Using an RRG to Customize Your Captive Insurance Options

Some of the main reasons to opt for a captive insurance structure are flexibility and control. In some ways, a Risk Retention Group, or RRG, can take those elements to another level. There are some limitations to this structure as well, but if leveraged properly, RRGs can be utilized to as part of your captive insurance strategy to help maximize the benefits your company receives and the potential options for customization of your coverage.

What Is an RRG?

An RRG is an insurance company established according to the guidelines set forth in the Produce Liability Retention Act of 1981, which was passed in response to a hardening of the insurance markets that was making it difficult for certain types of companies to acquire some forms of liability coverage. The act first only applied to product liability coverage, but it was amended in 1986 to allow RRGs to write policies for all types of liability coverage, including errors and omissions, professional liability, commercial liability, and more. They cannot, however, write policies for any type of property coverage.

In many ways, an RRG resembles a traditional captive insurance company, but there are some key differences. For instance, all of the owners of the RRG must have some commonality in terms of the market they operate in or the types of liability they are exposed to. Additionally, all owners must be policyholders, all policyholders must be owners, and there must be at least two owners for every RRG. In general, RRGs must have more cash on hand than traditional captives, and they must be domiciled within the United States.

Benefits of an RRG

The limitations RRGs operate under come with some unique benefits as well. These include the fact that, although an RRG must be domiciled in a US state, it can operate and write policies in any other state as long as it was first registered and accepted that state’s commissioner to be designated as its agent. Upon meeting these requirements, an RRG can write policies directly in the state without the need to obtain a license, and it is seldom required to submit rate and form filings as other conventional insurance companies must.

Combining Strategies to Maximize Your Benefits

Because both RRGs and traditional captive insurance structures offer benefits along with their respective limitations, your best strategy may be to utilize both in order to create a more tailored system of coverage for your business. This may mean using the RRG as your primary insurer, while relying on a captive for reinsurance only in instances where you require a type of coverage the RRG can’t provide, for example.

This type of arrangement also allows for flexibility within a group or a medical practice, as individuals can obtain their liability coverage through an RRG, while the group receives specialized coverage from a captive. Many other customizations are possible as you explore your captive insurance options, and RRGs can play a vital role in helping to ensure you get the greatest possible benefit out of your coverage.

 

In order to take advantage of all of the advantages these arrangements can provide, it’s important to have knowledgeable professionals to guide you and help you make the best possible decisions every step of the way. The professionals at Venture Captive Management have years of experience in the industry that they can draw on to help your business succeed. To learn more, call Venture Captive Management today at 770.246.8535.