To qualify to receive a certificate of relief from insurance,
an employer must satisfy the following requirements:
(1) File with the
division an annual surety
bond issued by an insurance company licensed to do business in the state of
Iowa in an amount determined by applying the formula below, but in no case
shall the bond be less than $200,000 or, if an
employer cannot obtain a bond,
then any other security such as cash or negotiable securities which is
agreeable to the
commissioner, in an equal amount. Such surety bond shall be in
the form prescribed by the
commissioner and, in the event of
insolvency of the
employer, shall be payable to the
division to ensure the payment of the
employer's workers' compensation liabilities in the same manner as if the
division were such
employer, subject to the dollar limitation of such surety
bond.
The following formula will be used to determine the
appropriate amount of security required:
a. Determine the following three ratios:
(1) Current assets: Current
liabilities
(2) Capital + retained
earning (net of treasury stock) as a percentage of sales (less
discounts)
(3) Long term debt:
Capital + retained earnings
b. Upon determination of the value for the
above ratios, points will be calculated from the following tables:
(1) Current assets to current liabilities
2 : = 6 Points
1.75 : = 5 Points
1.6 : = 4 Points
1.4 : = 3 Points
1.25 : = 2 Points
1.1 : = 1 Point
1 : = 0 Points
(2) Equity to sales
20% = 6 Points
17.5% = 5 Points
13.5% = 4 Points
10% = 3 Points
8.5% = 2 Points
7% = 1 Point
5% = 0 Points
(3) Long term debt to equity
1 : 2 = 6 Points
1 : 1.75 = 5 Points
1 : 1.6 = 4 Points
1 : 1.4 = 3 Points
1 : 1.25 = 2 Points
1 : 1.11 = 1 Point
1 : 1 = 0 Points
c. Total the number of points for the three
ratios and assign the appropriate percentage:
18 Points = 0%
16 - 17 Points = 20%
14 - 15 Points = 40%
12 - 13 Points = 60%
9 - 11 Points = 70%
Less than 9 Points = 100%
d. The amount of the required security shall
then be calculated as follows:
(1) Determine
the three years average of medical payments and compensation paid under the
workers' compensation laws (If fiscal year, specify
dates_____________through________________.)
Year 1 Year 2 Year 3 Total
$___________________ +___________________
+___________________ =$_____________
Divide the total by 3 = $_____________
(2)Multiply this average by 2 =
$_____________
(3)Enter the total
amount of compensation for fatalities and permanent disabilities, both
permanent total and permanent partial for which the employer is presently
liable but has not paid, including medical reserves. $_____________
(4)Add lines 2 and 3 $_____________
(5)Multiply line 4 by the percentage
determined in subrule 57.3(1)"c. " This, when rounded to the
nearest thousand, will be the security required. $_____________
(2) For a private
employer, a parental guarantee, completed on forms provided by the
division, to
cover statutory losses and any loss adjusting expense is required from any
parent company.
a. The parental guarantee
shall provide for giving the commissioner 60 days' notice for cancellation.
Once notice is given, the division reserves the right to require additional
security to be obtained prior to the effective date of the
cancellation.
b. For a subsidiary
that is to be sold, which desires to avoid cancellation of the certificate of
relief from insurance, it must file pro forma financial statements representing
the condition of the subsidiary before and after sale, sales agreement,
financial statement of acquiring company and the parental guarantee of
acquiring company.
(3)
Each employer shall have within its own organization ample facilities and
competent personnel to service its own program with respect to claims,
administration, loss prevention, loss control, safety engineering and
rehabilitation services for injured employees or shall contract with a service
company to provide these services.
