Certificate of Self Insurance Benefits and Administration Guide

A Certificate of Self Insurance is a document that allows you to self-insure your business, providing financial protection against potential losses.

This type of insurance is often used by small businesses or individuals who cannot afford traditional liability insurance.

By self-insuring, you can save on premiums and have more control over your insurance costs.

However, self-insurance also requires you to set aside a portion of your income to cover potential losses.

You'll need to work with an insurance advisor to create a self-insurance plan that suits your business needs.

A Certificate of Self Insurance is typically issued by your state's insurance department or a licensed insurance company.

It's essential to carefully review the terms and conditions of your Certificate of Self Insurance to understand your responsibilities and obligations.

To qualify for a certificate of self-insurance, an employer must meet certain eligibility criteria. An employer must have been in business for at least three years in a legally authorized business form.

To apply for self-insurance, an employer must also have proof of current workers' compensation coverage. This ensures that the employer has a solid foundation for managing their workers' compensation liabilities.

Employers with outstanding procedural or compliance penalties are not eligible for self-insurance. This means that employers must be in good standing with their workers' compensation obligations before applying for self-insurance.

To demonstrate financial stability, employers must have a Moody's rating of A3 or greater, or an equivalent rating using credit risk assessment tools. This ensures that the employer has a strong financial foundation to support their self-insurance program.

Employers must also have tangible net worth that exceeds seven times the greater of their three-year average gross claims payments or annual premium paid. This requirement helps ensure that the employer has sufficient resources to manage their workers' compensation liabilities.

Additionally, employers must have three years of certified, independently audited financial statements with an auditor's opinion absent of negative qualifications. This requirement helps ensure that the employer has a transparent and accurate financial record.

Employers must also maintain a safety program to prevent accidents. This is crucial for reducing the risk of workplace injuries and managing workers' compensation claims.

Here is a summary of the eligibility criteria for self-insurance:

To apply for a certificate of self-insurance, employers must submit an application to the Office of Self-Insurance Plans (OSIP) for approval. The application process typically takes about 21 days from initial submission to issuance of a certificate of authority to self-insure.

Employers must meet certain regulatory requirements, including having three calendar years in business, three years of certified financial statements, and an acceptable credit rating for three full calendar years prior to application. Each subsidiary or affiliate company must file a separate application.

To submit an application, employers must provide the Application for Self-Insurance (Form SI-1) and all required documents proving eligibility. The initial amount of the security deposit will be based on the information provided in the application, as well as rates developed by the Compensation Insurance Rating Board (CIRB). The minimum security deposit effective July 1, 2024 is $1,828,000.

Filing Requirements can be a bit of a challenge, but understanding what's expected can make the process much smoother.

Once your self-insurance application is approved, you'll need to meet specified annual obligations.

You'll be required to submit an actuarial study, which determines your ultimate exposure to workers' compensation liabilities.

The audited financial statements you provide will be used to determine your minimum financial eligibility to be self-insured.

You'll also need to submit an annual report, completed jointly with your claims administrator, which describes various aspects of your self-insurance program.

Here are the specific details your annual report should include:

The Application Process can be a bit daunting, but understanding the steps involved can help make it less intimidating. In California, employers who want to self-insure their workers' compensation liabilities must apply to the Office of Self-Insurance Plans (OSIP) for approval.

The private sector application process typically takes around 21 days from the initial application to issuance of the certificate of authority to self-insure. During this time, OSIP evaluates the application to assess the applicant's financial strength, proposed benefit delivery system, and suitability to participate in self-insurance.

Current regulatory financial requirements for an organization desiring entry into self-insurance include having three calendar years in business in a legally authorized business form, three years of certified, independently audited financial statements, and an acceptable credit rating for three full calendar years prior to application.

To apply, you'll need to submit an Application for Self-Insurance (Form SI-1) - Workers’ Compensation Law for each entity applying, regardless of affiliation, along with all necessary documents proving eligibility.

If conditional approval is granted, you'll need to submit additional documents, including a signed and notarized Agreement and Undertaking of Employer to Pay Compensation (Form SI-3), a Certificate of Excess Insurance Contract for Self-Insurers (Form SI-21), a security deposit in a form prescribed by the Chair, and other necessary documentation.

The minimum security deposit required is $1,828,000, effective July 1, 2024, and will be based on the information provided in the application and rates developed by the Compensation Insurance Rating Board (CIRB).

To apply for self-insurance, you'll need to submit the Application for Self-Insurance (Form SI-1) electronically, along with all required documents proving eligibility.

The Office of Self-Insurance will review your application and notify you of conditional approval, at which point you'll need to submit additional documents, including a signed and notarized Agreement and Undertaking of Employer to Pay Compensation (Form SI-3).

To determine the initial security deposit amount, the Compensation Insurance Rating Board (CIRB) will use information from your application, as well as their developed rates.

The minimum security deposit effective July 1, 2024 is $1,828,000.

You'll need to submit a Certificate of Excess Insurance Contract for Self-Insurers (Form SI-21) and a security deposit in a form prescribed by the Chair, in addition to other necessary documentation.

Here's a summary of the documents needed for conditional approval:

Once all conditions are met, the Office of Self-Insurance will notify you of final approval.

Self-insurance is an alternative to traditional liability insurance, where businesses or individuals set aside funds to cover potential losses or damages.

The amount set aside for self-insurance can vary depending on the business's or individual's financial situation, but it's often a significant sum.

Businesses that opt for self-insurance typically have more control over their insurance costs and can tailor their coverage to their specific needs.

A self-insurer's security deposit is a crucial aspect of their self-insurance plan. The Self-Insurers Security Fund arranges and guarantees collateral deposit requirements for many self-insurers that meet their credit standards.

To determine the amount of the security deposit, an actuarial study is conducted at the expected confidence level. This study considers projected losses, net of specific excess insurance coverage, and includes incurred but not reported (IBNR) liabilities, allocated loss adjustment expense, and unallocated loss adjustment expense.

Self-insurers that don't meet the Fund's credit standards must directly post their collateral security deposits with the Office of Self-Insurance (OSIP). This ensures that the self-insurer has sufficient funds to cover potential claims and expenses.

The security deposit remains in place until all claims have been finally adjudicated and fully paid, all expenses and assessments have been paid, and the Board determines there is no future liability.

As a self-insurer, you'll need to pay various fees to stay compliant and cover administrative costs.

You'll typically receive two invoices annually, one from OSIP and one from the Security Fund.

The OSIP invoice covers the statutory assessments all employers pay, which include fees for the Workers' Compensation Administration Revolving Fund (WCARF) and other funds.

Here are the specific fees you can expect to pay through the OSIP invoice:

A Certificate of self-insurance is often required by public entities as a condition of doing business with them.

In some cases, a Certificate of self-insurance may be required to correct an inadvertence or mistake in a previous application.

Contractors may need to provide a Certificate of self-insurance that meets or exceeds the insurance requirements of a county or local government.

Here are some examples of Certificate of self-insurance in different contexts: