Section
§97-185. Deposits; surety bonds; letters of credit.
(a1) All individual self-insurers as defined in G.S. 97-130(5b) shall participate in the Association Aggregate Security System established under G.S. 97-131 unless excluded by the Board of Directors of the North Carolina Self-Insurance Security Association. The Board of Directors of the North Carolina Self-Insurance Security Association shall exclude all of the following from the Association Aggregate Security System:
(1) Individual self-insurers whose licenses have previously been revoked by the Commissioner.
(2) Individual self-insurers with a debt rating as established by Standard & Poor's Rating Service or by Moody's Investor Service, below the minimum Standard & Poor's and Moody's ratings established in the written plan for the Association Aggregate Security System submitted by the Association and approved by the Commissioner under G.S. 97-133(a)(2a).
(3) Individual self-insurers that have defaulted on the payment of its their self-insured workers' compensation liabilities.
(4) Individual self-insurers that fail to submit sufficient financial information to enable the Association to determine their total outstanding workers' compensation liabilities, or their creditworthiness, or both.
The Board of Directors of the North Carolina Self-Insurance Security
Association shall notify the Commissioner of the individual self-insurers that
are excluded from participating in the Association Aggregate Security System.
(b) Repealed by Session Laws 2003-115, s. 3, effective January 1, 2004.
(b2) An individual self-insurer that is excluded from participation in the
Association Aggregate Security System, including individual self-insurers that
are granted a license to self-insure after the North Carolina Self-Insurance
Security Association annually implements the Association Aggregate Security
System, shall deposit with the Commissioner an amount not less than one hundred
percent (100%) of the individual self-insurer's total undiscounted outstanding
claims liability per the most recent report from a qualified actuary as required
by G.S. 97-180(b), but not less than five hundred thousand dollars ($500,000),
or such greater amount as the Commissioner prescribes based on, but not limited
to, the financial condition of the individual self-insurer and the risk retained
by the individual self-insurer.
(b3) During any period of time that no Association Aggregate Security System is
in effect, individual self-insurers with a debt rating of BBB or better from
Standard & Poor's Rating Service, a division of McGraw Hill, Inc., or an
equivalent rating from another national rating agency shall deposit with the
Commissioner an amount not less than fifty percent (50%) of the individual
self-insurer's total undiscounted outstanding claims liability per the most
recent report from a qualified actuary as required by G.S. 97-180(b), but not
less than five hundred thousand dollars ($500,000). An individual self-insurer
licensed pursuant to G.S. 97-177 may utilize the debt rating of its guarantor
for the purpose of establishing the application of this subsection. The
Commissioner shall consider and may, in the Commissioner's discretion, increase
or reduce the deposit to a greater or lesser percentage of the individual
self-insurer's claims liability based on the financial strength of the
individual self-insurer and other financial information submitted by the
individual self-insurer. All other individual self-insurers shall deposit with
the Commissioner an amount not less than one hundred percent (100%) of the
individual self-insurer's total undiscounted outstanding claims liability per
the most recent report from a qualified actuary as required by G.S. 97-180(b),
but not less than five hundred thousand dollars ($500,000), or such greater
amount as the Commissioner prescribes based on, but not limited to, the
financial condition of the individual self-insurer and the risk retained by the
individual self-insurer.
(c) Deposits received, changes to existing deposits, or deposits exchanged after
the effective date of this section, shall be comprised of one or more of the
following:
(1) Interest-bearing bonds of the United States of America.
(2) Interest-bearing bonds of the State of North Carolina, or of its cities or counties.
(3) Certificates of deposit issued by any solvent bank domesticated in the State of North Carolina that have a maturity of one year or greater.
(4) Surety bonds in a form acceptable to the Commissioner and issued by a corporate surety. A surety bond deposited pursuant to this subsection shall require that the surety reimburse the Commissioner, or his successors, assigns, or transferees, for any costs incurred in the collection of the proceeds of the surety bond, including reasonable attorneys' fees, and any costs incurred in administering the insolvent self- insurer's workers' compensation claims.
(4a) Irrevocable letters of credit in a form acceptable to the Commissioner issued by a bank acceptable to the Commissioner. An irrevocable letter of credit deposited pursuant to this subsection shall require that the bank reimburse the Commissioner, or his successors, assigns, or transferees for any costs incurred in the collection of the proceeds of the letter of credit, including reasonable attorneys' fees.
(4b) The reimbursement of attorneys' fees and collections cost provided for in subdivisions (4) and (4a) of this subsection shall be no greater than fifteen percent (15%) of the penal amount of the bond and shall not come from the proceeds of the bond or the letter of credit but shall be in addition to the proceeds of the bond or the letter of credit.
(5) Any other investments that are approved by the Commissioner.
(d) All bonds or securities that are posted as a security deposit shall be
valued annually at market value. If the market value is less than the face
value, the Commissioner may require the self-insurer to post additional
securities. In making this determination, the Commissioner shall consider the
self-insurer's or guarantor's financial condition, the amount by which market
value is less than face value, and the likelihood that the securities will be
needed to provide benefits.
(e) Securities deposited under this section shall be assigned to the
Commissioner, the Commissioner's successors, assigns, or trustees, on a form
prescribed by the Commissioner in a manner that renders the securities
negotiable by the Commissioner. If a self-insurer or guarantor is deemed by the
Commissioner to be in a hazardous financial condition, the Commissioner may sell
or collect, or both, such amounts that will yield sufficient funds to meet the
self-insurer's obligations under the Act. In the case of a letter of credit, the
Commissioner may draw the full amount of a letter of credit if the letter of
credit is not renewed within 90 days prior to its expiration or at any time that
the bank issuing the letter of credit is no longer acceptable to the
Commissioner. Interest accruing on any negotiable security deposited under this
Article shall be collected and transmitted to the self-insurer if the
self-insurer or guarantor is not in a hazardous financial condition.
(f) No judgment creditor, other than a claimant entitled to benefits under the
Act, may levy upon any deposits made under this section.
(g) Pursuant to the provisions of this section and with the approval of the
Commissioner, deposits held by the Commissioner may be replaced with other
acceptable forms of deposit in amount determined by the Commissioner. Any
deposit to be replaced with another form of deposit shall not be released until
the approved replacement deposit is received by the Commissioner.
(h) Any self-insurer that ceases to self-insure, whether by voluntary
termination or by revocation of license, shall continue to secure and be liable
for its obligations under the Act and shall continue to report to the
Commissioner pursuant to G.S. 97-180. Upon the request of the Commissioner, a
self-insurer that ceases to self-insure shall submit filings, as prescribed in G.S. 97-180, to determine whether the deposit is sufficient to satisfy those
workers' compensation obligations incurred during the period that the
self-insurer was licensed as a self-insurer. The Commissioner may require an
increase in the deposit amount or may grant a reduction in the deposit amount to
ensure that the deposit is sufficient to cover all existing and future
obligations incurred by the self-insurer while subject to the provisions of the
Act.
(i) An endorsement to a surety bond shall be filed with the Commissioner within
90 days after the effective date of the endorsement. (1997-362,
s. 4; 2003; 2005; 2009.)
Display Complete Text of Chapter 97. Workers' Compensation Act.