Initial security equivalent to tariff premium (WIC rate estimated wages) for the previous 12 months plus a prudential margin of 50%. This is subject to the minimum self-insurer security requirement.

• A minimum security  of $2.5 million applies except for government entities (local councils and public universities) and former self-insurers. Government employers are exempt from the security requirements.
• SIRA has discretion to seek additional security if it believes circumstances are warranted. For subsequent reviews for self-insurers with a central estimate of outstanding claim liability <$50 million — 150% of self-insurer liabilities including a prospective component for the 12 months post balance date. The prudential margin does not apply to government entities.
• For self-insurers with a central estimate of outstanding claim liability ≥$50 million the security is to be determined as at the 95th percentile to achieve a 95% probability of adequacy.
• SIRA accepts cash, securities , or bank guarantees.

A self-insurer must obtain and maintain unlimited reinsurance cover during the currency of the licence so as to restrict its liabilities under the Workers Compensation Act 1987 and independently of the 1987 Act to a maximum amount approved by SIRA in respect of any one event. The reinsurance cover must be provided by an insurance company authorised by the Australian Prudential Regulation Authority.

• A retention  amount under the above policy or policies, provided that it is within the range of $500,000 to $2,500,000 per event is acceptable to SIRA.
• Retentions in excess of $2,500,000 will require prior approval by SIRA. In such instances SIRA will require the self-insurer to undertake and provide an assessment of the likely cost of risk retention and the appropriateness of the level of retention sought as part of the approval process.

s393 Workplace Injury Rehabilitation and Compensation Act 2013  (WIRC Act) 

A self-insurer  must ensure that there is in force at all times a guarantee in respect of its assessed liability. The guarantee must:

• be  given by an Authorised Deposit-Taking Institution (ADI);
• be in a form approved by WorkSafe Victoria; and
• guarantee payment of amounts not less than 150% of the assessed liability or $3 million (whichever is  greater ).

The valuation of the self-insurer’s assessed liability includes a prospective component which is included in the calculation of the quantum coverage of the guarantee.

s380(3) &  s393(1)(b) WIRC Act

• A Ministerial Order sets out the terms and conditions to which the approval of an  organisation as a self-insurer is subject.
• The Ministerial Order covers the requirements that must be met for a contract of insurance in respect of contingent liabilities that a self-insurer must have in force at all times.
• A self-insurer may select an excess for its contingent liability insurance policy of any amount not greater than $ 5 million. There is no minimum excess amount.

On 1 July 2013, changes to the minimum level of securities for self-insurers came into effect.

For self-insurers approved prior to 1 July 2013:

• The minimum level of securities increased from $1 million to $1.5 million.
• The level of outstanding claims liabilities plus the 50% prudential margins is rounded up to the next $100,000.

For self-insurers approved after 1 July 2013:

• The  minimum level of securities is set at $2 million.
• Thereafter, the level of securities is to be determined as above.

Actuarial assessments of outstanding claim liability are required on an annual basis and used to determine security amounts.

Outstanding liability multiplied by a prudential margin of 2. It is revised annually in accordance with an actuarial  report the employer must submit within 3 months after the end of the financial year. Minimum guarantee applies 01/01/2018— $870,000.

Refer to  Schedule 3 Return to  Work Regulations 2015 and  Code of Conduct for Self-insured Employers .

Self-insurers need to maintain an excess of loss insurance policy that must satisfy:

• $100  million on the sum insured
• a deductible of not less than $500,000 per event or series of events, and
• if the self-insured employer elects to include a stop loss excess or aggregate excess, such stop loss or aggregate excess must not be less than the higher of:
  • 3 times  the individual incident excess, or
  • 10% abov e the average incurred claim cost for the prior 3 years.

Refer to  Schedule 3 Return to Work Regulations 2015 and  Code of Conduct for Self-insured Employers .

For self-insurers with less than 3 years' experience:

• Bank guarantee equal to:
  • Yr 1: Notional Premium x 100%
  • Yr 2: Notional Premium x 140%
  • Yr 3: Notional Premium x 180%
• Plus the greater of:
  • 30% of the adjusted notional premium, or
  • the amount of excess to be paid (per event retention), or
  • $500,000.

For self-insurers with more than 3 years experience:

• Minimum of 150% of central estimate of outstanding claims liabilities or $1m  whichever is greater.

Providing a financial undertaking 

How the Financial Undertaking is determined 

Guarantee from an authorised deposit-taking institution for the greater amount of:

• $1, 000,000 or
• an am ount calculated by an actuary to be the estimate of outstanding claims liability at the balance date, plus a prudential margin of 50%. –  s84A of the  Workers Compensation Regulation 2002 

Prudential conditions are outlined in the  Licence Compliance and Performance Model. 

• Deed between the Commission, Comcare and a bank or insurer for an amount that can be called  upon by the Commission in the event a self-insurance licence is suspended or revoked.
• The guarantee is usually provided annually and if required must be provided within 170 days of  the start of the financial year to which the guarantee relates.
• The guarantee must be for an amount calculated by the actuary as the greater of:
  • the 95th percentile of Outstanding Claims Liabilities at the Balance Date and the addition of one reinsurance policy retention amount, or
  • the 95th percentile of projected Outstanding Claims Liabilities in 12/18/24* months' time from the Balance Date and the addition of one reinsurance policy retention.

NB: actual licence will specify: 12 months for licences in the 6th or more year of licence; 18 months for licences in the 4th — 5th year of licence; 24 months for licences in the 1st — 3rd year of licence

ACC provides 2 liability caps to Accredited Employers to manage the financial risk: 

• Stop Loss Cover –  Optional under Partnership Discount Plan, mandatory under Full Self Cover Plan.  Accredited Employers can limit their liability for total claim costs incurred for injuries suffered  during a cover year by choosing a range of 160% to 250% of the defined risk. 
• High Cost Claim Cover – Not available under Partnership Discount Plan, optional under Full Self Cover Plan. Accredited Employers can limit their claim liability due to a single catastrophic event that results in claim entitlement costs to an excess level of their choice ($250,000, $500,000, $750,000, $1 million, $1.5 million, $2 million or $2.5 million).

Any reinsurance is prohibited under the legislation. The Accredited Employer is required to carry the risk of workplace injury with no ability to offload any of this risk.