An Act to Amend the Workers' Compensation Self-insurance Laws to Allow for the Use of Fronting Companies
Maine Legislature, Session 131, LD 1372
Committee: Labor and Housing
Sponsors: MORRIS, STEWART, PERRY, RUSSELL
Amends: 39-A MRSA §403

Legislative Document
No. 1372
H.P. 886
House of Representatives, March 28, 2023
An Act to Amend the Workers' Compensation Self-insurance Laws 
to Allow for the Use of Fronting Companies
Reference to the Committee on Labor and Housing suggested and ordered printed.
ROBERT B. HUNT
Clerk
Presented by Representative MORRIS of Turner.
Cosponsored by Senator STEWART of Aroostook and
Representatives: PERRY of Calais, RUSSELL of Verona Island.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  39-A MRSA §403, sub-§4-B is enacted to read:
4-B.  Group self-insurance reinsurance fronting arrangements.  This subsection 
governs group self-insurance reinsurance fronting arrangements.
A.  As used in this subsection, unless the context otherwise indicates, the following 
terms have the following meanings.
(1)  "Fronting arrangement" means a situation in which a fronting company issues 
a policy for workers' compensation insurance to an employer member of a group 
self-insurer licensed under this Title and cedes all of the premium and exposure of 
the policy for out-of-state employers to the self-insured group.
(2)  "Fronting company" means an entity that engages in a fronting arrangement.  
A fronting company may be owned by one or more group self-insurers or by a 
group self-insurance reinsurance account.
(3)  "Superintendent" means the Superintendent of Insurance.
B.  An employer member of a group self-insurer licensed under this Title may insure 
its employees through a fronting arrangement under the following conditions.
(1)  The group self-insurer must:
(a)  Be a member of a group self-insurance reinsurance account, the assets of 
which must be available to satisfy the obligations of a fronting company;
(b)  Insure employees who live or work in a state other than this State and agree 
to be subject to the workers' compensation laws of that state; and
(c)  Provide that members of a group self-insurer are jointly and severally liable 
for the workers' compensation obligations of an employer member of a group 
self-insurer whose out-of-state employees are insured by a fronting company.
Any fronting arrangement must require the group self-insurer or group self-
insurance reinsurance account to assume all responsibility for administration and 
claims handling for the fronting company.  More than one group self-insurer may 
enter into a fronting arrangement with the same fronting company.  The obligations 
of a fronting company ceded to a group self-insurer must be included in the 
actuarial analysis of the group and such other filings as the Superintendent may 
require under this section.
(2)  The fronting company must:
(a)  Have capital in the amount of $500,000;
(b)  Submit a plan of operation to the superintendent, establish a board of 
directors and establish bylaws and procedures by which all the powers and 
duties of the company are performed, including, but not limited to, defining 
the date and conditions upon which the fronting company will commence 
coverage for claims;
(c)  Provide a detailed explanation of each fronting arrangement, including the 
process by which all exposures are ceded to a group self-insurer; and
(d)  Be subject to examination and regulation by the superintendent.  The board 
of directors of a fronting company under this subsection shall submit, within 
days after the close of each fiscal year, an audited financial report, an 
actuarial report, an audited financial statement and other information the 
superintendent may require.
C.  The provisions of Title 24-A and rules adopted under that Title relating to the 
formation, review, approval and operation of a workers' compensation insurance 
company do not apply to a fronting company established under this subsection.
D.  The superintendent may adopt rules to implement to this subsection.  Rules adopted 
pursuant to this paragraph are routine technical rules as defined in Title 5, chapter 375, 
subchapter 2-A.
SUMMARY
Current law provides that group self-insurers under the Maine Workers' Compensation 
Act of 1992 are regulated by the Superintendent of Insurance.  Under current law, 
employees of a member of a self-insurance group who live and work out of state cannot be 
covered by the group but must purchase a conventional insurance policy in each state in 
which the employees work.  This bill establishes fronting companies, which allow self-
insured groups to insure employees in other states.