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RISK RETENTION GROUPS may have won another battle over state regulation of the groups, but the war will not be won until they prevail against continuing state efforts to impose various fees on the groups.
As we report on page 2, the Maryland Insurance Administration reversed an earlier decision to impose a $1,000 anti-fraud fee on all risk retention groups that want to do business in Maryland-including groups licensed in other states.
Maryland Insurance Commissioner Steve Larsen's reason for reversing the earlier decision, made prior to his joining the department, is less than satisfying. He said the fee should not be imposed because the Maryland statute establishing the fees-used to help fund the state's anti-insurance fraud efforts-did not specifically say the fee could be imposed on risk retention groups.
We think, though, that there is a much more compelling reason that risk retention groups should not be subjected to fees in Maryland and other non-domiciliary states: Such levies are pre-empted by the federal Risk Retention Act.
We think the language of the act also unambiguously pre-empts other types of charges that are popping up in other states on risk retention groups.
Nevada, for example, imposes a $2,450 registration and renewal fee on groups that want to provide policies to members in the state, while Alaska has $1,000 initial and renewal fees.
The federal Risk Retention Act clearly pre-empts these types of ancillary costs. States can-as is only fair-require risk retention groups to pay premium taxes on a non-discriminatory basis.
The federal act did not authorize additional charges on the groups, however, so that risk retention groups could operate in the most cost efficient way.
We hope buyers and state regulators can meet to resolve the issue of fees and charges amicably. If not, more litigation and perhaps federal intervention seems inevitable.
The two sides should sit down for peace talks before their skirmishes escalate into a war.