1997 Minnesota Statutes

     79A.22 Commercial self-insurance group operating 
  requirements. 

    Subdivision 1.    Board of directors.  (a) A commercial 
 self-insurance group shall elect a board of directors who shall 
 have complete authority over and control of the assets of the 
 commercial self-insurance group.  The board of directors will 
 also be responsible for all of the operations of the commercial 
 self-insurance group. 

    (b) The majority of the board of directors shall be owners, 
 officers, directors, partners, or employees of members of the 
 commercial self-insurance group.  No third-party administrator 
 or vendor of risk management services shall serve as a director 
 of the commercial self-insurance group. 

    (c) The directors shall approve applications for membership 
 in the commercial self-insurance group. 

    Subd. 2.    Financial standards.  Commercial 
 self-insurance groups shall have and maintain: 

    (1) combined net worth of all of the members in an amount 
 at least equal to 15 times the group's selected retention level 
 of the workers' compensation reinsurance association; 

    (2) sufficient assets and liquidity in the group's common 
 claims fund to promptly and completely meet all obligations of 
 its members under this chapter and chapter 176. 

    Subd. 3.    New membership.  The commercial 
 self-insurance group shall file with the commissioner the name 
 of any new employer that has been accepted in the group prior to 
 the initiation date of membership along with the member's signed 
 indemnity agreement and evidence the member has deposited 
 sufficient premiums with the group as required by the commercial 
 self-insurance group's bylaws or plan of operation.  The 
 security deposit of the group will be increased to an amount 
 equal to 50 percent of the new member's premium.  The department 
 of commerce may, at its option, review the financial statement 
 of any applicant whose premium equals 25 percent or more of the 
 group's total premium. 

    Subd. 4.    Commercial self-insurance group common claims 
 fund.  (a) Each commercial self-insurance group shall 
 establish a common claims fund. 

    (b) Each commercial self-insurance group shall, not less 
 than ten days prior to the proposed effective date of the group, 
 collect cash premiums from each member equal to not less than 20 
 percent of the member's annual workers' compensation premium to 
 be paid into a common claims fund, maintained by the group in a 
 designated depository.  The remaining balance of the member's 
 premium shall be paid to the group in a reasonable manner over 
 the remainder of the year.  Payments in subsequent years shall 
 be made according to the business plan. 

    (c) Each commercial self-insurance group shall initiate 
 proceedings against a member when that member becomes more than 
 15 days delinquent in any payment of premium to the fund. 

    (d) There shall be no commingling of any assets of the 
 common claims fund with the assets of any individual member or 
 with any other account of the service company or fiscal agent 
 unrelated to the payment of workers' compensation liabilities 
 incurred by the group. 

    Subd. 5.    Joint and several liability.  Each member of 
 a commercial self-insurance group shall be jointly and severally 
 liable for the obligations incurred by any member of the same 
 group under chapter 176 for any fund year in which the member 
 was a participant of the commercial self-insurance group. 

    Subd. 6.    Annual audit.  The accounts and records of 
 the common claims fund shall be audited in the manner required 
 under section 79A.03, subdivision 10.  

    Subd. 7.    Investments.  (a) Any securities purchased 
 by the common claims fund shall be in such denominations and 
 with dates of maturity to ensure securities may be redeemable at 
 sufficient time and in sufficient amounts to meet the fund's 
 current and long-term liabilities. 

    (b) Cash assets of the common claims fund may be invested 
 in the following securities: 

    (1) direct obligations of the United States government, 
 except mortgage-backed securities of the Government National 
 Mortgage Association; 

    (2) bonds, notes, debentures, and other instruments which 
 are obligations of agencies and instrumentalities of the United 
 States including, but not limited to, the federal National 
 Mortgage Association, the federal Home Loan Mortgage 
 Corporation, the federal Home Loan Bank, the Student Loan 
 Marketing Association, and the Farm Credit System, and their 
 successors, but not including collateralized mortgage 
 obligations or mortgage pass-through instruments; 

    (3) bonds or securities that are issued by the state of 
 Minnesota and that are secured by the full faith and credit of 
 the state; 

    (4) certificates of deposit which are insured by the 
 federal Deposit Insurance Corporation and are issued by a 
 Minnesota depository institution; 

    (5) obligations of, or instruments unconditionally 
 guaranteed by, Minnesota depository institutions whose long-term 
 debt rating is at least AA-, or Aa3, or their equivalent by at 
 least two nationally recognized rating agencies. 

    Subd. 8.    Administration.  (a) The commercial 
 self-insurance group shall be required to secure administrative 
 services through a service company which maintains an office in 
 the state of Minnesota.  Services provided by the service 
 company or its subcontractor should at a minimum include claim 
 handling, safety and loss control, and submission of all 
 required regulatory reports. 

    (b) The service company must demonstrate it has the 
 capability to provide, through its employees or by contract, 
 services which are necessary to administer the self-insurance 
 group and it must employ or have under contract a claims 
 adjuster with at least three years of Minnesota specific 
 workers' compensation claim handling experience. 

    (c) The service company retained by a commercial 
 self-insurance group to administer workers' compensation claims 
 shall estimate the total accrued liability of the group for the 
 payment of compensation for the commercial self-insurance 
 group's annual report to the commissioner and shall make the 
 estimate both in good faith and with the exercise of a 
 reasonable degree of care. 

    Subd. 9.    Marketing and communications.  A commercial 
 self-insurance group's applications, coverage documents, 
 quotations, and all marketing materials must prominently display 
 information indicating that the commercial self-insurance group 
 is a self-insured program, that members are jointly and 
 severally liable for the obligations of the commercial 
 self-insurance group, and that members will be assessed on an 
 individual and proportionate basis for any deficits created by 
 the commercial self-insurance group. 

    Subd. 10.    Reinsurance.  (a) A commercial 
 self-insurance group shall be required to purchase specific 
 excess coverage with the workers' compensation reinsurance 
 association at the lower retention level for its first three 
 years of operation.  After that time it may select the higher or 
 super retention level with prior notice given to and approval of 
 the commissioner. 

    (b) The commissioner may require a commercial 
 self-insurance group to purchase aggregate excess coverage.  Any 
 reinsurance or excess coverage purchased other than that of the 
 workers' compensation reinsurance association must be secured 
 with an insurance company or reinsurer licensed to underwrite 
 such coverage in Minnesota and maintains at least an "A" rating 
 with the A.M. Best rating organization. 

    Subd. 11.    Disbursement of fund surplus.  (a) One 
 hundred percent of any surplus money for a fund year in excess 
 of 125 percent of the amount necessary to fulfill all 
 obligations under the workers' compensation act, chapter 176, 
 for that fund year may be declared refundable to a member at any 
 time.  The date shall be no earlier than 18 months following the 
 end of such fund year.  The first disbursement of fund surplus 
 may not be made prior to the completion of an operational audit 
 by the commissioner.  There can be no more than one refund made 
 in any 12-month period.  When all the claims of any one fund 
 year have been fully paid, as certified by an actuary, all 
 surplus money from that fund year may be declared refundable. 

    (b) The commercial self-insurance group shall give notice 
 to the commissioner of any refund.  Said notice shall be 
 accompanied by a statement from the commercial self-insurer 
 group's certified public accountant certifying that the proposed 
 refund is in compliance with paragraph (a). 

    Subd. 12.    Satisfaction of fund deficit.  In the event 
 of a deficit in any fund year, such deficit shall be paid up 
 immediately, either from surplus from a fund year other than the 
 current fund year, or by assessment of the membership.  The 
 commissioner shall be notified within ten days of any transfer 
 of surplus funds.  The commissioner, upon finding that a deficit 
 in a fund year has not been satisfied by a transfer of surplus 
 from another fund year, shall order an assessment to be levied 
 on a proportionate basis against the members of the commercial 
 self-insurance group during that fund year sufficient to make up 
 any deficit. 

    HIST: 1995 c 231 art 2 s 31