Chapter 8. Office of the Director
Subchapter 2. Administration of Self-Insurance Plans
Article 13. Group Self-Insurance

§15496. Group Self-Insurer's Security Deposit.

(a) Each group self-insurer shall post and maintain a security deposit with the Director upon approval of its Certificate of Consent to Self-Insure. The security deposit amount shall be in accordance with the provisions of this section, and, once a Self-Insurer's Actuarial Study and Summary has been filed, no less than as determined pursuant to Labor Code Section 3701, calculated as the undiscounted expected actuarial confidence level including each of the following components: incurred but not reported (IBNR) liabilities, Allocated loss adjustment expense (ALAE), Unallocated loss adjusted expense (ULAE) net of specific excess insurance coverage.

The required deposit may be increased at the Director's discretion as set forth in Article 3 of these regulations.

(b) Upon approval of a Certificate of Consent to Self-Insure, the group self-insurer, in the manner provided in subsection (c), shall post an initial security deposit in an amount no less than the following:

(1) An amount equal to sixty percent (60%) of one year average incurred losses of the initial affiliate member(s). The average incurred losses shall be determined by taking the previous three years of incurred losses of the initial member(s), adding them together and dividing by three to determine the one year average incurred loss. The initial deposit shall be posted in four equal installments. The first installment shall be posted within thirty (30) days of the effective date of the certificate to self-insure, and each of the remaining installments shall be posted at ninety days intervals after the initial deposit;

(c) The group self-insurer's security deposit shall be posted in one of the following manners:

(1) A surety bond executed on State issued bond and rider forms pursuant to Section 15212 of these regulations;

(2) An irrevocable letter of credit issued by a bank, credit union, savings institution or other financial institution pursuant to Section 15215 of these regulations;

(3) Approved securities in the form of government issued or corporate issued securities, meeting the requirements of Section 15213 of these regulations;

(4) Cash in trust deposited pursuant to requirements of Section 15214 of these regulations; or

(5) Any combination of one or more of the foregoing methods.

(d) Failure to maintain the required amount of security deposit or to post an acceptable form of deposit as set forth in this Article shall be good cause for assessment of civil penalties pursuant to Labor Code Section 3702.9(a) and/or revocation of the Certificate of Consent to Self-Insure pursuant to Labor Code Section 3702, and Section 15423 of these regulations.

(e) A group self-insurer or group member requesting a hearing pursuant to Article 11 shall provide proof of workers' compensation coverage under a policy from an admitted carrier for the period of time without the required security deposit or deposit increase, or proof of compliance with the Chief's request to post security.

Note: Authority cited: Sections 54, 55, 3701.8 and 3702.10, Labor Code. Reference: Sections 59, 3700, 3701, 3701.5, 3701.8, 3702, 3702.3, 3702.6, 3702.10, 3740, 3741, 3742, 3743, 3744 and 3745, Labor Code.

HISTORY

1. New section filed 3-2-2009; operative 3-2-2009 pursuant to Government Code section 11343.4 (Register 2009, No. 10).

2. Amendment of subsection (a), repealer of subsections (a)(1)-(3) and amendment of subsections (c) and (g) filed 12-31-2012 as an emergency; operative 1-1-2013 pursuant to Government Code section 11346.1(d) (Register 2013, No. 1). A Certificate of Compliance must be transmitted to OAL by 7-1-2013 or emergency language will be repealed by operation of law on the following day.

3. Certificate of Compliance as to 1-1-2013 order transmitted to OAL 7-1-2013 and filed 8-13-2013 (Register 2013, No. 33).

4. Amendment of section heading and section filed 12-14-2016; operative 1-1-2017 pursuant to Government Code section 11343.4(b)(3) (Register 2016, No. 51).