In response to continued difficulties in the medical malpracticemarket, 2008 began the year with a surge of new risk retentiongroups formed to provide medical malpractice for physicians.

In fact, not since the height of the hard market in 2003 has theRisk Retention Reporter added so many new RRGs to its listings inany one month.

In January, of the seven new RRGs added to RRR listings, sixwere organized to insure doctors. Four states were selected asdomiciles: Arizona (two), Montana (two), South Carolina (two) andVermont (one).

A common element running through the recently formed RRGsinsuring physicians is that all have arisen from existing groups ofdoctors. While some of the RRGs will insure physicians in only onestate, others plan to expand to multiple states.

Under the provisions of the Liability Risk Retention Act, RRGsdomiciled in one state can operate in other states upon filing aregistration application notifying nondomiciliary states of theirintent to do so.

A common theme among physicians forming RRGs is that thetraditional market is not meeting their needs. For at least one ofthe new RRGs, the med mal market in its state--New York--where theRRG's insureds practice medicine, is in crisis.

The Empire State's residual carrier--the Medical MalpracticeInsurance Pool--is running a deficit of about $1.9 billion. A taskforce appointed by Gov. Eliot Spitzer charged with findingsolutions to New York's ongoing med mal insurance financingproblems failed to make a year-end deadline to issue a report.

For some of the other RRGs, motivation stems from a desire byinsureds to control their own programs and achieve rate stabilityover the long-term. Many doctors have learned this is not possiblewith traditional insurers, which reduce rates in soft markets andraise them in hard markets--sometimes to exorbitant levels.

Another motivating factor for physician RRGs islearning--typically through feasibility studies--that their lossexperience does not warrant the rates they have been paying totraditional insurers. Often insurers lump physicians together withhigh-risk specialties. In effect, they are subsidizing higher-riskdoctors.

One of the six new physician RRGs reported in the January RRRwas sponsored by North Shore-Long Island Jewish Health System, thenation's third-largest nonprofit secular health care system (basedon the number of beds) and New York's largest (based on net patientrevenue).

The new RRG--North Shore-LIJ Physicians Insurance Company RRG,domiciled in Vermont--will provide professional liability insuranceto voluntary staff physicians affiliated with NSLIJ and will alsoinsure an excess layer of NSLIJ's professional liability.

With an annual $4 billion operating budget, NSLIJ is the largestemployer on Long Island and the ninth-largest in New York City,serving a population of 5.2 million in Long Island, Queens andStaten Island. Its hospitals serve as academic campuses for medicalschools, including New York University School of Medicine and theAlbert Einstein College of Medicine.

The RRG will insure only voluntary physicians. Employedphysicians are insured through a combination of coverages providedby NSLIJ's Bermuda captive.

Although the property-casualty market has softened in the lastfew years, with decreased rates and increased availability, RRGsare likely to continue to form to insure doctors in states withtight medical malpractice markets, such as New York.

"Often insurers lump physicians together with high-riskspecialties. In effect, they are subsidizing higher-riskdoctors."

Karen Cutts