RRGs

Question 1

Define and describe concept of a Risk Retention Group (RRG)

Answer 1

• a liability insurance company owned by its members
• members are a group of similar business that have pooled their risks

Question 2

What is most common line of business covered by a RRG

Answer 2

medical malpractice

Question 3

How is a RRG formed

Answer 3

• formed using a combination of state and federal laws under auspices of Federal Liability Risk Retention Act
• must submit plan of operation to commissioner of domiciliary state that includes: coverage, deductibles, limits, rates, classification system
• may be formed under a state’s captive or traditional insurance laws

Question 4

How does a RRG operate

Answer 4

• may write business directly in states where they are registered without obtaining a license
• can be domiciled in 1 state but still do business in another state if:
• registration process is completed and the state’s insurance commissioner is designated as agent for service of process
• treated as multi-state insurers and subject to NAIC accreditation standards for RRGs

Question 5

Is a RRG required to comply with quarterly and annual financial filing requirements

Answer 5

yes and this includes but is not limited to: financial statements, RBC, SAO, Management’s Discussion and Analysis, audited statements

Question 6

Identify regulatory differences between RRGs and traditional insurers (3)

Answer 6

• many RRGs use GAAP instead of SAP
• few RRGs submit rate filings
• RRGs cannot participate in state guaranty funds