Survey of State Regulators on Risk Retention Group

U.S. Government Accountability Office

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Introduction

At the request of Congress, GAO is conducting a review of risk retention groups (RRGs) to determine how they have met the insurance needs of businesses, if the regulatory treatment of domiciled and non-domiciled RRGs differs across states, and if identified differences have resulted in any regulatory concerns. We believe that you can make an important contribution to this current study, and ask that you respond to this survey so we can provide the most complete information about RRGs to Congress.

The survey should take about 90 minutes to complete, although additional time may be required if your state has licensed several RRGs. The survey does not need to be completed in one sitting. Your responses can be saved and accessed at a later date. To learn more about completing the questionnaire, printing your responses, and whom to contact if you have questions, _____.

Thank you for your time and assistance.

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Section I: Your Role as a Domiciliary State Regulator and Requirements for RRGs Domiciled in Your State

Definitions of acronyms and terms used in this questionnaire

Risk Retention Group (RRG):
An RRG is any corporation or other limited liability association whose primary activity consists of assuming and spreading all, or any portion of the liability exposure to its group members and who has as its owners, only persons who comprise the membership of the RRG and who are provided insurance by such group. The Liability Risk Retention Act permits RRGs to provide commercial liability insurance for its members and largely exempts them from state insurance laws other than the laws of their domiciliary and licensing state.

State of Domicile:
The state that charters and licenses an RRG and is responsible for performing regulatory oversight, including examinations. ("State" includes the District of Columbia, and for RRGs licensed before 1985, Bermuda and the Cayman Islands.)

Host state:
Any state in which an RRG is registered and insures risks but is not licensed and chartered.

In Section I, we are asking about the role of your state as a "domiciliary" state for RRGs, the state primarily responsible for regulating an RRG. This information is important, even if your state has not actually licensed or licensed an RRG, because the laws and regulations for domiciling RRGs vary from state to state. In contrast, Section II contains questions pertaining to RRGs insuring risks in, but not domiciled in your state.

In addition, in some states RRGs can be licensed under more than one set of laws. When responding to the questions below, please respond for each law under which a RRG could be licensed and chartered, even if a RRG or you the regulator would prefer a RRG be licensed under one law (e.g., a captive law) rather than another (e.g., traditional insurance company law).

You will be asked to verify or update some information that your state provided in responses to the previous survey.

As indicated in several questions, we would like you to provide us information about insurance statutes and regulations that apply to RRGs licensed in your state. For the regulations only, we are requesting that you provide a hyperlink to the regulation, but you are also welcome to send us a copy of the regulation to RRGSurvey2011@gao.gov.

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1. In the previous survey, your state provided the following information regarding use of traditional insurance laws to license RRGs.

• Citation for statute under which RRGs are licensed: _____

• Citation for regulation (website link): _____

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1a. Is the information provided above current?

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Yes, the information is current. No, the information is not current. Please provide the most current information below: Number of respondents
28 21 49

• Citation for statute under which RRGs are licensed:

Response Summary: Data intentionally not reported.

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• Citation for regulation (website link):

Response Summary: Data intentionally not reported.

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2. In the previous survey, your state provided the following information regarding use of captive laws to license RRGs:

• Citation for Statute: _____

• Citation for regulations (website link): _____

• Year captive law enacted: _____

• Year regulations created: _____

• This law /regulation permits RRGs to be licensed as a captive: _____

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2a. Is the information provided above current?

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Yes, the information is current. No, the information is not current. Please provide the most current information below: Number of respondents
33 16 49

• Citation for Statute:

Response Summary: Data intentionally not reported.

(View question)

• Citation for regulations (website link):

Response Summary: Data intentionally not reported.

(View question)

• Year captive law enacted:

Response Summary: Data intentionally not reported.

(View question)

• Year regulations created:

Response Summary: Data intentionally not reported.

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3. In the previous survey, your state provided the following minimum capital and/or surplus requirements for an RRG domiciled in your state under traditional, captive, or other laws and regulations:

• RRGs domiciled under traditional insurance laws: _____

• RRGs domiciled under captive insurance laws: _____

• RRGs domiciled under other laws: _____

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3a. Have any of these minimum capital and surplus requirements changed since January 2004?

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No, the requirements have not changed. Yes, the requirements have changed. Please provide the most current information below: Number of respondents
37 12 49

• RRGs domiciled and licensed under traditional insurance laws:

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Mean Median Low High Number
of respondents
2,195,698 2,000,000 240,000 7,500,000 43

• RRGs domiciled and licensed under captive insurance laws:

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Mean Median Low High Number
of respondents
844,738 500,000 150,000 4,000,009 19

• RRGs domiciled and licensed under other laws:

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Mean Median Low High Number
of respondents
2,033,333 1,600,000 1,500,000 3,000,000 3

4. Are RRGs domiciled in your state under traditional insurance laws or regulations required to submit the same financial information as traditional insurance companies to the NAIC?

(View question)

Yes, in all circumstances. Yes, in some circumstances. No Not applicable, our state does not domicile RRGs under traditional insurance laws. Number of respondents
35 1 2 10 48

4a. If yes, what is the citation for the related statute in question 4 above? Please provide website link below.

Response Summary: Data intentionally not reported.

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5. Are RRGs domiciled in your state under captive insurance laws or regulations required to submit the same financial information as traditional insurance companies to the NAIC?

(View question)

Yes, in all circumstances.



Yes, in some
circumstances.



No




Not applicable,
our state does
not domicile
RRGs under captive
insurance laws.
Number of respondents
13 5 8 23 49

5a. If yes, what is the citation for the related statute in question 5 above? Please provide website link below.

Response Summary: Data intentionally not reported.

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6. Which accounting principle does your state require RRGs use when filing annual financial statements with your state? (check only one answer)

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Generally Accepted
Accounting Principles
(GAAP)
Statutory Accounting
Principles (SAP)
Modified GAAP


Modified SAP


Other (please
specify below)

Number of respondents
10 30 4 0 5 49

If other, please specify:

Response Summary: Data intentionally not reported.

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7. Which accounting principle does your state allow RRGs use when filing annual financial statements with your state? (check all that apply)

Response Summary: Data is not provided due to possible misinterpretation by respondents

1. Generally Accepted Accounting Principles (GAAP)

2. Statutory Accounting Principles (SAP)

3. Modified GAAP

4. Modified SAP

5. Other (please specify below)

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8. If you have any comments related to Section I, please write them here:

Response Summary: Thirteen respondents provided comments; data intentionally not reported.

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Section II, Part A: Your Role as a Host State Regulator For RRGs Operating and Insuring

In Section II, we are asking about the role of your state as a "host state" regulator. The 1986 Liability Risk Retention Act limits the state laws that may be enforced by the "host state" regulators to RRGs insuring risks in but not domiciled or licensed in their states. This section pertains only to requirements for RRGs operating and insuring risks, but not domiciled in your state.

A. Submission of Operational Plans or Feasibility Studies and Financial Statements to Host State Regulators

The Liability Risk Retention Act requires that each RRG submit to the insurance commissioner of each state in which it intends to do business, a copy of a plan of operation or a feasibility study which includes the coverages, deductibles, coverage limits, rates and rating classification systems for each line of insurance the group intends to offer, and a copy of any revisions to such plan or study.

The Act also requires that each RRG submit to the insurance commissioner of each state in which it is doing business, a copy of the group's annual financial statement submitted to the State in which the group is licensed as an insurance company, which statement shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American Academy of Actuaries, or a qualified loss reserve specialist.

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9. As of year-end 2010, how many RRGs were registered with your state to conduct business?

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Number of registered RRGs Number of respondents %
Less than 25 1 2.0
26 to 50 3 6.1
51 to 75 15 30.6
76 to 100 22 44.9
101 to 125 6 12.2
More than 125 2 4.1
  49 100.0

10. To the best of your knowledge, has any RRG that insured risks in your state since January 2004 failed to provide copies of its plans of operation or feasibility studies before it started to do business in your state?

(View question)

No Yes Not applicable, no RRGs have applied to register in our state since January 2004. Number of respondents
45 4 0 49

10a. If you answered yes to question 10, please explain:

Response Summary: Data intentionally not reported.

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11. To the best of your knowledge, has any RRG that insured risks in your state since January 2004 ever failed to provide a copy of its annual financial statement to your state insurance department?

(View question)

No Yes Number of respondents
39 10 49

11a. If you answered "yes" to question 11, please explain:

Response Summary: Respondents answering "yes" described several circumstances in which an RRG failed to provide a copy of its annual financial statement. Circumstances included the RRG not providing a statement when registering with the state; the RRG filing electronically with NAIC and not filing with the state; the RRG's operations having ceased or being in the process of ending; or the state having placed the RRG in liquidation, receivership, or rehabilitation.

(View question)

12. If you have any comments related to Section II Part A, please write them here:

Response Summary: Eight respondents provided comments; data intentionally not reported.

(View question)

Section II, Part B: Your Role as a Host State Regulator For RRGs Operating and Insuring

B. Identification of RRGs Operating and Insuring Risks in Your State

INSTRUCTIONS: To answer questions 13 and 14, please refer to the following table, which lists all RRGs that reported writing premiums in your state to NAIC during 2010. To respond to the questions below, please compare the list of RRGs that reported to NAIC that they wrote premiums in your state in 2010 with your internal records.



_____

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13. To the best of your knowledge, were all of the RRGs reporting to NAIC that they wrote premiums in your state in 2010 also registered to insure risks in your state in 2010?

Note: The table above does NOT contain RRGs in your state that did not actively write premiums in 2010. We are only interested in those RRGs that wrote premiums in your state in 2010.

(View question)

Yes No Not sure. Some RRGs may have written premiums in our state without first registering with our department, but we are double-checking NAIC's information directly with the RRGs in question. (Request: Please let GAO know if you identify RRGs that operated but were not registered in your state in 2010, even if you have already submitted your survey.) Number of respondents
34 13 2 49

13a. If you answered no to question 13, please list the names of RRGs that wrote premiums in your state but were not registered in your state:

Response Summary: Data intentionally not reported.

(View question)

14. Based on a review of your internal records, did you identify any RRGs that wrote premiums in your state in 2010 but were not listed in NAIC's data in the table above?

(View question)

No Yes Do not know. Our state does not track whether registered RRGs wrote premiums in our state. Number of respondents
36 9 4 49

14a. If you answered yes to question 14, please list the names of RRGs that wrote premiums in your state in 2010 but were not included in NAIC's data as writing premiums in your state in 2010:

Response Summary: Data intentionally not reported.

(View question)

15. If you have any comments related to Section II Part B, please write them here:

Response Summary: Six respondents provided comments; data intentionally not reported.

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Section III: Your Applicable Fees, Taxes and Registration Requirements

For Part III, we are asking about fees, taxes and other registration requirements that RRGs must satisfy to insure risks in your state. To answer question 19 please refer to the corresponding table, which lists your state's premium tax rates by type of insurer as obtained from NAIC. Please note: The "insurer generally" tax rate was used if your state does not make a distinction between the premium tax rates charged for the types of insurers listed in the table below. If your state has a specific premium tax rate for RRGs, this rate was used for both domiciled and non-domiciled RRGs if no distinction was made.

(View question)

16. Please describe your state's process for non-domiciled RRGs to register to write premiums in your state.

Response Summary: State regulators responded that their registration processes included: obtaining documentation required by the Liability Risk Retention Act (LRRA), such as copies and revisions to an RRG's plan of operation or feasibility study; obtaining an application for registration and charging various fees to RRGs, such as filing and registration fees.

The type of registration process (and number of responses) are given below.

Note: Nine state regulators responded with a web link and no other specific information.



• Application for registration/application form/NAIC application form (30)

• Copies of and/or revisions to feasibility study/plan of operation/business plan (17)

• Various fee types (filing, registration, etc.) (16)

• Financial statement (9)

• Service of process/Power of attorney form (9)

• Unnamed general requirements (8)

• General reference to LRRA or state code (9)

• Copy of certificate of authority from domiciliary state (4)

• Statement identifying information such as: the state or states in which the risk retention group is chartered and licensed as a liability insurance company, date of chartering, principal place of business and information on its membership (4)

• Othera (22)

aRegistration processes categorized as "other" included: requesting RRGs to submit evidence of reinsurance arrangements, requesting an RRG's articles of incorporation, registering to pay premium taxes electronically, compliance with closed claim reporting requirements (for medical malpractice insurers only), and providing a letter of good standing from the RRG's domiciliary state.

(View question)

17. Please list any documentation and/or filings either required or routinely requested by your state to complete the RRG registration process. Please use the column labeled "Purpose" to explain how this information is used and/or assists your office in its function.

Response Summary: The most frequently reported document types that states required or routinely requested RRGs to complete for the registration process were an RRG's plan of operation or feasibility study, financial statement, application for registration, service of process and registration forms. Six states did not provide a response.

The type of document (and number of responses) are provided below. The states could report up to a maximum of five documents. We reviewed each document and classified it into the most appropriate category. For example, an application for registration could also be considered as a registration form.

• Plan of operations / Feasibility study (32)

• Financial statement (30)

• Application for registration (15)

• Service of process (14)

• Registration form (13)

• Certificate of authority from domicile state/certificate of compliance (10)

• Examination report (8)

• Articles of incorporation (4)

• List or statement of other states of operation (2)

• Biographical information of officers/directors (2)

• Reinsurance contracts (2)

• Othera (26)

aDocument types that did not fit in the established categories were listed as "other." Examples of other required or routinely requested documents included: a listing of shareholders, solicitation of business and agency licensure, a statement identifying the states in which the RRG is licensed and chartered, restrictions or conditions imposed on an RRG by its domiciliary state, and information on whether the RRG's registration has been suspended, revoked or denied in any state within the past 10 years.

(View question)

18. How much were the required event-based fees (such as a one-time registration or application fee) and periodic fees (such as annual renewal fees or quarterly filing fees) that each of the following types of insurers had to pay in order to do business in your state as of December 31, 2010?

Please enter a description of the fee in the first column, frequency of fee in the second column, and the related dollar amounts for each type of insurer. If any of the fees only apply to one type of insurer, please enter "NA" in the columns for which the fee is not applicable.

Please note: if your list of fees for traditional insurance companies is lengthy, we will allow you to send us an attachment of the full list instead of using the chart, which can e-mail to RRGSurvey2011@gao.gov. Please use the chart to list all RRG fees, whether or not there is a corollary fee associated with traditional insurance companies.

(View question)

1. Check box at left if this state does not charge any fees.

Checked Number of respondents
12 12

Response Summary: The most commonly reported fees types charged to RRGs to conduct business in responding states included: an annual renewal fee, initial or one-time registration fee, annual statement filing fee, and a one-time application fee.

We conducted our own analysis of the data supplied in this question after the fees were grouped into similar fee types. Across the four most frequently reported fee types, we found that while similar fees varied considerably across states, nondomiciled RRGs were being charged the lowest average fee within each of the fee types. For event based application fees and initial registration fees, traditional insurers paid more on average than domiciled RRGs while for periodic fees such as annual renewal and annual statement filing fees, domestic RRGs paid more on average than traditional property and casualty insurers.

The fee type (and number of responses) are given below.

Note: The states could report up to a maximum of five fees. Each fee listed was individually reviewed and classified into the most appropriate category. Some states have retaliatory fees--meaning a state charges out-of-state insurance companies operating in its jurisdiction in the same way that the state's own insurance companies are charged by other states. These retaliatory fees were excluded from this analysis. In addition, we also excluded responses containing insufficient information to determine how to classify the fee type--for example, if a respondent answered "fee varies by insurer."

• Annual renewal (29)

• Registration (20)

• Annual statement filing (18)

• Application (17)

• Renewal of certificate of authority (6)

• Agent appointment fee (4)

• Certificate of authority (4)

• Fraud (3)

• Examination (1)

• Othera (16)

aFee types that did not fit in the established categories were listed as "other." Examples included: application review, filing amendments to bylaws or articles of incorporation, technology, and merger/acquisition fees. These specific fees were charged one-time, annually, or per occurrence.

(View question)

19. Are the premium tax rates charged by type of insurer listed below correct as of December 31, 2010?

Premium tax rates as a percentage by insurer type.
Insurers Generally: _____
Property/Casualty: _____
Domiciled RRG: _____
Non-domiciled RRG: _____
Surplus Lines: _____

(View question)

Yes, the premium tax rates are correct. No, the premium tax rates are incorrect. (Please provide the correct premium tax rates in the table below): Number of respondents
33 16 49

Insurers Generally

(View question)

Mean Number
of respondents
0.8 39

Property/Casualty:

(View question)

Mean Number
of respondents
0.8 39

Domiciled RRG:

(View question)

Mean Number
of respondents
0.4 38

Non-domiciled RRG:

(View question)

Mean Number
of respondents
0.9 44

Surplus Lines:

(View question)

Mean Number
of respondents
1.1 43

Note: Some states implement a retaliatory premium tax rate--meaning a state taxes out-of-state insurance companies operating in its jurisdiction in the same way that the state's own insurance companies are taxed by other states. States with retaliatory premium taxes were excluded from this analysis. In addition, we also excluded responses containing insufficient information to determine how to classify the tax rate.

20. As of year-end 2010, what was your state's required or mandatory waiting period, if any, applicable to each of the following types of insurers after filing for registration or licensure and before writing business in your state? Please enter a time period (i.e. 60 days, 90 days, 1 year, etc). If any of the types of insurers does not do business in your state, please enter "NA."

Note: This question does not reference the application review period. This question refers to the period after the application is approved but before writing business in your state.

(View question)

1. Check box at left if this state does not have any waiting periods.

Checked Number of respondents
46 46

Response Summary: Three regulators responded that depending on insurer type, their states had mandatory waiting periods of 30 to 90 days, or until the state issued a certificate of authority to write business in the state.

Traditional P&C insurers

(View question)

Domiciled RRGs

(View question)

Non-domiciled RRGs

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21. If you have any comments related to Section III, please write them here:

Response Summary: Respondents provided explanations of their state's fees, premium tax rate structures, and differences in the registration and licensing process based on insurer type.

(View question)

Section IV: Regulatory Experiences

For Part IV, we are asking about your state's regulatory experiences involving RRGs as a domiciliary or host state insurance regulator. To answer questions 22 - 24, please refer to the specific RRG involved with a number (i.e. RRG 1, RRG 2). Please do not provide the specific name of the RRG.

(View question)

22. As a domiciliary state for RRGs, if a request has been made of your state to conduct an examination of a RRG domiciled in your state, please identify each request made during the past 24 months, including the date of the request, a brief explanation of the circumstances, and if your state complied with the request.

(View question)

1. This state is not a domiciliary state for RRGs.

Checked Number of respondents
24 24

2. This state has not been requested to conduct an examination of a RRG domiciled in the state.

Checked Number of respondents
25 25

23. As a host state for RRGs, if your state has asked a domiciliary state to conduct an examination of a RRG operating in your state, please identify each request your state has made during the past 24 months, including the date of request, the domiciliary state to which you made the request, a brief explanation of the circumstances and if the state complied with your request.

(View question)

1. This state has not requested an examination.

Checked Number of respondents
48 48

Questions 24 and 25 ask you to identify actions and proceedings involving your state and an RRG. Question 24 specifically asks about administrative actions and Question 25 specifically asks about civil or criminal proceedings.

(View question)

24. Please identify each administrative regulatory action taken by your state since January 2004, including the date of the action, the domiciliary state of the RRG, and a brief explanation of the circumstances. (An example of an administrative action could be liquidation, seizure or a cease and desist order.)

(View question)

1. To the best of my knowledge, this state has not taken any administrative regulatory action against a RRG.

Checked Number of respondents
27 27

Response Summary: Administrative regulatory actions reported by respondents included canceling or suspending an RRG's registration, issuing a cease and desist order, and ordering the liquidation of an RRG.

25. Please identify any civil or criminal proceeding involving your state and a RRG since January 2004, including the case name or number, name of court, domiciliary state of the RRG, date the lawsuit was filed, a brief explanation of the circumstances, and a brief explanation of its current status.

(View question)

1. To the best of my knowledge, this state has not been involved with any civil or criminal proceeding involving a RRG.

Checked Number of respondents
46 46

Response Summary: Civil or criminal proceedings reported by respondents included issuing a cease and desist order and ordering the liquidation of an RRG.

26. If you have any comments related to Section IV, please write them here:

Response Summary: Three respondents provided comments; data intentionally not reported.

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Section V: Opinions on the Risk Retention Act

 

(View question)

27. Has your state had any differences in interpretation with other state regulators regarding the definition of "commercial liability insurance" in the last 24 months?

(View question)

Yes No Don't know Number of respondents
7 36 6 49

27a. If yes, how many differences in interpretation has your state had with other state regulators?

(View question)

1-5 6-10 More than 10 Number of respondents
6 0 1 7

27b. If yes, please characterize the nature of the differences in interpretation.

Response Summary: Responses of those who answered "yes" included statements that the differences in interpretation with other state regulators included whether certain coverage types--for example, stop loss coverage for self-insured health care plans and contractual liability obligations--could be offered or met the definition of liability under LRRA.

(View question)

28. Has your state had any differences in interpretation with RRGs regarding the definition of "commercial liability insurance" in the last 24 months?

(View question)

Yes No Don't know Number of respondents
6 39 4 49

28a. If yes, how many differences in interpretation has your state had with RRGs?

(View question)

1-5 6-10 More than 10 Number of respondents
6 0 0 6

28b. If yes, please characterize the nature of the differences in interpretation.

Response Summary: Responses of those who answered "yes" included statements that the differences in interpretation with RRGs included whether certain coverage types--for example, workers' compensation, health insurance stop loss coverage, and contractual liability--could be offered or met the definition of liability under LRRA.

(View question)

29. Has your state had a difference of opinion with other state regulators regarding the financial solvency of an RRG domiciled or registered and insuring risk in your state?

(View question)

Yes No Don't know Number of respondents
4 42 3 49

29a. If yes, how many differences of opinion has your state had with other state regulators?

(View question)

1-5 6-10 More than 10 Number of respondents
4 0 0 4

29b. If yes, please characterize the nature of the differences of opinion.

Response Summary: Differences of opinion reported by respondents included whether an RRG was in sound financial condition and whether an RRG was required to meet the minimum capital and surplus requirements of a nondomiciliary state.

(View question)

30. Does your state believe RRGs have expanded the availability of commercial liability insurance for groups in your state that would otherwise have difficulty in obtaining coverage?

(View question)

Yes No No Opinion Number of respondents
17 8 24 49

30a. Please explain or elaborate on your answer to question 30 here.

Response Summary: Responses of those answering "yes" included statements that RRGs have increased the availability of medical malpractice insurance and coverage that would otherwise be hard to obtain, and helped with availability of coverage during hard insurance markets (i.e., periods of rapidly rising premium rates, tightened underwriting standards, narrowed coverage, and the withdrawal of insurers from certain markets). Responses of those answering "no" included statements that their state had a competitive insurance market without the presence of RRGs or did not have challenges with availability. Responses of those answering "no opinion" included statements that they did not know or had not studied if RRGs expanded availability in their states.

(View question)

31. Does your state believe RRGs have improved the affordability of commercial liability insurance for groups in your state that would otherwise have difficulty in obtaining coverage?

(View question)

Yes No No Opinion Number of respondents
13 9 26 48

31a. Please explain or elaborate on your answer to question 31 here.

Response Summary: Responses of those who answered "yes" included statements that RRGs have improved the affordability of medical malpractice insurance and commercial liability insurance through competition. Responses of those who answered "no" included statements that the amount of coverage RRGs provided might be lower in some instances than traditional insurers provided, or that there was no problem with affordability in their state due to a competitive insurance market. Responses of those who answered "no opinion" included statements that the state had not studied if RRGs improved affordability in their states.

(View question)

32. How would you characterize the current commercial liability insurance market in your state?

(View question)

Hard/Hard turning
to soft
Soft/Soft turning
to hard
No Opinion
Number of respondents
2 32 15 49

32a. Please explain or elaborate on your answer to question 32 here.

Response Summary: Respondents answers' included the following observations: the current market is stable but softening, the market is soft, the market is stable and competitive, and the state had no basis to form an opinion

(View question)

33. In your state's opinion, given the current condition of the insurance market, are RRGs needed as a mechanism to provide commercial liability insurance in your state?

(View question)

Great extent




Some extent




RRGs are not
needed to provide
commercial liability
insurance in
my state
No Opinion




Number of respondents
2 20 10 17 49

33a. Please explain or elaborate on your answer to question 33 here.

Response Summary: The respondents answering that RRGs are needed to a "great extent" stated that RRGs provide more insurance choices for professionals, small businesses, and not-for-profits. Responses provided of those answering "to some extent" included statements that RRGs are needed to provide coverage for certain lines of liability insurance, such as medical malpractice, for certain industries such as trucking, and when the commercial insurance market is unable to provide coverage. Some respondents stated that RRGs also provide additional competition and capacity for the market. Responses of those answering that "RRGs are not needed to provide commercial liability insurance in their state" included statements that there was sufficient availability of insurance and a competitive and stable marketplace. Some respondents also stated that the exemption of RRGs from most state regulation creates an uneven playing field and is unfair to regulated market participants. Respondents answering "no opinion" generally stated that they had no basis to form an opinion or believed that the need for RRGs was subject to market conditions.

(View question)

34. What is your state's opinion as to whether the Risk Retention Act should be expanded to permit RRGs to provide property insurance?

(View question)

Yes, the Act
should be expanded
No, the Act should
not be expanded
No opinion

Number of respondents
5 32 12 49

34a. Please explain or elaborate on your answer to question 34 here.

Response Summary: Responses of those who answered "yes" included statements that expanding the Act would allow businesses to self-insure their property exposures in the same way as their liability exposures, and would be sensible given the difficulty in obtaining property insurance. However, some respondents also said that nondomiciliary states should be given more regulatory authority over these entities. Responses of those who answered "no" included statements that commercial property insurance is sufficiently available and RRGs may not be sufficiently capitalized to provide property insurance. Respondents who answered "no opinion" included statements that there is no evidence of an availability/affordability problem and that the property insurance market would be more appropriate for minimally capitalized companies.

(View question)

35. What is your state's opinion as to whether the federal government should have the primary role for arbitrating disputes between states and RRGs?

(View question)

Yes, the federal
government should
have this role
No, the federal
government should
not have this
role
No opinion


Number of respondents
6 29 14 49

35a. Please explain or elaborate on your answer to question 35 here.

Response Summary: Respondents who answered "yes" opined that the federal government should have this role because it would support a federal law and would give RRGs the ability to defend themselves without costly attorney fees. Respondents who answered "no" opined that the federal government's role should be minimal, it could add an unnecessary level of bureaucracy or authority, and that current dispute mechanisms are adequate. Respondents who answered "no opinion" stated that their state did not have significant cases for arbitrating disputes and that Congress has the authority to amend the law to allow the arbitration of disputes.

(View question)

36. If the federal government were to assume the role of arbitrating disputes between states and RRGs, which department/agency should have this authority?

(View question)

The Department
of Commerce

The Department
of Treasury

Federal Insurance
Office (under
the Dodd-Frank
Act)
Other (Please
specify the department/agency
below)
No opinion


Number of respondents
1 0 13 5 29 48

If other, please specify here.

Data intentionally not reported.

(View question)

36a. Please explain or elaborate on your answer to question 36 here.

Response Summary: Responses of those who selected the Federal Insurance Office included statements that the FIO would have experienced staff who are knowledgeable about insurance matters. Responses of those who selected "other" included statements suggesting the creation of a separate office within the Department of Transportation or the Department of Commerce, or suggesting that this role remain with the courts. Responses of those who selected "no opinion" did not believe any federal agency should have this role.

(View question)

37. In your opinion, how adequate or inadequate are the regulatory protections or safeguards built into the Risk Retention Act?

(View question)

Skips

Very adequate

Adequate

Neither adequate
nor inadequate
Inadequate

Very inadequate
No opinion

Number of respondents
0 0 8 6 15 7 13 49

37a. Please explain or elaborate on your answer to question 37 here.

Response Summary: The respondent who selected "adequate" stated that LRRA's regulatory safeguards and protections were adequate because RRGs will be included in NAIC's accreditation standards. Responses of those that selected "inadequate" or "very inadequate" included statements that LRRA does not adequately provide protection for consumers; does not adequately address the financial condition of an RRG--such as capitalization and solvency requirements--exposing insureds to the risk of nonpayment of claims; and that domiciliary state regulators do not have "skin in the game." Responses of those that selected "no opinion" or "neither adequate nor inadequate" cited concerns about the lack of guaranty fund coverage and that their state does not have any problems with the current safeguards and protections in LRRA.

(View question)

38. Does your state have an opinion as to whether the Risk Retention Act should be clarified or amended in any way?

(View question)

Yes No No Opinion Number of respondents
16 6 27 49

38a. Please explain or elaborate on your answer to question 38 here.

Response Summary: Responses of those who answered "yes" included statements that LRRA could be clarified or amended to provide: better corporate governance standards; a clearer definition of terms such as "member" and "shareholder," and of what constitutes permissible liability insurance coverage; more authority to nondomiciliary state regulators over initial RRG registration and applicable financial criteria; more direction on the application review and approval process; regulatory authority to states where RRGs write the most premiums or a certain percentage of their business; and a requirement for RRGs to file annual financial statements using statutory accounting principles. Responses of those who answered "no" or "no opinion" included suggestions that RRGs should not be formed unless there is a documented need and that nondomiciliary regulators should be provided with cease-and-desist authority.

(View question)

39. If you have any comments related to Section V, please write them here:

Response Summary: Seven respondents provided comments; data intentionally not reported.

(View question)