Section R20-5-713. Guaranty Bond

A.      A pool shall obtain and maintain during all periods of self- insurance a guaranty bond equal to the greater of either:

1.        125% of the total outstanding accrued liability as reflected in the option election form described in subsec- tion (B); or

2.     $200,000.

B.       A pool shall complete and sign an option election form when an initial or renewal application is filed to determine the amount of the bond or securities required to cover the pool’s losses. A pool shall ensure that the information contained in the option election form is in agreement with the data provided in the actuarial report. A guaranty bond or continuation certifi- cate for the guaranty bond shall be in the amount established in the option election form.

C.      A guaranty bond or continuation certificate for the guaranty bond filed with the Commission shall bear the effective date of the certificate of authority under which the pool is authorized to self-insure. The guaranty bond or continuation certificate shall be valid for a period of one year, subject to annual renewal in the amount established in the Option Election Form filed with a renewal application.

D.      A guaranty bond or continuation certificate for the guaranty bond shall be issued by an insurance carrier authorized by the Arizona Department of Insurance to transact fidelity and surety insurance in Arizona. The guaranty bond and continua- tion certificate shall be executed by an authorized agent of a surety, as evidenced by a certified power of attorney, and countersigned by a licensed resident agent.

E.       Instead of posting a guaranty bond, a pool may either deposit with the Commission for transmittal to the Arizona State Trea- surer, bonds of the United States or other securities. The amount of the bond or securities shall bear a face value equal to the requirements of subsections (A) and (B).

F.       Instead of posting a guaranty bond, a pool may obtain a letter of credit. The amount of the letter of credit shall be equal to the requirements of subsections (A) and (B).

G.      The Commission shall not accept certificates of deposit instead of a guaranty bond, securities, or letter of credit.

Historical Note

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