RRG Premiums Soaring To Over $2 Billion
Most new risk retention groups formed to cover health care facilities and providers
The 17th annual survey of risk retention groups conducted by the Risk Retention Reporter reveals the continued surge in RRG formations, reflecting use of the Liability Risk Retention Act by commercial insurance buyers who are finding coverage unavailable or unaffordable in the traditional marketplace.
Health care remains the business sector accounting for the lion's share of formations.
The RRR survey found that 2004 RRG annual premium is projected to top $2.158 billionan increase of $418.8 million (24.1 percent) over 2003 premium, which grew 37.4 percent from 2002.
Premium increases are projected for all business areas, with health care accounting for more than $1 billion in 2004 premiuman increase of almost 20 percent from 2003.
RRGs serving the health care marketplace are projected to generate $1.063 billion in 2004 annual premium, with RRGs serving hospitals and their affiliates accounting for 68 percent ($725.1 million) of that total, and RRGs serving physicians accounting for 19 percent ($206.2 million).
The remaining areas of the health care sector, RRGs account for 13 percent ($130.8 million) of total RRG health care premiums, with the growth of premium in nursing homes representing the largest percentage gain for the sector from the previous year.
Premium for RRGs in nursing homes is projected to increase fourfoldfrom $10.1 million in 2003 gross written premium to $40.9 million this year.
Prior to 2003, no RRGs were formed to insure nursing homes. In 2003, however, as long term care operators faced skyrocketing premiums and unavailability of liability coverages from traditional insurers, RRGs were formed, with 11 established in 2003 and nine during the first 10 months of this year.
Another business sector showing rapid premium growth is contractors, where premium is projected to increase by 72.5 percent in 2004, growing to an estimated $95.1 million from $55.1 million in 2003. With eight RRGs in the contractors sectorfive of which were formed in the last year-and-a-halfcontractors' RRGs account for more than 60 percent of total 2004 estimated premium for property development, which is the business area where these RRGs are classified.
Premium generated by RRGs insuring homebuilders is projected to account for the second-largest increase, growing to $45.8 million in 2004 from $41.7 million in 2003.
Overall, premium in property development is projected to grow by 46.2 percent to $148.9 million in 2004 from $101.9 million in 2003.
The dramatic surge of RRG formations which began in 2003 has continued, with RRGs being formed at six times the rate they did in 2001.
Unavailability and unaffordability of liability coverages continue to drive commercial insureds into alternative markets, with RRGs serving as one of the most viable options for insurance buyers.
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, November 11, 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.
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