing of the policies.

By way of background, 49 U.S.C. 30141(c)(1)(C) and 30147(b), as implemented by 49 CFR 592.5(a)(8), (a)(9), and (e) require this agency to ensure that a registered importer (RI) provide and maintain evidence of sufficient financial responsibility to meet certain obligations, principally to notify purchasers and remedy safety-related defects or noncompliances occurring in motor vehicles for which the RI has import certification responsibility. The regulatory method we chose was to require an RI to obtain a "mandatory service insurance policy issued by an independent insurance company," in an amount up to $2,000 for each motor vehicle imported or conformed by the RI.

When the regulation went into effect early in 1990, the initial RIs were unable to find any company registered as an insurer which was willing to issue such a service insurance policy. However, Automobile Consumer Service Corporation developed a "warranty" to serve the same purposes as an insurance policy, and we acceded to this arrangement. We assisted ACSC in drafting an acceptable document, even though we had no information on its financial reserves and its financial ability to honor the "warranty." However, we are not aware of any instance in which one of these warranties was presented to ACSC, let alone presented and not honored.

Nevertheless, the question of the adequacy of reserves to honor policies has continued to concern us. Your letter of November 2 informed us of the willingness of the National Warranty Insurance Risk Retention Group ("National Warranty") to insure ACSC on its issuance of its warranties. In turn, on November 23, 1999, Signet Star Reinsurance Company ("Signet Star") agreed to reinsure National Warranty under its agreement with ACSC, a copy of which you furnished us on November 29.

After reviewing these documents, we have concluded that an RI who obtains an ACSC warranty that is covered by ACSC's agreement with National Warranty, and by National Warranty's agreement with Signet Star, provides a satisfactory assurance of financial ability to fulfill the RI's statutory obligations. You may proceed to order your policies. However, our consent to this arrangement does not preclude us from considering other ways in which the statutory objectives may be effected. Any changes, of course, would be the subject of public notices to afford interested persons an opportunity to comment.

Sincerely,
Frank Seales, Jr.
Chief Counsel
ref:592
d.2/3/2000