Sanford Elsass, a member of the board of directors for the National Risk Retention Association (NRRA), tells NU, "For all of that work, the response was mild compared to the gravity of the work the states have done to try to slow the growth of RRGs or stop RRGs."

He adds that to his understanding, the purpose of the GAO report was to "create a very clear black-and-white picture of whether there have been egregious acts that violated the law—which we have proven there are."

Elsass is perplexed because "a lot of us spent time with the GAO, so to have this be in the report is politically not very useful or very helpful to risk-retention groups."

Joseph Deems, NRRA executive director and chair of the association's Government Affairs committee, says in a statement: "The GAO report noted that legislation (HR 2126) has been introduced that provides for a federal arbitrator to resolve disputes between RRGs and state regulators, but it does not take a strong stand against efforts by some states to encroach on the right of RRGs to operate with only limited regulation as authorized by the federal law (LRRA)."

The National Association of Insurance Commissioners (NAIC), which supports amending the 1986 federal law, has said it wants the law "clarified" to limit the preemptive authority of the current legislation and to make it clear that RRGs must pay premium taxes, registration fees and also pay for oversight by the state insurance agency in each state.

Proposed legislation would amend the LRRA, which currently allows RRGs to operate through the laws of the state in which the group is domiciled, to allow RRGs to provide commercial property insurance and would include a federal arbitrator to resolve disputes between RRGs and state insurance regulators.

While supporting the NAIC's request for clarification, the GAO gave the risk-retention industry a clean bill of health.

In its report, GAO says that "certain indicators" suggest that the financial condition of the industry in aggregate generally is profitable, that its share of the commercial-liability market has grown from 1.17 percent in 2003 to about 3 percent in 2010.

In 2010, more than 80 percent of RRGs were domiciled in Vermont, South Carolina, the District of Columbia, Nevada, Hawaii and Arizona, but RRGs wrote about 95 percent of their premiums outside their state of domicile, according to the GAO.