Proposed Amendments to Risk Retention Act Debated
This past June the Commerce, Consumer Protection and Competitiveness Subcommittee of the House Energy and Commerce Committee conducted a hearing on House bill 4351, which would amend the Liability Risk Retention Act of 1986.
During the hearing Susan Howard, associate undersecretary for economic affairs for the Department of Commerce, recommended amendments to the act that would ensure membership control of risk retention and purchasing groups; preserve single state regulation; tighten state regulation of purchasing groups; and improve disclosure requirements regarding purchasing groups and their insurers.
Ms. Howard, who was accompanied by department representatives Jane Malloy and Ted Barrett, said that although the department does not specifically endorse the bill, it supports many of its provisions.
The department panel opposed the suggestion from Rep. Jim Slattery, D-KS, who proposed the bill, that the department should investigate the solvency of particular risk retention groups when state regulators are suspected of failing to do so. In addition, the panel recommended that the NAIC increase its monitoring of risk retention and purchasing groups. It also suggested that the association develop standardized forms for risk retention group and purchasing group filings in non-chartering states.
Several members of the subcommittee expressed concern about the regulation of risk retention and purchasing groups to ensure solvency and subsequent payments. This may have occurred as a result of the investigation conducted by another subcommittee of the House Energy and Commerce Committee into insolvencies of U.S. insurance companies. The panel, however, agreed that some states needed to improve their regulatory requirements but indicated that it could be done under a single state regulatory system. It recommended that the chartering state conduct the regulation.
A representative of the Independent Insurance Agents of America opposed the bill and criticized provisions that permitted officers and directors of risk retention groups to act as unlicensed agents. Rep. Slattery commented that it seemed unnecessary for risk retention groups directly marketing their programs to have agents interposed between …