I 
110TH CONGRESS 
2D SESSION 
H. R. 5792 
To amend the Liability Risk Retention Act of 1986 to increase insurance 
competition and available coverage for consumers. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 15, 2008 
Mr. MOORE of Kansas (for himself, Ms. PRYCE of Ohio, Mr. CAMPBELL of 
California, and Mr. KLEIN of Florida) introduced the following bill; which 
was referred to the Committee on Financial Services 
A BILL 
To amend the Liability Risk Retention Act of 1986 to in-
crease insurance competition and available coverage for 
consumers. 
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 ‘‘Increasing Insurance 
Coverage Options for Consumers Act of 2008’’. 
SEC. 2. FINDINGS. 
Congress finds the following: 
(1) The establishment of risk retention groups 
and risk purchasing groups have provided a success-
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ful model for the sale of insurance across State 
lines, reducing costs, providing alternative mecha-
nisms for coverage to increase competitive options 
for consumers, and promoting greater premium com-
petition among insurers, especially in areas or for 
risks where coverage is very limited and relatively 
unaffordable. 
(2) There have been abuses of the Liability 
Risk Retention Act of 1986 (15 U.S.C. 3901 et seq.) 
and increasing concerns by legislators and regulators 
about the solvency and policyholder control of man-
agement in many of the more recently formed risk 
retention groups. 
(3) There have also been inappropriate efforts 
by certain States to regulate, directly or indirectly, 
risk retention groups or risk purchasing groups in 
an extra-territorial manner precluded by section 3 
and 4 of the Liability Risk Retention Act of 1986 
(15 U.S.C. 3902 and 3903). 
(4) The Liability Risk Retention Act of 1986 
should be strengthened by— 
(A) requiring uniform corporate govern-
ance, disclosure, and financial accounting 
standards; 
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(B) clarifying and strengthening required 
compliance with certain State consumer protec-
tion laws; 
(C) allowing risk retention groups under 
the new standards to provide certain commer-
cial property insurance coverage; 
(D) allowing risk purchasing groups to 
contract more broadly for commercial property 
coverage as well as coverage for all forms of li-
ability insurance; and 
(E) reinforcing a foundation of the Act 
that exempts risk retention groups and risk 
purchasing groups from laws of a State other 
than their chartering State, except as specifi-
cally provided in the Act (15 U.S.C. 3901 et 
seq.). 
(5) Fixing and expanding the Liability Risk Re-
tention Act of 1986 will reduce solvency exposure 
and management abuses of risk retention groups 
while providing more available competitive insurance 
coverage for consumers. 
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SEC. 3. EXPANSION OF THE LIABILITY RISK RETENTION 
ACT OF 1986 TO INCLUDE PROPERTY INSUR-
ANCE. 
The Liability Risk Retention Act of 1986 (15 U.S.C. 
3901 et seq.) is amended— 
(1) in section 2 (15 U.S.C. 3901)— 
(A) in subsection (a)— 
(i) in paragraph (4)— 
(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), by striking the 
final period and inserting ‘‘; and’’; and 
(v) by adding at the end the following 
new paragraph: 
‘‘(8) ‘commercial property insurance’ means 
commercial lines of real or personal property insur-
ance, including, with regard to excess insurance, in-
surance against loss or damage from any and all 
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hazard or cause and against loss consequential upon 
such loss or damage, including business interruption 
insurance, other than non-contractual legal liability 
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’’; and 
(3) in section 6(b) (15 U.S.C. 3905(b)), by in-
serting ‘‘or commercial property’’ after ‘‘liability’’ 
each place it appears. 
SEC. 4. EXPANSION OF PURCHASING GROUPS TO INCLUDE 
COMMERCIAL PROPERTY INSURANCE. 
Section 4 of the Liability Risk Retention Act of 1986 
(15 U.S.C. 3903) is amended— 
(1) in subsection (b)— 
(A) in paragraph (1), by inserting ‘‘or 
commercial property’’ after ‘‘liability’’; and 
(B) in paragraph (2)— 
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(i) by redesignating subparagraphs 
(B) and (C) as subparagraphs (C) and 
(D), respectively; and 
(ii) by inserting after subparagraph 
(A) the following new subparagraph: 
‘‘(B) commercial property insurance;’’; and 
(2) in subsection (d)(1)(B), by inserting ‘‘and 
commercial property’’ after ‘‘liability’’. 
SEC. 5. CORPORATE GOVERNANCE AND FINANCIAL AC-
CREDITATION STANDARDS. 
(a) RISK RETENTION GROUP DEFINITION.—Section 
2(a) of the Liability Risk Retention Act of 1986 (15 
U.S.C. 3901(a)) is amended— 
(1) in paragraph (4)— 
(A) in subparagraph (C), by striking 
clauses (i) and (ii) and inserting the following: 
‘‘(i) is chartered or licensed as an in-
surance company and authorized to engage 
in the business of insurance under the laws 
of a State with respect to providing liabil-
ity or commercial property insurance as a 
risk retention group; or 
‘‘(ii) met the definition of a risk re-
tention group as defined in this paragraph 
on the day before the effective date of the 
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Increasing Insurance Coverage Options for 
Consumers Act of 2007.’’; 
(B) in subparagraph (G)(ii), by striking ‘‘; 
and’’ and inserting ‘‘;’’; 
(C) in subparagraph (H), by striking the 
period and inserting a semicolon; and 
(D) by adding at the end the following new 
subparagraphs: 
‘‘(I) which— 
‘‘(i) in the case of a corporation or 
other limited liability association other 
than a corporation or association referred 
to in subparagraph (C)(ii), is licensed or 
chartered in a State that has adopted cor-
porate governance standards that apply to 
risk retention groups licensed or author-
ized by the State that are materially iden-
tical to— 
‘‘(I) the corporate governance 
standards described in section 8; or 
‘‘(II) similar standards relating 
to corporate governance that apply to 
risk retention groups that a State rea-
sonably determines provide at least as 
much protection as the standards re-
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ferred to in subclause (I) for the 
members of such group chartered in 
the State; and 
‘‘(ii) in the case of a corporation or 
other limited liability association referred 
to in subparagraph (C)(ii), has imple-
mented the requirements of the corporate 
governance standards described in para-
graphs (1) through (7) of section 8 or 
similar standards referred to clause (i)(II); 
‘‘(J) which, prior to providing coverage for 
commercial property insurance, is licensed or 
chartered in a State that has adopted require-
ments, as appropriate, for examination author-
ity, audits by certified public accountants, ac-
counting practices and procedures, filings with 
the National Association of Insurance Commis-
sioners, valuation of investments, safety and li-
quidity of investments, liabilities and reserves, 
actuarial opinions, capital and surplus, correc-
tive actions, holding company systems, risk lim-
itations, and reinsurance ceded rules; and 
‘‘(K) which, prior to providing coverage for 
commercial property insurance, is licensed or 
chartered in a State that has adopted minimum 
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requirements for safety and soundness, includ-
ing requirements that— 
‘‘(i) prohibit groups from under-
writing any single risk exposure, such as 
wind losses in a coastal region or earth-
quake coverage on a single fault, that 
could unduly impair the group’s capital, 
similar to such requirements for other in-
surance companies or for risk retention 
groups in other States; 
‘‘(ii) establish minimum standards for 
size or sophistication of risk retention 
group members; and 
‘‘(iii) establish solvency requirements 
for risk retention groups.’’; 
(2) in paragraph (6), by striking ‘‘; and’’ and 
inserting ‘‘;’’; 
(3) in paragraph (7), by striking the period and 
inserting ‘‘; and’’; and 
(4) by adding at the end the following new 
paragraph: 
‘‘(8) ‘materially identical’ means requiring or 
prohibiting identical conduct with respect to cor-
porate governance by risk retention groups, notwith-
standing that the standards adopted by a State may 
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differ with respect to conduct required or prohibited 
with respect to other activities or entities.’’. 
(b) CODIFICATION OF STANDARDS.—The Liability 
Risk Retention Act of 1986 (15 U.S.C. 3901 et seq.) is 
amended by adding at the end the following new section: 
‘‘CORPORATE GOVERNANCE STANDARDS 
‘‘SEC. 8. Corporate governance standards described 
in this section are standards that require the following: 
‘‘(1) INDEPENDENT DIRECTORS.— 
‘‘(A) IN GENERAL.—The board of directors 
of the risk retention group shall have a majority 
of independent directors. If the risk retention 
group is a reciprocal, then the attorney-in-fact 
would be required to adhere to the same stand-
ards regarding independence of operation and 
governance as imposed on the risk retention 
group’s board of directors or subscribers advi-
sory committee under these standards and, to 
the extent permissible under State law, service 
providers of a reciprocal risk retention group 
should contract with the risk retention group 
and not the attorney-in-fact. 
‘‘(B) INDEPENDENCE.—No director quali-
fies as independent unless the board of direc-
tors affirmatively determines that the director 
has no material relationship with the risk reten-
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tion group. Each risk retention group shall dis-
close these determinations to its domestic regu-
lator, at least annually. For this purpose— 
‘‘(i) any person that is a direct or in-
direct owner of, or subscriber in, a risk re-
tention 
group 
defined 
in 
section 
2(a)(4)(E)(ii) is considered to be inde-
pendent; and 
‘‘(ii) any person that is an officer, di-
rector, or employee of a person described 
in clause (i) is considered to be inde-
pendent, unless some other position of 
such officer, director, or employee con-
stitutes a material relationship. 
‘‘(C) MATERIAL RELATIONSHIP.—A mate-
rial relationship between a person and a risk re-
tention group includes the following: 
‘‘(i) The receipt in any one 12-month 
period of compensation or payment of any 
other item of value by such person, a mem-
ber of such person’s immediate family, or 
any business with which such person is af-
filiated from the risk retention group or a 
consultant or service provider to the risk 
retention group is greater than or equal to 
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general underwriters, or other party responsible 
for underwriting, determination of rates, collec-
tion of premium, adjusting and settling claims, 
or the preparation of financial statements. In 
this subparagraph, the term ‘lawyer’ does not 
include defense counsel retained by the risk re-
tention group to defend claims, unless the 
amount of fees paid to such lawyer is greater 
than or equal to five percent of the risk reten-
tion group’s gross written premium for such 12- 
month period or two percent of its surplus, 
whichever is greater, as measured at the end of 
any fiscal quarter falling in such a 12-month 
period. 
‘‘(C) PRIOR
APPROVAL.—Any contract 
with a service provider that has a material rela-
tionship with the risk retention group shall be 
submitted for prior approval by the domestic 
regulator at least 30 days prior to the effective 
date. No service provider contract involving a 
material relationship referred to in paragraph 
(1)(C) shall be entered into unless the risk re-
tention group has notified the Commissioner in 
writing of its intention to enter into such trans-
action at least 30 days prior thereto and the 
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Commissioner has not disapproved it within 
such period. 
‘‘(3) WRITTEN CHARTER.—The risk retention 
group’s board of directors shall have a written policy 
in the Bylaws that requires the board to— 
‘‘(A) assure that all insured owners of the 
risk retention group receive evidence of owner-
ship interest; 
‘‘(B) develop a set of governance standards 
applicable to the risk retention group; 
‘‘(C) oversee the evaluation of the risk re-
tention group’s management; 
‘‘(D) review and approve all material serv-
ice provider contracts; 
‘‘(E) approve the compensation for all 
service providers; and 
‘‘(F) review and approve, at least annu-
ally— 
‘‘(i) the risk retention group’s goals 
and objectives relevant to the compensation 
of officers and service providers; 
‘‘(ii) the officers’ and service pro-
viders’ performance in light of those goals 
and objectives; and 
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‘‘(iii) the continued engagement of the 
officers and material service providers. 
‘‘(4) AUDIT COMMITTEE.— 
‘‘(A) IN
GENERAL.—The risk retention 
group shall have an audit committee composed 
of at least three independent board members as 
described in paragraph (1). A non-independent 
board member may participate in the activities 
of the audit committee, if invited by the mem-
bers, but cannot be a member of such com-
mittee. 
‘‘(B) 
WRITTEN
CHARTER.—The 
audit 
committee shall have a written charter that de-
fines the committee’s purpose, which, at a min-
imum, must be to— 
‘‘(i) assist board oversight of (1) the 
integrity of the financial statements, (2) 
the compliance with legal and regulatory 
requirements, (3) the qualifications, inde-
pendence, and performance of the inde-
pendent auditor and actuary, and (4) the 
performance of the captive manager, man-
aging general underwriter, or other party 
or parties responsible for underwriting, de-
termination of rates, collection of premium, 
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adjusting or settling claims or the prepara-
tion of financial statements; 
‘‘(ii) discuss the annual audited finan-
cial statements and quarterly financial 
statements with management; 
‘‘(iii) discuss the annual audited fi-
nancial statements with its independent 
auditor and, if advisable, discuss its quar-
terly financial statements with its inde-
pendent auditor; 
‘‘(iv) discuss policies with respect to 
risk assessment and risk management; 
‘‘(v) meet separately and periodically, 
either directly or through a designated rep-
resentative of the committee, with manage-
ment and independent auditors; 
‘‘(vi) review with the independent 
auditor any audit problems or difficulties 
and management’s response; 
‘‘(vii) set clear hiring policies of the 
risk retention group for employees or 
former employees of the independent audi-
tor; 
‘‘(viii) require the external auditor to 
rotate the lead (or coordinating) audit 
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partner having primary responsibility for 
the risk retention group’s audit and the 
audit partner responsible for reviewing 
that audit so that neither individual per-
forms audit services for more than five 
consecutive fiscal years; and 
‘‘(ix) report regularly to the board of 
directors. 
‘‘(C) WAIVER.—The domestic regulator 
may waive the requirement to establish an audit 
committee composed of independent directors if 
the risk retention group is able to demonstrate 
to the domestic regulator that it is impracti-
cable to do so and the risk retention group’s 
board of directors itself is otherwise able to ac-
complish the purposes of an audit committee, as 
described in subparagraph (B). 
‘‘(5) GOVERNANCE STANDARDS.—The risk re-
tention group shall adopt and disclose governance 
standards that include— 
‘‘(A) a process by which the directors are 
elected by the insured owners; 
‘‘(B) director qualification standards; 
‘‘(C) director responsibilities; 
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‘‘(D) director access to management and, 
as necessary and appropriate, independent advi-
sors; 
‘‘(E) director compensation; 
‘‘(F) director orientation and continuing 
education; 
‘‘(G) management succession; and 
‘‘(H) annual performance evaluation of the 
board. 
‘‘(6) BUSINESS
CONDUCT
AND
ETHICS.—The 
risk retention group shall adopt and disclose a code 
of business conduct and ethics for directors, officers, 
and employees and promptly disclose to the board of 
directors any waivers of the code for directors or ex-
ecutive officers, which shall include— 
‘‘(A) conflicts of interest; 
‘‘(B) corporate opportunities; 
‘‘(C) confidentiality; 
‘‘(D) fair dealing; 
‘‘(E) protection and proper use of risk re-
tention group assets; 
‘‘(F) compliance with all applicable laws, 
rules, and regulations; and 
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‘‘(G) requiring the reporting of any illegal 
or unethical behavior that affects the operation 
of the risk retention group. 
‘‘(7) REPORTING NON-COMPLIANCE.—The cap-
tive manager or chief executive officer of the risk re-
tention group shall promptly notify the domestic reg-
ulator in writing if either becomes aware of any ma-
terial non-compliance with any of the risk retention 
group’s governance standards. 
‘‘(8) 
ENFORCEMENT.—The 
risk 
retention 
group’s domestic regulator may take appropriate 
regulatory action against any director or officer of 
the risk retention group or its captive manager pur-
suant to its laws and regulations if the risk retention 
group or captive manager violates these governance 
standards.’’. 
SEC. 6. NO PARTICIPATION IN STATE GUARANTY FUNDS. 
Section 3 of the Liability Risk Retention Act of 1986 
(15 U.S.C. 3902) is amended by adding at the end the 
following new subsection: 
‘‘(i) Notwithstanding any other provision of this sec-
tion, a risk retention group may not participate in an in-
surance insolvency guaranty association that includes par-
ticipants other than risk retention groups.’’. 
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SEC. 7. FINANCIAL STATEMENTS. 
Section 3 of the Liability Risk Retention Act of 1986 
(15 U.S.C. 3902) is further amended in subsection 
(d)(3)— 
(1) by redesignating subparagraphs (A) and 
(B) as clauses (i) and (ii), respectively, and moving 
the margins two ems to the right; 
(2) by striking ‘‘which statement shall be cer-
tified’’ and inserting ‘‘which statement shall— 
‘‘(A) be certified’’; 
(3) in subparagraph (A)(2) (as designated by 
paragraphs (1) and (2)), by striking the period and 
inserting a semicolon; and 
(4) by adding at the end the following new sub-
paragraphs: 
‘‘(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.’’. 
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SEC. 8. DISCLOSURE REQUIREMENTS. 
Section 3 of the Liability Risk Retention Act of 1986 
(15 U.S.C. 3902) is further amended— 
(1) in subsection (a)(1)— 
(A) in subparagraph (G), by striking ‘‘ju-
risdiction;’’ and inserting ‘‘jurisdiction; and’’; 
(B) in subparagraph (H), by striking ‘‘im-
paired; and’’ and inserting ‘‘impaired.’’; and 
(C) by striking subparagraph (I); and 
(2) by adding at the end the following new sub-
section: 
‘‘(j) Each risk retention group shall provide to each 
member of such group, on the front page and the declara-
tion page of each insurance policy issued by such group, 
in bold 12-point or larger type, the following notice: ‘This 
policy is issued by your risk retention group of which you 
are a part owner. Your risk retention group is primarily 
regulated under the laws of llll and may not be sub-
ject to all of the insurance laws and consumer protections 
of your State. If your risk retention group fails, it may 
not be protected by a State insurance insolvency guaranty 
fund.’. The risk retention group shall insert the name of 
the State in which the risk retention group is chartered 
or licensed in place of the blank space.’’. 
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SEC. 9. FIDUCIARY DUTY. 
Section 3 of the Liability Risk Retention Act of 1986 
(15 U.S.C. 3902) is further amended by adding at the 
end the following new subsection: 
‘‘(k) The board of directors of a risk retention group 
shall have a fiduciary duty to operate in the best interests 
of the group.’’. 
SEC. 10. UNDERSCORING THE EXEMPTION. 
The Liability Risk Retention Act of 1986 (15 U.S.C. 
3901 et seq.) is amended— 
(1) in section 3 (15 U.S.C. 3902)— 
(A) in subsection (a), by striking ‘‘Except 
as provided’’ and inserting ‘‘Except as specifi-
cally provided’’; and 
(B) in subsection (f)(1)— 
(i) by inserting ‘‘or purchasing group’’ 
after ‘‘risk retention group’’; and 
(ii) by inserting before the period ‘‘, 
except that a State may not issue a cease- 
and-desist order to any risk retention 
group or purchasing group not chartered 
or licensed in such State, or otherwise at-
tempt to regulate such group directly or 
indirectly, except as specifically permitted 
under this Act.’’; and 
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(2) in section 4(a) (15 U.S.C. 3903(a)), by 
striking ‘‘Except as provided’’ and inserting ‘‘Except 
as specifically provided’’. 
SEC. 11. TECHNICAL CORRECTION AND AMENDMENT TO 
SHORT TITLE. 
(a) TECHNICAL CORRECTION.—Section 3(a)(1) of 
the Liability Risk Retention Act of 1986 (15 U.S.C. 
3902(a)(1)) is amended by striking ‘‘many’’and inserting 
‘‘any’’. 
(b) SHORT TITLE.—Section 1 of the Liability Risk 
Retention Act of 1986 (15 U.S.C. 3901 note) is amended 
by striking ‘‘Liability Risk Retention Act’’ and inserting 
‘‘Risk Retention Act’’. 
SEC. 12. DELAYED EFFECTIVE DATE. 
(a) IN GENERAL.—Subject to subsection (b), this Act 
and the amendments made by this Act shall take effect 
on the date of the enactment of this Act. 
(b) EXCEPTION.—Notwithstanding subsection (a), 
sections 3 (except clauses (iii) through (v) of paragraph 
(1)(A) of section 3), 5, 7, 8, and 9 shall take effect on 
the date that is 18 months after the date of the enactment 
of this Act. 
Æ 
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