Okay group - I need your help understanding something a little better!
I'm trying to learn more about Risk Retention Groups (RRG) and how their Reinsurance Treaties work. More specifically, how would a RRG insolvency affect the reinsurance carriers in the event of losses? Would the primary or first tier of reinsurance become responsible for the RRG's claim losses? In the event of several reinsurance carriers or layers of reinsurance, how would the other companies react? Would their individual tiers change? What would happen in the event of premium financed policies and unearned premium returns? Who pays them?
That's it. I appreciate the information and thank you in advance for your help!
I think you would have to have access to the reinsurance contracts to know the answer. The contracts spell out responsibility and I don't recall seeing anything about insolvency in any contract. That would mean that the reinsurance companies would only be responsible for the same losses regardless...so I would guess the to your question is no, they are not.
One other consideration..... is that RRG's are usually admitted in one or more states, so they may be covered by the state guarantee fund in their domiciled state. The reinsurance would not drop down..... is my understanding.....
Great feedback everyone, please don't be shy if you have input! As the popularity of RRG's grow and they continue to become more recognized by mainstream insurance America, it's important to understand how they operate.
A good resource I have found on RRG's is the Risk Retention Reporter and Risk Retention Group Directory. Both are available by contacting Karen Cutts at at (626) 796-4972. She has done a wonderful job of answer any questions I have come up with for her as well.
