NU Online News Service, Sept. 25, 11:15 a.m.EDT

The chief executive of a reinsurance brokerage firm has urged atrade group to look into the creation of a capital pool forexpanding Risk Retention Groups.

Tal P. Piccione, chairman and CEO of U.S. RE Companies Inc.,made his proposal in a speech to the National Risk RetentionAssociation at the group's recent annual conference.

Risk Retention Groups (RRGs) operate under a federally-createdformat for insurance companies that provide liability coverage toindustries under the U.S. Liability Risk Retention Act of 1986 thatpermits an RRG licensed in a single state to operate in all 50states without additional licensing.

There are 254 RRGs operating today. In 2008, premium volume ofthe top 100 RRGs exceeded $2.5 billion. Industry net worth grew to$2 billion, up from $1.4 billion three years earlier, according tofigures contained in Mr. Piccione's announcement of hisproposal.

Uni-Ter Underwriting Management Corporation, a member of theU.S. RE Group, builds and manages Risk Retention Groups in 47states.

Mr. Piccione said the large number of RRGs limited in theirwritings by available capital may well create attractiveopportunities for investors, including reinsurance companies, hedgefunds, private equity funds, and fronting companies. He encouragedthe NRRA to explore opportunities to create this new source ofinvestment capital.

"Looking to the future, I believe the reinsurance industry couldtake a more dynamic part in helping RRGs achieve their potential.In some cases, initial capital outside the base of potentialstockholders is needed to get an RRG off the ground or enable astartup to gain momentum," said Mr. Piccione.

"Reinsurers are entrepreneurs like you. I believe some could beinterested in exploring the possibility of subscribing to a pool ofcapital available to RRGs. Such a pool would be consistent withhistoric practice in some quarters of the insurance industry toenable procurement of financing to facilitate availability ofinsurance capacity," he explained.

Mr. Piccione offered to work with the Association in studyingthe potential for developing an investment pool.