NU Online News Service

The National Association of Insurance Commissioners is considering amending the NAIC Model Risk Retention Act to require the states of domicile to follow the NAIC's governance model governing risk retention groups, an attorney for a risk retention group association said.

On Nov. 4, the NAIC Risk Retention (C) Working Group met to discuss amending the NAIC Model Risk Retention Act and possible amendments to the NAIC Risk and Purchasing Group Handbook, according to the National Risk Retention Association.

After some discussion, the Working Group decided that the appropriate place to include the Corporate Governance would be in a new Section 3D, which would mean it would apply to all RRGs chartered within a state.

The amendment to the model risk retention group act would impose uniformity in corporate governance on the states of domicile–such as where and how often board meetings would be held, for example–because the liability risk retention act preempts state law in many respects, NRRA's General Counsel, Robert H. Myers Jr. of Morris Manning & Martin LLP, who attended the meeting on behalf of NRRA, told NU Online News Service.

"The purpose for incorporating the standards into the model act would be that the states would amend their laws to include this," he said, adding that this opens up the issue of whether the standards need amending.

"This is a long process, and it's cumbersome, because everything in insurance is state-by-state," he said. For example, if this becomes part of the NAIC model and the state of Vermont adopts it, "that means it applies to all the Vermont RRGs," he said. He added that while some states may adopt the model, others may not.

Then the question becomes whether the NAIC accreditation standards will require this. "Yes, they can if the accreditation committee adopts this as part of those model laws that have to become part of state law," he said. "That's the enforcement mechanism."

Whether or not this happens will be seen in 2011, he said.

Myers said NRRA members with suggestions for changes may contact him. There will be a follow-up NAIC conference call to discuss all comments on Jan. 13.

Special Reports /

NAIC Looking to Incorporate Risk Governance Into State Law

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