An Act To Amend the Workers' Compensation Laws Governing Affiliated Self-insurance Groups (AFTER DEADLINE)
Maine Legislature, Session 128, LD 1888
Committee: Labor, Commerce, Research and Economic Development
Sponsors: VOLK
Amends: 39-A MRSA §403

Legislative Document
No. 1888
S.P. 721
In Senate, March 28, 2018
An Act To Amend the Workers' Compensation Laws Governing 
Affiliated Self-insurance Groups
(AFTER DEADLINE)
Approved for introduction by a majority of the Legislative Council pursuant to Joint Rule 
205.
Reference to the Committee on Labor, Commerce, Research and Economic Development 
suggested and ordered printed.
HEATHER J.R. PRIEST
Secretary of the Senate
Presented by Senator VOLK of Cumberland.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  39-A MRSA §403, sub-§3, as amended by PL 2011, c. 98, §1 and c. 180, 
§1, is further amended to read:
3.  Proof of solvency and financial ability to pay; trust.  The employer may 
comply with this section by furnishing satisfactory proof to the Superintendent of 
Insurance of solvency and financial ability to pay the compensation and benefits, and 
depositing cash, satisfactory securities, irrevocable standby letters of credit issued by a 
qualified financial institution or a surety bond with the superintendent, in such sum as the 
superintendent may determine pursuant to subsection 8, the Treasurer of State to be listed 
as beneficiary of the bond or the irrevocable standby letter of credit and the bond or the 
irrevocable standby letter of credit to be conditional upon the faithful performance of this 
Act relating to the payment of compensation and benefits to any injured employee. In 
case of cash or securities being deposited, or drawn on a surety bond or letter of credit, 
the cash or securities must be placed in an account at interest by the Treasurer of State, 
and the accumulation of interest on the cash or securities so deposited must be credited to 
the account and may not be paid to the employer to the extent that the interest is required 
to secure the employer's self-insurance obligations, including the amount needed to 
support any present value discounting in the determination of the amount of the deposit. 
Any security deposit must be held by the Treasurer of State in trust for the benefit of the 
self-insurer's employees for the purposes of making payments under this Act.  If the 
superintendent determines that the self-insurer has experienced a deterioration in financial 
condition that adversely affects the self-insurer's ability to pay obligations under this Act, 
the security amount may be in excess of the minimum amount required by this Title.
A Except as provided in subsection 5, paragraph A-1, a self-insurer may, with the 
approval of the Superintendent of Insurance, use the following types of security to satisfy 
the self-insurer's responsibility to post security required by the superintendent: a surety 
bond; an irrevocable standby letter of credit; cash deposits and acceptable securities; and 
an actuarially determined fully funded trust.  For purposes of this section, "tangible net 
worth" means equity less assets that have no physical existence and depend on expected 
future benefits for their ascribed value.  Unless disapproved by the superintendent 
pursuant to paragraph C, subparagraphs (5) and (6), a group self-insurer that maintains a 
trust actuarially funded to the confidence level required by the superintendent may use an 
irrevocable standby letter of credit as follows:  only in an amount not greater than the 
difference between the funding to the required confidence level and funding to the 
confidence level reduced by 10 percentage points; only as long as the trust assets are not 
used as collateral for the letter of credit; and only as long as the value of trust assets, 
excluding the value of the letter of credit, is at least equal to the present value, evaluated 
to the 65% confidence level, of ultimate incurred claims, claims settlement costs and, if 
determined necessary by the superintendent, administrative costs.
A.  An individual A self-insurer providing an irrevocable standby letter of credit as 
security shall file with the Superintendent of Insurance a letter of credit, on a form 
approved by the superintendent, copies of any agreements or other documents 
establishing the terms and conditions of the employer's or group's reimbursement 
obligations to the financial institution issuing the letter of credit, together with copies 
of any required security agreements, mortgages or other agreements or documents 
granting security for the employer's or group's reimbursement obligations and any 
other agreements that contain conditions, restrictions or limitations of any kind upon 
the employer or group, the superintendent or the Treasurer of State.  The form of 
letter of credit approved by the superintendent must include, but is not limited to, all 
terms specifically required by this subsection and all terms reasonably required to 
secure the payment of compensation and benefits to claimants as required under this 
Act.  
In order to issue an irrevocable standby letter of credit as security under this 
paragraph, a financial institution or its parent company must either:
(1)  Maintain a long-term unsecured debt rating of at least A by either Moody's 
Investors Service, Inc. or Standard and Poor's Corporation;
(2)  Maintain a short-term commercial paper rating within the 3 highest 
categories established by Moody's Investors Service, Inc. or Standard and Poor's 
Corporation; or
(3)  Be certified in writing by the Superintendent of Financial Institutions to be 
well capitalized and well managed in accordance with the criteria set forth in 
Title 9-B, section 446-A, subsections 1 and 2.  The Superintendent of Insurance 
shall keep the certification confidential, except from the subject financial 
institution, in accordance with Title 9-B, section 226.
The Superintendent of Insurance may adopt rules to establish additional 
qualifications for financial institutions issuing irrevocable standby letters of credit.  
Rules adopted pursuant to this paragraph are routine technical rules pursuant to Title 
5, chapter 375, subchapter 2-A.
The irrevocable standby letter of credit must be the individual obligation of the 
issuing financial institution, may not be subject to any agreement, condition, 
qualification or defense between the financial institution and the employer or group 
and may not in any way be contingent on reimbursement by the employer or group.  
If the rating of an issuing financial institution that has issued an irrevocable standby 
letter of credit pursuant to this section falls below the required standard, the employer 
or group shall obtain a new irrevocable standby letter of credit from a qualified 
financial institution or shall provide other eligible security of equal value approved 
by the Superintendent of Insurance.  The irrevocable standby letter of credit is 
automatically extended for one year from the date of expiration unless, 90 days prior 
to any expiration date, the issuing financial institution notifies the Superintendent of 
Insurance that the financial institution elects not to renew the irrevocable standby 
letter of credit.
An irrevocable standby letter of credit that has been issued by a qualified financial 
institution and accepted by the Superintendent of Insurance binds the issuing 
financial institution to pay one or more drafts drawn by the Treasurer of State, as 
directed by the superintendent, as long as the draft does not exceed the total amount 
of the irrevocable standby letter of credit.  Any draft presented by the Treasurer of 
State, as directed by the superintendent, must be promptly honored if accompanied by 
the certification of the superintendent that any obligation under this chapter has not 
been paid when due or that a proceeding in bankruptcy has been initiated by or with 
respect to the employer or group in a court of competent jurisdiction.
If the Superintendent of Insurance certifies that the superintendent has been notified 
by the issuing financial institution that the irrevocable standby letter of credit expires 
by its terms in 30 days or less and that the irrevocable standby letter of credit was not 
replaced within 15 days after that notice to the superintendent by other eligible 
security of equal value approved by the superintendent, then the financial institution 
must remit within 15 days the full amount of the irrevocable letter of credit to the 
Treasurer of State without further certification.
Any proceeds from a draw on such an irrevocable standby letter of credit by the 
Treasurer of State, as directed by the Superintendent of Insurance, must be held by 
the Treasurer of State on behalf of workers' compensation claimants to secure 
payment of claims until either the superintendent authorizes the Treasurer of State to 
release those proceeds to the employer or group upon provision by the employer or 
group of replacement security adequate to meet the requirements for security set by 
the superintendent or the superintendent directs distribution of the proceeds in 
accordance with this Title.
To the extent not inconsistent with state law, the letter of credit is subject to and 
governed by the International Standby Practices 1998 or successor practices 
governing standby letters of credit duly adopted by the International Chamber of 
Commerce.  If any legal proceedings are initiated with respect to payment of the 
letter of credit, those proceedings are subject to the State's courts and law.
B.  The Superintendent of Insurance shall prescribe the form of the surety bond that 
may be used to satisfy, in whole or in part, the self-insurer's responsibility under this 
section to post security.  The bond must be continuous, be subject to nonrenewal only 
upon not less than 60 days' notice to the superintendent, cover payment of all present 
and future liabilities incurred under this Act while the bond is in force and cover 
payments that become due while the bond is in force that are attributable to injuries 
incurred in prior periods and otherwise unsecured by cash, irrevocable standby letters 
of credit or acceptable securities.  A bond must be held until all payments secured by 
the bond have been made or until the bond has been replaced by other eligible 
security approved by the superintendent that covers all outstanding liabilities.  
Payments under the bond are due within 30 days after notice has been given to the 
surety by the board that the principal has failed to make a payment required under the 
terms of an award, agreement or governing law.  A trust established to satisfy the 
requirements of this section may not be funded by a surety bond.
C.  A self-insurer may establish an actuarially determined fully funded trust, funded 
at a level sufficient to discharge those obligations incurred by the employer pursuant 
to this Act as they become due and payable from time to time, as long as the 
Superintendent of Insurance requires that the value of trust assets be at least equal to 
the present value of ultimate expected incurred claims and claims settlement costs, 
plus required safety margins and, if determined necessary by the superintendent, 
administrative costs for the operation of the plan of self-insurance.  For the purpose 
of determining whether an a group self-insurer's actuarially determined fully funded 
trust has a surplus of funds in excess of that required by this subsection, the 
superintendent shall consider, based upon the group's audit for all completed plan 
years, only the following assets held outside the trust account:  cash up to $10,000; 
accounts receivable, limited to amounts collected and deposited in the trust account 
by the date of the surplus distribution; accrued interest on trust account assets that 
will be collected and deposited in the trust account within 6 months from the date of 
the surplus determination; tangible assets that will be converted to cash and deposited 
in the trust account prior to the distribution date of any surplus; and a letter of credit 
to be used to partially fund the trust to the extent allowed under this section and rules 
adopted by the superintendent, as supported in the actuarial review.  
The 
superintendent shall consider cash held outside the trust account in excess of $10,000 
if the self-insurer provides, to the superintendent's satisfaction, documentation 
regarding why the money is being held outside the trust account.  An actuarially 
determined fully funded trust must be funded as follows, as determined by the 
superintendent.
(1)  For individual and group self-insurers, the amount of security must be 
determined based upon an actuarial review.  The actuarial review must take into 
consideration the use by a group self-insurer of any irrevocable standby letter of 
credit.  Except as provided in subparagraph (3), initial funding for each plan year 
must be maintained at the 90% or higher confidence level.  Funding after the 
completion of the initial plan year may be established no lower than the 75% 
confidence level if the following has occurred:
(a)  A year considered for reduction is completed;
(b)  The supporting actuarial review includes an evaluation of the completed 
year experience with claims evaluated not less than 6 months from the end of 
the plan year, or in the case of a group self-insurer in existence for at least 36 
months, not less than 4 months from the end of the plan year; and
(c)  For individual self-insurers, prior approval from the superintendent is 
obtained.
For the purposes of determining the confidence level, all completed years at the 
same confidence level may be aggregated.  For individual self-insurers, funds 
may not be released from the trust or transferred between years except as 
approved by the superintendent.  The governing body of a group self-insurer may 
at any time declare a surplus of funds above the required confidence level, but 
may only release funds after the completion of any plan year.  The superintendent 
may request information regarding any such declaration.  Any distribution of 
surplus must be based upon an actuarial review of all outstanding obligations for 
all completed plan years, an audited financial statement of the group for all 
completed plan years and a surplus distribution worksheet for all completed plan 
years on a form approved by the superintendent.  The group self-insurer must 
provide the required information within 10 days after the distribution.  Any 
surplus declared or distributed pursuant to this paragraph is subject to adjustment 
after review by the superintendent within 60 days of the receipt of the required 
information.  Any deficit below the required confidence level, as determined by 
the superintendent, that results from a distribution under this paragraph must be 
funded within 45 days from the date of the notice by the superintendent.
(2)  A group self-insurer may elect to fund at a higher confidence level through 
the use of cash, marketable securities or reinsurance.  If a member of a group 
self-insurer terminates membership in the group for any reason, that member 
shall fund the member's proportionate share of the liabilities and obligations of 
the trust to the 95% confidence level.  If for any reason the departing member 
fails to fund the member's proportionate share of the trust's exposure to the 95% 
level of confidence, the trust is responsible for that member's liabilities and 
obligations to the trust. If the superintendent finds that a material risk to the 
trust's ability to satisfy its liabilities and obligations in full exists due to the 
failure of one or more departing members to fund the departing members' 
proportionate share of those liabilities and obligations to the 95% confidence 
level or due to the failure of the group trust to enforce the funding requirement, 
the superintendent shall consider the unfunded share of the trust's exposure when 
approving a determination of a surplus or deficit in the trust.
(3)  
Subject to prior approval by the superintendent in accordance with 
subparagraph (5), a self-insurer that has successfully maintained an actuarially 
determined fully funded trust for a period of 5 or more consecutive years may 
fund all years, including the prospective fund year, at the 75% or higher 
confidence level in the aggregate and a group self-insurer that has successfully 
maintained an actuarially determined fully funded trust for a period of 10 or more 
consecutive years may fund all years, including the prospective fund year, at the 
65% or higher confidence level in the aggregate.
(4)  Trust assets must consist of cash or marketable securities of a type and risk 
character as specified in subsection 9.  The trustee shall submit a report to the 
superintendent not less frequently than quarterly that lists the assets comprising 
the corpus of the trust, including a statement of their market value and the 
investment activity during the period covered by the report.  The trust must be 
established and maintained subject to the condition that trust assets may not be 
transferred or revert in any manner to the employer except to the extent that the 
superintendent finds that the value of the trust assets exceeds the present value of 
incurred claims and claims settlement costs with an actuarially indicated margin 
for future loss development.  In all other respects, the trust instrument, including 
terms for certification, funding, designation of trustee and payout, must be as 
approved by the superintendent, except that the value of the trust account must be 
actuarially calculated at least annually by a casualty actuary who is a member of 
the American Academy of Actuaries and adjusted to the required level of 
funding.
(5)  
In determining whether a self-insurer that maintains an actuarially 
determined fully funded trust qualifies for a reduction in the required confidence 
level pursuant to subparagraph (1) or (3) or is subject to an enhanced confidence 
level pursuant to subparagraph (6), the superintendent shall consider the financial 
condition of the self-insurer in relation to the potential workers' compensation 
liabilities.  The factors the superintendent may consider include the self-insurer's 
liquidity, leverage, tangible net worth, size and net income.  For group self-
insurers, the superintendent's review must be based on the aggregate financial 
condition of the group members.  At the request of the superintendent, a group 
self-insurer shall report relevant financial information, on a form prescribed by 
the superintendent, at such intervals as the superintendent directs.  
The 
superintendent may establish additional review criteria or procedures by rule.  
Rules adopted pursuant to this subparagraph are routine technical rules as defined 
in Title 5, chapter 375, subchapter 2-A.
(6)  If the superintendent determines, based on an evaluation of a self-insurer's 
financial condition pursuant to subparagraph (5), that the confidence level at 
which the self-insurer has been authorized to fund its trust is not sufficient to 
provide adequate security for the self-insurer's reasonably anticipated potential 
workers' compensation liabilities, the superintendent shall make a determination 
of the appropriate confidence level and order the self-insurer to take prompt 
action to increase funding to that level within 60 days.
D.  Notwithstanding any provision of this chapter, authorization to self-insure may 
not be conditioned on a bond or security deposit that is in excess of $50,000 for the 
State, the University of Maine System or any county, city or town with a state-
assessed valuation equal to or in excess of $300,000,000 and either a bond rating 
equal to or in excess of the 2nd highest standard as set by a national bond rating 
agency or a net worth equal to or in excess of $35,000,000.  If a county, city or town 
that is a self-insurer relies upon a bond rating to qualify under this paragraph, it shall 
value or cause to be valued its unpaid workers' compensation claims pursuant to 
sound accepted actuarial principles.  This value must be incorporated in the annual 
audit of the county, city or town, together with disclosure of funds appropriated to 
discharge incurred claims expenses.
E.  In consideration of a self-insuring entity's application for authorization to operate 
a plan of self-insurance, the Superintendent of Insurance may require or permit an 
applicant to employ valid risk transfer by the utilization of primary reinsurance, 
subject to the provisions of subsection 8.  Standards respecting the application of 
reinsurance must be contained in a  rule adopted by the superintendent pursuant to the 
Maine Administrative Procedure Act.  Reinsurance must be defined as insurance 
covering workers' compensation exposures in excess of risk retained by a self-insurer.
F.  An employer may be eligible for approved self-insurance status pursuant to this 
Act if the employer submits a written guarantee of the obligations incurred pursuant 
to this Act, the guarantee to be issued by a United States or Canadian corporation that 
is a member of an affiliated group of which the employer is a member, and which 
corporation is solvent and demonstrates an ability to pay the compensation and 
benefits, and the guarantee is in a form acceptable to the Superintendent of Insurance.  
The guarantor shall provide audited annual financial statements and such other 
information as the superintendent may require, including quarterly financial 
statements, and the employer shall provide a cash deposit, satisfactory securities, 
irrevocable standby letters of credit issued by a qualified financial institution or a 
surety bond as otherwise required by this Act in an amount not less than $100,000.  
The guarantor is deemed to have submitted to the jurisdiction of the board and the 
courts of this State for purposes of enforcing the guarantee.  The guarantor, in all 
respects, is bound by and subject to the orders, findings, decisions or awards rendered 
against the employer for payment of compensation and any penalties or forfeitures 
provided under this Act.  The superintendent, following hearing, may revoke the self-
insured status of the employer if at any time the assets of the guarantor become 
impaired or encumbered or are otherwise found to be inadequate to support the 
guarantee.
G.  A subsidiary employer may be eligible for approved self-insurance status 
pursuant to this Act if:  the subsidiary employer files an application jointly with a 
qualified parent corporation that has direct ownership of a majority voting interest of 
the subsidiary employer; the parent corporation and subsidiary employer submit an 
irrevocable contract of assignment, on a form approved by the Superintendent of 
Insurance, of the subsidiary employer's obligations incurred pursuant to this Act; the 
parent corporation is solvent and demonstrates an ability to pay the compensation and 
benefits of the subsidiary employer; and the subsidiary employer meets all other 
requirements for application and qualification as a self-insurer under this chapter and 
under any applicable rules adopted by the superintendent.  If the parent corporation is 
not a United States corporation, the superintendent may, in the superintendent's sole 
discretion, establish the conditions of any approval of the foreign parent corporation 
or deny the application of the foreign parent corporation.   As part of its application 
for approval, a foreign parent corporation must provide the following information to 
the superintendent: evidence that its country of domicile has substantially similar 
laws with respect to submission to the jurisdiction of the board and the courts of this 
State for the purposes of payment of workers' compensation claims of the subsidiary 
employer; audited financial statements, as otherwise required by this Act, prepared in 
the English language by a certified public accountant licensed in a state in the United 
States in accordance with generally accepted auditing standards as prescribed by the 
American Institute of Certified Public Accountants; and security, as otherwise 
required by the Act, in United States currency.  The irrevocable contract of 
assignment and application must be signed by a duly authorized officer of each 
corporation and the application must include a board of directors' resolution from 
each entity as evidence of each officer's authority to enter into the contract.  The 
superintendent may determine the subsidiary employer's eligibility for self-insurance 
authority and the amount of required security based upon the parent corporation's 
consolidated financial statement, as long as the employer complies with paragraph H.  
A subsidiary employer currently authorized to self-insure need not pay the 
application fee required of a new applicant in order to file an application to qualify 
under this subsection, but the subsidiary employer and parent corporation must 
provide all information required under this subsection as if they were a new 
applicant.  Once the subsidiary employer becomes authorized to self-insure under this 
section, the parent corporation assumes liability for all prior workers' compensation 
liabilities incurred by the subsidiary employer during the period of self-insurance 
prior to the date of authorization under this subsection, unless the subsidiary 
employer files an alternative plan approved by the superintendent.  The parent 
corporation and the subsidiary employer must both be named on the certificate of 
authorization for self-insurance authority.  
Upon issuance of a certificate of 
authorization pursuant to this subsection, the following applies.
(1)  The parent corporation is deemed to have submitted to the jurisdiction of the 
board and the courts of the State for the purposes of payment of workers' 
compensation claims of the subsidiary employer and is deemed to have submitted 
to the jurisdiction of the superintendent for purposes of implementation of this 
Act.  The parent corporation, in all respects, is bound by and subject to all orders, 
findings, decisions or awards rendered against the subsidiary employer for 
payment of compensation and any penalties or forfeitures provided under this 
Act.
(2)  A subsidiary employer authorized under this subsection and the parent 
corporation are considered one employer for the purposes of membership in the 
Maine Self-Insurance Guarantee Association.  In the event of termination, 
transfer, insolvency, dissolution or bankruptcy of a subsidiary employer 
qualifying under this subsection, the parent corporation assumes all assessment 
obligations of the subsidiary employer for its period of self-insurance and is not 
considered a new member of the association.
(3)  If the subsidiary employer fails for any reason to pay compensation and 
benefits as required under this Act, the parent corporation stands in the place of 
the subsidiary employer and is deemed to be the employer, subject to all 
requirements and provisions of this Act.  For the purposes of payment of benefits 
and compensation under this Act, an employee of the subsidiary employer is 
deemed to be concurrently employed by both corporations.  
Concerning 
notification of injury to an employee of the subsidiary employer, notice to or 
knowledge of the occurrence of the injury on the part of the subsidiary employer 
is deemed notice or knowledge on the part of the parent corporation.  The 
transfer, insolvency, dissolution or bankruptcy of a subsidiary employer 
qualifying under this subsection does not relieve the parent corporation from 
payment of compensation for injuries or death sustained by an employee during 
the time the subsidiary employer was approved for self-insurance authority under 
this subsection and the parent corporation continues to be deemed an employer 
until such time as all outstanding workers' compensation claims have been 
discharged.
(4)  The transfer, insolvency, dissolution or bankruptcy of a parent corporation 
causes the termination of the subsidiary employer's authorization to self-insure 
and a termination plan must be filed pursuant to subsection 14.
H.  Each individual self-insurer shall submit with its application, and not less 
frequently than annually thereafter, a financial statement of current origin that has 
been audited by a certified public accountant.  When a self-insurer qualifies on the 
basis of a financial guarantee or on the basis of an irrevocable contract of assignment, 
the Superintendent of Insurance may accept an audited financial statement of the 
guarantor or parent corporation in satisfaction of this requirement and may also 
require combining statements provided in an array that is reconciled to the 
consolidated report.
Sec. 2.  39-A MRSA §403, sub-§5, ¶A, as amended by PL 1995, c. 594, §2, is 
further amended to read:
A.  Any group of employers may adopt a plan for self-insurance, as a group, for the 
payment of compensation under this Act to their employees.  A group may not be 
approved to operate a self-insurance plan in the form of a corporation, partnership or 
limited liability company.  Under a group self-insurance plan the group shall assume 
the liability of all the employers within the group and pay all compensation for which 
the employers are liable under this chapter. When the plan is adopted, the group shall 
furnish satisfactory proof to the Superintendent of Insurance of its financial ability to 
pay the compensation for the employers in the group and its revenues, their source 
and assurance of continuance. The superintendent shall require the deposit with the 
board of such securities as the superintendent determines necessary of the kind 
prescribed in subsection 9 or the filing of a bond issued by a surety company 
authorized to transact business in this State, in an amount to be determined to secure 
its liability to pay the compensation of each employer as above provided in 
accordance with subsection 9.  The surety bond must be approved as to form by the 
superintendent. The superintendent may also require that any agreements, contracts 
and other pertinent documents relating to the organization of the employers in the 
group be filed with the superintendent at the time the application for group self-
insurance is made. The application must be on a form prescribed by the 
superintendent. The superintendent has the authority to deny the application of the 
group to pay the compensation for failure to satisfy any applicable requirement of this 
section.  The superintendent shall approve or disapprove an application within 90 
days. The group qualifying under this paragraph is referred to as a self-insurer.
Sec. 3.  39-A MRSA §403, sub-§5, ¶A-1 is enacted to read:
A-1.  A group self-insurer shall maintain an actuarially determined fully funded trust 
in compliance with subsection 3, paragraph C, except that, with the approval of the 
Superintendent of Insurance, an affiliated group self-insurer may secure the liabilities 
of each member employer in accordance with this paragraph.
(1)  An affiliated group self-insurer shall designate a principal member, subject to 
the approval of the superintendent.  The principal member must be the direct or 
indirect parent company of every other group member.
(2)  If the principal member does not have employees in the State, the principal 
member must meet the same qualifications as a subsidiary employer applying to 
become an individual self-insurer under subsection 3, paragraph G, except that 
direct majority ownership is not required and the group's indemnity agreement is 
deemed to meet the requirement for an irrevocable contract of assignment.
(3)  Unless otherwise ordered by the superintendent, the principal member may 
provide security for the affiliated group self-insurer's obligations in the same 
form and amount as the security required for an individual self-insurer, based on 
the financial condition of the principal member and the aggregate self-insurance 
exposure of the group.
Sec. 4.  39-A MRSA §403, sub-§5, ¶D, as amended by PL 2011, c. 180, §2, is 
further amended to read:
D.  If for any reason the status of a group self-insurer under this paragraph is 
terminated, the securities, the surety bond, the letter of credit or the deposit security 
required by this section continues must continue to be held by the Superintendent of 
Insurance or Treasurer of State in accordance with this section and remains subject to 
the control of the board until all claims secured by the securities, surety bond, letter 
of credit or deposit against the group self-insurer have been discharged. When all 
such claims have been discharged or after such period as the Superintendent of 
Insurance determines proper, the superintendent may accept in lieu thereof, and for 
the additional purpose of securing such further and future contingent liability as may 
arise from prior injuries to workers and be incurred by reason of any change in the 
condition of such workers warranting the board making subsequent awards for 
payment of additional compensation, a policy of insurance furnished by the group 
self-insurer, its successor or assigns or other entity carrying on or liquidating such 
self-insurance group. The policy must be in a form approved by the superintendent 
and issued by any insurance company licensed to issue this class of insurance in the 
State. It may only be issued for a single complete premium payment in advance by 
the group self-insurer. It must be given in an amount determined by the 
superintendent and when issued is noncancellable for any cause during the 
continuance of the liability secured and so covered.
Sec. 5.  39-A MRSA §403, sub-§10, as enacted by PL 1991, c. 885, Pt. A, §8 and 
affected by §§9 to 11, is amended to read:
10.  Form of reinsurance contracts.  All  reinsurance contracts issued or renewed 
after the effective date of this subsection must be issued by companies that meet the 
requirements of subsection 11 and must name the self-insurer and the Maine Self-
Insurance Guarantee Association as coinsureds to the extent of their respective interests 
an additional insured.  These reinsurance contracts must recognize the Maine Self-
Insurance Guarantee Association's rights of recovery, within the terms of coverage 
provided by the contract, for payments made by the association to or on behalf of 
claimants regarding covered claims and for claims in the course of settlement, the value 
of which when reduced to payments will create an obligation on the part of the  
reinsurance carrier to reimburse the association to the extent of funds disbursed by the 
association to discharge covered claims.  The requirements of this subsection apply to any 
reinsurance contract issued to any individual or group self-insurer as part of a self-
insurance program approved for use within this State and are in addition to any other 
requirement applicable to reinsurance contracts imposed by law or rule.
Reinsurance contracts must further specify that the reinsurance carrier and the Maine 
Self-Insurance Guarantee Association may enter into agreements on the terms of 
settlement and distribution of benefits accruing to claimants within the limits of the 
authority of the parties to make settlements with respect to any coverage year.
To the extent that the Maine Self-Insurance Guarantee Association succeeds to a recovery 
of benefits from any reinsurance carrier on behalf of claimants, those benefits must be 
timely disbursed by the association to or on behalf of claimants as they become due and 
payable pursuant to this Act.  Funds recovered under reinsurance contracts on behalf of 
claimants must be applied consistent with the terms of coverage under the contract to 
loss, loss adjustment expense and attorneys' fees that are payable under this Act.
Sec. 6.  39-A MRSA §403, sub-§14, ¶H-1 is enacted to read:
H-1.  A member of a group self-insurer and a successor employer of a member of a 
group self-insurer may apply for continuing membership in the group self-insurer, 
subject to the approval of the Superintendent of Insurance and the group self-insurer, 
in accordance with procedures established by the group self-insurer.  The procedures 
established by the group self-insurer must include requirements the superintendent 
determines are substantially similar to the relevant provisions of paragraphs C and D.  
As long as the successor employer remains a member in good standing and has fully 
assumed the former member's obligations, the former member may not be treated as a 
departing member for purposes of enhanced security requirements under subsection 
3, paragraph C, subparagraph (2).
SUMMARY
This bill amends the workers' compensation laws governing self-insurers.  It requires 
a group self-insurer that provides an irrevocable standby letter of credit as security to file 
with the Superintendent of Insurance a letter of credit and other agreements or documents 
relating to the employer's reimbursement obligations.
The bill amends the workers' compensation laws governing the participation of 
employers in a group self-insurance plan.  It requires a group self-insurer to maintain an 
actuarially determined fully funded trust as security for self-insurance, except that the 
Superintendent of Insurance may authorize an affiliated group self-insurer meeting 
certain requirements to secure the liabilities of each of its members.  It requires that if the 
status of a group self-insurer is terminated the required security remains subject to the 
control of the Workers' Compensation Board until claims against the group self-insurer 
have been discharged.
The bill removes a requirement that reinsurance contracts name the self-insurer as a 
coinsured with the Maine Self-Insurance Guarantee Association.  It also authorizes a 
member of a group self-insurer and a successor employer of a member to apply for 
continuing membership in the group self-insurer.