Prudential and financial conditions of a licence

The financial and prudential conditions of licence are designed to ensure that the SRC Commission is aware of the financial suitability of an organisation to hold a licence and the ability of the organisation to pay its workers' compensation liabilities.

Financial

Under the financial conditions of licence, licensees are subject to continual financial monitoring and may be subject to an annual risk based desktop review process using the licensees audited financial statements. The financial monitoring and desktop review are conducted by independent financial experts.

Should any concerns become evident, the desktop review would be extended to a more comprehensive review requiring further financial and corporate information in order to assess whether the licensee has the capacity to continue to meet the SRC Commission’s licence requirements.

Prudential

The prudential conditions of licence require a licensee to obtain on a yearly basis:

• an actuarial assessment of current and projected outstanding workers’ compensation liabilities.
• a bank guarantee based on the 95th percentile of outstanding workers’ compensation liabilities, subject to a minimum of $2.5 million.
• a reinsurance policy with a reinsurance retention amount as approved by the SRC Commission.
• certification by the principal officer of the licensee that the actuarial assessment has been made in accordance with the licence conditions, provision has been made in the accounts for meeting the estimated liabilities and the licensee has the capacity to meet any single claim up to the reinsurance retention amount.

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