While the recent Government Accountability Office (GAO) report on risk-retention groups (RRGs) recommends that Congress pass legislation clarifying certain provisions of the Liability Risk Retention Act (LRRA), it doesn't go far enough, according to one industry expert.
In a report released Jan. 11, the GAO recommends that Congress consider "clarifying 1) whether RRG registration requirements beyond those currently specified in LRRA are permitted in nondomiciliary states (states other than the state in which the RRG is licensed); and 2) whether fees, in addition to premium and other taxes, could be charged to RRGs by nondomiciliary states in which they operate."
Fees and other requests by nondomiciliary states have been an ongoing issue—and they violate the federal act, according to the National Risk Retention Association (NRRA).
Sanford Elsass, a member of the NRRA board of director, tells NU that to his understanding, the purpose of the GAO report was to "create a very clear black-and-white picture of whether there have been egregious acts that violated the law—which we have proven there are."
Elsass is perplexed because "a lot of us spent time with the GAO, so to have this be in the report is politically not very useful or very helpful to risk-retention groups."
Joseph Deems, NRRA executive director and chair of the association's government affairs committee, said in a statement, "The GAO report noted that legislation (HR 2126) has been introduced that provides for a federal arbitrator to resolve disputes between RRGs and state regulators, but it does not take a strong stand against efforts by some states to encroach on the right of RRGs to operate with only limited regulation as authorized by the federal law (LRRA)."
The National Association of Insurance Commissioners, which supports amending the 1986 federal law, has said it wants the law "clarified" to limit the preemptive authority of the current legislation and to make it clear that RRGs must pay premium taxes, registration fees and also pay for oversight by the state insurance agency in each state.
Proposed legislation would amend the LRRA to allow RRGs to provide Commercial Property insurance and would include authorizing the aforementioned federal arbitrator to resolve disputes between RRGs and state-insurance regulators.
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