Risk Retention Amendments of 1986
PL 99-563 (S.2129), enacted 10/27/1986

100 STAT. 3170 
PUBLIC LAW 99-563—OCT. 27, 1986 
Public Law 99-563 
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99th Congress 
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An Act 
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Oct. 27, 1986 
To amend the Product Liability Risk Retention Act of 1981 to include coverage of 
[S. 2129] 
other lines of liability insurance, and for other purposes. 
Risk Retention 
Be it enacted by the Senate and House of Representatives of the 
Amendments of 
United States of America in Congress assembled, 
1986. 
State and local 
SECTION 1. SHORT TITLE. 
governments. 
15 use 3901 
This Act may be cited as the 
Risk Retention Amendments of 
note. 
1986". 
SEC. 2. REFERENCES IN THE ACT. 
Whenever in this Act an amendment is expressed in terms of an 
amendment to a section, the reference shall be deemed to be a 
reference to the Product Liability Risk Retention Act of 1981 (15 
U.S.C. 3901 et seq.), unless otherwise provided. 
SEC. 3. COVERAGE OFFERED BY RISK RETENTION GROUPS. 
(a) EXPANSION OF COVERAGE.—Section 2(a) (15 U.S.C. 3901(a)) is 
amended— 
(1) by striking paragraphs (1) and (3); 
(2) by redesignating paragraph (2) as paragraph (1); and 
(3) by inserting after paragraph (1), as so redesignated, the 
following new paragraphs: 
"(2) 'liability'— 
"(A) means legal liability for damages (including costs of 
defense, legal costs and fees, and other claims expenses) 
because of injuries to other persons, damage to their prop-
erty, or other damage or loss to such other persons result-
ing from or arising out of^ 
"(i) any business (whether profit or nonprofit), trade, 
product, services (including professional 
services), 
premises, or operations, or 
"(ii) any activity of any State or local government, or 
any agency or political subdivision thereof; and 
"(B) does not include personal risk liability and an 
employer's liability with respect to its employees other than 
legal liability under the Federal Employers' Liability Act 
(45 U.S.C. 51 et seq.); 
"(3) 'personal risk liability' means liability for damages 
because of injury to any person, damage to property, or other 
loss or damage resulting from any personal, familial, or house-
hold responsibilities or activities, rather than from responsibil-
ities or activities referred to in paragraphs (2XA) and (2XB);". 
(b) DEFINITIONS.—Such section is further amended— 
(1) by striking "and" at the end of paragraph (5); 
(2) by striking the period at the end of paragraph (6) and 
inserting "; and"; and 
(3) by adding at the end thereof the following new paragraph: 
PUBLIC LAW 99-563—OCT. 27, 1986 
100 STAT. 3171 
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"(7) 'hazardous financial condition' means that, based on its 
present or reasonably anticipated financial condition, a risk 
retention group is unlikely to be able— 
"(A) to meet obligations to policyholders with respect to 
known claims and reasonably anticipated claims; or 
< "(B) to pay other obligations in the normal course of 
business.". 
SEC. 4. REQUIREMENTS RELATING TO RISK RETENTION GROUPS AND 
PURCHASING GROUPS. 
(a) CHARACTERISTICS OF RISK RETENTION GROUPS AND THEIR MEM-
BERS.—(1) Section 2(a)(4) (15 U.S.C. 3901(a)(4)) is amended by striking 
"taxable as a corporation, or as an insurance company, formed 
under the laws of any State, Bermuda, or the Cayman Islands". 
(2) Subparagraph (A) of such section is amended by striking 
"product liability or completed operations liability risk exposure" 
and inserting "liability exposure". 
(3) Subparagraph (C) of such section is amended to read as follows: 
"(C) which— 
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"(i) is chartered or licensed as a liability insurance 
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company under the laws of a State and authorized to 
engage in the business of insurance under the laws of 
such State; or 
"(ii) before January 1,1985, was chartered or licensed 
and authorized to engage in the business of insurance 
under the laws of Bermuda or the Cayman Islands and, 
before such date, had certified to the insurance 
commissioner of at least one State that it satisfied the 
capitalization requirements of such State, except that 
any such group shall be considered to be a risk reten-
tion group only if it has been engaged in business 
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continuously since such date and only for the purpose 
of continuing to provide insurance to cover product 
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liability or completed operations liability (as such 
terms were defined in this section before the date of the 
enactment of the Risk Retention Act of 1986);". 
(4) Such section is further amended— 
(A) by striking "and" at the end of subparagraph (D); and 
(B) by striking subparagraph (E) and inserting the following 
new subparagraphs: 
"(E) which— 
"(i) has as its owners only persons who comprise the 
membership of the risk retention group and who are 
provided insurance by such group; or 
"(ii) has as its sole owner an organization which has 
£is— 
"(I) its members only persons who comprise the 
membership of the risk retention group; and 
"(II) its owners only persons who comprise the 
membership of the risk retention group and who 
are provided insurance by such group; 
"(F) whose members are engaged in businesses or activi-
ties similar or related with respect to the liability to which 
such members are exposed by virtue of any related, similar, 
or common business, trade, product, services, premises, or 
operations; 
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Corporations. 
Business and 
industry. 
Bermuda. 
Cayman Islands. 
100 STAT. 3172 
PUBLIC LAW 99-563—OCT. 27, 1986 
"(G) whose activities do not include the provision of 
insurance other than— 
"(i) habihty insurance for assuming and spreading all 
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or any portion of the similar or related liability expo-
sure of its group members; and 
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"(ii) reinsurance with respect to the similar or 
related liability exposure of any other risk retention 
group (or any member of such other group) which is 
engaged in businesses or activities so that such group 
(or member) meets the requirement described in 
subparagraph (F) for membership in the risk retention 
group which provides such reinsurance; and 
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"(jj) ^jjg name of which includes the phrase 'Risk Reten-
tion Group'.", 
(b) CHARACTERISTICS OF PURCHASING GROUPS.—Section 2(aX5) (15 
U.S.C. 3901(aX5)) is amended to read as follows: 
"(5)'purchasing group'means any group which— 
"(A) has as one of its purposes the purchase of liability 
insurance on a group basis; 
"(B) purchases such insurance only for its group members 
and only to cover their similar or related liability exposure, 
as described in subparagraph (C); 
"(C) is composed of members whose businesses or activi-
ties are similar or related with respect to the liability to 
which members are exposed by virtue of any related, simi-
lar, or common business, trade, product, services, premises, 
or operations; and 
"(D) is domiciled in any State;". 
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SEC. 5. CONCERNING SCOPE OF EXEMPTIONS RELATING TO RISK RETEN-
TION GROUPS. 
(a) IN GENERAL.—Section 3(b) (15 U.S.C. 3902(b)) is amended to 
read as follows: 
Business and 
"0>) The exemptions specified in subsection (a) apply to laws 
industry. 
governing the insurance business pertaining to— 
"(1) liability insurance coverage provided by a risk retention 
group for— 
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"(A) such group; or 
"(B) any person who is a member of such group; 
"(2) the sale of liability insurance coverage for a risk reten-
tion group; and 
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"(3) the provision of^-
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"(A) insurance related services; 
Securities. 
"(B) mgmagement, operations, and investment activities; 
Claims. 
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"(C) loss Control and claims administration (including loss 
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control and claims administration services for uninsured 
risks regained by any member of such group); 
for a risk retention group or any member of such group with 
respect to liability for which the group provides insurance.". 
(b) PLANS OF OPERATION, FEASIBILITY STUDIES, AND FINANCIAL 
STATEMENTS.—Section 3 (15 U.S.C. 3902) is further amended— 
(1) in subsection (aXD— 
(A) by striking subparagraph (D) and redesignating sub-
paragraphs (E), (F), and (G) as subparagraphs (D), (E), and 
(F), accordingly; and 
PUBLIC LAW 99-563—OCT. 27, 1986 
100 STAT. 3173 
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(B) by striking all that follows after "documents or proc-
ess" in subparagraph (D) (as redesignated) and inserting a 
semicolon; and 
(2) by adding at the end of such section the following new 
subsection: 
"(d) Each risk retention group shall submit— 
"(1) to the insurance commissioner of the State in which it is 
chartered— 
"(A) before it may offer insurance in any State, a plan of 
operation or a feasibility study which includes the 
coverages, deductibles, coverage limits, rates, and rating 
classification systems for each line of insurance the 
group intends to offer; and 
"(B) revisions of such plan or study if the group intends to 
offer any additional lines of liability insurance; 
"(2) to the insurance commissioner of each State in which it 
intends to do business, before it may offer insurance in such 
State— 
"(A) a copy of such plan or study (which shall include the 
name of the State in which it is chartered and its principal 
place of business); and 
"(B) a copy of any revisions to such plan or study, as 
provided in paragraph (IXB) (which shall include any 
change in the designation of the State in which it is char-
tered); and 
"(3) to the insurance commissioner of each State in which it is 
doing business, a copy of the group's annual financial statement 
submitted to the State in which the group is chartered as an 
insurance company, which statement shall be certified by an 
independent public accountant and contain a statement of opin-
ion on loss and loss adjustment expense reserves made by— 
"(A) a member of the American Academy of Actuaries, or 
"(B) a qualified loss reserve specialist.". 
(c) EXAMINATION OF FINANCIAL CONDITION.—Section 3(aXlXE) (as 
15 use 3902. 
redesignated by subsection (b)) is amended— 
(1) by striking clause (i); 
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(2) by redesignating clause (ii) as clause (i); and 
(3) by adding at the end the following new clause: 
"(ii) any such examination shall be coordinated to 
avoid unjustified duplication and unjustified repeti-
tion;". 
(d) COMPLIANCE WITH DELINQUENCY PROCEEDING ORDERS.—Section 
3(aXlXF) (as redesignated by subsection (b)) is amended to read as 
follows: 
"(F) comply with a lawful order issued— 
"(i) in a delinquency proceeding commenced by the 
State insurance commissioner if there has been a find-
ing of financial impairment under subparagraph (E); or 
"(ii) in a voluntary dissolution proceeding;". 
(e) ADDITIONAL STATE LAW REQUIREMENTS.—Section 3(aXl) (15 
U.S.C. 3902(aXl)) is further amended by adding at the end the 
following new subparagraphs: 
"(G) comply with any State law regarding deceptive, 
false, or fraudulent acts or practices, except that if the 
Fraud. 
State seeks an injunction regarding the conduct described 
in this subparagraph, such injunction must be obtained 
from a court of competent jurisdiction; 
100 STAT. 3174 
PUBLIC LAW 99-563—OCT. 27, 1986 
"(H) comply with an injunction issued by a court of 
competent jurisdiction, upon a petition by the State insur-
ance commissioner alleging that the group is in hazardous 
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financial condition or is financially impaired; and 
"(I) provide the following notice, in 10-point type, in any 
insurance policy issued by such group: 
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NOTICE 
" 'This policy is issued by your risk retention group. Your risk 
retention group may not be subject to all of the insurance laws and 
regulations of your State. State insurance insolvency guaranty 
funds are not available for your risk retention group.' ". 
SEC. 6. ADDITIONAL REQUIREMENTS RELATING TO PURCHASING GROUPS. 
Post, p. 3175. 
Section 4 (15 U.S.C. 3903) is amended by adding at the end the 
following new subsections: 
"(d)(1) A purchasing group which intends to do business in any 
State shall furnish notice of such intention to the insurance commis-
sioner of such State. Such notice— 
"(A) shall identify the State in which such group is domiciled; 
"(B) shall specify the lines and classifications of liability 
insurance which the purchasing group intends to purchase; 
"(C) shall identify the insurance company from which the 
group intends to purchase insurance and the domicile of such 
company; and 
"(D) shall identify the principal place of business of the group. 
"(2) Such purchasing group shall notify the commissioner of any 
such State £is to any subsequent changes in any of the items 
provided in such notice. 
"(e) A purchasing group shall register with and designate the 
State insurance commissioner of each State in which it does busi-
ness as its agent solely for the purpose of receiving service of legal 
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documents or process, except that such requirement shall not apply 
in the case of a purchasing group— 
"(1) which— 
"(A) was domiciled before April 1,1986; and 
"(B) is domiciled on and after the date of the enactment 
of this Act; 
in any State of the United States; 
"(2) which— 
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"(A) before the date of the enactment of this Act, pur-
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chased insurance from an insurance carrier licensed in any 
State; and 
"(B) since such date of enactment, purchases its insur-
ance from an insurance carrier licensed in any State; 
"(3) which w£is a purchasing group under the requirements of 
this Act before the date of the enactment of the Risk Retention 
Amendments of 1986; and 
"(4) as long as such group does not purchase insurance that 
was not authorized for purposes of an exemption under this Act 
as in effect before the date of the enactment of the Risk 
Retention Amendments of 1986. 
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"(f) A purchasing group may not purchase insurance from a risk 
retention group that is not chartered in a State or from an insurer 
not admitted in the State in which the purchasing group is located, 
unless the purchase is effected through a licensed agent or broker 
PUBLIC LAW 99-563—OCT. 27, 1986 
100 STAT. 3175 
acting pursuant to the surplus lines laws and regulations of such 
State.". 
SEC. 7. CONCERNING AUTHORITY OF STATES TO ENJOIN CERTAIN CON-
DUCT. 
. Section 3 (15 U.S.C. 3902), as amended by section 5(b) of this Act, is 
further amended by adding at the end the following new subsection: 
"(e) Nothing in this section shall be construed to affect the 
authority of any Federal or State court to enjoin— 
"(1) the solicitation or sale of insurance by a risk retention 
group to any person who is not eligible for membership in such 
group; or 
"(2) the solicitation or sale of insurance by, or operation of, a 
, 
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risk retention group that is in hazardous financial condition or 
is financially impaired.". 
SEC. 8. ADDITIONAL CLARIFICATION OF PERMISSIBLE STATE AUTHOR-
ITY. 
(a) CLARIFICATION OF STATE AUTHORITY RESPECTING RISK RETEN-
TION GROUPS.—Section 3 (15 U.S.C. 3902), as amended by sections 
5(b) and 7 of this Act, is further amended by adding at the end the 
following new subsections: 
"(f)(1) Subject to the provisions of subsection (a)(1)(G) (relating to 
injunctions) and paragraph (2), nothing in this Act shall be con-
strued to affect the authority of any State to make use of any of its 
powers to enforce the laws of such State with respect to which a risk 
retention group is not exempt under this Act. 
"(2) If a State seeks an injunction regarding the conduct described 
in paragraphs (1) and (2) of subsection (e), such injunction must be 
obtained from a Federal or State court of competent jurisdiction. 
"(g) Nothing in this Act shall affect the authority of any State to 
bring an action in any Federal or State court. 
"(h) Nothing in this Act shall be construed to affect the authority 
of any State to regulate or prohibit the ownership interest in a risk 
retention group by an insurance company in that State, other than 
in the case of ownership interest in a risk retention group whose 
members are insurance companies.". 
(b) CLARIFICATION OF STATE AUTHORITY RESPECTING PURCHASING 
GROUPS.—Section 4 (15 U.S.C. 3903), as amended by section 6 of this 
Act, is further amended— 
(1) in subsection (a), by inserting "and section 6" after "sec-
tion"; and 
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(2) by adding at the end the following new subsections: 
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"(g) Nothing in this Act shall be construed to affect the authority 
of any State to make use of any of its powers to enforce the laws of 
such State with respect to which a purchasing group is not exempt 
under this Act. 
"(h) Nothing in this Act shall affect the authority of any State to 
bring an action in any Federal or State court.". 
(c) OTHER CLARIFICATION.—The Act is further amended by adding 
at the end the following new section: 
"CLARIFICATION CONCERNING PERMISSIBLE STATE AUTHORITY 
"SEC. 6. (a) Nothing in this Act shall be construed to exempt a risk 
Motor vehicles. 
retention group or purchasing group authorized under this Act from 
^^ ^SC 3905. 
100 STAT. 3176 
PUBLIC LAW 99-563—OCT. 27, 1986 
the policy form or coverage requirements of any State motor vehicle 
no-fault or motor vehicle financial responsibility insurance law. 
"(b) The exemptions provided under this Act shall apply only to 
the provision of liability insurance by a risk retention group or the 
purchase of liability insurance by a purchasing group, and nothing 
in this Act shall be construed to permit the provision or purchase of 
any other line of insurance by any such group. 
"(c) The terms of any insurance policy provided by a risk retention 
group or purchased by a purchasing group shall not provide or be 
construed to provide insurance policy coverage prohibited generally 
by State statute or declared unlawful by the highest court of the 
State whose law applies to such policy. 
15 use 3902. 
"(d) Subject to the provisions of section 3(a)(4) relating to discrimi-
nation, nothing in this Act shall be construed to preempt the 
authority of a State to specify acceptable means of demonstrating 
financial responsibility where the State has required a demonstra-
tion of financial responsibility as a condition for obtaining a license 
or permit to undertake specified activities. Such means may include 
or exclude insurance coverage obtained from an admitted insurance 
company, an excess lines company, a risk retention group, or any 
other source regardless of whether coverage is obtained directly 
from an insurance company or through a broker, agent, purchasing 
group, or any other person.". 
SEC. 9. INJUNCTIVE POWERS OF FEDERAL COURTS. 
The Act, as amended by section 8(c) of this Act, is further 
amended by adding at the end the following new section: 
"INJUNCTIVE ORDERS ISSUED BY UNITED STATES DISTRICT COURTS 
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"SEC. 7. Any district court of the United States may issue an order 
enjoining a risk retention group from soliciting or selling insurance, 
or operating, in any State (or in all States) or in any territory or 
possession of the United States upon a finding of such court that 
such group is in hazardous financial condition. Such order shall be 
binding on such group, its officers, agents, and employees, and on 
any other person acting in active concert with any such officer, 
agent, or employee, if such other person has actual notice of such 
order.". 
SEC, 10. OVERSIGHT OF IMPLEMENTATION; REPORT TO CONGRESS. 
15 use 3901 
(a) IN GENERAL.—(1) Not later than September 1, 1987, and not 
note. 
later than September 1, 1989, the Secretary of Commerce shall 
submit reports to the Congress concerning implementation of this 
Act. 
(2) Such report shall be based on— 
(A) the Secretary's consultation with State insurance commis-
sioners, risk retention groups, purcheising groups, and other 
interested parties; and 
(B) the Secretary's analysis of other information available to 
the Secretary. 
(b) CONTENTS OF THE REPORT.—The report shall describe the Sec-
retary's views concerning— 
(1) the contribution of this Act toward resolution of problems 
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relating to the unavailability and unaffordability of liability 
insurance; 
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PUBLIC LAW 99-563—OCT. 27, 1986 
100 STAT. 3177 
(2) the extent to which the structure of regulation and 
preemption established by this Act is satisfactory; 
(3) the extent to which, in the implementation of this Act, the 
public is protected from unsound financial practices and other 
commercial abuses involving risk retention groups and purchas-
ing groups; 
(4) the causes of any financial difficulties of risk retention 
groups and purchasing groups; 
(5) the extent to which risk retention groups and purchasing 
groups have been discriminated against under State laws, prac-
tices, and procedures contrary to the provisions and underlying 
policy of this Act and the Product Liability Risk Retention Act 
(as amended by this Act); and 
(6) such other comments and conclusions as the Secretary 
deems relevant to assessment of the implementation of this Act. 
SEC. 11. EFFECTIVE DATE; APPLICABILITY. 
(a) GENERAL RULE.—Subject to subsection (b), this Act shall take 
effect on the date of its enactment. 
(b) SPECIAL RULE REGARDING FEASIBIUTY STUDY.—The provisions 
of section 3(d) of the Liability Risk Retention Act of 1986 (as added 
by section 5(b) of this Act), relating to the submission of a feasibility 
study, shall not apply with respect to any line or classification of 
liability insurance wMch— 
(1) was defined in the Product Liability Risk Retention Act of 
1981 before the date of the enactment of this Act; and 
(2) was offered before such date of enactment by any risk 
retention group which has been chartered and operating for not 
less than 3 years before such date of enactment. 
(c) RULE REGARDING POLLUTION LIABILITY.— 
(1) Section 210 of the Superfund Amendments and Reauthor-
ization Act of 1986 is amended by inserting "(a)" following 
"Pollution Liability Insurance" and adding at the end thereof 
the following: 
"(b) For purposes of subsection (a) of this section, the powers and 
authorities of States addressed by the Risk Retention Amendments 
of 1986 are in addition to those of this Act.". 
(2) Nothing in this Act shall be construed, interpreted or 
applied to diminish the obligations of any person to establish or 
maintain evidence of financial responsibility or otherwise 
comply with any of the requirements of Federal environmental 
laws, including but not limited to the (I!omprehensive Environ-
mental Response, C!ompensation and Liability Act of 1980 and 
the Solid Waste Disposal Act. 
SEC. 12. TECHNICAL AND CONFORMING AMENDMENTS. 
(a) IN THE SHORT TITLE.—Section 1 (15 U.S.C. 
amended to read as follows: 
15 u s e 3901 
note. 
15 u s e 3901 
note. 
15 u s e 3901 
note. 
Ante, p. 1716. 
42 u s e 9671 
note. 
15 u s e 3901 
note. 
42 u s e 9601 
note. 
42 u s e 6901 
note. 
3901, note) is 
Ante, p. 3170. 
SHORT TITLE 
"SECTION 1. This Act may be cited as the 'Liability Risk Retention 
Act of 1986'." 
(b) IN SECTION 2(b).—Section 2(b) (15 U.S.C. 3901(b)) is amended by 
striking "product liability and product liability insurance" and 
inserting "liability, personal risk liability, and insurance". 
Liability 
Risk Retention 
Act of 1986. 
100 STAT. 3178 
PUBLIC LAW 99-563—OCT. 27, 1986 
(c) IN SECTION 3(a)(1)(C).—Section 3(a)(1)(C) (15 U.S.C. 3902(a)(lXC)) 
is amended by striking "product liability or completed operations". 
(d) IN SECTION 4(b).—Section 4(b) (15 U.S.C. 3903(b)) is amended— 
(1) in paragraph (1), by striking "product liability or 
completed operations liability insurance, and comprehensive 
general liability insurance which includes either of these 
coverages," and inserting "liability insurance"; and 
(2) in paragraph (2), by striking "product liability or com-
pleted operations insurance, and comprehensive general". 
Approved October 27, 1986. 
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LEGISLATIVE HISTORY—S. 2129 (H.R. 5225): 
HOUSE REPORTS: No. 99-865 accompanying H.R. 5225 (Cbmm. on Energy and 
Commerce). 
SENATE REPORTS: No. 99-294 (Comm. on Commerce, Science, and Transportation). 
CONGRESSIONAL RECORD, Vol. 132 (1986): 
July 17, considered and passed Senate. 
Sept. 23, H.R. 5225 considered and passed House; proceedings vacated and S. 
2129, amended, passed in lieu. 
Oct. 6, Senate concurred in House amendments with an amendment. 
Oct. 9, House concurred in Senate amendment.