In a December 2011 letter to the Federal Insurance Office (FIO),1 the National Risk Retention Association (NRRA) advised FIO that revisions are needed to stop the states from encroaching on risk retentions groups’ (RRGs’) rights to operate nationally when licensed in a single state.2 In particular, the NRRA cited examples of “common and clearly egregious non-domiciliary state violation of the LRRA [Liability Risk Retention Act of 1986],” and also expressed concerns over what it calls “discriminatory practices violating the LRRA… relating to whether or not foreign RRGs are ‘authorized insurers.’” The letter comes in response to FIO’s request for public input on how to modernize and improve the system of insurance regulation in U.S. This information will be used by FIO to prepare a report mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act that is due to Congress in January 2011.3
The LRRA authorized businesses and charities to form and own insurers, known as RRGs, to write liability insurance for their owners on a multi-state basis without overlapping state regulation. The NRRA indicated in its letter that it believes this right has been eroded by certain states’ approach to RRG regulation, forcing RRGs to seek enforcement in federal court. The NRRA hopes to garner support for what it views as a more effective and efficient remedy: a federal dispute resolution mechanism included in legislation introduced in the House under H.R. 2126 “Risk Retention Modernization Act of 2011.”4
In December 2011, the federal Government Accountability Office (GAO) also weighed in on multistate regulation of RRGs, concluding that Congress should consider clarifying some provisions of the LRRA. See our previous blog on this topic here.
See our previous blog on this topic here.
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2 The NRRA is a nonprofit trade association composed mostly of owner insureds, representing the risk retention group and purchasing group industry.
3 To see our previous blog on the mandated report, click here.