A softening of the property-casualty market in 2005 was mirrored by the declining number of risk retention groups formed by year's end–33 compared with 54 in 2004 and 58 in 2003.

Notwithstanding the decline, however, the RRG formation rate remains considerably higher than the average for the last 10 years. The total number of RRGs now stands at a record high of 217.

Three business areas–health care, property development and transportation–continue to account for the majority of RRG formations.

Among the highlights:

o Of the 18 health care RRGs formed in 2005, seven (38 percent) insure physicians. This is half the number formed in 2004 to insure doctors.

o Similarly, the number of RRGs formed in 2005 to insure nursing homes and hospitals is about half the number of formations in 2004 in each of the sectors. Five nursing home RRGs were formed in 2005 compared to 11 in 2004. Five hospital RRGs were formed in 2005 versus nine in 2004.

o The number of RRGs formed in property development–to provide liability coverages for contractors and homebuilders–remained the same as in 2004, with six RRGs formed in both years.

o The number of RRGs in transportation remained almost the same, with three RRGs insuring commercial vehicles, and two insuring trucking operations.

The accompanying bar graph shows the growth of RRG formations, while the table compares the leading business areas where RRGs were formed in the last three years.

Special Reports /

RRG Formations Fall In Softening Market

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