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With any risk retention group, the big question is who's managing the money, and will it actually be there when a claim happens.

Working for a major healthcare provider (hospital), we do not accept any healthcare contractor (i.e. independent ER groups, anesthesiologists, etc.) who is covered by a risk retention group do to the above reasons. Risk retention groups aren't reviewed by the state departments of insurance (which isn't good).

Don't give the impression that RRG's are the only ones that could possibly manage the money in a less than forthright fashion -- insurers aren't exempt from that allegation.

When the market is tight RRG's make a market offering their members/subscribers/owners/insured's insurance at a relatively reasonable price but generally with proprietary policy forms that can be fairly curious. In those times it truly is a port in a storm.

When markets loosen up as they have over the past 2 yrs or so traditional insurers, many "A" rated, come to the fore and with pricing close if not equal to the RRGs. Naturally, the RRG business begins to leave them and flow to the "A" rated insurers. Price, ISO or close to ISO form, and perceived financial stability are the reasons.

At this time there are few reasons to place business with RRGs. First your E&O will penalize you for doing so or you will have no coverage for business placed with them. Second, there are "A" rated admitted and nonadmitted markets of good reputation using ISO forms at reasonable prices. Third, just as with carriers downgraded to "B" or less when business flows out there is not enough incoming premium to the RRGs to pay future claims. Their capital dwindles as does the policyholder surplus of traditional insurers to the point where they will phase out unless they secure rated issuing companies who have a piece of the action to bolster them.

Contracting RRGs have been around now since 2002 or so. If the RRG does not have a rating by now, by all means jettison it or move the book. If the RRG gives the 2010 1185 AI form and is willing to life the prior completed projects exclusion, by all means move away fast. If the RRG's pricing is steadily decreasing annually run quickly in the opposite direction. The question with RRGs is not how the money is managed but their term of relevant existence. RRGs are federally policed with a modicum of state oversight.........that means, in essence, that the inmates run the prison.

RRGs can be valuable vehicles at the right time in the market BUT the concept is inherently flawed because they can only write a particular line of business. As such they cannot build a book of heterogeneous coverages and diversity as do insurers. Writing one distressed line of coverage dooms them from day 1. Those that grow fairly large fast with a tight, but curious form, will be around longer than the RRGs who from their birth are undercapitalized & give away all coverages making them dead men walking from inception......but both will inevitably die unless they reorganize of find fronts cos.

I am not sure about previous posts and I do not want this to turn into a history lesson but I would like to bring the following information to light, as we have found RRG's to be very useful for specialty placements and our E&O carrier does provide coverage for our placements with RRG's !! ( I had to negotiate that into our policy but it was not that hard) Further while one must watch the financial condition of any RRG, we do the same for any insurance carrier or captive insurance company. Many of the long standing RRG's have ratings. Many of these RRG's have outstanding financials and have been very successful, while others have failed, it is a risky business. History has shown that many of the RRG's do not have an ebb and flow of business, in fact they tend to be pretty stable overall however there is no guarantee. As for regulation there is some state regulations. Perhaps you may want to visit this site and get most if not all of the facts concerning RRG's. http://www.rrr.com/education/ Perhaps you may find this site useful. So they have been around for better than 20 years and yes they are not foolproof but neither was The Home Ins Co, or Transit Ins Co or Legion Ins Co !! Like I stated, insurance is a risky business.

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. 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). 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. 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.

Good hunting

As I read this information about Risk Retention Groups, I marvel at how uninformed these "posters" are (with the exception of the last person who actually took time to do real research). Risk Retention Groups are like any business, they can be successful or fail depending on the quality of the business plan and the management. There is nothing inherent in the structure that makes them more or less likely to fail than insurance companies. In fact, since they are "member owned", I would venture to say that, if they have strong board oversight, and have not been coopted by an insurance third party, they are probably stronger than regular insurance companies because the fraud and greed quotient is lower. I don't know who provides the broker E&O for these folks, but I have never seen an E&O carrier exclude coverage for a broker writing for an RRG, just because it is an RRG.

Ins E&O writers routinely do not provide coverage for insurance companies with a Best rating under a specified level, usually it is in the B 10 range. If a claim is filed for a lesser rated insurer they might cover one for sales and service allegations, but definitely not for insolvency allegations. A large amount of RRG business might also result in E&O premium surcharges. The wise broker will only write with RRGs if they secure a strong signoff letter at the time of binding confirming that they have discussed RRGs with the insured [pros & cons] and that the insured [and the producer if it is a wholesale placement] agrees with the risk and the placement. The insured, broker and, if any, subproducer signs the letter for the arranging broker's file. This is an absolute condition of my E&O insurer and without such a letter in my file at the time of a claim, there is no E&O coverage for the RRG placement.... nil.....nada...not negotiable.

The previous post seems to imply that no RRGs are rated. Ours is an A- (Excellent). So my point, again, is that is is not the structure that is the issue here, it is the financial integrity. RRGs can be strong or weak, just like other insurance companies. It makes no more sense to say all RRGs are suspect than to say all insurance companies are suspect. Seems to me the distinction here is between rated and unrated insurance companies, not RRGs and other types of insurance companies.

I don't know who provides the broker E&O for these folks, but I have never seen an E&O carrier exclude coverage for a broker writing for an RRG, just because it is an RRG.

In CA .... that's very common. Stiff surcharge if you want to "buy back" the RRG placements exclusion endorsement from your E&O policy.

Guess we tend to see the norm as what we see in our on offices/firms/locale.

When an RRG can place a roofer or roofers for 1/2 what the rest of the marketplace wants to charge - one must kinda ask ... What does the UW team at the RRG know that the rest of the actuaries and claim professionals across the industry DON'T?

mightyquinn......do you have a blank sample of the letter you have signed that you keep in file regarding Risk Retention Groups that you could email me?

thanks,
Sean
info@sean4insurance.com

RRGs are a valuable source of capacity in a shrinking market ruled by megolomaniac CEOs who feel they can dictate when the market changes and criticize companies in a stronger financial position than themselves.

alphonse denare wrote:RRGs are a valuable source of capacity in a shrinking market ruled by megolomaniac CEOs who feel they can dictate when the market changes and criticize companies in a stronger financial position than themselves.

WOW! Seems someone has an axe to grind!

pita3333 wrote:

alphonse denare wrote:RRGs are a valuable source of capacity in a shrinking market ruled by megolomaniac CEOs who feel they can dictate when the market changes and criticize companies in a stronger financial position than themselves.

WOW! Seems someone has an axe to grind![/quote]
I don't think that it is an axe being ground. I don't feel that loss experience had anything to do with contractors being put at the high premiums they are currently paying. If you look at it historically, it all goes back to a Class Action suit in Texas that shifted the burden of proof from the customer to the CONTRACTOR. I do realize that the company's have to guard their reserves but I think that they over re-acted and made the Contractors Market unreasonably difficult to obtain coverage in a standard or admitted market.

Greg: I was referring to how it seemed that the reply had nothing to do with the topic...and was rather brutal.