Legislation has been introduced to permit risk retention groups to write commercial property coverage, expanding their role from the selling of liability insurance only.

Dennis Moore

The Risk Retention Modernization Act (HR 4802), sponsored by Reps. Dennis Moore (D-Kan.) and John Campbell (R-Calif.), is aimed at decreasing insurance costs and increasing coverage availability, particularly in higher-risk areas prone to hurricanes or other natural disasters. A similar bill before Congress last year failed.

The legislation would update the 1981 and 1986 versions of the Liability Risk Retention Act (LRRA) that enabled groups comprised of businesses or professionals to organize self-insured risk retention groups (RRG) across state lines. Once licensed by their state of domicile, RRGs may offer liability insurance, except workers’ compensation coverage, in any other states.

The introduction of the bill met with immediate support from the Self-Insurance Institute of America.

“SIIA has for many years supported both the availability of commercial property coverage to members of risk retention groups and the assurance of a consistent regulatory environment,” said Kevin Doherty, chair of SIIA’s committee on alternative risk transfer, in a statement.

The Independent Insurance Agents and Brokers of America (Big I) has not taken a formal position on the bill, according to Charles Symington, senior vice president of government affairs.

But he said the Big I is concerned with a proposed federal dispute resolution process, a new component in this year’s bill, allowing the U.S. Treasury Department to pre-empt states’ oversight of RRGs if the federal agency deemed a state’s regulations to be inconsistent with those of the state where the RRG is domiciled.

“We believe this new ‘dispute mechanism’ language could needlessly intrude on state regulation of insurance and we look forward to working with the sponsors of the legislation and other interested parties on rolling back or modifying this newly-added provision,” Symington said in a statement.

The SIIA said the modernization will provide relief to a commercial property market that has been afflicted by significant catastrophic events in recent years.

The legislation also includes provisions to enhance governance standards and regulation for RRGs.

RRGs have helped increase the availability and affordability of commercial liability insurance for certain groups with limited access to insurance such as medical malpractice coverage, according to a 2005 survey, conducted by the Government Accountability Office.