U.S. House Subcommittee To Hold Insurance Regulatory Reform Hearing; Risk Retention Legislation To Be Filed In Advance

The U.S. House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises has scheduled a hearing entitled “Examining Proposals on Insurance Regulatory Reform” for Wednesday, April 16, 2008 at 2 p.m. at 2128 Rayburn, House Office Building.

Today, April 10, 2008, National Underwriter on-line magazine reported that legislation to allow risk retention groups to provide property-casualty insurance if they enhance existing safety-and-soundness standards is scheduled to be introduced next week in the United States House of Representatives in advance of the hearing. Representative Dennis Moore, D-Kansas and Deborah Pryce, R-Ohio, the bill sponsors, are both members of the House Financial Services Committee.

The House Financial Services press release on the hearing and the National Underwriter article are reprinted below.

A member of this Firm will monitor the hearing and provide a report on the proceedings.

Should you have any questions or comments, please do not hesitate to contact this office.

 

Financial Services Subcommittee Examines Proposals on Insurance Regulatory Reform

Washington, DC—Congressman Paul E. Kanjorski (D-PA), Chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, today announced that the Subcommittee will hold its third in a series of hearings on insurance regulatory reform on Wednesday, April 16 at 2:00 p.m. This hearing will examine a variety of proposals to address insurance regulatory reform.

“Our previous two hearings considered the need for insurance regulatory reform,” said Chairman Kanjorski. “At this upcoming hearing, witnesses will discuss a variety of state and federal proposals on reform. We will hear from two panels comprised of government and private witnesses respectively. It is my belief that Congress should take action on insurance regulation, and I look forward to hearing the recommendations of our witnesses.”

“This hearing provides an important opportunity for Congress to review various proposals to improve regulatory efficiency and help make insurance more affordable for consumers and policyholders,” said Congresswoman Pryce (R-OH), Ranking Member of the Subcommittee. “In particular, I look forward to hearing about efforts to improve consumer protections by addressing any unscrupulous practices in the marketplace.”

 

Bill Would Let RRGs Offer P-C Cover
BY ARTHUR D. POSTAL
NU Online News Service, April 10, 11:53 a.m. EDT

WASHINGTON—Legislation that would allow risk retention groups to provide property-casualty insurance is scheduled to be introduced next week in the House of Representatives.

Besides broadening the products that could be sold by these entities, the legislation will also impose stronger corporate governance standards, National Underwriter has learned.

It will also contain language clarifying that risk-retention groups cannot access state guarantee funds that included non-risk-retention groups.

The legislation will be introduced by Rep. Dennis Moore, D-Kansas, and Deborah Pryce, R-Ohio, both members of the House Financial Services Committee.

The legislation will be introduced in advance of a Wednesday hearing on financial services regulation scheduled to be held by the Capital Markets Subcommittee of the House Financial Services Committee.

A representative of the industry is expected to testify on the need for the legislation at the hearing, according to insurance lobbyists.

A draft of the legislation indicates that if enacted the bill will allow RRGs to provide property-casualty only if they enhance existing safety-and-soundness standards.

These will include prohibiting excess exposure to individual risks, requiring risk based capital standards, mandating financial statements include SAP conversion notes, and (where possible and nondiscriminatory), requiring participation in NAIC solvency monitoring mechanisms.

Although exact language was unavailable last week, the legislation is expected to clarify that RRGs who want to add new classes of members or engage in the new activities must implement minimum corporate governance standards.

This stems from a Government Accountability Office report several years ago that raised concerns about the depth of the corporate governance rules mandated for RRGs.

It will allow RRGs to provide property-casualty coverage only if their state of domicile state has adopted specific standards for examination authority, audits by certified public accountants, accounting practices and procedures, filings with the National Association of Insurance Commissioners, valuation of investments and safety and liquidity of investments policies.

Other issues that must be addressed in order to qualify for the added authority will be liabilities and reserves, actuarial opinions, capital and surplus, corrective actions, holding company systems, risk limitations, and reinsurance ceded rules, the legislation is expected to say.

The legislation, according to sources, would be effective 18 months after date of enactment.

 

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