February 13, 2014
HOT TOPICS PLANNED FOR 2014
CONFERENCE IN CHICAGO
Plans for NRRA’s 2014
Conference -- to be held in Chicago for the first time -- are moving ahead with
hot topics on the agenda. The Conference is scheduled for September 30 through
October 2 at the luxurious Sofitel Hotel on the city’s Gold Coast.
“After holding the Conference
in Washington, DC, for the last several years, we chose Chicago this year for
its central location easily accessible to members from all parts of the
country. Early Fall is a great time of year in Chicago, and the Sofitel is
close to five-star restaurants, shopping, museums and other attractions for
attendees to enjoy,” said Rod Nofziger,
A major session will be
devoted to the future direction of Risk Retention Groups as an industry in the
face of slow growth with no early end in sight for the soft market. Industry
executives, analysts and regulators will assess the outlook and offer advice on
how to navigate the road ahead. Other hot topics include the increasingly
important issue of Cyber Security for RRGs and the developing impact of the
Affordable Care Act on RRGs in the healthcare sector.
“The Conference Committee
will be developing the program over the next few weeks. We welcome suggestions
from our members on subjects that are important to their operations,” Nofziger
said. Suggestions should be directed to Executive Director Joe Deems (email@example.com). Major speakers and a host of expert panels
on a wide variety of topics essential to RRGs and PGS will be assembled over
the next couple of months.
Registration information will
be published soon on our website, www.riskretention.org. Please put the dates on your calendar now.
DEATH OF PATRICK TUOHY,
INSURANCE INDUSTRY LEADER AND FRIEND OF NRRA,
“We lost a great friend of
our Association with the untimely passing of Patrick Tuohy,” said Sanford Elsass, Chairman of the NRRA
Board. “Over the years, we enjoyed working with him and we’re saddened by his
Tuohy had been Senior Vice
President of Prime Advisors, Inc. Over the past 30 years, he held senior
positions at Brookfield Asset Management, American Re Asset Management and
Prudential Home Mortgage. He graduated from the Columbia University School of
Business and Bernard Baruch, CUNY.
PGs HIT PEAK IN 2013
Purchasing Groups topped out
at 912 in 2013 with 47 new groups and 14 that closed down, according to the Risk Retention Reporter.
“Despite the volatility in
the greater insurance marketplace, Purchasing Groups have been growing quite
steadily since 2005,” RRR reported.
Healthcare accounted for 16 of the new groups, followed by property development
with 11. Thirteen of the new PGs registered in Delaware, followed by Illinois
with seven and Texas with six.
RECORD NUMBER OF RRGs CLOSED AND INSOLVENCIES PEAKED IN 2013
The RRG marketplace hit a
bump in 2013 with retirements up, formations down and the largest number of
insolvencies in a single year since the Liability Risk Retention Act of 1986
launched the industry, according to the Risk
Retention Reporter’s year-end statistical journal.
Twenty-one RRGs ceased
operations while only 10 were licensed. Six RRGs became insolvent, compared
with one or two in most years. Of the 15 that closed, eight dissolved
voluntarily, one never became operational and six closed due to mergers. Seven
of the newly formed groups and nine of the retired groups, were in healthcare.
THE RRG MARKETPLACE TODAY --
In a recent interview, David Provost, Vermont Deputy
Commissioner, Captive Insurance Division and a leading authority on RRGs, said,
“I think the collection of RRGs will continue to outperform the industry in
2014.” As for slow growth and a spike in insolvencies, Provost observed, “I
really look at the number of insolvencies in 2013 as an aberration and see little
correlation among them. I look at some decrease in formations as simply a
market that has matured.”
Sanford Elsass, Chairman of the National Risk Retention
Association, pointed to exit issues for smaller RRGs, continuing opposition to
RRGs by a few hostile states and the pressure being brought to bear on
insurance departments by cash-strapped state governments to pay for their
operations by hiking up fees as major issues facing the industry in 2014. “Without
an exit strategy and a succession plan, it will be increasingly difficult for
smaller RRGs to realize their equity under current market conditions,” Elsass
Robert H. Myers, Managing Partner in the Washington, DC office
of Morris, Manning & Martin, LLP and General Counsel of NRRA, identified a
move by the National Association of Insurance Commissioners to treat captive
reinsurers as standard reinsurers as a new issue in 2014. According to Myers,
“wrapping captive reinsurers into the same regulatory framework as traditional
reinsurers through the accreditation process could impact some RRGs.”
Henry Witmer, a Senior Analyst at A. M. Best, cautioned that “uncertainty with
respect to the future of the RRG format as it continues to be debated at the
NAIC” may become a major issue in 2014. He said this may bring about “more
restricted regulatory scrutiny of RRGs and possible limitations on the
coverages offered.” As for industry performance, he said: “There are quite a
few very strong and well-capitalized RRGs that serve a well-defined niche.
These will continue to prosper. Others with a less sound capital base will
struggle, at least in the near term.”
February 8, 2014
SANDY ELSASS REPORTS ON RRG INDUSTRY
You can watch his two-part interview now on www.WRIN.tv -- the video network that reaches more than 25,000 insurance industry leaders across the country. Just click this LINK to see Sandy in action.