b) As provided in this Part, every nonexempt insurer writing workers' compensation policies that are subject to a large deductible agreement covering employees located in Illinois must require full collateralization of the policyholders' obligations under the agreement, including policyholder obligations for employees located in other states.

1. 1) The initial collateral:

   1. A) shall be determined by first computing the standard premium and then determining the amount by which the standard premium is reduced as a result of the large deductible credit; and
   2. B) shall be set at the amount of the large deductible credit subject to other adjustments based on the insured's financial status, anticipated payment pattern of losses, the existence and attachment point of an aggregate deductible limit, and the expected development above and below the deductible sufficient to secure the nonexempt insurer against the potential deductible reimbursement liability it is assuming.
2. 2) At least annually, the collateral shall be adjusted periodically pursuant to the large deductible agreement by first determining the amount of open case reserves on all claims reported under the policy plus the expense reserve for those expenses covered by the large deductible agreement and an allowance for incurred but not reported (IBNR) claims, limited by the per claim or aggregate cap as provided in the large deductible agreement. The collateral is then adjusted upward or downward based on the reserve amount as calculated in subsection (b)(1) compared to the collateral being held on the date of each adjustment. If the large deductible agreement or any other law requires the collateral to be an amount higher than the amount required in Section 2909.50, then the higher amount shall apply.