Risk Retention Group (RRG)

FAQs

What is the difference between an RRG and a purchasing group?

Both are creatures of the LRRA, but they function differently. A purchasing group buys insurance from an admitted carrier or RRG using the group's collective bargaining power—it does not create its own insurance company. An RRG is itself an insurance company owned by its members. Purchasing groups are easier to form but do not provide the same control over pricing, terms, or profit retention.

Can an RRG write professional liability for members in all 50 states?

Yes. Once licensed in its home state, an RRG can write liability coverage in all other states after registering and paying applicable premium taxes. The LRRA's preemption prevents other states from requiring full admission or imposing substantive insurance regulations—this multi-state access is the RRG's primary regulatory advantage over standard admitted or surplus lines markets.

What happens if an RRG becomes insolvent?

State guaranty funds do not cover RRG insolvencies—this must be disclosed to all members. If an RRG fails, its home state insurance department handles the receivership or liquidation. Members are unsecured creditors with claims on the RRG's remaining assets.

Related Terms

• Captive Insurance

  An insurance company wholly owned by the entity or group it insures, created to fund the owner's own risks rather than transfer them to a commercial carrier.

• Purchasing Group

  An LRRA entity allowing members with similar liability exposures to purchase insurance collectively, leveraging group size for favorable carrier terms.

• Surplus Lines Compliance

  Regulatory requirements governing non-admitted insurance placement—diligent search documentation, stamping office filings, disclosure, and tax remittance.

• Producer Licensing

  The state-by-state system requiring insurance agents and brokers to obtain and maintain licenses to solicit or sell insurance for each line of authority.