La. Admin. Code tit. 37 § XIII-1109

Current through Register Vol. 50, No. 9, September 20, 2024

Section XIII-1109 - Excess Insurance Requirements for Group Self-Insurance Funds

A. All funds shall maintain specific excess insurance or reinsurance in the amount of at least $2,000,000 per occurrence and aggregate excess insurance or reinsurance of at least $2,000,000.

B. For the purposes of §1109, no loss fund shall be less than 70 percent of earned normal premium without the approval of the commissioner.

C. - E. Repealed.

F. The commissioner shall deny the use of a retention requested by a fund if he finds:

1. that the higher retention will have a significant adverse effect on the financial condition of the fund; or

2. that the fund is unable to establish reserves using monies from:

a. premium earned during the year the loss was incurred; or

b. investment earnings from the year in which the loss was incurred; or

c. from future investment earnings on the specific loss reserve.

G. Each fund shall provide security for aggregate losses by selecting one of the following alternatives:

1. purchasing an acceptable aggregate excess policy;

2. upon approval of the commissioner, post a cash security deposit in the amount of $1,000,000 or 20 percent of annual standard premium, whichever is greater; or

3. if the fund has been in operation at least 60 months, upon approval of the commissioner, establish an actuarially sound reserve for aggregate losses.

H. Repealed.

I. If the option in §1109. G.2 is selected, a fund, upon approval of the commissioner, may self-insure part of its aggregate limit by posting as a cash security deposit for the amount which is self-insured.

J. If a fund receives permission to provide security for its aggregate losses by establishing an aggregate reserve, the fund shall comply with the following requirements.

1. At least 60 days prior to the beginning of each policy year for which an aggregate reserve will be established, the fund shall submit a plan for that year. Approval of the plan by the commissioner shall be required before an aggregate reserve may be established for the next policy year.

2. Within six months after the end of each fund year, the fund shall submit an actuarial review, by a qualified actuary, of its aggregate reserve for each fund year whose aggregate losses are guaranteed by the reserve.

3. Along with the actuarial review, the fund shall provide financial information which sets forth the financial position of the aggregate reserve.

4. In actuarially determining the amount of ultimate loss, the fund and its actuary may take into account current or future recoveries from any aggregate or specific excess contract, if such contract complies with this regulation.

K. The commissioner may:

1. reject an actuarial review or financial report which does not comply with the requirements of §1109. L If this occurs, the commissioner may, at the expense of the fund, conduct his own actuarial or financial review, or, upon request of the fund, allow the fund to submit another actuarial or financial report, subject to the commissioner's approval of the party preparing the report;

2. for good cause, order a fund to cease using an aggregate reserve for securing its aggregate losses. Good cause shall include a finding that the aggregate reserve is actuarially unsound, that the fund is insolvent, that the fund will lack sufficient liquidity to run off its claims without reliance on future premium income, or that the fund has failed to comply with the provisions of this regulation;

3. in the event that the fund's aggregate reserve, or reserves, is actuarially unsound, order the fund to take such corrective action as necessary to make the reserve actuarially sound.

L. If a fund receives approval of its plan to use an aggregate reserve to provide security for its aggregate losses, then:

1. payment of dividends from premium in a fund year shall not be requested or approved for that fund year as long as any claims reserves, reserves for loss development, or reserves for losses incurred but not reported (IBNR) are unfunded by actual cash reserves;

2. no dividends shall be requested or approved from investment earnings unless the aggregate reserves for all years are actuarially sound, taking into account future contributions, and aggregate excess insurance;

3. advance premium discounts and all expenses unnecessary for the fund to meet its obligations will be reduced or eliminated, if necessary, to provide funds to make an aggregate reserve actuarially sound;

4. amounts actuarially determined to be necessary for the reserves for loss development and IBNR shall be a part of the fund's security deposit requirement;

5. no premium from a year prior to the year for which the aggregate reserve is established may be allocated to fund an aggregate reserve until 12 months after the close of the prior year.

La. Admin. Code tit. 37, § XIII-1109

Promulgated by the Department of Insurance, Office of the Commissioner, LR 18:1403 (December 1992), Amended LR 49269 (2/1/2023), Amended LR 49490 (3/1/2023).

AUTHORITY NOTE: Promulgated in accordance with R.S. 23:1200.1.