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DEPARTMENT OF LABOR
Office of Workers' Compensation Programs
Division of Longshore and Harbor Workers' Compensation
Industry Notice 100
Subject: Insurer Security Deposits; Request for Information
The Division of Longshore and Harbor Workers' Compensation (DLHWC)
has long required a security deposit from all self-insured employers, and from
insurers under certain conditions. These security deposits provide the funds
that may be necessary to continue timely benefit payments to claimants without
shifting the cost to all other self-insurers and insurance carriers, through
increased assessments for the Special Fund, in the event that an
employer's or insurer's insolvency would otherwise prevent payments.
In the recent past, DLHWC has required deposits from insurers based on
the A.M. Best rating of the individual insurers; if an insurer's rating is
A- or lower at the initial application for authorization, or falls to that
level during participation, DLHWC requires a deposit. The amount of the deposit
is based on DLHWC's evaluation of the insurer's exposure and
financial history. The minimum deposit requirement has been $200,000 for
insurers with a small and minimally exposed claims base.
DLHWC is seeking industry input into the evaluation of the security
deposit practice. This Notice to the Industry is an invitation to submit your
insight, ideas, and suggestions to DLHWC about how to improve the industry
evaluation process to determine the circumstances under which DLHWC should
require an individual insurance company to deposit securities as a condition of
providing insurance in the Longshore system. Are there alternative rating
mechanisms that would provide DLHWC with earlier and more objective ratings?
Are there other methods of monitoring the financial condition of companies that
would be more useful? What are the alternatives to the requirement of a
security deposit that would adequately protect workers and the Longshore
Special Fund from the costs of insurer insolvency? What incentives might be
offered to companies to help avoid the problem? What industry driven practices
might be adopted that would provide equivalent protections? DLHWC is eager to
consider your ideas.
This request constitutes a general solicitation of comments from the
public. No person is required to supply specific information pertaining to the
commenter, other than that necessary for self-identification, as a condition of
the agency's full consideration of the comment. Please respond not later
than March 25, 2002. Written responses, on letterhead, should be addressed to:
Michael Niss, Director, Division of Longshore and Harbor Workers'
Compensation, U.S. Department of Labor, 200 Constitution Ave., NW, Suite
C-4315, Washington, DC 20210.
Electronic responses may be submitted to Niss.Michael@dol.gov. Please use
the subject line, "Insurer Security Suggestions" and include your
name, title, company, address, telephone number, and email address in your
submission.
Signed at Washington, DC this 15th day of February, 2002
MICHAEL NISS Director, Division of Longshore and Harbor
Workers' Compensation Programs
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