The Self Insurers Security Fund ('the Fund"), is a non-profit mutual benefit corporation created by the State of California in 1984, to provide continuation of statutory workers compensation obligations to the employees of private (non-public entity) employers which were legally self-insured for workers compensation in California and defaulted in their workers compensation obligations. Self-insurance is regulated by the State of California, and private organizations must meet certain criteria in order to self-insure workers compensation coverage. The Fund's assets and operations, which are designed to assume the future workers compensation liabilities of private self-insureds in the event of default, help ensure the viability of a workers compensation self-insurance program option for private companies operating in California.

 

The Director of the Department of Industrial Relations (DIR) and its Office of Self Insurance Plans (OSIP) provides regulatory enforcement and administrative control over all workers compensation self-insured entities operating in California. In addition, prior to July 1, 2003 and currently for certain non-qualified self-insured entities, DIR determines the amount of collateral (security deposit) a self-insured must post with the State to cover expected future claim costs in the event the entity defaults in its workers comp obligations. DIR monitors each self-insured and determines if and when a self-insured is declared to be in default, which typically arises after Chapter 7 bankruptcy. Once this occurs, the insolvent self-insured's estate of workers comp claims is then turned over to the Fund to manage until all of the estate's claim obligations can be settled and/or legally closed.

The Fund's claim-related expenses arising from the estates turned over to the Fund as well as its operational expenditures are funded through annual member assessments as well as the Fund's on-going investment earnings. The State of California provides no financial support to the Fund since it demands that all of the Fund's operations and obligations be borne by its member entities through assessments. Currently, 518 private self-insured entities operating in California with over three (3) million employees represent an aggregate total estimated future liability of nearly $6 billion in workers compensation claims.

All private self-insureds in California are required by Labor Code to be members of the Fund, and are assessed annually to sustain its operations and to attain adequate assets (Default Loss Fund) to cover actual and potential obligations arising from estate workers comp claims. The Fund has built up cash and investments and has maintained annual risk transfer arrangements to provide reasonable assurance that the Fund has the capacity to assume current and future financial obligations arising from estates turned over to the Fund. If the Fund were to experience unforeseen financial short-falls in the future, it has the legal authority to assess its members to fund its operations which include its workers comp obligations.

Since July 6, 1984, when the Fund was incorporated by the State of California, it has assumed ultimate workers comp claim liabilities of $160 million arising from 64 insolvent, former self-insured entities. California Canners & Growers was the first Fund's first assigned estate in 1984. Of the $160 million in estimated total claim costs, surety bonds or collateral posted with the State by the former self-insureds totaled less than $70 million. As a result, the Fund and its members have had to assume a projected ultimate shortfall of nearly $90 million.

As expected, the majority of the workers compensation injuries or illnesses inherited by the Fund are mature indemnity claims arising from diverse industries that typically provided lifetime medical and/or disability benefits. In fact, some of the California estate injured workers, now handled by the Fund, had suffered workers compensation injuries or illnesses as far back as the 1940's.

Utilizing two third-party claims administration firms, the Fund manages over 1,500 open claims from 41 active estates that represent an ultimate future liability - including administrative costs - of approximately $48 million. The highest aggregate expense of claims paid by the Fund in any single year was $13.5 million. Currently, the Fund spends about $8 million per year to cover estate claim payments and claim administration costs. Since early 2003, when the Fund was in a negative equity position of over $50 million, the Fund now has gross assets of approximately $220 million as well as a $100 million line of credit.