Self-Insurance Division

I. Applications:

A. Individual Self-Insurance

B. Group Self-Insurance

C. Group Membership

II. Reports:

A. Loss Summary Data Report

B. Premium Tax Report

C. Financial Statements

D. Report Cards

III. Excess Insurance:

IV. Security Deposit:

V. Guaranty Funds:

VI. Renewals:

A. Individual Self-Insurance

B. Group Self-Insurance

VII. Fees / Taxes / Assessments:

VIII. Internet Links

1. Arkansas Law

2. Commission Rules

IX. Publications

1. Applications:

1. Individual Self-Insurance - An individual self-insurer is an employer that has provided satisfactory proof to the Workers= Compensation Commission of its financial ability to pay compensation and received an authorization from the Commission to pay compensation directly. The following are the basic requirements for an application for individual self-insurer status:

1. Properly submitted application (all information complete and on an original form) received at least sixty (60) days prior to the desired effective date.

2. Acceptable certified audited financial statement showing a net worth of not less than two hundred fifty thousand dollars ($250,000) and a current ratio of more than 1 to 1 (this requirement may be waived in the case of a public utility or in those instances where generally recognized accounting principles peculiar to a particular industry make this requirement unreasonable). An acceptable certified audited financial statement may be from the company applying for self-insurance or could be from their parent company. In the event an applicant submits a financial statement from its parent company, the Commission requires the parent company to execute a Resolution and an Indemnity Agreement by which the parent company obligates itself to meeting the workers’ compensation obligations of the applicant in the event the applicant fails to do so.

3. Proof of ability to provide for qualified persons to service its program either by staff personnel or by contract with an approved third-party administrator. In the event an applicant desires to have its claims administrated outside the state of Arkansas, it must apply for a waiver to Commission Rule 099.29.

4. Securities or surety bond as determined by the Commission; however, in no case will the amount of securities or surety bond be less than one hundred thousand dollars ($100,000).

5. Excess insurance requirements as determined by the Commission.

6. Paid non-refundable application fee in the amount of one hundred dollars ($100) payable to the Arkansas Workers' Compensation Commission.

2. Group Self-Insurance - A group self-insurer is an arrangement where two (2) or more employers enter into agreements to pool their workers= compensation liabilities for the purpose of qualifying as a self-insurer. There are two (2) types of group self-insurers, homogeneous self-insurers and common self-insurers.

1. Homogeneous self-insurers are employers engaged in the same activity or business pursuit.

2. Common self-insurers are employers who are members of the same trade or professional association.

An application for group self-insurer status shall contain the following:

1. Completed application (on original form with all questions answered) received at least sixty (60) days prior to the desired effective date.

2. An Indemnity Agreement jointly and severally binding the group and each member thereof to comply with the provisions of the Arkansas Workers= Compensation laws and Rules and Regulations of the Commission (not required on public employer groups).

3. Individual application of each member of the group applying for membership in the self-insurer group on the inception date of the group.

4. Current financial statements supported by a certified audit of at least two (2) members showing the combined net worth of these members applying for membership to be no less than one million dollars ($1,000,000) and having a combined current ratio of more than 1 to 1.

5. A set of by-laws governing the operation of the group self-insurer (subject to approval by the Commission).

6. A non-refundable application fee of one hundred dollars ($100) payable to the Arkansas Workers= Compensation Commission.

7. Proof of ability to provide for in-state qualified persons to service its program either by staff personnel or by contract with an approved third-party administrator.

8. Securities or surety bond as determined by the Commission; however, in no case will the amount of securities or surety bond be less than two hundred thousand dollars ($200,000).

9. Excess insurance requirements as determined by the Commission.

10. Satisfactory proof that the group has met the requirements of the appropriate Guaranty Fund.

3. Group Membership - Group members are employers who have agreed to pool their workers= compensation obligations and have been approved by the Commission for membership in a group. Applications for group membership shall include:

1. An application (on original form) to the commission thirty (30) days prior to the desired effective date of self-insurer status. Groups may Abind@ coverage for a period of thirty (30) days. If a binder has been issued, it must be filed with the Commission within five (5) days of issuance, and the completed application and supporting documentation shall be submitted within fifteen (15) days of the effective date of the binder.

2. Current financial statement (not required to be audited, but must be certified by two (2) officers or partners of the applicant or by the owner).

2. Reports:

   1. Loss Summary Data Report - A Loss Summary Data Report is to be filed by February 1 each year, reflects the preceding calendar year information regarding losses. The report requires information regarding the number of employees, number of cases by type, total amounts paid for medical-only cases, and amounts paid for indemnity and medical on lost time and death cases. Additionally the report requires that all lost time and death cases be listed separately showing the date of accident, nature of injury, amounts paid for indemnity and medical, and the balance of pending reserves. Click here for the detailed Completion Instructions.

   2. Premium Tax Report - The Commission operates from monies received through a premium tax that is collected on all workers’ compensation policies. The tax is limited by law to a maximum of three (3%) percent of tabulated written manual premium pursuant to A.C.A § 11-9-303 (b). The Premium Tax Report is the means by which the self-insurers report payrolls, manual premium is calculated, and the tax is paid.

   The report is due on April 1 of each year and covers the preceding calendar year=s payroll information. The Commission utilizes the National Council on Compensation Insurance=s Basic Manual=s Rules for workers= compensation classifications and premium determination. This is the standard for all workers= compensation policies in Arkansas and is used by the majority of states.

As defined in A.C.A. 11-9-303 (b), and used hereafter:

AWritten manual premium shall mean premium produced in a given year by the manual rates in effect during the experience period and shall exclude the premium produced by the expense constant. Further, written manual premium, for the purposes of this law, means premium before any allowable deviated discounts, any experience rating modification, any premium discount, any reinsurance or deductible arrangement as common with fronting carriers, any dividend consideration, or other trade discount.@

The Premium Tax Report requires information regarding gross payroll, the types and amounts of allowable workers= compensation exclusions, and the Areportable@ payroll amounts separately by class code. Separate premiums are calculated based on the rate applicable to each class code. The separate premiums are then added to arrive at total written manual premium. The tax amount to be paid is then calculated from the total written manual premium based on the tax rate for that calendar year.

3. Financial Statements - In addition to the certified audited financial statement submitted with the initial application for self-insurance, each self-insurer and self-insurer group is required to submit a certified audited financial statement each year for purposes of renewing its Certificate of Authority to act as a self-insurer. The certified audited financial statement is due by April 1 of each year.

4. Report Card - The Commission, through its Chief Executive Officer, or a designee, shall report, at least twice each year to all insurers their performance as to:

   1. Filing of forms; and

   2. First payment of benefits; and

   3. Problem resolution.

   The performance standards for the Report Card is set forth in Commission Rule 099.29. Rule 099.29 contains information as to objecting to the Report Card and obtaining a waiver to handle claims out-of-state.

3. Excess Insurance - Excess insurance, although not statutorily required, is purchased by self-insurers and filed with the Commission. Excess Insurance is a means by which a self-insured company may limit its exposure to large and/or catastrophic losses. Excess insurance is posted by practically all self-insurers and self-insurer groups. The fact that a company has purchased excess insurance, as well as the retention limits on the policy, is considered in both the application and renewal evaluation reports.

4. Security Deposits - Arkansas law requires that a self-insurer or self-insurer groups (public employers such as counties, municipalities, and schools are excluded) post a security deposit guaranteeing the payment of workers= compensation obligations. The minimum security deposit for individual self-insurers is one hundred thousand dollars ($100,000). The minimum security deposit for a self-insurer group is two hundred thousand dollars ($200,000). Security deposits may be posted by means of the following:

   1. Certificates of Deposit - Certificates of Deposit shall be issued by a state or national chartered bank in the state of Arkansas.

   2. Letters of Credit - An Irrevocable Standby Letter of Credit shall be issued by a State or national chartered bank with offices in the state of Arkansas. Letters of Credit issued by a bank not meeting the requirements may be accepted by the Commission with a Confirming Letter of Credit from a bank meeting the prescribed criteria.

   3. Surety Bonds - Surety Bonds may be purchased from any corporate surety admitted or approved by the Insurance Commissioner of the state of Arkansas to transact such business in the state.

All security deposits posted with the Commission shall be held until the later of, the expiration of the statute of limitations for workers= compensation claim filings while self-insured, or the fulfillment of all obligations incurred while self-insured under the Workers= Compensation law.

5. Guaranty Funds - There are two (2) guaranty funds that have been established for individual self-insurers and group self-insurers. The Arkansas Self-Insurers Guaranty Fund, Inc. is for individual self-insurers and homogeneous self-insurer groups. The Arkansas Common Self-Insurers Guaranty Fund, Inc. is for common self-insurer groups. Each guaranty fund=s board of directors independently determines that amounts to be assessed to establish a sufficient pool of funds to pay workers= compensation benefits owed by an Arkansas self-insurer when such self-insurer fails to meet its workers= compensation benefit obligations. The amounts for assessments are indicated in Part VII below.

6. Renewals - The Self-Insurance Division prepares annually a Renewal Evaluation Report for the Full Commission on individual self-insurers and group self-insurers for renewal for the respective Certificates of Authority. Individual self-insurer certificates and group self-insurers certificates are renewed annually on May 1.

1. Individual Self-Insurance - In order to begin the renewal process, an individual self-insurer must submit the following information / reports:

1. A completed Loss Summary Data Report. This information is reviewed to determine the total amount paid for losses as well as the amounts established for pending reserves for the prior calendar year. Previous years= information is also reviewed to determine trends in losses and reserve amounts.

2. A recent certified audited financial statement. This information is used to determine a company=s financial stability in regard to meeting its workers= compensation obligations.

3. A Premium Tax Report and tax payment for the preceding calendar year.

In addition to the above information, the Division reviews the file to assure that there is proof of current excess insurance, and a proper Resolution and an Indemnity Agreement (if required). Additionally, the amount posted for security deposit is reviewed for adequacy.

2. Group Self-Insurance - In order to begin the renewal process, a group self-insurer must submit the following information / reports:

1. A completed Loss Summary Data Report. This information is reviewed to determine the total amount paid for losses as well as the amounts established for pending reserves for the prior calendar year. Previous years= information is also reviewed to determine trends in losses and reserve amounts.

2. A recent certified audited financial statement. This information is used to determine a company=s financial stability in regard to meeting its workers= compensation obligations.

3. A Premium Tax Report and tax payment for the preceding calendar year.

4. An actuarial report based on a study conducted of the known losses, estimates of losses for claims incurred but not reported, and required reserves .

Additionally, a group must provide (if not previously submitted):

5. A copy of the current Group Fidelity Bond.

6. A copy of the current Third-Party Administrator Fidelity Bond.

7. A copy of the current Third-Party Administrator Agreement.

8. A copy of the current Excess Insurance Certificate.

9. 9. A copy of the current Group Indemnity Agreement (not required of public groups).

10. 10. A copy of the current by-laws of the group.

7. Fees / Taxes / Assessments:

1. Applications:

1. Individual and Group Self-Insurance application fee is one hundred dollars ($100). This fee is non-refundable regardless of the disposition of the application.

2. Annual Fees:

1. Premium Tax - As previously mentioned, there is a tax limited by law to a maximum of three percent (3%) of total written manual premium as calculated on the Premium Tax Report. The tax is due April 1 each year.

2. Guaranty Fund Assessments - The guaranty fund assessments are made June 1 for the preceding calendar year. The assessment is due on receipt of the billing statement.

3. Guaranty Funds:

1. Arkansas Self-Insurers Guaranty Fund, Inc. - Assessments are determined by the Fund’s Board of Directors.

2. Arkansas Common Self-Insurers Guaranty Fund, Inc. - Assessments are determined by the Fund’s Board of Directors.

8. Internet Links:

1. Arkansas Law - The workers= compensation laws of the state of Arkansas, found in Title 11, Chapter 9 are available online.

2. Commission Rules - The Rules of the Commission are available online through the link on the Commission=s home page.

9. Publications - The Commission's laws, rules, forms and advisories are available in a book published by the Matthew Bender Company, a division of Lexis Law Publishing. For more information, call that firm at 1-800-833-9844. You may fax an order to Lexis at 1-800-643-1280. You may contact the Arkansas Workers' Compensation Commission's Support Services Division at 1-800-622-4472 for information about the book.