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BALTIMORE-Reversing an earlier decision, the Maryland Insurance Administration will not assess a $1,000 anti-fraud fee against risk retention groups operating in the state and will refund any fees RRGs have paid.

The Maryland Insurance Administration earlier this year agreed to re-evaluate its decision to impose the fee on RRGs amid protests from the National Risk Retention Assn. NRRA, the trade group that represents RRGs and service providers, said the federal Risk Retention Act pre-empts non-domiciliary states from imposing fees on RRGs (BI, Aug. 11).

Maryland Insurance Administrator Steve Larsen reversed the decision-made prior to his joining the department this summer-because the Maryland statute establishing the anti-fraud fee did not cite risk retention groups as being subject to the fee. Mr. Larsen said letters would go to RRGs notifying them of the change. RRGs that already have paid the fee will receive refunds.

NRRA applauded the Maryland Insurance Administration's action and its responsiveness.

"This is the way the system is supposed to work. We made our case, stated our facts, and the department responded appropriately," said Jon Harkavy, chairman of NRRA's government affairs committee and vp and general counsel for USA Risk Services in Arlington, Va.

Earlier, NRRA had protested the Maryland Insurance Administration's interpretation of a recent law that imposes a $1,000 fraud prevention fee on "each insurer, health maintenance organization, non-profit health service plan, fraternal benefit society or any entity operating in the state under the regulatory jurisdiction of the commissioner."

NRRA said the imposition of the fee on RRGs was barred by the federal Risk Retention Act, which pre-empts states from imposing fees-other than premium and other applicable taxes-on RRGs.

"This ($1,000) assessment, which both the Maryland Insurance Administration and the statute describe as a 'fee,' is clearly not 'applicable premium and other taxes,'.*.*.and thus cannot be levied by Maryland against its non-domiciliary RRGs," Mr. Harkavy earlier wrote to the Maryland Insurance Administration.

NRRA's victory in Maryland is the group's second this year. In May, the 5th U.S. Circuit Court of Appeals affirmed a lower court ruling striking down a 1995 Louisiana law and application procedures that imposed a wide variety of fees as well as capital and surplus requirements on RRGs licensed in other states that wanted to issue policies to members in Louisiana (BI, May 12).

While NRRA prevailed in Louisiana and Maryland, new battles may lie ahead for the trade group, which has become more aggressive in challenging laws and regulations it believes the Risk Retention Act pre-empts.

Mr. Harkavy said the group is concerned about other state efforts to impose registration and renewal fees on RRGs. But, NRRA has not taken official action yet.

For example, Nevada imposes both a one-time $2,450 application fee on RRGs that want to operate in the state as well as a $2,450 annual renewal fee, while Alaska sets a $1,000 initial fee and a $200 annual renewal fee.

Congress specifically excluded RRGs from such assessments-other than premium taxes-because legislators wanted the groups to operate in the most cost-efficient way, RRG advocates earlier said.

The Risk Retention Act allows RRGs, which are special multiple-owner captives, to operate throughout the United States after meeting the licensing requirements of one state. RRGs may write coverage only for members. RRGs may write all commercial liability lines except workers compensation.

Sixty-eight risk retention groups are licensed, about half of which are domiciled in Vermont, which has an attractive captive statute.