Rule 4 - Assigned Risk Plan Rules

Revision History
Type	Effective Date	Circular	Notes
Part 1 - Rule 4	01/01/2024	C-23-13	Revisions to Assigned Carrier Performance Standards Related to Loss Prevention Surveys and Audits
Part 1 - Rule 4	08/01/2023	N/A	Correct typo in 4.C.7.b - Application of LSRP During the Policy Term - Table 2
All	07/01/2021	C-21-12	Revisions to North Carolina Basic Manual for Workers Compensation and Employers Liability
Part 1 - Rule 4	09/01/2020	C-20-23	Revisions to North Carolina Basic Manual Rule 4-A-2-g – Reassignment Rule
Part 1 - Rule 4	04/01/2020	C-19-15	Cancellation and Non-Renewal Rule Change
Part 1 - Rule 4	07/01/2019	C-19-6	NCCI Item RM-W-8046 – Revisions to Alternate Employer Endorsement (WC 00 03 01A)
Part 1 - Rule 4	03/01/2019	C-19-2	Revisions to North Carolina Basic Manual Rule 4-A – Workers Compensation Insurance Plan (WCIP)
Part 1 - Rules 3 & 4	05/01/2017	C-15-15	NCCI Item B-1430 - Elimination of Anniversary Rating Date (ARD)
Part 1 - Rule 4	07/01/2016	C-16-7	North Carolina Basic Manual for Workers Compensation and Employers Liability Update and Revised Endorsement Forms WC 00 04 15B, WC 00 04 17B and WC 00 04 18F
All	04/01/2016	C-16-6	North Carolina Basic Manual for Workers Compensation and Employer Liability - Digital Edition

Applicable to North Carolina Assigned Risk policies only

4A. Workers Compensation Insurance Plan (WCIP)

Pursuant to North Carolina General Statute 58-36-1, there is hereby established a North Carolina Workers Compensation Insurance Plan (“Plan” or “WCIP”), which provides for the equitable apportionment of employers who are in good faith entitled to workers compensation insurance as defined herein, but who are unable to procure such insurance in a regular manner. This Plan and any future modifications are to be written in accordance with state laws, regulations and/or rules and approved by the North Carolina Commissioner of Insurance (“Commissioner”).

1. WCIP Definitions

a. Affiliated Insurer

An insurer that directly, or indirectly through one (1) or more intermediaries, controls, or is controlled by, or is under common control with, another insurer specified. The term “control” means possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an insurer, whether through the ownership of voting securities, by contract or otherwise. Control is deemed to exist if any person or business enterprise, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies, representing ten (10) percent or more of the voting securities of any other insurer.

b. Agent

An agent as referenced in NCGS 58-36-1(5)a that is properly licensed in the State of North Carolina whose privileges under the Plan have not been suspended or revoked and who has been designated by the employer or applicant to secure workers compensation and employers liability insurance on behalf of the insured or employer. For purposes of this Plan, an agent is considered to be acting on behalf of the insured or employer applying under this Plan and not as an agent of the Plan Administrator or of any assigned carrier for Plan business.

c. Application

The application is the form(s) approved for use in the residual market by the Plan Administrator for the purpose of securing workers compensation insurance under the Plan. The form currently approved for use under the Plan is the ACORD 135 NC® (North Carolina Workers Compensation Insurance Plan Application for Designation of An Insurance Company).

d. Application Submission Methods

The methods approved by the Plan Administrator in which eligible producers or agents may submit an application, on behalf of good faith eligible employers, for the purpose of securing coverage through the WCIP are as follows:

Online – At www.ncrb.org through the ManageAR system
Mail – By U.S. Postal Service delivery or other overnight delivery service
Hand Delivery – To the Bureau at its offices on weekdays, excluding holidays, Monday through Thursday, during its business hours.

See Rule 4.A.2.a for good faith eligibility requirements.

e. Assigned Carrier

An insurer that has been assigned to provide coverage to an employer who has applied for and is in good faith eligible for workers compensation insurance under the Plan. There are two types of assigned carriers:

Servicing Carrier - An insurer authorized by the Plan Administrator to receive Plan assignments and provide coverage to eligible employers on behalf of those participating companies subscribing to the Association Bylaws incorporated as part of this Plan and reinsured through the Reinsurance Agreement, or

Direct Assignment Carrier - An insurer that has elected and has been authorized by the Plan Administrator to receive direct assignments under Option 1 of Rule 4.A.4 of this Plan. An insurer selecting the direct assignment option is solely responsible for the financial results of the assignments it receives

f. Assigned Carrier Performance Standards

Assigned Carrier Performance Standards (ACPS) provides the minimum level of performance for assigned carriers writing coverage pursuant to the WCIP. The purpose of the ACPS is to provide policy issuance and service level requirements that assigned carriers must comply with to provide residual market policyholders with effective and consistent service levels.

g. Association Bylaws

Association Bylaws are the Bylaws of the National Workers Compensation Reinsurance Association NFP (NWCRA). The NWCRA member insurers participate in the Reinsurance Agreement(s) authorized under this Plan to provide reinsurance to the servicing carriers on employers assigned to them under this Plan. The Bylaws are the agreement subscribed to by insurers selecting Option 2 – Subscription to Association Bylaws as their means of satisfying their participation in the Plan. The Bylaws are incorporated by reference and made a part of this Plan to the extent that the Association Bylaws are not inconsistent with this Plan and applicable North Carolina law.

h. Board of Directors

For purposes of this Plan, Board of Directors means Board of Directors for the National Workers Compensation Reinsurance Association NFP.

i. Common Managing (or Management) Interest

With respect to an applicant or policyholder as referenced in the Plan, common managing (or management) interest exists when one or more individuals are or were owners or officers of, or perform or performed management functions for, two or more entities, or for a succession of entities. To secure or maintain coverage under the Plan, all employers that are under common managing (or management) interest must be in good faith eligible for workers compensation insurance under the Plan.

j. Employer

An employer is any business organization or enterprise that is required by state law, regulation, and/or rule or elects to maintain workers compensation insurance in this State. The term any business organizations or enterprises that are or were affiliated at any time as a result of common managing (or management) interest or common ownership.

k. Insured

An insured is an assigned risk employer designated on the Information Page of the policy or policies to which this Plan is applied and issued by an assigned carrier.

l. Net Premiums Written

The gross direct premiums charged less all premiums (except dividends and savings refunded under participating policies) returned to insureds for all workers compensation and occupational disease insurance, exclusive of premiums for

Employers subject to this Plan;
Employers written under the National Defense Projects Rating Plan; and
Excess policies.

m. North Carolina Rate Bureau or Bureau

The statutory rating organization designated as the Plan Administrator and authorized in this State to make and file loss costs, residual market rates, rating values, policy and endorsement forms, classifications, and rating plans for workers compensation insurance. (Also referred to herein as the Bureau)

n. Payment Methods - Initial or Deposit Premium

The payment method currently approved for the required initial or deposit premium on application submissions is the electronic payment method prescribed by the Plan Administrator.

Note: Payment other than through the prescribed electronic method would require Plan Administrator approval.

o. Plan Administrator

The North Carolina Rate Bureau is the organization designated to administer the affairs of this Plan.

p. Premium in Dispute

A workers compensation insurance premium obligation over which a bona fide dispute exists and for which the employer or its representative has provided:

Written notice to the assigned carrier detailing the specific area of dispute;
An estimate of the premium the employer believes to be correct, with an explanation of the premium calculation;
Payment of the undisputed portion of the premium and
A written report to the Plan Administrator which includes all documentation relevant to the dispute, describes the attempts to reconcile the differences and requests review and appropriate action to resolve the areas of dispute.

q. Producer

A licensed North Carolina agent, broker, producer or insurance representative as defined in the state insurance code, whose privileges under this Plan have not been suspended or revoked, designated by the employer or applicant applying under this Plan to secure and maintain workers compensation and employers liability insurance on behalf of the employer. For purposes of this Plan, the producer is considered to be acting on behalf of the insured or employer applying for coverage under this Plan and not as an agent of the Plan Administrator or any assigned carrier for Plan business.

r. Regulatory Authority

The North Carolina Commissioner of Insurance or a properly appointed designee.

s. Reinsurance Agreement

A contractual arrangement among Association members providing a quota share reinsurance facility for workers compensation insurance in a number of states and for which administrative services are provided by the National Council on Compensation Insurance, Inc., in its capacity as Administrator as designated under the Association Bylaws.

t. Residual Market

The residual market is the state insurance plan that provides employers unable to secure coverage in the voluntary market with a means for insuring their operations through a designated insurance carrier. The residual market is also known as:

Assigned risk market

Involuntary market

Market of last resort

u. Undisputed Premium

A workers compensation insurance premium obligation that is not the subject of a bona fide dispute.

v. Voluntary Carrier

A voluntary carrier is a licensed insurer providing workers compensation insurance coverage on a policy written in the voluntary market, and not through this Plan.

w. Workers Compensation Insurance

Statutory workers compensation and occupational disease liability insurance, including insurance for liability under the United States Longshore and Harbor Workers’ Compensation (USL&HW) Act, as amended, and the Federal Mine Safety and Health Act, as amended;
Employers liability insurance written in connection with a workers compensation insurance policy; and
Such other coverages as determined by the Plan Administrator and approved by the Commissioner.

x. Workers Compensation Insurance Plan (WCIP or Plan)

A program established by NCGS 58-36-1 and approved by the Commissioner whereby eligible employers unable to secure coverage in the voluntary market may secure workers compensation insurance.

2. Rules for Eligibility and Assignment

North Carolina General Statute 58-36-1(5) requires, in part, that as a prerequisite to the transaction of workers compensation insurance in North Carolina, each carrier shall file written authority with the Bureau permitting the Bureau to assign to it employers which are in good faith entitled to workers compensation insurance as defined herein, but who are unable to procure such insurance in a regular manner. The following rules, which have been adopted by the Bureau and approved by the Commissioner of Insurance, shall cover the assignment and the insuring of such employers as provided by the law mentioned above. Any dispute arising from the application or interpretation of this Plan is subject to the dispute resolution procedures provided in this Plan.

a. Good Faith Entitlement

This Plan shall apply only to employers that are in good faith entitled to workers compensation insurance.

An employer is not in good faith entitled to insurance, and the insurance may be refused or cancelled, if any of the circumstances listed below exist, at the time of the application or thereafter, or other evidence exists that such employer is not in good faith entitled to insurance. The employer will remain ineligible for coverage through the Plan until the employer has complied with the policy provisions or satisfied any of the outstanding obligation(s) listed below, as applicable, and is deemed by the Bureau to be in good faith entitled to insurance.

1) At the time of application, a self-insured employer is aware of and fails to disclose pending bankruptcy proceedings, insolvency or cessation of operations involving the employer.

2) At the time of application, a self-insured employer is aware, or with the exercise of reasonable diligence should be aware, of prior conditions, exposures, claims, or any other information which make it likely that a significant number of occupational disease or cumulative injury claims will arise from exposure incurred while the employer was self-insured and the employer fails to disclose such prior conditions, exposures, claims, or other information.

3) On a current or previous workers compensation insurance policy, the employer:

knowingly refuses to meet reasonable health, safety, or loss control requirements
does not allow reasonable access to its records, premises, or work locations for audit or inspection; or
does not comply with any other policy or Plan obligations and conditions.

4) The employer has any outstanding workers compensation insurance premium obligation or other monetary obligation on a current workers compensation insurance policy or on any previous workers compensation insurance policy or while a member of a licensed group of self-insurance associations that is not subject to a bona fide premium dispute.

5) The employer, its representative and/or the agent/producer knowingly fails to comply with Plan procedures, or knowingly makes a material misrepresentation on the application by omission or otherwise, including, but not limited to, the following:

estimated payroll
nature of business
name
management of ownership of business or predecessor entities
previous insurance history
avoidance of an experience rating modification
an outstanding premium obligation or other monetary policy obligation
noncompliance with any applicable state licensing or registration requirement

b. Employer Certification

An employer shall not be considered as subject to this Plan unless such employer has been certified to be difficult to place by an agent licensed in North Carolina and such agent so certified in the prescribed application form.

c. Application Requirements

A standard application form for insurance under this Plan must be completed by or on behalf of the employer. The application shall require:

Complete underwriting information and reasonable payroll estimates.
A statement that the employer will maintain a complete record of its payroll transactions in such form as the assigned carrier may reasonably require and that such record will be available to the assigned carrier at a designated place during the policy period and for one (1) year after.
A statement that the employer will comply with all reasonable recommendations of the assigned carrier relating to the welfare, health, and safety of employees.

d. Plan Administrator

The Plan shall be administered by the North Carolina Rate Bureau (referred to herein as the “Plan Administrator” or the “Bureau”), or its designee.

e. Assignment Procedures

Upon receipt of a properly completed application for insurance, the Plan Administrator shall (1) determine, to the extent possible based on the application, that the employer is in good faith entitled to insurance; (2) establish the appropriate classifications, rates, and estimated annual premium; and (3) designate an assigned carrier and bind coverage, contingent upon payment of the estimated annual or deposit premium.

The Plan Administrator may request additional information, at its discretion, to establish eligibility, to assign appropriate classification codes, to calculate applicable premium, and to otherwise appropriately process the application. Such information may include tax documentation, ownership information, contracts, or any other information deemed necessary to process the application. The employer and/or its representative shall provide this information/documentation or provide an acceptable explanation for failure to do so.

To secure a requested effective date, the employer or its representative must submit to the Plan Administrator a fully completed and signed application, using an approved application submission method.

Depending on the application submission method, the earliest effective date for coverage will be established in the following manner:

Application Submission Table 1

If the application is submitted by regular mail and the envelope containing the application has . . .	Then the earliest effective date will be 12:01 a.m. on the day after . . .
A legible U.S. postmark or certified mail receipt	Postmark
An illegible U.S. postmark	Receipt of the application by the Plan Administrator
A private postage meter mark only	Receipt of the application by the Plan Administrator
Internet postage with a legible cancellation stamp	The date on the cancellation stamp
Internet postage without a cancellation stamp or an illegible cancellation stamp	Receipt of the application by the Plan Administrator

Application Submission Table 2

If the application is submitted by overnight mail and . . .	Then the earliest effective date will be 12:01 a.m. on the day after . . .
The package containing the application has proof of mailing that can be verified	The application was sent to the Plan Administrator
The package containing the application does not have proof of mailing or proof of mailing cannot be verified	Receipt of the application by the Plan Administrator
Proof of mailing (i.e., certified mail receipt) can be obtained	Receipt of the application by the Plan Administrator
Proof of mailing cannot be obtained	Receipt of the application by the Plan Administrator

Application Submission Table 3

If the application is hand-delivered to the Plan Administrator . . .

Then the earliest effective date will be 12:01 a.m. on the day after receipt by the Plan Administrator.

Application Submission Table 4

If the application (including any necessary supplemental applications) is submitted through the Bureau’s ManageAR system . . .

Then the earliest effective date will be 12:01 a.m. on the day after submission to the Plan Administrator.

IF AN APPLICATION EMPLOYS A COMBINATION OF ANY OF THE ABOVE DESCRIBED METHODS OF SUBMISSION, THE BUREAU SHALL APPLY THE ABOVE DESCRIBED RULES USED TO DETERMINE THE EARLIEST EFFECTIVE DATE BASED ON THE METHODS OF SUBMISSION EMPLOYED AND THE EARLIEST EFFECTIVE DATE OF COVERAGE SHALL BE THE LATEST EFFECTIVE DATE OF SUCH METHODS EMPLOYED BY THE APPLICANT.

f. Policy Term

The assigned carrier shall issue a standard policy of insurance with an effective date as established by the Plan Administrator. The policy shall be issued for a term of at least one (1) year, unless insurance for a shorter term has been requested. A short-term policy may be obtained only once within a twelve-month (12) period, unless agreed to by the assigned carrier.

g. Reassignment

An employer may submit a written request for reassignment to a different assigned carrier 30 to 60 days prior to policy expiration unless otherwise approved by the Plan Administrator.

The employer must provide the Plan Administrator with acceptable reason(s) for the request with the appropriate documentation.

Acceptable reasons for reassignment requests from an employer are:

Documented items pertaining to assigned carrier service—timely issuance of statements, policies, and endorsements, or services not provided under the policy
Documented refusal of or inability of an assigned carrier to supply a required type of coverage (e.g. longshore, coal mine, maritime, and additional state exposures)
Documented items pertaining to an assigned carrier’s return of premium due to the insured, where there is no valid bona fide premium dispute
The assigned carrier’s A.M. Best rating or financial size category is below that required by the producer and/or employer and appropriate documentation of a required rating is provided to and approved by the Plan Administrator
Other substantial documented reasons subject to approval at the discretion of the Plan Administrator

Any request for reassignment is subject to the approval of the Plan Administrator. If approved, reassignment will require the submission of a properly completed application and payment of the required initial or deposit premium and the employer must also otherwise be eligible for coverage through the Plan in accordance with Rule 4-A-2.

h. Additional States Coverage

All assignments under this Plan are to be made on an intrastate basis. However, any employer desiring insurance in additional states may request its assigned carrier to furnish insurance in such additional states in accordance with the Interstate Assignment section of this Plan.

i. Agent/Producer Information

Commission: Five percent (5%) of the total premium charged and collected from the employer shall be the commission to be paid to the producer of record or licensed agent designated by the insured employer.
Changes: The employer shall designate a licensed agent or producer of record and, with respect to any renewal of the coverage, may change the agent or producer by notice to the assigned carrier prior to the date of such renewal or, with the consent of the assigned carrier, at any other time.

j. Available Coverages

Other coverages may be available to the employer through the assigned carrier.

3. Assigned Carrier Responsibilities

The assigned carrier is held accountable to the Assigned Carrier Performance Standards, all applicable state laws and regulations, and all procedures set forth in or promulgated under this Plan including, but not limited to, the following:

a. Approved Classifications, Forms, Rates, and Rating Plans

All policies must be written utilizing the classifications, forms, rates, and rating plans that have been adopted for use in the residual market by the Plan Administrator and approved by the Commissioner.

b. Policy Information Page

The Policy Information page and all endorsements must be reported electronically in the format established by the Plan Administrator.

c. Cancellation of the Policy

If, after the issuance of a policy, the assigned carrier determines that an employer is not entitled to insurance, or has failed to comply with reasonable health, safety, or loss control requirements, or has violated any of the terms and conditions under which the insurance was issued, and after providing opportunity for cure, the assigned carrier shall initiate cancellation and inform the Plan Administrator of the reason for such cancellation.

Failure or refusal by an employer to make full disclosure to the assigned carrier or Plan Administrator of information regarding true ownership, change of ownership, operations, payroll, or any other records pertaining to workers compensation insurance or any other information required under this Plan or to comply with policy or Plan terms or conditions shall be sufficient grounds for cancellation of the policy.

The assigned carrier shall also endeavor to contemporaneously send to the agent copies of correspondence to the employer relating to good faith entitlement, failure or refusal to comply, or other violations of policy or Plan terms or conditions.

Any insured employer so cancelled must reestablish eligibility or must demonstrate entitlement to the Plan Administrator before any further assignment can be made under this Plan.

d. Effective Date of Policy

Subject to Rule 4-A-3-f below, policies must be renewed or reinstated without a lapse in coverage when premium is received or U.S. postmarked prior to the policy effective date or cancellation date.

On new assignments policies must be issued based on the effective date provided by the Plan Administrator.

e. Renewal and Nonrenewal of Coverage

At least forty-five (45) days prior to the expiration date of insurance, the assigned carrier shall send a renewal proposal or notice of impending expiration of coverage to the insured, the agent and the Plan Administrator. Upon receipt of the required premium, the policy shall be issued in the normal manner and a copy of such policy and all endorsements, properly identified as a WCIP or AR (Assigned Risk) policy, shall be furnished to the Plan Administrator within the time frame and in the format established by the Plan Administrator.

f. Reapplication and Reassignment to the Plan

Any assigned carrier unwilling to renew an employer assigned to it shall notify the employer, agent, and the Plan Administrator at least forty-five (45) days in advance of expiration, giving a reason or reasons acceptable to the Plan Administrator. Reassignment will require the submission of a properly completed application.

g. Cancellation for Voluntary Coverage

Notwithstanding Rule 4-A-3-j, any insurer that is willing to insure an employer as voluntary business may do so at any time. If such insurer is not the assigned carrier, the assigned carrier must cancel its policy pro rata as of the effective date of the voluntary carrier’s policy.

h. Notification of Outstanding Premium

Outstanding premium or other monetary policy obligation information identified by the assigned carrier or its representative shall be provided to the Plan Administrator in accordance with the appropriate performance standards or other legal or regulatory requirements.

i. Policyholder Services

The assigned carrier shall provide to its policyholders and their designated agents/producers access to audit, loss control, and safety services; prompt, professional handling of claims, including investigation, resolution, and communication; fair and prompt responses to complaints and disputes; and access to appropriate information regarding the classification of the business and the factors influencing the policy premium.

j. Confidentiality of Information

The assigned carrier shall keep in confidence and shall not, except as directed by the insured or the agent/producer of record, or as otherwise may be required by law or regulatory authority, disclose to any third party, or use for the benefit of itself or any third party, such information pertaining to a policyholder as it may obtain by virtue of its position as the assigned carrier. Such information will be used solely for the evaluation, underwriting, and issuance of coverage under this Plan and not for any other purpose. The assigned carrier shall not use any information it obtains in this capacity as the assigned carrier to request, encourage, or solicit employers it insures under this Plan to utilize the services of any specific insurance agent, agency, broker, insurer, or group of insurers for purposes of providing voluntary workers compensation insurance or other lines of insurance to such employer.

4. Participation

All insurers licensed to write workers compensation insurance in this state are required to participate in this Plan. All affiliated insurers must select the same option. An insurer must satisfy its participation required by selecting one of the following options:

Option 1: Becoming a direct assignment carrier and receiving assignments from the Plan Administrator. Any policy issued by an insurer that has selected this option will not be eligible for reinsurance through the Reinsurance Agreement(s) among members of the Association.

Option 2: Subscribing to the Association Bylaws.

If Option 1 is selected, one insurer may be designated to accept direct assignments on behalf of all affiliated insurers.

Any insurer wishing to select Option 1 must receive prior approval from the Plan Administrator. Application for such approval must be made no later than ninety (90) days prior to the end of any calendar year. The Plan Administrator must review the application and approve or disapprove it within sixty (60) days of receipt of the request. If the application is approved, that insurer shall become a direct assignment carrier on January 1 of the year following the Plan Administrator’s approval. Such approval shall continue in effect until terminated (a) by the mutual agreement of the insurer and the Plan Administrator, (b) upon notice from the insurer to the Plan Administrator at least 90 days prior to the end of the calendar year that the insurer elects, effective as of January 1 of the following year, another manner of satisfying its participation requirement under the Plan, or (c) upon the disqualification of the insurer as a direct assignment carrier.

Any insurer wishing to select Option 1 must:

Maintain a Best’s rating of A- or better;

Agree to conform, at a minimum, to such standards of performance as may be implemented by the Plan Administrator;

Agree to maintain necessary facilities to provide risks assigned to it the same level of service rendered to its voluntary business; and

Execute the Plan Administrator’s direct assignment contract.

An insurer that fails to make application to the Plan Administrator for approval as a direct assignment carrier at least ninety (90) days prior to the end of any calendar year shall automatically be deemed to have selected Option 2 for the following year. If the Plan Administrator fails to act on a letter of application or disapproves the letter of application for direct assignment carrier status, such insurer shall automatically be deemed to have selected Option 2. During the period of time an application is pending or an appeal is pending before the Plan Administrator with regard to a disapproved letter of application for direct assignment carrier status, an insurer shall automatically be deemed to have selected Option 2 for the period during which approval has not been granted. If previously a subscriber to the Association Bylaws, an insurer seeking to become a direct assignment carrier must also comply with the withdrawal provision in the Bylaws.

An insurer applying to be licensed in this State to write workers compensation insurance after this Plan has been approved and which desires to become a direct assignment carrier must submit its application to become a direct assignment carrier at the time it subscribes to and becomes a member of the North Carolina Rate Bureau. The Plan Administrator shall approve or disapprove the application within sixty (60) days.

If a licensed workers compensation insurer has not made an election, that insurer shall be deemed to have selected Option 2 until the next Plan membership election, at which time the insurer may then make its own participation selection. An insurer shall automatically be deemed to have selected Option 2 for the following calendar year when the insurer has an opportunity to make a participation selection and fails to do so.

Whenever participation under the Association Bylaws consists of those insurers cumulatively writing less than forty (40) percent of the total net workers compensation insurance premiums written by all insurers in this state as calculated in accordance with the preceding calendar year figures or whenever the Plan Administrator determines the capacity of servicing carriers to handle assignments made pursuant to the Rules for Eligibility and Assignment section falls below a level which is adequate to handle all the assignments being made, or whenever the reinsurance mechanism provided pursuant to the Association Bylaws is terminated, those insurers that selected Option 2 shall, as of January 1 of the following year, automatically be deemed to have selected Option 1 for employers insured effective on or after said January 1. Under this provision all licensed insurers shall automatically be deemed approved as direct assignment carriers and shall not need to seek Plan Administrator approval.

5. Plan Administrator

In recognition of the interests of the participating companies who have subscribed to the Association Bylaws, the Plan Administrator will consult with the Board of Directors, as appropriate, in the course of carrying out its duties and responsibilities with respect to the establishment of servicing carrier eligibility requirements under Rule 4-A-6-a and performance standards under Rule 4-A-6-c. The Plan Administrator shall also be responsible for determining the expenses for the operation of the Plan, and shall assess each insurer participating in the Plan for those expenses on an equitable basis as determined by the Plan Administrator. The Plan Administrator will have the following duties and responsibilities in addition to any others set forth in this Plan:

a. Administering, managing, and enforcing the Plan subject to the provisions contained herein;

b. Determining the methodology and formula for making assignments to assigned carriers pursuant to the Assignment Formula section and securing the necessary information in order to make the assignments;

c. Processing assigned risk applications pursuant to the requirements of this Plan;

d. Administering the Plan with respect to the approval of direct assignment carriers;

e. Establishing eligibility criteria for servicing carriers and selecting servicing carriers by competitive bid process or otherwise;

f. Establishing written performance requirements for servicing carriers, including but not limited to:

Verification of ongoing Plan eligibility for the employer
Issuance of policies and endorsements
Filings with administrative agencies
Maintenance of premiums on policies consistent with manual rules, rates, rating plans, and classifications
Completion and billing of final audits
Collection of premium
Claim services, including investigation, disability management, and medical cost control
Loss control services and safety information to encourage employers to make safety a part of their business
Payment of agent commissions
Issuance of renewal proposals and non-renewal notices
Assurance of insured and insurer compliance with all terms and conditions of the policy contract
Resolution of complaints and response to insured/agent inquiries
Reporting financial and statistical data;

g. Monitoring servicing carrier performance and enforcing performance requirements and incentives;

h. Administering the dispute resolution mechanism as provided in the Dispute Resolution Procedure section;

i. Developing and implementing assigned risk operating rules and forms to the extent necessary to carry out the purposes of this Plan;

j. Informing the Commissioner of any insurer that is not participating in this Plan; and

k. Monitoring the performance and operation of the Plan and initiating amendments thereto as appropriate.

6. Servicing Carriers

The Plan Administrator shall also be responsible for determining the expenses for the operation of the Plan, and shall assess each insurer participating in the Plan for those expenses on an equitable basis as determined by the Plan Administrator.

a. Eligibility to Act as a Servicing Carrier

The Plan Administrator shall establish written requirements that insurers must meet in order to be eligible to act as a servicing carrier. An insurer that has been approved as a direct assignment carrier pursuant to Option 1 under the Participation section is not eligible to be selected as a servicing carrier under this Plan. From among those insurers that are eligible and have applied to act as a servicing carrier, and subject to any applicable regulatory approval or review, the Plan Administrator shall select a sufficient number of servicing carriers that are needed to handle the assignments made pursuant to this Plan. Before the selection process begins, the Plan Administrator will consult with the Board of Directors, as appropriate, in determining the number of servicing carriers that are needed to handle the assignments made pursuant to this Plan. The Plan Administrator may terminate the servicing carrier status of any insurer that fails to meet the servicing carrier requirements on a continuing basis.

b. Servicing Carrier Operations Report

Each servicing carrier shall provide a report to the Plan Administrator in such format and time as determined by the Plan Administrator. This report, among other things, shall provide information on the servicing carrier's operations related to the Plan business in the following areas: underwriting, auditing, claims, loss control, premium collection, and customer service.

c. Standards for Servicing Carrier Performance, Compensation and Incentives

The Plan Administrator shall establish written minimum levels of acceptable performance for servicing carriers and shall establish procedures for measuring servicing carrier performance. In recognition of the interests of the participating companies who have subscribed to the Association Bylaws, the Plan Administrator will consult with the Board of Directors, as appropriate, in establishing these standards. Servicing carriers shall manage losses in compliance with the performance standards established hereunder. The Plan Administrator shall also establish the compensation for servicing carriers which shall take into consideration, among other things, provisions for (1) rewarding servicing carriers for positive action targeted at reducing losses and costs, (2) disincentives for inefficiencies and poor service, and (3) servicing carrier capacity.

d. Monitoring and Enforcement

The Plan Administrator shall monitor and review servicing carrier performance by (1) reviewing the operations reports, (2) requiring and reviewing self-audits, (3) conducting on-site audits, and (4) reviewing any other information available that relates to the servicing carrier. The Plan Administrator shall require servicing carriers to maintain desired performance levels and shall take appropriate remedial action where necessary including, but not limited to, establishment and administration of a progressive discipline program which may lead to terminating an insurer's servicing carrier status. Any action taken by the Plan Administrator under this provision is subject to review under the Dispute Resolution Procedure section. In order to fulfill its responsibilities under this Plan, the Plan Administrator shall have the right, itself or through authorized representatives, at all reasonable times during regular business hours, to audit and inspect the books and records of any servicing carrier with respect to any policies, claims, or related documents coming within the purview of this Plan, the Association Bylaws, or the Reinsurance Agreement(s). The Plan Administrator may provide the Board of Directors with a report and other data as appropriate, concerning the Plan Administrator's monitoring and enforcement activities related to servicing carriers.

7. Direct Assignment Carriers

The Plan Administrator shall establish written performance requirements for direct assignment carriers. The Commissioner of Insurance shall monitor direct assignment carrier performance through market conduct examinations, or through such other methods that he shall deem appropriate.

8. Interstate Assignments

a. Additional States Requested During the Policy Period

Any employer assigned under this Plan and desiring workers compensation insurance for operations in states other than that covered by this Plan may request its assigned carrier to furnish such insurance in such additional states. Workers compensation insurance in such additional states may be written by the assigned carrier on a voluntary basis and in accordance with the law, rates, rules, classifications, and regulations applicable to the voluntary workers compensation market in those states.

If the assigned carrier does not wish to provide the additional states on a voluntary basis, such assigned carrier may provide assigned risk coverage in such additional states subject to the following:

1) Workers compensation insurance may only be provided in accordance with the Rules of Eligibility and Assignment section above in those states that have a Workers Compensation Insurance Plan that is similar to this Plan and that allows employers applying for coverage under those Plans to obtain coverage for operations in this State.

2) An assigned carrier providing such insurance shall collect all premiums due on operations located in such other states. The effective date of such insurance in such additional states shall be the day after premium is received; however, in the event coverage in such additional states is on an “if any” basis, the effective date of such coverage shall be the day following receipt of an acceptable request for such insurance by the assigned carrier. A copy of the Policy Information Page and all endorsements, properly identified as a WCIP or AR (Assigned Risk) policy, shall be submitted to the appropriate plan administrator having jurisdiction in the State where the coverage is effected.

3) The rates, rating plans, classifications, and policy forms used to provide coverage in such additional states shall be those that are applicable to the residual market and are on file and have been approved by the regulators in those additional states and authorized for use in the residual market by the Plan Administrator.

4) In the event the assigned carrier is a servicing carrier, in order to combine multiple states on a single policy, the assigned carrier must also be a signatory to an agreement providing reinsurance for residual market employers similar to the Association Bylaws in each state where the coverage shall be provided. If the assigned carrier is a direct assignment carrier pursuant to Option 1 in the Participation section, in order to combine multiple states on a single policy, it must also be authorized to act as a direct assignment carrier or servicing carrier in each state where the coverage shall be provided. Separate policies must be issued for states in which the insurer is a direct assignment carrier and for states in which the insurer is a servicing carrier.

An assigned carrier unwilling or unable to provide insurance for an employer in additional states either on a voluntary basis or in accordance with this section shall refer the request to the Plan Administrator.

b. Multi-state Policy Procedure at Time of Application

Employers who make application for workers compensation insurance under another state’s Workers Compensation Insurance Plan may purchase coverage for operations in this State without meeting the application requirements of this Plan, provided: (a) the employer qualifies for such insurance under the other state’s Plan,(b) the employer is in good faith entitled to insurance under this Plan, (c) the other state’s Plan is similar to this Plan,(d) that Plan also provides for interstate assignments, and (e) the payroll for the employer’s operation in this State is not greater than the payroll in the other state.

The rates, rating plans, classifications, and policy forms used to provide coverage in this State shall be those that are applicable to the residual market in this State and are on file and have been adopted by the Plan Administrator for use in the residual market and approved by the Commissioner.

The administrator of the other Plan is authorized to assign employers with operations in this state to the other Plan’s assigned carriers subject to the following conditions:

1) If the assigned carrier is a direct assignment carrier, it must also be a direct assignment carrier in this state pursuant to Option 1 of Rule 4-A-4, or a servicing carrier in this state pursuant to Rule 4-A-6-a.

2) If the assigned carrier is a signatory to an agreement providing reinsurance for residual market employers similar to this State’s Association Bylaws, it must also be a signatory to the Association Bylaws in this state or a direct assignment carrier in this state. In addition, if the payroll for the employer’s operation in this state is greater than $250,000, and if the assigned carrier is a signatory to the Association Bylaws or a similar document in the other state, it must also be a servicing carrier or a direct assignment carrier in this State. If there is no eligible assigned carrier in this State that is also an insurer in the state of assignment, then the above payroll limitation may be removed at the discretion of the Plan Administrator or the employer may be required to submit a separate application for coverage in this State.

3) The other state’s Plan must give the Plan Administrator in this State similar authority to make interstate assignments.

With regard to interstate assignments and policies, this Plan shall have jurisdiction over all disputes resulting from the application of rules, programs and procedures that are specific to this State. Disputes regarding application requirements shall be under the jurisdiction of the state’s Plan where the application was filed.

9. Assignment Formula

The following procedures describe the mechanism used to provide for the random and equitable distribution of employers under this Plan to assigned carriers. This distribution is based on each direct assignment carrier's allocable percentage and the combined allocable percentage of all servicing carriers, and the amount of estimated premium in the Plan, so far as practicable. When assigning an employer to an insurer, the mechanism considers the employer's prior Plan coverage, special requirements (i.e., additional states or federal coverage) and premium size.

The mechanism provides that the allocable percentage for each assigned carrier shall be determined as follows:

a. If the assigned carrier is a direct assignment carrier, its allocable percentage will be equal to its net premiums written as compared to the total net premiums written in this State.

b. If the assigned carrier is a servicing carrier, it shall be responsible for providing services on behalf of those insurers that have elected to meet their Plan assignment requirements by subscribing to the Association Bylaws pursuant to Option 2 of the Participation section. Its allocable percentage will be determined by the Plan Administrator; however, the combined allocable percentages for all servicing carriers shall be equal to the combined net premiums written for all signatories to the Association Bylaws as compared to the total net premiums of all insurers participating in the Plan in this State.

The Plan Administrator may override the random assignment process to ensure the availability of requested Plan coverages to the employer.

10. Dispute Resolution Procedure

Any person affected by the operation of the Plan including, but not limited to, participating companies, insureds, agents, and assigned carriers, who may have a dispute with respect to any aspect of the Plan may seek a review of the matter by the Plan Administrator by setting forth in writing with particularity the nature of the dispute, the parties to the dispute, the relief sought and the basis thereof. The Plan Administrator may secure such additional information as it deems necessary to make a decision.

Appeals from employers and insurers on Plan matters regarding individual employer disputes shall be within the jurisdiction of the mechanism established to handle such appeals under the applicable rating law. All other disputes shall be handled as follows:

a. If the dispute relates to the general operation of the Plan, excluding individual employer disputes, those arising under the Association Bylaws, and those pertaining to the selection of servicing carriers, the Plan Administrator shall review the matter and render a written decision with an explanation of the reasons for the decision within thirty (30) days after receipt of all the information necessary to make the decision. Any party affected by such decision made by the Plan Administrator may seek a de novo review by the Commissioner by requesting such review, in writing, within thirty (30) days after the date of such decision.

In reviewing any such matter, the Commissioner shall follow normal hearing procedures. The Commissioner shall decide the dispute in accordance with applicable state laws and regulations, with due consideration to approved rules, procedures, and rating plans and pursuant to the provisions of the approved North Carolina Workers Compensation Insurance Plan.

b. If the dispute relates to any competitive bid process, the Bid Protest Procedure contained in the applicable Request for Proposal shall apply.

c. Except as provided below, if the dispute arises under the Association Bylaws or Reinsurance Agreement(s), the administrator designated under the Association Bylaws (the “Reinsurance Administrator”) shall first review the matter and render a written decision with an explanation of the reasons for the decision within thirty (30) days after receipt of all the information necessary to make the decision. Any party affected by the decision may seek a review by the Board of Directors established under the Association Bylaws by requesting such review, in writing, within thirty (30) days of the date of the decision by the Reinsurance Administrator under the Association Bylaws. The Board of Directors may (1) consider the matter and render its written decision pursuant to the procedures set forth in the Association Bylaws, or (2) waive its decision and offer the aggrieved party the option of appealing directly to the Commissioner or submitting the dispute to arbitration in accord with the terms and conditions established by the Board of Directors. Any party affected by a decision of the Board of Directors may seek a de novo review by the Commissioner by requesting such a review, in writing, within thirty (30) days of the date of the Board of Directors’ decision.

If the dispute relates to the expulsion of a participating company under the Association Bylaws by the Board of Directors or the non-continuation of the reinsurance afforded under the Association Bylaws, any appeal may be taken directly to the Commissioner without first complying with the procedures contained herein. The Commissioner shall have exclusive jurisdiction over all such disputes. In reviewing any such matter, the Commissioner shall follow those procedures applicable to administrative hearings as set out in Article 3A of Chapter 150B of the NC General Statutes and 11 NCAC 1.0400 et seq.

4B. Professional Employer Organization Arrangements (PEO)

Refer to Rule 3-D for PEO rules.

4C. Loss Sensitive Rating Plan (LSRP)

1. Introduction to the Loss Sensitive Rating Plan

a. Loss Sensitive Rating Plan (LSRP) is a mandatory assigned risk retrospective rating plan for those employers that have a qualifying workers compensation and employers liability insurance policy(ies) through the Rule 4-A (WCIP).

b. LSRP adjusts the premium for an employer’s WCIP policy(ies) on the basis of losses incurred during a particular policy term. LSRP reflects the actual experience of the employer by using the losses incurred during the term of the policy(ies) to establish the cost of insurance, including provisions for all expenses and taxes on premium. The result of the actual experience may be additional premium, return premium, or no change to the estimated premium.

c. The LSRP is designed to:

Encourage safety and loss prevention
Provide incentives for employers with favorable loss experience through lower premiums
Provide a disincentive for employers with unfavorable loss experience through higher premiums
Depopulate the assigned risk market

2. Eligibility

a. Eligibility for LSRP is determined in accordance with the Eligibility Tables below. Refer to Rule 4-C-5-c (12) for the definition of LSRP standard premium.

Eligibility Table 1

If a single-state employer has operations in…	Then…
One LSRP-approved state, and Has a single-state WCIP policy covering such operations in the state	The single-state WCIP policy must meet or exceed LSRP standard premium of $250,000
One LSRP-approved state, and Has two or more WCIP policies covering such operations in the state, and The two or more policies are written by the same assigned carrier	The combined LSRP standard premium of all policies written by the same assigned carrier must meet or exceed $250,000

Eligibility Table 2

If a multistate employer has operations in…

Then…

Two or more LSRP-approved states, and
Has one multistate WCIP policy covering such operations in those states

The combined LSRP standard premium of all states on the policy must meet or exceed:

$250,000
The premium eligibility requirement for the LSRP state generating the largest LSRP standard premium if such state’s eligibility requirement is less than $250,000

Two or more LSRP-approved states, and
Has multiple WCIP policies covering such operations in those states, and
The two or more policies are written by the same assigned carrier

The combined LSRP standard premium of all policies written by the same assigned carrier must meet or exceed:

$250,000, or
The premium eligibility requirement for the LSRP state generating the largest LSRP standard premium if such state’s eligibility requirement is less than $250,000

b. It may not always be possible for a single carrier to provide coverage for all requested states; additional policies issued by more than one carrier may be necessary. Refer to Rule 4-C-5-b (3) for more information about policy issuance and corresponding deposits.

c. WCIP policies issued in non-LSRP-approved jurisdictions are not subject to LSRP and are not combinable with WCIP policies in LSRP-approved jurisdictions for eligibility purposes.

d. LSRP eligibility may be impacted by ownership or combinability status in accordance with the Experience Rating Plan Manual.

3. Evasion of LSRP

a. Some employers may take actions for the purpose of avoiding the application of LSRP. Other employers may take actions for otherwise legitimate business reasons that nonetheless result in the improper calculation and/or application of LSRP. Regardless of intent, any action that results in the miscalculation and/or misapplication of LSRP determined in accordance with these LSRP rules is prohibited. These actions include, but are not limited to:

Misrepresentation and/or miscalculation of payroll at application, audit, or renewal
Failure to report changes in ownership or ownership information according to the WCIP and the Experience Rating Plan Manual.
Violation of any of the terms and conditions under the policy for which this insurance was issued
Failure to allow the assigned carrier and/or Plan Administrator and/or rating organization reasonable access to facilities or files and records for audit or inspection
Failure to disclose to the assigned carrier and/or Plan Administrator and/or rating organization the full nature and scope of the employer’s exposure or business operations

b. In such circumstances, the assigned carrier and/or Plan Administrator and/or rating organization may obtain any information that indicates evasion or improper calculation or application of LSRP due to actions included, but not limited to, those listed in Rule 4-C-3-a. The assigned carrier and/or Plan Administrator and/or rating organization will act to ensure the proper calculation and application of LSRP to inception of all current and preceding Rule 4-A (WCIP) policies impacted by these actions.

4. Assigned Carrier Responsibilities

Assigned carrier responsibilities include, but are not limited to:

a. Administering, managing, and applying LSRP in accordance with these rules to:

1) Individual LSRP policies within an LSRP-approved jurisdiction.

2) Other WCIP policies related through common majority ownership as defined in the Experience Rating Plan Manual.

b. Providing the employer with a full explanation and potential impact of LSRP at policy issuance, in accordance with Rules 4-C-6-b (2).

c. Completing preliminary physical and final physical audits for all new business qualifying for LSRP (and any other audit requirements for renewal business) in accordance with the Assigned Carrier Performance Standards. Assigned carriers may choose to conduct these audits remotely using electronic means if the requirements in PS 6-C-4 are met.

d. Indicating on all renewal quotes to employers that payment of the renewal deposit constitutes knowledge and acceptance of the possible application of LSRP to the policy(ies).

e. Attaching all appropriate LSRP endorsement(s) to the policy (ies) in accordance with Rule 4-C-6-b (2).

f. Filing for Proof of Claim when it receives notification that the employer has declared bankruptcy; for information about off-cycle valuations, refer to Rule 4-C-9-e.

g. Performing valuations of losses in accordance with Rule 4-C-9-f.

h. Calculating all LSRP premiums.

i. Collecting or returning any LSRP premium and/or LSRP contingency deposit.

5. LSRP Definitions

a. Assigned Carrier

Assigned carrier refers to direct assignment carriers and servicing carriers as defined in Rule 4-A (WCIP) or applicable state workers compensation insurance plan approved for use in a jurisdiction.

b. Deposits

1) Deposit or Initial Premium

For purposes of LSRP, deposit or initial premium is paid on all new and renewal WCIP policies, including LSRP policies, in accordance with the North Carolina WCIP (Rule 4A). On LSRP policies, it is paid in addition to the LSRP contingency deposit as detailed below and in Rule 4-C-6-c. For more information about all payment methods, refer to www.ncrb.org.

2) LSRP Contingency Deposit

a) In addition to the WCIP initial or deposit premium, new and renewal LSRP policies are secured with a LSRP contingency deposit.

b) The LSRP contingency deposit serves as collateral for premium that may be due to the assigned carrier as a result of losses incurred during the policy term.

c) The LSRP contingency deposit must be paid in accordance with Rule 4-C-6-c, as applicable.

d) At policy inception, the LSRP contingency deposit is calculated by multiplying the LSRP standard premium by 20%. When WCIP policies are combined for LSRP purposes, the LSRP contingency deposit is calculated by multiplying the combined LSRP standard premium for all policies by 20%.

3) Deposit/Initial Premium and LSRP Contingency Deposit Submission Requirements

Deposit/initial premium and LSRP contingency deposits are submitted for single and multiple policy employers in accordance with the table below.

Deposit/Initial Premium, LSRP Contingency Deposit and Policy Issuance Table

Application and Conditions	Application Assignment and Policy Issuance	The employer must submit…
One application- No other applications or existing policies are in effect that may be combined for LSRP eligibility determination and/or coverage	Individual application assigned to carrier Assigned carrier issues one policy	Individual WCIP deposit or initial premium for the WCIP policy, and An additional 20% LSRP contingency deposit based on the LSRP standard premium
Multiple applications – To determine LSRP eligibility, review possible combination with any applications and/or policies in effect for an employer with common majority ownership as defined in the Experience Rating Plan Manual	Multiple applications assigned to same carrier Assigned carrier issues LSRP policies for those that meet the eligibility requirement Policy effective dates may vary; however, all policies must have a common expiration date	Individual WCIP deposit or initial premium for each WCIP policy (e.g., two WCIP policies require two WCIP initial or deposit premiums), and An additional 20% LSRP contingency deposit based on the combined LSRP standard premium
Multiple applications – For the rare circumstance when applications and/or policies in effect for an employer with common majority ownership as defined in the Experience Rating Plan Manual cannot be assigned to an individual carrier	Multiple applications assigned to multiple carriers, including affiliated insurers when possible Assigned carriers issue LSRP policies for those that meet the eligibility requirement Policy effective dates may vary	Individual WCIP deposit or initial premium for each WCIP policy (e.g., two WCIP policies require two WCIP initial or deposit premiums), and An additional 20% LSRP contingency deposits based on individual eligible LSRP standard premium(s)
Assigned carriers must issue a guaranteed cost policy(ies) for a state(s) where LSRP is not approved.

c. Elements of the LSRP

1) Basic Premium Factor (BPF)

The basic premium factor (BPF) is a fixed factor of 0.40 used to determine the basic premium.

2) Basic Premium

a) Basic premium is determined by multiplying the total LSRP standard premium by the BPF.

b) The basic premium contributes to the recovery of expenses, such as those for servicing the LSRP policy, loss prevention services, premium audit, and general administration of the LSRP policy.

c) The basic premium does not include premium taxes or claim adjustment expenses. These elements are provided for in the tax multiplier and the loss conversion factor.

3) Loss Conversion Factor (LCF)

A loss conversion factor (LCF) is applied to actual incurred losses to determine converted losses. The LCF:

Includes claim adjustment expenses
Includes the costs of the assigned carrier’s claim services, such as investigations of claims and filing claim reports
Applies on a state basis, as shown in the individual state assigned risk Miscellaneous Values section.

4) Converted Losses

Converted losses are determined by applying an LCF to the actual incurred losses. A converted loss is the loss amount including an approximate load for claim adjustment expenses.

5) Incurred Losses (ICL)

Losses used in the LSRP calculation are those incurred losses (ICL) reported in accordance with the applicable statistical plan, subject to exclusions in accordance with Rule 4-C-9-f.

6) Loss Limitations

For purposes of LSRP, losses are not limited.

7) Loss Development Factor (LDF)

The loss development factor (LDF) is included in all four adjustments of LSRP premium. The LDF:

Anticipates a pattern of increasing loss valuations during the adjustment periods
Stabilizes premium adjustments
Applies on a state basis, as shown in the individual state assigned risk Miscellaneous Values section.

8) Maximum Premium Factor (MaxPF)

The maximum premium factor (MaxPF) is a fixed factor of 1.75 used to determine the greatest amount of premium that may be paid.

9) LSRP Maximum Premium

LSRP maximum premium is determined by multiplying LSRP standard premium by the MaxPF. It limits the impact of incurred losses on LSRP premium. The policyholder will not pay more than the calculated LSRP maximum premium. For combinable policies, the LSRP maximum premium is based on the combined LSRP standard premium for all combinable policies.

10) Minimum Premium Factor (MinPF)

The minimum premium factor (MinPF) is a fixed factor of 0.75 used to determine the least amount of premium that may be paid.

11) LSRP Minimum Premium

LSRP minimum premium is determined by multiplying LSRP standard premium by the MinPF. The policyholder will not pay less than the calculated LSRP minimum premium. For combinable policies, the LSRP minimum premium is based on the combined LSRP standard premium for all combinable policies.

12) LSRP Standard Premium (SP)

a) LSRP standard premium (SP) is determined on the basis of authorized rates (including premium developed from payroll assigned to aircraft classifications), and includes any:

Increased limits of liability
Experience rating modification
Deductible credit, if applied
ARAP and/or assigned risk surcharge programs and/or other assigned risk pricing programs other than LSRP
Minimum premium

b) Determination of LSRP standard premium must exclude:

Premium resulting from non-ratable elements
Premium discount
Premium developed by the occupational disease rates for employers subject to the Federal Mine Safety and Health Act
Expense constant
Premium developed by catastrophe provisions in accordance with Rule 3-A-23

c) LSRP standard premium is calculated differently than standard premium as defined in Rule 3-A-19

d) LSRP standard premium may change before, during and/or after a policy period due to reasons including, but not limited to:

Premium endorsements
Preliminary and/or final audits
A change in ownership or combinability status in accordance with the Experience Rating Plan Manual.

13) Tax Multiplier (TM)

The tax multiplier (TM) varies by state and includes licenses, fees, assessments, and taxes that an assigned carrier must pay on the premium it collects. The appropriate factors for these elements are located in the individual state assigned risk Miscellaneous Values section.

d. Total Standard Premium, Estimated Annual Premium and Final Annual Premium

Premiums developed in accordance with state-specific premium algorithms include premium elements that may be excluded from LSRP standard premium as detailed in Rule 4-C-5-c (12). Although these elements are excluded from LSRP standard premium and the calculation as detailed in Rule 4-C-9-c for LSRP purposes, these elements are still charged as part of a WCIP policy's total standard premium, estimated annual premium, and final annual premium as determined in accordance with the applicable algorithms and NC Basic Manual rules.

6. General Explanations

a. Policy Effective Date Basis

All LSRP rating values are applied on a policy effective date basis for all single and multiple LSRP policy risks.

b. Application of LSRP

1) Applicable Rating Programs, Pricing Programs, and Premium Elements

Although certain rating and/or pricing programs and corresponding premium elements (if any) may be specifically excluded from LSRP standard premium, the rating and/or pricing programs may still apply to LSRP policies. These include:

Increased limits of liability
Wrap-up construction policies, including Owner-Controlled Insurance Programs (OCIPs)
Premium discount

2) Assigned Risk Policyholder Notices

a) ACORD 135® NC Application

Notification about LSRP is provided to the employer and its representative when submitting the ACORD 135® NC application for coverage in the assigned risk market. By signing the applicant statement on the ACORD 135® NC, the applicant understands and agrees that they are acknowledging that the LSRP has been explained, and agrees to the terms of LSRP if the employer meets the eligibility requirements. The applicant also agrees to submit an additional LSRP contingency deposit in accordance with and 4-C-6-c.

The ACORD 135® NC application will include the following language above the signature of the employer:

“By signing below I acknowledge that the loss sensitive rating plan, if applicable, has been explained to me by my agent. I agree that I shall be bound by the terms of such plan if my estimated annual premium or preliminary physical audit premium meets or exceeds the premium eligibility requirement.”

b) Assignment Letter (Binder)

In states that have approved LSRP, notification about the application of LSRP to an employer’s WCIP policy is provided to the employer and its representative on the assignment letter.

c) Endorsements

The following endorsements are applied to all new and renewal assigned risk policies in accordance with the LSRP rules.

LSRP Endorsements Table
Endorsement Instructions and Purpose	Instructions and Purpose
WC 32 04 17 – Assigned Risk Loss Sensitive Rating Plan Notification Endorsement	Assigned carriers must attach this endorsement to all new and renewal assigned risk policies regardless of premium size This endorsement ensures that all assigned risk employers, regardless of premium size, are notified of the intent and details of LSRP as well as possible application of LSRP if the employer meets the eligibility requirements
WC 32 04 18 – Assigned Risk Loss Sensitive Rating Plan Endorsement	All assigned carries must attach this endorsement to all new and renewal assigned risk policies meeting the LSRP eligibility requirements This endorsement advises policyholders meeting the eligibility requirements of the applicable LSRP factors and how LSRP premium is calculated

c. LSRP Contingency Deposit Procedures

1) Mandatory LSRP Contingency Deposit

a) In accordance with Rule 4-C-5-b (2), the employer must pay the LSRP contingency deposit as collateral. Nonpayment of the LSRP contingency deposit will result in:

Cancellation of the WCIP policy according to the Plan rules, state law or the Assigned Carrier Performance Standards, whichever is more stringent, and
Ineligibility in good faith for coverage in the assigned risk market

b) Upon receipt, LSRP contingency deposits are treated in accordance with Rule 4-C-7 and 4-C-10.

2) LSRP Contingency Deposit Submission Methods

When the LSRP contingency deposit payment is made to the NCRB for the initial premium, the only acceptable form of payment is the electronic payment method prescribed by the Plan Administrator. Payment to the NCRB other than the prescribed electronic method would require Plan Administrator approval. When the LSRP contingency deposit payment is made directly to the assigned carrier, the below methods may be available:

a) Automated Clearing House/Electronic Funds Transfer (ACH/EFT)

Assigned carriers may offer policyholders the ability to pay LSRP contingency deposit by ACH in the form of an EFT.

b) Credit Card

Assigned carriers may offer policyholders the ability to pay LSRP contingency deposit by credit card.

c) Personal or Business Check

A personal or business check may be provided to pay the LSRP contingency deposit. For details on how to tender the check, based on whether submitting a new application or payment for renewal policies, refer to Rules 4-C-6-c (3) and (4) below, respectively.

d) Irrevocable Letter of Credit (ILOC)

An ILOC may be provided as collateral for the LSRP contingency deposit. The ILOC must:

Be drawn on a member bank of the U.S. Federal Reserve System.
Be acceptable, clean, unconditional and irrevocable.
Name the insured on the policy as the Applicant.
Name the assigned carrier as the Beneficiary. The Plan Administrator and/or the rating organization must not be named as the Beneficiary(ies).
Contain a provision where the assigned carrier is notified by the issuing bank in advance of any proposed alteration, modification, amendment or waiver of terms and conditions. No alterations, modifications, amendments or waivers of terms and conditions are permitted without the advance express written consent of the Beneficiary.
Not be assignable or transferable.
Have an initial expiration date no earlier than 10 months following the policy expiration date.
Have an automatic annual renewal clause for as many as three additional one-year periods.

3) New Application Submission

a) The employer must pay the deposit or initial premium, as defined in Rule 4-C-5-b (1), at time of application submission for a binder to be issued. Additionally, LSRP contingency deposits are treated in accordance with the Deposit/Initial Premium, LSRP Contingency Deposit and Policy Issuance Table in Rule 4-C-5-b (3).

At the time of application, the employer must pay the LSRP contingency deposit or obtain an acceptable ILOC. Upon assignment, the Plan Administrator will forward the LSRP contingency deposit or ILOC to the assigned carrier with the deposit premium and assignment/binder package.

b) A binder is issued by the Plan Administrator in accordance with Rule 4-A (WCIP) when an employer is determined to be eligible for coverage under the WCIP and is eligible for LSRP.

c) The binder also specifies the appropriate LSRP contingency deposit, which is determined at the time of application submission.

d) The employer may be considered ineligible for coverage under the WCIP, and the binder may be revoked or cancelled in accordance with Plan rules, state law and the Assigned Carrier Performance Standards, whichever is more stringent, if for any reason:

The funds provided are insufficient or are not received by the assigned carrier, or
An ILOC is not secured

4) Renewal of Coverage

a) Assigned carriers must include notice of any new LSRP contingency deposit in its renewal quote.

b) The new LSRP contingency deposit must be paid to the assigned carrier in accordance with Rules 4-C-5-b (2) and 4-C-6-c (1) and (2) before the expiration of the current policy for coverage to be renewed without any gap in coverage.

c) If the employer is unable to obtain an ILOC for the renewal policy and has notified the assigned carrier, to avoid any gap in coverage, the new LSRP contingency deposit must still be paid for the renewal policy to the assigned carrier before expiration of the current policy.

d) Effective dates for renewal LSRP policies are established in accordance with Rule 4-A (WCIP) or other applicable state rules.

7. Changes in LSRP Standard Premium

a. For all policies except for professional employer organizations and temporary arrangements, in accordance with the tables below, during the policy term:

1) LSRP may be applied to a policy or

2) A policy may be converted to a guaranteed cost policy

b. For treatment of professional employer organizations and temporary arrangements, refer to Rule 4-C-11.

Application of LSRP During the Policy Term - Table 1

If during the first 120 days of the policy term…	Then…
The LSRP standard premium decreases and falls below the LSRP eligibility threshold	The policy is converted to a guaranteed cost policy, retroactively to policy inception LSRP contingency deposit is returned
The LSRP standard premium increases and meets the LSRP eligibility threshold	LSRP is applied retroactively to policy inception An LSRP contingency deposit must be paid within 30 days of the assigned carrier issuing notice of the application of LSRP Valuations are calculated in accordance with Rule 4-C-9 The assigned carrier must hold the LSRP contingency deposit in accordance with Rule 4-C-10
The employer’s LSRP policy is cancelled due to reasons detailed in Rule 3-A-3-b, Cancellation Provisions Tables 1, 2 or 3	The policy is converted to a guaranteed cost policy, retroactively to policy inception The policy is cancelled pro rata The LSRP contingency deposit and any unearned premium is returned, subject to final audit
The employer’s LSRP policy is cancelled due to reasons detailed in Rule 3-A-3-b, Cancellation Provisions Table 4	The policy is converted to a guaranteed cost policy, retroactively to policy inception The policy is cancelled short rate The LSRP contingency deposit and any unearned premium is returned subject to final audit

Application of LSRP During the Policy Term - Table 2

If after the first 120 days of the policy term…	Then…
The LSRP standard premium decreases and falls below the LSRP eligibility threshold	LSRP continues to apply to the policy Valuations are calculated in accordance with Rule 4-C-9
The LSRP standard premium increases and meets the LSRP eligibility threshold	The policy remains a guaranteed cost policy LSRP is applied at renewal, subject to meeting the eligibility requirements on the renewal policy
The employer’s LSRP policy is cancelled due to reasons detailed in Rule 3-A-3-b, Cancellation Provisions Tables 1, 2 or 3	LSRP continues to apply to the policy The policy is cancelled pro rata in accordance with Rule 4-C-8 Valuations are calculated in accordance with Rule 4-C-9 The assigned carrier must hold the LSRP contingency deposit in accordance with Rule 4-C-10
The employer’s LSRP policy is cancelled due to reasons detailed in Rule 3-A-3-b, Cancellation Provisions Table 4 • LSRP continues to apply to the policy	LSRP continues to apply to the policy The policy is cancelled short rate in accordance with Rule 4-C-8 Valuations are calculated in accordance with Rule 4-C-9 The assigned carrier must hold the LSRP contingency deposit in accordance with Rule 4-C-10

Refer to Rule 4-C-6-b-2-c for further information on the proper application of endorsements.

c. Application of LSRP in accordance with Rule 4-C-3 applies retroactively to policy inception, regardless of the 120-day timing requirement detailed in Application of LSRP During the Policy Term - Table 1 and Application of LSRP During the Policy Term - Table 2.

8. Cancellation of LSRP Policies

a. General Information

1) Cancellation of LSRP policies must be in accordance with the standard workers compensation and employers liability insurance policy.

2) Cancellation of LSRP policies is subject to pro rata or short rate calculation of LSRP standard premium in accordance with Rule 3-A-3.

3) The assigned carrier must report noncompliance and any subsequent compliance to the Plan Administrator.

4) Cancelled LSRP policies are subject to all LSRP rules, as applicable.

5) Employers with cancelled LSRP policies are responsible for any additional premium due for reasons including, but not limited to:

a) Premium endorsements

b) Audits

c) An ownership change or change in combinability status in accordance with the Experience Rating Plan Manual.

d) An employer retiring from business

e) Any applicable and/or remaining LSRP valuations.

b. Calculation of Minimum and Maximum Premium

1) Elements

Based on the type of policy cancellation (pro rata or short rate), minimum and maximum premiums for LSRP policies are adjusted in accordance with the applicable calculation method, using the following elements:

SP represents LSRP Standard Premium
PRF represents Pro Rate Factor
SR represents Short Rate Factor
MinPF represents Minimum Premium Factor
MaxPF represents Maximum Premium Factor

2) Methods

a) Pro Rata LSRP Minimum Premium Calculation Method (PMnP)

PMnP = SP x PRF x MinPF

b) Pro Rata LSRP Maximum Premium Calculation Method (PMxP)

PMxP = SP x PRF x MaxPF

c) Short Rate LSRP Minimum Premium Calculation Method (SMnP)

SMnP = SP x SR x MinPF

d) Short Rate LSRP Maximum Premium Calculation Method (SMxP)

SMxP = SP x SR x MaxPF

9. LSRP Valuation

a. General Information

LSRP policies are subject to a first valuation with three subsequent valuations for a maximum of four valuations. The valuations adjust LSRP standard premium to reflect the actual experience of the employer. The result of the actual experience may be additional premium, return premium, or no change to the estimated premium.

b. Timing and Reporting of Valuations

1) LSRP valuations and resulting premium adjustments must be based on losses valued at 18, 30, 42, and 54 months after the month in which the policy became effective in accordance with the applicable statistical plan.

2) For policies in effect for less than 12 months, the first LSRP valuation must be calculated as soon as practical based on losses valued six months after the WCIP policy(ies) expiration. Three additional LSRP valuations must be calculated at 30, 42, and 54 months after the month in which the policy(ies) became effective in accordance with the applicable statistical plan. Refer to Rule 4-C-9-e for information about off-cycle valuations.

3) Reporting subsequent valuations must occur in accordance with the applicable statistical plan reporting requirements for open, closed, and/or reopened claims.

c. Formula

The LSRP formula is designed to allow for a premium that is not less than the LSRP minimum premium or more than the LSRP maximum premium in accordance with Rules 4-C-5-c (9) and (11). The formula is:

LSRP (Additional/Return) Premium = {[(SP x BPF) + (ICL x LCF) + (SP x LDF x LCF)] x TM} – SP

d. Calculation of LSRP (Additional/Return) Premium

1) LSRP (additional/return) premium is calculated by the assigned carrier.

2) The data used must be reported in accordance with the applicable statistical plan.

3) LSRP (additional/return) premium adjustments are calculated as soon as practical.

4) A maximum of four valuations are calculated to determine the LSRP (additional/return) premium per policy period.

e. Off-Cycle Valuation of LSRP (Additional/Return) Premium

1) In certain circumstances, the assigned carrier may perform an off-cycle (early) valuation to determine LSRP (additional/return) premium. Such cases include, but are not limited to cancellation of the policy; and/or the employer’s:

Noncompliance with policy terms and conditions
Bankruptcy
Default on premium
Involvement in any liquidation, reorganization, or receivership
Disposal of all, or substantially all, of its assets

2) The employer or the bankruptcy estate, if applicable, is responsible for any additional premium due as a result of any off-cycle valuations or other applicable remaining valuations.

3) Report of off-cycle valuations must be in accordance with the applicable statistical plan.

f. Treatment of Incurred Losses in Valuation Calculation

For purposes of calculating LSRP (additional/return) premium, certain losses associated with classifications or rating and/or pricing programs are treated in accordance with the Loss Treatment Table.

Loss Treatment Table
Program or Loss Type	Treatment
Deductible programs	Include all losses at the net amount, regardless of net/gross reporting
Federal Coal Mine Safety and Health Act	Exclude the disease-related portion of losses covered under the Act
Catastrophe provisions in accordance with Rule 3-A-23	Exclude losses
Any other losses where premium is non-ratable	Exclude losses
Losses that are reported as fully fraudulent according to the NC Statistical Plan Manual	Exclude losses
Losses that are reported as noncompensable according to the NC Statistical Plan Manual	Exclude losses

10. Application of LSRP (Additional/Return) Premium

Application of LSRP (additional/return) premium is determined in accordance with the tables below. LSRP contingency deposits are typically held until the fourth or final valuation.

First and/or Subsequent Valuations Table
If the first and/or a subsequent valuation results in…	Then…
Additional premium due to the assigned carrier	The assigned carrier must: Bill the employer for additional LSRP premium due, and Hold the LSRP contingency deposit until the fourth or final valuation Payment must be postmarked or submitted electronically on or before 30 days from the date of billing or earlier, if required by state law If the employer is noncompliant for nonpayment, any existing WCIP policy may be cancelled; the employer will no longer be eligible in good faith for coverage under the WCIP
Return premium due to the employer	The assigned carrier must: Return the LSRP premium due, and Hold the LSRP contingency deposit until the fourth or final valuation, subject to earlier return based on sound underwriting judgment except for all PEOs and temporary arrangements policies; the file must be documented with sufficient level of detail when an early return of the contingency deposit is made, and Provide the employer with a billing statement, including a reason for the return

Fourth and/or Final Valuations Table
If the fourth and/or final valuation results in…	Then…
Additional premium due to the assigned carrier	The assigned carrier: Must bill the employer for additional LSRP premium due May offset the additional LSRP premium with the LSRP contingency deposit if the employer requests that contingency deposit funds or an ILOC originally provided be applied Payment must be postmarked or submitted electronically on or before 30 days from the date of billing or earlier, if required by state law If the employer is noncompliant for nonpayment, any existing WCIP policy may be cancelled; the employer will no longer be eligible in good faith for coverage under the WCIP
Return premium due to the employer	Within 10 days after the valuation, the assigned carrier must: Return the LSRP premium due and LSRP contingency deposit, if any Provide the employer with a billing statement, including a reason for the return
No premium due to the assigned carrier or employer	Within 10 days after the valuation, the assigned carrier must: Return the LSRP contingency deposit, if any Provide the employer with a billing statement

11. Professional Employer Organizations (PEO) and Temporary Arrangements

a. General Information

1) LSRP is a mandatory assigned risk retrospective rating plan for those PEOs and its individual clients and temporary arrangement employers that have a qualifying workers compensation and employers liability insurance policy(ies) through the WCIP.

2) Unless otherwise specified, Rules 4-C-1 through 10 apply to PEO, individual client, and temporary arrangement WCIP policies.

b. Definitions

1) Client

Client is defined in accordance with Rule 3-D-1. For purposes of LSRP, clients are referred to as individual clients when used in conjunction with multiple coordinated policies.

2) Multiple Coordinated Policies (MCP) Basis

WCIP policies written in accordance with Rule 3-D-1 or other applicable state rules.

3) PEO and PEO Arrangement

PEO is defined in accordance with Rule 3-D-1. PEO arrangement is defined in accordance with Rule 3-D-1.

4) Temporary Arrangement

Temporary arrangement is defined in accordance with Rule-3-D-1.

c. Eligibility

1) Eligibility for LSRP for PEOs, its individual clients and temporary arrangement employers is determined in accordance with the Eligibility Tables below. Refer to Rule 4-C-5-c (12) for the definition of LSRP standard premium.

Eligibility Table 1
If a single-state employer has operations in…	Then…
One LSRP-approved state, and Has a single-state WCIP policy covering such operations in the state	The single-state WCIP policy must meet or exceed LSRP standard premium of $250,000
One LSRP-approved state, and Has two or more WCIP policies covering such operations in the state, and The two or more policies are written by the same assigned carrier	The combined LSRP standard premium of all policies written by the same assigned carrier must meet or exceed $250,000

Eligibility Table 2
If a multistate employer has operations in…	Then…
Two or more LSRP-approved states, and Has one multistate WCIP policy covering such operations in those states	The combined LSRP standard premium of all states on the policy must meet or exceed: $250,000 or The premium eligibility requirement for the LSRP state generating the largest LSRP standard premium if such state’s eligibility requirement is less than $250,000
Two or more LSRP-approved states, and Has one multistate WCIP policy covering such operations in those states The two or more policies are written by the same assigned carrier	The combined LSRP standard premium of all states on the policy must meet or exceed: $250,000 or The premium eligibility requirement for the LSRP state generating the largest LSRP standard premium if such state’s eligibility requirement is less than $250,000

2) It may not always be possible for a single carrier to provide coverage for all requested states; additional policies issued by more than one carrier may be necessary. Refer to Rule 4-C-5-b (3) for more information about policy issuance and corresponding deposits.

3) WCIP policies issued in non-LSRP-approved jurisdictions are not subject to LSRP and are not combinable with WCIP policies in LSRP-approved jurisdictions for eligibility purposes.

4) LSRP eligibility may be impacted by ownership or combinability status in accordance with the Experience Rating Plan Manual.

5) LSRP standard premium is determined in accordance with Rule 4-C-5-c (12); however, the policy type/type of arrangement must be considered when determining LSRP standard premium as referenced in the Arrangement Type Eligibility Table below.

Arrangement Type Eligibility Table
Policy Type/Type of Arrangement	LSRP eligibility is determined...
PEO multiple coordinated policy (MCP)	For PEOs (excluding clients), using LSRP standard premium of any PEO policy written in accordance with Rule 3-D-1 or other applicable state-specific WCIP MCP rule For individual clients of PEOs, using LSRP standard premium separately for each individual client PEO policy written in accordance with Rule 3-D-1 or other applicable state-specific WCIP MCP rule
Temporary Arrangement	Using LSRP standard premium for the entire temporary arrangement policy

d. Deposit/Initial Premium and LSRP Contingency Deposits

Deposit and initial premium and LSRP contingency deposits are applied in accordance with Rules 4-C-5-b and 4-C-10.

e. Application of LSRP

PEO arrangement and temporary arrangement policies are subject to Rule 4-C-5-c (12). If the LSRP eligibility threshold is met at any time then:

LSRP is applied retroactively to policy inception
An LSRP contingency deposit is required to be paid within 30 days of the assigned carrier issuing notice of the application of LSRP
Valuations are calculated in accordance with Rule 4-C-9
The assigned carrier must hold the LSRP contingency deposit until the fourth or final valuation is completed.

12. LSRP Examples

The Loss Sensitive Rating Plan (LSRP) is a mandatory assigned risk loss sensitive retrospective rating plan for those employers in the assigned risk market whose standard premium meets a minimum threshold. LSRP impacts the amount of premium owed after the policy has expired, and after all of the losses incurred during the policy term have been valued in accordance with Rule 4-C.

The following examples show how valuations may impact workers compensation premium. The values and factors used in the valuations are for illustration purposes only. The values and factors are shown in the assigned risk Miscellaneous Values section.

The formula below applies for all examples:

Formula

LSRP (Additional/Return) Premium = {[(SP x BPF) + (ICL x LCF) + (SP x LDF x LCF)] x TM} – SP

Where...	Equals...
SP	LSRP Standard Premium
FPF	Basic Premium Factor
ICL	Incurred Losses
LCF	Loss Conversion Factor
LDF	Loss Development Factor
TM	Tax Multiplier

LSRP Contingency Deposit

A 20% LSRP contingency deposit is held by the assigned carrier until the 4th or final valuation, unless the assigned carrier has determined that an earlier return is warranted based on sound underwriting judgment.

a) Example 1

Consider Policy A with valuations between the LSRP minimum and maximum premium amounts.

LSRP Standard Premium (SP)	$339,000
LSRP Contingency Deposit Percentage	20%
LSRP Contingency Deposit	$67,800

(1) LSRP Factors

Basic Premium Factor (BPF)	0.40
Minimum Premium Factor (MinPF)	0.75
Maximum Premium Factor (MaxPF)	1.75
Loss Conversion Factor (LCF)	1.125
Tax Multiplier (TM)	1.125

Valuation	Incurred Losses (ICL)	Loss Development Factors (LDF)
1st	$184,000	0.31
2nd	$271,200	0.21
3rd	$280,000	0.15
4th	$289,650	0.10

(2) LSRP (Additional/Return) Premium Calculations

	Factors/Formulas	1st Valuation	2nd Valuation	3rd Valuation	4th Valuation
1	LSRP Standard Premium (SP)	$339,000	$339,000	$339,000	$339,000
2	Basic Premium Factor (BPF)	0.40	0.40	0.40	0.40
3	Basic Premium (1) x (2)	$135,600	$135,600	$135,600	$135,600
4	Incurred Losses (ICL)	$184,000	$271,200	$280,000	$289,650
5	Loss Conversion Factor (LCF)	1.125	1.125	1.125	1.125
6	Converted Losses (4) x (5)	$207,000	$305,100	$315,000	$325,856
7	Loss Development Factor (LDF)	0.31	0.21	0.15	0.10
8	Loss Development Premium (1) x (7) x (5)	$118,226	$80,089	$57,206	$38,138
9	Subtotal (3) + (6) + (8)	$460,826	$520,789	$507,806	$499,594
10	Tax Multiplier (TM)	1.126	1.126	1.126	1.126
11	Valued LSRP Premium (9) x (10)	$518,890	$586,408	$571,790	$562,543
12	Minimum Premium Factor (MinPF)	0.75	0.75	0.75	0.75
13	LSRP Minimum Premium (1) x (12)	$254,250	$254,250	$254,250	$254,250
14	Maximum Premium Factor (MaxPF)	1.75	1.75	1.75	1.75
15	LSRP Maximum Premium (1) x (14)	$593,250	$593,250	$593,250	$593,250
16	LSRP Premium (adjusted for minimum/maximum if necessary)	$518,890	$586,408	$571,790	$562,543
17	Premium billed through prior valuation	$339,000	$518,890	$586,408	$571,790
18	LSRP (Additional/Return) Premium (16) – (17)	$179,890 (additional)	$179,890 (additional)	$14,618 (return)	$9,247 (return)

(3) Summary

Based on the incurred losses, the LSRP premium as of the 4th valuation is $562,543. The valued LSRP premium is between the minimum and the maximum premium under the LSRP. So, no further premium adjustment is needed.

At the 4th valuation, the amount due to the employer is $77,047, which is the sum of the return premium of $9,247 and the LSRP contingency deposit of $67,800.

b) Example 2

Consider Policy B with the 4th valuation below the LSRP minimum premium amount.

LSRP Standard Premium (SP)	$270,000
LSRP Contingency Deposit Percentage	20%
LSRP Contingency Deposit	$54,000

(1) LSRP Factors

Basic Premium Factor (BPF)	0.40
Minimum Premium Factor (MinPF)	0.75
Maximum Premium Factor (MaxPF)	1.75
Loss Conversion Factor (LCF)	1.171
Tax Multiplier (TM)	1.168

Valuation	Incurred Losses (ICL)	Loss Development Factors (LDF)
1st	$78,000	0.31
2nd	$90,300	0.20
3rd	$60,000	0.16
4th	$53,100	0.01

(2) LSRP (Additional/Return) Premium Calculations

	Factors/Formulas	1st Valuation	2nd Valuation	3rd Valuation	4th Valuation
1	LSRP Standard Premium (SP)	$270,000	$270,000	$270,000	$270,000
2	Basic Premium Factor (BPF)	0.40	0.40	0.40	0.40
3	Basic Premium (1) x (2)	$108,000	$108,000	$108,000	$108,000
4	Incurred Losses (ICL)	$78,000	$90,300	$60,000	$53,100
5	Loss Conversion Factor (LCF)	1.171	1.171	1.171	1.171
6	Converted Losses (4) x (5)	$91,338	$105,741	$70,260	$62,180
7	Loss Development Factor (LDF)	0.31	0.20	0.16	0.01
8	Loss Development Premium (1) x (7) x (5)	$98,013	$63,234	$50,587	$3,162
9	Subtotal (3) + (6) + (8)	$297,351	$276,975	$228,847	$173,342
10	Tax Multiplier (TM)	1.168	1.168	1.168	1.168
11	Valued LSRP Premium (9) x (10)	$347,306	$323,507	$267,293	$202,463
12	Minimum Premium Factor (MinPF)	0.75	0.75	0.75	0.75
13	LSRP Minimum Premium (1) x (12)	$202,500	$202,500	$202,500	$202,500
14	Maximum Premium Factor (MaxPF)	1.75	1.75	1.75	1.75
15	LSRP Maximum Premium (1) x (14)	$472,500	$472,500	$472,500	$472,500
16	LSRP Premium (adjusted for minimum/maximum if necessary)	$347,306	$323,507	$267,293	$202,500
17	Premium billed through prior valuation	$270,000	$347,306	$323,507	$267,293
18	LSRP (Additional/Return) Premium (16) – (17)	$77,306 (additional)	$23,799 (return)	$56,214 (return)	$64,793 (return)

(3) Summary

Based on the incurred losses, the valued LSRP premium as of the 4th valuation is $202,463. Since the valued LSRP premium of $202,463 is below the LSRP minimum premium of $202,500, the LSRP minimum premium of $202,500 becomes the LSRP premium.

At the 4th valuation, the LSRP premium of $202,500 is subtracted from the amount paid through the 3rd valuation, $267,293. The 4th valuation is adjusted to a return premium of $64,793. The amount due to the employer is $118,793, which is the sum of the return premium of $64,793 and the LSRP contingency deposit of $54,000.

c) Example 3

Consider Policy C with 3rd and 4th valuations above the LSRP maximum premium amount.

LSRP Standard Premium (SP)	$420,000
LSRP Contingency Deposit Percentage	20%
LSRP Contingency Deposit	$84,000

(1) LSRP Factors

Basic Premium Factor (BPF)	0.40
Minimum Premium Factor (MinPF)	0.75
Maximum Premium Factor (MaxPF)	1.75
Loss Conversion Factor (LCF)	1.185
Tax Multiplier (TM)	1.151

Valuation	Incurred Losses (ICL)	Loss Development Factors (LDF)
1st	$240,000	0.20
2nd	$300,000	0.14
3rd	$400,000	0.10
4th	$560,000	0.05

(2) LSRP (Additional/Return) Premium Calculations

	Factors/Formulas	1st Valuation	2nd Valuation	3rd Valuation	4th Valuation
1	LSRP Standard Premium (SP)	$420,000	$420,000	$420,000	$420,000
2	Basic Premium Factor (BPF)	0.40	0.40	0.40	0.40
3	Basic Premium (1) x (2)	$240,000	$300,000	$400,000	$560,000
4	Incurred Losses (ICL)	$78,000	$90,300	$60,000	$53,100
5	Loss Conversion Factor (LCF)	1.185	1.185	1.185	1.185
6	Converted Losses (4) x (5)	$284,400	$355,500	$474,000	$663,600
7	Loss Development Factor (LDF)	0.20	0.14	0.10	0.05
8	Loss Development Premium (1) x (7) x (5)	$99,540	$69,678	$49,770	$24,885
9	Subtotal (3) + (6) + (8)	$551,940	$593,178	$691,770	$856,485
10	Tax Multiplier (TM)	1.151	1.151	1.151	1.151
11	Valued LSRP Premium (9) x (10)	$635,283	$682,748	$796,227	$985,214
12	Minimum Premium Factor (MinPF)	0.75	0.75	0.75	0.75
13	LSRP Minimum Premium (1) x (12)	$315,000	$315,000	$315,000	$315,000
14	Maximum Premium Factor (MaxPF)	1.75	1.75	1.75	1.75
15	LSRP Maximum Premium (1) x (14)	$735,000	$735,000	$735,000	$735,000
16	LSRP Premium (adjusted for minimum/maximum if necessary)	$635,283	$682,748	$735,000	$735,000
17	Premium billed through prior valuation	$420,000	$635,283	$682,748	$735,000
18	LSRP (Additional/Return) Premium (16) – (17)	$215,283 (additional)	$47,465 (return)	$52,252 (return)	0

(3) Summary

Based on the incurred losses, the valued LSRP premium as of the 3rd valuation is $796,227. When the maximum premium factor is applied, the LSRP maximum premium equals $735,000 ($420,000 x 1.75). Therefore, the adjusted policy premium at the 3rd valuation is $735,000.

The valued LSRP premium as of the 4th valuation is $985,814. Since this also exceeds the LSRP maximum premium of $735,000, the LSRP maximum premium still applies at the 4th valuation.

Because the maximum premium of $735,000 still applies and has been paid in full as of the 3rd valuation, no LSRP additional/return premium is due. Therefore, the only amount due to the employer is the LSRP contingency deposit of $84,000.

4D. Assigned Risk Adjustment Program (ARAP)

1. Administration

a. The Plan Administrator determines the applicability of all Assigned Risk Adjustment Program (ARAP) rules.

b. ARAP applies on a mandatory basis for employers written in the assigned risk market that meet the criteria in Rule 4-D-3.

c. Experience rated assigned risk employers with multistate operations are subject to ARAP in jurisdictions in which ARAP applies.

d. A policy cannot be cancelled, rewritten, or extended for purposes of enabling an employer to avoid application of ARAP.

e. Any action taken in any form to evade the application of an ARAP surcharge factor determined in accordance with these rules is prohibited.

f. The ARAP surcharge factor is calculated, issued, and if necessary, revised by the designated rating/advisory organization on behalf of the appropriate Plan Administrator.

g. The designated rating/advisory organization in a jurisdiction, on behalf of the Plan Administrator, issues an experience rating worksheet for the risk that includes the ARAP surcharge factor.

h. ARAP surcharge factor issuance, revision, and application is limited in accordance with the Experience Rating Plan Manual or other applicable experience rating plan.

i. The calculated ARAP surcharge factor is applied by the assigned carrier(s) in accordance with these rules and other applicable rules, statutes, and/or regulations.

2. General Terms

a. ARAP

ARAP refers to the Assigned Risk Adjustment Program.

b. ARAP Surcharge Factor

ARAP identifies assigned risk employers with less favorable loss experience and requires them to share in the underwriting losses of the assigned risk market. ARAP recognizes the difference among individual assigned risk employers with respect to safety and loss prevention by providing more weight to the severity of the total losses rather than the frequency of individual losses. The differences are reflected by an ARAP surcharge factor, which may result in an increase in assigned risk premium.

c. Employer

For purposes of ARAP, employer is defined in accordance with Rule 4-A (WCIP).

d. Experience

The experience used to calculate a risk’s ARAP surcharge factor is comprised of losses that are reported by insurance carriers. The statistical plan data used to develop the ARAP surcharge are the same data used in the corresponding experience rating modification.

e. Experience Rating Plan

The Experience Rating Plan Manual defines experience rating modifications referenced in these rules. Any reference to experience rating refers to the program outlined in the Experience Rating Plan Manual.

f. Losses

Experience Rating Plan Manual defines losses for the purposes of ARAP.

g. Plan

Plan refers to North Carolina’s Workers Compensation Insurance Plan (WCIP), as set out in Rule 4-A.

h. Plan Administrator

The North Carolina Rate Bureau (NCRB or Bureau) is the organization which has been designated to administer the affairs of the Plan.

i. Risk

The Experience Rating Plan Manual defines risk for the purposes of ARAP.

j. Statistical Plan

The statistical plan references mean the North Carolina Workers Compensation Statistical Plan Manual and/or any other applicable unit statistical plan approved for use in a jurisdiction. Statistical plans detail data reporting requirements for individual risk experience.

3. Criteria

a. The designated rating/advisory organization calculates an ARAP surcharge factor for an intrastate and/or interstate risk. The risk must:

1) Be experience rated, and

2) Have an experience rating modification that includes data from at least one ARAP-approved jurisdiction, and

3) Have an experience rating modification factor greater than or equal to 1.01, and

4) Meet or exceed the weighted test ratio in accordance with Rule 4-D-6.

b. An ARAP surcharge factor is not calculated in an ARAP-approved jurisdiction if:

1) A risk is not experience rated, or

2) An intrastate and/or interstate experience rated risk does not have an ARAP-approved jurisdiction’s data included in the experience rating modification calculation, or

3) A risk has a calculated experience rating modification equal to or less than 1.00.

4. Application

a. The ARAP surcharge factor appears on a risk’s experience rating modification worksheet.

b. ARAP surcharge factors generally are determined on an annual basis and are effective for a period of 12 months. However, as provided in the applicable experience rating plans, certain circumstances may result in a reduced or extended application of an ARAP surcharge factor consistent with the experience rating modification.

c. Only one ARAP surcharge factor applies to an assigned risk policy at any time.

d. The ARAP surcharge factor is applied to the total modified premium of an assigned risk policy in ARAP-approved jurisdictions, in accordance with the applicable state assigned risk premium algorithm or any other applicable programs or statutory requirements. The ARAP surcharge factor is included in total standard premium.

e. Revisions to an ARAP surcharge factor are made and applied in accordance with the Experience Rating Plan Manual or other applicable experience rating plan.

f. In the event of a change in ownership or combinability status of a risk, the applicable experience rating plan applies to the experience used to calculate ARAP surcharge factors. The experience for any entity undergoing such a change will be retained or transferred to the ARAP surcharge factor of the acquiring, surviving, or new entity unless specifically excluded in the Experience Rating Plan Manual or other applicable experience rating plan.

g. Maximum ARAP Surcharge Factor

1) In North Carolina, the ARAP surcharge factor is limited based on risk expected losses as follow:

Maximum Surcharge

Maximum Surcharge (%) Based on Risk Expected Losses ($)

$2,500

$5,000

$10,000

$25,000

$40,000 and

over

49%

14%

22%

38%

49%

2) When an ARAP surcharge factor is calculated for an interstate experience rated risk with at least one ARAP-approved jurisdiction included in the calculation, the ARAP surcharge factor will be limited to the jurisdiction with the highest maximum ARAP surcharge factor. For ARAP surcharge factor for states other than North Carolina, refer to the appropriate manual for the applicable jurisdiction.

3) It is the assigned carrier’s responsibility to apply an ARAP surcharge factor in accordance with each jurisdiction’s specific maximum ARAP surcharge factor. The ARAP surcharge factor applied by the assigned carrier cannot exceed the specific jurisdiction’s maximum surcharge.

5. Values and Elements Used in ARAP

a. Values

1) R represents the weighted test ratio calculated in accordance with Rule 4-D-6-a. The weighted test ratio compares a risk’s actual losses to the modified expected losses.

2) E represents the total expected losses of the particular risk, shown in thousands, and limited to 40.

3) S represents the ARAP surcharge factor. If a risk is interstate experience rated, S is calculated on a full interstate basis.

b. Elements

All elements used to calculate the weighted test ratio (R) and the ARAP surcharge factor (S) are those used in an individual risk’s experience rating modification calculation. Losses are limited in accordance with the Experience Rating Plan Manual or other applicable experience rating plan.

1) W represents weighting value

2) Ap represents actual primary losses

3) A represents actual losses

4) M represents the experience rating modification factor for a particular risk

5) Ep represents expected primary losses

6) E represents total expected losses

6. Formulas

a. Weighted Test Ratio (R)

1) After the calculation of the experience rating modification factor (M) for a particular risk, the weighted test ratio (R) is calculated using the following formula:

R=	((0.5 – 0.5W)Ap	+	(0.5 + 0.5W)
	M x Ep		M x E

2) R is limited to 2.00.

3) For interstate experience rated risks, R is calculated on a full interstate basis.

b. ARAP Surcharge Factor

1) If R is greater than 1.00, the ARAP surcharge factor S is calculated using the following formula:

S = 1+	1+ (0.08)E’(R – 1)1.25
	(E’ + 3)0.5

2) S is limited in accordance with Rule 4-D-4-g (3).

4E. Take-Out-Credit Program (TOC)

1. General Information

a. The Take-Out Credit Program (TOC) provides carriers with financial incentives for writing assigned risk market employers on a voluntary market basis.

b. Each carrier that removes an employer insured under the WCIP may be eligible for a TOC. The TOC is applied against the premium used to calculate the voluntary market carrier’s Plan participation base as defined in the WCIP.

c. All carriers licensed in North Carolina and writing workers compensation and employers liability insurance coverage are eligible to participate in the TOC program.

d. It is the voluntary market carrier’s responsibility to:

1) Enroll with the Plan Administrator as well as update enrollment information on an annual basis. Once a carrier has formally requested to participate, they are automatically enrolled each year thereafter.

2) Provide supporting data as may be required by the Plan Administrator.

e. TOCs are not issued to carriers that do not enroll in the program.

f. The Plan Administrator determines the applicability of all TOC program rules.

2. General Terms

a. Direct Premiums Written in the Exhibit of Premiums and Losses (Statutory Page 14)

Refers to a carrier’s Direct Premiums Written in the Exhibit of Premiums and Losses (Statutory Page 14) contained in its Annual Statement.

b. Employer

Employer refers to an insured or a policyholder, in accordance with Rule 4-A (WCIP).

c. Experience Rating Threshold

For purposes of TOC, no experience rating threshold applies in North Carolina.

d. Individual Reported Policy Premium

For purposes of TOC, individual reported policy premium is the amount of policy premium included for specific employers in the carrier’s Direct Premiums Written in the Exhibit of Premiums and Losses (Statutory Page 14) of the carrier’s Annual Statement for the most recent calendar year. This premium is also the basis for carrier participation in the Plan.

e. Plan

Plan refers to North Carolina Workers Compensation Insurance Plan (WCIP).

f. Plan Administrator

The North Carolina Rate Bureau is the organization which has been designated to administer the affairs of the Plan. For purposes of TOC, the Plan Administrator may also be referred to as the TOC Administrator.

g. Plan Participation Base

Plan participation base refers to the basis of a carrier’s participation in the WCIP in accordance with rules of the North Carolina WCIP.

h. Program Length

In North Carolina, the program length is three (3) years in length. This means that a voluntary market employer’s initial policy and two subsequent voluntary renewals may qualify for TOC.

i. TOC

TOC refers to the Take-Out Credit program. This term is also used to refer to the actual credit (e.g., a carrier may qualify for a TOC to be applied to its Plan participation base). TOC is an assigned risk market depopulation incentive program, with state-specific program parameters.

j. Program Year

Program year refers to the individual year that an employer’s initial and renewal voluntary market policies may participate in TOC. For example, an eligible initial voluntary market policy would be Program Year I. The consecutive renewals would be Program Years 2 and 3, respectively.

k. TOC Ratio

In North Carolina, the TOC ratio is 1:1. It is multiplied against the individual reported policy premium for all policies.

l. Voluntary Market Carrier

For purposes of TOC, a voluntary market carrier removes an employer from the assigned risk market and writes the employer on a voluntary basis. For purposes of TOC, voluntary market carrier(s) will be referred to only as carrier(s).

3. TOC Requirements

a. Any carrier, other than the last voluntary carrier of record, may remove an employer without any restriction on the length of time that the employer was written in the assigned risk market. For purposes of TOC, these requirements apply to a carrier’s group/affiliate as well as the carrier.

b. A carrier will not receive a TOC for any employer removed from the assigned risk market within 12 months of that carrier, or a member of that carrier’s group, writing the employer in the voluntary market.

c. In no instance may a carrier receive a TOC for employers returned to the assigned risk market within 12 months of being removed from the assigned risk market.

d. If the enrolled carrier keeps the employer out of the assigned risk market for the full program length, that carrier will receive the TOC for premium relating to each of the program years of voluntary market coverage.

e. A carrier is not eligible for TOC for an employer’s remaining program years if:

1) A carrier does not enroll in TOC for an employer’s first program year, or

2) A carrier does not request a TOC for an employer’s first program year, or

3) A carrier requests a TOC for an employer’s first program year, but subsequently decides not to accept the TOC, or

4) An enrolled carrier accepts a TOC for a specific program year, but not its subsequent program years.

f. Subject to Rule 4-E-3-a through e, if the enrolled carrier does not write the employer for the full program length, it will receive TOC only for that consecutive period of time that it covered the employer in the voluntary market.

4. TOC Calculation

a. Individual reported policy premium is used to determine the Individual Policy TOC and is subject to subsequent adjustments:

Individual

Policy

TOC

Individual Reported

Policy Premium

TOC

Ratio

b. Total Carrier TOC is calculated as follows:

Total

Carrier

TOC

Sum of Individual

Policy TOC

c. Subsequent adjustments made to TOC, such as audit premiums, retro adjustments, etc., are developed and reported in the calendar year in which they are made.

d. Regardless of when a policy adjustment is made by the carrier, a TOC adjustment is applied if it is related to a policy within the program length.

5. Carrier Submission of Request for Take-Out Credit

If a carrier wishes to have a TOC applied to its Plan participation base, it must request the TOC in accordance with the following:

a. Carriers must enroll in the TOC program in accordance with the enrollment procedures established by the Plan Administrator.

b. In order to receive a TOC for the entire program length, policies of employers taken out of the assigned risk market must be identified as voluntary and accurately reported every year.

c. The Plan Administrator performs a systematic review and provides enrolled carriers with an electronic detailed report of eligible policies. The report includes only voluntary market policies as reported by the enrolled carrier for employers that were previously written in the assigned risk market.

d. Enrolled carriers must review and report to the Bureau any corrections, additions, or deletions needed to ensure that only eligible policies are included in the calculation of the TOC. The report changes must be provided in accordance with the procedures established by the Plan Administrator.

e. Enrolled carriers must ensure that the individual reported policy premium is the amount included in the Direct Premiums Written in the Exhibit of Premiums and Losses (Statutory Page 14) of the carrier’s Annual Statement for the most recent calendar year.

f. If no changes are necessary, refer to Rule 4-E-5-h.

g. Upon receipt of a modified report, the Plan Administrator reviews the submitted changes to ensure agreement. The Plan Administrator has the discretion to eliminate policies from the report that were inaccurately reported or whose changes cannot be confirmed.

h. The enrolled carrier must review and provide final approval of the policies on the report. The approval and corresponding confirmation that the report is correct must be sent to the Plan Administrator for final processing.

6. Total Carrier TOC Application to Plan Participation Base

a. A total carrier TOC will be given only to enrolled carriers that provide acceptance of the final TOC Report to the Plan Administrator, in accordance to the established enrollment procedures.

b. The developed total carrier TOC is applied to the carrier’s Plan participation base.

c. There is no maximum limit on the total carrier TOC amount, but a carrier’s Plan participation base will not be reduced below zero as a result of the TOC.

d. Total carrier TOCs are applied to each individual carrier’s Plan participation base, and are not rolled up to an aggregate TOC for the carrier’s group.

4F. Available Coverages

1. General Information

a. In accordance with the Rule 4-A (WCIP), additional coverage(s) may be secured, at the employer’s request, on a WCIP Standard Workers Compensation and Employers Liability Insurance Policy.

b. Additional coverage(s) availability is subject to the assigned carrier’s ability and agreement to provide the requested coverage.

c. If federal coverage is requested and the assigned carrier is able and agrees to provide the requested federal coverage, it can only be provided in addition to state act workers compensation coverage.

2. Limits of Employers Liability Insurance

a. Standard Limits of Liability

1) Employers liability insurance can only be secured in the assigned risk market in conjunction with workers compensation insurance. Employers liability insurance without workers compensation insurance is not available.

2) Standard limits of liability apply to employers liability insurance, as detailed in Rule 3-A-13.

b. Increased Limits of Liability

1) Increased limits of liability are available under Part Two – Employers Liability of the policy. In the assigned risk market, the standard limits may be increased up to the maximum limits provided in the following table:

Increased Limits of Liability Availability Table

Coverage

Maximum Increased Limited Available

Employers Liability Insurance

• $1,000,000 – Bodily Injury by Accident, Each Accident

• $1,000,000 – Bodily Injury by Disease, Policy Limit

• $1,000,000 – Bodily Injury by Disease, Each Employee

2) Increased limits, their corresponding factors and minimum premiums are applied in accordance with Rule 3-A-13-b, Appendix C, and applicable state rules and algorithms.

c. Limits of Liability for Specific Coverages

If endorsed onto the policy, Voluntary Compensation (WC 00 02 03) and Employers Liability Coverage and USL&HW Act and its extensions are included in the limits of employers liability insurance requested under Part Two – Employers Liability.

3. Limited Other States Insurance

Limited Other States Insurance coverage is provided under the WCIP through the Residual Market Limited Other States Insurance Endorsement (WC 00 03 26A). This endorsement is attached to all assigned risk policies.

4. Waiver of Our Right to Recover From Others (Subrogation)

a. The Waiver of Our Right to Recover From Others Endorsement (WC 00 03 13) is available if required of the insured by contract. A copy of the contract requiring the employer to obtain the coverage is not required prior to issuance of the endorsement. However, a copy of the contract that requires the employer to obtain the endorsement must be provided to the assigned carrier upon notification of a claim to the assigned carrier and/or at policy audit, as requested by the assigned carrier.

b. Blanket waivers are available in the North Carolina assigned risk market.

c. Additional premium charged for a waiver of subrogation is applied in accordance with Rule 3-A-21.

5. Alternate Employer Endorsement

a. The Alternate Employer Endorsement (WC 00 03 01A) is available if required of the insured by contract and only when the state of operations of the alternate employer is listed in Item 3.A of the policy.

b. The Alternate Employer Endorsement is not available for Professional Employer Organizations (PEOs) arrangement policies.

6. Federal Coverages

a. USL&HW Act and Extensions

1) USL&HW Act and Extensions

Coverage for the United States Longshore and Harbor Workers’ Compensation (USL&HW) Act (WC 00 01 06A) is available by endorsement in the assigned risk market written only in addition to state workers compensation act coverage.

2) USL&HW Act Extensions

Coverage for USL&HW Act’s extensions are available in the assigned risk market only when the Longshore and Harbor Workers’ Compensation Act Endorsement is attached, as well as the other appropriate endorsements, and is available when written only in addition to state workers compensation act coverage.

3) Endorsements

The available endorsements are:

Longshore and Harbor Workers’ Compensation Act Coverage Endorsement (WC 00 01 06A)
Defense Base Act Coverage Endorsement (WC 00 01 01A)
Nonappropriated Fund Instrumentalities Act Coverage Endorsement (WC 00 01 08A)
Outer Continental Shelf Lands Act Coverage Endorsement (WC 00 01 09C)

For more information about federal coverages, refer to Rules 3-A-4 and 3-A-13.

b. Coverage for Maritime (Admiralty), Program I or Program II

1) General Information

Coverage for Maritime (Admiralty), Program I or Program II, is available by endorsement (WC 00 02 01 B) only at the standard limit of liability in accordance with Rule 3-A-13-B (4), and written only in addition to state workers compensation act coverage. Increased limits are not available for this coverage in the assigned risk market.

2) Additional Maritime (Admiralty) Options

Coverage for the following may be included at an additional charge, subject to certain requirements.

a) Transportation, Wages, Maintenance, and Cure (TWMC)

In conjunction with Maritime coverage, the assigned carrier may provide coverage for TWMC on the Maritime Coverage Endorsement (WC 00 02 01B).
The TWMC premium charge for the exposure is determined by the assigned carrier based on its evaluation of the exposure presented by the risk.

b) Voluntary Compensation Maritime Coverage

In conjunction with Maritime coverage, the assigned carrier may provide coverage for voluntary compensation maritime exposure only under Program II for masters and members of the crews of vessels and only when the Maritime Coverage Endorsement is attached.

c) Endorsements

The available endorsements are:

Maritime Coverage Endorsement (WC 00 02 01B)
Voluntary Compensation Maritime Coverage Endorsement (WC 00 02 03)

c. Federal Mine Safety and Health Act

Coverage for Federal Mine Safety & Health Act is available by endorsement (WC 00 01 02A), and written only in addition to state workers compensation act coverage. For more information about how to provide this coverage, refer to Rule 3-A-11.

7. Cancellation and Non-Renewal

The Cancellation and Non-Renewal Endorsement (WC 32 06 01 B) allows a carrier to designate on the policy a third party to be notified in the event of cancellation or non-renewal and/or allows a carrier to extend the number of days notice required for cancellation or non-renewal beyond the statutory required minimums.

For Assigned Risk, it is mandatory for a carrier to apply this endorsement to an assigned risk policy upon request from the insured, but only for the purpose of notifying a third party. When this endorsement is applied to assigned risk policies, the number of days notice provisions must be left blank and the number of days notice required by North Carolina law will apply.

This endorsement is to be used in conjunction with required North Carolina Amended Coverage Endorsement (WC 32 03 01D). This endorsement is optional with application to voluntary policies.

4G. Producer Fees

1. General Explanation and Requirements

a. For purposes of this rule, producer means a licensed North Carolina insurance agent, broker, or insurance representative, as defined in the state insurance code, whose privileges under the WCIP have not been suspended or revoked, designated by the employer or applicant applying under this Plan to secure and maintain workers compensation and employers liability insurance on behalf of the employer.

For the purposes of this Plan, the producer is considered to be acting on behalf of the insured or employer applying for coverage under the Plan and not as an agent of the Plan Administrator or of any assigned carrier for Plan business.

Also, for purposes of this rule:

1) Producer fees may be referred to as producer fees, fees, or commissions.

2) Proper producer licenses and producer licensing refer to resident or nonresident producer and/or agency licenses as applicable.

3) Plan Administrator is defined in accordance with Rule 4-A (WCIP).

b. Rule 4-A (WCIP) provides the authority for the fees that must be paid by an assigned carrier to a licensed agency for all new and renewal assigned risk policies for which the agency is the agency of record.

c. Assigned carriers must have and adhere to internally documented state producer and agency licensing requirements for payment of producer fees.

d. To be paid a fee, a producer and/or agency must be properly licensed to write in North Carolina. It is the assigned carrier’s responsibility to determine whether or not the producer and/or agency is properly licensed. Producer fee checks are made payable to the licensed agency of record rather than to the individual licensed producer, unless they are one and the same.

e. Only one producer and agency can be recognized by the assigned carrier at any one time for a single policy. The producer of record and agency of record are the producer and agency designated on the application unless the producer and/or agency changes during the policy period in accordance with Rule 4-A (WCIP).

2. Licensing Requirements

a. Application Submission

1) When the assigned risk ACORD® 135 NC is submitted to the Plan Administrator the producer must include either the Federal Employer Identification Number for the agency or the Social Security Number for the agent.

2) If the producer is not properly licensed (e.g., expired licenses, lack of an applicable nonresident license) the assigned carrier will accept the assignment, but the producer fee will not be paid to the producer listed on the application. However, for all other purposes, the unlicensed representative is treated as the producer of record.

3) When the assigned carrier receives the WCIP assignment/binder package from the Plan Administrator, it must confirm proper producer and/or agency licensing.

b. Continuing License Verification – During Policy Term and Renewals

1) At renewal, the assigned carrier must confirm that the producer and/or agency is properly licensed in North Carolina.

2) If during the policy period, an assigned carrier obtains written documentation that a producer’s and/or agency’s license has been suspended or revoked by a particular state(s), the producer and/or agency:

Will be terminated as the producer of record,
Will no longer be eligible for procedure fees, and
Will no longer be treated as the producer of record.

If the producer and/or agency appeal the suspension or revocation of their license and subsequently win their appeal, the producer and/or agency will not be paid producer fees retroactively.

3) Subject to Rule 4-G-1-c, if the agency of record is still properly licensed even though the producer is not licensed, the agency will continue to be paid producer fees and will continue as the agency of record.

c. Multistate Policies

On a multistate policy, a fee is paid only in the state(s) in which the producer and/or agency is properly licensed. If a policy covers two or more states, and the producer and/or agency is properly licensed in:

1) Only one of the states, the fee is paid only on the premium and premium basis for the state in which the producer and/or agency is licensed.

2) Two or more of the states, the fee is paid on all premiums for all states in which the producer and/or agency is licensed, based on each state’s premium basis and percentage. A fee is not paid on any premium for a state in which a producer and/or agency is not licensed.

3. Producer Changes

a. A policyholder may change its producer and/or agency of record by providing written notice to the assigned carrier. Such written notice is generally in the form of a “producer of record” letter, indicating the new producer and/or agency information and the requested effective date of the change.

b. Such requests must be made before the renewal policy effective date or with the consent of the assigned carrier at another agreed upon time. The assigned carrier is not required to make such a change before renewal, but changes typically become effective as of the date of renewal. The policyholder must contact the assigned carrier for its requirements.

4. Premium Basis

a. General Information

In North Carolina, producer fees are paid based on total annual premium charged and collected. Premium may be adjusted due to endorsements and preliminary, interim, and final audits, which may result in an adjustment to the producer fee.

b. LSRP Policies

In states in which LSRP applies:

1) Producer fees are paid based on premium in accordance with Rule 4-G-4-a, not LSRP Standard Premium as defined in Rule 4-C-5-c (12).

2) Producer fees are not paid on the LSRP contingency deposit.

3) No additional producer fee is payable or return commission chargeable as a result of LSRP valuation activity.

5. Payment Information

a. The assigned carrier pays fees in accordance with Table 1- Collected Premium and Table 2- Exceptions below:

Table 1 – Collected Premium

If premium is charged and collected from the policyholder and the…	Then the assigned carrier must process and mail fee payments within 30 days of the…
Producer fee meets or exceeds $25, or The policy is a minimum premium policy	Date that the assigned carrier issues the policy in accordance with the Assigned Carrier Performance Standards, or Receipt of premium
Producer fee is less than $25	Date of reaching a cumulative total of $25 per agency, or Date the withholding time period exceeds six months, or Request for payment, or Whichever is earlier

Table 2 – Exceptions

If premium is not collected and the account…	Then producer fees are…
Has not yet been referred to an outside collection agency	Not paid on any uncollected premium until the premium is collected and the fees meet the requirements in Table 1 – Collected Premium
Has been referred to an outside collection agency	Never paid on any balance that is referred to the outside collection agency, even if the balance is subsequently collected

b. Producers and/or agencies must return fees to the assigned carrier in a timely manner when return premiums are generated. The fee payment may also be applied to return fees that the producer and/or agency may owe to the carrier from other assigned risk policies for that agency.

c. The producer may not deduct the producer fee when sending in the deposit premium or a payment. The assigned carrier will forward the fee as appropriate.

6. Producer Fee

The producer fee paid by the assigned carrier must be a 5% flat fee applied to the total annual premium charged and collected.

7. Producer Disputes

For information about disputes relating to the calculation and/or payment of producer fees and producer of record changes, contact the Plan Administrator, per Rule 4-A (WCIP).

4H. Deposit Premium

Deposit premium for Assigned Risk is determined using a percentage of the estimated annual premium. The percentage varies with the amount of the estimated annual premium.

Estimated Annual Premium	Payment Basis	Minimum Deposit Percentage	Additional Payments During Year
Under $5,000	Annual	100% of annual	None
At least $5,000	Semiannual	75% of annual	One
At least $10,000	Quarterly	50% of annual	Three

Additional payments shall be in equal amounts. The sum of which, when added to the deposit premium, shall equal 100% of estimated annual premium. Estimated annual premium and the payment schedule are subject to adjustment at interim or final audit, and a risk may select a higher deposit premium at inception.

The above “Deposit Premium” table is followed by the designated carriers. After assignment the designated carrier, based on sound underwriting practices, has the right to make appropriate changes in the payment basis which the employer has selected. The designated carrier will give the reasons for any change.