Risk Retention Groups Post Strong First-Quarter Results, Report Finds

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June 16, 2021 |

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Risk retention groups (RRGs) are reporting excellent financial results for the first quarter of 2021, according to a new report.

The Analysis of Risk Retention Groups—First Quarter 2021, report by Demotech, Inc., titled "RRGs Report Nearly 20 Percent Increase to Policyholders' Surplus," found RRGs' cash and invested assets jumped 14.1 percent in the first quarter of 2021 from the first quarter of 2020, while total admitted assets rose 13 percent.

In all, RRGs' policyholder surplus increased by $974.7 million. That increase in surplus "becomes increasingly important in times of difficult economic conditions by allowing an insurer to remain solvent when facing uncertainty," the Demotech analysis, written by Douglas A Powell, senior financial analyst, noted.

While RRGs reported a total underwriting loss of $19.5 million during the first quarter of 2021, that loss was overshadowed by a net investment gain of $201.7 million, resulting in net income of $178.4 million.

In all, RRGs received $1.2 billion in net premiums written during the first quarter of this year, up 5.8 percent from the same period a year ago.

In all, "RRGs remain financially stable while providing specialized coverage to their insureds," the June 15, 2021, Demotech report noted.

RRGs are a specialized type of group captive insurance company, which were first authorized under legislation Congress passed in 1981. Under that law, RRGs, which were allowed to operate in any state after meeting the licensing requirements of the state where they are domiciled, could only write product liability coverages for policyholder owners.

Five years later after RRGs' initial authorization, Congress, responding to soaring premiums in the traditional market, expanded the law to enable RRGs to write all casualty coverages except workers compensation.

Currently, there are 220 RRGs, according to the Risk Retention Reporter.

June 16, 2021