California Code of Regulations
Title 8 - Industrial Relations
Division 1 - Department of Industrial Relations
Chapter 8 - Office of the Director
Subchapter 2 - Administration of Self-Insurance Plans
Article 13 - Group Self-Insurance
Section 15497 - Adjustments in the Amount of a Group Self-Insurer's Security Deposit

(a) Each group self-insurer's security deposit requirement pursuant to Labor Code Section 3701 shall be reviewed by the Chief at least annually following receipt of the private group's Self-Insurer's actuarial study and summary. If following the receipt of the group self-insurer's actuarial study and summary an increase in security deposit is required, the increase shall be calculated pursuant to Labor Code Section 3701 and Section 15496(a) of these regulations and shall be posted no later than thirty (30) days from the date the written notice of security deposit demand is made.

(b) In addition to any increase in the security deposit pursuant to subsection (a), the Chief may require the group self-insurer to post additional amounts pursuant to Section 15496 in the event that new affiliate members have been added to the group self-insurer but have not yet reported a full year of losses, in the event of audit increases pursuant to Section 15301, or in the event of a change in the deposit rate pursuant to Sections 15497 or 15497.1.

(c) No group self-insurer shall reduce its security deposit based on calculations pursuant to Section 15496(a) without prior written authorization from the Chief.

(d) For good cause, the Chief may require a group self-insurer to increase its security deposit at any time. Good cause includes, but is not limited to, impairment of financial condition of the self-insurer as determined by the Chief, increases in group membership, increases in losses as indicated in Self-Insurer's Annual Report, increases in losses as indicated in the actuarial study and summary or by audit over losses projected in actuarial reports, or failure of the group self-insurer to maintain total assets greater than its total liabilities.

(e) In the event that a security deposit increase is required and upon sending by the Chief to the group self-insurer a letter demanding the increase, a perfected security interest in the group self-insurer's and each affiliate group member's assets to the extent of any unsecured portion of the group self-insurer's incurred liabilities shall be created in favor of the Director pursuant to Labor Code Section 3701(k).