[Bob Kuczewski]

Fellow Hawks,

These are extraordinary times in our sports. It's a time to look carefully at the facts and think clearly and calmly.

USHPA is desperately soliciting donations to maintain their monopoly over our sports. Do they deserve that monopoly? Are there other alternatives that USHPA is not revealing? If there were a way to continue to insure our sports without relying 100% on USHPA, do you think USHPA would tell you?

I think you already know the answers to those questions.

There is another way, and here's how it would work. Pilot's should ONLY donate money to their own LOCAL clubs with the understanding that those donations will ONLY go to USHPA's RRG if:

   1. There is sufficient money to reach the needed amount
   2. USHPA gives local clubs autonomy in insuring members

These are not unreasonable requests, and if USHPA refuses, then that's telling you that they have no intention of changing the policies that have led to this fiasco.

And speaking of this fiasco, it's important for members to understand how this came about. USHPA has been controlled by commercial interests for years now (maybe decades). Those commercial interests call the shots and USHPA has looked the other way whenever problems are reported against any of their "buddies". I know because I reported problems at Torrey Pines when I was Director, and nothing was done. It wasn't much more than a year later that those same unaddressed problems resulted in a serious injury and a subsequent insurance claim. I know because I was an expert witness in that case (as was Dennis Pagen and others). The evidence was clear that there had been gross negligence on the part of the Torrey operator, and the evidence was clear that I had reported it to USHPA long before the accident. The insurance company ended up settling that case just this past spring for an undisclosed amount of money. I'm sure it wasn't peanuts. But USHPA isn't telling you about that case, are they?

No, USHPA is trying to rally everyone to "save free flight".

Don't be fooled again.

There's nothing wrong with pooling the money of local clubs through USHPA to obtain group insurance, but the control of that insurance should rest with the local clubs and not with the failed leadership at USHPA. Look at my case as a clear example. If USHPA had heeded my warnings, it's very likely that an accident would have been averted and this insurance "emergency" would not have happened. But how did USHPA reward me for speaking out? With a national smear letter and an expulsion. Is it any surprise that USHPA has become uninsurable?

USHPA members have trusted USHPA with one thing - to keep us flying. USHPA has failed. In life ... as in flying ... there are penalties for mistakes. USHPA is asking pilots to step in and pick up the tab for their mistakes. Fine, when a business comes to its shareholders asking for more money, the shareholders have every right to ask for more stock and more control. That's what the local clubs should be doing. Don't give your money blindly to USHPA. Give it to your local club instead. If the numbers add up then your club can participate in the RRG on favorable terms. But if they don't, then at least you've still got control of your money locally. Once it goes to USHPA ... it's not coming back.

Please feel free to post or redistribute this message, and please contact me any time at 858-204-7499. These are extraordinary times, and we have an opportunity to really make a change for the better if we act calmly and wisely.

Sincerely,
Bob Kuczewski
Founder of Torrey Hawks and US Hawks (ushawks.org)

[dhmartens]

Am I missing something? Is this illegal?

http://ushpa.aero/freeflightforever.asp
"....
Who owns the RRG?
The owners will be USHPA, the Foundation For Free Flight, PASA and some individual flight schools. Ownership and management will be shared proportionally to the investment of each in the RRG. It will be managed by a five-member board chosen by the owners. Members of the board will be a Vermont insurance expert, and pilots who are familiar with our sport and issues of insurance, finance and legal. USHPA members do not own “shares” in the RRG individually, but they will share in its profits and success through USHPA membership benefits and future dues rates.

The RRG will pay a management firm in Vermont to handle regulatory filings, and it will pay for auditing and actuarial analysis to maintain compliance with Vermont laws. It will also pay a law firm experienced in our sport to handle claims management and evaluation, with the final decisions made by the board of directors of the RRG. We are designing it to run as lean as we can, to minimize overhead and expenses.
..."

Taken from crossfit, another sport that uses RRG
https://www.crossfitrrg.com/faq

"...
What is the capital contribution and why do I have to pay it?
The capital contribution is also referred to as our membership contribution. Essentially, it is a purchase of CrossFit RRG stock. Every policyholder within the company is also a stockholder. We set it up this way to give affiliates two distinct advantages. One, we offer a policy created by HQ and the affiliates that doesn’t have restrictions for affiliate owners. And two, we handle claims differently than a typical insurer. Claims within CrossFit RRG are defended and coordinated by the CFHQ legal team. Their sole purpose is defending affiliates and they don’t back down from a fight that should be fought.
Do I have to pay the whole capital contribution up front?
The $200 for trainers must be paid before a policy can be obtained.
For Affiliates, $350 can be paid at the beginning of the first policy year and the remaining $650 balance can be paid at the first year renewal. If you paid less than the full $1,000 during our capital drive, you can either bring the balance up to $350 or leave it at any figure above that until you have your first renewal at which point you will need to have the $1,000 fully paid.
Will my stock return dividends?
Yes, underwriting profits of the company will be distributed to the shareholders. The dividend amount will fluctuate based on loss history and maturity of the company. Affiliates owners who are on the board of directors will decide when, and how, a dividend will be paid.
What happens if the company sustains many maximum claims in a short period of time? Will CrossFit RRG go bankrupt?
It’s extremely unlikely that CrossFit RRG would ever be in such a negative financial position. We have purchased reinsurance (insurance for insurance companies) which transfers most of the risk to another insurer. CrossFit RRG can sustain a multitude of maximum hits before we should get nervous.
So, is this a mutual insurance company?
The CrossFit RRG is a Stock Insurance Company which is owned by CrossFit affiliates and CrossFit trainers. Each will receive a share(s) of stock for their capital contribution/investment.

..."

[dhmartens]

I am confused. It sounds like USHPA is selling us a Sponsored Captive and not a RRG.
An RRG sells shares of stock to its members, A Sponsored Captive is owned by investors and Rents/Access Fee to the customers.
"***Captive ownership is unlimitedowners can be policyholders or anyone else; RRG ownership is limited to policyholders only.***"

http://www.captive.com/resources/captiv ... -insurance

Sponsored Captive Insurers

Sponsored captive insurers, sometimes referred to as nonowned or nonaffiliated captives, have many of the same elements as a pure captive insurer. The insureds are required to put their capital at risk, risks are financed outside of the commercial regulatory environment, and the purpose is to achieve the risk financing objectives of the captive's insureds. However, a sponsored captive is not formed by its insureds—known as participants, and a sponsored captive does not necessarily pool its insured’s risks.

A sponsored captive may be set up by an insurance industry-related entity to be used by its clients, or there may be no previous connection between the sponsor and the participants. The sponsor contributes the captive's statutory capital (sometimes called core capital). Many sponsored captives do not require insureds to pay in capital, but simply to pay an access fee. These are sometimes referred to as rental captives.

A sponsored captive does not necessarily pool the risks of its insureds. It may keep a separate underwriting account for each insured participant. In some domiciles, these accounts are legally separated or protected, and the term cell captive is used, meaning that the assets in one participant’s account may not be used to pay liabilities in another unless the respective participants have entered into an agreement to do so.

This is a key difference between a pure group captive and a sponsored captive. The sponsored captive can be structured to maintain legally separate underwriting accounts, whereas an insured that is a member or owner in a pure group captive shares risk with the other captive insureds.

Insureds who are shareholders or members of an industrial insured group captive have to contribute capital to access the captive insurance program, and their capital is at risk based on the performance of the group as a whole. In a sponsored (rented) segregated cell captive, each participant’s risk capital is typically only exposed to the risk of its own underwriting performance.

If required under domiciliary law, the sponsor's core capital may be at risk. This would mean that if one insured becomes bankrupt or otherwise defaults on its obligations, producing an insolvent cell or underfunded underwriting account, liabilities of the cell would become liabilities of the sponsor. In domiciles that do not have the legal requirement that the sponsor's core capital is at risk, the cell participant may be required to sign an agreement that losses paid under policies issued or reinsured by the captive are limited to the assets in the participant's cell.

Sponsored captives may be used by insureds that are too small to own their own captives. The captive cell program acts like an incubator for these small insureds to begin a captive program. When sufficient surplus has been accumulated, an insured has the option of using those funds to set up its own pure captive insurance company.

A captive insurer may be formed by an association for the benefit of its members. Does this make it a "sponsored captive"? Not exactly! The association captive is "pure," meaning that it insures only the risks of its owners. The sponsoring association may contribute 100 percent of the required capital, but since the association is owned by its members, its members indirectly own and have voting control over the captive insurance company.



http://www.propertycasualty360.com/2004 ... tives-rrgs
Differences Between Captives, RRGs



Although risk retention groups are a form of captive, there a number of key differences between them. Here are a few examples of how they differ:

Captives have been around more than 100 years, while the legislation authorizing RRGs was enacted in 1981 and amended in 1986.

Captives can have a single parent-policyholder, while RRGs must have at least two policyholders.

RRGs must have at least $500,000 in capital, and usually more; captives, depending on the domicile, can have far lower capital requirements.

Captives can be used for any line of coverage; RRGs can only cover liability productsgeneral, auto, professional. (The National Association of Insurance Commissioners is debating whether to recommend that Congress amend the Liability Risk Retention Act to include property and workers compensation exposures.)

Captives can be set up wherever there are captive domiciles, U.S. and worldwide; since 1986, RRGs have been allowed to domicile only in the United States.

***Captive ownership is unlimitedowners can be policyholders or anyone else; RRG ownership is limited to policyholders only.***

Captives can be fronted by any willing, licensed primary insurerlimited only by regulatory and state insurance guidelines; RRGs are portable. They do not require a front as legislation allows RRGs to underwrite in any state once charted in a U.S. domicile.

Captives and RRGs are both eligible to be rated by any independent rating agency.

[Rick Masters]

I am confused.

Everybody will continue to be confused until the association provides specifics such as

1) "How much will it cost to enlist participation of and insure the directors of the RRG?" (This is expensive because nobody who qualifies for this is likely to sit on a dangerous sports RRG BOD without insurance.) This is done through a reinsurance entity. (Reinsurance is typically unavailable to a new and underfunded RRG but it is available to the directors.)

2) "How much will be spent on captive managers, auditors, accountants, actuaries, investment advisers, lawyers, managing general underwriters, or other parties responsible for underwriting, determination of rates, collection of premium, adjusting and settling claims, and/or preparation of financial statements?
see http://www.captive.com/news/2015/10/21/ ... -standards

3) "How much will be spent on taxes in all states under participation? (RRGs are subject to state tax! Ouch!!)

4) "Are the RRG BOD members properly vetted? Who are they?" (USHPA can suffer massive fines or lose the RRG entirely if any members of the BOD have relationships with commercial free flight activities.)

Because of all this, my personal feeling is that the US Hawks should not even get involved in this sinking ship because underfunded RRGs frequently fail, which leads to another question:

5) "What lawsuits are in the pipeline?" What happens if you drop the policy defending them. Does the RRG pick them up?

I get the feeling that's when the fat lady sings. Personally, I wouldn't touch an RRG for less than a $1,000 per member pay-in. And now I have a bigger question:

6) "Is the RRG necessary if existing site and liability insurance would otherwise continue in the absence of commercial activities? That is, is the USHPA telling its present insurer that it will not continue with its existing site and individual third party liability policy unless that insurer continues to insure schools and tandem 'instruction'? Is the USHPA walking away from providing the existing support of recreational free flight - sites and pilot 3PL - in order to hatch a scheme to provide commercial operations insurance coverage?"
[Red lights. Sirens. ]

That is a membership voting decision. And if that is the case, this is a scandal.

If that is the case, members need to quickly ask themselves if it is worth the risk of losing everything they presently have so the very few who profit from the exclusive USHPA training model can continue without transitioning to a wide-open, informal and essentially non-commercial peer training model. Is that what this is all about?

Are they - you, the members, the recreational pilots - being taken advantage of by people who have too much invested in the commercial side of the sport (mostly paragliding, joyriding and instruction)? Or is this scheme really being hatched to ensure the (mostly) commercial aspects of free flight and being presented as a do-or-die moment when it's really not that at all? Which is it? And who can you trust to tell the truth?

I saw the USHGA BOD go astray with ultralights back in the 1980s. Boy, that was close! We narrowly escaped being absorbed by motorheads before we recreational hang glider pilots made enough noise to turn the ship around. This whole RRG thing is beginning to stink like that.

[DaveSchy]

Yes, it is stinky.
As long as MGF (and clones) keeps telling us that USHPA insurance is way too complicated for us to understand and that they must be entrusted to make this decision "for us", I will continue being skeptical.

Until the membership has a vote of all 9,900 (appx) active members, and this after a full disclosure of the intricacies of this "insurance" scheme, I suggest extreme caution. This group of people is quite good at caution, agreed?

Full disclosure, by USHPA?? Har de har. This smells more like a power and money grab (and a sucker deal for the members) every time I get a whiff of it!

From the USHPA website, it appears that site insurance will NOT be at risk unless USHPA plays this for "all or nothing", yet clarification is not forthcoming, nor should we expect it from the likes of MGF (and clones).

[DaveSchy]

From USHPA.aero

"At present our coverage for landowners does include instruction. Due to claims history and concerns by the insurers, future coverage for landowners under the USHPA policy will be limited to non-commercial instruction only. Any instruction for pay of any kind will require that the instructor be affiliated with a certified school. The school will have the ability to add a landowner to their policy for coverage of commercial instruction. More on this will be coming in an email to instructors later in December."

According to this, all the current Forbesian whining about "losing sites" only pertains to paid instruction. Once again, USHPA can not even keep their own baloney straight!

What is worse is that there has been an intentional effort by the Board to misrepresent to the membership what is "really" going on with insurance. Plus, the instructors will get more info ("later in December") but it seems that USHPA members get the bill, without the info!

[DaveSchy]

I got a very informative and cordial reply from Rich Hass 'splainin' what the present situation is re: the RRG proposal.

MGF posted " We either find a way to self-insure through the RRG, or we're done" yesterday, and I take issue with that kind of drama. Is MGF getting burned out on finding a carrier after investing so much of his time in the presently proposed RRG? Is USHPA so deeply invested in the RRG proposal that they are not willing to "shop"? We still have 2 months!

Only 4.6% of the present membership have to date signed on to the RRG scheme.

OK, so First Flight will not renew the USHPA policy. Do we know why?

I find it difficult to believe that there is no other carrier interested in insuring our sport, especially if we do not try to insure ANY commercial activities that are not covered by Part 103 any way! Are there any carriers who respect Outdoor Recreation Acts at the state level as a first line of liability protection?

Inclusion of PASA (kiteboarding) in a corporation that owns the RRG might be an artifact of USHPA's long term delusion of "growing".

If windsurfing is to kiteboarding, as hang gliding is to paragliding, (bones vs bags) then windsurfing might also be included in the proposed RRG. That brings up the idea of including sailing, as well.

[Rick Masters]

OK, so First Flight will not renew the USHPA policy. Do we know why?

Hang gliding was able to receive third-party liability insurance for over 35 years.
Recreational flying, competitions and even tandem instruction was covered at affordable cost.
What changed?

Hint: http://bcove.me/bgnizhpi

[JoeF]

At Oz:

Jlee

Clarity - RRG ownership Fri, Dec 18 2015, 11:06:30 am
A number of intelligent pilots I respect express qualms about donating to the RRG because donations essentially give up one's right to ownership.

That is partially true.

However, consider the context.

The first to know their insurance would not be renewed were those with commercial school insurance.

USHPA + those affected arrived at the RRG model as a solution.

One commercial school owner with very deep pockets made it clear he wanted majority controlling interest in the RRG.

USHPA rightly did not think it wise to form an RRG where the majority owner would be one voice motivated by commercial interests.

This is why USHPA (a democratic organization with representatives elected by the membership) is seeking donations from members so the donations can be pooled under USHPA's name resulting in USHPA remaining the majority owner (aka decision-maker) of the RRG.

One individual pilot (even all the chapter clubs combined) cannot come up with enough capital to supercede that one commercial school owner's contribution.

Donations to USHPA are the only viable way to insure the RRG is not run by a single commercially-motivated business owner.

http://ushpa.aero/donation_form-RRG.asp

First poster noted:

I assume that we are talking about John Harris.

[Rick Masters]

in line with the anti-fraud provisions of applicable State and Federal laws, any solicitation for funds must disclose all material facts regarding the RRG and its insurance operations.

If an RRG is found to be "in hazardous financial condition," any state or U.S. District Court may issue an order enjoining a RRG from soliciting, selling insurance, or continuing operations.

Members of an RRG must be engaged in businesses or activities which are similar or related in regards to the liability exposures created by virtue of common business or trade practices, products, services, premises or operations. In addition, an individual or firm that meets this criteria cannot be excluded from the group if the intent of the exclusion is to provide the group with a competitive advantage.

http://www.nrra-usa.org/aboutus/faqs

In response to the GAO’s criticism that some RRGs are not controlled by their member/insureds, the Standards require that the majority of the members of the board be “independent,” which is defined as not having a “material relationship” with the RRG. Examples of “material relationships” in the Standards are: the receipt of compensation from a service provider or consultant to the RRG in an amount greater than 5 percent of gross written premium or 2 percent of surplus in a single year; employment or other relationship with the auditor of the RRG (either currently or during a “cooling off” period of one year); and a relationship with a related entity as a result of “overlapping boards” or employment. A determination of a director’s “independence” must be made annually by the whole board and disclosed to the domestic regulator.

http://www.mmmlaw.com/media-room/publications/newsletter/letter-from-washington-good-governance-for-rrgs