1330 AAS 4/14/97 S2845

1330 AAS 4/14/97 S2845.1

HB 1330 - S COMM AMD

By Committee on Commerce & Labor

ADOPTED 4/14/97

Strike everything after the enacting clause and insert the following:

"Sec. 1. RCW 51.14.020 and 1995 c 31 s 1 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) 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, or provide an irrevocable letter of credit issued by a federally or state chartered commercial banking institution authorized to conduct business in the state of Washington filed with the department. The money, securities, bond, or letter of credit 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, bond, or letter of credit 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. However, a letter of credit shall be acceptable only if the self-insurer has a net worth of not less than five hundred million dollars as evidenced in an annual financial statement prepared by a qualified, independent auditor using generally accepted accounting principles. The money, securities, bond, or letter of credit so deposited shall be held by the director solely for the payment of compensation by the self-insurer and his or her assessments. In the event of default the self-insurer loses all right and title to, any interest in, and any right to control the surety. The amount of surety 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.

(b) The letter of credit option authorized in (a) of this subsection shall not apply to self-insurers authorized under RCW 51.14.150 or to self-insurers who are counties, cities, or municipal corporations.

(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. Until July 1, 2001, subsidiary companies, holding companies, or affiliated legal entities of the reinsurer not involved in providing reinsurance shall be allowed to 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.

(6) For purposes of the application of this section, the department may adopt separate rules establishing the security requirements applicable to units of local government. In setting such requirements, the department shall take into consideration the ability of the governmental unit to meet its self-insured obligations, such as but not limited to source of funds, permanency, and right of default.

(7) The director shall adopt rules to carry out the purposes of this section including, but not limited to, rules respecting the terms and conditions of letters of credit and the establishment of the appropriate level of net worth of the self-insurer to qualify for use of the letter of credit. Only letters of credit issued in strict compliance with the rules shall be deemed acceptable.

NEW SECTION. Sec. 2. A new section is added to chapter 51.14 RCW to read as follows:

(1) Self-insurers shall report to the department any attempt by a reinsurer to participate in the administration of the responsibilities of the self-insurer under this title.

(2) The department shall conduct a study of self-insurers' adjudication outcomes, claims management practices, and other appropriate outcomes and practices. The study shall compare outcomes and practices of self-insurers who use the services of reinsurers and administrators that are affiliated to those of self-insurers who use the services of unaffiliated reinsurers and administrators, as well as to the outcomes and practices of the department. The department shall report the results of the study to the legislature by January 1, 2000.

(3) The department shall adopt rules to implement this act.

(4) This section expires July 1, 2001."

HB 1330 - S COMM AMD

By Committee on Commerce & Labor

ADOPTED 4/14/97

On page 1, line 2 of the title, after "insurers;" strike the remainder of the title and insert "amending RCW 51.14.020; adding a new section to chapter 51.14 RCW; and providing an expiration date."