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Commerce secretary proposes RRA amendments.

In February Commerce Secretary Robert Mosbacher proposed amendments to the Liability Risk Retention Act of 1986 that address many concerns raised in the Department of Commerce's 1987 Implementation Report and 1989 Operations Report. The following is a synopsis of the provisions that may have the greatest general impact.

The act would be amended to require that risk retention groups be member-owned and that those members have decision-making control regarding the organization's affairs and retention of suppliers of goods and services. This would preclude situations in which service providers have retained practical control.

A similar amendment would affect purchasing groups by precluding control by insurers, agents or brokers whose interests the Department of Labor perceives may not parallel those of the insureds. Hence, the group would be kept from achieving the bargaining power it needs to obtain coverage on the best terms.

Expanding Definitions

Other proposed amendments to the act include expanding the definition of the term "state" to include Puerto Rico. The term "principal place of business" for a purchasing group would require designation by the group, members within that state and maintaining an office within the state. The definition is important because premium taxes would be imposed on risk retention groups at the same rate as admitted insurers, not at the higher surplus lines rate most states impose. In addition, the requirement that risk retention groups must participate in joint underwriting associations on a non-discriminatory basis would be eliminated.

By deleting other language, risk retention groups would be exempted from countersignature requirements. Further, states will be precluded from refusing to recognize a letter of credit as an asset if the letter is issued by a bank that is a Federal Reserve system member and is listed by the National Association of Insurance Commissioners' Security Valuation Office as meeting NAIC standards.

Also, if the letter is in a form recognized by the commissioner of the licensing jurisdiction and is approved as an asset by the commissioner of the licensing jurisdiction, states can preclude its recognition as a letter of credit.

Other provisions that would have great impact include a risk retention group being able to provide liability coverage to a non-member if a member must provide coverage for contractual obligations to cover the liability of others, or an agent in the state in which a risk purchasing group has its principal place of business being able to act on behalf of the group in all states without additional licensing.

The most dramatic provision is the limitation on qualifications of purchasing group insurers. To qualify as a purchasing group insurer entitled to write business subject to single state regulations, an insurer must meet one of three requirements.

First, the insurer must be admitted in one state with the capital and surplus required of an admitted insurer writing similar business under the laws of each state in which it is writing risk purchasing group business. It must retain risk net of reinsurance in an amount less than the maximum permitted under the laws of each state in which it is writing insurance business (generally 10 percent of capital and surplus), maintain a premium to surplus ratio of no more than 3-to-1 and maintain minimum capital and surplus of at least $3 million as determined by the statutory accounting principles of the state in which the risk purchasing group maintains its principal place of business.

NAIC Certified

Second, the insurer must be domiciled in a state certified by the NAIC as meeting its financial regulatory standards. Last, the insurer must be an alien insurer listed on the most recent NAIC Non-Admitted Insurers Quarterly Listing, or the insurer must have been approved for writing after publication of the most recent listing.

Finally, only the state in which the risk purchasing group has its principal place of business will have the right to regulate forms and rates under the proposed provisions. Other states in which insured members are located may require the risk purchasing group insurer to comply with unfair claim settlement practices law, pay taxes as levied on admitted insurers, register with the state, submit to financial examinations under certain circumstances and comply with court orders and file certain notices.

May 22, Washington, DC, and New York: Workers Compensation: Crisis Resolution. This video conference, with direct broadcast to locations nationwide, will cover medical costs, derivative suits, managed health care and workplace design. An optional panel discussion following the broadcast will address local workers' compensation issues. Other locations available. $125. Contact: The Society of CPCU, (215) 251-2763.

June 12-14, Los Angeles: ERISA Basics: A Primer on ERISA Issues. Topics include core rules for plans and assets, fiduciary responsibility, retirement income plan minimum standards, welfare plans, corporate mergers and acquisitions, reporting and disclosure, employment discrimination and employee benefits, litigation issues, pre-emption and government enforcement policies. $475 for ABA members; $500 for non-members. Contact: American Bar Association, Division for Professional Education, (312) 988-6200.

June 14, Oklahoma City, and June 20, Greenboro, NC: Event Risk Management. Topics include why losses occur, loss prevention, risk analysis, health and safety, crowd management and security. Other dates available. $135. Contact: Event Risk Management, (714) 493-0529.

June 16-20, San Francisco: International Insurance Society's Annual Seminar. Topics include global marketing, financing growth, the impact of global demographic changes on the insurance industry, long-term health care, public and private pensions and the future of Lloyd's. $1,050; $500 for academics and government officials. Contact: Mary Silberberg, International Insurance Society Inc., (205) 348-8974.

June 16-21, Vancouver: Air & Waste Management Association's Annual Meeting and Exhibition. Highlights include the greenhouse effect and global climate change, the handling and disposal of waste and hazardous materials, fossil fuel alternatives, the deteriorating quality of indoor air, U.S. Clean Air Act amendments of 1990 and the Canadian Green Plan. An exhibition hall will feature pollution-control equipment and instrumentation. $270 for members, $345 for non-members before May 24; $330 for members, $405 for non-members after May 24. Contact: Air & Waste Management Association, (412) 232-3444.

June 17-18, Montpellier, France: The Montpellier Conference on Risk Financing and Captive Insurance Companies in the European Community. Experts and specialists will give "position" papers on the latest risk financing techniques, reinsurance for captives, the taxation of risk financing alternatives to conventional insurance, how risk management underpins risk financing, reinsurance structures and location and risk management. FF7,500. Contact: Susan McMahon, Risk & Insurance Research Group Ltd., (4471) 836-0614.

June 17-21 and Oct. 7-11, Brookfield, WI: Fundamentals of International Employee Benefits. Highlights include legal and regulatory issues, retirement plan design and financing, international compensation, expatriates and third country nationals, communication in the international environment and practical implications of cultural differences. $1,050 for IFEBP members; $1,175 for non-members. Contact: International Foundation of Employee Benefit Plans, (414) 786-6700.

June 20, Oak Brook, IL: Repetitive Motion Injury in the Workplace: A Symposium on Prevention and Management. Topics include the early signs of injury and preventive measures to take at the job site, ergonomics, job redesign, employee education, pre-employment screening, prevention of re-injury and treatment. $125; $150 after June 3. Contact: Schwab Rehabilitation Center, (312) 522-2010, ext. 5010.

July 1-3, London: World Insurance Congress. Sponsored by Business Insurance and Lloyd's of London Press, this conference will cover the distribution system, the role of the broker, insurer, reinsurer and banker following a catastrophe, global restructuring of insurance markets, EC directives and the green movement. 650 pounds for the first delegate; 585 pounds for each additional delegate from the same company. Contact: Barbara Dalton, Communication Services Department, Business Insurance, (212) 210-0299.

P. Bruce Wright is a member of the New York Bar. He is also a member of the law firm LeBoeuf, Lamb, Leiby and MacRae.
 ext. 5010.
 July 1-3, London: World Insura
 Congress. Sponsored by Business
 Insurance and Lloyd's of London
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Title Annotation:Legal Considerations; Robert Mosbacher; Liability Risk Retention Act
Author:Wright, P. Bruce
Publication:Risk Management
Date:May 1, 1991
Previous Article:The truth behind captives and taxation.
Next Article:Congress readies to act on regulation reform.

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