National Underwriter - October 3, 2011

Poll Finds Strong Majority Of RRGs,
PGs Favor Property Coverage Addition

BY KARRIE HYATT

In two recent surveys, strong majori- ties of risk-retention group (RRG) and purchasing-group (PG) managers indicate they would be in favor of offering property coverage to their members if given the opportunity.

The Risk Retention Reporter conducted the surveys in response to introduction of the Risk Retention Modernization Act, H.R. 2126, to the House of Representatives in June.

If passed, H.R. 2126 would allow both RRGs and PGs to write property coverage in addition to the liability coverage they already offer.

H.R. 2126 would also create a mediator in the Office of Federal Insurance to settle disputes between non-domiciliary states and RRGs and PGs; and it would set corporate-governance standards for RRGs.

In 2006, the Risk Retention Reporter conducted a similar survey, canvassing only RRGs. At that time, only 40 percent of respondents were interested in property coverage for their group.

The reasoning for the change would seem to be the difference in markets. With the soft market, being able to write a more comprehensive package would help to keep members and attract new members.

At the time of the last survey, taken at the height of the hard market, property didn’t make such a big difference.

Of RRGs surveyed this summer, 66 percent say there would be a moderate to definite likelihood their RRG would add property coverage to the products offered to their members. Only 34 percent answer there is little to no possibility their RRGs would offer the coverage (see chart).

The PG survey returns even more positive results: 33 percent of PG managers indicate they would definitely add property coverage. Another 33 percent note a high

SURVEY

33%

11%

22%

11%

14%

13%

Not Likely

Purchasing Groups Risk Retention Groups

Low Moderate High De;nite

10% 20% 30% 40%

21%

What Is The Likelihood You Would Offer
Property Coverage To Members?

likelihood they would offer the coverage; and 11 percent answer there is a moderate likelihood of offering the coverage. Just 23 percent respond there is little to no chance they would offer property (see chart).

63 percent indicate there is a high to very high chance that the additional coverage would positively aid their business.

RRG managers are less enthusiastic,
with only 30 percent responding
there would be a high to very high
chance that it would help them.
Another question asked was
whether respondents thought the
ability to write property insurance
would make their business sec-
tor more competitive—with new
RRGs and PGs forming to write
that type of coverage.
Only 35 percent of PG respon-
dents believe it would negatively
affect their business and 65 per-
cent think there is moderate to no
chance the addition of property
coverage would make their busi-
ness sector more competitive.
The majority of RRG respon-
dents, 59 percent, also say they
believe the chance of new com-
petition would be low to unlikely.
Many survey respondents are
enthusiastic about the opportunity
to offer property coverage (espe-
cially auto). Several respondents,
however, note the substantial dif-
ferences between underwriting
and claims handling for liability
and for property, observing that many
existing groups would not have the ex-
perience to manage property coverage—
and they caution that careful preparation
would be needed of RRGs before entering
the property arena. NU

BOON TO BUSINESS?

Both PGs and RRGs were asked whether the addition of property coverage would be a boon to their business and allow them to expand their base of insureds.