RRG Market Growing In Number, Markets

While risk retention group formation in the first five months of2004 matched last year's growth figure for the same time period,there were some intriguing trends to consider.

There were 17 RRGs formed from January to May the same as in2003. The total number of operational RRGs now stands at 153, morethan double the amount reported at the same time two years ago.

While health care remains the dominant business area in whichRRGs have formed in the past two years, such entities are beinglaunched with greater frequency in other sectors as well notablyproperty development, providing liability coverages to homebuildersand contractors. Moreover, the pace of formations in this areaappears to be accelerating.

During 2003, four RRGs were created to provide liabilitycoverages to homebuilders and contractors, while this year, twoalready have been formed to provide coverage for insureds in thatsector.

Taking a closer look at the composition of these RRGs, it'snotable that several have been established by large homebuilderorganizations to provide coverage for subcontractors or to insurehomebuilder warranties, while others have been formed byhomebuilder associations to provide coverage for members.

A captive manager who has assisted in the formation of severalRRGs said he receives calls almost daily from state homebuilderassociations who want to set up such facilities for their members,calling it the “me-too syndrome,” as association executives learnof RRGs being formed to insure members of homebuilder associationsin other states.

As liability coverage for contractors becomes increasinglyexpensive, and in some cases unavailable, more RRGs can be expectedto form to fill this growing need.

Another interesting development is the formation of RRGs in newbusiness areas in which such entities have not previously employed.A new RRG added to our listings in May is the first of its kind,providing general liability to entertainment industry productions,including nightclubs, special events, concerts and similaractivities.

With RRGs becoming increasingly popular, the emergence of thesealternative market entities in an even greater range of sectors canbe anticipated.

(Note: The 15th annual edition of the “Risk Retention GroupDirectory & Guide, 2004″ is available. It contains in-depthprofiles of 151 RRGs, including 60 new entities added to thisyear's edition. Also included are listings for more than 400service providers. To order, visit www.rrr.com.)

Karen Cutts is managing editor and publisher of the “RiskRetention Reporter,” a monthly newsletter based in Pasadena,Calif.

Reproduced from National Underwriter Edition, May 21, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.