Oklahoma Administrative Code › Title 365 - Insurance Department › Chapter 15 - Property and Casualty › Subchapter 1 - General Provisions › Section 365:15-1-3.2 - Financial requirements - mega deductible workers' compensation policies

Current through Vol. 41, No. 20, July 1, 2024
(a) Every insurer issuing mega deductible
				workers' compensation policies ("MDWC"), as defined in subsection c of this
				Section, shall comply with the following requirements:
(1) The MDWC policy shall require
				collateralization, as provided herein, of the outstanding deductible
				reimbursement obligations of the policyholder for any prospective period of
				coverage. "Collateralization" means deposit by the policyholder with the
				insurance company of assets to serve as security in the event that a
				policyholder fails to reimburse the insurer for losses within the
				deductible.
(2) For purposes of
				this section, only the following assets shall qualify as "collateral":
(A) Assets admissible pursuant to Article 16
				of Title 36 of the Oklahoma Statutes;
(B) A surety bond issued by a surety insurer
				authorized to transact business by the Commissioner and whose financial
				strength and size ratings from A.M. Best Company are not less than "A" and "V",
				respectively;
(C) An irrevocable
				letter of credit, utilizing a form designated by the Commissioner, issued by a
				financial institution whose deposits are federally insured. Letters of credit
				meeting applicable standards of issuer acceptability as of the dates of their
				issuance or confirmation shall, notwithstanding the issuing or confirming
				institution's subsequent failure to meet applicable standards of issuer
				acceptability, continue to be acceptable as security until their expiration,
				extension, renewal, modification, or amendment, whichever first occurs;
				provided however, that a letter of credit must be replaced within three months
				after the date of the institution's failure to meet applicable standards of
				issuer acceptability;
(D) Guaranty
				of a solvent parent or affiliated entity that has:
(i) been continuously engaged in business for
				not less than three (3) years immediately preceding the application for the
				MDWC policy;
(ii) at least one
				hundred (100) employees (all states included); and
(iii) at least One Million Dollars
				($1,000,000.00) in net assets, as shown in its immediately preceding year-end
				GAAP audited financial statements. For purposes of this subparagraph,
				"affiliated" shall have the meaning ascribed in 36 O.S. §
												1651;
				or
(E) Any combination of
				the foregoing.
(3) When a
				policy is written with an aggregate deductible option, the amount of the
				collateral may not exceed the aggregate deductible.
(4) Collateral held pursuant to this
				subsection shall be under the direct control of the insurer. Collateral shall
				be held for the express and sole purpose of securing the policyholder's
				obligations under the mega deductible workers' compensation policy. Collateral
				shall not be commingled with the assets of the insurer. Insurers shall not
				permit policyholders or agents or affiliates of policyholders, or any third
				party with any contractual or other relationship to the policyholder, directly
				or indirectly, to access such collateral.
(5) Claims information for each mega
				deductible insured employer and co-employer shall be maintained in the
				possession of the insurer for at least six years.
(6) Insurers shall not permit policyholders
				or agents or affiliates of policyholders, or any third party with any
				contractual or other relationship to the policyholder, directly or indirectly,
				to administer claims under a mega deductible workers' compensation
				policy.
(7) All agreements between
				insurers and policyholders relating to handling of claims by third parties
				shall be maintained by the insurer and made available to the Commissioner upon
				request.
(8) Notwithstanding any
				other limitation on the insurer's right to cancel the insurance, the policy
				shall provide that the policyholder's failure to post collateral as required by
				the policy or pay deductible reimbursements when due, are grounds for policy
				cancellation, upon 10 days prior notice.
(9) Before issuing or renewing a mega
				deductible workers' compensation policy, the insurer shall obtain an audited
				financial statement for the policyholder, or a financially strong parent or
				affiliate that has issued an unconditional financial guaranty of the
				policyholder's deductible obligations. The amount of the policyholder's
				aggregate deductible obligation is limited to no more than 20% of the total net
				worth of the policyholder and guarantor, at each policy inception and renewal.
				Net worth shall be determined as of the fiscal year-end GAAP audited financial
				statements next preceding such inception or renewal. The Commissioner may
				request and consider more recent unaudited GAAP financial statements.
(10) If the policy covers employers,
				co-employers, subcontractors, or other employers in addition to the
				policyholder, the policy shall provide that deductible reimbursements are the
				sole obligation of the policyholder, unless such additional covered employer
				has given informed written consent to be jointly obligated and the employer's
				maximum reimbursement obligation is limited to an amount consistent with
				paragraph 9 of this subsection.
(11) No insurer shall issue a mega deductible
				workers' compensation policy to a professional employer organization as defined
				by 40 O.S. §
										600.2,
				which is affiliated with such insurer.