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Chapter 8. Office of the Director
Subchapter 2. Administration of Self-Insurance Plans
Article 13. Group Self Insurance
§15471. Initial Feasibility Study.
Included with each group self insurer's initial application for a Certificate To Self Insure required by Section 15482 of these regulations shall be a feasibility study report prepared by the prospective Group Administrator or an independent risk management individual or firm, consisting of the following:
(a) An analysis of the advantages and disadvantages of group self insurance for the proposed group members as compared to the options of individual self insurance or coverage under a policy issued by a carrier(s);
(b) Identification of all of the initial proposed group members and the combined total payroll for the proposed group self insurer;
(c) A consolidated summary of the historical workers' compensation claims loss experience and the allocated loss expenses of the proposed group members for a minimum of the three most recent, full policy years, as well as the current policy year through the last completed quarter under the current policy at the time the application is submitted;
(d) An evaluation of the historical workers' compensation claims costs for the anticipated initial group members, including an actuarial projection of the expected claims costs for each of the first five years of the group self insurer's operation. The actuarial projection shall be prepared by an independent person with current experience in making California workers' compensation actuarial projections for self insured employers or group insurance, and who shall have a designation of Fellow of the Casualty Actuarial Society (FCAS) or be a member of the American Academy of Actuaries (MAAA).
(e) A five year pro forma financial statement including, but not limited to, an income statement, balance sheet, projected cash flows, and claims payout projections. The pro forma financial statement must include a detailed separation of assets, liabilities, retained earnings, taxes, and accrual and distribution of excess contributions. If any claims costs are discounted, the interest rate assumptions and payout patterns must be described and must be based on reasonable assumptions. The claims payout schedule shall be calculated using the 80th percent actuarial confidence level figures from the actuarial study.
(f) A summary of the specific details of the group self insurer's operating plan or the plan itself, including, but not limited to, descriptions of:
||(1) The group self insurer's legal and organizational structure;
||(2) Method of governance;
||(3) General management of the group self insurer, including underwriting policies, insurance coverage, billing, commissions, fees, and all other expenses.
||(4) Rating or contribution plans, or other means by which group funding during the first five years of operation will generated and the amounts to be generated by the methods proposed for each of the first 5 years of operation.
(g) The first 12 month budget of the group self insurer;
(h) The names and credit ratings of any anticipated excess insurance coverage carriers, including estimated cost, levels of retention for specific excess insurance, aggregate excess insurance if obtained, and maximum liability levels of each excess policy;
(i) The company name and name of the person designated as the independent Group Administrator and the company name of the independent third party claims administrator chosen by the Board of Trustees;
(j) A description of safety and loss control services available from the group self insurer to group members;
(k) A description of the underwriting requirements for member selection for the group self insurer, including a description of any underwriting requirements or restrictions imposed by the specific excess insurance carrier;
(l) The name of the certified public accountant that will prepare annual financial reports for the group self insurer;
(m) The name and professional actuarial designation of the actuary who will prepare actuarial reports for the group self insurer, as well as an indication of how frequently actuarial reports will be completed;
(n) A statement indicating the means by which the group self insurer will post the required security deposit; and
(o) A statement describing any fidelity insurance coverage and errors and omissions insurance coverage to be maintained by the group self insurer, and/or by vendors with the group self insurer named as beneficiary.
|| Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 3700, 3701 and 3702.1, Labor Code.
1. New section filed 6-30-94; operative 6-30-94 (Register 94, No. 26).
2. Amendment filed 3-2-2009; operative 3-2-2009 pursuant to Government Codesection 11343.4 (Register 2009, No. 10).
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