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Article Directory :: Business - General Articles
A Risk Retention Group is an insurance company in which each policy holder is also a effectively stock holder. An RRG is usually formed to address business liability insurance needs of a specific group or niche. However, as the name implies, these groups do not actually buy commercial insurance policies, rather they "retain" the risk within the group.
Any individual who chooses to be insured through a Risk Retention Group possesses partial ownership of the insurance company, in other words, the members of the RRG collectively invest in a fund to be utilized only for liability issues. Risk retention groups do not write first party coverages like property, workers' compensation or personal lines.
What is effectively happening in an RRG is that the members of the group are insuring each other against liability claims and lawsuits. However, because a risk retention group is technically considered an insurer, it may purchase reinsurance. Reinsurance is a form of insurance that companies buy to cede part of their risk or spread losses over multiple years.
One major advantage of RRG's is that it is not necessary to fulfill multiple filing and licensing requirements for multiple state. A risk retention group must simply be licensed as an insurance company in its home state. RRG's can also provide stability in members' fees, such as coverage costs and rates.
One of the most appealing benefits of RRG's in comparison to standard insurance coverage is how much cheaper it is for the company. The savings are evident in a multitude of ways. First of all, members of RRG's save inherently simply because all employees are pooling together, in resources and in sheer numbers. RRG's are also not affected by frequent changes in the outside commercial liability insurance market. Some RRG's even allow premiums that have gone unused to roll over for investing in, and thereby decreasing the cost of future premiums. There are also no fronting costs, which benefits all members of the Risk Retention Group.
Statistics show that the affordability of RRGs is steadily growing. More than likely, that's because that in today's recessionary economic environment, Risk Retention Groups are an innovative and affordable option. They offer a different commercial insurance option for individuals who want the stability of liability coverage without the typical costly fees of a standard insurance policy. To find RRG's that serve businesses in your particular niche, start by searching the Internet for "RRG + your niche", or contact your insurance broker, agent or financial services advisor.
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