Alarm Industry Forms RRG

By Caroline McDonald

NU Online News Service, Oct. 13, 11:37 a .m.EDT?The National Burglar & Fire Alarm Association tradeorganization said it has formed a risk retention group to providean alternative source of affordable insurance for current andprospective members.

"Security America was formed to fill a void in coverageavailability for alarm companies that install, service and monitorin the U.S.," said Marc Tepper, a shareholder in Buchanan IngersollPC's Philadelphia office and chair of the firm's InsuranceRegulatory Practice Group.

Mr. Tepper said Security America "is intended to cover thegeneral liability and professional liability exposures."

He told National Underwriter that the response frommembers has been "encouraging. This has literally only been outthere for a few weeks, and the response, from what I'm hearing fromthe director of the NBFAA, has been positive?literally severalcalls every day."

Mr. Tepper said that most insureds involved in the riskretention group will be "the experienced and probably moreestablished operators in the burglar and fire alarm businesses.It's also going to be critical that they are financiallysound."

He added that "we're requesting that they have at least threeyears of operating experience or five years managing anothercompany."

Though the coverages are available in the general market, "theprice has skyrocketed, the deductibles have gone up and the limitshave contracted," Mr. Tepper explained.

The retention group, he noted, is intended to make coverageavailable to members on an ongoing basis and will provide amechanism for NBFAA members to participate actively in themanagement of their own risks.

The Security America Risk Retention Group Inc. was licensed inthe domicile of Vermont on Sept. 4.

Because Security America qualifies as a risk retention groupunder federal law (the Liability Risk Retention Act), it will beable to insure the liability of NBFAA members throughout thecountry without having to obtain a license to do business in eachstate, according to Buchanan Ingersoll. The ability of an RRG tooperate across state lines while being subject to regulation byonly its state of domicile distinguishes risk retention groups fromtraditional insurers.

"Every industry has felt the crunch of this hard insurancemarket; the alarm industry is no exception," explained BryanLawrence, counsel to the NBFAA and co-chair of the firm's SecurityAlarm Group, in a statement. "The NBFAA wanted to help ease thisburden on the industry."

Mr. Tepper said that forming the risk retention group was a stepin the right direction for the NBFAA.

"Regardless of your industry, risk is a guaranteed by-product ofoperating a business enterprise. But while traditional insurers mayinsure simultaneously different types of risks generated acrossmultiple industries, the risk retention group model provides anindustry-specific solution. That's one of the reasons why it hasbecome the insurance mechanism of choice for many tradeassociations throughout the country."

NBFAA, founded in 1948 and with more than 2,000 members in 50states and four U.S. territories, owns a majority of the stock inthe new insurer, said Buchanan Ingersoll.