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Big ‘I’ Submits Testimony on Damaging Risk Retention Group Expansion

The “Nonprofit Property Protection Act” would broadly preempt state insurance regulatory protections, undermining the state-based system.
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On Wednesday, the Big “I” submitted testimony before the U.S. House of Representatives Committee on Financial Services Subcommittee on Housing, Community Development and Insurance at a hearing titled “Examining the Availability of Insurance for Nonprofits.”

The focus of the hearing was H.R. 4523, the “Nonprofit Property Protection Act.” This troubling legislation led by Rep. Al Green (D-TX) and sponsored by other members would needlessly expand the Liability Risk Retention Act of 1986 (LRRA) and broadly preempt state insurance regulatory protections. Specifically, the legislation attempts to undermine the state-based system by allowing Risk Retention Groups (RRGs) to offer commercial property and commercial auto insurance.

Testifying at the hearing in person, among others, was Chlora Lindley-Myers, the Missouri State Insurance Commissioner representing the National Association of Insurance Commissioners. Director Lindley-Myers provided examples of the serious consumer protection issues the legislation would create, as well as the lack of regulatory oversight facing RRGs. 

Currently, RRGs are only permitted to provide commercial liability coverage to their customers and, despite the absence of evidence, supporters of the legislation claim that there is a property insurance crisis similar to the significant liability insurance crisis that plagued the U.S. economy during the early- to mid-1980s.

The Big “I” understands nonprofits must have access to insurance coverage options, but there is currently no evidence of marketplace failure. Needlessly expanding RRGs would only serve to put consumers at risk and undermine the state-based system of insurance.

The Big “I” will continue to work with Congress to defend a modernized state regulatory system and to shed light on questionable proposals such as H.R. 4523.

Joseph Cortina is Big “I” director, federal government affairs.