28 Tex. Admin. Code § 5.6403 - Application for Initial Certificate of Approval
(a) An unincorporated association or business
trust composed of five or more private employers that proposes to organize as a
workers' compensation self-insurance group shall file with the department an
application for a certificate of approval.
(b) Contents of the application must include
the information required by Labor Code §
407A.051.
(c) In addition to the information required
under subsection (b) of this section, an applicant shall also provide the
following:
(1) A statement that demonstrates
that the members of the group are in the same or similar type of business as
required by Labor Code §
407A.002(a)(1).
(A) The statement should demonstrate that the
members of the group have the same governing classification.
(B) If the members of the proposed group have
different governing classifications, the statement should demonstrate how the
business pursuits of the members of the group are similar enough in operation
in the Commissioner of Insurance's discretion to be grouped together.
(2) To aid the department in
making the determination that the trade or professional association meets the
requirements of Labor Code §
407A.002(a)(2)
that the trade of professional association has been in existence in this state
for purposes other than insurance for five years before the establishment of
the group, provide copies of documents relating to the organization, governance
and operation of the association and a narrative describing the activities of
the association. Annual reports, conventions, seminars, dues requirements,
newsletters and other evidence acceptable to the Commissioner of Insurance may
be submitted to aid the department in making its determination.
(3) In addition to the copy of the bylaws of
the group required by Labor Code §
407A.051(c)(6),
submit copies of documents relating to the organization, governance and
operation of the group.
(4)
Projected financial statements for the 24 month period from the group's start
of operations using quarterly balance sheet projections based on the group's
fiscal year, quarterly cash flow schedules reflecting expenditures by category,
quarterly revenue and expense projections and an actuarial projection of the
group's total projected incurred liabilities for workers' compensation which
demonstrate compliance with Labor Code §
407A.051(c)(10)
which requires the group to show its financial ability to pay the workers'
compensation obligations of the employers who are members of the group and
Labor Code §
407A.053(c)
which requires the group to post security equal to the greater of $300,000 or
25% of the group's total incurred liabilities for workers' compensation. The
projections shall include an estimate of the employees to be covered on which
the projections and actuarial assumptions are based. The projections must
reflect the identity, qualifications and credentials of the persons making the
projections.
(5) A written
commitment, binder, or policy or contract of excess insurance that meets the
requirements of §5.6405 of this division (relating to Excess
Insurance).
(6) A fidelity bond for
an administrator in the amount of $250,000. The fidelity bond must meet the
requirements of §5.6408 of this division (relating to Fidelity and Performance
Bonds).
(7) A fidelity bond for a
service company identified pursuant to paragraph (12)(A) or (B) of this
subsection, if there is one, in the amount of $250,000. The fidelity bond must
meet the requirements of §5.6408 of this division.
(8) A performance bond for a service company
identified pursuant to paragraph (12)(A) of this subsection that provides
claims service to or on behalf of a group, if there is one, in the amount of
$250,000. This performance bond is in addition to the fidelity bond required in
paragraph (7) of this subsection for a service company. The performance bond
shall be in the form prescribed in §5.6408 of this division.
(9) An indemnity agreement executed by the
members of the group binding the members, jointly and severally, for the
obligations of the group. At a minimum, the agreement shall include the
provisions described in §5.6406 of this division (relating to Indemnity
Agreement).
(10) An
acknowledgement, in the form prescribed in §5.6407 of this division (relating
to Acknowledgement of Indemnity Agreement), executed by each member of the
group that it is aware that it can be called upon to pay the workers'
compensation claims of another member of the group pursuant to the Labor Code
Chapter 407A.
(11) The statement
required by §5.6404 of this division (relating to Notification to the
Department and Responsibility for Continued Compliance).
(12) A business plan or plan of operation
that describes the group's business activities, safety program, and
organization. The plan must also include:
(A)
the identity of the administrator of the group and any third party
administrator that provides services to or on behalf of the group;
(B) excluding any person identified pursuant
to subparagraph (C) of this paragraph, the identity of any service company that
performs one or more of the following services:
(i) provides cash and asset management
services to a group, including any person that has access to or disbursement
authority over any of the group's assets and accounts;
(ii) maintains the group's accounting records
or organizational documents;
(iii)
stores or maintains the group's electronic books and records, including a
person identified by a group under §5.6409(b)(3) of this division (relating to
Books and Records); or
(iv)
provides management of a function for which the group retains ultimate
responsibility under the Insurance Code, the Labor Code, or rules adopted
thereunder;
(C) the
identity of:
(i) the accountant of the group;
and
(ii) the actuary of the
group.
(D) a general
description of the experience, qualifications, facilities, and personnel of a
person identified pursuant to subparagraph (A) or (B) of this paragraph;
and
(E) the identity of the
affiliates of a person identified pursuant to subparagraph (A) or (B) of this
paragraph. A group may identify such affiliates in an organizational
chart.
(13) A copy of
each written agreement required under §5.6411 of this division (relating to
Contract Provisions).
(14) A
statement that a third party administrator identified pursuant to paragraph
(12)(A) of this subsection either holds the required authorization from the
department or has applied for the required authorization from the department
and that the group will verify that such authorization has been granted by the
department before the group allows the third party administrator to provide
services to or on behalf of the group.
(d) The group must also submit the following:
(1) proof that it has received payment or a
promise to pay from each member of 25% of its first year estimated modified
schedule rating premium. If the group approves a member's submission of a
promise to pay the 25% of premium, the employer must submit payment of the
amount promised no later than 10 days after the effective date of the member's
coverage with the group, or
(2) a
certification by a certified public accountant and an actuary that assets and
reserves of the trust satisfy the requirement of the Labor Code §
407A.051(c)(11)(B).
(e) Each member of the initial
board of trustees of a group, subsequent members of the board of trustees of a
group, and the executive officers of a person identified pursuant to subsection
(c)(12)(A) or (B) of this section shall provide to the department a completed
biographical affidavit in accordance with §
7.1604(b)(1)(C)
of this title (relating to Application Denial, Suspension, Cancellation, or
Revocation). A biographical affidavit is not required if a biographical
affidavit from the individual has been filed with the department within the
prior three years and contains substantially accurate information. A
biographical affidavit must demonstrate that the affiant has sufficient
experience, ability, standing, and good record to make success of a group
probable.
(f) Each member of the
initial board of trustees of a group, subsequent members of the board of
trustees of a group, and the executive officers of a person identified pursuant
to subsection (c)(12)(A) or (B) of this section shall comply with the
requirements of Chapter 1 Subchapter D of this title (relating to Effect of
Criminal Conduct).
(g) A person
subject to this division and to the requirements of the Insurance Code §
4151.055 may satisfy
the requirements of §4151.055 by obtaining a fidelity bond that meets the
requirements of subsection (c)(6) or (7) of this section, as
applicable.
(h) Pursuant to the
Labor Code §
407A.051(b)(7),
the commissioner may require the submission of any other relevant information
reasonably required to determine whether to approve or disapprove an
application for a certificate of approval.
Notes
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