News
April 12, 2013
NINTH CIRCUIT COURT RULES IN FAVOR OF RISK RETENTION GROUPS IN NEVADA CASE -- A VICTORY FOR THE INDUSTRY
San Francisco, CA -- The Ninth Circuit Court of Appeals this week affirmed a District Court ruling that under federal law the State of Nevada cannot deny a risk retention group the right to do business in the State. Joseph Deems, Executive Director of the National Risk Retention Association, hailed the decision as “a victory for risk retention groups.”
“As in other cases where States have attempted to impose requirements on RRGs that violate federal law exempting them from most regulation outside their home State, the Ninth Circuit issued an unqualified opinion upholding the preemption provisions of the Liability Risk Retention Act of 1986 (LRRA),” Deems said.
In 2010, the Alliance of Non-Profits for Insurance Risk Retention Group (ANI) was ordered by the Nevada Commissioner of Insurance to cease writing auto liability insurance in the State because it was not an “authorized insurer” under State law. ANI won a summary judgment in the District court that the LRRA preempts state regulation over risk retention groups.
The three-judge Circuit Court affirmed the lower court decision, stating that, “The LRRA broadly preempts any State law, rule, regulation or order to the extent that such law, rule, regulation or order would … make unlawful, or regulate, directly or indirectly the operation of a risk retention group.”
At the same time, the Circuit Court denied award of Attorneys’ fees to ANI on grounds that the LRRA’s “preemption provision did not unambiguously confer a right to be free from state law” under the U.S. Constitution.
In his statement, Deems said: “While NRRA, and no doubt others, are disappointed with the court's decision to deny attorneys’ fees, it is important to note that attorneys’ fees have been granted in the other cases, including Greenfield v. National Warranty, an earlier decision by this very court.”
“The inability to recover attorneys’ fees is no deterrent to larger companies and associations like NRRA. We will continue to rely upon the substantive law of this very favorable decision to support our right to resist unlawful overregulation by the States. It is just a matter of time before we will be able to persuade the lawmakers and the courts that the individual owners of RRGs, like all other citizens, are entitled to be free from discriminatory actions.”
Media Contact: Mechlin Moore, Director of Communications, National Risk Retention Association (Cell: 239-777-1595; mooremechlin@gmail.com)
April 1, 2013
RISK RETENTION REPORTER AND DEMOTECH PARTNER FOR IN-DEPTH ANALYSIS OF RISK RETENTION GROUP MARKETPLACE
Pasadena, CA -- The Risk Retention Reporter and Demotech, Inc. have joined together to create an in-depth analysis of the Risk Retention Group marketplace to be published in conjunction with the Risk Retention Reporter's annual book, the Risk Retention Group Directory and Guide, available in May.
Click here for the full press release.
February 14, 2013
AMICUS UPDATE
NINTH CIRCUIT HEARS ORAL ARGUMENT ON APPEAL IN ANI CASE -- DECISION WEEKS AWAY
Oral argument on an appeal from the federal District Court decision to allow the Alliance of Nonprofits for Insurance RRG (ANI) to continue operating in Nevada, despite the State’s effort to shut it down, was heard February 11 before a panel of justices at the Ninth Circuit Court of Appeals. A decision by the Court is not expected for weeks.
Attorneys for the State of Nevada sought a reversal of the District Court opinion, claiming that its Cease and Desist Order to halt ANI operations was legal under state law. ANI counsel argued that the order to cease operations discriminated against the RRG in violation of the Liability Risk Retention Act of 1986 (LRRA) and called on the higher court to affirm the District Court decision that upheld ANI’s right to do business in the state.
NRRA led a coalition of supporters of ANI with an Amicus Brief filed in December 2011 asking the Circuit Court to uphold the lower court decision. ANI has been issuing affordable, commercial auto liability policies to non-profit organizations in Nevada since 2001. The Company is rated “A-Excellent” by A.M. Best. In September, 2010, the Nevada Division of Insurance ordered ANI to stop writing insurance in the State because it was not an “authorized insurer” under State law. The lower court affirmed ANI’s right to do business and ordered the State to recognize RRGs as “authorized insurers” under the authority granted by the federal law.
“Simply stated, the District Court correctly found that the LRRA preempts Nevada laws that bar RRGs not chartered in Nevada from writing first-dollar liability auto insurance in the state. The decision should be affirmed,” wrote Robert H. Myers Jr., NRRA General Counsel, who filed the brief on behalf of the four organizations. NRRA Executive director, Joseph Deems, who attended the hearing on February 11th, observed that the arguments seemed to focus on the correct legal issues and precedent and was optimistic for an appropriate decision by the court.
APPEAL OF RIGHT TO REQUIRE ARBITRATION CASE REMANDED TO LOWER COURT IN NEW JERSEY
The New Jersey Superior Court-Appellate Division has now remanded to the lower court for further determination an appeal by Allied Professionals Insurance Company (APIC) to reverse the trial court order that would require APIC to arbitrate a claim-coverage dispute in New Jersey, contrary to the provisions of the policy. The National Risk Retention Association (NRRA) had sought leave to file an Amicus Brief in support of the appeal.
“Requiring arbitration in states other than those specified in a policy by an RRG violates the exemption provisions of the federal Liability Risk Retention Act (LRRA), and it would drive up claims settlement costs resulting in less affordable liability coverage for RRG members,” said Joseph Deems, NRRA Executive Director.
In its brief, NRRA asserted that the trial court's order not only disregarded the terms of the policy that arbitrations be conducted in California where APIC has its administrative headquarters, but more importantly, was also in direct violation of the LRRA.
The appeal stems from a malpractice claim against Joanna Jodar and her employer, Integral Acupuncture, following which Jodar had failed to disclose the claim in an application for coverage. After the insured brought the action in New Jersey, APIC moved for arbitration, which was granted but the trial court ordered that the arbitration take place in New Jersey. APIC appealed the venue order. In its brief, NRRA told the court that, “New Jersey state law cannot be used to force APIC to arbitrate this matter in New Jersey because the state law is federally preempted by the LRRA.”
In an affidavit accompanying NRRA's Amicus Brief, declined by the Court because leave had only been sought at the reply stage, Deems asserted that if RRGs chartered in other states were to be subject to New Jersey state laws, such as the requirement to hold arbitrations in the state, many RRGs that operate nationally would no longer write policies there. “They simply could not afford to restructure their business plans in order to bear the risk and expense of arbitration in New Jersey.”
February 11, 2013
ELSASS WRITES ON CAPITAL NEEDS FOR SOME RRGs
In an opinion piece published by Demotech, NRRA Chairman Sandy Elsass wrote that lack of capital is a major obstacle to growth for many risk retention groups. "In my opinion, the soft market is not the critical reason for the slowdown in RRG growth. The real culprit is lack of capital to support expansion."
With an estimated 30 million presently uninsured persons eligible for cover under the Affordable Care Act in 2014, the demand for professional liability insurance will grow sharply. Risk retention groups are ideally suited to serve this market," Elsass noted. He proposed that entrepreneurial investors and hedge funds take a look at risk retention groups. Bank financing with some profit participation has been used in some cases -- especially banks that own insurance brokers. Elsass also recommended reviving a proposal made at a NRRA conference three years ago that reinsurers create a pool of capital to grow RRGs. "As proposed, the pool would be a win-win for investors. The reinsurers would generate an attractive return, and they would gain access to more reinsurance business from growing RRGs," Elsass wrote.
Click here for the full story.
LONDON MARKET REINSURERS LIKE RRGs, SAYS NRRA DIRECTOR BARRETT
Ken Barrett, Managing Director of London broker Besso Re and a member of the NRRA Board, gave a strong endorsement of risk retention groups in an interview with Douglas Powell, Demotech analyst. In the rating agency's latest online quarterly journal, Barrett had this to say: "The markets we use have a preference for dealing with RRGs over the larger property/casualty companies." He gave four reasons why London market reinsurers like RRGs -- policy-holder owned; tend to be mono-line writers; usually don't operate in all states; RRGs need reinsurance and that makes for a much preferred client base.
Click here for the full interview.
January 24, 2013
DEMOTECH REPORTS RRG FINANCIALS STABLE AND GROWING THROUGH THIRD QUARTER 2012
RRGs collectively reported $185.2 million net income and an underwriting gain of nearly $43.9 million for the first nine months of 2012, according to Demotech, the financial analysis and rating firm. The RRG sector has reported underwriting gains each year since 2004, and will maintain this strong track record in 2012. The industry combined loss and expense ratio improved from 92.9 percent in the same period of 2011 to 90.5 percent in the third quarter of 2012.
Other financial measures also underscored the financial stability of the RRG industry. Assets and surplus increased faster than liabilities. Surplus, the industry's capital base, grew 73.4 percent since third quarter 2008 while liabilities increased only 10.7 percent. Liquidity -- liabilities to cash and invested assets -- was approximately 68.4 percent, an improvement over third quarter 2011's 74.6 percent. Leverage -- liabilities to surplus -- in third quarter 2012 was 132.4 percent compared to 155.2 percent in 2011.
January 16, 2013
COMMITTEE CHAIR SAYS NON-ADMITTED AND REINSURANCE REFORM ACT NEVER INTENDED TO APPLY TO THE CAPTIVE INSURANCE INDUSTRY
The National Risk Retention Association (NRRA) commended the announcement last week by Rep. Judy Biggert reaffirming that the Non-Admitted and Reinsurance Reform Act was never intended to apply to captive insurance.
"While the Act does not apply to risk retention groups because they were specifically excluded in the legislation, we're pleased that Rep. Biggert has made it clear that Congress did not intend it to apply to captives," said Joe Deems, Executive Director of NRRA.
"NRRA applauds the Vermont Captive Insurance Association and others in their efforts to secure this clarification. Clarifying language in complex federal legislation after its passage is no easy task and requires significant planning and coordination between coalition partners. Serious effort needs to be expended in advance by our industry to ensure that drafters of legislation understand technical distinctions between certain types of entities to avoid subsequent abuse by some state regulators," he added.
Rep. Biggert issued her clarification of the drafters' intent in response to regulators in some states who asserted that the Act's surplus lines tax provisions applied to captives. In her letter to the new Chairman and Ranking Member of the Committee, Rep. Biggert wrote, "As a supporter of the Non-Admitted and Reinsurance Reform Act and an advocate for its inclusion and passage as part of Dodd-Frank, I can tell you unequivocally that the Act was never intended to apply to the captive insurance industry."
NRRA is the professional association that represents risk retention and risk purchasing groups. There are more than 250 risk retention groups and over 800 risk purchasing groups that write liability insurance under the Liability Risk Retention Act of 1986 exempt from most state regulation outside the state in which the companies are licensed.
January 12, 2013
GAC MEMBERS LEAD WEBINAR ON CRITICAL ISSUES FACING RRGs
Members of NRRA's Government Affairs Committee will lead webinars sponsored by the International Center for Captive Insurance Education (ICCIE) online January 24 and 31 repeated February 7 and 14. Jon Harkavy, an authority on regulatory issues affecting RRGs; Stephanie Mapes, leader of the Captive Insurance Team at the Vermont law firm, Paul Frank + Collins; and Robert "Skip" Myers.
NRRA General Counsel, compose the faculty for this elective course.
"The instructors will explore the ways in which non-domiciliary states are abusing risk retention groups and clearly exceeding their limited empowerment under the Liability Risk Retention Act and RRG responses to non-domiciliary state overreaching," ICCIE announced.
"We recommend this webinar to RRG board members, staff and captive managers," said Joe Deems, NRRA Executive Director. "In just an hour and fifteen minutes you'll be brought up to date on issues important to your business and have an opportunity to interact with some of the most knowledgeable people in our field," he added.
To register, contact Chelsea Hunter, Director of Administration, ICCIE, toll free at 1-866-60-ICCIE or online at http://www.iccie.org/course-catalog/electives/RRG.shtml
January 11, 2013
GOVERNMENT AFFAIRS COMMITTEE REPORT
Your Government Affairs Committee watchdogs stay alert to legal and regulatory challenges to RPG and RRG operating authority. Our new Amicus Update will keep you posted on actions taken by NRRA to defend our industry. Please contact me or a member of our Board to advise of any threats to RRGs or RPGs in your area.
Joe Deems
Executive Director and Chair, Government Affairs Committee
AMICUS UPDATE
NRRA DEFENDS RRG's RIGHT TO REQUIRE ARBITRATION
The National Risk Retention Association has filed amicus briefs in two cases that threaten the right of Risk Retention Groups to require arbitration under the terms specified in the policy.
"Requiring arbitration in states other than those specified in a policy by an RRG violates the exemption provisions of the federal Liability Risk Retention Act (LRRA), and it would drive up claims settlement costs resulting in less affordable liability insurance for RRG members," said Joseph Deems, NRRA Executive Director.
In New Jersey, NRRA has recently sought leave to file its Amicus Brief in support of an appeal to the New Jersey Superior Court-Appellate Division by Allied Professional Insurance Company, A Risk Retention Group (APIC), to reverse a trial court order which required APIC to arbitrate a claim-coverage dispute in New Jersey, contrary to the provisions of the policy. NRRA asserts that the trial court's order not only disregards the terms of the policy that arbitrations be conducted in California where APIC has its administrative headquarters, but more importantly, it is also in direct violation of the LRRA.
The appeal stems from a malpractice claim against Joanna Jodar and her employer, Integral Acupuncture, following which Jodar had failed to disclose the claim in an application for coverage. After the insured brought the action in New Jersey, APIC moved for arbitration, which was granted but the trial court ordered that the arbitration take place in New Jersey. APIC appealed the venue order. In its briefing, NRRA told the court that, "New Jersey state law cannot be used to force APIC to arbitrate this matter in New Jersey because the state law is federally preempted by the LRRA."
In an affidavit accompanying NRRA's Amicus Brief, Deems asserted that if RRGs chartered in other states were to be subject to New Jersey state laws, such as the requirement to hold arbitrations in the state, many RRGs that operate nationally would no longer write policies there. "They simply could not afford to restructure their business plans in order to bear the risk and expense of arbitration in New Jersey."
In another amicus brief filed recently in Louisiana state court, NRRA is challenging a lawsuit brought against APIC under the state's "direct action" insurance statute. In its amicus brief addressed to the 19th Judicial District Court in East Baton Rouge, NRRA is supporting APIC's objection to being directly sued in that court, as well as its concurrent demand that APIC be allowed to arbitrate the case pursuant to the terms of its policy.
In that case, Ronald and Angela Courville sought damages under the Lousiana statute for an injury suffered by Ronald Courville in a cervical adjustment performed by Dr. Thomas Rathmann, a chiropractor insured by APIC.
"Imposing Louisiana's direct action statute against APIC essentially nullifies the arbitration provision contained in APIC's policy." Such an action, NRRA and APIC contend, constitutes an improper effort to regulate the operations (i.e., the business of insurance) of APIC in violation of the LRRA. They go on to say that the potential economic harm will not only affect APIC, but also prospectively the 88 other RRGs doing business in Louisiana, and would undermine the entire purpose and intent of the LRRA by threatening the existence of affordable liability insurance coverage."
SLOW BUT STEADY GROWTH FOR RRG/RPG SECTOR IN 2012
The RRG market continued to recover in 2012 from its big decline in 2009 when the recession took its toll. In 2012, the Risk Retention Reporter noted that 18 RRGs were formed and 13 closed. Healthcare represented the biggest increase with 11 new RRGs. However, nine healthcare RRGs were retired during the year, leaving a net gain of only two. "Healthcare formations and retirements will likely remain volatile in the next two or three years as the Affordable Care Act is implemented throughout the United States," the journal commented.
The Risk Purchasing Group market sustained steady growth in 2012 with 35 formations and only five closings. Overall, the RPG market grew 3.4 precent in 2012 -- similar to its average growth rate of 3.7 precent over the last five years. As with RRGs, the biggest gain was in healthcare, with property development close behind.
December 1, 2012
RRG INDUSTRY YEAR-END OUTLOOK POSITIVE
Five new Risk Retention Groups were formed in the third quarter and more are in the pipeline to be announced by year-end. Premium volume is forecast to exceed the $2,527,700 recorded in 2012, and the number of RRG policyholders is rising sharply. “The outlook for the fourth quarter is very positive. As many insurance forecasters are claiming a turn in the market is either here already or close at hand, indicators for the RRG sector also show that the market place is primed to see some serious growth in the next few years,” the Risk Retention Reporter predicted.
NEW STUDY SHOWS RRGs COST LESS TO OPERATE THAN TRADITIONAL INSURERS IN THE SAME LINES OF BUSINESS
When compared to traditional insurers with multi-state operations, Risk Retention Groups are more cost-effective, according to a new study conducted by J. Tyler Leverty, Associate Professor of Finance at the University of Iowa. “The costs associated with multi-state regulation are significantly higher than those for single-entity regulation,” Leverty reported. According to the study, “the average multi-state, standard insurer pays $187,323 in licensing fees, while the average multi-state RRG pays $44,237.” Bottom line, the study found that RRGs cost less to operate than traditional insurers, which results in savings to insurance consumers. Leverty’s study, The Cost of Duplicative Regulation: Evidence from Risk Retention Groups, was published in The Journal of Risk and Insurance.
WHAT DOES THE FUTURE HOLD FOR PURCHASING GROUPS?
Three industry leaders predict slow but steady growth and a generally positive outlook for the Purchasing Group marketplace over the next few years. Look for their comments in the December issue of Risk Retention Reporter. Daniel O’Leary, Partner in the firm of Mandell Menkes LLC; Michael Schroeder, a Director of NRRA and Chairman of three Purchasing Groups in the healthcare field; and Diane Sheakley, Principal, Captive Insurance Services, agreed that economies of scale, tailored coverage and lower rates for associations and affinity groups, along with stable, available coverage will prove the need for PGs regardless of market conditions.
October 18, 2012
NRRA EXECUTIVE DIRECTOR JOE DEEMS REVIEWS NRRA'S 25th ANNIVERSARY CONFERENCE
Washington, DC -- In an interview with World Risk and Insurance News, NRRA Executive Director Joe Deems discusses the FIO review of reinsurance, stop loss and the NAIC, other regulatory/legislative issues and the upcoming presidential election. Click here to watch the interview.
NRRA CHAIRMAN SANDY ELSASS FEATURED IN AM BEST INTERVIEW
The NRRA Chairman says the Risk Retention Act of 1981 could have never made its way through congress today. Click here to watch the interview.
October 16, 2012
ELSASS TO SERVE SECOND TERM AS NRRA CHAIRMAN
Washington, DC -- Sanford Elsass, a builder and manager of Risk Retention Groups, was elected Chairman of the National Risk Retention Association for a second one-year term at the Association's 25th Anniversary Conference. Click here for the full press release.
NATIONAL RISK RETENTION ASSOCIATION HONORS ROBERT LARSEN
Washington, DC -- Robert L. Larsen, a founding member of NRRA and a driving force in building support for the Liability Risk Retention Act of 1986, received the Association's Karen Cutts Visionary Award at the Association's 25th Anniversary Conference. Click here for the full press release.
October 5, 2012
NRRA UNVEILS ITS FREE 2012 "APP" FOR HAND-HELD DEVICES
Just in time for its 2012 Annual Conference next week in Washington, D.C., the National Risk Retention Association (NRRA) has unveiled its new App for hand-held devices. Available for iPhone, Android and Blackberry "smart phones," as well as tablet devices such as the iPad, the new NRRA APP will revolutionize the way NRRA will communicate with the industry. In its effort to show the alternative risk industry that NRRA will put its money where its mouth is, it is FREE, according to Joe Deems, Executive Director of NRRA. "This technology will be a 'must have' for anyone in the industry who wants to keep abreast of current developments."
In addition, it literally takes only minutes to install, according to Deems. Just go to your app store, or wherever you download apps, and put in "NRRA" App. Follow your instructions as you would for any app download, and within a short time you will be up and going. The NRRA banner will take you to the NRRA website, where you can obtain updated news and headlines.
We developed this technology, according to Deems, to accelerate and enhance our 2012 conference participation by attendees and enable our valuable NRRA sponsors and participants to more easily communicate with one another in the current environment. It will continue to be available after the conference and throughout the year, he said.
For further information, contact NRRA at info@riskretention.org, or call our executive offices at (818) 995-3274.
September 14, 2012
NEWS ALERT -- NRRA 25th ANNIVERSARY CONFERENCE TO CONFRONT CHALLENGES FACING RRG INDUSTRY
Washington, DC -- The National Risk Retention Association (NRRA) at its annual Conference October 9-ll in Washington will mark 25 years defending Risk Retention Groups (RRG) and Purchasing Groups (PG) against attempts by some state regulators to restrict their operations in violation of federal law. Clickhere to view the press release.
NRRA LEADERS IN THE NEWS
NRRA Chairman Sandy Elsass spelled out the issues facing Risk Retention Groups in a cover story that appeared in the August issue of Best’s Review. If you’re looking for an insider’s perspective on reinsurance for RRGs, check the September issue of Risk Retention Reporter for an in-depth interview with NRRA Board member Ken Barrett, CEO of Besso Re in London. Also appearing in the September issue -- an article by Executive Director Joe Deems on where NRRA is heading as we celebrate the 25th anniversary. If you missed the July issue, look back for our General Counsel Skip Myers’ thought-provoking comments on what it would take to get a Supreme Court decision on RRG operating authority.
August 14, 2012
NRRA CHAIRMAN SANDY ELSASS REPORTS FROM THE VERMONT CAPTIVE INSURANCE ASSOCIATION CONFERENCE ON ISSUES FACING RRGs AND CAPTIVES
Click here and here to see his interviews on World Risk and Insurance News.
August 9, 2012
BRALEY AND BEMI HONORED BY VCIA
Brian Braley and Michael Bemi, two former chairmen of NRRA, were honored by the Vermont Captive Insurance Association at its annual conference for their outstanding contributions to the captive industry. Braley was named a lifetime member of the Association for his industry leadership, and Bemi received the Captive Crusader Award, which is given by the VCIA staff to a member for distinguished service to the Association. Braley, has long been in charge of government relations as Vice President - Legislative Affairs at the Housing Authority Risk Retention Group. Bemi is President and CEO of The National Catholic Risk Retention Group, Inc.
August 8, 2012
VCIA REPORTS CAPTIVE MARKET STRONG AND GROWING
Vermont continues to be the leading captive domicile with 982 captives that write $26.1 billion premium, industry spokesmen reported at the annual Vermont Captive Insurance Association meeting. To date in 2012, 14 new captives have been formed in Vermont. This follows a strong record in 2011 when 41 new captive insurance companies were licensed in the state.
“The market is heating up and getting a bit harder,” Dan Towle, Director of Financial Services, Vermont Department of Economic Development, told reporters at a press conference on opening day. He noted that newly formed captives in the manufacturing sector signal that the economy is beginning to improve.
Asked if they’re seeing newly emerging exposures including cyber, social media, supply chain and reputational risks in the captive market, Richard Smith, President of VCIA, and Towle said there’s “lots of talk but not much action” as underwriters study how to price these risks. They said medical stop-loss coverage is drawing more interest currently in the captive industry.
THE OTHER NRRA -- A PROBLEM FOR THE CAPTIVE INDUSTRY
A big issue being discussed at the conference is the potential impact on captives of the Non-Admitted and Reinsurance Reform Act (NRRA) that is part of the Dodd-Frank financial legislation. VCIA asserts that NRRA “was never intended to include captive insurance under the definition of “non-admitted insurance.”
A big issue being discussed at the conference is the potential impact on captives of the Non-Admitted and Reinsurance Reform Act (NRRA) that is part of the Dodd-Frank financial legislation. VCIA asserts that NRRA “was never intended to include captive insurance under the definition of “non-admitted insurance.”
Richard Smith, President of VCIA, told reporters at a press conference, that the Association has retained counsel in Washington to amend the law to make clear that it does not apply to captive insurance companies. In an earlier statement, Smith wrote, “If the NRRA requires that the placement of non-admitted insurance that includes captives will be subject to the statutory and regulatory requirements solely of the insured’s home state, the whole framework of a strong captive insurance industry is put at risk.”
Rep. Peter Welch of Vermont told the conference general session that he is working on an amendment to Dodd-Frank to remove this threat to the captive industry. He pledged also to continue efforts to build support for HR 2126, the Risk Retention Modernization Act, that would allow RRGs to write commercial property coverage and create a mechanism to resolve disputes with non-domiciliary states without having to go to the federal courts.
July 30, 2012
NEWS ALERT -- NRRA TO FOCUS ON ISSUES AFFECTING PURCHASING GROUPS IN 2012 ANNUAL CONFERENCE
NRRA issued a release to the national trade media today announcing that the association will focus on issues affecting Purchasing Groups (PG) in its annual conference, October 9-11, 2012 in Washington, D.C. Click here to view the press release.
July 19, 2012
STRONG FIRST QUARTER FOR RRGs
In a comprehensive review of first quarter results by Douglas Powell, Senior Financial Analyst at Demotech, the RRG industry recorded improvements across the board. “Risk Retention Groups continue to exhibit financial stability,” Powell reported. Most important, Powell’s analysis showed a constantly improving trend. “In comparing the last five first-quarter results, short-term assets, total admitted assets and policyholders surplus have continued to increase at a quicker rate than total liabilities. Since first-quarter 2008, short-term assets have increased 36.8 percent, and total admitted assets have increased 29.5 percent. More importantly, policyholders surplus has increased 64.3 percent during this time, while total liabilities have only increased 13.5 percent," Powell wrote. The combined loss and expense ratio for the first-quarter was 88.1 percent, an improvement over 90.6 percent in last year’s first quarter, Despite a $10 million net underwriting loss, “RRGs collectively report $49.8 million net income for first-quarter 2012,” Powell stated.
WILL IT TAKE A SUPREME COURT DECISION TO END THE WAR OVER RRG OPERTING AUTHORITY? SEE WHAT NRRA GENERAL COUNSEL ROBERT “SKIP”MYERS HAS TO SAY
In an interview with the Risk Retention Reporter, Myers recounted the history of federal court litigation of challenges to RRGs by non-domiciliary states. On the positive side, he said, “The clear language of the Liability Risk Retention Act and decisions favorable to the industry in some Circuits make it likely that the Supreme Court would uphold preemption of most non-domicile state regulation.” However, Myers pointed out that, “the obstacles to getting a case before the Supreme Court are formidable. It’s a costly process, and you can’t be sure the Court will accept the appeal.” Myers’ bottom line, “It’s a long shot. The bar to acceptance by the Supreme Court is high. Nonetheless, if the right case came along, it could go all the way, and I’m confident the LRRA would be upheld.” The interview appears in the July issue of Risk Retention Reporter.
RRG INDUSTRY STABLE IN 2011 -- HEALTHCARE SECTOR DRIVES RESULTS
Excluding results for small RRGs -- less than $4.9 million -- premiums for the largest 100 RRGs climbed nearly 3 percent in 2011, reflecting the stability of the sector. Total industry premium was $2,527,700, a decline of 0.3 percent from 2010. The report on 2011 appeared in the June issue of Risk Retention Reporter. While healthcare, with 59 percent of industry premium, registered a decline of 0.7 percent, other major sectors were down also. Transportation premium declined 18 percent. However, total premium for the industry was down only 0.3 percent.
June 14, 2012
NEWS FLASH -- NRRA ANNUAL CONFERENCE 2012
NRRA issued a release to the national trade media today announcing the theme and subject matter of the association's annual conference to be held October 9-12 in Washington, DC.
May 24, 2012
MARKET UPTURN PREDICTED FOR RRGs
After holding relatively steady through the economic downturn, the market for RRGs in 2012 is looking good. In its Quarterly Journal of Statistics, the Risk Retention Reporter states, “The outlook for the risk retention industry indicates that there should be a market upturn.” The Journal reported that at the recent Captive Insurance Companies Association (CICA) annual meeting attended by major RRG captive managers and state regulators, the overall mood was optimistic. “Coupling this positive industry sentiment with the more tangible evidence of several RRGs in the pipeline leads to the belief that formations will outpace retirements by year’s end,” the Journal predicted. At least four RRGs were being formed in the first quarter and reports from large captive managers indicate more are in the licensing process. “If anything, 2012 is shaping up to be a very dynamic year for the risk retention marketplace,” the Journal concluded.
PREMIUM VOLUME IMPROVED SLIGHTLY IN 2012 -- LARGE RRGs THE BIG WINNERS
RRG premiums dropped 0.3 percent in 2012 to just over $2.5 billion-- a significant improvement compared to a decline of 3.5 percent in 2010. Growth was concentrated in the large RRGs. According to the Risk Retention Reporter, “size clearly is making a difference in the performance of RRGs.” Of the top 50 RRGs by premium, 35 reported increases while only 15 reported declines. Of the top 100, 68 reported gains in premium while only 32 reported decreases. However, among the other 150 RRGs, the drop in premiums was 24 percent with 84 decliners and only 43 gainers. Some smaller RRGs did not report premiums to the National Association of Insurance Commissioners, which may have somewhat distorted the results.
May 24, 2012
MARKET UPTURN PREDICTED FOR RRGs
After holding relatively steady through the economic downturn, the market for RRGs in 2012 is looking good. In its Quarterly Journal of Statistics, the Risk Retention Reporter states, “The outlook for the risk retention industry indicates that there should be a market upturn.” The Journal reported that at the recent Captive Insurance Companies Association (CICA) annual meeting attended by major RRG captive managers and state regulators, the overall mood was optimistic. “Coupling this positive industry sentiment with the more tangible evidence of several RRGs in the pipeline leads to the belief that formations will outpace retirements by year’s end,” the Journal predicted. At least four RRGs were being formed in the first quarter and reports from large captive managers indicate more are in the licensing process. “If anything, 2012 is shaping up to be a very dynamic year for the risk retention marketplace,” the Journal concluded.
PREMIUM VOLUME IMPROVED SLIGHTLY IN 2012 -- LARGE RRGs THE BIG WINNERS
RRG premiums dropped 0.3 percent in 2012 to just over $2.5 billion-- a significant improvement compared to a decline of 3.5 percent in 2010. Growth was concentrated in the large RRGs. According to the Risk Retention Reporter, “size clearly is making a difference in the performance of RRGs.” Of the top 50 RRGs by premium, 35 reported increases while only 15 reported declines. Of the top 100, 68 reported gains in premium while only 32 reported decreases. However, among the other 150 RRGs, the drop in premiums was 24 percent with 84 decliners and only 43 gainers. Some smaller RRGs did not report premiums to the National Association of Insurance Commissioners, which may have somewhat distorted the results.
May 8, 2012
MEMBER RESOURCES SECTION NOW AVAILABLE
A comprehensive database compiled exclusively for NRRA members is now available. Members now have the opportunity to view documents that detail the last 5 years of NRRA’s legislative, regulatory and judicial advocacy on your behalf. The database is just one of the benefits offered to members and will be updated regularly as more materials become available. Thank you to all of NRRA’s members for your continuing support.
April 30, 2012
DEMOTECH GIVES RRGs HIGH MARKS
In a just-published study of 2011 results, Demotech Senior Financial Analyst Douglas Powell reported that Risk Retention Groups as an industry are financially stable with growing assets and policyholders’ surplus along with strong liquidity and a continuing favorable leverage ratio. Demotech has been issuing Financial Stability Ratings® to property/casualty insurers since 1989.
Powell reported that all metrics confirmed that RRGs as a group remained strong through the economic downturn and continue to grow in 2011:
- RRGs as a collective group reported positive net income since 1996 and profitable underwriting results since 2004 despite difficult continuing economic conditions.
- Assets and policyholders’ surplus increased for the 12th consecutive year with surplus up more than 367 percent, going from approximately $686 million in 2000 to more than $3.2 billion in 2011.
- Liquidity, as measured by liabilities to cash and invested assets, was about 69 percent in 2011 compared to more than 72 percent in 2010. A value less than 100 percent is favorable because there was more than $1 of net liquid assets for each $1 of total liabilities.
- Leverage, measured by total liabilities to policyholders surplus for 2011 was about 136 percent -- an improvement over 146 percent in 2010.
- Policyholders’ surplus accounted for 43 percent of the industry’s $7.7 billion total net assets .
- The loss adjustment and expense ratio was 39 percent of total admitted assets.
- Direct written premiums decreased 1.9 percent in 2011 but so did expenses.
NRRA COUNSEL COMMENTARY
The Demotech study also included a guest commentary by NRRA General Counsel Robert Myers, Jr. Myers challenged the recent federal Government Accountability Office report on RRGs for wrongly interpreting the Liability Risk Retention Act. “The GAO’s flawed analysis is most prominent in its examination of non-domiciliary registration requirements, fees and non-discriminatory financial responsibility requirements,” Myers wrote.
“The GAO report misstates that the ‘Liability Risk Retention Act does not provide for a specific process for RRGs to register to conduct business in non-domiciliary states.’ In fact, the LRRA plainly states that the registration requirements in a non-domiciliary state are limited to submitting the documents specified under 15 U.S.C. § 3902 (d) (2). Unless expressly excepted under 15 U.S.C. 3902 (a) (1), all other state laws are broadly preempted,” he pointed out. According to the GAO report, “The silence of LRRA on fees has prompted state insurance regulators and RRG representatives to interpret the law differently.” However, Myers noted that LRRA is not ‘silent’ on fees. “Rather, the plain language of the LRRA broadly and expressly exempts non-domiciliary RRGs from any law other than those exempted under §3902 (a) (1)…”
Myers also pointed out that some non-domiciliary state regulators have relied upon and expanded the intended scope of § 3905 (d), which permits states to require “acceptable means of demonstrating financial responsibility.” However, any regulation pursuant to § 3905 (d) is also subject to the non-discrimination provisions of § 3902 (a) (4), Myers noted, adding “Consequently, any requirement imposed as a demonstration of financial responsibility must be non-discriminatory against RRGs.” He noted that the courts have been divided on this issue. However, according to Myers, the Ninth Circuit Court acknowledged the fundamental flaws in opinions by the Seventh and Eleventh Circuit Courts. “Based on the plain language of the Liability Risk Retention Act and underlying policy concerns, the Ninth Circuit correctly interpreted §§ 3905 (d) and 3904 (a) (4) to prohibit any categorical exclusion of all RRGs regardless of intent,” Myers wrote.
April 16, 2012
NEWS ALERT -- NRRA CHALLENGES GAO REPORT
NRRA issued a release to the national trade media today challenging the Government Accountability Office for findings in its recent report to Congress. Click here to view the press release.
NRRA Executive Director, Joe Deems Offers His Views on the January 2012 GAO Report in the February Issue of the Risk Retention Reporter
In the first part of a two-part series covering reaction to the January 2012 GAO report, NRRA Executive Director, Joe Deems answered a number of questions from the Risk Retention Reporter, "to inform the debate on whether the GAO report went far enough and how it will affect efforts to enact legislation that would resolve continuing disputes over the preemptive issue."
Click here to view Part 1.
In Part 2, Mike Lynch, deputy commissioner - Captive Program, Nevada Division of Insurance; Sean O'Donnell, director of financial examinations - D.C. Department of Insurance, Securities and Banking; and David Provost, deputy commissioner - Captive Insurance, Vermont Department of Banking, Insurance, Securities and Health Care Administration offer their views.
Click here to view Part 2.
NRRA Newsletter Archive