Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 8 - EARLY WARNING SYSTEM FOR INSURERS IN HAZARDOUS CONDITION › Subchapter A - HAZARDOUS CONDITION › Section 8.4 - Hazardous Conditions Related to Negotiated Deductible Workers' Compensation Policies

Current through Reg. 49, No. 28; July 12, 2024
(a) This section
				  applies to insurers that offer negotiated deductible workers' compensation
				  policies in Texas and is to be followed in conjunction with The Texas Basic
				  Manual of Rules, Classifications and Experience Rating Plan for Workers'
				  Compensation and Employers' Liability Insurance. This section, along with
				  conditions set out in §
										8.3
				  of this chapter relating to hazardous conditions, sets forth the various
				  conditions that the Department will consider to determine whether an insurer
				  issuing workers' compensation policies with a negotiated deductible is in a
				  hazardous financial condition. The existence of one or more of the following
				  conditions does not necessarily mean that an insurer issuing workers'
				  compensation policies with a negotiated deductible is in hazardous financial
				  condition. When one or more of the conditions are found to exist, they will be
				  considered in the context of the state of affairs of an insurer. If the
				  Department determines that the insurer is in a condition hazardous to
				  policyholders, creditors, and the general public, it will initiate appropriate
				  regulatory action.
(b) The insurer
				  remains liable for all valid claims even if it appears that the insurer will
				  ultimately not be reimbursed as provided in the workers' compensation policy
				  with a negotiated deductible as referenced in Rule XIX - Deductible Programs of
				  The Texas Basic Manual of Rules, Classifications and Experience Rating Plan for
				  Workers Compensation and Employers' Liability Insurance.
(c) In order to mitigate the risk of being in
				  a potentially hazardous financial condition, this section addresses the
				  insurer's maintenance of the fund of money over and above surplus and premiums
				  to serve as security to protect the workers and the insurer in the event of a
				  policyholder failure to reimburse the insurer for losses. This security shall
				  be used to secure the policyholder's reimbursement of the negotiated deductible
				  amount owed to the insurer.
(d) The
				  following words and terms used in this section shall have the following
				  meanings unless the context clearly indicates otherwise:
(1) Department--Texas Department of
				  Insurance.
(2) Workers'
				  compensation policy with a negotiated deductible--A policy in which the insurer
				  assumes full liability for the statutory obligation of the employer
				  policyholder within the scope of workers' compensation coverage while the
				  policyholder assumes a contractual obligation to the insurer to reimburse the
				  insurer for claims paid up to the deductible amount under Insurance Code
				  Article 5.55C.
(3) First dollar
				  losses--Total losses before applying the negotiated deductible.
(4) Gross premium--Premium calculated before
				  factoring in the negotiated deductible.