I 
111TH CONGRESS 
2D SESSION 
H. R. 4802 
To modernize the Liability Risk Retention Act of 1986 and expand coverage 
to include commercial property insurance, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 10, 2010 
Mr. MOORE of Kansas (for himself, Mr. CAMPBELL, and Ms. KOSMAS) intro-
duced the following bill; which was referred to the Committee on Finan-
cial Services 
A BILL 
To modernize the Liability Risk Retention Act of 1986 and 
expand coverage to include commercial property insur-
ance, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Risk Retention Mod-
ernization Act of 2010’’. 
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SEC. 2. OVERSIGHT OF COMPLIANCE WITH PREEMPTION 
OF STATE LAW UNDER THE LIABILITY RISK 
RETENTION ACT OF 1986. 
The Liability Risk Retention Act of 1986 (15 U.S.C. 
3901 et seq.) is amended by adding at the end the fol-
lowing new section: 
‘‘OVERSIGHT OF COMPLIANCE WITH PREEMPTION OF 
STATE LAW 
‘‘SEC. 8. (a) SURVEY.—The Secretary of the Treas-
ury shall survey and evaluate the extent to which States 
are in compliance with the prohibition under this Act of 
State regulation of risk retention groups and purchasing 
groups that are not domiciliaries of such State and peri-
odically submit to the President and Congress reports on 
such compliance. 
‘‘(b) DISPUTES.—In any dispute in which an issue 
arises of whether this Act preempts the regulation of a 
risk retention group or purchasing group by a State, any 
party to the dispute may make a written submission to 
the Secretary of the Treasury to request a determination 
as to whether the regulation at issue is preempted by this 
Act. 
‘‘(c) STANDARD.—The Secretary of Treasury may 
only issue a determination under paragraph (b) that the 
regulation at issue is preempted by this Act if the regula-
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tion imposes a requirement upon the risk retention group 
that is inconsistent with the provisions of this Act. 
‘‘(d) REGULATIONS, POLICIES, AND PROCEDURES.— 
Not later than 90 days after the effective date in section 
11 of the Risk Retention Modernization Act of 2010, the 
Secretary of the Treasury shall publish in the Federal 
Register final regulations, policy statements, guidelines, or 
procedures to implement this section. 
‘‘(e) APPLICABILITY
OF ADMINISTRATIVE PROCE-
DURES ACT.—Determinations issued pursuant to sub-
section (b) shall be subject to the applicable provisions of 
subchapter II of chapter 5 of title 5, United States Code 
(relating to administrative procedure). 
‘‘(f) JUDICIAL REVIEW.—Any party to the dispute 
may seek review of a final order of the Secretary of the 
Treasury under subsection (b) in the United States Court 
of Appeals for the District of Columbia Circuit.’’. 
SEC. 3. CORPORATE GOVERNANCE STANDARDS. 
The Liability Risk Retention Act of 1986 (15 U.S.C. 
3901 et seq.), as amended by section 2 of this Act, is fur-
ther amended by adding at the end the following new sec-
tion: 
‘‘CORPORATE GOVERNANCE STANDARDS 
‘‘SEC. 9. 
‘‘(a) GOVERNANCE STANDARDS.—The Secretary of 
the Treasury shall, not later 30 days after the effective 
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date in section 11 of the Risk Retention Modernization 
Act of 2010, issue corporate governance standards for risk 
retention groups, which shall include requirements that— 
‘‘(1) the governing body of a risk retention 
group shall at all times include a majority of inde-
pendent directors; 
‘‘(2) any material relationship between a direc-
tor of a risk retention group and a service provider 
shall— 
‘‘(A) be documented by a written contract 
that— 
‘‘(i) is for a term of not more than 5 
years; and 
‘‘(ii) may be terminated at any time 
for cause after providing reasonable notice 
as set forth in the contract; 
‘‘(B) be approved upon commencement and 
upon any renewal by a majority of the inde-
pendent directors of a risk retention group; and 
‘‘(C) be approved by the insurance com-
missioner of the State in which such service 
provider is chartered; 
‘‘(3) unless the insurance commissioner of the 
State in which the risk retention group is chartered 
permits the governing body of a risk retention group 
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to exercise the function as a whole, such risk reten-
tion group shall have an audit committee of its gov-
erning body with a written charter defining the pur-
poses of the committee, which shall include— 
‘‘(A) providing oversight of— 
‘‘(i) the integrity of financial state-
ments; 
‘‘(ii) compliance with legal and regu-
latory requirements; 
‘‘(iii) the qualifications, independence, 
and performance of auditors and actuaries; 
and 
‘‘(iv) the performance of service pro-
viders; and 
‘‘(B) reviewing the annual audited finan-
cial statements and quarterly statements with 
the management of the risk retention group; 
‘‘(C) reviewing the annual audited financial 
statements with the auditor of the risk reten-
tion group and, if advisable, reviewing quarterly 
financial statements with such auditor; 
‘‘(D) establishing policies with respect to 
risk assessment and risk management; 
‘‘(E) meeting separately and periodically, 
either directly or through designated represent-
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atives of the committee, with the management 
and auditor of the risk retention group; 
‘‘(F) reviewing with the auditor of the risk 
retention group any audit problems or difficul-
ties and the response to such problems or dif-
ficulties by the management of the risk reten-
tion group; 
‘‘(G) establishing clear policies regarding 
the hiring of employees or former employees of 
the current or former auditor of the risk reten-
tion group; 
‘‘(H) requiring, through contract or nego-
tiation, the auditor of the risk retention group 
to rotate partners with primary responsibility 
for the audit of the risk retention group and 
the partner responsible for reviewing such 
audit, in order to assure that no individual per-
forms these services for more than five consecu-
tive years; and 
‘‘(I) reporting regularly on the foregoing 
matters to the governing body of the group; 
‘‘(4) a risk retention group shall adopt and pro-
vide upon request to the members of such risk reten-
tion group governance standards that address— 
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‘‘(A) the means of providing evidence of 
each the ownership interest of each member of 
the risk retention group; 
‘‘(B) the process by which the governing 
body of the risk retention group is elected by 
the members of the risk retention group; 
‘‘(C) qualification standards for and re-
sponsibilities of directors of the risk retention 
group; 
‘‘(D) access to the management and inde-
pendent advisors of the risk retention group by 
the directors of the risk retention group; 
‘‘(E) compensation of directors of the risk 
retention group, if any; 
‘‘(F) orientation and education of directors 
of the risk retention group; 
‘‘(G) succession of management of the risk 
retention group; and 
‘‘(H) annual performance evaluations of 
the management, officers, and members of the 
risk retention group by the governing body of 
the risk retention group; 
‘‘(5) a risk retention group shall adopt a code 
of business conduct and ethics applicable to direc-
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tors, officers, and employees of the risk retention 
group that address— 
‘‘(A) conflicts of interest; 
‘‘(B) corporate opportunities; 
‘‘(C) confidentiality; 
‘‘(D) fair dealing; 
‘‘(E) protection and proper use of the as-
sets of the risk retention group; 
‘‘(F) compliance with applicable laws and 
regulations; and 
‘‘(G) reporting of any illegal or unethical 
behavior which affects the operation of the risk 
retention group; and 
‘‘(6) any manager or chief executive officer of 
a risk retention group shall promptly notify the do-
mestic regulator in writing if either becomes aware 
of any material noncompliance with any governance 
standard required by this section, if such noncompli-
ance is not cured within a reasonable period from 
detection not to exceed 60 days. 
‘‘(b) DEFINITIONS.—In this section: 
‘‘(1) AUDITOR.—The term ‘auditor’ means the 
person providing certification of the annual financial 
statement of a risk retention group provided to a 
State in section 3(d)(3). 
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‘‘(2) DIRECTOR.—The term ‘director’ means a 
member of the governing body of a risk retention 
group. 
‘‘(3) 
INDEPENDENT
DIRECTOR.—The 
term 
‘independent director’ means a director of a risk re-
tention group that the governing body of such risk 
retention group determines has no material relation-
ship with— 
‘‘(A) such risk retention group; 
‘‘(B) a member of such risk retention 
group; or 
‘‘(C) an officer, director, or employee of 
such member. 
‘‘(4) MATERIAL
RELATIONSHIP.—The term 
‘material relationship’ means a relationship between 
an entity or an individual and a risk retention group 
where such entity or individual, or a member of the 
immediate family of such individual or any business 
with which such individual or entity is affiliated, re-
ceives compensation or payment from such risk re-
tention group during any 12-month period in an 
amount of— 
‘‘(A) 5 percent or more of the gross writ-
ten premiums of such risk retention group for 
such 12-month period; or 
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‘‘(B) 2 percent or more of the surplus of 
such risk retention group as measured at the 
end of any fiscal quarter falling within such 12- 
month period. 
‘‘(5) MEMBER.—The term ‘member’ means a 
person or entity that— 
‘‘(A) is insured by a risk retention group; 
and 
‘‘(B) maintains an ownership interest in 
such risk retention group in accordance with 
the laws of the State in which such risk reten-
tion group is domiciled. 
‘‘(6) SERVICE
PROVIDER.—The term ‘service 
provider’ means— 
‘‘(A) a provider of regular ongoing insur-
ance, corporate, or regulatory services to a risk 
retention group, including management compa-
nies, auditors, accountants, actuaries, invest-
ment advisors, lawyers, manager general under-
writers, and any other parties responsible for 
underwriting, determining rates, collecting pre-
miums, adjusting and settling claims or the 
preparation of financial statements; 
‘‘(B) does not include defense counsel re-
tained by a risk retention group to defend 
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claims, unless the amount of fees paid to such 
counsel would otherwise result in it having a 
material relationship with the risk retention 
group. 
‘‘(c) SUPERSEDURE.— 
‘‘(1) IN GENERAL.—The provisions of this sec-
tion shall supersede any State law relating to the 
corporate governance standards required for risk re-
tention groups and purchasing groups. 
‘‘(2) DEFINITIONS.—In this subsection: 
‘‘(A) STATE.—The term ‘State’ includes a 
State and the District of Columbia, any polit-
ical subdivisions thereof, and any agency or in-
strumentality of a State. 
‘‘(B) STATE LAW.—The term ‘State law’ 
includes all laws, decisions, rules, regulations, 
or other State action having the effect of law, 
of any State.’’. 
SEC. 4. COMMERCIAL PROPERTY INSURANCE. 
The Liability Risk Retention Act of 1986 (15 U.S.C. 
3901 et seq.) is further amended— 
(1) in section 2 (15 U.S.C. 3901)— 
(A) in subsection (a)— 
(i) in paragraph (4)— 
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(I) in subparagraph (C)(i) by 
striking ‘‘a liability’’ and inserting 
‘‘an’’; and 
(II) in subparagraph (G)(i), by 
inserting ‘‘or commercial property’’ 
after ‘‘liability’’; 
(ii) in paragraph (5)(A), by inserting 
‘‘or commercial property’’ after ‘‘liability’’; 
(iii) in paragraph (6), by striking 
‘‘and’’ at the end; 
(iv) in paragraph (7)(B), by striking 
the final period and inserting ‘‘; and’’; and 
(v) by adding at the end the following 
new paragraph: 
‘‘(8) ‘commercial property insurance’ means in-
surance that indemnifies a business, nonprofit orga-
nization, or governmental entity for damage to, theft 
of, or destruction of real property or business prop-
erty, owned by or leased to such business, nonprofit 
organization, or governmental entity, including in-
surance that indemnifies a business, nonprofit orga-
nization, or governmental entity for damage to, theft 
of, or destruction of furniture, fixtures, and inven-
tory, from any and all perils or causes of loss and 
against consequential loss or damage, including busi-
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ness interruption, other than noncontractual legal li-
ability for such loss or damage.’’; and 
(B) in subsection (b), by inserting ‘‘, com-
mercial property’’ after ‘‘of liability’’; 
(2) in section 3 (15 U.S.C. 3902)— 
(A) in subsection (a)(1)(C), by inserting 
‘‘or commercial property’’ after ‘‘liability’’; 
(B) in subsection (b), by inserting ‘‘or 
commercial property’’ after ‘‘liability’’ each 
place it appears; and 
(C) in subsection (d)(1)(B), by inserting 
‘‘or commercial property’’ after ‘‘liability’’; 
(3) in section 4 (15 U.S.C. 3903)— 
(A) in subsection (b)— 
(i) in paragraph (1), by inserting ‘‘or 
commercial property’’ after ‘‘liability’’; and 
(ii) in paragraph (2)— 
(I) by redesignating subpara-
graphs (B) and (C) as subparagraphs 
(C) and (D), respectively; and 
(II) by inserting after subpara-
graph (A) the following new subpara-
graph: 
‘‘(B) commercial property insurance;’’; and 
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(B) in subsection (d)(1)(B), by inserting 
‘‘and commercial property’’ after ‘‘liability’’; 
and 
(4) in section 6(b) (15 U.S.C. 3905(b)), by in-
serting ‘‘or commercial property’’ after ‘‘liability’’ 
each place it appears. 
SEC. 5. FINANCIAL STATEMENTS; DISCLOSURE REQUIRE-
MENTS; 
FIDUCIARY 
DUTY; 
AND 
UNDER-
SCORING THE EXEMPTION. 
The Liability Risk Retention Act of 1986 is amended 
as follows: 
(1) 
FINANCIAL
STATEMENTS.—In 
section 
3(d)(3) (15 U.S.C. 3902(d)(3))— 
(A) by redesignating subparagraphs (A) 
and (B) as clauses (i) and (ii), respectively, and 
moving the margins two ems to the right; 
(B) by striking ‘‘which statement shall be 
certified’’ and inserting ‘‘which statement 
shall—’’ 
‘‘(A) be certified’’; 
(C) in subparagraph (A)(ii) (as designated 
by subparagraphs (A) and (B)), by striking the 
period and inserting a semicolon; and 
(D) by adding at the end the following new 
subparagraphs: 
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‘‘(B) be filed not later than the earlier 
of— 
‘‘(i) June 1, for the preceding cal-
endar year; and 
‘‘(ii) such time as the State in which 
the risk retention group is chartered re-
quires; and 
‘‘(C) if not prepared in conformity with 
statutory accounting principles, include appro-
priate notes for conversion of such statement to 
statutory accounting principles.’’. 
(2) DISCLOSURE REQUIREMENTS.—In section 3 
(15 U.S.C. 3902)— 
(A) in subsection (a)(1)— 
(i) in subparagraph (G), by striking 
‘‘jurisdiction;’’ and inserting ‘‘jurisdiction; 
and’’; 
(ii) in subparagraph (H), by striking 
‘‘impaired; and’’ and inserting ‘‘impaired.’’; 
and 
(iii) by striking subparagraph (I); and 
(B) by adding at the end the following new 
subsection: 
‘‘(i) Each risk retention group shall provide to each 
member of such group, on the front page and the declara-
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