FIO Receives Request from NRRA

National Risk Retention Association urges federal law change to better protect the operations of risk retention groups.

Insurance Networking News, December 21, 2011

Justin Stephani

A call for the revision of a federal law, which allows risk retention groups (RRG) to operate nationally when licensed in a single state, has been lodged by National Risk Retention Association General Counsel Robert Myers, Jr.

In a letter to Federal Insurance Office Director Michael McRaith, Myers calledmodernization of the law an essential step in stopping states from interfering with RRG operations. Myers cited a record of states encroaching on RRG operating authority granted by the Liability Risk Retention Act of 1986 (LRRA), stating that without an enforcement mechanism, RRGs must go to the federal courts for relief—a long, expensive process that most RRGs cannot afford.

"In fact, even when a court has entered a decision favorable to RRGs, non-domiciliary states (states other than the state in which the RRG is chartered) have construed the decision narrowly, ignored it, or dismissed it as being binding only in the circuit in which it was issued,” wrote Myers.

The Liability Risk Retention Act of 1986 was intended to allow businesses and charities to form companies known as RRGs to write liability insurance on a multi-state basis without excessive and overlapping state regulation. "Over the 25 years since the LRRA was last amended, that freedom of operation has been eroded by the states," Myers told the FIO.

The NRRA letter was written in response to a call by FIO for public input on a report to Congress regarding how to modernize and improve the system of insurance regulation in the United States.

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