Nevada Commissioner Blocks Fee on Risk Retention Groups

Nevada Insurance Commissioner Brett Barratt has rejected a proposal to impose fees on risk retention groups (RRGs) that the National Risk Retention Association said would violate the federal Liability Risk Retention Act of 1986 (LRRA).

The LRRA, a federal law, authorizes RRGs licensed in a single state to operate nationally without additional licensing and free of most regulation by other states, explained Brian Braley, NRRA chairman.

Commissioner Barratt recently rejected a plan to impose “desk audit fees” in connection with state premium taxes. Under the federal law, states are authorized to tax RRG premiums, but there is no provision for imposition of audit fees. In response to a letter from Robert H. Myers Jr., NRRA general counsel, Commissioner Barratt said any RRGs contacted earlier by the Insurance Department should rest assured that “desk audit fees” would not be required.

“The effort by Nevada Examiners to exact audit fees are examples of states interfering with the legal operation of RRGs under federal law and reinforce the need for Congress to provide a mechanism to enforce the Liability Risk Retention Act,” Braley said. He noted that Commissioner Barratt’s action helps to prevent “lengthy and expensive litigation.”

NRRA is the trade association that represents the interests of RRGs, purchasing groups, and other alternative risk transfer mechanisms. There are 251 RRGs active today writing some $2.5 billion gross premiums, the association said. Legislation that died in the last Congress is expected to be reintroduced this year to provide for arbitration of disputes with states.