Insurance CEO Takes Fight for Nonprofit Coverage to Congress

Pamela Davis, president, founder and CEO for the Nonprofits Insurance Alliance (NIA), is on a mission to help nonprofits be successful at their mission by ensuring insurance is affordable and available.

She started the Nonprofit Insurance Alliance in 1988. Today it is comprised of four 501(c)(3) nonprofit organizations in 32 states serving more than 20,000 nonprofit organizations.

The group is limited, however, to writing only liability insurance in most states because as a risk retention group (RRG) it cannot write property or auto physical damage, which Davis says are “impossible to find on a standalone basis for small organizations.”

NIA has been able to work with various carriers to get nonprofits the property half of the BOP, but, in recent years some of those insurers have decided not to continue offering the coverage.

Davis said they sought other ways to offer the coverages, but when those didn’t pan out, she went to representatives of the U.S. Congress to develop a long-term solution. Through that process came H.R. 4523, the Nonprofit Property Protection Act, a bill to amend the Liability Risk Retention Act of 1986 to expand the types of commercial insurance authorized for risk retention groups serving nonprofit organizations.

The bill allows nonprofit RRGs to form in states and offer property and auto physical damage insurance to members under strict limitations, including:

• The RRG must serve 501 (c)(3) nonprofit organizations.
• The RRG has been chartered or licensed as an insurance company under the laws of the state and authorized to write insurance.
• The RRG has provided liability insurance for at least 10 years, has at least $10 million in capital, and insures any one member for a maximum total insured value of $50 millon.
• No RRG may begin offering property insurance in a state if the insurance department for that state has posted on its website the names of three licensed, admitted carriers that are providing standalone property in BOP form and auto physical damage, and that coverage is readily available to 501(c)(3) nonprofit organizations.

On Jan. 29, Davis testified before the U.S. House of Representatives Subcommittee on Housing, Community Development, and Insurance. She highlighted the tightening insurance market that nonprofits are beginning to face and why this bill is necessary, noting several commercial insurance companies that have competed for nonprofit business are shutting their nonprofit programs and/or drastically reducing their willingness to offer coverage — particularly to child-serving and animal rescue organizations.

“Considering the headlines around sexual abuse and sexual harassment, many child-serving nonprofits are finding it difficult to obtain adequate amounts of sexual abuse liability insurance coverage. This is putting additional pressure on nonprofits’ own RRGs who are working to fill the gaps left by departing commercial insurance companies,” Davis told the House subcommittee.

Proponents of the bill include the Consumer Federation of America, the Council of Insurance Agents and Brokers, and the Reinsurance Association of America.

Opposition groups include the NAIC and the Independent Insurance Agents & Brokers of America (IIABA or Big “I”), who argue that RRGs do not offer the same protections to policyholders in the case of insurer insolvency, and that RRGs operate with less oversight and regulatory requirements than admitted insurance companies.

“Expanding the lines of coverage an RRG can write, as H.R. 4523 would do, expands the unlevel playing field and exposes nonprofits to greater risk with fewer regulatory protections,” testified Missouri Insurance Commissioner Chlora Lindley-Myers.

In a statement to Insurance Journal, IIABA Senior VP of External, Industry & Government Affairs Charles Symington said IIABA supports state-based insurance regulation, adding that the Big “I” opposes H.R. 4523 because it erodes the state insurance regulatory system.

“Even if targeted marketplace concerns exist, they are not to a degree that would warrant such a significant federal preemption of state law. Any remedy for insurance affordability can and should be sought at the state level,” he said.

Davis said RRGs do, in fact, have the same solvency standards as commercial carriers. NIA’s goal is not to take away business from admitted carriers, she said, and noted the bill stipulates an RRG can only form if there is a market failure.

“We’re not trying to corner the market here. We just know our members need this coverage,” she said.