Rule may require collateral for large-deductible comp policiesReprints
A proposed rule set for consideration this month could require some Illinois employers to provide collateral to show they can pay for large deductibles under their workers compensation policies.
The rule is set to be discussed by the Illinois Joint Committee on Administrative Rules on Dec. 13, according to a copy of the committee’s agenda posted online. If approved by the committee, the rule would become effective in late December or January, an Illinois Department of Insurance spokesman told Business Insurance on Tuesday.
The rule says employers would be required to provide workers comp insurers with audited financial statements during each year's underwriting process, according to a copy posted online. The per-occurrence deductible amount under the large deductible agreement cannot exceed 20% of the policyholder's net worth as determined by the audited financial statement.
The rule would require 100% collateralization for policyholders' obligations under their worker comp policies, including for covering employees in other states, the rule states. Collateral can be provided through surety bonds and letters of credit.
Illinois insurers would be exempt from the rules if they have an A- or better rating from Oldwick, New Jersey-based ratings agency A.M. Best Co. or has at least $200 million in surplus. Having no rating from A.M. Best is the same as having less than an A- rating, according to the notice.