Risk Retention Group
Risk Retention Group
Insurance industry is a vast business world composed of individuals, partners and groups offering different types of insurance policies for continues operation. One of these is the Risk Retention Group
Risk retention group is one type of insurance enterprise that is operated and owned by the members of the group. It is created to essentially help people and businesses that have troubles in acquiring a liability insurance in a traditional insurance enterprise. The members of this group would gather together and share effectively the risks that are closely related to the business.
Risk retention groups have been authorized by the United States under Liability Risk Retention Act. This act was established in 1986 to answer the growing problems in the insurance industry by which either caused by a refusal to provide liability insurance by the company or due to high premiums.
The Risk Retention group is considered to be legal as the bear taker and the insurer of the risks the policies may indicate. In addition, the members of the risk retention group are the only group that will be insured against liability damages and losses like compensation and legal costs from claims caused by faulty products and professional mistakes. It will not cover any personal insurance which includes auto insurance for employees and directors as well as health insurance. It does not also include the coverage for property insurance like theft or fire.
Risk retention group members are obliged to be involved with the same type of insurance in general within the industry. If in case uncertainty may rise of whether the group qualifies, take a look at the liability risks it bears if it is similar or not.
Advantages and Disadvantages of Risk Retention Group
• Avoidance of licensing requirements and multiple state filing
• Member control against litigation management problems and risks
• Establishment of unchanging market for rates and coverage
• No fronting expense fees.
• Risks are solely limited to liability insurance
• Not allowed to write any business outside
• No available guarantee funds for its members
The major advantage of the risk retention group is that the firms would be able to acquire liability insurance at the most reasonable price rates as compared to getting it individually. At the same time these firms may act as both the client and the insurer which means that these firms can take control of a greater care to prevent situation that would ignite a claim and thus will improve professional standards.
Risk retention group should be registered by the state and must be governed by laws. Once this had been done, the group can now start taking on and invite and cover members all over the country. The Risk Retention group are exempted to numerous state regulations under the Liability Risk Retention Act. Generally speaking, the state’s power over this group are only limited to the collection to taxes and forcing the group to follow the basic insurance practices which includes settling any claim in a proper manner.