risk retention group

Alternatives to Traditional Insurance

Businesses of all shapes and sizes are protected from lawsuits over liabilities exposures through insurance policies, but some companies have unique financial or exposure needs that can be best served through a risk retention group (RRG). If you need help answering “what is a risk retention group,” consider the following information.

The Captive Alternative

RRGs are an organization that can offer commercial coverage, as a form of a captive insurance company. There were some businesses that couldn’t get traditional coverage either because it was too expensive or the risks were too unique for a traditional underwriting team. As a result, several companies with similar risks were able to band together and form their own insurance companies, underwriting their own risks against the companies that formed the group. The federal government has established clear regulations for these entities, with the following being the federal mandates.

  1. RRGs can only write liability insurance.
  2. There must be more than one owner or insurer in the RRG.
  3. All owners of the RRG must be insureds or all insureds must be owners.
  4. The membership of the RRG must be considered homogeneous.

The state-level government can have additional requirements for RRG organizations, and a group must meet both state and federal demands to be operational. This is a cheaper option than traditional insurance, especially if there are risks exclusive to your industry.

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