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SIIA Supports Federal Study Examining State Regulation of Risk Retention Groups
July 23, 2010: The Self-Insurance Institute of America, Inc. (SIIA) applauded today’s directive by Rep. Dennis Moore (D-KS) to the Government Accountability Office (GAO) that it investigate abuses of federally sanctioned risk retention groups (RRGs) by some state insurance regulators.
Rep. Moore, chairman of the Oversight Committee on Financial Services, directed the GAO to study instances when non-domiciliary states attempt to improperly regulate the operation of RRGs through such tactics as “cease and desist” orders, onerous filing requirements, imposition of fees, waiting periods, information requests or other means.
“All of these forms of harassment have been directed against lawfully composed and operating risk retention groups,” said Kevin Doherty, chairman of SIIA’s Alternative Risk Transfer Committee. “We believe this study will prove this point and serve as the basis for a federal dispute resolution process to prevent further unlawful abuses by states of these self-insured groups.”
Industry sources cite one state’s consistent pattern of interference with RRGs to include a 60-day waiting period after filing for registration, recurring annual registration renewal, registration and renewal fees, wide-ranging reports as conditions for the insurance regulator’s approval and other abusive practices, all legally prohibited by federal law.
“The problem is that the LRRA never defined a federal enforcement process to defend the law and therefore it has been left up to each individual RRG to defend its interests and most of them don’t have the resources to sue state regulators in federal court. With enforcement through a dispute resolution process, risk retention groups can be confident of their rights under federal law,” said Mr. Doherty
RRGs are comprised of members of businesses or professions who self-insure their liability risks and also share ownership in the groups. Once licensed by their state of origin they may operate in any other state. RRGs have widely been credited with reducing liability litigation in such areas as medical malpractice, transportation, consumer products and others.
SIIA is hopeful that this independent study will bolster the case for the need of some sort of dispute resolution similar to what was proposed in the current House bill to modernize RRG operations. That bill, HR 4802, “The Risk Retention Modernization Act,” is sponsored by Rep. Moore along with Rep. John Campbell (R-CA) and Rep. Suzanne Kosmas (D-FL).
In addition to enforcing the federal exemption first established by the Liability Risk Retention Act of 1981, HR 4802 would allow risk retention groups to write commercial property coverage while also standardizing governance rules for the groups.
Along with other industry organizations including the National Risk Retention Association and RIMS, SIIA has worked closely with members of Congress to develop the bill that would modernize the LRRA. SIIA plans to coordinate the participation of its RRG and captive manager members in the GAO study to ensure that Congress is fully informed regarding improper regulatory action being taken at the state level.
SIIA is a national trade association that represents companies involved in the self-insurance/alternative risk transfer industry. Additional information about the association can be accessed online at www.siia.org or by calling 800-851-7789. ### |
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