436-050-0165 Security Deposit Requirements (1) Adoption of standards. The director adopts, by reference, the International Standby Practices 1998 (ISP98), ICC Publication No. 590. (a) This publication may be purchased from the International Chamber of Commerce website at https://2go.iccwbo.org/ ; and (b) Copies of this publication are available for review during regular business hours at the Workers’ Compensation Division, 350 Winter Street NE, Salem OR 97301. (2) Required security deposit. Each self-insured employer is required to provide a security deposit that is acceptable to the director as detailed in Bulletin 147 . Under the conditions and requirements of this rule, the director may accept: (a) An irrevocable standby letter of credit (ISLOC); or (b) A surety bond. (3) Irrevocable standby letters of credit. An ISLOC may be accepted by the director as all or part of the security deposit. (a) The director may accept the ISLOC under the following conditions: (A) The ISLOC is issued or confirmed by an Oregon state-chartered bank or a federally chartered bank from which funds will be immediately payable on demand; (B) Except for federally chartered instrumentalities of the United States operating under the authority of the Farm Credit Act of 1971, as amended, the issuing bank has a long-term certificate of deposit rating of: (i) “A” or better issued by Moody’s Investors Service Inc.; or (ii) “A” or better issued by S&P Global Ratings; (C) An ISLOC issued by a bank that does not meet the rating requirement of paragraph (B) at the time of issuance will only be accepted with a confirming ISLOC issued by an Oregon state-chartered bank or federally chartered bank that meets the rating requirement of paragraph (B). The confirming ISLOC must state that the confirming bank is primarily obligated to pay on demand any amount up to the full amount of the ISLOC regardless of reimbursement from the bank whose ISLOC is being confirmed; (D) Form 3640, “Irrevocable Standby Letter of Credit,” is used for the ISLOC; (E) The ISLOC is issued under the legal name or assumed business name of the self-insured employer as registered with the Oregon Secretary of State; (F) The ISLOC names the State of Oregon, acting by and through the Department of Consumer and Business Services, as its beneficiary; (G) The ISLOC allows the beneficiary to demand payment immediately if the self-insured employer has: (i) Defaulted in payment of its workers’ compensation liabilities or obligations, or in payments due to the director under ORS chapter 656; (ii) Filed for bankruptcy; (iii) Failed to renew the ISLOC or provide acceptable substitute security at least 15 days before the expiration date of the ISLOC; or (iv) Failed to provide additional or replacement security after being ordered to do so by the director, notwithstanding written notice to the self-insured employer; (H) The ISLOC states that: (i) The funds provided by the ISLOC will be available by presentation of the beneficiary’s sight draft drawn on the issuing bank, payable within three business days, when accompanied by one of the statements contained in paragraph (G) of this subsection, signed by the director; (ii) The ISLOC is not subject to any qualifications or conditions by the issuing bank or confirming bank and is each bank’s individual obligation, which is in no way contingent upon reimbursement; (iii) The ISLOC will be automatically extended without amendment for one year from the expiration date or any subsequent expiration date, unless, at least 60 days before the expiration date, the bank gives the director written notice by registered mail or overnight delivery that the bank has elected not to extend the ISLOC for another period; (iv) If the issuing bank or any confirming bank is closed at the time of expiration of the ISLOC for any reason that would prevent delivery of a demand notice during its normal hours of operation, the ISLOC will be automatically extended for a period of 30 days commencing on the next day of operation; (v) Payment of any amount under the ISLOC will be made by wire transfer to a department account with the State Treasurer at a designated bank, as instructed in the demand notice; (vi) All bank charges for the ISLOC will be for the account of the applicant; (vii) Any amendment to the ISLOC must be approved by the beneficiary before the amendment is effective; (viii) The funds provided by the ISLOC are not construed to be an asset of the self-insured employer; (ix) If legal proceedings are initiated by any party with respect to payment of any ISLOC, the proceedings will be subject to the jurisdiction of Oregon courts and application of Oregon law; (I) The ISLOC conforms to and references the International Standby Practices 1998 (ISP98), ICC Publication No. 590; (J) The self-insured employer that submits the ISLOC provides an accompanying Form 3529, “Memorandum of Understanding,” affirming the employer’s agreement to the following: (i) The ISLOC is provided to the director in place of, or in addition to, a surety bond or other form of security acceptable to the director under this rule; (ii) The ISLOC will remain in force without amendment unless canceled by the issuing bank as provided in (H)(iii) of this subsection; (iii) The ISLOC may be replaced with an ISLOC or surety bond of equal amount that is accepted by the director as substitute security, or a policy of paid-up insurance that is accepted by the director in accordance with OAR 436-050-0200(5); (iv) The director may immediately demand payment under the ISLOC as provided in paragraph (G) of this subsection; (v) The funds provided from a demand for payment under the ISLOC will be administered as provided in subsection (b) of this section and OAR 436-050-0190(1)(b); and (vi) If legal proceedings are initiated by any party with respect to payment of any ISLOC, the proceedings will be subject to the jurisdiction of Oregon courts and application of Oregon law. (b) If the director demands payment under an ISLOC, the funds provided by the ISLOC will be deposited with the State Treasurer in an account separate and distinct from the General Fund. (c) If a bank’s rating falls below the ratings required in (a)(B) of this section subsequent to the issuance of the ISLOC, the self-insured employer must, within 60 days of the publication of the lower rating: (A) Have the ISLOC confirmed by an Oregon state-chartered bank or a federally chartered bank that has an acceptable rating; (B) Replace the ISLOC with a security deposit that is accepted by the director in accordance with this rule and that covers all workers’ compensation liabilities and obligations that would have been covered by the ISLOC; or (C) Obtain a policy of paid-up insurance that is accepted by the director in accordance with OAR 436-050-0200(5), if the certification of the self-insured employer has been canceled or revoked. (d) If a bank elects not to extend an ISLOC as provided under subparagraph (3)(a)(H)(iii) of this rule, the self-insured employer must provide acceptable substitute security at least 15 days before the expiration date of the ISLOC. Substitute security provided under this subsection must have an effective date no later than the expiration date of the ISLOC (4) Surety bonds. A surety bond may be accepted by the director as all or part of the security deposit. (a) The director may accept the surety bond under the following conditions: (A) The surety bond is issued by a surety company authorized under ORS chapter 731 to transact surety business in Oregon; (B) The surety company or its parent has: (i) An Insurer Financial Strength Rating of A or better issued by S&P Global Ratings; or (ii) A Financial Strength Rating of B+ or better issued by A.M. Best Rating Services, Inc.; (C) Form 824, “Surety Bond,” is used for the surety bond; (D) The surety bond is issued under the legal name or assumed business name of the self-insured employer as registered with the Oregon Secretary of State; (E) The surety bond is continuous in form; (F) The surety bond states that it may only be terminated by the surety company by giving the director and the Principal written notice. The notice must state that the termination will be effective on a date not less than thirty days after the date the notice is received by the director. Termination of a surety bond in no way limits the liability of the surety for defaults of the Principal’s liability or obligations under ORS chapter 656 before the effective date of the termination; (G) The surety bond states that the liability of the surety company may only be discharged in the event that the surety bond is released in writing by the director. The director may release a surety bond when: (i) The Principal provides substitute security that is accepted by the director in lieu of the surety bond to be released, covering all past, present, existing, and potential liability of the Principal under ORS chapter 656, in an amount required by the director; or (ii) If the certification of the self-insured employer has been canceled or revoked, the employer obtains a policy of paid-up insurance that is accepted by the director in accordance with OAR 436-050-0200(5). (H) The surety bond and all surety bond riders are executed by the surety company’s attorney-in-fact. The attorney-in-fact’s appointment and power of attorney must accompany the surety bond and all riders submitted. The power of attorney must authorize the attorney-in-fact to execute the surety bond in the amount of the penal sum of the bond. (b) Form 1810, “Surety Bond Rider” must be used for all department-required increases or authorized decreases in the penal sum of the surety bond and all changes to the name of the Principal. The surety bond rider is not effective until it is accepted by the department. (c) If the surety company is placed in conservatorship, is seized, declares insolvency, or has a current credit rating below the ratings required in (a)(B) of this section, the self-insured employer must, within 30 days of receiving notice from the department: (A) Replace the surety bond with a security deposit that is accepted by the director in accordance with this rule and that covers all workers’ compensation liabilities and obligations that would have been covered by the surety bond; or (B) Obtain a policy of paid-up insurance that is accepted by the director in accordance with OAR 436-050-0200(5), if the certification of the self-insured employer has been canceled or revoked. (d) If a surety company terminates a surety bond as provided under paragraph (4)(a)(F) of this rule, the self-insured employer must provide acceptable substitute security at least 15 days before the effective date of the termination. Substitute security provided under this subsection must have an effective date no later than the termination date of the surety bond. (5) Government securities, certificates of deposit, or time deposit accounts. Government securities, certificates of deposit, or time deposit accounts will not be accepted as security deposits for certified self-insured employers who must increase their security deposit or for employers whose self-insurance certification was granted after January 1, 2004. (a) Government securities, certificates of deposit, or time deposit accounts that were accepted by the director as a self-insured employer’s or a self-insured employer group’s required security deposit before January 1, 2004, may remain as the security deposit until the maturity date of those investments. At that time, the government securities, certificates of deposit, or time deposit accounts pledged to the department as security deposits must be replaced by a surety bond or ISLOC acceptable to the director. (b) A self-insured employer that has government securities, certificates of deposit, or time deposit accounts as all or part of its security deposit must complete Form 4023, “Security Agreement and Notice to Intermediary,” granting the department a security interest in and control over those financial assets. Statutory/Other Authority: ORS 656.430 & ORS 656.726(4) Statutes/Other Implemented: ORS 656.430 History: WCD 4-2025, amend filed 11/13/2025, effective 01/01/2026 WCD 7-2022, amend filed 11/07/2022, effective 01/01/2023 WCD 18-2021, amend filed 12/13/2021, effective 01/01/2022 WCD 10-2019, amend filed 12/17/2019, effective 01/01/2020 WCD 5-2016, f. 11-28-16, cert. ef. 1-1-17 WCD 10-2014, f. 8-15-14, cert. ef. 9-15-14 WCD 6-2012, f. 10-4-12, cert. ef. 1-1-13 WCD 12-2003, f. 12-4-03, cert. ef. 1-1-04 WCD 8-2003(Temp), f. & cert. ef. 7-18-03 thru 1-13-04