Attorney Risk Retention Group Is a Case Study in the Evolution of a Captive

Atlas 2013 Annual Report cover image of building in front of blue skies

August 19, 2014 |

Atlas 2013 Annual Report cover image of building in front of blue skies

ALAS, Inc., risk retention group (RRG) was formed in 1987 and is domiciled in Vermont. Its purpose is to act as a primary insurance company providing direct underwriting, claims management, and loss prevention services for its members. This RRG basically served as a risk-taking fronting insurer for the Bermuda-based captive Attorneys' Liability Assurance Ltd. This Bermuda captive was formed much earlier in 1979 by 35 law firms that pooled $1 million in capital. In November 2013, the Bermuda captive re-domiciled to Vermont as a captive referred to as ALAS Ltd. According to Demotech, "On January 1, 2014, Attorney's Liability Assurance Society Inc., RRG (ALAS) entered into a Contribution Agreement with its parent, ALAS Investment Services Limited (AISL)." ALAS RRG assumed significant assets and liabilities of the parent. According to the first quarter 2014 statement that ALAS filed, "loss reserves historically ceded by (ALAS) to the parent …were reassumed by the Company." More than $2 billion in total assets and more than $1.5 billion in total liabilities were contributed to ALAS. The most significant liability assumed by ALAS was $1.2 billion of loss reserves. The net capital contribution of this transaction was more than $513 million. ALAS, Inc. RRG's website reports that "… it insures 222 firms and approximately 58,000 lawyers in 45 states and the District of Columbia." As of the end of the first quarter 2014, the Demotech Financial Analysis reports that the ALAS policyholder surplus was about $589 million.

August 19, 2014