Expansion of the Risk Retention Act

Issue
Should the Liability Risk Retention Act (LRRA) be amended to expand the scope of permissible insurance coverage offered by risk retention groups(RRGs) and risk purchasing groups to provide additional lines of commercial insurance.

Background
In 1981, Congress passed the Product Liability Risk Retention Act (LRRA) to allow risk retention groups (RRGs) to cover product liability exposures. After several committee hearings in the 99^th Congress, the 1981 Act was expanded to allow RRGs to cover all casualty risks except workers’ compensation. Under the Act, RRGs that meet certain licensing requirements of one state may operate nationwide. Except for the RRG’s chartering state, the risk retention group is exempt from any state law, or rule, that regulates or makes an RRG unlawful (with certain exceptions).

Proposals circulating in Washington, DC would amend the LRRA to expand the scope of permissible insurance coverage offered by a RRG. Under the changes, RRGs would be able to provide coverage for any line of commercial insurance, including property and surety. Excluded would be an employers’ statutory liability with respect to its employees under state workers’ compensation laws and personal risk coverages. Proponents of expansion point out that to do so would promote choice, competition, and lower rates by reducing administrative costs for businesses. In addition, many point out that expansion of the LRRA will add much needed insurance capacity to coastal areas ravaged by recent hurricanes.

SIIA Position
SIIA supports expansion of the LRRA to allow risk retention groups (RRGs) to provide coverage for any line of commercial coverages, including property and excess workers’ compensation insurance.

Status/Outlook
Hearings on LRRA may be held in 2007 before the House Financial Services Committee.