New Federal Bill Would Allow Risk Retention Groups to Cover Property

A bill recently introduced in the House seeks to expand the authority of Risk Retention Groups (“RRGs”) to write property, and not just commercial casualty, coverage. HR 3794, which was introduced on a bipartisan basis, would permit RRG’s to write property coverage for nonprofits with tax-exempt status, as well as educational and education-related institutions that are non-profits or governmental entities. Proponents argue that such an expansion of authority would fill a void in the marketplace by allowing nonprofits insured by an RRG to find appropriate property coverage that they otherwise cannot find or afford. Further, supporters argue such an expansion would provide protection for relatively small property expenses in relation to the larger liability that is already covered. Detractors argue that the expansion proposed in HR 3794 would be discriminatory as it would only be available to certain non-profit RRGs that have been operating for at least 10 years and maintain capital and surplus of at least $10 million.

The bill is considered to be unlikely to pass due to opposition from several insurance trade organizations, as well as general stagnation in the Congress. Even if the bill does not pass this year, however, supporters believe the proposed legislation will reappear in the next Legislative Session in a form that may be of broader benefit to the risk retention and purchasing group community.