Requirements for surrendering a self-insurer licence

Penalties for exiting the scheme (and/ or moving to Comcare scheme

New South Wales

SIRA requires a deed from the self-insurer undertaking to comply with SIRA’s licensing policy requirements as outlined in policy item 16.2 Claims run-off which states:

1. If a self-insurer no longer holds a licence, it will still be held responsible for the management of the tail of claims incurred whilst licensed as a self-insurer, and
2. The former licensee remains responsible for the tail of claims and will be expected to manage and administer run off claims in a professional manner and continue to provide claims data and other specified information to SIRA.

Security held or re-determined by SIRA (including guarantee arrangements) will remain in force until SIRA is satisfied that all claims have been discharged or adequately provided for pursuant to s216 of the Workers Compensation Act 1987. Legislation pursuant to s213 of the 1987 Act allows SIRA to require additional security from former self-insurers.

Workers Compensation Act 1987 — s208AA

This is a provision that is not a penalty but is intended to ensure the protection of the Insurance Fund against deficiencies that may result from the insured liabilities of existing insurers.

• SIRA may require contributions to the Insurance Fund from exiting employers which includes an employer moving to Comcare.
• As an alternative to the making of a contribution to the Insurance Fund, the self-insurer may enter into an agreement with SIRA to assume responsibility for the outstanding claim liabilities that would otherwise be payable by the licensed insurer who previously insured the employer.

Victoria

s403, s404, s405, s406, s407 and s408 — Workplace Injury Rehabilitation and Compensation Act 2013

Application:

At the request of the self-insurer or determined by WorkSafe Victoria (WSV), the self-insurer’s approval may be revoked.

Tail claims liability:

• Unless otherwise allowed by WSV, WSV assumes the liability for and responsibility for management of, the tail claims of the former self-insurer. A settlement payment covering the outstanding tail claims liability is payable by the former self-insurer to WSV.

Actuarial Assessment:

• An annual actuarial assessment is undertaken for a period of 6 years following the self-insurer’s approval being revoked. The actuarial assessment is undertaken by an actuary appointed by the WSV.
• An adjustment for the settlement payment is undertaken at the third and sixth year following the date the self-insurer’s approval is revoked.
• If the revised assessment at the end of the third year exceeds the initial assessment, the former self-insurer must pay the difference to WSV. If the revised assessment is less than the initial assessment, WSV must pay the difference to the former self-insurer.
• This process is repeated at the end of the 6 year liability period and if the revised assessment exceeds the assessment at the end of the third year, the former self-insurer must pay the difference to WSV. If the revised assessment is less, WSV must pay the difference to the former self-insurer.

Tail claims:

The former self-insurer must ensure all claims are given to WSV and all new claims are lodged with WSV.

Other charges:

• The former self-insurer is liable to pay the cost of the actuarial assessments obtained by WSV and any extra assessment, if the former self-insurer disputes WSV’s assessment.
• The former self-insurer must hold a guarantee against insolvency risk and claims deterioration until the final assessment of liability and if applicable, payment for the six year adjustment.

Time for settlement payment:

Payment for the tail claims liability and the third year/sixth year adjustments (if applicable) is payable within 28 days of the assessment or determination from WSV or for a further period as may be agreed between WSV and the employer.

Specific review provisions:

• The former self-insurer may appoint its own actuary to review WSV’s final assessment of liability. Ability to seek judicial review at common law and actions under the Administrative Law Act 1978 are excluded.

Outstanding payment:

• Failure to pay any outstanding liability amount may be recovered by WSV under the guarantee in force.

Part 9 — WIRC Act

Application:

Victorian scheme-insured or self-insured employers that exit the scheme to become licensed under the Comcare scheme. Applies from 1 July 2005 onwards.

Tail claims liability:

WSV assumes the liability for and responsibility for management of, the tail claims of the exiting employer. A settlement payment covering the outstanding tail claims liability may be payable by the exiting employer to WSV.

Actuarial Assessment:

• An annual actuarial assessment is undertaken for a period of 6 years following the employer’s exit. The actuarial assessment is undertaken by an actuary appointed by WSV.
• An adjustment for the settlement payment is undertaken at the third and sixth year following the date the employer exited the Victorian scheme.
• If the revised assessment at the end of the third year exceeds the initial assessment, the exiting employer must pay the difference to WSV. If the revised assessment is less than the initial assessment, WSV must pay the difference to the exiting employer.
• This process is repeated at the end of the 6 year liability period and if the revised assessment exceeds the assessment at the end of the third year, the exiting employer must pay the difference to WSV. If the revised assessment is less, WSV must pay the difference to the exiting employer.

Other charges:

• The exiting employer is liable to pay the cost of the actuarial assessments obtained by WSV and any extra assessment, if the employer disputes WSV’s assessment.
• The exiting employer must hold a guarantee against insolvency risk and claims deterioration until the final assessment of liability and if applicable, payment for the six year adjustment.

Time for settlement payment:

Payment for the tail claims liability and the third year/six year adjustments (if applicable) is payable within 28 days of the assessment or determination from WSV or for a further period as may be agreed between WSV and the exiting employer.

Specific review provisions:

The exiting employer may appoint its own actuary to review WSV’s final assessment of liability. Ability to seek judicial review at common law and actions under the Administrative Law Act 1978 are excluded.

Outstanding payment:

Failure to pay any outstanding liability amount may be recovered by WSV under the guarantee in force.

Penalties:

Penalties applied for failure to comply with a provision under Part 9 of the WIRC Act are:

• in the case of a natural person, 240 penalty units;
• in the case of a body corporate, 1,200 penalty units.

Queensland

Workers’ Compensation and Rehabilitation Act 2003 (s97) If the self-insurer does not intend to renew the licence, the self-insurer must advise the Regulator of that fact at least 20 business days before the current licence period ends. If a self-insurer’s licence is cancelled, the premium payable by the former self-insurer is to be calculated in the way prescribed under a regulation. The self-insurer must forward on to WorkCover all claims and related documentation for compensation and any claims that would have been lodged with the self-insurer are to be lodged with WorkCover (s99).

Recovery of ongoing costs from former self-insurer (s101 Workers’ Compensation and Rehabilitation Act 2003)

If after the cancellation of a licence, WorkCover pays compensation or damages, or incurs management costs in managing claims for which a self-insurer is liable, this is a debt due to WorkCover by the self-insurer.

Assessing liability after cancellation (s102 Workers’ Compensation and Rehabilitation Act 2003)

WorkCover must appoint an actuary to assess the former self-insurer’s liability. The amount of liability assessed and management costs are a debt due to WorkCover.

Return of bank guarantee or cash deposit after cancellation (s103 Workers’ Compensation and Rehabilitation Act 2003)

When a self-insurer’s licence is cancelled and they consider that all accrued, continuing, future and contingent liabilities have been discharged or adequately provided for, the self-insurer may, by written notice, ask the Regulator to return the balance of the bank guarantee or cash deposit.

Workers’ Compensation and Rehabilitation Act 2003 — s105B.

• Application: Solely to former self-insurers who join the Comcare scheme.
• Tail claims: The employer’s State licence continues for 12 months after exit and they retain liability for tail claims. After 12 months, WorkCover takes over responsibility for pre-exit tail claims and seeks contribution from employer or authorises the employer to continue to manage and pay for these claims.
• Extra charges: Levy fee for 12 months, share of actuary charges, and share of any arbiter costs.
• Time for payment: Interim payment 12 months after exit date needs to be made within 20 business days of receiving written assessment from WorkCover (s105I).
• Four years following licence cancellation, WorkCover and the employer must each appoint an actuary to recalculate the amount of liability. The employer must pay WorkCover the difference between the interim payment and the recalculation amount, plus interest on the difference from the day the whole of the interim payment was made.
• Specific review provisions: If WorkCover and the employer cannot agree on the recalculated amount they may refer to an arbiter.
• Penalties: No penalties specified for late payment.

Western Australia

An employer or group of employers that cease to be exempt is required to insure in accordance with s160 of the Workers’ Compensation and Injury Management Act 1981. Where cancellation occurs, the bond will be held until all claims relevant to the period of self-insurance are satisfied.

No specific provisions

South Australia

Assumption of liabilities

Pursuant to s167 of the Return to Work Act 2014, ReturnToWorkSA is the insurer of last resort and must undertake the liabilities of any self-insured employer that ceases to be registered as a self-insured employer. ReturnToWorkSA may at its sole discretion delay the undertaking of liabilities for such period as it deems appropriate.

Where ReturnToWorkSA assumes the liabilities of a self-insured employer, either in whole or part, it is entitled to receive a payment from the employer equal to the capitalised value of all outstanding liabilities multiplied by that same prudential margin applied on calculating financial guarantees. ReturnToWorkSA may recover the amount of liabilities undertaken by ReturnToWorkSA either as a debt due to ReturnToWorkSA or as a claim — s167(3), reg 62 and 8.6 Code of conduct for self-insured employers

Payment

ReturnToWorkSA may, at its discretion, give a self-insured employer whose registration is ceasing a choice as to whether to pay the capitalised sum from its own resources, or to have the financial guarantee provided during the period of self-insured employer registration paid to ReturnToWorkSA. Any shortfall in the financial guarantee relative to the assessed value of the liabilities will be payable by the employer to ReturnToWorkSA as a debt.

Run off of claims

Where ReturnToWorkSA deems a run off to be appropriate or necessary in the circumstances, ReturnToWorkSA may also determine that the former self-insured employer continues to exercise some or all of its delegated powers and discretions. Without limitation, ReturnToWorkSA will ordinarily consider the following circumstances as being suitable circumstances in which to allow the former self-insured employer to run off its claims:

1. Employers that have substantially reduced their workforce but which have performed their self-insured employer duties and obligations in accordance with the requirements of the Act and its term and conditions of registration.
2. A subsidiary of a self-insured employer is sold and the subsidiary or the self-insured employer has sufficient resources and financial security to run off its claims.
3. An employer closes down its operations in the state, but remains a viable company operating interstate.

ReturnToWorkSA will evaluate the former self-insured employer’s compliance with the Act, WHS Standards and Injury Management Standards and the agreement referred to in clause 8.8 and may terminate the run off if ReturnToWorkSA considers there are substantive grounds for doing so.

Upon cessation of the run off period, ReturnToWorkSA will appoint an Actuary to assess the value of the claims existing at that time in order to calculate the capitalised sum (if any) the employer must pay to ReturnToWorkSA.

Agreement

In circumstances where ReturnToWorkSA has decided not to delay the undertaking all of the liabilities of the former self-insured employer and to continue the delegation of powers and discretions to the former self-insured employer for a period, ReturnToWorkSA may require the former self-insured employer to enter into an agreement with ReturnToWorkSA.

ReturnToWorkSA does not impose a discontinuance fee or exit fee

Tasmania

Exit provisions are set out in the following Guideline:

How to apply to cease being a permit holder

No specific provisions

Northern Territory

Employer retains responsibility for run off of claims incurred during period of self-insurance

No specific provisions

Australian Capital Territory

Under s94 of the Workers’ Compensation Regulation 2002, the regulator may cancel a self-insurer's licence. This must be done in writing.

No specific provisions

C’wealth Comcare

A licensee may request the Commission to revoke its licence at a date from which it no longer wishes to hold such a licence under s107. There are two general scenarios for a licence revocation:

1. Comcare continues to hold the bank guarantee and the ex-licensee continues to discharge its SRC Act liabilities post-revocation. The ex-licensee (or a third party) would manage the claims relating to the licence period. In this scenario, a number of licence conditions (including requirements for claims management) survive revocation. The SRC Commission would need to be satisfied that the claims relating to the licence period continue to be managed in accordance with its standards. To verify this, some continued regulatory oversight may be required and payments made by the ex-licensee parties to ensure this regulatory work (post-revocation) is fully funded.
2. The bank guarantee is called in and Comcare (or a third party) manages the claims.

N/A

New Zealand

ACC has the right to terminate in respect of:

• any insolvency event, or
• a material breach

If the Accredited Employer no longer complies with the framework of the Accident Compensation Act 2001

N/A