Table 7.5: Bank guarantees/prudential margins and excess of loss requirements


Bank guarantees/prudential margins

Excess of loss requirements

New South Wales


  • Initial security equivalent to tariff premium (WIC rate estimated wages) for the previous twelve months plus a prudential margin of 50%. This is subject to the minimum self-insurer security requirement.
  • A minimum security of $2.5 million applies except for government entities (local councils and public universities) and former self-insurers. Government employers are exempt from the security requirements.
  • SIRA has discretion to seek additional security if it believes circumstances are warranted. For subsequent reviews for self-insurers with a central estimate of outstanding claim liability <$50 million — 150% of self-insurer liabilities including a prospective component for the 12 months post balance date. The prudential margin does not apply to government entities.
  • For self-insurers with a central estimate of outstanding claim liability ≥$50 million the security is to be determined as at the 95th percentile to achieve a 95 per cent probability of adequacy.



  • A self-insurer must obtain and maintain unlimited reinsurance cover during the currency of the licence so as to restrict its liabilities under the Workers Compensation Act 1987 and independently of the 1987 Act to a maximum amount approved by SIRA in respect of any one event. The reinsurance cover must be provided by an insurance company authorised by the Australian Prudential Regulation Authority.
  • A retention amount under the above policy or policies, provided that it is within the range of $500,000 to $2,500,000 per event is acceptable to SIRA.
  • Retentions in excess of $2,500,000 will require prior approval by SIRA. In such instances SIRA will require the self-insurer to undertake and provide an assessment of the likely cost of risk retention and the appropriateness of the level of retention sought as part of the approval process.



s393 — Workplace Injury Rehabilitation and Compensation Act 2013

  • A self-insurer must ensure that there is in force at all times a guarantee in respect of its assessed liability. The guarantee must :
    • – be given by an Authorised Deposit-Taking Institution (ADI);
    • – be in a form approved by WorkSafe Victoria; and
    • – guarantee payment of amounts not less than 150% of the assessed liability or $3 million (whichever is greater).
  • The valuation of the self-insurer’s assessed liability includes a prospective component which is included in the calculation of the quantum coverage of the guarantee.


s380(3) & s393(1)(b) — WIRC Act

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



s84 Workers’ Compensation and Rehabilitation Act 2003 — Provision of a security (an unconditional bank guarantee, cash deposit, or financial guarantee given by an insurance company that is an approved security provider), for an amount equivalent to 150% of the self-insurer’s estimated claims liability.

s86 Workers’ Compensation and Rehabilitation Act 2003 — Retention of reinsurance for an unlimited amount in excess of the self-insurer’s liability for each event that may happen during the period of reinsurance. The self-insurer’s liability must be not less than $300,000 and not more than the limit set by the Regulator on application by the self-insurer.

Western Australia

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

For current self-insurers:

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

For new self-insurers:

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

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

Common law and catastrophe insurance policy for a minimum of $50 million for any one claim or series of claims arising out of one event.

South Australia


  • Outstanding liability multiplied by a prudential margin of 2. It is revised annually in accordance with an actuarial report the employer must submit within 3 months after the end of the financial year. Minimum guarantee applies 01/01/2018— $870,000.
  • Refer to Schedule 3 — Return to Work Regulations 2015 and Code of Conduct for Self-insured Employers.


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

  • $100 million on the sum insured
  • a deductible of not less than $500,000 per event or series of events, and
  • if the self-insured employer elects to include a stop loss excess or aggregate excess, such stop loss or aggregate excess must not be less than the higher of:
    • – three times the individual incident excess, or
    • – 10% above the average incurred claim cost for the prior 3 years.
  • Refer to Schedule 3 of the Return to Work Regulations 2015 and Code of Conduct for Self-insured Employers.



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

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

For self-insurers with more than 3 years experience:

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

Providing a financial undertaking

How the Financial Undertaking is determined

Excess of loss policy for a minimum amount of $50 million and an irrevocable power of attorney over the policy — Securing an Excess of Loss Policy.

Northern Territory

Minimum level of financial security to be by either $1 million or 150% of self-insurers current central estimate of outstanding claims liability, whichever is greater.

Catastrophe Reinsurance of an unlimited amount excess of $1 million

Australian Capital Territory

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

  • $750,000 or
  • an amount calculated by an actuary to be the estimate of outstanding claims liability at the balance date, plus a prudential margin of 30%.


The application must provide evidence that the employer has reinsurance of $500,000 (CPI indexed) for a single event to cover the employer’s future liability under the Act.

C’wealth Comcare

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

  • Deed between the Commission, Comcare and a bank or insurer for an amount that can be called upon by the Commission in the event a self-insurance licence is suspended or revoked.
  • The guarantee is usually provided annually and if required must be provided within 170 days of the start of the financial year to which the guarantee relates.
  • The guarantee must be for an amount calculated by the actuary as the greater of:

a) the 95th percentile of Outstanding Claims Liabilities at the Balance Date and the addition of one reinsurance policy retention amount, or

b) the 95th percentile of projected Outstanding Claims Liabilities in 12/18/24* months' time from the Balance Date and the addition of one reinsurance policy retention.

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

Licensee is required to maintain an appropriate level of reinsurance to limit its liability to pay compensation and other amounts under the SRC Act in accordance with the scope of the licence.

New Zealand

No formal security is taken. No legislative provision to allow formal security arrangements like debentures over assets, bank bonds or guarantees or any other third-party guarantees. An employer must prove it has the ability to meet its program obligations completely in its own right in order to be accredited.

Accident Compensation Corporation provides Stop Loss Cover within a range of 160% to 250% of the defined risk. Stop Loss Cover is mandatory for Full Self Cover employers and optional for the Partnership Discount Plans. Any other reinsurance is prohibited under the legislation. The accredited employer is required to carry the risk of workplace injury with no ability to offload any of this risk.