Risk Retention Groups in Medical Malpractice Insurance: A Test of the Federal Chartering Option

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Risk Retention Groups in Medical Malpractice Insurance: A Test of the Federal Chartering Option

Author Info

Patricia Born
M. Martin Boyer ()

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M. Martin Boyer

Abstract

The liability crisis of the eighties led to the enactment of the federal Liability Risk Retention Act of 1986, which encouraged the formation of risk retention groups, a new organizational form that is incorporated under a federal charter. We use risk retention groups as a proxy for insurers opting for a federal charter and assess empirically the economic viability of an optional federal charter. Using annual data from the National Association of Insurance Commissioners, we assess whether risk retention groups increase insurance availability and competition in the medical malpractice insurance industry. We consider the insurers’ use of two different types of insurance contracts, namely occurrence contracts and claims-made and reported contracts, and evaluate the benefits to policyholders and society of insurers having access to an optional federal charter, while remaining under state regulatory and solvency controls.

La crise des assurances de la responsabilité civile qu’ont connue les États-Unis au milieu des années 80 a mené le gouvernement fédéral à légiférer pour augmenter le nombre d’assureurs au pays via le Liability Risk Retention Act de 1986. Cette loi a permis la création d’un nouveau type d’assureurs, les risk retention groups (RRG), qui sont régis par une charte quasi-fédérale contrairement aux assureurs traditionnels qui doivent obtenir un permis d’exploitation dans chaque état américain. Nous utilisons ces RRG dans notre étude pour évaluer la pertinence d’autoriser les assureurs américains d’être incorporés et réglementés par le gouvernement fédéral plutôt qu’au niveau des états individuellement. En utilisant des données de la National Association of Insurance Commissioners, nous examinons si la présence des RRG a augmenté la compétition et la disponibilité de produits d’assurance de la responsabilité civile des professionnels de la médecine. Nous évaluons ainsi les bénéfices pour les assurés et la société de permettre aux assureurs d’être réglementés et incorporés au niveau fédéral.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2008s-14.

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Date of creation: 01 May 2008
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Handle: RePEc:cir:cirwor:2008s-14

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This paper has been announced in the following NEP Reports:

NEP-ALL-2008-05-24 (All new papers)
NEP-HEA-2008-05-24 (Health Economics)
NEP-IAS-2008-05-24 (Insurance Economics)

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