Understanding an RRG

risk retention group

For many businessmen, the benefits associated with using a risk retention group (RRG) are lost in the misunderstanding and confusion about what an RRG actually is and does. To alleviate some of the stress and questions, here is a simple breakdown on the topic.

In the late 1970s, the federal government got involved with the skyrocketing costs of insurance premiums by using a task force to investigate what was making the cost of coverage so unreasonable for many small businesses. In an effort to costs stemming from fear and greed of commercial insurance, legislation was passed that allows several businesses to partner together and form their own insurance group. These became known as RRG’s.

The benefits of establishing, joining or using a risk retention group are many. Several of these include:

There is an establishment of a competitive market and rates.
Members have direct control with issues like litigation or management concerns.
There is an elimination of market residuals.
There is no expense associated with fronting fees.
There are also no licensing requirements or multi-state filing needs.

If you are interested in using a risk retention group, it should be noted that the insurance coverage will not be comprehensive. Liability insurance is the only policy that can be offered, leaving you with gaps in areas that might have other significant exposure.