ARRC To Congress: Let Us Fill Property Insurance Gap

But Lawrence H. Mirel, legal counsel of the newly formed ARRC, with Wiley Rein & Fielding in Washington, D.C. and former commissioner of the Department of Insurance, Securities and Banking of the District of Columbia, noted, "There is a generalized concern about the availability of property insurance along the coast."

He told National Underwriter that although this is a busy time for Congress, "this has become more of an issue as some insurers pull back from providing property coverage, creating a 'crisis of availability.'"

A solution, Mr. Mirel said, is to allow risk retention groups, "which are a kind of self-insurance, to sell property insurance. That's what was done by Congress in 1986, when the crisis then was liability insurance–and then it worked."

The ability of doctors and hospitals "to form RRGs and offer their members insurance when nothing else was available turned out to be of crucial importance to the overall market," he noted.

He acknowledged that RRG offerings are not a "complete solution," citing the current existence of medical malpractice insurance problems.

Mr. Mirel said RRG sales of property insurance could help property owners just as their offerings had helped physicians, "so we're urging Congress to take a simple step, which is to allow RRGs to sell property insurance as well as liability insurance." This, he said, would help create market conditions "that will help alleviate some of the problems along the coast."

Mr. Mirel said the timing is excellent because Mr. Baker has started an initiative to enact pieces of the State Modernization and Regulatory Transparency (SMART) Act that is aimed at revamping the insurance marketplace.

He said Mr. Baker, chairman of the Capital Markets Subcommittee of the SMART Act, announced at a June 21 hearing on surplus lines that his new strategy would be to "take pieces of the SMART act that made good sense and were less controversial, and try to get them enacted one by one."

He said that just as the surplus lines bill would make it easier to offer insurance along the coast, "we think the same would be true of what we're proposing."

Congress "could add it to the surplus lines bill, or they could add it to something else being worked on," he said. "It's exactly the kind of thing Congressman Baker has in mind."

Mr. Mirel noted that ARRC has provided Congress with some "relatively simple" language, which drops the word "liability" out of the LRRA and adds "property."

Brian Donovan, chairman of the National Risk Retention Association and president of STICO Mutual Insurance Company, a risk retention group in Arlington Heights, Ill., wondered at ARRC's timing.

"Are they going to get Congress to go into an extended session? I doubt it," he said. "[NRRA has] been talking to the staff people on committees about it for five years."

He noted that although NRRA thinks the issue is important, "if Congress isn't prepared to review the LRRA, it's silly for us to keep banging on that door."

Mr. Donovan said Congress' focus currently is on resolving issues tied to the GAO report on risk retention groups, and on working with the National Association of Insurance Commissioners, which has been charged with making recommendations to Congress.

"When Congress is prepared to deal with this, which probably won't be until some time next year, then we can focus on it," he said.

NRRA, he said, supports expansion of the LRRA to include property, as well as "a number of other issues brought up in the GAO report. We've spent a lot of time on the Congressional side making sure they understand our positions." But he doubted whether Congress would "move forward over the next two months on expansion of the LRRA."

Mr. Mirel said the GAO report made it clear that the LRRA has served well in "the limited purpose for which it was enacted–to help cope with an availability crisis in the medical malpractice area."

ARRC's timing, he added, couldn't be better, "because people don't think about hurricanes in January; they think about them in July and August. So, we're trying to make the pitch when there is a lot of concern about it."

He said that Congressman Baker, in particular, "represents a jurisdiction that has been battered by these storms and is very well aware of the problem."