Captive Insurance Company Reports, September, 2018

In this article written for Captive Insurance Company Reports, Derick White shares his thoughts on managing risk retention groups (RRGs) and some of the current trends and issues affecting RRGs.

RRGs continue to be a popular form of insurer to provide coverage. While the overall number of RRGs has fallen from a year-end high of 262 in 2008 to 214 as of midyear 2018, new formations are still occurring. During the past 18 months, 9 RRGs have formed. (See charts for coverages and domiciles on page 2.) RRGs servicing the healthcare industry remain the most popular with 4 out of the 9 new formations. Over the same period, 26 RRGs closed, half related to the healthcare industry (source: Risk Retention Reporter).

Vermont leads the way in domicile choice, forming three domiciles with both Nevada and North Carolina each forming two. Alabama licensed its first RRG during 2018 with a redomestication from Montana. Vermont also led the way for closures with eight, followed by South Carolina with four, and Nevada and DC tying with three each. Colorado, one of the first domiciles in the United States, had one risk RRG close.

Despite all of this activity and the freedom that the Liability Risk Retention Act (LRRA) intended to provide RRGs, they continue to be caught between the broad-based style of traditional regulation and the more proportional regulation applied to captive insurers. While the domestic regulator may recognize the need for requirements suited specifically to RRGs, foreign regulators often do not understand nor seem to care to understand the uniqueness of these insurers, along with the purpose they serve for many residents from their states.

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