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August 9, 2010
NEWS; Pg. 0015
Financial services reform could boost RRG legislation; But Congress not likely to take up risk retention bill
MARK A. HOFMANN
The new financial services regulatory reform law could give risk retention groups a boost in getting additional legislation passed on Capitol Hill, observers say.
That’s despite the fact that Congress is unlikely to take up the Risk Retention Modernization Act of 2010 before it adjourns for the November elections. The reason is the bill, which would have to be reintroduced in the next Congress, contains some of the same approaches as the surplus lines and reinsurance provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
That may be unsurprising because Rep. Dennis Moore, D-Kan., drafted the RRG bill as well as the surplus lines and reinsurance bill. Rep. Moore is retiring at the end of this Congress, but RRG supporters are optimistic that other sponsors will emerge.
Among other things, Rep. Moore’s RRG bill would require the Treasury secretary to report to Congress and the White House on whether states are complying with the Liability Risk Retention Act of 1986. That law makes an RRG’s domiciliary state its regulator, but some nondomiciliary states have ignored that provision by imposing fees and other requirements.
The bill also would require the U.S. comptroller general to report on ways to ensure that nondomiciliary states do not interfere with RRGs. It also would allow RRGs to write commercial property coverage and rename the law the Risk Retention Act.
In the meantime, Rep. Moore and the two other lawmakers sponsoring the bill-Reps. Suzanne Kosmas, D-Fla., and John Campbell, R-Calif.-have asked the Government Accountability Office to study states’ compliance with existing RRG law (BI, Aug. 2).
We believe once the report is completed, that will provide the background that we need in order to keep this bill alive in the next Congress, said Kevin Doherty, chairman of the Self-Insurance Institute of America Inc.’s alternative risk committee and a partner in the Nashville, Tenn., office of Burr & Forman L.L.P.
While noting that the final impact of the Dodd-Frank bill could give rise to unintended consequences, RRG backers say it should help their cause.
It’s going to take awhile to digest what actually has passed, said Robert Myers, general counsel of the Minneapolis-based National Risk Retention Assn. and a partner with Morris, Manning & Martin L.L.P. in Washington. But the bill does address surplus lines and reinsurance.
The Dodd-Frank bill grants a single state the right to regulate certain aspects of the surplus lines and reinsurance business (BI, July 19).
The theme of that portion of the act is that a single state can effectively regulate and this is analogous to the LRRA, said Mr. Myers. This is another example of Congress trying to improve state insurance regulation by using the lead-state model.
Mr. Myers said the lead-state model could help focus congressional attention on RRGs’ concern that nondomiciliary states in some cases tend to wander off and do what they want to do.
I think it’s impossible to know for sure what impact the new financial services law will have, Mr. Doherty said. But I do believe, overall, there’s a trend toward some type of federal oversight of our industry. I think that to the extent that that’s true, in the long run, it’s going to benefit risk retention groups.
Mr. Doherty said such a move would promote RRGs’ biggest issue, which is we need a federal overseer of risk retention groups to keep the states from overstepping their bounds.
The New York-based Risk & Insurance Management Society Inc. would like the law changed to allow RRGs to offer property coverage, said Scott Clark, RIMS secretary, director of RIMS’ External Affairs Committee, and risk and benefits officer of Miami-Dade County Public Schools.
It will continue on our radar screen and it will continue to be something we support, Mr. Clark said, but he noted that action is unlikely this session because of the shrinking legislative calendar.
Messrs. Myers and Doherty said allowing RRGs to write property coverage would be a welcome expansion of RRGs’ powers.
We think there is a need for it in certain circumstances, particularly where you may have an insurance program for certain organizations like colleges and universities where the liability insurance is already being written through a risk retention group, and the underwriting has already been done, so it would make sense to add property, Mr. Myers said.
There’s a need, particularly in the coastal areas that are exposed to natural catastrophes, Mr. Doherty said.
Both RRG advocates also said they expect the effort to pass RRG legislation to continue.
We still have bipartisan support, said Mr. Myers. We’ll miss Mr. Moore, but this is a good cause and we’ll find others to help us.
This is not a partisan issue-this is a common-sense issue, said Mr. Doherty. If party strengths are closer as a result of November’s elections, lawmakers will be looking for something they can agree on, and RRGs should provide that area of agreement, he said.
Whether we’ll get it passed next year or not, I can’t say, but I’m optimistic that it will continue to be an important issue that will have support, Mr. Doherty said.
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August 13, 2010