Section R20-5-707. Filing Requirements for Initial Application for Self-Insurance License

A.      Initial application for authorization to self-insure.

1.        An application for authority to self-insure shall be com- pleted on forms approved by the Commission.

2.        An application for authority to self-insure shall be filed with the Division. An application is considered filed when it is received at the office of the Division.

3.        An application shall be typewritten or written in ink in legible text.

4.        The administrator of a pool shall sign the application. The signature of the administrator shall be notarized.

5.        The administrator shall verify, in writing, that the infor- mation contained in and submitted with the application is true and correct.

B.       The Commission shall deem an initial application for authority to self-insure complete if an applicant provides the following information with the initial application:

1.        A copy of the contract required under A.R.S. § 23-961.01 establishing the pool;

2.        A copy of the articles of incorporation establishing the pool, if applicable;

3.        A copy of the trust agreement establishing the pool, if applicable;

4.        A copy of the by-laws governing the operations of the pool;

5.        An original, signed application to join the pool from every employer receiving approval from the board to join the pool;

6.        A resolution from the board approving employers for membership in the pool;

7.        A certified copy of an audited financial statement or an internally reviewed and signed financial statement for each employer applying for membership in the pool for the most current and prior two years that, considered col- lectively, demonstrate that the combined net worth of the employers applying for membership at the time of the ini- tial application is not less than $1,000,000;

8.        A copy of the following financial ratios for each employer applying for membership in the pool:

a.        Cash flow ratio;

b.        Current ratio;

c.        Debt status ratio;

d.        Profitability ratio;

e.        Quick ratio; and

f.         Working capital ratio.

9.        A detailed description of the loss control program required under R20-5-727, including a description of training programs and safety requirements implemented or to be implemented;

10.     A written statement from each member with an experi- ence modification rate greater than 1.10 describing the causes of the member’s experience modification rate and outlining remedial measures the member has taken and will take to lower the member’s experience modification rate;

11.     An original, signed fidelity policy, or a certified copy, that meets the requirements of R20-5-712, or written confir- mation from an authorized insurance company that it will provide fidelity coverage to the applicant as required under R20-5-712 which coverage is effective on the date the applicant is approved by the Industrial Commission to begin self-insurance;

12.     An original, signed guaranty bond, securities, or letter of credit that meets the requirements of R20-5-713 or any of the following:

a.        Written confirmation from an authorized insurance company that it will provide a guaranty bond to the applicant as required under R20-5-713 which shall

be deposited with the Industrial Commission before approval for self-insurance is effective,

b.        Written confirmation from a financial institution that it will provide a letter of credit to the applicant as required under R20-5-713 which is effective when approval for self-insurance is effective, or

c.        Written confirmation from a pool that it will obtain securities as required under R20-5-713 which shall be deposited with the Arizona State Treasurer before approval for self-insurance is effective.

13.     A completed and signed Option Election Form and Self- Insurance Bond Form;

14.     A copy of excess insurance policies issued by an autho- rized carrier that meet the requirements of R20-5-715 or written confirmation from an authorized insurance com- pany that it will provide excess insurance coverage to the applicant as required under R20-5-715. The excess cover- age shall be effective on the date the applicant is approved by the Industrial Commission to begin self- insurance;

15.     A copy of the signed agreement or contract of hire between a board and the administrator of the pool;

16.     A designation of a service company and a copy of the signed agreement between the service company and pool that meet the requirements of R20-5-725 or a written statement with supporting documentation required under R20-5-726 requesting authorization to process claims in- house;

17.     A list of all rates by code classification to be used by the pool to calculate premiums;

18.     A statement showing how premiums shall be calculated for members;

19.     A detailed description of the underwriting program required under R20-5-727;

20.     A feasibility study by a member of the American Acad- emy of Actuaries (MAAA) or a Fellow of the Casualty Actuarial Society (FCAS) that documents the rate struc- ture needed to set premium levels to cover potential losses and expenses of the pool; and

21.     A schedule showing net workers’ compensation premi- ums paid, total losses incurred, and experience modifica- tion rates for the three preceding years for each employer applying for membership in the pool.

Historical Note

Adopted effective September 9, 1998 (Supp. 98-3).