(a) To obtain a certificate of approval, each group shall comply with the financial requirements adopted under this section.
(b) The combined net worth of all employers who are members of the group must be at least $2 million. A member of the group may not be required to submit an audited financial statement to establish the $2 million combined net worth, but the group must file a report compiled by a certified public accountant and based on financial statements or tax returns to support the existence of a combined net worth of at least $2 million for the initial group. In the case of a group composed of a trust existing on September 1, 2003, the trust may satisfy the financial requirements of this section by showing that the trust has participant surplus, including accrued participant dividends of at least $2 million, in lieu of the requirement of the $2 million combined net worth of its members. Discounted reserves may not be considered in determining whether a trust existing on September 1, 2003, has a surplus of at least $2 million.
(c) The group must post security in the form and amount prescribed by the commissioner, equal to the greater of $300,000 or 25 percent of the group’s total incurred liabilities for workers’ compensation. The security may be provided by a surety bond, security deposit, or any combination of those securities. If a surety bond is used to meet the security requirement, the surety bond must be issued by a corporate surety company authorized to transact business in this state. If a security deposit is used to meet the security requirement, the following are acceptable securities:
(1) a bond or other evidences of indebtedness issued, assumed, or guaranteed by the United States of America or by an agency or instrumentality of the United States of America;
(2) certificates of deposit in a federally insured bank;
(3) shares or savings deposits in a federally insured savings and loan association or credit union;
(4) a bond or security issued by a state and backed by the full faith and credit of that state;
(5) public securities described by Subsection (f); and
(6) commercial paper payable in United States currency that is rated in one of the two highest credit rating categories by each rating agency.
(d) Any securities posted must be deposited in the state treasury and must be assigned to and made negotiable by the commissioner of workers’ compensation under a trust document acceptable to the commissioner of insurance. Interest accruing on a negotiable security deposited under this subsection shall be collected and transmitted to the depositor if the depositor is not in default.
(e) A bond or security deposit must be:
(1) made for the benefit of the state, to be used solely to pay claims and associated expenses; and
(2) payable on the failure of the group to pay workers’ compensation benefits that it is legally obligated to pay.
(f) Public securities may be used as security under this section if the public securities bear interest or are sold at a discount and are issued by any corporation, denominated in United States dollars.
Added by Acts 2003, 78th Leg., ch. 275, § 1, eff. Sept. 1, 2003.
Acts 2005, 79th Leg., Ch. 265 (H.B. 7), § 3.071, eff. September 1, 2005.