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New rule out for NMI bonding companies
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Posted on Mar 10 2005
Surety companies are now required to deposit 10 percent of their premiums to a separate account, allowing the government to better monitor their ability to pay labor and repatriation bonds when employers of alien workers become insolvent or leave the Commonwealth.
In a March 1 administrative order, Commerce Secretary Andrew Salas informed bonding companies of recently adopted amendments to regulations governing insurance and bonding companies.
Effective Feb. 28, 2005, each bonding company is required to establish a savings or escrow account, where they should deposit 10 percent of their total premiums written.
Salas said the account must show the insurance company and the insurance commissioner as holders of the account.
Deposits must be made monthly, with the bonding company providing the Office of the Insurance Commissioner a copy of the monthly bank statement.
To ensure that the appropriate amount is deposited, bonding companies are also required to provide a labor bonding report stating the balance at the end of each month. The report is due every 20th of the succeeding month.
“The purpose of these regulations is to cause bonding companies to retain percentages of their premiums and raise this rate of retained premiums over time to better suit the risk of exposure of claims based upon the labor bonds,” Salas said.
He noted that the initial rate of retained premiums is set at 10 percent. However, this will be raised incrementally over the next four years until it reaches 25 percent.
CNMI labor regulations require each employer to secure a bond for every foreign employee it hires. This bond is supposed to serve as a safety net when the employer shuts down its business, becomes bankrupt, or abandons the employee. The bond is expected to pay for the employee’s unpaid wages, medical expenses, and airline ticket back to his or her country of origin.
However, it was reported earlier that some insurance companies, when ordered by the Department of Labor, refuse to or are unable to issue labor bonds.
The amendments to the insurance regulations were proposed in January 2005 and adopted last month.
