Risk Retention Group
Encyclopedia
A Risk Retention Group (RRG) is a type of insurance
company. The way that an RRG is different than a "traditional" insurance company is that each of its policy holders are also stockholders. In addition most insurance companies are formed under state laws but RRGS are formed under federal laws - The Federal Liability Risk Retention Act of 1986.
A RRG will allow members who engage in similar or related business or activities to write liability insurance for all or any portion of the exposures of group members, excluding first party coverages, such as property, worker s compensation and personal lines. Authorization under the federal statute allows a group to be chartered in one state, but able to engage in the business of insurance in all states, subject to certain specific and limited restrictions. The Federal Act preempts state law in many significant ways.
The 1986 Liability Risk Retention Act allows two types of insurance entities to form, an RRG and also a Risk Purchasing Group (RPG).
The act states that a risk retention group must form as a liability insurance company under the laws of at least one state which is considered its state of domicile. The owners of the risk retention group are also its insureds.
A risk retention group must insure businesses of a similar type in regards to their liability exposures. Once domiciled in one state the RRG must be excepted by all other states but the RRG must register in each state which it wishes to do business.
Advantages:
Avoidance of multiple state filing and licensing requirements.
Member control over risk and litigation management issues.
Establishment of stable market for coverage and rates.
Elimination of market residuals.
Exemption from countersignature laws for agents and brokers.
No expense for fronting fees.
Unbundling of services.
Disadvantages:
Risks are limited to liability insurance.
Not permitted to write outside business.
No guaranty fund availability for members.
May not be able to comply with proof of financial responsibility laws.
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
company. The way that an RRG is different than a "traditional" insurance company is that each of its policy holders are also stockholders. In addition most insurance companies are formed under state laws but RRGS are formed under federal laws - The Federal Liability Risk Retention Act of 1986.
A RRG will allow members who engage in similar or related business or activities to write liability insurance for all or any portion of the exposures of group members, excluding first party coverages, such as property, worker s compensation and personal lines. Authorization under the federal statute allows a group to be chartered in one state, but able to engage in the business of insurance in all states, subject to certain specific and limited restrictions. The Federal Act preempts state law in many significant ways.
The 1986 Liability Risk Retention Act allows two types of insurance entities to form, an RRG and also a Risk Purchasing Group (RPG).
The act states that a risk retention group must form as a liability insurance company under the laws of at least one state which is considered its state of domicile. The owners of the risk retention group are also its insureds.
A risk retention group must insure businesses of a similar type in regards to their liability exposures. Once domiciled in one state the RRG must be excepted by all other states but the RRG must register in each state which it wishes to do business.
Advantages:
Avoidance of multiple state filing and licensing requirements.
Member control over risk and litigation management issues.
Establishment of stable market for coverage and rates.
Elimination of market residuals.
Exemption from countersignature laws for agents and brokers.
No expense for fronting fees.
Unbundling of services.
Disadvantages:
Risks are limited to liability insurance.
Not permitted to write outside business.
No guaranty fund availability for members.
May not be able to comply with proof of financial responsibility laws.
Companies who are risk retention groups
- Evergreen USA RRGEvergreen USA RRGEvergreen USA RRG, Inc., is a liability insurance company, offering liability insurance to privately owned campgrounds, RV parks, resorts, and paddlesport operations throughout the United States....
- GovTech
- Global Hawk Insurance(RRG)