The employer has an aggregate stop loss excess insurance policy. It is:

The employer has an aggregate stop loss excess insurance policy. It is:

• A. Not legal in CA
• B. Legal but the ER receives no credit against the security deposit
• C. Legal and the excess policy reduces the amount of the security deposit
• D. Not required that the ER include it on the Annual Report

Answer: (B)

Aggregate stop-loss coverage is allowed with California workers’ compensation self-insurance plans. It serves as risk protection by covering losses that exceed the employer’s own retention, sharing excess risk with the insurer. But this coverage does not reduce the amount of the security deposit the state requires. The department treats stop-loss as a risk transfer tool rather than a credit against the self-insurer’s regulatory collateral. So, even with an aggregate stop-loss policy in place, there is no credit against the security deposit. That’s why the correct statement is that this arrangement is legal, but the employer receives no credit against the security deposit.

Aggregate stop-loss coverage is allowed with California workers’ compensation self-insurance plans. It serves as risk protection by covering losses that exceed the employer’s own retention, sharing excess risk with the insurer. But this coverage does not reduce the amount of the security deposit the state requires. The department treats stop-loss as a risk transfer tool rather than a credit against the self-insurer’s regulatory collateral. So, even with an aggregate stop-loss policy in place, there is no credit against the security deposit. That’s why the correct statement is that this arrangement is legal, but the employer receives no credit against the security deposit.