Insurance:

Activity Under the Product Liability Risk Retention Act of 1981

HRD-86-120BR: Published: Jul 22, 1986. Publicly Released: Jul 22, 1986.

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In response to a congressional request, GAO provided information on the extent to which risk retention and purchasing groups have formed under the authority of the Product Liability Risk Retention Act of 1981, specifically: (1) the number of firms with collective self-insurance under the act; (2) the types of firms most frequently organized under the act's provisions; (3) obstacles faced by groups formed under the act's provisions; and (4) changes in state insurance laws relating to the act.

GAO found that: (1) seven firms took advantage of the collective self-insurance provision of the act; (2) three of the firms were risk retention groups and four were purchasing groups; and (3) two states adopted model legislation that incorporates most of the federal act's provisions but also defines product liability with reference to each state's tort law. GAO also found that businesses had little incentive to form risk retention and purchasing groups because: (1) product liability insurance was readily available and more affordable until recently; (2) considerable effort and financial resources are needed to set up and administer the groups; and (3) some state insurance departments took legal action against risk retention and purchasing groups.

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