The purpose of the residual market mandatory
Loss Sensitive Rating Plan (PDF) or LSRP is to provide a retrospective rating plan for those employers who have an assigned risk workers compensation insurance LSRP standard premium of $250,000 or more.
The LSRP is designed to:
- encourage safety and loss prevention
- depopulate the residual market
- provide incentives for employers with favorable loss experience through lower premiums, and
- provide disincentives for employers with an unfavorable loss experience through higher premium
The residual market serves as the market of last resort to all eligible employers required by law to secure workers compensation coverage, but who cannot obtain it through other means. (This includes such options as self-insurance.) The residual market is not intended to compete with the voluntary market by allowing employers to avoid various LSRP offers in exchange for guaranteed cost policies.
The LSRP can apply on an intrastate or interstate basis. For a multistate risk, LSRP will apply when the total LSRP standard premium of all states that have approved LSRP meets the LSRP standard premium eligibility requirement.
These payment provisions apply:
LSRP contingency deposit of an additional 20% is calculated from the LSRP standard premium only in those states that have approved the LSRP. The contingency deposit for LSRP is not part of the premium and must be submitted in addition to the deposit premium.
- An irrevocable letter of credit (ILOC) may be provided as collateral for the LSRP contingency deposit. The ILOC must contain automatic renewal clause, drawn on a Federal Reserve Bank.
LSRP applies in AL, AZ, CT, DC, GA, ID, IL, IN, KS, MS, NV, NH, NC, OR, SC, SD, TN, VT, and WV.