SFAA Addresses Surety Qualifications and Bonding Obligation for California Workers? Compensation Collateral Requirements
SFAA submitted comments to the California Department of Insurance (Department) to address proposed rules that would allow surety bonds to be posted to collateralize up to 20% of the funds required to be set aside for the California deductible under a workers’ compensation deductible policy. We questioned the requirement for the surety to have a rating of at least an “A” from A.M. Best, Fitch Ratings, or Standard & Poor’s, or at least an A3 rating from Moody’s Investor Service as sureties already are subject to financial regulation and licensure from the Department. The rating requirement needlessly restricts the sureties that can provide the bond.
SFAA also recommended that the bond?s condition should be clarified to reflect a specific obligation as the proposed rules currently provide for unconditional payments. The surety also would have ten days to pay the amount owed under a written demand for payment from the insurer. SFAA also advised the Department on the value of bonds in comparison to the other forms of security permitted under the proposed rules.
The surety could not be affiliated with the insurer that issued the worker’s compensation deductible policy. The surety must provide 90 days’ notice for cancellation or nonrenewal of the bond and the collateral would have to be replaced within 30 days of the effective date.
Members should visit Advocacy / General Info (Members) for more information.