An insurer shall:

1. Require full collateralization of the outstanding obligations owed under a large-deductible agreement using one of the following methods:

(a) A surety bond issued by a surety insurer authorized to transact such insurance in this State, and whose financial strength and size ratings from A.M. Best Company, Inc., are not less than “A” and “V,” respectively, or are substantially equivalent ratings from another rating agency, as determined by the Commissioner;

(b) An irrevocable letter of credit issued by a financial institution with an office physically located within this State, and the deposits of which are federally insured; or

(c) Cash or securities held in trust by a third party or the insurer and subject to a trust agreement for the express purpose of securing the policyholder’s obligation under a large-deductible agreement, provided that if the assets are held by the insurer, those assets may not be commingled with the insurer’s other assets; and

2. Limit the size of the policyholder’s obligations under a large-deductible agreement to 20 percent of the total net worth of the policyholder at the inception of the policy and again at each renewal, as determined by an audited financial statement as of the most recent fiscal year-end for which such a statement is available, with the total net worth of the policyholder calculated as the difference between the total assets and the total liabilities of the policyholder.

(Added to NRS by 2017, 2344)