Forming a Risk Retention Group

In order to maintain the confidence and to ensure that the Risk Retention Group is profitable, all underwriting issues will need to be documented in order that forecasts can be made with regard to anticipated claims.

Being chartered as an insurance company allows the Risk Retention Group to approach any reinsurer that is acceptable to it. The most established markets are in North America, the London market (including Lloyd's of London), Bermuda and Europe.

Apart from the customary financial and legal service providers, the key service providers to be considered will consist of an underwriting management company and reinsurance intermediary.

Most States use a standard NAIC registration form as adopted in 1991 but around 20 states require their own forms to be used.

Before forming a Risk Retention Group it is important to perform a feasibility study to determine whether or not a Risk Retention Group is a viable proposition. Part of the feasibility study involves a review of all the participating companies' current insurance programs to determine suitability by comparing to what might be achievable under a Risk Retention Group scenario.