Illinois Large Workers’ Comp Deductible Rules Approved

The Illinois Department of Insurance has posted in the Illinois Register a second notice of the approval by the Illinois Joint Committee on Administrative Rules (IJCAR) of rules concerning size limits on large deductibles for workers’ compensation insurance policies.

The IJCAR approved the rules on Dec. 13, but as of Dec. 19 they have not yet been adopted. The rules respond to Public Act 099-0369, which was signed by Gov. Rauner in August 2015.

The rules apply to workers’ compensation insurers, with an A.M. Best Company rating below “A-” and less than $200,000,000 in surplus.

The Act requires insurers to limit the size of the policyholder’s obligations under a large deductible agreement to no greater than 20 percent of the policyholder’s total net worth and requires full collateralization of those outstanding obligations by surety bond, letter of credit or cash/securities held in trust.

Each nonexempt insurer writing workers’ compensation policies that are subject to a large deductible agreement and cover employees located in Illinois must require the policyholder to provide an audited financial statement during the underwriting process.

The per occurrence deductible amount under the large deductible agreement cannot exceed 20 percent of the policyholder’s net worth as determined by the audited financial statement. The aggregate limit of the policyholder under the large deductible agreement cannot exceed the net worth of the policyholder as determined by the audited financial statement.

A new audited financial statement is required for each successive policy year and shall apply to determine the per occurrence cap and aggregate limits of the renewal policy.

The proposed rules have no legal effect until they are adopted by IDOI and filed with the Secretary of State’s Office.

An insurer with no A.M. Best rating is considered to be the same as one with a rating below “A-“.

Source: IDOI

Topics Workers' Compensation Illinois