To the editor: Robert C. Quigley is off the mark in his Nov. 3 letter to the editor contending that regulation costs justify risk retention group fees. First, Mr. Quigley asserts that RRGs should be thought of as "a loose confederation of insureds with joint and several relationships which are only as strong as their weakest links." The fact is that few, if any, RRGs have joint and several liability among their members; and, the capital and surplus requirements needed to form a RRG are set by the RRG's domiciliary state regulator, who bases his or her judgment on, among other things, an independent actuarial report. Second, whether or not a non-domiciliary state can justify fees it attempts to impose on a RRG is irrelevant. The federal Liability Risk Retention Act clearly pre-empts the authority of non-domiciliary states to impose such fees.

Jon Harkavy

Vp and General Counsel

USA Risk Services Inc.

Arlington, Va.

To the editor: This letter is sent to you in reply to Robert C. Quigley's letter to the editor that appeared in your Nov. 3 issue. Mr. Quigley took issue with your Oct. 6 opinion concerning non-domiciliary regulation of risk retention groups. He thinks the fees charged risk retention groups by regulators in states in which the risk retention group is not domiciled are justified. He states: "In fact, risk retention groups continue to demand a disproportionate amount of time of state regulators' attention on matters of financial solvency." This is simply not true! The federal Risk Retention Act pre-empts state regulation, except for certain prescribed issues. The federal law imposes regulation on the state of domicile. If the non-domiciliary regulator is concerned about solvency, the federal law provides for injunctive relief if that regulator thinks the risk retention group is operating in a hazardous financial condition.

The truth is that these excessive fees are being charged to harass risk retention groups. Too many regulators still are resentful that the Risk Retention Act was passed in the first place. I think Mr. Quigley has another agenda in mind. Perhaps he has lost business to a risk retention group.

Donn P. McVeigh

Managing Director

CRC International

Oakland, Calif.