The primary purpose of an RRG is to provide liability coverage for its policyholder/shareholder members.
A Risk Retention Group (RRG) is a member-owned, member-operated insurance company that pools the risks of its members—all of whom typically share common interests or belong to the same industry or profession.
RRGs offer members the flexibility to design insurance policies that specifically address their risks and needs. This customization allows the RRG to provide more comprehensive coverage and better protection.
Operating with Greater Flexibility
Unlike conventional insurance companies, RRGs are formed under the auspices of the federal Liability Risk Retention Act of 1986, allowing groups to operate across state lines with greater regulatory flexibility. RRGs can provide access to risk-sharing arrangements, customized policies, and regulatory advantages—all while allowing groups to maintain control over their insurance programs. As such, RRGs offer a unique and collaborative approach to risk management, particularly as US corporations continue to face greater challenges in obtaining traditional insurance coverage.
Risk Retention Group FAQs
What is a Risk Retention Group (RRG)?
An RRG is a member-owned and member-operated insurance company that pools the risks of its members to provide liability coverage for its various policyholders/shareholders.
Who can create or be in an RRG?
RRGs are comprised of either commercial businesses/professionals or select government entities that require liability protection. RRGs are owned by their respective insureds, who must collectively represent a homogeneous industry group.
What are some lines of coverage an RRG cannot write?
An RRG cannot write workers' compensation, property insurance, or personal lines of coverage.
Does an RRG need a license for all states in which the group operates?
No! An RRG is not treated as a traditional insurance company. It’s exempt from having to obtain a state license in every state in which the group operates and is likewise exempt from state laws that regulate typical insurance programs.
Why would someone want to form an RRG? What are some of the benefits?
Insurance can be expensive. The number of RRGs formed goes up when insurance is either unavailable or unaffordable. Benefits of an RRG include control over your program; long-term rate stability; customized loss-control and risk management practices; and a stable source of liability coverage at affordable rates.
Risk Pooling & Coverages
RRG members pool their risk, with each member contributing premiums. These funds are then collectively used to cover the group’s liabilities and losses. By pooling risks, RRG members can spread the financial burden of claims across the entire group.
This spread can lead to more stable premium costs as well as reduced exposure to catastrophic losses. RRGs are often formed by federations of businesses or professionals—such as healthcare providers, contractors, or product manufacturers—with similar risk profiles, creating insurance policies tailored to the unique risks and requirements of each group’s members. This customization ensures coverage aligns closely with the federation’s needs and goals.
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