An Act to Amend the Provisions of the Maine Workers
Maine Legislature, Session 132, LD 1195
Committee: Labor
Sponsors: BAILEY
Amends: 39-A MRSA §403

Legislative Document
No. 1195
S.P. 484
In Senate, March 20, 2025
An Act to Amend the Provisions of the Maine Workers' 
Compensation Act of 1992 Governing Requirements for Self-
insurers
Submitted by the Department of Professional and Financial Regulation pursuant to Joint 
Rule 204.
Reference to the Committee on Labor suggested and ordered printed.
DAREK M. GRANT
Secretary of the Senate
Presented by Senator BAILEY of York.
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 2017, c. 401, §1, is further 
amended by amending the first blocked paragraph to read:
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.
Sec. 2.  39-A MRSA §403, sub-§3, ¶A, as amended by PL 2017, c. 401, §1, is 
further amended by amending the 3rd blocked paragraph to read:
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, at least 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.
Sec. 3.  39-A MRSA §403, sub-§3, ¶A, as amended by PL 2017, c. 401, §1, is 
further amended by amending the 4th blocked paragraph to read:
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.
Sec. 4.  39-A MRSA §403, sub-§3, ¶A, as amended by PL 2017, c. 401, §1, is 
further amended by repealing the 5th blocked paragraph.
Sec. 5.  39-A MRSA §403, sub-§3, ¶A, as amended by PL 2017, c. 401, §1, is 
further amended by repealing the 6th blocked paragraph.
Sec. 6.  39-A MRSA §403, sub-§3, ¶A, as amended by PL 2017, c. 401, §1, is 
further amended by repealing the 7th blocked paragraph.
Sec. 7.  39-A MRSA §403, sub-§3, ¶A-1 is enacted to read:
A-1.  The Superintendent of Insurance may instruct the Treasurer of State to draw on 
an irrevocable standby letter of credit if:
(1) Any obligation under this chapter has not been paid by the employer or group 
when due;
(2) A proceeding in bankruptcy has been initiated by or with respect to the 
employer or group in a court of competent jurisdiction; or
(3) The following conditions have been met:
(a) The superintendent has received notice that that the financial institution 
elects not to renew the irrevocable standby letter of credit;
(b) The self-insurer has had at least 15 days’ notice to replace the security with 
other eligible security of equal value approved by the superintendent; and
(c) The self-insurer has not replaced the irrevocable standby letter of credit 
with a new letter of credit or other approved security.
The issuing financial institution shall promptly honor a draft on an irrevocable standby 
letter presented by the Treasurer of State. Any proceeds from a draw on such an 
irrevocable standby letter of credit by the treasurer must be held by the treasurer on 
behalf of workers' compensation claimants to secure payment of claims until either the 
superintendent authorizes the treasurer 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.
Sec. 8.  39-A MRSA §403, sub-§3, ¶C, as amended by PL 2017, c. 401, §1, is 
further amended to read:
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 unencumbered 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 a group self-insurer's actuarially determined fully 
funded trust has a surplus of funds in excess of that is fully funded as 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.
(1-A)  A group self-insurer may secure its obligations to the confidence level 
required by the superintendent in the following manner:
(a)  The obligations must be secured by an actuarially determined fully funded 
trust with unencumbered assets at least equal to the present value of ultimate 
expected incurred claims and claims settlement costs, or such higher amount 
as the superintendent may require in accordance with subparagraphs (5) and 
(6); and
(b)  The balance may be secured by a letter of credit complying with paragraph 
A.
(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.
Sec. 9.  39-A MRSA §403, sub-§4-A, ¶L, as enacted by PL 2009, c. 232, §2, is 
amended by amending subparagraph (1) to read:
(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 self-insurer to the extent that it is 
reinsuring out-of-state liabilities beyond the scope of its Maine self-insurance plan.
Sec. 10.  39-A MRSA §403, sub-§5, ¶A-1, as enacted by PL 2017, c. 401, §3, is 
amended by amending subparagraph (2) to read:
(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 qualified parent corporation of 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.
Sec. 11.  39-A MRSA §403, sub-§11, as enacted by PL 1991, c. 885, Pt. A, §8 and 
affected by §§9 to 11, is amended to read:
11.  Qualifications for reinsurance carriers.  A workers' compensation contract or 
policy issued after the effective date of this section January 1, 1993 may not be recognized 
by the Superintendent of Insurance in considering the ability of an individual or group self-
insurer to fulfill its financial obligations under this Act, unless the contract or policy is 
issued by an admitted insurance company or a reinsurance company that meets on a 
continuous basis the requirements of Title 24‑A, chapter 9, subchapter III 3 and the 
reinsurance company has been approved by the superintendent to issue in this State 
contracts of primary workers' compensation reinsurance, or by Lloyd's of London, a 
syndicate of unincorporated alien insurers that has established and maintains United States 
trust funds consistent with the requirements of Title 24‑A, chapter 9, subchapter III 
formally organized association of incorporated underwriters and individual unincorporated 
underwriters, any one or more of which underwrite and assume as insurer a portion of the 
risk insured by them as set forth in the contract of insurance.  Each contract of primary 
workers' compensation reinsurance that is proposed for use in this State must be filed for 
approval in the manner set out in Title 24‑A, section 2412.  Insofar as is To the extent 
practicable, a contract so approved may be modified with less than 30 days advance filing 
notice if the superintendent determines the modifications suggested are not contrary to 
provisions of Title 24‑A, section 2412, this Title or Bureau of Insurance Rule Chapter 250 
and are necessary to effect required reinsurance coverage to authorize the self-insurer to 
operate a plan of workers' compensation self-insurance.
Sec. 12.  39-A MRSA §403, sub-§14, ¶F-1 is enacted to read:
F-1.  After terminating or suspending an authorization for self-insurance in accordance 
with this subsection, the Superintendent of Insurance shall promptly notify the board 
and forward to it a copy of the order terminating or suspending the authorization.
SUMMARY
This bill does the following to the Maine Workers' Compensation Act of 1992 
governing requirements for self-insurers.
1.  It removes the confidence level requirements for letters of credit for self-insureds.  
2.  It clarifies the notice period for nonrenewal of an irrevocable standby letter of credit.  
3.  It changes the requirements for when a draft on a letter of credit must be honored.  
4.  It clarifies how a group self-insurer may secure its obligations to the confidence 
level required.  
5.  It corrects "out-of-state insurer" to "out-of-state self-insurer."
6.  It corrects an error related to group self-insurers.
7.  It corrects a reference to Lloyd's of London.
8.  It adds a requirement that the Superintendent of Insurance notify the Workers' 
Compensation Board if an authorization for self-insurance is terminated or suspended.