Final answer:
A self-insured employer concerned about funding to cover losses should consider stop-loss insurance, adequately funding reserves, maintaining a contingency fund, and regularly reviewing their financial strategies. Similar principles from pension insurance and workman's compensation insurance can guide the creation of a robust risk management plan.
Step-by-step explanation:
If a self-insured employer is concerned about the availability of funds to cover a potential loss, several steps can be taken to mitigate this risk. One option is to purchase stop-loss insurance, which provides reimbursement for claims that exceed a certain threshold. This way, the employer can protect their financial stability while still self-insuring smaller, more predictable claims. Additionally, the employer should ensure they are adequately funding their reserves based on actuarial predictions of future claims and maintain a contingency fund for unexpected losses.
Looking at existing insurance schemes, like pension insurance, deposit insurance, and workman's compensation insurance, these can offer insights into managing risk. For instance, just as employers contribute to the Pension Benefit Guarantee Corporation for pension insurance, they could similarly set aside funds for other liabilities. The key is to balance between the funds reserved for potential claims and the premiums paid for additional insurance coverage.
To avoid being underinsured, the employer must consider not only immediate costs but also administrative expenses and future liabilities. Regularly reviewing and adjusting the insurance and reserve strategies, guided by financial and insurance advisors, is essential to ensure sufficient coverage and financial health.