Risk Retention Groups: Clarifications Could Facilitate States' Implementation of the Liability Risk Retention Act

PDF Version Also Available for Download.

Description

A letter report issued by the Government Accountability Office with an abstract that begins "Certain indicators suggest that the financial condition of the RRG industry in aggregate generally has remained profitable. In 2003, RRGs wrote about $1.8 billion, or 1.17 percent of commercial liability insurance. In 2010, RRGs continued to comprise a small percentage of the total market, writing about $2.5 billion--or about 3 percent of commercial liability coverage. Other financial indicators, such as ratios of RRG premiums earned compared to claims paid--also suggest profitability. In addition, the number of RRGs has increased since 2004, with the most growth occurring ... continued below

Creation Information

United States. Government Accountability Office. December 8, 2011.

Context

This report is part of the collection entitled: Government Accountability Office Reports and was provided by UNT Libraries Government Documents Department to Digital Library, a digital repository hosted by the UNT Libraries. More information about this report can be viewed below.

Who

People and organizations associated with either the creation of this report or its content.

Provided By

UNT Libraries Government Documents Department

Serving as both a federal and a state depository library, the UNT Libraries Government Documents Department maintains millions of items in a variety of formats. The department is a member of the FDLP Content Partnerships Program and an Affiliated Archive of the National Archives.

Contact Us

What

Descriptive information to help identify this report. Follow the links below to find similar items on the Digital Library.

Description

A letter report issued by the Government Accountability Office with an abstract that begins "Certain indicators suggest that the financial condition of the RRG industry in aggregate generally has remained profitable. In 2003, RRGs wrote about $1.8 billion, or 1.17 percent of commercial liability insurance. In 2010, RRGs continued to comprise a small percentage of the total market, writing about $2.5 billion--or about 3 percent of commercial liability coverage. Other financial indicators, such as ratios of RRG premiums earned compared to claims paid--also suggest profitability. In addition, the number of RRGs has increased since 2004, with the most growth occurring in health care-related lines. In 2010, more than 80 percent of RRGs were domiciled in Vermont, South Carolina, the District of Columbia, Nevada, Hawaii, and Arizona, but RRGs wrote about 95 percent of their premiums outside their state of domicile. Evidence suggests that RRGs may choose to domicile in a particular state, partly due to some financial and regulatory advantages such as lower minimum capitalization requirements. RRG representatives opined that RRGs have expanded the availability of commercial liability insurance--particularly in niche markets--but differed in their opinions of whether RRGs have improved its affordability. Different interpretations of LRRA have led to varying state regulatory practices and requirements in nondomiciliary states and disputes between state regulators and RRGs in areas such as registration requirements, fees, and types of coverage RRGs may write. For example, while some states have interpreted LRRA to permit RRGs to write contractual liability coverage, others have not, and therefore may not allow RRGs to write this coverage in their state. RRGs have challenged requirements established by nondomiciliary states that RRGs assert are not permitted by LRRA. However courts also have differed in their interpretations of LRRA. Some regulators with whom GAO spoke indicated that their actions toward nondomiciled RRGs reflect an effort to use their limited regulatory authority to protect insureds in their states as well as address concerns about RRG solvency. Some state regulatory practices for RRGs have changed since 2004, and federal legislation has been proposed. In 2005, GAO recommended implementation of more uniform, baseline state regulatory standards, including corporate governance standards to better protect RRG insureds. The National Association of Insurance Commissioners (NAIC) has since revised its accreditation standards to more closely align with those for traditional insurers which are subject to oversight in each state in which they operate. For example, all financial examinations of RRGs that have commenced during or after 2011 should use the risk-focused examination process. NAIC also has begun developing corporate governance standards that it plans to implement in the next few years. Proposed legislation would amend LRRA to allow RRGs to provide commercial property insurance and also include a federal arbitrator to resolve disputes between RRGs and state insurance regulators. While some RRG representatives and state regulators supported this legislation, others expressed concerns about whether RRGs would be adequately capitalized to write commercial property insurance and about federal involvement in state regulation."

Language

Item Type

Identifier

Unique identifying numbers for this report in the Digital Library or other systems.

Collections

This report is part of the following collection of related materials.

Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

What responsibilities do I have when using this report?

When

Dates and time periods associated with this report.

Creation Date

  • December 8, 2011

Added to The UNT Digital Library

  • June 12, 2014, 7:50 p.m.

Usage Statistics

When was this report last used?

Yesterday: 0
Past 30 days: 0
Total Uses: 5

Where

Geographical information about where this report originated or about its content.

Place Name

Publication Place

Map Information

  • map marker Automatically generated Place Name coordinates.
  • map marker Automatically generated Publication Place coordinates.
  • Repositioning map may be required for optimal printing.

Mapped Locations

Interact With This Report

Here are some suggestions for what to do next.

Start Reading

PDF Version Also Available for Download.

Citations, Rights, Re-Use

United States. Government Accountability Office. Risk Retention Groups: Clarifications Could Facilitate States' Implementation of the Liability Risk Retention Act, report, December 8, 2011; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc297845/: accessed July 24, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.