NU Online News Service, March 23, 2:52 p.m. EDT
States continue to interfere with the lawful operation of risk retention groups and federal legislation is needed to stop the practice, the National Risk Retention Association is telling the Government Accountability Office.
The NRRA is voicing its concerns at the same time a rival group, the Self-Insurance Institute of America, has persuaded members of Congress in both houses to propose legislation that should be introduced soon designed to deal with the concerns raised by the NRRA letter.
“The Liability Risk Retention Act (LRRA) of 1986 gave RRGs freedom to do business nationally when licensed in a single state, but as the industry grew, some states imposed burdensome requirements on RRGs that violate the will of Congress,” says Brian Braley, NRRA chairman.
“Unfortunately, the law did not provide for enforcement, but in the face of continued actions by some states, it’s time to amend the LRRA to allow RRGs to function as Congress intended,” Braley says.
Robert Myers, NRRA general counsel, expressed the group’s concerns in a letter to the GAO.
The letter by Myers cites burdensome requirements placed on RRG operations by some states in violation of the federal law.
According to Jay Fahrer, SIIA director of government relations, the NRRA concerns would be addressed by legislation that will soon be introduced by Sen. John Tester, D-Mont., in the Senate, and Rep. John Campbell, R-Calif., in the House.
The bill would allow risk retention groups to sell commercial property insurance, and would also establish a mechanism to resolve disputes between non-domiciliary states and RRGs by assigning broad mediation powers to the Treasury Department.
Myers’ letter cites impediments to uniform RRG regulation by “a number of states” which impose unlawful registration requirements that “delay, prevent or otherwise impede RRG operations.”
He says these include fees for filing and renewal, causing delays that take new RRGs many months to resolve before they can do business, and multiple rounds of requests for information already provided to the state in which the RRG is licensed.
He also cites discriminatory practices by some states despite the fact these are prohibited by the national law.
He says the industry has worked with the states and the National Association of Insurance Commissioners to explain that their regulatory actions are not consistent with the federal law, but that the results have been discouraging.
He adds that the LRRA is one of the few federal laws without any federal agency oversight, and he voices support in the letter for the legislation that will soon be introduced by Sen. Testor and Rep. Campbell.
Fahrer says that the cases cited by NRRA in its letter to the GOA are similar to the examples that have been documented by SIIA.
“They are clear evidence on why this legislation is so necessary,” he says.
“If enacted, RRGs would have a much better ability to provide their members more expansive and more cost-efficient lines of coverage.”