What is the purpose of the security deposit held by the self-insurer?

• A. To secure incurred liabilities and obligations
• B. To fund future hires
• C. To pay for marketing
• D. To cover capital investments

Answer: (A)

The security deposit is there to guarantee that funds are available to satisfy the self-insurer’s incurred liabilities and obligations. When an employer self-insures, it bears the responsibility for paying claims and other ongoing costs out of its own resources. The deposit acts as collateral held by the regulator to ensure there are readily available funds to pay workers’ compensation benefits or other plan obligations, even if reserves dip or cash flow is tight. This protection helps maintain benefit continuity for claimants and demonstrates the plan’s financial reliability. It isn’t intended to fund future hires, marketing, or capital investments, which fall outside the obligation to settle claims.