Risk Retention Group Law and Legal Definition

A Risk Retention Group (RRG) is a type of insurance company owned by its members and organized for the primary purpose of assuming and spreading the liability risk exposure(s) of its group members (member-owners). Owners of RRGs must be both members of and insured by the group. RRG’s are formed under the Federal Liability Risk Retention Act of 1986. (FLRRA). RRG’s must be domiciled in a state. Authorization under the federal statute allows a group to be chartered in one state, but able to engage in the business of insurance in all states, subject to certain specific and limited restrictions. An RRG will allow members who engage in similar or related business or activities to write liability insurance for all or any portion of the exposures of group members, excluding first party coverages. The Federal Act preempts state law in many significant ways. Because the LRRA is a federal law, it preempts state regulation, making it much easier for RRGs to operate nationally. The risks are limited to liability insurance and RRG’s are not permitted to write outside business.