Maine lawmakers are moving forward with a bill that could bring notable changes to how self-insurers manage workers' compensation obligations in the state. Legislative Document 1195 (LD 1195), introduced on March 20, 2025, proposes to update several provisions of the Maine Workers' Compensation Act of 1992. The bill is now before the Committee on Labor for consideration.
At the center of LD 1195 is a move to ease some of the current financial requirements for self-insurers. The bill would eliminate the need for letters of credit to meet specific confidence levels - a change that could give employers more flexibility when securing their workers’ compensation obligations. The idea is to simplify the financial mechanics without compromising the security of employee claims.
The bill also sets clearer expectations around non-renewals. Financial institutions issuing irrevocable standby letters of credit would be required to give at least 90 days' notice before choosing not to renew, giving regulators and employers time to react and avoid any coverage gaps.
Another big shift proposed by LD 1195 would give the Superintendent of Insurance expanded authority to direct the Treasurer of State to draw on a letter of credit. This could happen if an employer fails to pay claims, enters bankruptcy, or fails to replace an expiring letter of credit after notice. Proceeds from a draw would be held on behalf of claimants until replacement security is provided or claims are resolved, adding another layer of protection for workers.
For group self-insurers, LD 1195 spells out new options for meeting financial security requirements. Groups would still need to maintain actuarially funded trusts but could use letters of credit for a portion of their funding, provided they meet the necessary standards set by the Superintendent.
There’s also a new requirement for members leaving a group trust. Departing employers would have to fund their share of liabilities up to the 95% confidence level. If they don’t, the group itself would be responsible for covering the shortfall, ensuring that claims remain fully secured.
The bill also tweaks the rules around surplus distributions. Group self-insurers would need to base any surplus release on updated actuarial reviews and audited financials. Even after surplus distributions are made, the Superintendent would retain the right to adjust or reclaim distributions if a deficit emerges.
In terms of trust management, LD 1195 tightens standards for the types of assets allowed and requires quarterly reporting to the Superintendent. Trusts must remain properly funded to cover present and future liabilities, with actuarial certification required at least annually.
LD 1195 also cleans up a few technical details. It corrects references in the law from "out-of-state insurer" to "out-of-state self-insurer," updates language about Lloyd’s of London to reflect its correct structure, and clarifies requirements for group self-insurers around reinsurance carriers and membership qualifications.
LD 1195 remains under committee review. If passed and signed, the new rules would take effect immediately, prompting self-insurers and financial institutions to adjust their compliance strategies. For Maine employers and insurers involved in workers' comp self-insurance, staying ahead of these changes could make all the difference once the new standards are in place.
