2004: Another Banner Year For RRGs Risk retention group formations still on the rise despite softening market
Despite signs of a softening insurance market, risk retention group formations have continued to soar in 2004, as they did the previous yearan all-time record breakerreflecting the continued unavailability and unaffordability of liability insurance that buyers face in the traditional marketplace.
This year, 54 RRGs were formed, compared to 58 at the end of last year, with health care continuing to account for the greatest number of formations. Two health care sub-areasphysicians and nursing homeseither exceeded or equaled last year's number of formations.
The number of RRGs providing liability coverages for physicians formed this year (14) just barely exceeded the number formed in 2003 (13), bringing the total number of operating RRGs serving the physician marketplace to 32.
The other health care sub-area that sustained formations this year is nursing homes, with 11 RRGs formed this year compared to an equal number in 2003. This brings the total number of RRGs insuring nursing homes and similar eldercare facilities to 22.
Hospitals and affiliates, which had accounted for the greatest number of RRG formations in the health care sector in 2003 (23), accounted for only nine formations in 2004.
While health care dominates RRG formations, other business areas are also showing gainsspecifically property development and transportation. In 2003, four RRGs formed in property developmentwith three insuring the liability exposures of contractors and one insuring the liability exposures of homebuilders.
In 2004, the number of RRG formations in property development increased to six, with four insuring homebuilders and two insuring contractors.
The number of RRG formations in transportation also increased. Three RRGs insuring trucking operations and one insuring commercial vehicles were formed in 2003, compared with five RRG formations in 2004 (three insuring commercial vehicles, while two insure trucking operations).
Looking back over the decade of the 1990s, in which RRG formations slowed due to the soft traditional insurance market, the net number of RRGs (formations minus retirements) remained fairly constant throughout this period, hovering between 65 and 70 at the end of each year.
In 1999 and 2000, a total of only five RRGs formed while twice as many retired. In 2001, formations rose slightly to seven, with three retirements. However, after 2001, RRG formations began their dramatic increasemore than doubling from the year-end total of 69 in 2001 to 186 at year-end 2004.
Karen Cutts is editor and publisher of the Risk Retention Reporter in Pasadena, Calif. Visit www.rrr.com for information on risk retention groups and purchasing groups.
Despite signs of a softening insurance market, risk retention group formations have continued to soar in 2004, as they did the previous yearan all-time record breakerreflecting the continued unavailability and unaffordability of liability insurance that buyers face in the traditional marketplace.
This year, 54 RRGs were formed, compared to 58 at the end of last year, with health care continuing to account for the greatest number of formations. Two health care sub-areasphysicians and nursing homeseither exceeded or equaled last year's number of formations.
The number of RRGs providing liability coverages for physicians formed this year (14) just barely exceeded the number formed in 2003 (13), bringing the total number of operating RRGs serving the physician marketplace to 32.
The other health care sub-area that sustained formations this year is nursing homes, with 11 RRGs formed this year compared to an equal number in 2003. This brings the total number of RRGs insuring nursing homes and similar eldercare facilities to 22.
Hospitals and affiliates, which had accounted for the greatest number of RRG formations in the health care sector in 2003 (23), accounted for only nine formations in 2004.
While health care dominates RRG formations, other business areas are also showing gainsspecifically property development and transportation. In 2003, four RRGs formed in property developmentwith three insuring the liability exposures of contractors and one insuring the liability exposures of homebuilders.
In 2004, the number of RRG formations in property development increased to six, with four insuring homebuilders and two insuring contractors.
The number of RRG formations in transportation also increased. Three RRGs insuring trucking operations and one insuring commercial vehicles were formed in 2003, compared with five RRG formations in 2004 (three insuring commercial vehicles, while two insure trucking operations).
Looking back over the decade of the 1990s, in which RRG formations slowed due to the soft traditional insurance market, the net number of RRGs (formations minus retirements) remained fairly constant throughout this period, hovering between 65 and 70 at the end of each year.
In 1999 and 2000, a total of only five RRGs formed while twice as many retired. In 2001, formations rose slightly to seven, with three retirements. However, after 2001, RRG formations began their dramatic increasemore than doubling from the year-end total of 69 in 2001 to 186 at year-end 2004.
Karen Cutts is editor and publisher of the Risk Retention Reporter in Pasadena, Calif. Visit www.rrr.com for information on risk retention groups and purchasing groups.
Reproduced from National Underwriter Edition, December 10, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
