The insurance industry, particularly property/casualty insurance, is known for alternating periods of "hard" and "soft" markets. Turns in this cycle are typically traced to unexpected changes in the investment climate, unexpected changes in insurance payouts, or both. During a typical hard market, the supply of insurance goes down, insurance prices go up, and underwriting standards become more stringent. This often leads to consumers encountering difficulty in finding and affording insurance. During a soft market, prices are typically flat, and insurers are more willing to underwrite greater risks, so consumers typically do not face such problems in obtaining insurance. Legislative attention tends to focus on insurance matters during hard markets as constituents relate complaints about finding or affording insurance to their legislators. Because regulation of the insurance market was left to the states in the McCarran-Ferguson Act of 1945, however, the legislature in question is most often a state legislature. Among the solutions offered at the state level has been the creation of, or allowance for, "alternative" market entities to increase the amount of insurance available to consumers. The alternative market is made up of entities or arrangements that spread and finance risk like an insurance company, but that operate outside the normal regulations governing the world of "regular" insurance companies. In 1981, Congress authorized the creation of alternative market entities known as risk retention groups and risk purchasing groups (RRGs and RPGs). Their purpose was to expand insurance supply by simplifying state insurance regulation. In the 1981 act, subsequently amended in 1986 and known now as the Liability Risk Retention Act (LRRA), Congress crafted a narrow exception to the usual state insurance regulations for these groups in largely exempting the groups from multiple state regulation. Over the past few years, interest in risk retention and purchasing groups has increased as access to affordable insurance has become a challenge for some businesses. Some have suggested that Congress needs to expand the narrow exception that was made in the 1980s in order to expand the supply of insurance in areas outside of the liability coverage allowed under the current law. Legislation was introduced in both the 110 th and 111 th Congresses to expand the LRRA to commercial property insurance, but no action was take on these bills. Such legislation ( H.R. 2126 ) was introduced again in the 112 th Congress by Representative John Campbell. H.R. 2126 was introduced by Representatives John Campbell, along with Representative Peter Welch, on June 3, 2011. It has been referred to the House Committee on Financial Services. This bill would expand the federal preemption of state insurance laws, allowing risk retention groups to cover commercial property risks and risk purchasing groups to purchase coverage for commercial property risks. The bill would also change the enforcement mechanism for federal preemptions in the LRRA, and add additional federal corporate governance, disclosure, and fiduciary duty requirements for risk retention groups under the act. Under existing law, the federal preemptions in the LRRA are enforced through court action. If a risk retention group believes a state is attempting to regulate in a manner counter to the LRRA, it can bring suit in a federal court. H.R. 2126 would create a process under which the director of the Federal Insurance Office could issue determinations as to whether a state's regulation of an RRG or RPG is preempted by the act. In addition, the director is to study and issue reports to Congress on the states' regulation of RRGs and RPGs and the compliance with the LRRA. The corporate governance standards to be issued by the director of the Federal Insurance Office by the bill would include requirements that a majority of directors on an RRG's board be independent, any audit committee be made up of independent directors, written governance standards be in place, and contracts with service providers be limited to less than five years and be approved by the state insurance commissioner. Additional specific amendments to the LRRA would expand the consumer disclosure required in the act and impose a fiduciary duty on the board of directors of a risk retention group. H.R. 4802 was introduced by Representative Dennis Moore (along with Representatives John Campbell and Suzanne Kosmas) on March 10, 2010. It was referred to the House Committee on Financial Services but was not acted upon further. This bill was essentially similar to H.R. 2126 as introduced in the 112 th Congress (detailed above). Differences include the replacement of the "Secretary of the Treasury" in H.R. 4802 with the "Director of the Federal Insurance Office" as the primary federal official tasked with overseeing state compliance with federal law and the deletion of a section in H.R. 4802 calling for an study by the Comptroller General of the United States. The sponsors of H.R. 4802 , through a separate July 22, 2010, letter to the Comptroller General, requested that the Government Accountability Office (GAO) conduct a study similar to the one required in H.R. 4802 . According to Representative Moore's office, GAO indicated that such a study would be conducted, but it is unclear when the results may be issued. H.R. 5792 was introduced by Representative Dennis Moore (along with Representatives Deborah Price, John Campbell, and Ron Klein) on April 15, 2008. It was addressed in an April 16 hearing "Examining Proposals on Insurance Regulatory Reform" held by the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. The bill was marked up by this subcommittee on July 9, 2008, and forwarded to the full committee, but it was not acted on further in the 110 th Congress. H.R. 5792 would have expanded the LRRA exemptions to commercial property insurance. In addition, the bill would have implemented a number of corporate governance standards for RRGs, including requiring a majority of independent directors on an RRG's board, requiring an audit committee made up of independent directors, requiring a written charter, and limiting longer-term contracts with service providers. The bill would also have required all RRGs offering property coverage to be U.S.-licensed insurance companies. Risk retention groups are required by current federal law to be state-chartered insurance companies; they are allowed to insure commercial liability risks, such as the risk that a physician will be found liable for medical malpractice, but not other property/casualty risks, such as the risk that a physician's office might burn down. These insurance companies also must be owned by the members of the group. All policies issued by a risk retention group must bear a federally mandated warning that the policy is not regulated or guaranteed in the same way as other insurance. Group members are required to be businesses, including individual professionals such as physicians and attorneys, or government entities, such as public universities, school districts, and town or city administrations, who are engaged in a similar business or face similar risks. The exact corporate structure of a risk retention group can vary. Many are licensed as "captive" insurers, which may have lower capital requirements, but some are licensed as "regular" mutual insurers. Risk purchasing groups are likewise groups of entities in a similar business or facing similar risks. Instead of creating their own insurance company, these groups join together to purchase commercial insurance from established insurance companies. If risk retention groups must be licensed as an insurer under the existing laws of an individual state, two questions arise: What advantages do they possess? Why go to the trouble and expense of creating such a group? The answers are in the different regulatory treatment of these groups as they operate outside of the state where they are chartered (or "domiciled"). Under normal circumstances, an insurer who wishes to operate outside of its domiciliary state must receive a license and submit to regulation from every state in which it wishes to do business. This means complying with up to 51 different sets of state or district laws and regulations in order to do business across the country. The impact of this multiplicity of regulation is particularly high in insurance, as compared with other businesses, because both the prices and the content of insurance policies are highly regulated in most states. This perceived burden of multiple state regulatory systems is also the primary argument cited currently by some in the insurance industry for creating a federal charter to replace or supplement the current state system. Risk retention groups are exempted by federal law from the requirement to be licensed in all states in which they operate as well as from other state laws regulating the business of insurance. They must register and file documentation with a state's insurance regulator, but after this filing, they are essentially free to do business in that state. This exemption from state law extends to most laws on the business of insurance, but laws such as those on fraudulent trade practices, nondiscrimination, and unfair claim settlement practices still apply. Risk retention groups must also pay state premium taxes as regular insurers do. In addition, a non-domiciliary state's insurance regulator is empowered to monitor the financial solvency of a group, including requiring that a group submit to a financial condition examination if the chartering state regulator refuses to do such an exam, and seeking an injunction to force it to cease doing business if the group is in hazardous financial condition. This regulatory oversight is less than that accorded regular insurance companies, however, and some observers fear that this might lead to an increased danger of such groups becoming insolvent. In the case of a risk retention group insolvency, the policyholders have no recourse to a state guaranty fund because membership in these funds is specifically prohibited by the federal statute. Risk purchasing groups are given a similar, but more limited, exemption from state law. Many states have laws, known as "fictitious grouping laws," that specifically prohibit or limit groups from purchasing insurance for the members of the group, particularly if the group exists solely for the purchase of insurance. State insurance regulators use these laws to protect consumers and ensure solvency.