SECTION 810:25-9-4. Security deposit

(a)   As a condition to self fund its workers' compensation obligations, an employer approved as an individual own risk employer shall post acceptable security with the Commission, in such form and amount as determined by the Commission.

(b)   Acceptable forms of security, are:

(1)   An irrevocable letter of credit issued by a financial institution, whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC). The financial institution must be approved in advance by the Commission. The letter of credit must be on a form prescribed by the Commission, include an automatic renewal clause, and cannot be non-renewed without at least sixty (60) days' prior written notice to the Commission. The letter of credit shall be made payable to the Commission. The Commission may make demand and collect on the posted letter of credit in whole or in part, in the case of actual or imminent default of the employer to pay compensation liabilities, or the cancellation of the letter of credit without an adequate replacement;

(2)   A surety bond from an admitted or surplus lines insurer with an AM Best Rating of B+ or better, and on a form prescribed by the Commission; and

(3)   Such other forms of security approved by the Commission.

(c)   The amount of the security deposit shall be determined by the Commission after evaluating the financial ability of the individual own risk employer to pay its compensation and workers' compensation exposure. The determination may include consideration of a factor for IBNR for the prior claims' years and the permit year applied for. The Commission may require an actuarial report of estimated claims reserves and IBNR from a Commission approved actuary. The minimum amount of the security required in Subsection (b)(1) or (b)(2) of this Section shall be the greater of:

(1)   One Hundred Thousand Dollars ($100,000.00); or

(2)   The employer's average yearly incurred workers' compensation losses for three (3) calendar or fiscal years immediately preceding the application date; or

(3)   If the company is a renewal applicant, the amount of outstanding claims reserves for the employer, as determined by an approved third-party administrator or benefits administrator. Outstanding reserves submitted by an approved self-insured entity or organization must use a standardized approach to assessing future exposure. All future liabilities should be reserved to at least the "most probable outcome." The Commission defines "most probable outcome" as the expected amount of money to cover a claim based upon information known at the time of the report. An organization or entity that discounts either future indemnity or medical payouts based upon present value or a reduced life expectancy must identify said claims and acknowledge the potential future value.

(d)   The security required of an individual own risk employer, and any proceeds thereof collected upon demand, including any interest thereon, shall be maintained by the Commission as provided in the AWCA until each claim for workers' compensation benefits is paid, settled or lapses under the AWCA, and costs of administration of those claims are paid, or until the security is released by the Commission as provided in 810:25-9-19.

[Source: Added at 31 Ok Reg 497, eff 2-4-14 (emergency); Added at 32 Ok Reg 1493, eff 8-27-15]