WASHINGTON, DC — (Marketwire) — 01/12/12 — The Government Accountability Office (GAO)
report issued this week cites the need to update the Liability Risk
Retention Act of 1986 (LRRA) but does not go far enough in affirming the
authority for Risk Retention Groups (RRG) to operate nationally with only
limited regulation by states where RRGs are not licensed, says the National
Risk Retention Association.
“We-re pleased that the GAO has recommended Congressional action to clarify
provisions of the LRRA with respect to state regulation but disappointed
that the agency-s report failed to take a strong position in support of
RRGs where certain states have imposed requirements that clearly are in
direct conflict with the federal law,” said Sanford Elsass, Chairman of
NRRA.
The GAO report recommended that Congress consider: “Clarifying whether, (1)
RRG registration requirements beyond those currently specified in LRRA are
permitted in non-domiciliary states (states other than the state in which
the RRG is licensed) and (2) fees in addition to premium and other taxes
could be charged to RRGs by non-domiciliary states in which they operate.”
“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),” said Joseph Deems,
Executive Director of NRRA and Chair of the Association-s Government
Affairs Committee.
“Clearly, the time has come for Congress to act. Legislation to put teeth
into the LRRA has been before Congress for three years. The Risk Retention
Modernization Act (HR 2126) would establish a dispute resolution mechanism
to deal with state actions that put burdensome requirements on RRGs.
Currently, the only way for RRGs to assert their rightful authority is
through lengthy, costly litigation. Federal courts have ruled in favor of
RRGs in landmark cases but without an enforcement mechanism in the law
there is no efficient, timely way for RRGs to assert their rights,” Deems
said.
Risk Retention Groups were authorized under LRRA to operate nationally with
only limited regulation by states other than the state in which they are
licensed. The legislation was intended to make essential liability
insurance widely available to business and professional groups that could
not obtain affordable coverage in the traditional insurance markets. Since
the law was enacted in 1986, RRGs have grown into an important segment of
the insurance market. There are 254 RRGs generating more than $2.6 billion
premium today providing coverage to markets underserved by the major
insurance companies. The National Risk Retention Association is the voice
of the RRG industry.
Media contact:
Mechlin Moore
Director of Communications
National Risk Retention Association
239-777-1595