Risk retention group captive

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A risk retention group (RRG) is a captive insurance company owned by multiple businesses with similar insurance needs. They were first allowed with the passing of the federal Liability and Risk Retention Act (LRRA) which allowed groups to form an insurance company and to be chartered in one state but engage in the business of providing insurance in all states in which they become registered and licensed.

Although the RRG is required to comply with the laws of the domicile in which it is organized, federal regulation eases some of the financial reporting and filing fees associated with becoming an admitted carrier in the various states in which it provides coverage. This gives a risk retention group the ability to provide more cost effective insurance for its members/owners. A typical RRG issues polices to its members and retains some risk. The RRG would determine how much risk they wanted to assume and would purchase reinsurance to cover losses in excess of their risk appetite. Most of the RRGs require their members not only to pay premium to the captive, but require them to make a capital contribution to the insurance company as well.