In two recent surveys, strong majorities of risk-retention group(RRG) and purchasing-group (PG) managers indicate they would be infavor of offering property coverage to their members if given theopportunity.

The Risk Retention Reporter conducted the surveys inresponse to introduction of the Risk Retention Modernization Act,H.R. 2126, to the House of Representatives in June.

If passed, H.R. 2126 would allowboth RRGs and PGs to write property coverage in addition to theliability coverage they already offer.

H.R. 2126 would also create a mediator in the Office of FederalInsurance to settle disputes between non-domiciliary states andRRGs and PGs; and it would set corporate-governance standards forRRGs.

In 2006, the Risk Retention Reporter conducted asimilar survey, canvassing only RRGs. At that time, only 40 percentof respondents were interested in property coverage for theirgroup.

The reasoning for the change would seem to be the difference inmarkets. With the soft market, being able to write a morecomprehensive package would help to keep members and attract newmembers.

At the time of the last survey, taken at the height of the hardmarket, property didn't make such a big difference.

Of RRGs surveyed this summer, 66 percent say there would be amoderate to definite likelihood their RRG would add propertycoverage to the products offered to their members. Only 34 percentanswer there is little to no possibility their RRGs would offer thecoverage (see chart).

The PG survey returns even more positive results: 33 percent ofPG managers indicate they would definitely add property coverage.Another 33 percent note a high likelihood they would offer thecoverage; and 11 percent answer there is a moderate likelihood ofoffering the coverage. Just 23 percent respond there is little tono chance they would offer property (see chart).

BOON TO BUSINESS?

Both PGs and RRGs were asked whether the addition of propertycoverage would be a boon to their business and allow them to expandtheir base of insureds.

PGs are overwhelmingly more positive about the impact that HR2126 would have on their business. Of PG respondents, 63 percentindicate there is a high to very high chance that the additionalcoverage would positively aid their business.

RRG managers are less enthusiastic, with only 30 percentresponding there would be a high to very high chance that it wouldhelp them.

Another question asked was whether respondents thought theability to write property insurance would make their businesssector more competitive—with new RRGs and PGs forming to write thattype of coverage.

Only 35 percent of PG respondents believe it would negativelyaffect their business and 65 percent think there is moderate to nochance the addition of property coverage would make their businesssector more competitive.

The majority of RRG respondents, 59 percent, also say theybelieve the chance of new competition would be low to unlikely.

Many survey respondents are enthusiastic about the opportunityto offer property coverage (especially auto). Several respondents,however, note the substantial differences between underwriting andclaims handling for liability and for property, observing that manyexisting groups would not have the experience to manage propertycoverage—and they caution that careful preparation would be neededof RRGs before entering the property arena.