Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 3 minutes
A Risk Retention Group (RRG) is a member-owned liability insurance company. The policyholders are also the owners, and members generally share similar business activities and liability exposures. RRGs operate under a mix of state and federal law, including the Liability Risk Retention Act of 1986.
How RRGs are regulated
An RRG is licensed and primarily regulated in one domiciliary state, and it can offer liability coverage to its members in other states with limited additional regulation. Non-domiciliary states can still require important items such as registration, payment of applicable premium taxes, and compliance with unfair claims settlement practices, among other provisions listed in federal law.
What an RRG can cover
By federal law, RRGs can write commercial liability insurance for their members. Depending on the program, that may include general liability, professional liability, product liability, and other liability lines tied to the group’s shared exposure.
If you also need property insurance or workers’ compensation, you will typically purchase those policies separately through other insurers or programs.
Key pros and cons for small businesses
Potential advantages
- Program control and stability. Members may have more say in underwriting standards, claims philosophy, and risk management.
- Industry fit. Many RRGs are designed around a niche, which can make their coverage and loss control services more tailored than those of broad-market options.
Potential drawbacks
- No state guaranty association backstop. RRG policies must disclose that state insurance insolvency guaranty funds are not available. This makes financial due diligence especially important.
- Coverage is liability-focused. You may still need multiple carriers to complete your insurance program.
How to evaluate an RRG before you buy
Before joining an RRG, ask for:
- The RRG’s domiciliary state and proof of required registrations in your operating states.
- The most recent audited financial statements, plus reserve information and reinsurance details.
- A clear explanation of claims handling, defense counsel selection, and whether defense costs are inside or outside limits.
- Any member obligations, such as potential assessments, capital contributions, or governance requirements.
Not sure which option fits
If you are comparing an RRG with traditional commercial insurance, the right answer depends on your industry, loss history, contract requirements, and the level of financial and coverage flexibility you need.
USA Business Insurance can help you compare markets and put the right mix of liability, property, and workers’ compensation in place. We will walk you through quotes, coverage terms, exclusions, and insurer financial considerations so you can choose the best program for your risk.
