Big ‘I’ Opposes Risk Retention Act Expansion

The Big “I” has publicly announced its strong opposition to a bill that aims to expand the Liability Risk Retention Act (LRRA) and could potentially hurt many insurance consumers. Reps. Dennis Ross (R-Florida) and Ed Perlmutter (D-Colorado) introduced the legislation in question, H.R. 3974, the “Nonprofit Property Protection Act,” last week.

H.R. 3974 would allow many Risk Retention Groups (RRGs) to expand their insurance offerings to include all lines of commercial coverage for 501c(3) non-profits, including educational institutions. In the current marketplace, RRGs are only permitted to offer commercial liability insurance. Supporters of this effort seek to allow RRGs to expand their scope and offer all types of commercial insurance to their clients.

In an association press release, Charles Symington, Big “I” senior vice president of external and government affairs, said, “While we have great respect for both Reps. Ross and Perlmutter, this is a classic case of a solution in search of a problem and we disagree with them on this issue. The Big ‘I’ opposes this unnecessary legislation that has the potential to harm consumers, not help them. Allowing RRGs to write nearly any form of commercial insurance coverage while retaining this weaker and preferential system of regulatory oversight will place traditional commercial insurers, and their agents, at a further disadvantage, distort the competitive balance within the insurance industry to a greater extent and place consumers at increased risk.”

On Capitol Hill, the Big “I” will continue to highlight the negative impact such a broad expansion could have on consumers and the marketplace.

Congress enacted the LRRA to address a significant liability insurance crisis that plagued the U.S. economy in the early to mid-1980s. Some claim that Congress “bent or broke the rules” to enact LRRA because the country was facing such a severe commercial liability crisis and many businesses were simply unable to secure liability coverage. The law authorizes businesses and individuals engaging in similar commercial activities and sharing similar liability exposures to band together as RRGs and write liability coverage for their members. It broadly preempts state insurance laws and exempts RRGs from nearly all forms of regulatory oversight in any state outside of its domiciliary jurisdiction, including licensing requirements and most other forms of oversight in the other jurisdictions in which they operate, such as rate and form review, solvency regulation and more.

A notable concern for the Big “I” is that the LRRA also prevents any state from requiring RRGs to participate in the guaranty fund system that is meant to protect consumers in the event of insurer insolvencies. Many state insurance regulators have consistently criticized this lack of oversight, particularly as numerous RRGs have gone insolvent. In fact, the National Association of Insurance Commissioners recently took a formal position opposing H.R. 3974.

Today, no marketplace need or commercial insurance crisis exists to justify this broad expansion, which will needlessly leave consumers exposed without the protection of the safety net the state guaranty fund system provides.

Jen McPhillips is Big “I” senior director of federal government affairs.