Section 60. Security deposit and surety bond requirement

A. Except as provided in subsection B of this section, each group self-insurance association licensed by the commission shall maintain with the State Treasurer a security deposit of acceptable securities or surety bond in an amount of $250,000 for the first plan year, or such other amount as the commission prescribes, and for succeeding plan years such amount as the commission deems reasonable taking into account the financial condition of the association and any excess insurance carried by the association. The commission may, from time to time, increase, release or reduce the security deposit or surety bond requirement. The security deposit or surety bond shall be held by the State Treasurer pursuant to § 65.2-801 C of the Code of Virginia, and so far as not inconsistent with the provisions of the Act or these regulations shall be subject to the provisions of Article 7 (§ 38.2-1045 et seq.) of Chapter 10 of Title 38.2 of the Code of Virginia.

For the purposes of this chapter, acceptable securities shall be (i) investments allowed by § 2.2-4500 of the Code of Virginia (legal investments for public sinking funds) and § 2.2-4501 of the Code of Virginia (legal investments for other public funds), (ii) securities issued by states, other than Virginia, and their municipalities or political subdivisions rated A or better by Moody's Investors Services, Inc., or Standard and Poor's, Inc., (iii) revenue bonds rated Aa (AA) or better by Moody's Investors Services, Inc., or Standard and Poor's, Inc. that are bonds issued by municipalities or political subdivisions of this Commonwealth or any other state, (iv) securities issued by the Federal Home Loan Banks, and (v) securities issued by the Federal Intermediate Credit Banks.

Surety bonds deposited pursuant to this section shall be issued by an insurer duly licensed in this Commonwealth to transact a surety business and shall not either directly or indirectly be under the same ownership or management as the principal on such bonds. The surety bond shall be designated as applying to agreements approved or awards by the Virginia Workers' Compensation Commission made at any time on account of injuries or deaths occurring during the continuance of the principal's license and the continuance of the bond.

In addition to the minimum security deposit or surety bond required by this section, the commission may require additional securities or surety it considers appropriate after giving consideration to such factors as excess insurance and the financial ability of the group to meet its obligations under the Act.

B. As an alternative to the security deposit or surety bond required by subsection A of this section, a group self-insurance association may have an appropriate endorsement attached to its contracts for excess insurance as required in 14VAC5-370-90. The endorsement must provide that in the event the group self-insurance association fails to pay to any employee or dependent of any employee any compensation provided by the Act, the excess coverage insurer will become liable immediately for 100% of the compensation and will make payment as directed by the Virginia Worker's Compensation Commission.

C. Any deposit made with the State Treasurer prior to May 1, 1988 must be maintained with the State Treasurer until specifically released in writing by the commission.

Historical Notes

Derived from Regulation 16, Case No. INS870353, § 4, eff. May 1, 1988; amended, Volume 26, Issue 14, eff. March 1, 2010.

Statutory Authority

§§ 12.1-13 and 65.2-802 of the Code of Virginia.