H-3279              _______________________________________________

                                                   HOUSE BILL NO. 1548

                        _______________________________________________

State of Washington                              49th Legislature                              1986 Regular Session

By Representative Lux

Read first time 1/17/86 and referred to Committee on Commerce & Labor.

AN ACT Relating to reinsurance for employers self-insured under industrial insurance; and amending RCW 51.14.020 and 51.14.160.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

        Sec. 1.  Section 27, chapter 289, Laws of 1971 ex. sess. as last amended by section 9, chapter 323, Laws of 1977 ex. sess. and RCW 51.14.020 are each amended to read as follows:

          (1) An employer may qualify as a self-insurer by establishing to the director's satisfaction that he or she has sufficient financial ability to make certain the prompt payment of all compensation under this title and all assessments which may become due from such employer.  Each application for certification as a self-insurer submitted by an employer shall be accompanied by payment of a fee of one hundred fifty dollars or such larger sum as the director shall find necessary for the administrative costs of evaluation of the applicant's qualifications.  Any employer who has formerly been certified as a self-insurer and thereafter ceases to be so certified may not apply for certification within three years of ceasing to have been so certified.

          (2) A self-insurer may be required by the director to supplement existing financial ability by depositing in an escrow account in a depository designated by the director, money and/or corporate or governmental securities approved by the director, or a surety bond written by any company admitted to transact surety business in this state filed with the department.  The money, securities, or bond shall be in an amount reasonably sufficient in the director's discretion to insure payment of reasonably foreseeable compensation and assessments but not less than the employer's normal expected annual claim liabilities and in no event less than one hundred thousand dollars.  In arriving at the amount of money, securities, or bond required under this subsection, the director shall take into consideration the financial ability of the employer to pay compensation and assessments and his or her probable continuity of operation.  The money, securities, or bond so deposited shall be held by the director to secure the payment of compensation by the self-insurer and to secure payment of his or her assessments.  The amount of security may be increased or decreased from time to time by the director.  The income from any securities deposited may be distributed currently to the self-insurer.

          (3) Securities or money deposited by an employer pursuant to subsection (2) of this section shall be returned to him or her upon his or her written request provided the employer files the bond required by such subsection.

          (4) If the employer seeking to qualify as a self-insurer has previously insured with the state fund, the director shall require the employer to make up his or her proper share of any deficit or insufficiency in the state fund as a condition to certification as a self-insurer.

          (5) A self-insurer ((may reinsure a portion of his or her liability under this title with any reinsurer authorized to transact such reinsurance in this state:  PROVIDED, That the reinsurer may not participate in the administration of the responsibilities of the self-insurer under this title.  Such reinsurance may not exceed eighty percent of the liabilities under this title)) shall carry adequate reinsurance purchased from the state fund.  Any reinsurance agreement lawfully entered into by a self-insurer with a reinsurer other than the state fund prior to the effective date of this 1986 act shall not be renewed or extended beyond the expiration date contained in the agreement.

        Sec. 2.  Section 8, chapter 191, Laws of 1982 as amended by section 3, chapter 174, Laws of 1983 and RCW 51.14.160 are each amended to read as follows:

          The director shall promulgate rules to carry out the purposes of RCW 51.14.150:

          (1) Governing the formation of self-insurance groups for the purposes of this chapter;

          (2) Governing the organization and operation of the groups to assure their compliance with the requirements of this chapter;

          (3) Requiring adequate monetary reserves, determined under accepted actuarial practices, to be maintained by each group to assure financial solvency of the group; and

          (4) Requiring each group to carry adequate reinsurance purchased from the state fund.  Any reinsurance agreement lawfully entered into by a self-insurance group with a reinsurer other than the state fund prior to the effective date of this 1986 act shall not be renewed or extended beyond the expiration date contained in the agreement.