OAR 436-050-0165
Security Deposit Requirements

(1) Adoption of standards. The director adopts, by reference, the International Standby Practices 1998 (ISP98), ICC Publication No. 590.
(a) This publication may be purchased from the International Chamber of Commerce website at https://2go.iccwbo.org/; and
(b) Copies of this publication are available for review during regular business hours at the Workers’ Compensation Division, 350 Winter Street NE, Salem OR 97301.
(2) Required security deposit. Each self-insured employer is required to provide a security deposit that is acceptable to the director as detailed in Bulletin 147. Under the conditions and requirements of this rule, the director may accept:
(a) An irrevocable standby letter of credit (ISLOC); or
(b) A surety bond.
(3) Irrevocable standby letters of credit. An ISLOC may be approved by the director as all or part of the security deposit. The director may approve the ISLOC under the following conditions:
(a) The ISLOC must be issued or confirmed by an Oregon state-chartered bank or a federally chartered bank from which funds will be immediately payable on demand;
(A) Except for federally chartered instrumentalities of the United States operating under the authority of the Farm Credit Act of 1971, as amended, the bank issuing the ISLOC must, at the time of issuance, have a long-term certificate of deposit rating of:
(i) “Aaa”, “Aa”, or “A” in the current monthly edition of “Moody’s Statistical Handbook” prepared by Moody’s Investors Service Inc., New York; or
(ii) “AAA”, “AA” or “A” in the current quarterly edition or monthly supplement of “Financial Institutions Ratings” prepared by Standard & Poor’s Corporation, New York;
(B) An ISLOC issued by a bank that does not meet the rating requirement of paragraph (A) at the time of issuance will only be accepted with a confirming ISLOC issued by an Oregon state-chartered bank or federally chartered bank that meets the rating requirement of paragraph (A). The confirming ISLOC must state that the confirming bank is primarily obligated to pay on demand the full amount of the ISLOC regardless of reimbursement from the bank whose ISLOC is being confirmed;
(C) If a bank’s rating falls below the rating requirement of paragraph (A) subsequent to the issuance of the ISLOC, the self-insured employer must, within 60 days of the publication of the lower rating:
(i) Replace the ISLOC with a new ISLOC issued by an Oregon state-chartered bank or a federally chartered bank with an acceptable rating;
(ii) Have the ISLOC confirmed by an Oregon state-chartered bank or a federally chartered bank that has an acceptable rating;
(iii) Replace the ISLOC with a surety bond of equal amount that is approved by the director as substitute security, if the surety bond covers all workers’ compensation liabilities and obligations that would have been covered by the ISLOC; or
(iv) Obtain a policy of paid-up insurance that is accepted by the director in accordance with OAR 436-050-0200 (Self-Insured Certification Cancellation; Revocation)(5), if the certification of the self-insured employer has been canceled or revoked;
(b) Form 3640, “Irrevocable Standby Letter of Credit,” must be used for the ISLOC;
(c) The ISLOC must be issued under the legal name or assumed business name of the self-insured employer as registered with the Oregon Secretary of State;
(d) The ISLOC must state that it will be automatically extended, without amendment, for one year from the expiration date or any subsequent expiration date, unless the bank gives the director written notice, by registered mail or overnight delivery, at least 60 days before the expiration date, that the bank has elected not to extend the ISLOC for another period;
(e) The ISLOC must state that if the issuing bank or any confirming bank is closed at the time of expiration of the ISLOC for any reason that would prevent delivery of a demand notice during its normal hours of operation, the ISLOC will be automatically extended for a period of 30 days commencing on the next day of operation;
(f) The ISLOC must be able to be called immediately if:
(A) The self-insured employer has defaulted in payment of its workers’ compensation liabilities or obligations, or in payments due to the director under ORS chapter 656;
(B) The self-insured employer has filed for bankruptcy;
(C) The self-insured employer has failed to renew the ISLOC or provide acceptable substitute security at least 15 days before the expiration date of the ISLOC; or
(D) The self-insured employer has failed to provide additional or replacement security after being ordered to do so by the director, notwithstanding written notice to the self-insured employer;
(g) The funds provided by the ISLOC must be available by presentation of the beneficiary’s sight draft drawn on the issuing bank, payable within three business days, when accompanied by one of the statements contained in subsection (f), signed by the director;
(h) The ISLOC must not be subject to any qualifications or conditions by the issuing bank or confirming bank and must state that it is each bank’s individual obligation, which is in no way contingent upon reimbursement;
(i) The ISLOC must state that:
(A) The funds provided by the ISLOC are not construed to be an asset of the self-insured employer; and
(B) If legal proceedings are initiated by any party with respect to the payment of any ISLOC, it is agreed that such proceedings will be subject to Oregon courts and Oregon law;
(j) The ISLOC must state that payment of any amount under the ISLOC will be made by wire transfer to a department account with the State Treasurer at a designated bank. Wire transfers must be in the name of the “Department of Consumer and Business Services In Trust For [the legal name of the certified self-insured employer]”;
(k) The ISLOC must conform to and reference the International Standby Practices 1998 (ISP98), ICC Publication No. 590;
(l) The ISLOC must state that all bank charges for the ISLOC will be for the account of the applicant;
(m) The ISLOC must state that any amendment to the ISLOC must be approved by the beneficiary before the amendment is effective;
(n) The self-insured employer that submits the ISLOC must provide an accompanying Form 3529, “Memorandum of Understanding,” affirming the self-insured employer’s acceptance of the following:
(A) The ISLOC is provided to the director in place of, or in addition to, a surety bond or other form of security acceptable to the director under this rule;
(B) The ISLOC will be automatically extended without amendment for one year from the expiration date, or any subsequent expiration date, unless, at least 60 days before the expiration date, the bank notifies the director in writing that the ISLOC will not be renewed;
(C) The ISLOC may be replaced with an ISLOC or surety bond of equal amount that is accepted by the director as substitute security, or a policy of paid-up insurance that is accepted by the director in accordance with OAR 436-050-0200 (Self-Insured Certification Cancellation; Revocation)(5), if the new ISLOC, surety bond, or policy of paid-up insurance covers all workers’ compensation liabilities and obligations that would have been covered by the ISLOC;
(D) The ISLOC can be called immediately, at the director’s discretion, if the director receives notice that the ISLOC will not be renewed; if the self-insured employer fails to pay its workers’ compensation liabilities, obligations, or payments due to the director under ORS chapter 656; if the self-insured employer files bankruptcy; if the self-insured employer fails to renew the ISLOC or provide acceptable substitute security at least fifteen days before the expiration date of the ISLOC; or if the director has ordered the self-insured employer to provide additional or replacement security, and neither has been provided, notwithstanding written notice to the self-insured employer; and
(E) If legal proceedings are initiated by any party with respect to payment of any ISLOC, the proceedings will be subject to the jurisdiction of Oregon courts and application of Oregon law.
(4) Surety bonds. A surety bond may be approved by the director as all or part of the security deposit.
(a) The director may approve the surety bond under the following conditions:
(A) The surety bond must be issued by a surety company authorized under ORS chapter 731 to transact surety business in Oregon;
(B) The surety company or its parent must have and maintain an acceptable credit rating in accordance with the following:
(i) Standard and Poor’s Insurer Financial Strength Rating of A or better; or
(ii) A.M. Best Company Financial Strength Rating of B+ or better;
(C) Form 824, “Surety Bond,” must be used for the surety bond;
(D) The surety bond must be issued under the legal name or assumed business name of the self-insured employer as registered with the Oregon Secretary of State;
(E) The surety bond must be continuous in form;
(F) The surety bond must state that it may only be terminated by the surety company by giving the director and the Principal written notice. The notice must state that the termination will be effective on a date not less than thirty days after the date the notice is received by the director. Termination of a surety bond in no way limits the liability of the surety for defaults of the Principal’s liability or obligations under ORS chapter 656 before the effective date of the termination;
(G) The surety bond must state that the liability of the surety company may only be discharged in the event that the surety bond is released in writing by the director. The director may release a surety bond when:
(i) The Principal provides substitute security that is accepted by the director in lieu of the surety bond to be released, covering all past, present, existing, and potential liability of the Principal under ORS chapter 656, in an amount required by the director; or
(ii) If the certification of the self-insured employer has been canceled or revoked, the self-insured employer obtains a policy of paid-up insurance that is accepted by the director in accordance with OAR 436-050-0200 (Self-Insured Certification Cancellation; Revocation)(5).
(H) The surety bond and all surety bond riders must be executed by the surety company’s attorney-in-fact. The attorney-in-fact’s appointment and power of attorney must accompany the surety bond and all riders submitted. The power of attorney must authorize the attorney-in-fact to execute the surety bond in the amount of the penal sum of the bond.
(b) Form 1810, “Surety Bond Rider” must be used for all department-required increases or authorized decreases in the penal sum of the surety bond. The surety bond rider is not effective until it is accepted by the department.
(c) The surety bond must be replaced by the self-insured employer with an acceptable type of security deposit within 30 days after notice from the department that the Surety has been placed in conservatorship, is seized, declares insolvency, or has a current credit rating below the ratings required in subsection (a)(B).
(5) Government securities, certificates of deposit, or time deposit accounts. Government securities, certificates of deposit, or time deposit accounts will not be accepted as security deposits for certified self-insured employers who must increase their security deposit or for employers whose self-insurance certification was granted after January 1, 2004.
(a) Government securities, certificates of deposit, or time deposit accounts that were accepted by the director as a self-insured employer’s or a self-insured employer group’s required security deposit before January 1, 2004, may remain as the security deposit until the maturity date of those investments. At that time, the government securities, certificates of deposit, or time deposit accounts pledged to the department as security deposits must be replaced by a surety bond or ISLOC acceptable to the director.
(b) A self-insured employer that has government securities, certificates of deposit, or time deposit accounts as all or part of its security deposit must complete Form 4023, “Security Agreement and Notice to Intermediary,” granting the department a security interest in and control over those financial assets.

Source: Rule 436-050-0165 — Security Deposit Requirements, https://secure.­sos.­state.­or.­us/oard/view.­action?ruleNumber=436-050-0165.

436‑050‑0003
Purpose and Applicability 436‑050‑0005
Definitions 436‑050‑0008
Requests for Hearings or Administrative Review 436‑050‑0015
Suspension and Revocation of Authorization to Issue Workers’ Compensation Insurance Policies 436‑050‑0025
Service of the Notice of Civil Penalty Orders 436‑050‑0040
Responsibility for Providing Coverage When a Contract is Awarded 436‑050‑0045
Nonsubject Workers 436‑050‑0050
Corporate Officers, Limited Liability Company Members, Partners 436‑050‑0055
Extraterritorial Coverage 436‑050‑0110
Notice of Insurer’s Place of Business in State 436‑050‑0120
Records Insurers Must Keep in Oregon 436‑050‑0150
Qualifications of a Self-Insured Employer 436‑050‑0160
Applying for Certification as a Self-Insured Employer 436‑050‑0165
Security Deposit Requirements 436‑050‑0170
Excess Insurance Requirements 436‑050‑0175
Annual Reporting Requirements 436‑050‑0180
Determination of Amount of Self-Insured Employer’s Deposit 436‑050‑0185
Qualifications for Deposit Exemption for Self-Insured Cities, Counties, and Qualified Self-Insured Employer Groups, Application Procedures, Conditions and Requirements, Revocation and Requalification 436‑050‑0190
Using Self-Insured Employers’ Security Deposit/Self-Insured Employer Adjustment Reserve/Self-Insured Employer Group Adjustment Reserve/Director-Ordered Assessments of Private Employer Members of Self-Insured Employer Groups 436‑050‑0195
Requirements for Changes in Self-Insured Employer Entity 436‑050‑0200
Self-Insured Certification Cancellation 436‑050‑0205
Notice of Self-Insurer’s Personal Elections 436‑050‑0210
Notice of Self-Insurer’s Place of Business in State 436‑050‑0220
Records Self-Insured Employer Must Keep in Oregon 436‑050‑0230
Out-of-State Recordkeeping and Claims Processing by Self-Insured Employer 436‑050‑0260
Qualifications of a Self-Insured Employer Group 436‑050‑0270
Applying for Certification as a Self-Insured Employer Group: Private Employers 436‑050‑0280
Applying for Certification as a Self-Insured Employer Group: Governmental Subdivisions 436‑050‑0290
Commencement/Termination/Cancellation of Employers with a Self-Insured Employer Group 436‑050‑0300
Self-Insured Employer Group, Common Claims Fund 436‑050‑0340
Group Self-Insurance Revocation
Last Updated

Jun. 8, 2021

Rule 436-050-0165’s source at or​.us