DISB Supports NAIC Regulatory Activities Affecting Captives (Cont.)

To address the issues by the GAO, the NAIC had appointed two groups: one under C Committee and one under E Committee. The Risk Retention (C) Working Group has been asked to study the corporate governance issues; consider how to improve transparency to RRG member/policyholders regarding the lack of guaranty fund coverage, and address issues regarding whether it is appropriate for an RRG to sell contractual liability to an entity that is off-loading a risk that it has assumed by selling a service contract (generally an auto or home extended warranty) to the public instead of commercial interests.

"The recent RRGs that have been declared insolvent were not regulated under the captive regulatory scheme but the regulatory process we use for traditional companies," said Hampton, adding that DISB is a member of the NAIC subgroup. "Changing RRGs that are regulated as captives to the traditional company regulatory scheme does not address the financial solvency concerns that contribute to these insolvencies."

Hampton emphasized that DISB will be attending NAIC's financial summit on Feb. 13-15 in Orlando, FL, where decisions will be made regarding the regulations. He urged for more commissioners from other states, especially those with RRGs, to attend. Washington, DC, is one of six states where RRGs are licensed as captives, and Hampton added that captives bring benefit to the city.

"DISB will continue to promote our Risk Finance Bureau, captives and RRGs as economic development drivers in the District of Columbia," said Hampton, adding that DISB has licensed 59 captives so far. "Our captives division collected in excess of $1 million in taxes and assessments and we believe this will continue to grow. We need your support."

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