Congressman Dennis Moore (Third District – Kansas) and Congresswoman Deborah Pryce (Fifteenth District - Ohio), introduced legislation Tuesday to help bring down prices and increase coverage availability in the commercial property insurance marketplace.

The legislation, referred to as the Increasing Insurance Coverage Options for Consumers Act, would do this by allowing risk retention groups (RRGs) and risk purchasing groups (RPGs) to expand their insurance offerings to include commercial property coverage. Currently, they are limited to offering liability coverage.

“My legislation will build upon the success of these groups in improving capacity in the liability marketplace by expanding coverage to commercial property coverage,” said Moore, a senior member of the House Financial Services Committee. “At the same time, it will shore up corporate governance standards for these entities to ensure that the groups are operating in the best interest of their members. The bipartisan support for this legislation is a testament to the need for this reform.”

In response to recurring shortages of liability insurance, Congress passed the Products Liability Risk Retention Act in 1981. This legislation authorized a group of similar businesses with similar risk exposures to form RRGs to self-insure those risks on a group basis and created RPGs to allow insurers to market on a group basis. In 1986, the Act was amended into its present form to include all types of liability coverage while also providing that RRGs and RPGs would be regulated primarily by their domiciliary states, with only limited regulatory oversight by non-domiciliary states in which the groups operate.

A 2005 study conducted by the Government Accountability Office (GAO) found that RRGs have had an important effect on increasing the availability and affordability of commercial insurance for certain groups with limited access to insurance, such as medical malpractice insurance. The GAO also found, however, that the Act’s partial preemption of state insurance laws has resulted in divergent state standards and limited regulator confidence in the system.

Congresswoman Pryce, who introduced the bill with Moore, echoed the importance of passing this important reform: “Risk retention groups proved their effectiveness when the traditional liability insurance industry became cost-prohibitive to a number of sectors in our economy like malpractice insurance, higher education, and public housing. With enhanced regulation, risk retention groups should be expanded to provide affordable coverage to areas of our economy that have proven difficult to price, such as catastrophic coverage.”

Moore and Pryce were joined by their colleagues Congressman John Campbell [R-CA] and Ron Klein [D-FL], who are original cosponsors of the legislation. The legislation was introduced in advance of a Wednesday hearing on insurance regulation scheduled to be held by the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.