New Analysis Shows RRGs Are Writing More Business

While the number of risk retention groups (RRGs), a special type of captive authorized under legislation Congress passed in 1981 and expanded in 1986, has remained relatively stable in recent years, RRGs are writing more business, according to a new analysis.

The analysis of RRGs, which can do business in any state after meeting the licensing requirements of one state and can write all casualty lines, except workers compensation, conducted by Pinnacle Actuarial Resources, Inc., a Bloomington, Illinois-based property/casualty actuarial firm, found RRGs' premium volume has increased significantly in recent years.

For example, last year RRGs' premium volume topped $3.2 billion, up from just $2.5 billion in 2012, while the number of RRGs remained stable during the period, averaging 217.

Citing an A.M. Best Co. analysis of 228 RRGs in 2018, Vermont, by far, was the largest RRG domicile, with 83 RRGs licensed in the Green Mountain State.

Where RRGs are licensed, though, has little to do with the location of its policyholder-owners, according to the analysis. For example, states with the biggest RRG premium volume based on where risks are located—New York, Pennsylvania, California, Massachusetts, Florida, Texas, Maryland, Connecticut, Illinois, and New Jersey—combined have just a handful of licensed RRGs.

By line of business, medical professional liability is, by far, the biggest line of business funded through RRGs, according to the analysis. In 2018, nearly $2 billion in premiums for medical professional liability coverages flowed through RRGs.

Of the 228 RRGs licensed in 2018, 176 RRGs wrote well over 90 percent of their premium volume in one line of business.

The analysis noted that of the 228 RRGs operating in 2018, just 40 had ratings from A.M. Best Co. Of those 40 ratings, a majority—21—were A.

In all, the analysis, 2019 Risk Retention Group Benchmarking Study, "is a detailed look into diverse data, making it particularly helpful in understanding the specific conditions of a very distinct and heterogeneous RRG market," Pinnacle Principal and Consulting Actuary Rob Walling said in a statement.