BURLINGTON, VT.–Vermont's captive regulator said he is reluctant to advise risk retention groups domiciled in his state to comply with Massachusetts' requirement that they supply management Social Security numbers and other confidential data.
Leonard Crouse, deputy commissioner, Captive Insurance Division, with the Vermont Department of Banking, Insurance, Securities and Health Care Administration (BISHCA), said there is a confidentiality risk in the RRGs disclosing such information and the groups should not be subject to such requests because they are governed by federal law.
Risk retention groups, created by Congress under a 1986 law, are limited to providing liability insurance. RRGs are structured as corporations or limited liability associations that function as captive insurance companies for member-owners.
The National Risk Retention Association (NRRA) and numerous risk retention groups recently sent a letter requesting Massachusetts drop its requirements for RRGs. Their requests were only partially met. One of the items still required is a biographical affidavit for every officer and director on an RRG's board, said NRRA's general counsel, Robert H. "Skip" Myers Jr.
Mr. Crouse said at a press conference here, during the annual conference of the Vermont Captive Insurance Association, that Massachusetts' officials "are free to come up to my office. On any RRG that I have licensed, they are free to come up and look at everything,"
He added, "Do you understand about having that document out there in the public? We ask for bios and Social Security numbers." This information, he said, is generally guarded by RRGs, which "actually want us to give [the information] back, or guarantee that we have them under lock and key because, as you know, identity theft is a big problem. Confidentiality is important."
VCIA President Molly Lambert added that the documents are not public because they contain Social Security numbers.
Mr. Myers said Massachusetts originally requested that RRGs submit:
o An application or renewal form.
o A National Association of Insurance Commissioners biographical affidavit for every officer and director.
o A check for $125.
o A completed NAIC Uniform Certificate of Authority Application questionnaire (Form 8).
Although the UCAA Form 8–a "monstrous form, which is basically the heart of the traditional licensing application"–was dropped, Mr. Myers said the biographical affidavit was not.
"A lot of people don't like the idea of a biographical affidavit that includes your Social Security number being filed with different states," Mr. Myers said. "Who knows what's going to happen under the Freedom of Information Act, or what security arrangements are in place?"
Because RRGs fall under the federal Liability Risk Retention Act, he said, they are required to license in their state of domicile and provide notice, in the form specified by the act, to other states in which they will be operating [NU Online News Service, Aug. 8, 2007].
NRRA's letter to the Massachusetts insurance department, dated July 13, said that each of the four requirements violates the LRRA's limitation on a nondomiciliary state's authority. The letter stated that the law is "crystal clear that these requests by Massachusetts violate the LRRA and are subject to federal preemption."
In response, Mr. Myers said, Massachusetts issued a notice on July 30, from the office of Massachusetts Insurance Commissioner Nonnie S. Burnes, that it had dropped the UCAA Form 8–"which is great," he said. He added, however, that the state is still asking for the check for $125; the application form, which he said was expanded to include even more questions; and the biographical information.
The letter from Massachusetts noted that the biographical information was needed "to identify pending or resolved administrative or legal proceedings(s) involving these risk retention groups, or their officers and directors, to the extent this information has not been identified through the division's prior registration and renewal process."
Mr. Myers said NRRA intends to respond with another letter addressing the requirements, including the obligation to file biographical affidavits.
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