Certified Self Insurance
- What is Self Insurance?
- Who May Apply?
- Primary Qualifications
- Request an Application Packet
- Application and Approval Process
- Program Fees and Taxes
- Listing of Certified Self-Insurers (PDF)
- Public Entity Self-Insured
Certified Self-Insurance is a program that allows private employers in Texas to self-insure for their workers' compensation losses. The enabling statute is found in Chapter 407 of the Texas Labor Code (TLC). Program rules are in Chapter 114 of the Texas Administrative Code.
Employers wanting to self-insure must apply to the Texas Department of Insurance, Division of Workers' Compensation (TDI-DWC) Self Insurance Regulation (SIR) program for a Certificate of Authority to Self-Insure. After approval, the company pays its own workers' compensation losses.
Approval as a Certified Self-Insurer (CSI) affords the applicant company workers' compensation insurance coverage under the TLC.
Since workers' compensation coverage is not mandatory in Texas, some companies that are non-subscribers use the term "self-insured" to describe their workers' compensation coverage status under the TLC. Unless a private company holds a Certificate of Authority as a CSI, a company is considered a non-subscriber according to the TLC.
Self-Insurance is available to qualifying private employers that have operations in Texas.
Public entities such as cities, counties, school districts, any state of Texas agency, state college or university, or other public entity may self-insure by virtue of Sections 501-504 of the TLC. There is no self-insurance application and approval process for these entities to self-insure. SIR does not regulate these public self-insured entities or their self-insured groups.
Some of the key requirements to become a CSI in Texas include:
- A private employer with operations in Texas;
- An estimated unmodified manual insurance premium of at least $500,000 in Texas, or at least $10,000,000 nationwide;
- Presentation of audited financial statements;
- Qualifying Credit/Debt ratings:
- Dun & Bradstreet - 3A1 or better or
- Standard & Poor's - BBB or better or
- Moody's Investor Services Baa or better;
- A qualifying Tangible Net Worth to Long Term Debt ratio of 1.5 to 1, with minimum Tangible Net Worth of $5 million;
- Posting of a minimum security deposit of $300,000;
- Posting of excess insurance in the amount of $5 million per occurrence;
- Submission of an "Application for Certificate of Authority" to SIR; and
- Payment of a non-refundable $1,000 application fee.
To request an application packet call 512-804-4775 and leave your name, company name and address or send an e-mail to SelfInsurance@tdi.texas.gov with your name and company name. SIR's normal office hours are 8 a.m. to 5 p.m. (Central Standard Time), Monday through Friday.
- Self-Insurance Regulation processes your application
- Your application is presented for approval
- Certification processing after approval
- Ongoing Regulatory Activities
- Withdrawal From Self-Insurance
SIR processes your application
- After receipt of your application, SIR will acknowledge receipt of your application and provide you with the name of your individual Account Manager. The Account Manager is the SIR employee responsible for processing your company's application and serves as your primary contact at TDI-DWC.
- The Account Manager, in conjunction with the TDI-DWC claims, finance, and safety staff, will review your application and contact you if additional information is needed.
- After the initial review process, the following work on your application will proceed concurrently:
- Review of financial and corporate structure information;
- Review of claims-related information and calculation of a recommended security deposit; and
- Review of safety plan and on-site safety program inspections.
- When the review is complete, a report is prepared that discusses the company in general and includes financial, claims, and safety information.
- If the applicant meets all TLC and agency rule requirements, SIR presents the report on the applicant company to the Guaranty Association in a public meeting. The Guaranty Association votes to recommend or not recommend your application for approval and your company's membership in the Guaranty Association.
Generally, the Guaranty Association meets on a quarterly basis to consider applications. Your SIR Account Manager will advise you as to the specific meeting time and date when your application will be presented. It is recommended that your company have a representative present at this meeting to answer any questions or clarify information regarding your application or company that might arise in the course of the Guaranty Association's discussion.
- After the application is approved by the Guaranty Association, the Commissioner of Workers' Compensation will issue a certificate. Several items must be filed with SIR prior to the effective date of a Certificate of Authority to Self-Insure.
- Parental Guaranty - If applicable, completed form(s) will be sent to you for signature.
- Security Deposit - A security deposit in the amount determined by the Division in the form of a Letter of Credit, Surety Bond, or cash.
- Letter of Credit - An Irrevocable Standby Letter of Credit prepared on DWC Form-223 from a Texas or federally chartered bank with a branch office in Texas and with a long-term debt rating of A or better by "Moody's Statistical Handbook" or Standard & Poor's "Financial Institutions Rating". In addition, the Self-Insurer's Agreement to Post Documentary Irrevocable Standby Letter of Credit prepared on DWC Form-225 must also be submitted. After receipt of signed agreements, SIR will sign and return one copy for your records.
- Surety Bond - A Surety Bond written on DWC Form-210 issued by a company authorized to conduct such business in Texas and has an A.M. Best rating of B+ or better or a Standard & Poor's rating of claims paying ability of A or better.
- Cash - U.S. currency.
- Signed Third-Party Administrators Agreement - One complete copy of the contract for claims administration. Both the certified self-insured and the qualified Third-Party Administrator must properly execute the contract. If actual financial costs are an addendum to the contract, it is not necessary to provide the financial information.
- Excess Insurance Coverage - Proof of excess insurance coverage from the excess insurance carrier with retention equal to or less than the Security Deposit. The Guaranty Association must be named as an additional insured in the event a CSI becomes an impaired employer.
- Certification - Upon receipt of the above items, the following events take place:
- Certificate of Authority to Self-Insure will be issued for a one-year period;
- An invoice is submitted to the CSI for its fees (Refer to Program Fees & Taxes for information on fee assessments); and
- Your company becomes a member of the Guaranty Association and you will be contacted directly by the Guaranty Association concerning requirements and obligations as a member.
- Annual Renewal Report - Several months before the expiration of your current certificate, your Annual Renewal Report form will be mailed to you for completion. SIR has combined all of its annual reporting requirements into the Annual Renewal Report for your convenience. In order to avoid processing delays caused by additional requests for information, submit complete and accurate information on the renewal report. SIR reserves the right to request additional information, including loss information to analyze the continuing adequacy of the security deposit on file.
- On-Site Safety Inspections - Upon initial application, the first renewal, and at least once every three years thereafter, the SIR Safety section will conduct an on-site safety program inspection of your Texas operations. Safety program inspections may be conducted at other times, as necessary.
- Actuarial Reports - An actuarial report will be due with the Annual Renewal Report that is filed after your company has completed three full years of certified self-insurance experience, and every three years thereafter. SIR may require an interim or special actuarial report for circumstances deemed necessary.
- Covered Locations - Any additions or deletions to your covered location list should be promptly provided to your SIR Account Manager to ensure that any change is covered under the certificate. A request to add significant subsidiary operations or new subsidiaries may be subject to an on-site safety program inspection prior to extending coverage under your certificate.
- Voluntary Withdrawal
The CSI must submit advance written notice of the intent to withdraw. The notice should address these items:
- The proposed withdrawal date;
- A written plan that shows how the claims liabilities will be paid and administered until all liabilities are paid;
- Location where the claim files will be stored;
- Provide notification to SIR if the files are relocated, if the Third-Party Administrator (TPA) is changed, and/or if the Austin, Travis County Representative has changed;
- A copy of the signed TPA contract, if different from the TPA that is currently administering the claims;
- Current loss run listings; and
- The company contact person, if different from the current contact person.
After receipt of a notice to withdraw, SIR will prepare a report summarizing the claims payout plan you have outlined. This report will be submitted to the Guaranty Association for review and the Commissioner of Workers' Compensation for approval. Once your withdrawal plan has been approved an Official Order will be issued showing that your company withdrew from the program.
- Ongoing Regulation After Withdrawal - SIR will continue to monitor your payout plan and the withdrawn CSI must continue to report on a yearly basis for the claims it incurred during its period of certification. Actuarial reports and annual financial statements will continue to be required; however, safety program inspections are not conducted after withdrawal.
This section provides a summary of Certified Self-Insurance fees.
- Regulatory Fee
- Maintenance Tax
- Research Maintenance Tax
- Texas Certified Self-Insurer Guaranty Association Fees
The fee examples shown in this section are based upon Calendar Year 2016 billings. Applicants can use these estimates for planning purposes in evaluating their own particular cost, if the applicant were to become a CSI.
Regulatory Fee [ TLC §407.102]
The regulatory fee covers the administrative costs of SIR incurred by the TDI-DWC in implementing the Self-Insurance Program in the TLC. The regulatory fee that is billed at the time of certification is an estimated amount for the calendar year based upon an estimated annual administrative cost and an estimated total of all CSIs' income benefit payments. A final assessment is made at the beginning of the following calendar year, based upon the actual total administrative cost of the self-insurance program, as well as the actual total of all CSIs' income benefit payments, once all companies have reported for the billing year. A reconciliation of actual fees owed versus actual fees billed in the prior calendar year is then calculated. Overpayments from the prior calendar year, if applicable, appear as credits on the following calendar year's regulatory fee invoices. Conversely, final bills are generated and sent to all CSIs when regulatory fees are owed from the prior calendar year.
SIR uses the CSI's income benefit payments made in the preceding calendar year to calculate each CSI's regulatory fee. For the purposes of continuity and fairness to all CSIs, the preceding calendar year is translated as the most recent year for which all CSIs are able to report calendar year end totals. For example, a company certified in 2016 would be invoiced on benefit payments made in 2014 for claims occurring in 2012, 2013, and 2014. Claims occurring within a three-year time frame are used in order to stabilize regulatory fee changes between the years due to fluctuating benefit payments.
The following is an example of how the formula was used to calculate the regulatory fee for the 2016 invoices:
Using the amounts below as an example, a company would owe $3,167 for the regulatory fee.
The regulatory fee is calculated as follows:
The TLC authorizes the TDI-DWC to collect a maintenance tax to pay for the TDI-DWC's cost of administering the TLC. CSIs, as well as all Texas workers' compensation insurance carriers, other than governmental entities, pay this tax. It covers the operations of the TDI-DWC, excluding SIR, which is paid directly by the CSIs through the regulatory fee. This billing is done on an annual basis at the time of certification.
The CSI's TDI-DWC maintenance tax calculation is based on the individual company's amount of liabilities for Texas workers' compensation claims that occurred in the previous year including claims incurred but not reported (IBNR), plus the amount of expense incurred by the CSI multiplied by 1.02. This tax base is multiplied by the rate assessed by the DWC to insurance carriers, which is subject to a limit of two percent. For the purposes of continuity and fairness to all CSIs, the previous year is translated as the most recent year for which all CSIs are able to report calendar year end totals. For example, companies certified in 2016 were invoiced on liabilities for claims occurring in 2014.
The formula for the DWC maintenance tax is:
As an example, a company with a CSI tax base of $1,000,000 and a DWC maintenance tax rate of 1.478% would owe $11,478 for the DWC maintenance tax. The calculation is as follows:
Workers' Compensation Research Maintenance Tax [ Section 405.003]
CSIs, as well as all Texas workers' compensation insurance carriers, except government entities, pay this tax. TDI is authorized to set a maintenance tax rate to fund the activities related to certain workers' compensation research functions. SIR collects Workers' Compensation Research maintenance tax on its behalf. This billing is done on an annual basis at the time of certification.
The Workers' Compensation Research maintenance tax is based on the same CSI tax base as the DWC maintenance tax. The tax base is then multiplied by the rate assessed to insurance carriers, which is subject to a limit of one-tenth of one percent.
As an example, a company with a $1,000,000 CSI tax base (as defined above) and a Workers' Compensation Research maintenance tax rate of .00015% would owe $150 for the Workers' Compensation Research maintenance tax. The calculation is as follows:
Texas Certified Self-Insurer Guaranty Association Fees [ Section 407.126]
The Guaranty Association is required by the TLC to create a Texas Certified Self-Insurer Guaranty Trust Fund of at least $1 million, not to exceed $2 million, over a period of ten years beginning January 1, 1993, for the emergency payment of the compensation liabilities of an impaired CSI. The Guaranty Association bills an assessment for this fund and also assesses fees, billed separately from DWC, to cover various costs of the Association. Inquiries about the Association's fees should be directed to the Executive Director, Guaranty Association at (817) 456-6727.
Public entities such as cities, counties, school districts, any state of Texas agency, state college or university, or other public entity may self-insure by virtue of Sections 501-504 of the TLC.
There is no self-insurance application and approval process for these entities to self-insure.
SIR does not regulate public self-insured entities or their self-insured groups.
To Contact Self-Insurance Regulation
Telephone 512-804-4775 OR 800-252-7031 x44775
SIR's normal office hours are 8 a.m. to 5 p.m. (Central Standard Time), Monday through Friday.
To Contact Group Self-Insurance
SIR does not regulate private employers that have established a workers' compensation self-insurance group under TLC, Chapter 407, Subchapter A. Group Self-Insurance is regulated by the Texas Department of Insurance. For information call 512-322-3507.
For more information, contact:
Last updated: 08/01/2016