500 employees in NSW, employees means permanent staff whether full-time or part-time

SIRA may use its discretion to grant a licence to an employer which does not meet this requirement if such an employer can demonstrate its ability to meet the application requirements.

The requirement to have 500 employees is not applicable for licence renewals as SIRA will continue to assess a self-insurer’s legislative compliance and performance under its licensing framework to determine licence renewal.

Workers Compensation Act 1987 , Part 7, Div 5 

Self-insurers must demonstrate ongoing financial viability and strength to undertake their obligations to comply with requirements of the workers compensation legislation. Self-insurers need to demonstrate that they have sufficient financial resources to cover their financial obligations, and be of sufficient size to provide the necessary security to mitigate the risk of insolvency and to properly invest in the infrastructure and resources required to best meet SIRA self-insurance requirements.

s379(4)(a) — Workplace Injury Rehabilitation and Compensation Act 2013 (WIRC Act). Consideration given to both primary and secondary financial indicators and associated benchmarks dependent on industry sector, i.e. Manufacturing, Finance, Retail, Transport and Other (Public/Non-Public).

Primary financial indicators and benchmarks: Balance Sheet Test (1.0–1.5), Current Liquidity (0.8–1.2), Claims Liability (4.0%), Interest Coverage (2.0–3.0), Gearing Ratio (55–60%), Cash Flow Margin (3.0–6.7%), Bad Debt Ratio (2.0%), Excess Capital (10.0%).

Secondary financial indicators and benchmarks: Return on Investment (5.0-10.0%), Profit Margin (pre-tax) (1.4–4.9%), Quick Liquidity (0.5–0.8%), Stock Turnover (5.0–6.0), Debtor Turnover (46–50 days), Labour Costs (33%), Customer Loan Ratio (50), Net Interest Margin (1.5) and Operating Costs to Revenue (65%).

Workers’ Compensation and Rehabilitation Act 2003   s71 ,  s72 ,  s75 ,  s84 ,  s86 

s71 — Employers must be considered fit and proper to be self-insurers. ( s75 ) This includes a consideration of the long-term financial viability of the employer, evidenced by its level of capitalisation, profitability and liquidity.

Self-insurers must:

• s84 — Lodge a security (unconditional bank guarantee, cash deposit, or financial guarantee given by an insurance company that is an approved security  provider ), for an amount equivalent to 150% of the self-insurer’s estimated claims liability, and
• s86 — have  reinsurance cover, where the self-insurer’s liability is an amount chosen by the self-insurer that is not less than $300,000 or more than the set limit without approval.

NB. The Workers’ Compensation Regulator has the discretion to issue or renew a self-insurance licence in circumstances where an employer does not meet one or more of the strict criteria for self-insurance, if satisfied that special circumstances exist that warrant the employer or group employer being issued a licence or having a licence renewed. The circumstances where an employer does not meet the criteria for self-insurance include, but are not limited to, instances where an employer or self-insurer does not have 2,000 full time workers.

s164 and  s165 — Self-insurers are to maintain adequate financial resources to comply with the requirements of the Workers’ Compensation and Injury Management Act 1981. 

Self-insurers must provide audited financial statements, which include:

• Balance Sheet Test (i.e. total tangible assets/total liabilities)
• quick liquidity (i.e. current assets less stock/current liabilities)
• current liquidity (i.e. current assets/current liabilities)
• interest coverage (net profit before tax/net interest expense)
• return on investment (net profit before tax/total equity)
• claims liability as a percentage of net assets (outstanding claims/net assets), and
• gearing ratio (loan capital/total capital employed).
• WorkCover WA, at its discretion, may apply further secondary financial indicators if there are doubts concerning the organisation’s financial viability.

ReturnToWorkSA will consider each of the following 4 primary indicators in all cases and the secondary indicator, where considered appropriate:

Primary indicators

• Balance sheet test, being total tangible assets divided by total liabilities
• Gearing ratio, being loan capital divided by total capital employers
• Liquidity ratio, being current assets divided by current liabilities
• Cash flow margin , being operating cash flow divided by net sales

Secondary indicator

• Profitability  ratio , being net profit before tax divided by total equity.

Part IX, Div 2,  s105 of Workers Rehabilitation and Compensation Act 1988.

s105(2) — In granting a self-insurer permit, the Board is to take into consideration:

1. the employer’s financial history; and
2. the employer’s ability to provide the statistical and other information required or likely to be required under the Act; and
3. the employer’s ability to satisfy such prudential standards as the Board determines; and
4. the employer’s capacity to comply with Part XI and any regulations or guidelines for the purposes of that Part; and
5. the employer’s commitment to occupational health and safety.

WorkCover must be provided with:

• a completed Permit to Self-Insure Application form.
• a completed Financial Indicators form.
• a desktop review of financial information by an independent expert.
• printed or electronic copies of the last 3 annual reports
• evidence of a high standard of proven work health and safety management practices.
• evidence of a high standard of injury management practices.
• evidence of a high standard of claims management practices.
• evidence of ability to meet  WorkCover’s data reporting requirements.

For new entity employers (that is, a legal entity with no history of operating in Tasmania), you must satisfy additional financial criteria.

• See  How to apply for a permit to insure (self insurer) for more information.

Return to Work Act 1986   s120 

• Financial viability of the employer —  s120(3) , which is to be demonstrated through:
• the provision of the company’s 3 latest detailed annual balance sheets, including profit and loss statements, together with notes and their auditor’s report following this   an actuarial report on the company, which details its current NT workers’ compensation liabilities and ability to  meet both its current and expected liabilities under the Act
• reinsurance cover of an unlimited amount in excess of the company’s liability of $1 million (indexed) for any one event, and
• a 3 year history of the company’s NT workers’ compensation claims.
• financial security by way of a bank guarantee

Workers Compensation Regulation 2002   Part 10 .

Evidence that the applicant has unlimited reinsurance for a single event to cover the applicant’s existing and expected liability.

Actuarial report containing an estimate of:

• existing outstanding liability in relation to compensable injuries;
• the applicant’s expected liability each year for the 2-year period beginning on the day the applicant applies for the licence; and
• the total of the expected payments in satisfaction of the applicant’s liability for compensable injuries likely to be made each year for the 2-year period  beginning on the day the applicant applies for the licence.

A guarantee from an authorised deposit-taking institution in favour of the DI fund for $1,000,000 or the estimate of outstanding claims liability at the balance date, plus a prudential margin of 50% (whichever is greater).

Evidence that the applicant has in place an occupational health and safety management system that complies with any Australian or New Zealand standards in relation to safety mentioned in a protocol relating to applying for a licence

The regulator may, in writing, require further evidence that demonstrates the applicant is financially and prudentially sound or will be able to meet any obligations as an insurer under the Act for which the employer is, or is expected to be liable.

Safety, Rehabilitation and Compensation Act 1988 ,  Part VIII 

Financial:

• provide  previous 5 years’ audited statements
• financial viability assessment conducted by independent financial consultant, and
• provide certification from the principal officer that they are not aware of any likely events which may materially impact on the suitability of the applicant for approval.

Prudential:

• must have the actuary prepare a liability report to the Safety, Rehabilitation and Compensation Commission’s (the Commission)  requirements
• the lia bility report must:
  • – include an estimate of the applicant’s outstanding liability at the end of the first 12 and 24 months of the licence
  • – advise the level of guarantee required (calculated by the actuary at the 95th percentile of projected outstanding claims liabilities in 24 months’ time from the licence commencement date, and
  • – the addition of one reinsurance policy retention amount
• must recommend appropriate reinsurance arrangements and comment on the suitability of arrangements, and assess the applicant’s capacity to pay amounts up to the recommended reinsurance excess amount, and
• the applicant is required to obtain the bank or other guarantee in the form required by the Commission and appropriate reinsurance cover, before the commencement of the licence.

No specific minimum employee number

In practice, the pricing mechanism makes entry to the program not financially viable to employer whose standard levy is less than NZ$250,000.

Accident Compensation Act 2001   s185  

Accident Compensation Corporation (ACC) is required to satisfy itself that an employer is able and will continue to be able to meet its expected financial and other obligations in relation to work-related injury claims because it is insolvent and financially sound. 

The Framework for the Accredited Employers Programme requires ACC must have regard to the degree that the employer can establish: 

• it has substantial net worth
• that its contingent liabilities are not excessive (details to be provided including an evaluation as to likely crystallisation of those liabilities)
• it has an appropriate working capital ratio based on current assets divided by current liabilities
• it has an appropriate equity to debt ratio, and
• it has an appropriate return on equity.

These figures should, where possible, be provided for the 3 financial periods preceding the application and include best estimates for at least the then current financial period and the next financial period (‘period’ normally meaning a year).