What is a Risk Retention Group?

A Risk Retention Group (RRG) is recognized as an alternative risk transfer entity specifically designed to provide liability insurance for its members, who are typically businesses or organizations with similar risk profiles. This allows members to pool their resources to finance their own risk while gaining access to the insurance market in a manner that can be more flexible and economical compared to traditional insurance companies.

RRGs operate under unique regulations, allowing them to tailor coverage specifically to the needs of their members. They are chartered in one state but can provide coverage across state lines. This model assists businesses in managing liability risks while also allowing them to retain control over their insurance program.

The other options do not accurately define a Risk Retention Group. While stock insurance companies are traditional insurers that operate for profit, RRGs focus primarily on serving their members rather than generating profit for shareholders. A group of policyholders seeking mutual insurance refers to a mutual insurance company, which generally functions differently than an RRG by providing coverage to its members as policyholders who also share in the ownership of the company. An unauthorized insurer refers to an entity that operates without being licensed or authorized within a state, which is not characteristic of Risk Retention Groups, as they are structured to comply with legal requirements.