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PIA Objects to NAIC Risk Retention Act Proposals

The NAIC is considering supporting the expansion of the Federal Liability Risk Retention Act, to allow for risk retention groups to write commercial property insurance...
December 16, 2003

The NAIC is considering supporting the expansion of the Federal Liability Risk Retention Act, to allow for risk retention groups to write commercial property insurance and evaluate whether risk retention groups should be allowed to assume personal lines risks.  This Task Force also is considering a recommendation to exclude warranty-type products and conduct a further review in the insurance oversight of the warranty area.

PIA noted the incongruity of NAIC's current charge and discussion of this issue as compared with NAIC's past position on this act, as well as its current commitment to state regulation. PIA also raised questions to the NAIC about their current consideration to support or be neutral to the expansion of this federal law for all commercial property needs. PIA requested that the NAIC include in this Task Force's charge:

  • A review and update of the old NAIC model on this issue addressing state oversight
  • Inclusion of a comparative analysis and equity outline between the liberalizations of this act and the current market for oversight treatment of both producers and carriers, to include risk-based capital and unauthorized entities
  • A financial soundness review given the far more liberal financial leverage these entities can have over current insurers.

What It Means to Agents: PIA will follow up with the NAIC committee that oversees this Task Force and request that our suggestions be added to this task force's charge. NAII supports the current NAIC direction on expanding this act. PIA was joined in its comments only by AIA and was advised by the NAIC that we are the only insurance parties raising objections. Several NAIC member states are actively encouraging the NAIC to support this expansion.