Risk Retention Group (E) Task Force
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The Risk Retention Group (E) Task Force met Dec. 5, 2009. During this meeting, the Task Force:

• Discussed the Annual Financial Reporting Model Regulation (#205) and the corporate governance standards for risk retention groups (RRGs) licensed as captive insurers. Significant revisions to model #205 were adopted in 2006 and require that insurers comply with certain best practices related to auditor independence, corporate governance and internal controls over financial reporting. Corporate governance standards specific to RRGs were adopted by the Property and Casualty Insurance (C) Committee at the 2007 Summer National Meeting. The Task Force discussed specific sections in model #205 that will be required for traditional insurers for accreditation purposes and noted that some of the requirements related to audit committees and independence conflict with related guidance in the corporate governance standards. The Task Force agreed that it would be acceptable for a state to adopt either the requirements in model #205 or the corporate governance standards. NAIC staff will draft updated guidance that will be discussed on an interim conference call.

• Discussed a letter from Vermont regarding the previously adopted Part A: Laws and Regulations standards for RRGs. At the 2008 Summer National Meeting, the Task Force voted to adopt its "Part A Summary Memo" regarding which Part A standards should apply to captive RRGs. Vermont's letter included several interpretative questions related to the filing of RBC reports, holding company disclaimers of affiliation and reinsurance. Regarding RBC reports, the Task Force agreed that the Part A Summary Memo should be updated to require RRGs to file an annual RBC report, but it also formed a subgroup to develop a regulatory tool for use with RRGs that would more accurately assess the adequacy of capital. The Task Force also decided that a guideline should be added to the Information Sharing standard, indicating that states should require RRGs to file a disclaimer of affiliation with other states in which they are licensed as a change in business plan. Regarding reinsurance, the Task Force agreed that the required rating agency ratings should be treated prospectively.

• Discussed a letter from the National Risk Retention Association requesting that the accreditation standards related to RRGs be amended to promote state compliance with the legal requirements of the federal Liability Risk Retention Act. The Task Force discussed that the purpose of the accreditation program is to ensure sufficient state regulation by the domestic state and not to limit the authority of non-domestic states. For that reason, penalizing non-domestic states for taking certain actions in regard to RRGs is not within the scope or spirit of the accreditation program. The Task Force noted that it might be appropriate to include guidance on this issue in the Risk Retention and Purchasing Group Handbook and agreed to refer the issue to the Property and Casualty Insurance (C) Committee.