It is enacted by the General Assembly as follows:

SECTION 1. Sections 27-7.2-1, 27-7.2-2, 27-7.2-3, 27-7.2-8, 27-7.2-9, 27-7.2-9.1, 27-7.2-20.1, 27-7.2-20.2 and 27-7.2-20.3 of the General Laws in Chapter 27-7.2 entitled "Workers' Compensation Insurance Fund" are hereby amended to read as follows:

27-7.2-1. Definitions. -- When used in this chapter, the following words shall have the following meanings:

(1) "Board" means the board of directors of the state compensation insurance fund;

(2) "Fund" means the state compensation insurance fund ; {ADD known as The Beacon Mutual Insurance Company; ADD}

(3) "Manager" means the manager of the state compensation insurance fund;

(4) "Personal injury" or "injury" has the meaning given to it in chapter 29 of title 28 ; {ADD . ADD}

(5) "Residual risk" means an employer who in good faith attempts to procure or retain workers' compensation insurance but is unable to do so at competitive rates through ordinary methods in the voluntary market with a qualified insurer and who is not selfinsured. The term also includes any legal entities that may be combined for experience rating purposes;

(7) "Voluntary risk" means an employer for which the fund voluntarily elects to provide workers' compensation or incidental coverage under this chapter.

27-7.2-2. Creation of fund. -- (a) {ADD The purpose of the fund is to ensure that all employers in the state of Rhode Island have the opportunity to obtain workers' compensation insurance at the lowest possible price. It is also the express policy and purpose of this chapter to establish and maintain that the fund shall be the insurance carrier of last resort. ADD} The fund is created as a nonprofit independent public corporation for the purpose of insuring employers against liability for personal injuries for which their employees may be entitled to benefits under chapter 33 of title 28 or under 33 U.S.C. section 901 et seq. or other employer's liabilities incidental thereto.

(b) The fund must be organized and, except as provided in subsection (c) of this section, section 27-7.2-9.1(c), or elsewhere in this chapter, operated as a domestic mutual insurance company.

(c) The fund shall be deemed to have met the requirements of section 27-1-37 and section 27-8-5 when the director of the department of workers' compensation has appropriated to the fund any portion of the amount provided for in section 27-7.2-19 and all policies issued by the fund shall be without the contingent mutual liability of the policyholders for assessment.

(d) The fund shall be deemed to be an insurance company organized pursuant to chapter 1.1 of title 7. Without limiting the foregoing, section 7-1.1-4.1 relating to, among other things, indemnification of officers, directors, and employees shall apply to the fund.

(e) The fund may amend its charter pursuant to section 7-1.1-53.1, subject to the prior approval of all amendments by the director of the department of business regulation.

(f) The general assembly declares that an adequate residual risk {ADD a stable ADD} market for workers' compensation insurance {ADD for all employers seeking coverage ADD} is necessary to the economic welfare of Rhode Island; that an adequate residual risk {ADD such stable and competitive ADD} insurance market will benefit all employers, all employees and their families, and all insurance companies doing business in Rhode Island; that without the {ADD such ADD} insurance {ADD at a competitive rate ADD} , the orderly growth and economic development of the state would be severely impeded; and that the provision of residual risk {ADD competitive ADD} insurance coverage by the fund for employers in Rhode Island and the capitalization of the fund through capital assessments as provided in this chapter is for the benefit of the public and in furtherance of a public purpose.

27-7.2-3. Board of directors. -- (a) The board of directors consists of seven (7) members and the director of the department of labor and the manager of the fund who shall be ex officio members. Each director shall hold office until a successor is appointed and qualifies. Each director shall represent a policyholder and may be an employee of a policyholder. A policyholder may designate a person to represent them on the board. The initial board of directors shall be appointed by the governor and shall consist of seven (7) members, and the director of the department of labor who shall serve ex officio. If the fund is operational and issuing policies {ADD Except as provided in the following paragraph, ADD} upon the expiration of the {ADD four (4) year ADD} terms of the initial board {ADD directors in office upon the effective date of this section ADD} and thereafter, the governor shall appoint {ADD four (4) ADD} every other director{ADD s ADD} until the governor has made four (4) appointments. {ADD and ADD} T {ADD t ADD} he remaining three (3) directors shall be chosen by the fund's policyholders. In addition to the director of the department of labor, no more than one member of the board shall be a representative of a governmental entity. At least two (2) {ADD three (3) ADD} members of the board shall represent private, for profit, enterprises. No member {ADD other than the manager ADD} of the board may represent or be an employee of an insurance company.

(b) The membership terms shall be four (4) years . {ADD , except as provided below. Notwithstanding any of the foregoing provisions, from and after the repayment by the fund of the loan from the director of the department of labor described in section 27-7.2-19, the board of directors of the fund may by resolution provide that all directors, other than those servicing ex officio, shall thereafter be elected by the policyholders of the fund for terms of not more than four (4) years in accordance with the provisions for the election and classification of directors as may be established in the fund's bylaws. In no event shall such provisions alter the duration of the four (4) year terms of the directors elected by the fund's policyholders or appointed by the Governor prior to July 1, 1995. Any vacancy occurring during the term of any director shall be filled as provided in the fund's bylaws. ADD} Members shall be entitled to reasonable reimbursement for vouchered expenses incurred in their official capacity not to exceed twenty five hundred dollars ($2,500) annually . The board shall annually elect a chairperson from among its members and other officers it deems necessary for the performance of its duties. Directors shall be entitled to receive compensation of one hundred and fifty dollars ($150) per diem for each day or part thereof actually spent on the business of the fund provided that for any one year those amounts shall not exceed four thousand dollars ($4,000) for the chairperson or two thousand five hundred dollars ($2,500) for any other member .

27-7.2-8. Insure workers' compensation liability. -- (a) The fund may insure an employer against any workers' compensation claim, claims under the 33 U.S.C. section 901 et seq. and other employer's liabilities incidental thereto arising out of and in the course of employment, {ADD including the provision of excess workers' compensation insurance coverage, ADD} as fully as any other insurer.

(b) There is established within the fund both a voluntary risk program and a residual risk program for the provision of insurance against workers' compensation liabilities arising under title 28 and incidental liabilities.

(c) The fund shall issue separate rating plans for the voluntary risk program and the residual risk program.

(d) To participate in the voluntary risk program, the applicant shall satisfy the definition of voluntary risk as stated in section 27-7.2-1.

(e) To participate in the residual risk program, the applicant shall satisfy the definition of residual risk as stated in section 27-7.2-1.

27-7.2-9. General powers and limitations. -- For the purposes of exercising the specific powers granted in this chapter and effectuating the other purposes of this chapter, the fund:

(1) may sue and be sued;

(2) may have a seal and alter it at will;

(3) may make, amend, and repeal rules relating to the conduct of the business of the fund;

(4) may enter into contracts relating to the administration of the fund;

(5) may rent, lease, buy, or sell property in its own name and may construct or repair buildings necessary to provide space for its operations;

(6) may declare a dividend when there is an excess of assets over liabilities, and minimum surplus requirements;

(7) may pay medical expenses, rehabilitation expenses, compensation due claimants of insured employers, pay salaries, and pay administrative and other expenses;

(8) may hire personnel and set salaries and compensation; and

(9) may perform all other functions and exercise all other powers of a domestic mutual insurance company that are necessary, appropriate, or convenient to administer the fund provided, however, that the fund shall not be a member of the National Council on Compensation Insurance (NCCI).

27-7.2-9.1. Residual risk program. -- {ADD 27-7.2-9.1. Insurance coverage program. -- ADD}

(a) Provision of residual risk {ADD workers' Compensation ADD} coverage.

(1) Subject to the transitional implementation provisions of section 27-7.2-20(b) and other limitations set forth in this chapter, the fund shall consider coverage applications for {ADD provide ADD} workers' compensation insurance against liabilities arising under title 28 of the general laws from {ADD for ADD} any residual risk {ADD employer ADD} that tenders the necessary premium.

(2) If the fund determines that (A) the applicant satisfies the conditions and standards of residual risk coverage established pursuant to this chapter, and (B) the writing of the residual risk coverage is consistent with the applicable reserve and surplus requirements and the solvency of the fund, then the residual risk shall be provided with workers' compensation insurance against liabilities arising under title 28 at the appropriate residual risk premium as provided by the fund's rates and rules. The residual risk may be required to meet other conditions considered by the fund to be necessary to protect the fund's interests.

(b) Residual risk {ADD A ADD} a pplications; denial {ADD provision ADD} of coverage.

(1) Policy applications. -- After the commencement of the fund's residual risk program and upon expiration of the applicant's then current workers' compensation insurance policy, a residual risk a {ADD A ADD} pplicant{ADD s ADD} may apply for coverage by the fund in good faith, either directly or through an insurance producer licensed by the state of Rhode Island to procure worker's compensation insurance according to rules adopted by the board under section 27-7.2-17. An application shall establish the applicant's status as a residual risk. No applicant shall be eligible to secure worker's compensation coverage from the fund by canceling its then current workers' compensation insurance coverage.

(2) Denial, cancellation, and termination {ADD nonrenewal ADD} . -- The nonpayment of premium for current or prior policies issued by the fund to the applicant, or to another entity for which the fund deems the applicant to be a successor in interest, may be a basis for the fund to deny residual risk {ADD , nonrenew or terminate ADD} coverage. The failure or refusal by a residual risk {ADD an ADD} applicant or insured to fully and accurately disclose to the fund information concerning the applicant's {ADD or insured's ADD} ownership, change of ownership, operations, or payroll, including allocation of payroll among state and federal compensation programs, classification of payroll, and any other information determined by the fund to be important in determining proper rates shall be sufficient grounds for the fund to deny an application or to nonrenew or terminate {ADD cancel ADD} an existing policy or to assess a premium surcharge against the insured pursuant to subsection (d). The failure or refusal by any residual risk policyholder {ADD insured ADD} or applicant to comply with the fund's safety requirements or to permit premises inspections to the sole satisfaction of the fund shall be sufficient grounds for having its workers' compensation insurance coverage surcharged, nonrenewed, or cancelled, or an application for the coverage denied.

(3) Appeal to director. -- Any determination of the fund with respect to the denial, cancellation, or nonrenewal of any residual risk workers' compensation insurance policy against liabilities arising under title 28, with the exception of cancellation for nonpayment of premium, may be appealed to the director of the department of business regulation in writing, within thirty (30) days of notice of that {ADD such ADD} action. If the director thereupon determines that the fund has unreasonably denied, cancelled, or failed to renew any residual risk {ADD such ADD} workers' compensation insurance policy, the fund shall in good faith reconsider issuing, reinstating, or renewing the residual risk workers' compensation insurance policy. If the fund has not issued, reinstated, or renewed the residual risk workers' compensation insurance policy within thirty (30) days of {ADD such ADD} a determination of the director, the residual risk {ADD applicant or insured ADD} may appeal the denial, cancellation, or failure to renew by the fund to the superior court for Providence County.

(c) Residual risk e {ADD E ADD} xemptions. -- (1) Except as {ADD otherwise ADD} provided for in subsection (d), the residual risk program of the fund shall be exempt from {ADD subject to ADD} rate regulation under Rhode Island law {ADD title 27, chapter 7.1. ADD}

(2) Notwithstanding subsection (c)(2) {ADD the foregoing ADD} , if, at any time, the {ADD insurance ADD} commissioner finds that a rate or filing of the fund is unjust, unreasonable, inadequate, excessive, or unfairly discriminatory, he or she shall, after a hearing held upon not less than ten (10) days written notice, specifying the matters to be considered at that hearing, issue an order specifying on {ADD in ADD} what respects he or she finds that the rate or filing is unjust, unreasonable, inadequate, excessive, or unfairly discriminatory and stating when within a reasonable period thereafter the rate shall no longer be used or the filing shall be deemed no longer effective. That order shall not affect any contract or policy made or issued prior to the expiration of the period set forth in the order. If, however, the commissioner finds that an unfair discrimination exists in the application of a rate or filing to an individual risk {ADD applicant or insured ADD} , the commissioner may, after a hearing held on like notice to the fund, issue an order that the discrimination be removed.

(3) Except as provided in sections 27-7.2-19 and 27-7.2-20.2, the residual risk program of the fund shall not be required to comply with any surplus requirements for a domestic mutual insurance company.

(4) Except as provided in sections 27-7.2-19 and 27-7.2-20.2, the residual risk program of the fund shall not be required to comply with any reserve requirements for a domestic mutual insurance company.

(d) Residual risk r {ADD R ADD} ate regulation. (1) Notwithstanding any law to the contrary, the fund may file rates for residual risk workers' compensation insurance coverage with the director of the department of business regulation and use the rates ninety (90) days after the filing. When a filing is not accompanied by the information upon which the fund supports that filing, and the commissioner {ADD director ADD} does not have sufficient information to determine whether the filing meets the requirements of applicable law, the commissioner {ADD director ADD} may require the fund to furnish the information upon which it supports the filing. The information furnished in support of a filing may include (A) the experience or judgment of the fund, (B) its interpretation of any statistical data it relies upon, (C) the experience of other insurers or rating organizations, or (D) any other relevant factors. However, the fund shall not file and use any rates which would increase residual risk workers' compensation insurance rates in excess of an average of twenty five percent (25%) annually of its then effective residual risk workers' compensation insurance rates without prior approval of the director of the department of business regulation. Notwithstanding the foregoing, during the ninety (90) day period the fund may use the rates as filed, subject to refund if and to the extent any rate increase requested in the filing is disapproved or modified by the director.

(2) Notwithstanding any law to the contrary, the fund and any residual risk workers' compensation insurance policyholder may mutually consent to modify the rates for that policyholder's workers' compensation insurance policy, provided the fund files notice of the modification with the director of the department of business regulation.

(3) If upon review by the director of the department of business regulation within the ninety (90) day period of subsection (c) (1) a residual risk workers' compensation insurance rate filed by the fund under this subsection is determined to be unjust, unreasonable, inadequate, excessive, or unfairly discriminatory by the director, the director may disapprove or modify in whole or in part that rate. Any review and decision by the director of the department of business regulation shall be subject to the provisions of the administrative procedures act, chapter 35 of title 42.

(4) {ADD (3) ADD} Notwithstanding any law to the contrary, the fund may establish and apply {ADD a ADD} multitiered premium and surcharge systems for its residual risk program. The multitiered premium and surcharge systems shall be {ADD protocol ADD} {ADD . ADD} subject to the file and use procedures set forth in subsection (d)(1) The systems {ADD protocol ADD} shall provide for higher premium and surcharge payments by residual risk insureds who present higher than normal risks within a class, including the ability of the fund to assess from time to time a premium surcharge of up to three (3) times its otherwise applicable premium rate, as it deems appropriate to further the public purposes set forth herein, with {ADD . ADD} t {ADD T ADD} he surcharge to {ADD may ADD} be payable, at the option of the fund, upon assessment, over the policy year, or upon renewal. Any premium surcharge assessed by the fund may be appealed to the director of the department of business regulation within twenty (20) days of notice thereof, and the director may modify or rescind the surcharge if the director determines that the surcharge is unjust, unreasonable, inadequate, excessive, or unfairly discriminatory.

(5) {ADD (4) ADD} Notwithstanding any other provisions of law, immediately upon May 18, 1992 the fund may commence to issue residual risk workers' compensation insurance policies at an initial rate not in excess of the rates then in effect for residual market workers' compensation insurance coverage offered by any other insurers within the state of Rhode Island, subject to the discretion of the fund to apply discounts and surcharge multipliers of up to three (3) times the premiums that would otherwise be applicable under the rates, with the premium surcharge to be payable as provided in subsection (d)(4). The fund may continue to issue residual risk workers' compensation insurance coverage at the initial rates until the effectiveness of any revised rates filed pursuant to subsection (d)(1).

{ADD 27-7.2-20.1. Workers' compensation capital assessment. -- ADD} (a) In order to establish the capital reserves and surplus to allow the fund to effect the assumption of residual risk market in fulfillment of the public purposes as set forth above, a workers' compensation capital assessment shall be assessed and collected by the director of the department of labor against each insurance company deemed by the director of the department of business regulation to have been licensed as of January 1, 1991, to write workers' compensation insurance in Rhode Island. The assessment shall be payable quarterly and due within fifteen (15) days following the close of each calendar quarter or, at the discretion of the director of the department of labor, on an annual basis on or before July first of each year. The director of the department of labor shall have the power to institute suit to collect any assessment under this section to the same extent as provided in section 28-37-28.

(b) The director of the department of labor shall collect all of the capital assessment amounts in a separate restricted purpose account and shall promptly transfer all the amounts to the fund upon receipt and such amounts shall become the property of the fund pursuant to section 27-7.2-14 for capital reserve and surplus purposes for the residual risk program only {ADD in recognition of the fund's role as carrier of last resort ADD} . During the transition period, the assessment for each party shall equal three percent (3%) of gross premiums received from workers' compensation insurance or employer's liability insurance written or renewed on risks within the state or subject to the jurisdiction of the state, or such other level of gross premiums as the director of the department of business regulation deems appropriate to ensure both the solvency of the fund and the fund's ability to establish surplus reasonably adequate to allow it to complete the assumption of the residual risk market in furtherance of the public purposes stated above. For the purpose of this chapter, "gross premiums" shall be calculated for insurance companies in the same manner as provided in section 28-37-14 for the applicable period. From and after the transition period, the director of the department of business regulation shall periodically determine the rate of the assessment at levels adequate to allow the fund to service the residual risk market and satisfy the reserve and surplus requirements of section 27-7.2-20.2.

(c) Each insurance company may pass through the entire capital assessment amount to each of its policyholders on a pro rata basis.

(d) In the event that any insurance company deemed by the director of the department of business regulation to have been licensed on January 1, 1991, to write workers' compensation insurance discontinues the issuance of workers' compensation insurance policies in Rhode Island prior to December 31, 1994, that company shall be and remain obligated to pay the capital assessment surcharge through December 31, 1994, calculated on the basis of the average voluntary and residual risk gross premiums received or the average voluntary and residual risk gross losses paid in the thirty six (36) month period prior to its departure from the Rhode Island market.

{ADD (e) The fund shall pay an annual fee to the director of the department of labor in the amount of two-tenths of one percent of the earned premiums of the fund for the prior year in recognition of the continuing obligations of the department of labor under sections 27-7.2-20.1 (a) and (b) hereof. ADD}

{ADD 27-7.2-20.2. Reserves -- Premium to surplus ratio -- Insolvency fund. -- ADD} (a) The fund shall establish and maintain reserves and surpluses for losses attributable to its voluntary risk program and residual risk program on an actuarially sound basis.

(b) From and after January 1, 1995, the fund shall maintain a ratio of premiums on residual risk policies written to residual risk surplus of not more than three (3) to one, or such greater or lesser ratio as the director of the department of business regulation deems appropriate. In determining the ratio, the director may at all times consider the net present value of future capital assessment amounts as current capital reserves and surplus.

{ADD To facilitate the ongoing oversight of the fund, the fund shall submit to the Department of Business Regulation quarterly and annual statements in the format and scope specified in section 27-12-2. ADD}

(c) {ADD (b) ADD} The residual risk program of the fund shall not participate in or be subject to the insurers' insolvency fund established under section 27-34-6.

{ADD (c) In the event of the liquidation of the fund pursuant to the Insurers' Rehabilitation and Liquidation Act, R.I. Gen. Laws. 27-14.3, the fund's policy holders, in their capacity as owners of the fund, shall have no distributive claims under section 27-14.3-46(8) to the liquidation estate of the fund and, upon satisfaction of any other class 1 through class 7 claims under section 27-14.3-46, the Insurance Commissioner, as receiver, shall distribute the residual, if any, of the fund's liquidation estate to the Director of the Rhode Island Department of Labor; provided, however, that in no event shall the foregoing affect the validity or priority of (i) any claims arising from and within the coverage of any policies of the fund; or (ii) claims of the Director of the Rhode Island Department of Labor to repayment of the term note of the fund issued pursuant to section 27-7.2-19. ADD}

{ADD 27-7.2-20.3. Payment of taxes and fees. -- ADD} {ADD 27-7.2-20.3. Payment assessments and fees. -- ADD} (a) Except as provided in this chapter, the fund shall pay premium taxes and assessments in the same manner as an insurance carrier authorized to issue workers' compensation insurance in Rhode Island.

(b) In light of the special public benefit and public {ADD express ADD} purpose of the residual risk program of the fund , the fund is granted a tax {ADD to serve as the insurance carrier of last resort, the fund shall be exempt credit equal to two percent (2%) of the gross workers' compensation residual risk premiums written by the fund during the period for which taxes are assessed {ADD from any taxes due pursuant to title 44, chapter 17 ADD} . The credit may be applied against the taxes otherwise due to the state of Rhode Island. Further, in no event shall any amounts received by the fund relating to the workers' compensation capital assessment be subject to any form of state taxation or assessment.

SECTION 2. Section 27-7.2-20 and 27-7.2-21 of the General Laws in Chapter 27-7.2 entitled "Workers' Compensation Insurance Fund" are hereby repealed in its entirety:

27-7.2-20. Implementation. -- (a) Initial operations . -- The members of the board of directors shall be appointed no later than January 1, 1991. The board shall act promptly to hire a manager, hire necessary employees, and acquire necessary facilities and supplies to begin operation. The fund shall begin providing workers' compensation insurance coverage when the board determines that the fund is able to do so and all requirements under state law have been met. The fund shall not issue insurance policies to employers until the approval of the auditor general has been obtained.

(b) Residual risk implementation. -- It is the intent of this subsection to provide for an orderly transfer of residual risk workers' compensation insurance policies issued pursuant to existing assigned risk agreements authorized under section 27-9-43 to the residual risk program of the fund through a gradual transition to be completed by December 31, 1993, as follows:

(1) Policy continuation. -- Insurers which as of January 1, 1992, were insuring residual risks in Rhode Island through assigned risk agreements authorized under section 27-9-43 ("pool carriers") shall not discontinue any policy for residual risk workers' compensation insurance prior to the expiration date thereof other than for nonpayment of premium, so that the transition of the residual risk market shall occur on a renewal basis only;

(2) Market transition. -- From and after January 1, 1993, the fund shall commence its residual risk program pursuant to the provisions of section 27-7.2-9.1; and

(3) Transition contract; Emergency powers. -- The fund is authorized to contract with the pool carriers to establish mutual commitments throughout the transition period to facilitate the orderly transition of the residual risk market, including the commitment of the fund to assume the market on a transitional basis and the commitment of the pool carriers to continue existing workers' compensation insurance policies as set forth above and to service those policies in accordance with the standards of the fund. The contract or contracts shall be subject to approval of the director of the department of business regulation. In the event that the contract or contracts have not been executed by the fund and the pool carriers and approved by the director within sixty (60) days after May 18, 1992, the director shall have such emergency powers over the pool carriers as are necessary to effect the orderly transition of the residual workers' compensation insurance market, including the authority to order pool carriers to continue and service existing policies as set forth above, and authority to require such special assessments to pool carriers as are necessary to enable the fund to assume portions of the residual risk workers' compensation insurance market sooner than as set forth above.

27-7.2-21. Report to the legislature and governor. -- The board shall, no later than April 1 of each year report to the legislature, governor, and the state auditor general the operations of the fund up to that date. The report shall include but not be limited to:

(6) any other information the board deems appropriate.

SECTION 3. This act shall take effect upon passage.