260 R.I. Code R. 260-RICR-50-05-1.8

Current through December 3, 2024

Section 260-RICR-50-05-1.8 - DEPOSIT OF SECURITY

A. Failure by a certified employer to post and maintain the required amount of security and in an acceptable type as determined by the director shall be good cause for terminating or non-renewal of the employer's self insurance certificate.

B. New applicants for self insurance shall submit along with the Application For Approval of Workers' Compensation Self-Insurance Form RI SI-2, a summary of annual incurred losses experienced by their Rhode Island operations for the previous three full calendar years with the loss experience being current to within 120 days prior to the application filing date prepared by their carrier or insurance broker. Initial security deposit, shall be calculated as the higher of the following:

1. the minimum security deposit required by the director, currently $500,000;

2. two times the average incurred liability of the applicant's Rhode Island operations over the previous three years plus any adjustment for self insured retention level of the proposed specific excess insurance policy the applicant intends to purchase; or

3. the amount of initial security required by the director in his or her discretion.

C. Renewing certified employers during their first three years in self insurance shall submit along with the Renewal Application for Approval of Workers' Compensation Self-Insurance Form RI SI- 2a, their loss experience in self insurance from the inception date of the self insurance program. Security deposits, shall be calculated as the higher of the following:

1. the minimum security deposit required by the director, currently $500,000; or

2. two times the average incurred liability of the applicant's Rhode Island operations over the most recent three years (insured and self insured periods) times the quantity (1 + the number of years they have been self insured). In addition the security should be adjusted for the self insured retention level of the proposed specific excess insurance policy the applicant has to purchased;

3. two times the expected unpaid liabilities of all open claims from the inception date of self insurance plus any adjustment for self insured retention level of the proposed specific excess insurance policy the applicant intends to purchase; or

4. the amount of security required by the director in his or her discretion.

D. Renewing certified employers after their first three full years in self insurance shall submit along with the Renewal Application for Approval of Workers' Compensation Self-Insurance Form RI SI-2a, their loss experience in self insurance from the inception date of the self insurance program. Security deposits, shall be calculated as the higher of the following:

1. the minimum security deposit required by the director, currently $500,000; or

2. two times the expected unpaid liabilities of all open claims from the inception date of self insurance plus any adjustment for self insured retention level of the proposed specific excess insurance policy the applicant intends to purchase; or

3. the amount of security required by the director in his or her discretion.

E. For good cause and after providing at least ten days advanced written notice to the certified employer or formerly certified employer, the director may audit or review or cause to be audited and reviewed any claim or claims reported in the renewal application, or the claims detail reported on any claim or claims, as well as, the case reserves posted on any claim or claims by a certified employer, or to evaluate any actuarial report provided on the liabilities of any certified employer or formerly certified employer to determine the adequacy of the security posted with the director to secure the liabilities of the employer. Should the results of the audit or review determine the security is not adequate in the sole determination of the director; the director may adjust the amount of required security posted. Any cost to the director to conduct such an audit or review or to cause such an audit or review to be conducted shall be reimbursed by the certified employer or formerly certified employer.

F. The director shall require an additional security adjustment from certified employers based on the self insured retention level of the employer's specific excess insurance policy during the initial or renewal period of self insurance as follows:

1. Security Adjustment Based on Self Insured Retention (SIR) Level of Specific Excess Policy

SIR Range	Additional Security Required
Less than $500,000	None
$500,000 - $749,999	2 times (SIR - $350,000)
$750,000 - $1,000,000.00	3 times (SIR - $350,000)
$1,000,000.00 or more	4 times (SIR - $350,000)

G. The director may call in whole or part any security posted by a certified employer to secure the employer's self insured workers' compensation liabilities and services under R.I. Gen. Laws Chapters 28-33 and 28-34 by providing a signed statement by the director on departmental letterhead to certify that the named certified employer has failed in whole or part on its self insured workers' compensation obligations under R.I. Gen. Laws Chapters 28-33 and 28-34

H. The director shall not reduce the amount of security posted by a formerly certified employer during the first ten years after the date of termination of the employer's workers' compensation self insurance program. After the tenth year, the director may agree to a reduction in the required amount of security to not less than 200% of the remaining unpaid liabilities plus the minimum deposit amount of $500,000 or to any higher amount the director in his or her sole discretion shall determine appropriate to secure the known and unknown liabilities of the employer. The adjusted deposit amount shall remain in place for an additional ten years at which time the former certified employer may petition the director for a reduction in security. Accompanying such petition shall be a report prepared by an actuary acceptable to the director addressing the potential of any occupational health claims being filed that have long latency periods to develop before being diagnosed, such as from asbestos, silica, chemical, or similar hazardous occupational exposures to the employees of the formerly certified employer during the period of workers' compensation self insurance in Rhode Island. The director shall make a decision on the petition and grant or deny an adjustment in the security required. The director may hold security for a period of up to 50 years from the date of program termination to secure occupational health exposures to the employees of the former certified employer.

I. Any certified employer or formerly certified employer may petition the director for a reduction in the amount of security required to be posted to secure the employers\'s workers' compensation self insurance program. The director in his or her sole discretion may grant such a request provided that the new security amount that would be required of the employer fully meets all the requirements of R.I. Gen. Laws § 28-36-1 and these rules and regulations on the amount of security required to be posted.

J. A certified employer or a formerly certified employer may sell off all or any part of the employer's remaining claim liabilities to an insurance carrier duly licensed to write primary workers' compensation insurance in Rhode Island via a workers' compensation loss portfolio transfer policy. Such loss portfolio transfer policy shall assume all liability of each claim that is being transferred, including any liability that may be subject to reimbursement from an excess carrier. If the policy proposes to wrap up all remaining compensation liabilities for an employer to release the posted security deposit, then the loss portfolio transfer policy must clearly indicate in its declarations that the policy covers all remaining past, present or future unpaid liabilities, whether known and unknown, including any future occupational health claims for the period of self insurance that may yet be filed against the certified employer incurred during the self insured period in Rhode Island. Any loss portfolio transfer policy shall meet the requirements to be an assumed claims transaction covered by the Rhode Island Property & Casualty Insurers' Guaranty Association under R.I. Gen. Laws Chapter 27-34.

260 R.I. Code R. 260-RICR-50-05-1.8

Amended effective 11/28/2018