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Bill would allow nonprofits to cover property in risk retention groups


Nearly three decades after federal lawmakers passed legislation expanding coverages risk retention groups can provide to member-owners, a new effort is being launched to further expand RRGs.

Legislation introduced Wednesday by Reps. Dennis Ross, R-Fla., and Ed Perlmutter, D-Colo., would allow certain risk retention groups to cover policyholders’ property risks.

Specifically, the measure, H.R. 3794, would allow RRGs to write property coverages for policyholders that are nonprofit organizations with tax-exempt status or educational institutions and educational-related institutions that are nonprofit organizations or governmental entities.

The expansion of coverage, though, only would be available to RRGs that have been operating for at least 10 years, while the RRG would have to maintain capital and surplus of at least $10 million.

The legislation also only would allow adding property coverage as long as the total insured value of risks of any individual policyholder insured by the RRG does not exceed $50 million.

Backers of the legislation say the expansion is needed because small to medium sized nonprofit organizations often cannot obtain property coverage on a standalone basis.

“We are trying to solve a real need in the marketplace,” said Pamela Davis, president and CEO of the Vermont-domiciled Alliance of Nonprofits for Insurance Risk Retention Group in Santa Cruz, California.

Virtually all of the RRG’s 6,200 member-owners would benefit if Congress passed the expansion legislation, Ms. Davis said.

Some organizations, though, oppose the measure. “Allowing RRGs to write nearly any form of commercial insurance coverage while retaining a weaker and preferential system of regulatory oversight will create an uneven playing field, distort the competitive balance within the insurance market, and, most importantly, place consumers at increased risk,” Charles Symington, senior vice president of external and federal government affairs at the Independent Insurance Agents & Brokers of America Inc. in Alexandria, Virginia said in a statement.

Other insurance-related organizations, though, support the bill. The expansion will help an “underserved market,” said Joel Wood, senior vice president of the Council of Insurance Agents and Brokers in Washington.

The National Risk Retention Association does not yet have a position on the measure, said Jon Harkavy, NRRA’s secretary.

But speaking personally, Mr. Harkavy, who also is vice president and general counsel of RRG manager Risk Services L.L.C. in Washington, said if Congress does expand the law, that expansion should not be limited to nonprofit organizations.

“We don’t want a two-tier system,” he said.

Congress passed the original risk retention group legislation in 1981. The law allowed RRGs, which are special group captives to provide coverage to member-owners after meeting the licensing requirements of one state. The 1981 law, though, limited RRG coverage to product liability and completed operations risks.

Then, in 1986, Congress expanded the law to allow RRGs to write all casualty coverages, except workers compensation.

Currently, there are about 235 RRGs.

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