An Act To
Maine Legislature, Session 126, LD 0706
Committee Amendment CA_A_S74 (Senate)
Amends: 39-A MRSA §403

MAINE STATE LEGISLATURE 
The following document is provided by the 
LAW AND LEGISLATIVE DIGITAL LIBRARY 
at the Maine State Law and Legislative Reference Library 
http://legislature.maine.gov/lawlib 
Reproduced from scanned originals with text recognition applied 
(searchable text may contain some errors and/or omissions) 
~~ 
~ 
Date: 6/1 'lzor3 
L.D.706 
(Filing No. s-14 ) 
INSURANCJB: AND FINANCIAL SERVICES 
Reproduced and distributed under the direction of the Secretary of the Senate. 
SENATE 
U6TH LEGISLATURE 
COMMITTEE AMENDMENT "A" to S.P. 255, L.D. 706, Bill, "An Act To 
Amend the Workers' Compensation Self-insurance Laws" 
Amend the bill by striking out everything after the enacting clause and before the 
summary and inserting the following: 
'Sec. 1. 39-A MRSA §403, sub-§4-A, as amended by PL 2009, c. 232, §2, is 
further amended to read: 
4-A. Group self-insuranc~, reinsurance account. As an alternative to obtaining a 
reinsurance contract providing coverage against losses arising out of one occurrence, an 
individual or group self-insurer authorized under this section may, with the approval of 
the Superintendent of Insurance, participate in a group self-insurance reinsurance 
account, referred to in this subst:ction as "an account," as provided in this subsection. A 
group self-insurer authorized under the laws of another state may participate in an 
account through a protected cell arrangement as provided in paragraph 1. More than one 
account may be established pursuant to this subsection. An account established pursuant 
to this subsection may be established as either an independent private entity or an 
instrumentality of the State, but the debts and liabilities of an account established as an 
instrumentality of the State are not debts and liabilities of the State. 
An account 
established as an instrumentality of the State within 24 months of its formation, with the 
approval of the Superintendent of Insurance, may transfer all of its assets and liabilities 
into an account established as an independent private entity. 
A. 
A group self-insurer that is subject to joint and several liability pursuant to 
subsection 4, paragraph F, a group self-insurer authorized under the laws of another 
state and that executes an agreement that its members will be jointly and severally 
liable in accordance with the provisions of paragraph L or an individual self-insurer 
authorized under this secbon that executes an agreement to be responsible for 
contingent assessment liability in accordance with the provisions of paragraph F may 
apply to reinsure through an account. 
COMMI-rTEE AMENDMENT 
~~ 
~ 
COMMITTEE AMENDMENT "A .. to S.P. 255, L.D. 706 
(1) 
Upon the petition of 4 or more authorized group self-insurers, the 
Superintendent of Insurance may approve an account for the deposit of funds in 
lieu of reinsurance. 
(2) The account must indemnify its participating self-insurer members for claims 
incurred during the account's operation. 
The purpose of the account is to 
accumulate funds to provide coverage against losses arising out of one 
occurrence in excess of $SQQ,QQQ or sa6h other am01:lRts as may be flefR'littea or 
reqliirea for flarti6alar members established retention levels consistent with the 
plan of operation established pursuant to paragraph B. 
(3) A self-insurer is deemed to be a member of the account for reinsurance 
coverage for purposes of a claim if the self-insurer is a member of the account 
when an injury occurs or a covered occupational disease loss is incurred. 
(4) A self-insurer that reinsures through an account shall continue to make 
payments into that account in accordance with the plan of operation established 
pursuant to paragraph B. 
(5) A self-insurer's participation in an account is considered as a component of 
the self-insurer's renewal application. A self-insurer's membership in an account 
is considered adequate protection against losses arising out of a single occurrence 
unless the Superintendent of Insurance determines, after considering the financial 
condition and catastrophic loss exposure of both the self-insurer and the account, 
that it is necessary to maintain additional reinsurance protection, maintain a lower 
self-insured retention level or provide some other form of additional security, 
singly or in combination. 
B. An account must operate in accordance with a plan of operation established by the 
group self-insurer members and approved by the Superintendent of Insurance. 
(1) 
Those group self-insurers creating an account shall submit to the 
Superintendent of Insurance a plan of operation and any amendments to it that 
are necessary to ensure the fair, reasonable and equitable administration of the 
account. The plan of operation is effective upon approval by the superintendent. 
Any amendments subsequent to the plan's initial approval must be submitted to 
the superintendent by the plan's board of directors and are effective upon 
approval by the superintendent. 
(2) The plan of operation must: 
(a) Create a board of directors and initial bylaws, including the terms and 
conditions of board membership and the manner by which board members 
are initially appointed and are replaced when vacancies occur; 
(b) Establish the procedures by which all the powers and duties of the 
account are performed, including, but not limited to, defining the date and 
conditions pursuant to which the account will commence coverage for claims 
by participating group self-insurer members and establishing provisions for 
determining limits of exposure for the account; 
COMMITTEE AMENDMENT 
~~ 
~ 
COMMITTEE AMENDMENT "A," to S.P. 255, L.D. 706 
(c) Establish procedures for handling assets of a fund created pursuant to 
paragraph C; 
(d) 
Establish underwriting rules and criteria by which rates are to be 
established; 
(e) Establish proced'ures by which claims may be filed with the account; 
(f) Establish an investment policy for a fund created pursuant to paragraph 
C' , 
(g) Establish procedures for records to be kept of all financial transactions of 
the account, its agents and the board of directors; 
(h) Establish procedures for withdrawal from the account by a self-insurer 
member, which must, at a minimum, require 90 days' notice from the 
withdrawing self-insurer member to the board of directors and the 
Superintendent of Insurance; 
(i) Establish, subject to approval by the Superintendent of Insurance, a 
minimum level of funding to be achieved by the account; aOO 
(j) Contain additional provisions necessary or proper for the execution of the 
powers and duties of the board of directors and the ability of the account to 
meet its obligations~·; and 
(k) Establish a standard per occurrence retention level for claims covered by 
the account. 
C. The bylaws of an accOlmt established pursuant to this subsection must establish 
the powers and duties of the board of directors of an account and must include the 
authority: 
(1) 
To administer a self-insurance specific reinsurance account fund, to be 
known in this subsecrion as "a fund," which must receive payments from 
participating self-insurer members of the account as required by paragraph A. 
The costs of administration by the board of directors and expenses of the account 
must be borne by the fund; 
(2) 
In its discretion, to secure reinsurance for the fund's exposure and to 
otherwise invest the assets of the fund to effectuate the purpose of the account, 
subject to the approval of the Superintendent of Insurance; 
(3) To accept or rejel;t applications of self-insurers to be underwritten by the 
account, subject to the approval of the Superintendent of Insurance; 
(4) To accept or reject applications of a self-insurer member to self-insure any 
exposure for one occurrence at a level other than $500,000 the standard retention 
level provided in the plan of operation established pursuant to paragraph B, 
subject to: 
(a) 
Compliance with applicable provisions of the plan of operation 
established pursuant to paragraph B; 
COMMITTEE AMENDMENT 
\)~~ 
~ 
COMMI1"fEE AMENDMENT ''A " 
to S.P. 255, L.D. 706 
(b) Notice. to and prior approval by the Superintendent of Insurance; and 
(c) For highef other retention levels, a statement from that member's actuary 
that the member has adequately funded its additional exposure; 
(5) To create a mechanism for assessing participating self-insurer members if 
funds are insufficient to pay the claims of the account; 
(6) To retain actuarial assistance to be used in the establishment ofloss reserves, 
reinsurance and risk management for the account, and in the development of 
underwriting criteria and premium rates for self-insurer members. 
Rates are 
subject to approval by the Superintendent of Insurance; 
(7) 
To associate with a participating self-insurer member in the defense, 
investigation or settlement of any claim, suit or proceeding that appears to 
involve indemnity by the account. This authority does not create a duty to 
investigate, handle, settle or defend any claims, suits or proceedings against a 
self-insurer member; 
(8) To borrow funds; 
(9) To amend the bylaws and plan of operation established pursuant to paragraph 
B, subject to the approval of the Superintendent of Insurance; and 
(10) To exercise such other powers as are established in the plan of operation 
established pursuant to paragraph B. 
D. An account is subject to examination and regulation by the Superintendent of 
Insurance. The board of directors of an account shall submit, within 120 days after 
the close of each fiscal year, an audited financial report and an actuarial report for the 
preceding fiscal year in a form approved by the superintendent. 
When the 
superintendent considers it necessary, the superintendent may require an account to 
maintain specific or aggregate reinsurance at such retention levels as the 
superintendent determines to be appropriate. 
E. The Superintendent of Insurance may address any deficiency in reserves, assets or 
reinsurance of an account in accordance with this paragraph. 
(1) The Superintendent of Insurance may conduct, upon reasonable notice, an 
examination to determine the [mancial condition of an account. An examiner 
duly qualified by the superintendent may examine the loss reserves, assets, 
liabilities, excess insurance and working capital of an account. 
If the 
superintendent finds that the reserves, excess insurance or assets may be 
inadequate, or that an account does not have working capital in an amount 
establishing the financial strength and liquidity of an account to pay claims 
promptly and showing evidence of the [mancial ability of an account to meet its 
obligations to self-insurer members, the superintendent shall notify an account of 
the inadequacy. Upon notification, the account within 30 days, or such other 
time as the superintendent approves, shall file with the superintendent its written 
plan specifying remedial action to be taken and the time frame for 
implementation of that plan. 
COMMITTEE AMENDMENT 
~~ 
~ 
COMMITTEE AMENDMENT 'Au to S.P. 255, L.D. 706 
(2) 
If the Superintendent of Insurance determines, after reviewing the 
infonnation filed pursuant to paragraph D, that a hazardous financial condition 
exists, the superintendent shall notify an account of the condition. 
Upon 
notification, an account shall implement within 30 days, or such other time as the 
superintendent approves I its plan to correct any deficiencies and within 90 days 
shall file with the superintendent proof of remedial action taken. 
If the 
superintendent is satisfied that the plan submitted to improve the inadequate 
condition of an account is sufficient, the superintendent shall notify the account. 
The account shall report quarterly to the superintendent until any deficiencies and 
their causes have been corrected. 
(3) The Superior Court may appoint the Superintendent of Insurance to act as 
receiver, in the same manner as for a delinquent insurer pursuant to Title 24-A, 
section 4360, if the supe:rintendent proves by clear and convincing evidence that 
a hazardous financial condition exists and that an account is unable or unwilling 
to take meaningful corrective action. 
F. 
A self-insurer's liabiliW for participating in an account is governed by this 
paragraph. 
(1) Each participating self-insurer in an account has a contingent assessment 
liability in accordance with the plan of operation established pursuant to 
paragraph B for payment of claims and expenses incurred while a member of the 
account and must execute an agreement acknowledging that it is responsible for 
the prompt payment of all assessments necessary to ensure that the account is 
fully funded and that, if any participant in the account fails to pay an assessment 
when due for any reason, the remaining participants are liable for the shortfall. 
(2) Each contract or other document certifying participation in the account, 
issued by the account, must contain a statement of the contingent liability of 
participating self-insurers. 
G. An account is exempt from payment of all fees and all taxes levied by this State 
or any of its subdivisions, except taxes levied on real or personal property. 
H. This subsection does not create any liability on the part of, and a cause of action 
of any nature does not arise against, any self-insurer member, an account or its agents 
or employees, the board of directors of an account or its individual members or the 
Superintendent of Insuranct: or the superintendent's representatives for any acts or 
omissions taken by them in the perfonnance of their powers and duties under this 
subsection. The immunity established by this subsection does not extend to willful 
neglect or malfeasance that would otherwise be actionable. 
I. Assets of an account's fimd may be used exclusively for payment of expenses of 
the account and payment of claims against the account and for no other purpose, 
except that an account established as an independent private entity pursuant to this 
subsection may issue such dividends to its members as are approved by the 
superintendent. 
COMMITTEE AMENDMENT 
~~ 
~ 
COMMITIEE AMENDMENT ,A" to S.P. 255, L.D. 706 
J. The Superintendent of Insurance~ shall adopt rules to administer and effectuate the 
intent of this subsection. 
Rules adopted pursuant to this subsection are routine 
technical rules as defined in Title 5, chapter 375, subchapter 2-A. 
K. In the event of dissolution of an account established as an instrumentality of the 
State pursuant to this subsection, all assets remaining after the satisfaction of all 
outstanding claims must be distributed to the Treasurer of State to be included in the 
Maine Self-Insurance Guarantee Association. 
L. With the approval of the Superintendent of Insurance, a self-insurance reinsurance 
account may create one or more protected cells under its plan of operation for the 
purpose of reinsuring obligations of group self-insurers that are organized under the 
laws of another state. Any protected cell and all participating group self-insurers and 
their member employers are subject to the jurisdiction and oversight of the 
Superintendent of Insurance with respect to all matters relating to their participation 
on the account. 
(1) Any out-of-state self-insurer that participates in the account may do so only 
through participation in a protected cell. An employer or group authorized by the 
Superintendent of Insurance to self-insure its Maine liabilities pursuant to this 
section is considered an out-of-state insurer to the extent that it is reinsuring out-
of-state liabilities beyond the scope of its Maine self-insurance plan. 
(2) The establishment of protected cells under this paragraph is a pilot project, 
limited to at most 2 protected cells, and approval of a protected cell or of a group 
self-insurer to participate in a protected cell is at the discretion of the 
Superintendent of Insurance. The Superintendent of Insurance may adopt rules 
pursuant to paragraph J to establish the terms and conditions of the pilot project, 
including criteria for the minimum and maximum size of a protected cell. 
(3) 
A separate account must be established for each protected cell. 
All 
contributions from participants in a protected cell must be deposited into the 
protected cell account. Funds in a protected cell account may be used only for 
the payment of claims and expenses associated with that protected cell, which 
may include a reasonable administrative fee paid periodically into the general 
account. Notwithstanding any other provision of this subsection, participants in a 
protected cell are not liable for claims or expenses of any other protected cell or 
of the general account, and the general account is not liable for the claims of any 
protected cell or any expenses associated with such claims or otherwise 
specifically attributable to the protected cell. 
(4) The minimum funding level for any protected cell may not be lower than the 
minimum funding level, calculated in accordance with the plan of operation and 
subject to paragraph E, that would apply to the general account with the same 
loss exposure and duration of operation. If the protected cell account falls short 
of the minimum funding level at any time, the reinsurance account must assess all 
protected cell participants. If a participating group self-insurer fails to pay any 
assessment in full when due, the reinsurance account must assess the group's 
member employers. All assessments are enforceable by the Superintendent of 
COMMITTEE AMENDMENT 
~~~ 
~ 
COMMITIEE AMENDMENT "A "to S.P. 255, L.D. 706 
Insurance through an adjudicatory proceeding under the Maine Administrative 
Procedure Act or through an action in the Superior Court. 
(5) Each protected celli must have its own board of directors, at least 2/3 of 
whom must be chosen by the protected cell's participants. The plan of operation 
shall provide for a reasonable allocation of authority between the reinsurance 
account's board of directors and the protected cell's board of directors. 
(6) No later than April 1st of each year, each reinsurance account with one or 
more protected cells must pay a regulatory assessment to the Bureau of Insurance 
from each protected cell account in the amount of 111100 of 1 % of the total 
standard reinsurance premium for the preceding calendar year for all participants 
in the protected cell for the level of coverage provided by the reinsurance 
account. 
(7) All groups participating in a protected cell must provide the reinsurance 
account and the Superintendent of Insurance with financial and actuarial 
information sufficient to evaluate loss exposure and financial condition. 
All 
information provided to the superintendent by protected cell participants and their 
member employers is confidential pursuant to subsection 15. All protected cell 
participants and their member employers must authorize their domiciliary 
regulator to provide any information requested by the superintendent, which is 
confidential to the extent provided in Title 24-A, section 216, subsection 5. 
(8) In evaluating the risk exposure of an out-of-state group self-insurer and in 
determining whether gr·oups from different states may participate in the same 
protected cell, the reinsurance account and the Superintendent of Insurance shall 
consider any relevant differences in the states' regulatory frameworks for group 
self-insurance and in their workers' compensation benefit laws. 
(9) A group self-insurer may not become a participant in a protected cell unless 
the group and all of its member employers have provided written 
acknowledgments to the Superintendent of Insurance that they are jointly and 
severally liable for the obligations of the protected cell and are subject to the 
jurisdiction of the superintendent and courts of the State for the enforcement of 
those obligations. 
(10) Any disputes between self-insured members, the self-insurance reinsurance 
account and any protected cell, including but not limited to any dispute arising 
out of or relating to any enforcement order or mechanism imposed by the 
Superintendent of Insur,illce, must be resolved in this State and pursuant to the 
laws of this State. 
Sec. 2. 39-A MRSA §403, sub-§9, as amended by PL 1995, c. 398, §4, is further 
amended to read: 
9. Acceptable deposit funds or investments for trust funds. In addition to cash, 
the deposit funds or permissible investments for trust funds acceptable to the 
Superintendent of Insurance as a security deposit are bonds, notes and bills that are issued 
by and are the direct obligation ofthe United States Treasury; the direct obligations of the 
followine: United States Government ae:encies: the Government }ilational Morte:ae:e 
COMMITTEE AMENDMENT 
~~~ 
~ 
COMMITTEE AMENDMENT 'An to S.P. 255, L.D. 706 
Assoeiatiofl; the Federal Home LOaR Bask; the Federal Farm Credit Baflk; the Studem 
LOaR MarketiRg AssoeiatioR; aRd the Federal }>~atioRal Mortgage AssoeiatioR; the direet 
oBligatiofls of aRY state of the UBited States or aRy sliBdi'lisiofl of aBy state to '.vflieh are 
pledged the full faith aRd eredit of the state or SUBdi'lisioR, the lIRseEnHed deBt of vAlieh is 
rated "A" or Better By Stafldard and Poor's C0lJ30ratiOR or the ratiflg eEtHiYaleRt of 
Moody's Ifl'lestors Serviee, lBe., Fiteh Iny-estors Serviee, me. or aRy other flatioflally 
reeogsi:led statistieal rating ageney; commercial paper rated as either "A -1" or IIp -1" by 
Moody's Investors Service, Inc., Standard and Poor's Corporation or the rating equivalent 
of Fitch Investors Service, Inc. or any other nationally recognized statistical rating 
agency; money market funds rated "Aam" or "AAm-G" or better by Standard and Poor's 
Corporation or the rating equivalent of any other nationally recognized statistical rating 
agency; certificates of deposit issued by a duly chartered commercial bank or thrift 
institution in the State protected by the Federal Deposit Insurance Corporation if lffi6h-a 
the bank or institution possesses assets of at least $100,000,000 and maintains a ratio of 
capital to assets equal to or greater than 6 112%; sayings eertifieates issued By aHY sEl-vings 
aRd IOaR assoeiationin the State preteeted By the Federal Deposit lBsuranee C0lJ30ratioR 
if sueh aR assoeiatiofl flossesses assets of at least $100,000,000 aad maintaifls a ratio of 
eapital to assets eEtual to or greater tIlaa (; 1/2%; eOlJ3orate bonds rated "Aaa," "Aal" or 
"Aa2" By Moody's m'lestors Serviee, me., or rated "AIt..A," "1\1\+" or "AA" By Staadard 
aRd Poor's COlJ3oration, or the ratiRg eEtHivalent of Fiteh lw;estors Serviee, lBe. or aay 
other Ratioflally reeogsized statistieal ageney, in aft afl'lOllRt not to e*eeed 20% of the total 
iWfestmeat portfolio; bonds that are issued by United States corporations. corporations 
acceptable to the superintendent or United States public entities and that are rated "A" or 
better by Standard and Poor's Corporation, or the rating equivalent of Moody's Investors 
Service, Inc., Fitch Investors Service, Inc. or any other nationally recognized statistical 
agency; and sueh other investments specifically approved by the superintendent. If an 
investment is downgraded so that it no longer meets the requirements of this subsection, 
its value may not be considered in determining whether a deposit or trust has surplus 
available for distribution, and the superintendent has discretion to discount or disallow 
the value of the investment for purposes of determining whether additional security is 
required. 
Investments must be diversified in a prudent manner to ensure that funds are maintained 
at a sufficient level to discharge workers' compensation obligations incurred by the 
employer pursuant to this Title as those obligations become due and payable. At least 
30% of the portfolio must consist of cash, direct obligations of the United States 
Treasury. commercial paper, money market funds or certificates of deposit. No more 
than 5% of the portfolio, other than cash and direct obligations of the United States, may 
be concentrated in a single issuer, and the superintendent shall establish standards to limit 
concentration in a single industry or market sector,' 
SUMMARY 
This amendment replaces the bill. The amendment provides flexibility to modify 
retention levels for self-insurance reinsurance accounts in response to medical inflation 
and other changes in circumstances with approval of the Superintendent of Insurance. 
The amendment also revises the investment standards for self-insurance deposits and 
COMMITTEE AMENDMENT 
"",di~ 
COMMITTEE AMENDMENT 'A" to S.P. 255, L.D. 706 
, , 
trusts to reduce concentration risk and other market risks posed by specifying a narrow 
range of permitted investments. 
COMMII-TEE AMENDMENT