North Carolina Self Insurer of Workers’ Compensation Bond: A Comprehensive Guide

August 8, 2022

North Carolina Self Insurer of Workers’ Compensation Bond

This guide provides information for insurance agents to help their customers obtain a North Carolina Self Insurer of Workers Compensation bond

At a Glance:

  • Average Cost: Between 2% to 10% of the bond amount per year based on the applicant’s credit history
  • Bond Amount: Minimum of $500,000
  • Who Needs it: Individual employers in North Carolina that self-insure their workers’ compensation liabilities and are excluded from the Association Aggregate Security System (AASS)
  • Purpose: To ensure their employees will receive compensation for financial harm if the employer fails to pay out all workers’ compensation claims
  • Who Regulates Self-Insurers in North Carolina: The North Carolina Department of Insurance

Background

North Carolina Statute 97-170 requires all employers the self-insure their workers’ compensation liabilities to obtain a license from the Department of Insurance. The North Carolina legislature enacted the licensing requirement to ensure that self-insurers are able to pay out workers’ compensation claims. To provide financial security for the enforcement of the licensing law, self-insurers that are excluded from the AASS by the state’s Self-Insurance Security Association must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the North Carolina Self Insurer of Workers’ Compensation Bond?

North Carolina requires self-insurers to purchase a surety bond as part of the application process to obtain a license. The bond ensures that the insurer’s employees will receive compensation for financial harm if the employer fails to comply with the regulations outlined in North Carolina Statute 97-185. Specifically, the bond protects the public if the employer fails to pay all valid workers’ compensation claims. In short, the bond is a type of insurance that protects employees if the employer violates the terms of their license.

North Carolina Self Insurer of Workers’ Compensation Bond Form

North Carolina Self Insurer of Workers’ Compensation Bond Form

How Can an Insurance Agent Obtain a North Carolina Self Insurer of Workers’ Compensation Surety Bond?

BondExchange makes obtaining a North Carolina Self Insurer of Workers’ Compensation bond easy. Simply login to your account and use our keyword search to find the “Insurer” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

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How is the Bond Amount Determined?

North Carolina Statute 97-185 dictates that the bond amount must be equal to 100% of the employer’s total undiscounted outstanding claims liability from their most recent end of the fiscal year report. However, the bond must be a minimum of $500,000.

Is a Credit Check Required for the North Carolina Self Insurer of Workers’ Compensation Bond?

Surety companies will run a credit check on the owners of the company to determine eligibility and pricing for the North Carolina Self Insurer of Workers’ Compensation bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit,” meaning that the credit check will not affect the owner’s credit.

How Much Does the North Carolina Self Insurer of Workers’ Compensation Bond Cost?

The North Carolina Self Insurer of Workers’ Compensation bond can cost anywhere between 2% to 10% of the bond amount per year. Insurance companies determine the rate based on several factors, including your customer’s credit score and experience. The chart below offers a quick reference for the cost of the $500,000 bond requirement.

$500,000 Self Insurer of Workers’ Compensation Bond Cost

Credit Score Bond Cost (1 year)
800+ $10,000
680 – 799 $18,750
650 – 679 $25,000
600 – 649 $37,500
550 – 599 $50,000

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

Who is Required to Purchase the Bond?

North Carolina requires individual employers that self insure their workers’ compensation liabilities and are excluded from the AASS to purchase a surety bond as a prerequisite to obtaining a license. North Carolina Statute 97-185 dictates that the Self-Insurance Security Association can exclude employers that meet any of the following conditions from the AASS:

  • Employers that have had their licenses revoked
  • Employers with a Standard and Poor’s Rating Service or Moody’s Investor Service debt rating below the minimum threshold set by the Self-Insurance Security Association
  • Employers that have defaulted on their workers’ compensation liabilities
  • Employers that do not submit the information needed to determine outstanding workers’ compensation liabilities

How do North Carolina Self Insurers Apply for a License?

Self-insurers in North Carolina must navigate several steps to obtain a license. Below are the general guidelines, but applicants should refer to the application form for details on the process.

Step 1 – Meet the Fixed Assets Requirements

Self-insurers must have total fixed assets (land, buildings, etc.) of at least $500,000 to be eligible for licensure.

Step 2 – Complete the Application

All North Carolina Self Insurer License applications should be emailed to  [email protected] and mailed to the following address:

North Carolina Self-Insurance Security Association (NCSISA)
Attn: Dewey R. Preslar, Jr.
1620 South MLK Jr. Ave. Suite 107
Salisbury, NC 28144

Self-insurers must complete the application in its entirety and submit the following items:

    • Audited company financial statements
    • Names, titles, and addresses of the top company owners/officers
    • Biographical affidavit for the top company owners/operators
    • Company organizational chart (only if the company is part of a holding company system)
    • Copy of a binder for specific and aggregate excess workers’ compensation policy with an endorsement made out to:

North Carolina Department of Insurance
Financial Analysis & Receivership Division
Special Entities
1203 Mail Service Ctr.
Raleigh, NC 27699-1203

Step 3 – Purchase a Surety Bond

Employers that are excluded from the AASS must purchase and maintain a surety bond (limits outlined above).

How do North Carolina Self Insurers of Workers’ Compensation File Their Bonds?

Self-insurers should mail their completed bond forms, including the power of attorney, to the following address:

North Carolina Department of Insurance
Financial Analysis & Receivership Division
Special Entities
1203 Mail Service Ctr.
Raleigh, NC 27699-1203

The surety bond requires signatures from both the surety company that issues the bond and from a representative of the employer. The surety company should include the following information on the bond form:

  • Legal name of the entity/individual(s) buying the bond
  • Surety company’s name
  • Bond amount
  • Date the bond is signed

What Can North Carolina Self-Insurers do to Avoid Claims Made Against Their Bonds?

To avoid claims against their bonds, North Carolina self-insurers of workers’ compensation must ensure that they pay all of their workers’ compensation liabilities on time and in full.

What Other Insurance Products Can Agents Offer Self-Insurers in North Carolina?

Most reputable employers will purchase liability insurance. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for North Carolina Self-Insurer Customers?

North Carolina conveniently provides a public database of employers that self-insure workers’ compensation liabilities. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2022-08-09T15:14:29-04:00