RISK RETENTION GROUP
DEFINITION

Risk Retention Groups are owner-controlled insurance companies authorized by the Federal Risk Retention Act of 1986.  An RRG provides Liability Insurance to members who engage in similar or related business or activities for all or any portion of the exposures of group members, excluding first party coverage's, such as property, workers’ 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.

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.

  

NOTE:  Pending in Congress and the Senate are two bills intended to expand the Federal  Risk Retention Act beyond LIABILITY INSURANCE only;

 

NOTE:  Pending in the Senate, already passed by the Congress and supported by President Bush, is Federal Regulation for Association Health Plans.  Making available group life and health to small employer members of an industry association, similar to the exemptions provided to Business Owners under the Federal Risk Retention Act.

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