What is a Risk Retention Group?



Risk Retention Group FAQ

What is a Risk Retention Group?

A risk retention group is a liability insurance company that is owned by its policyholders. Under a federal law known as the Liability Risk Retention Act (LRRA), risk retention groups must be licensed by one state - known as risk retention group's "domicile" state.

Recreation Risk Retention Group (Recreation RRG), is licensed by and domiciled in the sate of Vermont. Vermont is known as the "gold standard" for regulating risk retention groups. Vermont is known to be a fair, but extremely thorough, regulator.

After being licensed in their state of domicile, risk retention groups can insure members in all states in which it registers to do business. Recreation RRG Risk has registered to do business in more than 24 states. 

Risk retention groups usually retain a portion of the risk that they write, and obtain reinsurance for the rest.  Recreation RRG obtains its reinsurance from reinsurance companies rated Superior by A.M. Best.

What is the Liability Risk Retention Act?

The Liability Risk Retention Act (LRRA) is a US Federal law that was enacted to help US businesses, professionals, municipalities, non-profits, among others, to obtain liability insurance. At the time the law was enacted, there was a liability crisis - liability insurance had become either unaffordable or unavailable altogether for many of those the law was passed to help. Traditional liability insurance has become unavailable altogether for many of the members Recreation RRG.  For others some level of coverage can be obtained in the traditional market but not with the same stability.

Who forms Risk Retention Groups?

Of the roughly 244 risk retention groups currently in operation, the vast majority are in the area of health care. The rest are spread across areas of transportation, property development, government and institutions, professional services, manufacturing and commerce, environmental, financial, and leisure. In all cases, risk retention groups can only include those engaging in a similar business or activities and having similar liability risk exposure. Recreation RRG only insures those involved in activities related to recreation and has strict underwriting guidelines for eligibility.

How many Risk Retention Groups are there?

According to the Risk Retention Reporter, there were 244 risk retention groups operating as of July 2023.

Are Risk Retention Groups part of any state guaranty fund?

No. Because the LRRA is a US Federal law, risk retention groups are not part of any state guaranty funds. Recreation RRG demonstrates its independent financial strength with conservative financial ratios and reinsurance.

Every policy issued by Recreation RRG contains the following notice:

NOTICE: This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your State. State insurance insolvency guaranty funds are not available for your risk retention group


What are the advantages of Risk Retention Groups?

Unlike traditional insurance companies who are owned by investors on Wall street, risk retention groups are owned by the very members they insure. The members, as owners, have control which simply does not exist in traditional insurance companies. This control often results in long term lower premium rates, better coverage, and more stability.

Risk retention groups have more hands on management, which often translates to more effective loss control and risk management programs for their members, leading to a favorable loss experience in total.

Recreation RRG provides its members with specialized coverages unique to recreation that it insures, customized claims service, and loss control and risk management resources tailored to recreational sport.

The Recreation RRG Board of Directors is elected by the members insured by Recreation RRG.

What kinds of insurance coverage do Risk Retention Groups Provide?

Risk retention groups write liability insurance and Jones Act insurance.  The LRRA allows risk retention groups to write all types of third party liability insurance policies. It does not allow risk retention groups to write property insurance, workers compensation insurance, or personal lines, such as homeowners or personal auto insurance.

Who regulates Risk Retention Groups?

The LRRA is a US Federal law. But there is no US Federal insurance regulator.  So who regulates risk retention groups?

The insurance regulators of the state where the risk retention group is formed and licensed are responsible for regulation of the risk retention group.  This is state is referred to as the risk retention group's "domicle" state.  The LRRA relies upon the domicile state to regulate the risk retention groups domiciled in there.

Vermont has earned its reputation as the "Gold Standard" domicile for risk retention groups, due to its fair but thorough regulation of risk retention groups domiciled there. Recreation RRG is domiciled in Vermont and is regulated by the Department of Financial Regulation in the state of Vermont.

Are Recreation Risk Retention Group members assessable?

No. Recreation RRG is a nonassessable entity. This means that after a member has paid its initial membership capitalization fee, the member will never be asked to pay special fees above and beyond the premium for their insurance.

Does Recreation Risk Retention Group have protection for large claims?

Yes. Just like commercial insurance companies, Recreation RRG intends on maintaining a conservative surplus ratio and buys reinsurance to cover large claims. Recreation RRG has purchased reinsurance for claims in excess of its retention (including defense and indemnity). Recreation RRG's reinsurers are rated as Superior (A+) by a A.M. Best.