Financial Stability Ratings® Philosophy and Methodology – Risk Retention Groups
Since 1985, Demotech has been serving the insurance industry by providing accurate and proven Financial Stability Ratings® (FSRs) for the insurance industry, including Risk Retention Groups (RRGs) and Reciprocal Exchanges.
The Liability Risk Retention Act of 1986 (LRRA) was signed into law to provide a mechanism for the placement of product liability exposure for a broad spectrum of businesses. Property and Casualty insurers’ appetites for underwriting this exposure had significantly tightened in the 1970s and early 1980s. LRRA created a new form of insurance carrier, an RRG. To a certain degree, an RRG is a Property and Casualty insurer which may write business in all states without having to comply with many of the regulations of the states in which it chooses to do business. The primary regulatory compliance issues reside within the state that grants the initial charter to the RRG, with most of the regulations of the non-chartering states preempted by the Act. LRRA has been expanded and now includes most professional liability exposures. RRGs tend to insure medical providers, product manufacturers, law enforcement officials and contractors, as well as other professional industries.
Demotech understands the unique structure, advantages and opportunities that RRGs bring to the Property and Casualty professional liability market. Demotech continues to support RRGs and the Property and Casualty industry with our FSRs and presents the following summary of our philosophies and methodologies as an overview of our FSR process as it relates to RRGs.