:: About NRRA
The Liability Risk Retention
Act is a federal statute which is not overseen
or regulated by any federal agency. The primary
regulatory authority for a risk retention group
is its state of domicile. Other states have regulatory
authority curtailed by federal law.
Over the years, this unusual regulatory scheme has created over a number of issues and problems. As the principal advocate for risk retention groups
and purchasing groups, NRRA has represented their interests
to state regulatory authorities and to their association,
the National Association of Insurance Commissioners (NAIC).
In this effort, NRRA has been both an advocate
and a source of information and education for
state regulators and legislators. NRRA has also
provided this service to federal legislators and their staffs.
Some of the issues that have arisen in this context
are: (1) The assessment of premium taxes: What
rate of tax is permissible? When and how are taxes
paid? (2) Assessment of fees: Is a fee a “tax”?
Is it applied in a non-discriminatory manner?
(3) Registration requirements for risk retention
and purchasing groups in non-domiciliary states: Does the state requirement comport with federal
law? (4) Types of insurance coverage: Is it
“liability” as defined in the Act?
What authority does a non-domiciliary state have
to require insurance policy filing or review? (5) Risk retention group structure: Does the risk
retention group fulfill the Act’s requirement
for ownership and control? (6) Capitalization: What requirements can be imposed by statute?
(7) Financial responsibility: Is the state within
the exception provided by federal law? (8) Warranty Do the activities of the risk retention group
violate state law?.
Charter Risk Retention Insurance Company v. Rolka.
When the laws of Pennsylvania challenged the right
of a risk retention group insuring limousine companies
to operate in that state, NRRA filed an amicus
brief supporting the right of the insurance carrier
to operate. The court found that NRRA position
was correct and held that federal law preempts
the law of the state.
Mears Transportation Group v. State of Florida.
NRRA filed a brief supporting the proposition
that a state could not require a risk retention
group to require that a class of business could
purchase insurance only from a company which participated
in the state insurance guaranty fund.
Preferred Physicians Mutual Risk Retention Group
v. Patacki. The State of New York provided free
excess insurance coverage of $1,000,000 to doctors
insured with New York licensed insurers. NRRA
joined with Preferred in challenging this as the
group was not licensed in New York thereby in
effect creating indirect state regulation.
National Risk Retention Association v. Brown.
The State of Louisiana required that any risk
retention group have at least $5,000,000 in capital
and surplus, file a bond or funds of $100,000
with the State, and annually submitting a detailed plan of
operation together with a fee of $1,000
to be allowed to operate. Joining with three risk
retention groups, NRRA challenged these requirements
as the state’s actions were preempted by
the LRRA. In prevailing, NRRA established that
the federal law did preempt such state requirements.
Opthalmic Mutual Insurance Company v. Musser.
NRRA joined with Opthalmic in challenging a Wisconsin
law which required health-care providers to prove
financial responsibility by carrying insurance
obtained from an insurer licensed in the state.
National Warranty Insurance Company v. Greenfield.
The State of Oregon’s law required that
reimbursement insurance policies covering the
liability of certain service contracts be written
with an “authorized” insurer in the
state. This requirement barred risk retention
groups from selling this coverage in the state.
Joining with National Warranty, NRRA challenged
the law and won a major victory in establishing
that such a requirement was discriminatory and
in violation of the LRRA and the preemption of
Attorney’s Liability Assurance Society,
Inc., and Housing Authority RRG, Inc., v. Frank
M. Fitzgerald, in his official capacity as Commissioner
of the Office of Financial and Insurance Services
for the State of Michigan.
The State of Michigan imposed a fee on risk retention
groups which was referred to as a tax, but was
determined to be a regulatory fee and was therefore
barred by the Liability Risk Retention Act. In
addition, the court held that the employee-related
coverages issued by the two risk retention groups
are not barred by the Risk Retention Act. The court accepted the arguments put forward by ALAS,
HARRG and NRRA that the statutory language only
excludes risk retention groups from writing workers
NRRA can share a piece of the credit for this
victory. United States District Judge Enslen relied
substantially on the precedent created by NRRA
in its Louisiana litigation, National Risk Retention
Association v. Brown, affirmed without opinion,
and also cited the amicus curiae brief submitted
by NRRA in this proceeding.
In addition, the court invited the plaintiffs
to submit requests for reimbursement of their
legal fees pursuant to Sections 1983 and 1988
of Title 42 of the United States Code. The court
relied on the Oregon risk retention litigation,
National Warranty Ins. Co. v. Greenfield, to support
this ruling on fee reimbursement.
In 2002, NRRA started a multi-year campaign to
seek to expand the Liability Risk Retention Act
to permit risk retention groups to offer coverage
other than commercial liability and
commercial property coverage. NRRA initiated the
formation of a group that became known as the
Council for Expanding the Risk Retention Act (“CERRA”).
CERRA included representatives from consumer organizations,
real estate interests, housing authorities, captive
domicile associations, a state legislator organization,
and others. Over 30 organizations joined the effort.
NRRA counsel and members developed position papers,
drafted legislation, wrote opinion pieces, and
made numerous visits to Congressional and Senatorial
offices. NRRA was able to obtain support from
various insurance trade publications and trade
associations. An amendment was proposed to the
Terrorism Risk Insurance Act, but was not successful
as it was ruled not germane by the Senate parliamentarian.
Amending the Liability Risk Retention Act was
placed on the agenda of the House Financial Services
Committee, where it remains today.
In 2003, NRRA lead a successful effort to educate
and persuade the NAIC that it should not pass
a resolution opposing the expansion of the Liability
Risk Retention Act. The effort involved numerous
meetings and the presentation of testimony to
explain the beneficial role of risk retention
groups in the commercial liability market and
the relative safety and security of risk retention
groups. The NAIC did not take an adversarial position,
as a result.
In 2003, The U.S. Department of Housing and Urban
Development issued a rule which caused health
care facilities with professional liability insurance
from captives not rated at least B-double-plus
from A.M. Best (and, in some cases, licensed in
each state where risks are covered) to be disqualified
from obtaining HUD-backed financing. This rule
blocked a large number of health care facilities, perhaps
a majority, from obtaining this desirable
federally-backed financing. NRRA worked with a
coalition to get HUD to change this rule and filed
comments as part of the federal rule making process.
The revised rules permitted rating from Demotech,
a rating service that was more responsive to captives.
NRRA began the process of gathering information
to respond to the inquiries of the Government
Accountability Office (GAO), which had been charged
by the Chairman of the House Financial Services
Committee with preparing a study of the operation
of risk retention groups and their effect on the
marketplace. NRRA provided information to the
GAO which helped to establish the positive impact
of risk retention groups on the commercial liability
market. NRRA provided extensive documentation
regarding problems with numerous states. NRRA
also continued its advocacy role with the NAIC.
NRRA organized and implemented a response to the
GAO Report, which had both positive and negative
implications for risk retention groups. NRRA has
provided extensive follow-up information to both
federal and state authorities. NRRA presented
testimony at NAIC meetings, prepared position
papers, had numerous meetings with state regulators,
and otherwise continued its advocacy.
Washington State Responds Positively to NRRA's Concerns
In a letter dated September 8, 2006, to NRRA's legal counsel, the
Office of the Insurance Commissioner of Washington State indicated that
it had decided to start using the NAIC registration form for RRGs not
domiciled in that state. NRRA had previously written to the
Commissioner to object to language in the Washington form that required
the applicant to agree that it was not registered until it had received
notification from the Commissioner's Office.
appreciates the attention paid by Washington State to the concerns of
RRGs registering there," said Brian Donovan, NRRA Board Chair, "The
Liability Risk Retention Act, like many statutes, is not as clear as we
would like on some issues, and Washington's response to our concerns is
a big help to our members."
NRRA sends letter to Missouri's Department of Insurance regarding
Proposed Rule 20 C.S.R. 2 00- 18.020 (Proposed Rule)
Proposed Rule is to establish requirements and provide interpretive
language "to effectuate the provisions of Sections 407.1200 to
407.1227, RSMo, regarding assuring the faithful performance of a
provider's obligations to its contract holders."
The current language of Section 407.1203.1.3 (1) does not conflict with
the LRRA because it requires that a reimbursement insurance policy be
issued by "an insurer authorized to transact insurance in the state."
However, the interpretation of the Proposed Rule requiring a "valid
certificate of authority" does conflict with federal law because an RRG
is not required to have such a certificate.
Auto Dealers Risk Retention Group vs. Poizner
In February 2008 NRRA filed an amicus brief supporting Auto Dealers RRG’s position in this lawsuit that stemmed from the issuance of a 2009 cease and desist order by the California Department of Insurance (“CA DOI”). The major issues arising from this case included (1) the role and limits of authority of the non-domiciliary state regulator, particularly its authority to determine whether an RRG qualifies as such under the Risk Retention Act, (2) whether “liability” as defined under the LRRA was intended to include contractual liability (California has argued for some time that only tort-based liability is permissible under the LRRA), and (3) the ability of a non-domiciliary state to take administrative action (e.g. a cease and desist order) against RRGs, when the LRRA requires states to bring actions in a “court of competent jurisdiction.” A major victory was achieved on March 7, 2008, when the federal judge issued a preliminary injunction prohibiting the CA DOI from enforcing the cease and desist order.
The Increasing Insurance Coverage Options for Consumers Act of 2008 was introduced on April 17, 2008. The bill proposed to expand the LRRA to include the authority for RRGs to write commercial property coverage. H.R. 5792 did not pass the 110th Congress. However, NRRA continued to actively promote similar legislation to expand LRRA.
NRRA reached a settlement on the New Jersey/Indemnity Insurance Corporation of D.C. matter. There was also a victory regarding the Kentucky Administrative Costs Assessment. A letter was finalized regarding the Coalition for Competitive Insurance Rates. NRRA wrote a response to escalated "re-registration" efforts and similar overreaching inquiries being imposed by California. NRRA published a position paper on the MMSEA (Medicare, Medicaid and SCHIP Extension Act of 2007) reporting requirements.
The Risk Retention Modernization Act of 2010 proposed allowing risk retention groups to sell commercial property insurance. Its purpose was to create new uniform, baseline corporate governance standards for risk retention groups as well as establish a mechanism to resolve disputes between non-domiciliary states and RRGs. The bill was introduced by Rep. Dennis Moore (D-Kansas) and Rep. John Campbell (R-California). NRRA was instrumental in sponsoring the legislation.
Alliance of Nonprofits for Insurance Risk Retention Group vs. Nevada
After 9 years of successfully doing business in Nevada, ANI was suddenly issued a “cease and desist” order by the insurance commissioner, Brett Barratt, claiming that ANI was not an authorized insurer because it could not, by law, participate in the state insurance guarantee fund. NRRA mobilized a significant offensive and put together a combination of amicus briefings, one on behalf of NRRA and three other entities, with other groups filing their own supportive “amicus” briefs.
The Risk Retention Modernization Act, was introduced on June 3, 2011, substantially similar to H.R. 4208, the bill would again establish a dispute resolution mechanism to deal with state actions that put burdensome requirements on RRGs, this time through the newly formed FIO, established under Dodd-Frank. This bill is the most recent legislation co-sponsored by NRRA. It is assigned to the House Committee on Financial Services and is co-sponsored by Rep. John Campbell (R-California) and Rep. Peter Welch (D-Vermont).
NRRA Challenges GAO Report on Risk Retention Groups
In a letter to Alicia Puente Cackley, Director of the GAO’s Financial Markets and Community Investment Division, Joseph Deems, NRRA Executive Director, called upon the GAO to rectify errors in the original GAO document.
Over the years, NRRA has effectively met with and proactively effectuated positive intervention on numerous NAIC initiatives.
For any NRRA inquiries, please contact:
Joseph E. Deems, Executive Director
16133 Ventura Blvd., Suite 1055, Encino, CA 91436, U.S.A.
800.928.5809 x102 | email@example.com
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