Insurance markets are constantly changing. Like the stock market, insurance premiums go up and down. In the mid-1980’s certain liability premiums such as medical malpractice, environmental liability, and products liability were up and unaffordable for many businesses and simply not available to certain others. At that time, the Federal government passed the Federal Risk Retention Act which basically states that certain businesses can come together to form an alternative risk funding structure to insure those risks. The structures can be formed in one state and can provide coverage in other states by registering there. What this means to the consumer is that you can partner with like businesses that have better-than-average loss experience, self-insure your risk, and retain the underwriting profit with less constriction than forming either a standard commercial insurance company or a surplus lines insurance company.
Venture Captive Management’s Risk Retention Group
We at Venture Captive Management have created a successful risk retention group for assisted living facilities that is domiciled in Washington, D.C. The National Assisted Living Risk Retention Group (NALRRG) was created with the direction and funding of members of the North Carolina Association of Long Term Care Facilities when general/professional liability was unavailable in North Carolina. It is the intention of the Board of Directors of NALRRG to expand their company to any state that is suffering similar circumstances.
The Board is intensely active in its oversight of the risk retention group. They are actively involved in establishing underwriting guidelines, targeting additional states and ancillary industries that have risk profiles similar to North Carolina assisted living facilities, reviewing open claims and supporting the Third Party Administer in making solid claims decisions, and in monitoring the company’s financial position.
As a result of the creation of the NALRRG, the market is stable and thriving in North Carolina, and investors are building reserves to support other assisted living facility owners in other states. This is the real benefit of the risk retention group.
Risk Retention Groups for Other Industries
Today, there are still industry groups that are having issues with the liability coverages provided by the traditional commercial market. It may be that commercial coverage is not available, does not “fit” the nuances of the industry group, or is just not affordable for the average client. A risk retention group is an excellent vehicle to overcome these issues.
Forming a risk retention group requires a committed group of investors dedicated to forming the company. It takes financial leaders with determination to meet the requirements of the state of domicile—the Risk Retention Act applies specifically to U.S. risks—and it takes a commitment to participate in the decision-making of the risk retention group. While we at Venture Captive Management, LLC, can provide direction and insight, it takes the foresight and dedication of your industry leaders to participate in the insurance company activities or it loses the focus of the original purpose.
VCM has the business partners who will make your risk retention group work like a successful standard insurance company, but with the profit returned to the owners rather than to a commercial insurer. We will work with your industry group to give you the tools to make your investment grow. Contact us today for more information.