ABIC Contact Info:
Managing General Agency
Appalachian Underwriters, Inc.
800 Oak Ridge Turnpike,
Suite A-1000
Oak Ridge, TN 37830
Phone: 888.376.9633
Fax: 866.409.3367
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What is the Liability Risk Retention Act?
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The Liability Risk Retention Act (LRRA) is a federal law that was passed by Congress in 1986 to help U.S. businesses, professionals, and municipalities obtain liability insurance which had become either unaffordable or unavailable due to the "liability crisis" in the United States.
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How does the Risk Retention Act work?
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In passing the Liability Risk Retention Act, Congress provided insurance buyers with a marketplace solution to the "liability crisis," enabling them to have greater control of their liability insurance programs. To achieve this goal, Congress created two entities -- risk retention groups (RRGs) and purchasing groups (PGs).
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What is a risk retention group?
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A risk retention group (RRG) is a liability insurance company that is owned by its members. Under the Liability Risk Retention Act (LRRA), RRGs must be domiciled in a state. Once licensed by its state of domicile, an RRG can insure members in all states. Because the LRRA is a federal law, it preempts state regulation, making it much easier for RRGs to operate nationally. As insurance companies, RRGs retain risk.
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What kinds of insurance coverage do risk retention groups and purchasing groups provide?
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For both risk retention groups (RRGs) and purchasing groups (PGs), the type of insurance coverage permitted is set forth in the Liability Risk Retention Act's (LRRA's) definition of "liability," which includes all types of third party liability, such as general liability, errors and omissions, directors and officers, medical malpractice, professional liability, products liability, and so forth. The LRRA does not extend to workers compensation, property insurance, or to personal lines insurance, such as homeowners and personal auto insurance coverage.
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What are the advantages of risk retention groups?
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As insurance companies owned by their members, some of the key advantages offered by risk retention groups (RRGs) to their members relate to the control members obtain over their liability programs. This control often translates into lower rates, broader coverage, effective loss control/risk management programs, participation by RRG members in favorable loss experience, access to reinsurance markets, and stability of coverage, notwithstanding insurance market cycles.
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How many risk retention groups and purchasing groups are there?
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At the end of 2003, there were 141 risk retention groups and 670 purchasing groups operating in the United States, according to the Risk Retention Reporter.
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Who forms risk retention groups and purchasing groups?
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Risk retention groups (RRGs) are often formed from trade and professional associations, which serve as the sponsor for the RRG liability insurance program. Purchasing groups (PGs) are most often formed by insurance professionals, including agents, brokers and insurers, based upon an identified need of commercial insurance buyers.
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Who regulates risk retention groups and purchasing groups?
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Although the Liability Risk Retention Act is a federal law, it has no enforcement mechanism of its own, and relies wholly on state insurance departments for its implementation. Because of the differences between risk retention groups (RRGs) and purchasing groups (PGs), the regulation differs for each of the entities. For risk retention groups (RRGs), the state in which the RRG is domiciled has primary regulatory authority over the entity. For purchasing groups (PGs), regulation entails not only the domiciliary state of the PG, but regulation of the PG's insurer, as well as its agent and/or broker.
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