Group Captive Change Effort Encouraged

By Caroline McDonald

NU Online News Service, April 11:52 a.m. EST?Apush for a change in federal law to expand the permissibleactivities of group captive insurers has met a favorable responsefrom Washington lawmakers, according to the National Risk RetentionAssociation.

The Minneapolis-based group announced at it's annual conferencethat it would actively seek to expand the Liability Risk RetentionAct of 1986 governing the type of coverage that risk retention andpurchasing groups could write [NU March 11]. So far, theorganization said, its efforts have been fruitful.

Robert H. "Skip" Myers Jr., who is spearheading the effort asspecial counsel for NRRA, was involved in the initial passage ofthe Risk Retention Act in 1981, as well as passage of amendments in1986.

"We're getting some very welcome, friendly responses up on thehill," he said. "I think what we've discovered is that this strikesa responsive chord because our representatives on the Hill, in theHouse and the Senate, are getting calls from their constituentssaying 'we cannot get this property cover.'"

Amending the Risk Retention Act, Mr. Myers said, would present a"limited but very effective solution," at least in the context ofgroups that can "band together to provide their own insurancethrough a risk retention group."

Mr. Myers, a partner with Morris, Manning & Martin, LLP inWashington, D.C., said the purpose of an amendment would be toexpand the capability of risk retention groups?incorporated aseither association captives or as reciprocal captives?fromliability coverage to include all commercial lines except workers'compensation.

"In particular, property cover is very hard to find andexpensive, and there are a number of our groups that would like tobe able to provide that," he said.

The idea behind a risk retention group, he said, is to be ableto "control your destiny better. You can underwrite for the longterm, not just for the short term."

Mr. Myers said some members of coalition particularly interestedin the ability to write commercial lines include United Educatorsand the Housing Authority Risk Retention Group.

Another member, the National Association of Real EstateInvestment Trusts, he said, "is a good example of how this wouldoperate. The group already has a structure in place, and anassociation of commercial property owners who are having difficultygetting property coverage," he explained.

Jon Harkavy, who tracks regulatory and legislative activity forNRRA, said that, "I have yet to see a negative response fromanyone."

Mr. Harkavy, also vice president and general counsel, RiskServices, LLC in Arlington, Va., added that, "you have to take intoconsideration that this is not in a contested arena yet?no one elsehas weighed in and there have been no other factors yet. Buteveryone is very positive."

Mr. Harkavy said the NRRA legislative effort has intentionallyremoved itself from an insurance industry lobbying effort to securefederal backup for catastrophe levels of terrorism insuranceclaims.

"It's our firm desire and belief that the two should bede-linked as opposed to linked," he explained. "Whether you're forthe [terrorism] pool or not, this should not determine how you comeout on this issue."

Amendments to the Risk Retention Act, he said, are to providemore flexibility to the consumer.

"If you take a look at the history of the act when it was donein 1981, product liability was the problem," he said, and it wasrevised in 1986 because of a problem with general liability.

"What we've learned is that we just don't know where the nextinsurance problem will come from," he said. "All we're looking foris to expand the scope of the act so that you can write anythingbut personal lines and direct workers' compensation."

NRRA plans to continue laying groundwork. "We're hopeful thatCongress, before the end of the session, might seriously consideramending the Risk Retention Act," he said.

Mr. Harkavy said organizations supporting the amendment includethe Consumer Federation of America, as well as the Vermont CaptiveInsurance Association "and other captive associations, includingHawaii."

NRRA announced at its annual conference in March that hardmarket conditions had created a "favorable environment" foramending the RRA.

A letter to 375 risk retention and purchasing groups generatedinterest and raised conference registration levels, said DouglasBarnes, executive director for NRRA. The association has 101members, he said.