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OhioBWC - Basics: (Policy library) - File

Self-Insured Employer Securitization Requirements

 

Policy Name:

Self-Insured Employer Securitization Requirements

Policy #:

SI-19-01

Code/Rule Reference:

Ohio Revised Code (ORC) 4123.35 (B) and 4123.351 (E)

Ohio Administrative Code (OAC)  4123-17-15.5, 4123-19-03 (E) - (H) and 4123-19-03.1

Effective Date:

August 1, 2015

Origin:

Self-Insured Department/Employer Services

Supersedes:

N/A

History:

New Policy August 1, 2015

Review Date:

August 1, 2020

 

 

I.       Policy Purpose

This policy outlines the securitization requirements for employers that have been granted the privilege of self-insurance.

II.     Applicability

This policy applies to Self-Insuring Employers, Self-Insuring PEOs, and the Self-Insured Department.

III.    Definitions

A.    SI: Self-Insured.

B.    SI-40: Report of Paid Compensation and Case Reserves.

C.    SI employer: Self-Insuring employer.

D.    SI-PEO: Professional Employer Organization that has been granted the privilege to self-insure for workers’ compensation purposes.

E.    Client Employer: Employer with an active State Insurance Fund policy that has been approved to participate in a PEO agreement with a SI-PEO.

F.     PEO Lease Agreement: Written contract with a duration of not less than twelve (12) months to co-employ employees between a professional employer organization and a client employer.

IV.   Policy

A.    Pursuant to OAC 4123-19-03 and 4123-19-03.1, a SI employer may be required to provide additional security in a form and amount determined by the BWC.

1.     If it is determined that additional security is required for a newly established self-insured policy, the security amount will be established using the MIRA reserves for all claims, regardless of the date of injury, associated with all predecessor state fund policies included as part of the application for self-insurance.

a.     Reserve information will be established using the quarterly claim costs tool.

b.     The initial security amount required will be 100% of the MIRA reserves, as of the effective date self-insured status was granted, for all state fund policies included as part of the application for self-insurance.

c.     All PEOs approved for self-insurance will be required to provide additional security.

2.     The minimum security amount required will be $150,000.

3.     The security must be provided in the form of a Letter of Credit, unless otherwise approved by the Director of the SI department.

4.     The issuer of the security:

a.     Must be a financial institution with a physical U.S. location.

b.     May not be an entity affiliated with the SI employer.

c.     Must use the specified language as outlined by the BWC.

i.       The letter of credit language will be provided by the SI department upon request of the employer or issuing institution.

B.    The amount of security required from a SI employer will be evaluated annually, at a minimum, as part of the self-insured renewal process.

1.     The security requirements for a SI-PEO will be evaluated quarterly and may be adjusted at that time based on the quarterly claim and client reports submitted by a SI-PEO.

2.     See the Self-Insured Professional Employer Organization Client and Claims Reporting Requirements Policy.

C.    The SI department will evaluate the claims and credit risk of an employer to determine if additional security is required.

1.     The evaluation of claims risk will be based on a number of factors, including:

a.     The current and historical claim case reserves as self-reported by the employer on the SI-40.

b.     Paid costs for current and historical claims associated with the self-insured policy as reported on the SI-40.

c.     The SI department may request a loss run claims report that identifies costs for individual claims associated with the policy.

d.     Any claims that are being indemnified by an excess insurance policy.

e.     Upon request by the SI department, the claims loss liabilities identified in an independent actuarial study provided by an employer.

2.     The evaluation of credit risk is based on a number of factors, including:

a.     An assessment of information from the most recent Generally Accepted Accounting Principles (GAAP) certified financial statements, including a review of the auditor’s notes to those statements.  Considerations include, but are not limited to:

                                           i.         Total assets;   

                                         ii.         Total liabilities;

                                        iii.         Long-term debt;

                                        iv.         Retained Earnings;

                                         v.         Inventories;

                                        vi.         Cash and securities;

                                       vii.         Sales;

                                     viii.         Net income.

b.     The expected default frequency (EDF) rating using Moody’s analytics models.

c.     Bond issuer ratings from Moody’s and S&P.

d.     Any other pertinent information that may impact financial performance.

e.     Claims liability identified by an independent actuarial study.

f.      Any other information related to open claims associated with the employer.

D.    The amount of security required is calculated using the above claim and credit analysis in combination with the SI security matrix, which can be referenced at www.bwc.ohio.gov/downloads/blankpdf/SIEGFUpdate.pdf.

E.    Pursuant to OAC 4123-19-03 (H), a SI employer that does not provide a SI-38 parental guarantee from its ultimate U.S. parent shall provide an additional form of security.

1.     The additional security must be provided in the form of a Letter of Credit, unless otherwise approved by the SI department.

2.     The security amount required will be 100% of case reserves as self-reported by the employer on the SI-40.

F.     Upon the determination that additional security is required, or a change in the current security amount is appropriate, a formal written request will be made by the SI department.

1.     An employer will have thirty (30) days from the receipt of the notice to supply the requested security.

2.     If the requested security is not received timely, the SI department may seek non-renewal of self-insured status.

3.     If it is determined that the current security amount should be reduced, a formal written notice approving this reduction will be sent to the employer by the SI department.

4.     If it is determined that the current security amount should be released in full, the original security along with a formal written notice approving the cancellation of the security will be sent directly to the issuer by the SI department and a copy of the written notice will be sent to the SI employer.

 

V.   Resolution of Complaints

A.    Any complaints or disputes related to this policy must be submitted in writing to the SI department via mail or email as detailed in the Self-Insured Resolution of Complaints Policy.

Ohio Bureau of Workers’ Compensation

Attn. Self-Insured Department

30 W. Spring St., 22nd Floor

Columbus, Ohio 43215-2256

Email: SIINQ@bwc.state.oh.us.

B.    The SI department will issue a formal written response to any complaint. If the complaint is not resolved as a result of the formal response issued by the SI department, a written request that the issue be referred to the Self-Insured Review Panel (SIRP) may be submitted by the SI employer or SI-PEO.

 


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