Why risk retention groups are critical for a healthy insurance marketplace

Legislation currently making its way through Congress would authorize risk transfer groups to insure more types of risks. (Photo: iStock)

The insurance marketplace has evolved significantly over the past several decades. Organizations today have access to many forms of risk transfer beyond the purchase of traditional insurance. The Alternative Risk Transfer market (ART), as it has come to be known, is able to tailor solutions previously unavailable and has become an integral part of the insurance landscape.

As part of ART, risk retention groups (RRGs) are a crucial and highly successful form of insurance for many business entities. RRGs pool their similar risk exposures to collectively self-insure — they are effectively owned by their members. RRGs provide an innovative solution for similar entities to insure themselves. For example, a group of hospitals, attorneys, financial institutions, or nonprofits could find specialized insurance from an RRG to meet their specific needs.