S.C. Code Regs. § § 67-1501

Current through Register Vol. 48, No. 10, October 25, 2024

Section 67-1501 - Self-Insurance, Application

A. An employer may apply to individually self-insure by filing a Form 7, Application To Individually Self-Insure, with the Commission's Self-Insurance Division and as follows.

(1) Complete and sign the Form 7 and attach to the form the following:

(a) A two hundred fifty dollar application fee; and

(b) A statement describing in detail the proposed claims administration program including the resume of each member of the claims administration staff if claims will be administered by the employer, or a copy of the service contract and quote for service fee if claims will be administered by a third party claims administrator; and

(c) A description of an outside safety consultant program and annual fee, if any; and

(d) Three year's audited financial statements, audited according to generally accepted accounting principles, or a 10K report for each of the previous three years; and

(e) Quotes for excess insurance according to R.67-1503.

(2) In lieu of submitting audited financial statements, the sworn statement or affidavit of an independent auditor may be provided which verifies, based on financial ratios and guidelines set by the Commission, the financial condition of the employer.

(a) Upon application to self-insure, the Self-Insurance Division will provide the applicant with the following financial ratios to be used by the independent auditor. The ratios provided to the applicant will be at the twenty-fifth percentile for the applicant's industry and, if available, asset size will be obtained by the Self-Insurance Division from an independent financial information provider.

(1) Current Ratio. The current ratio is calculated by dividing total current assets by total current liabilities.

(2) Total Liabilities to Net Worth. Total liabilities to net worth is calculated by dividing total current liabilities and long term debt by net worth.

(3) Fixed Assets to Net Worth. Fixed assets to net worth is calculated by dividing fixed assets by net worth.

(4) Return on Sales. Return on sales is calculated by dividing net profit after taxes by annual net sales.

(5) Return on Assets. Return on assets is calculated by dividing net profit after taxes by total assets.

(6) Return on Net Worth. Return on net worth is calculated by dividing net profit after tax by net worth.

(b) The independent auditor must provide to the Self-Insurance Division a sworn statement or affidavit that the applicant has a net worth which equals or exceeds ten million dollars, that the applicant exceeds all six ratios, that the applicant's ratios are based on financial statements prepared according to generally accepted accounting principles and that the ratios were calculated according to R.67-1501 A(2)(a).

B. When a parent company applying to self-insure desires to include a subsidiary company in the parent's self-insurance program, the parent company shall attach to the Form 7 the following items in addition to the items in A(1)(a) through (e) above:

(1) A separate Form 7 and a Form 7A, Corporate Guaranty, for each subsidiary company.

(2) A one hundred dollar application fee for each subsidiary company.

C. When a subsidiary company applies to self-insure under a parent company's existing self-insurance program, the subsidiary company shall file a Form 7 as in A above and attach to the Form 7 the following items in addition to the items in A(1)(a) through (e) above:

(1) A Form 7A, Corporate Guaranty; and

(2) A one hundred dollar application fee.

D. When a subsidiary of a parent company desires to create its own self-insurance program, the subsidiary company shall file a Form 7, as in A above and attach to the Form 7 the following items, in addition to the items in A(1)(a) through (e) above:

(1) A Form 7A, Corporate Guaranty; and

(2) A two hundred fifty dollar application fee.

E. To apply for approval of a proposed self-insurance fund, an officer of the proposed fund shall file a Form 6, Application to Create a Self-Insurance Fund, with the Commission's Self-Insurance Division. The Form 6 must be completed, signed by an officer of the proposed fund, and have attached to it:

(1) A two hundred fifty dollar application fee; and

(2) A copy of the proposed fund's by-laws; and

(3) A current audited financial statement, audited according to generally accepted accounting principles, for each proposed member of the fund; and

(4) A list of the estimated standard premium collected by the fund, by month, for the first fiscal year; and

(5) An indemnity agreement which jointly and severally binds each member of the fund, signed by each proposed member; and

(6) A statement describing in detail the proposed claims administration program including the resume of each member of the claims administration staff if claims will be administered by the fund, or, a copy of the service contract and quote for service fee if claims will be administered by a third party claims administrator; and

(7) Quotes for excess insurance according to R.67-1503; and

(8) A completed Form 6A, Application for Membership in a Self-Insurance Fund for each employer applying for membership in the proposed fund. The proposed members of the fund must have a minimum combined total net worth of one million dollars.

(9) Fund investments shall be restricted to bonds, notes, or other evidence of indebtedness by the United States of America, or by an agency or instrumentality thereof, certificates of deposit in a federally insured bank, shares or savings deposits in a federally insured savings and loan association or credit union, certificates of deposit insured by a commercial bank duly chartered under the laws of this State, and other investments the Self-Insurance Division approves.

F. An employer may apply for membership in an existing self-insurance fund as follows.

(1) Qualify for membership in the self-insurance fund by:

(a) Operating a business similar in nature to the businesses in the fund; and

(b) Qualifying under the by-laws of the fund; and

(c) Being financially sound and have a net worth of not less than twenty-five thousand dollars.

(2) To apply for membership in a self-insurance fund, file a completed and signed Form 6A, Application for Membership in a Self-Insurance Fund, with the Commission's Self-Insurance Division and attach:

(a) A twenty-five dollar application fee; and

(b) A current financial statement.

G. The Self-Insurance Division will notify the applicant by letter if the application does not contain required information and attachments.

(1) The applicant shall complete the application process within one hundred and twenty days from the date of filing the application by providing requested information and documentation required above.

(2) Failure to complete the application process within one hundred and twenty days from the date of filing the application shall be deemed a voluntary withdrawal of the application.

(3) Further requests for approval to individually self-insure, to create a self-insurance fund, or to join a self-insurance fund shall be made by refiling the application and attaching the application fee and attachments provided above.

S.C. Code Regs. § 67-1501

Amended by State Register Volume 19, Issue No. 7, eff July 28, 1995; State Register Volume 22, Issue No. 6, Part 3, eff June 26, 1998.