The Commissioner may set a higher permanent surplus requirement on finding that the proposed organization's financial stability requires it. Initial Deposit or Letter of Credit. The Commissioner may accept this letter of credit or deposit in satisfaction of the initial permanent surplus requirement when the Commissioner is satisfied that the LSHO transfers all insurance risk to providers through provider contracts. Letters of credit must be clean, irrevocable, and automatically renewable on an annual basis for a term of three years unless notice is given to the Commissioner at least 60 days prior to a renewal date. The letter of credit shall be payable to the Commissioner when liquidation or rehabilitation proceedings have been initiated.
Compulsory surplus is an ongoing financial standard.
Security surplus is a financial standard which should be met to provide an ample margin of safety and to assure a sound operation. Security surplus is a tool used by the Commissioner's Office to monitor the solvency of insurers. The limited service health organization shall make arrangements satisfactory to the Commissioner to provide sufficient funds to finance any operating deficits in the business and to prevent impairment of the organization's permanent and compulsory surplus. In determining the acceptability of these arrangements the Commissioner will take into account reasonable projections of enrollment, claims and administrative costs, financial guarantees, financial conditions of guarantors, and other relevant information. Financial guarantee information should include a summary of all financial guarantees by providers, sponsors, controlling affiliates or parents, or any other guarantee which is intended to insure the financial success of the plan.