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 3 - Security Deposit Requirements
Section 15210.1 - Adjustments in the Amount of Security Deposit

(a) Pursuant to Labor Code Section 3701, the security deposit requirement of each individual private self-insured employer shall be reviewed by the Chief at least annually following receipt of the private Self-Insurer's Annual Report and Actuarial Study and Summary.

(b) The individual private self-insurer shall post any annual increase or decrease in security deposit required pursuant to Labor Code Section 3701 indicated in the annual actuarial study and summary as specified by these regulations or as determined by the Chief due to an audit, change in the self-insured employer's program or based on a change in required deposit made by the Chief under these regulations. This deposit posting is due no later than 30 days from the date the written notice of security deposit demand is made.

(c) No reduction or decrease in security deposit shall be made without prior written authorization of the Chief. The Chief shall review each individual private certificate holder's annual report and the certificate holder's file no less frequently than annually to determine the extent to which a decrease in deposit, if any, may be authorized.

(d) For good cause, the Chief may require the individual private self-insurer to post and maintain additional security deposit or adjust the required security deposit for a specific private self-insurer above the actuarially determined expected losses also commonly known as the actuarial central estimate, including incurred but not reported (IBNR) liabilities, Allocated loss adjustment expense (ALAE), and Unallocated loss adjustment expense (ULAE) as set forth in Labor Code Sections 3701, 3701.7, and 3701.8. Good cause includes, but is not limited to, understated future liability of claims on the Self-Insurer's Annual Report; the lack of, or an inadequate or unacceptable, actuarial study or summary; a pattern of understated liabilities in claim files audited in an audit; failure to report all claims; poor administration of claims or payment of benefits due injured workers found in the audit results of the Division of Workers' Compensation Audit Unit or audits by the Office of Self-Insurance Plans; lack of an effective safety and health program as indicated by final citations issued by the Division of Occupational Safety and Health showing repeat or willful violation of safety and health regulations; impairment of financial condition of the self-insurer as determined by the Chief; failure to provide and maintain current and complete parental Guaranty of Workers' Compensation Liabilities or board of director's resolutions; the result of evaluation of an application to self-insure; or to cover a period of unlawful self-insurance; or being required to post a security deposit in whole or part pursuant to Section 3701.8 of the Labor Code and Article 3.1 (commencing with Section 15220) of this subchapter 2.

(e) Whenever the Chief determines that a deposit increase is required, the Chief shall send written notice to the individual private self-insurer pursuant to Labor Code Section 3701(b) and (j). Notice of the amount of deposit due shall create a perfected security interest for the self-insurer's Security Fund.

(f) Any increase in the security deposit requirement for an individual private self-insurer following the Chief's determination that estimated future liabilities had been understated on the private employer's Self-Insurer's Annual Report, shall be reported to the Security Fund. The Security Fund shall be authorized to adjust the deposit assessment for the alternative composite deposit.