(1) What is financial watch?
Financial watch occurs when the department has concerns regarding a
self-insured employer's ability to promptly provide benefits to its
injured workers based on an analysis of the audited financial statements
provided by that employer.
The purpose of financial watch
(a) It serves to alert the employer that the
department is concerned with its ability to provide benefits to its
injured workers; and
(b) It enforces the due diligence that
the department must exercise in preserving the financial integrity of
(2) What factors can lead to a firm
being placed on financial watch? Contributing factors that can lead to a
firm being placed on financial watch are negative changes in the
following ratios and trends:
(a) Net losses;
(b) Ratio of debt to equity;
(c) Liquidity ratios;
(d) Ratios of debt and equity to total assets;
Ratio of net income to revenue;
(f) Trends in earnings;
(g) Trends in liquidity;
(h) Trends in levels of
(i) Ratio of tangible net worth to levels of debt.
To assess an employer's ability to promptly provide any and all
required benefits to its injured workers, the department will utilize
these and other analytical ratios. The department may also utilize
industry standards and other relevant information in its analysis.
(3) What are the consequences of being placed on financial watch?
At the department's discretion, the surety requirement for a firm being
placed on financial watch may be increased by up to twenty-five
percent. No reduction in surety will be allowed while an employer is on
(4) How long can a firm remain on
financial watch? The status of a firm on financial watch will be
re-evaluated annually upon receipt of its audited financial statements.
The department may request interim financial information in addition to
the annual audited financial statement.
improvement is not demonstrated to the department's satisfaction after
three years of being placed on financial watch, the department may
undertake action to withdraw the self-insurance certification of that
Authority: RCW 51.04.020,
06-07-141, § 296-15-123, filed 3/21/06, effective 5/1/06.]