Two alternatives to the standard insurance carrier for organizations seeking liability coverage are risk retention groups (RRG) and risk purchasing groups (RPG). The primary differences between RRGs and RPGs are who bears the group’s risks and how they are regulated. Both RPGs and RRGs are limited to placing liability coverage. [NAIC State Licensing Handbook]
Risk Retention Group (RRG)
An RRG is a liability insurance company owned by its members. As described by the NAIC, RRGs “allow businesses with similar insurance needs to pool their risks and form an insurance company that they operate under state regulated guidelines.” As an insurance entity, the RRG, therefore, bears the liability risks of the group’s members. RRGs operate under the applicable laws and regulations of their domiciled state as well as the federal Liability Risk Retention Act (LRRA), which enables their establishment. Some features of an RRG include: [NAIC]
Another unique feature of a captive RRG that distinguishes it from other captives is that it can write directly in a non-domiciled state without obtaining a license “by completing a registration process and designating the state’s commissioner as agent for service of process.” For this reason, RRGs are treated like multi-state insurance companies and are subject to NAIC accreditation standards established to suit the unique nature of these entities. [NAIC]
Risk Purchasing Group (RPG)
An RPG is a group of insureds engaged in similar businesses or activities authorized to purchase insurance coverage from a commercial insurer. [IRMI]
RPGs are formed to pool the purchasing power of their members to negotiate favorable terms with insurance carriers. Because RPGs operate under the LRRA as purchasing entities marketed by insurers but are not themselves insurers, they are generally not subject to state insurance laws. [NAIC State Licensing Handbook] Carriers selling policies to RPGs must generally follow the transaction regulations in that state. Therefore, both admitted and surplus lines insurers and producers must follow appointment and licensing rules as appropriate for their line of business. [NAIC State Licensing Handbook]
The Difference
The Difference is an ongoing educational series from ProAssurance, designed to compare and contrast common items in medical professional liability insurance. The side-by-side comparisons make it easy to compare so you can easily pick up the highlights of each.