NAIC.RRG

Reading: The Center for Insurance Policy and Research, Risk Retention Groups, updated March 23, 2021.

Author: NAIC

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Study Tips

Minor Update for 2022-Fall: The small update is a highlighted bullet point under formation of a risk retention group.

The topic of this reading is Risk Retention Groups or RRGs. This reading replaces a similar but more comprehensive reading on the same topic. The wiki article for the prior syllabus reading, GAO.Report, has been archived and you click the link to go to it. (GAO stands for General Accountability Office.) There are a small number of old exam problems but they cover material not part of the new reading.

The new article on RRGs is barely more than 1 page, much shorter than the prior reading, and signals to me that RRGs is not an important topic. On past exams, it accounted for a very small percentage of the total points (if it appeared on the exam at all) and is now likely to count for even less. I doubt you need to know anything more than the definition and a few basic facts. Past exam problems on RRGs are very likely not relevant anymore. Just memorize the BattleCards.

Estimated study time: 30 minutes (not including subsequent review time)

BattleTable

No past exam questions are available for this reading.

reference	part (a)	part (b)	part (c)	part (d)

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In Plain English!

Let's start with the basics.

Question: define and briefly describe the concept of a Risk Retention Group (RRG)

• a RRG is a liability insurance company owned by its members
• members are a group of similar business that have pooled their risks
• medical malpractice is the most common line of business for a RRG

Let's now dig a little deeper.

Question: how is a RRG formed and how does it operate

• formation:

- formed using a combination of state & federal laws under the auspices of the Federal LRRA (Liability Risk Retention Act)

→ must submit a plan of operation to commissioner of domiciliary state that includes coverage, deductibles, limits, rates, classification system

- may be formed under a state's captive or traditional insurance laws (click for the definition of captive insurer - not on syllabus)

• operation

- may write business directly in states where they are registered without obtaining a license (whereas captives cannot do this)

- can be domiciled in 1 state but still do business in another state if a registration process is completed and the state's commissioner is designated as agent for service of process

- treated as multi-state insurers and subject to NAIC accreditation standards for RRGs (NAIC standards are not discussed in this reading but you can click the link for a very brief overview of what those standards are)

The source reading touches briefly on RRG regulatory requirements and differences versus traditional insurers.

Question: is a RRG required to comply with the usual quarterly & annual financial filing requirements

• yes, and this includes but is not limited to:

- financial statements (yellow book format)

- RBC

- SAO

- MD&A (Management's Discussion and Analysis)

- audited statements

Question: identify regulatory differences between RRGs and traditional insurers

• many RRGs use GAAP instead of SAP
• few RRGs submit rate filings
• RRGs cannot participate in state guaranty funds

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