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Expanded Role for Risk Retention Groups Elicits Concern

July 14, 2008

Washington – Legislation allowing risk retention groups (RRGs) and risk purchasing groups to provide property insurance has passed a House subcommittee.

The House Financial Services’ Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises passed H.R. 5792, the Increasing Insurance Coverage Options for Consumers Act of 2008, which would expand the Liability Risk Retention Act. The law currently allows RRGs to cover all types of commercial liability risks except workers’ compensation.

However, insurers warned the legislation could create an unfair competitive environment.

“Admitted carriers are subject to the myriad of state regulations,” says Jimi Grande, VP of government and political affairs for the National Association of Mutual Insurance Companies. (NAMIC). “Allowing RRGs, which enjoy a lesser degree of regulation, to provide additional coverages that are readily available in the marketplace would provide a competitive advantage over traditional, conventionally formed insurers.”

Yet, Grande says NAMIC agrees that RRGs have had a small but important effect on the availability and affordability of commercial liability insurance for certain groups.

“The expansion of the RRGs into broader commercial insurance, including liabilities owed to individual consumers, is problematic, and we do not believe such an expansion should be approved at this time,” Grande says.

Source: National Association of Mutual Insurance Companies

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