What is the effect on the security deposit when an aggregate excess policy is purchased?

• A. Credit is given toward security deposit
• B. Partial credit is given
• C. No credit is given
• D. Credit determined by underwriting

Answer: (C)

The key idea is that the security deposit is a guaranteed funding mechanism to cover the self-insured employer’s liabilities, regardless of how risk is transferred. An aggregate excess policy provides coverage for losses above the self-insured retention, transferring some risk to an insurer, but it does not reduce the amount of collateral the regulatory administrator requires. The department needs ready funds or enforceable collateral to guarantee payment of claims, and the aggregate excess policy isn’t treated as a credit against that deposit. So the security deposit remains unchanged by adding this policy, which is why no credit is given.