Association Specialized Liability - An alternative


A Risk Retention Group is a corporation or other limited liability association, acting as a captive insurance company and organized for the primary purpose of assuming and spreading the liability risk exposure of its group members. A Risk Retention Group must be chartered and licensed as a liability insurance company in one of United States. It can also chartered as an industrial or association captive under special state captive laws such as Vermont, Delaware, Colorado, Illinois, etc.

A Risk Retention Group can be formed as a stock or mutual company, or as a reciprocal exchange. The Members of the Risk Purchasing Group must be engaged in businesses or activities which are similar or related in regards to the liability exposures created by virtue of common business or trade practices, products, services, premises or operations. The owners must be both members of and insured by the group. The non-chartering state has no approval authority over rates, coverages, forms, insurance-related services, management, operation, investment activities, or loss control and claims administration.

A Risk Retention Group cannot write coverage which is prohibited by state statute; however, the states do have broad discretionary powers in deciding whether coverage from a Risk Retention Group is acceptable where proof of financial responsibility is needed to obtain a license to engage in certain activities (i.e. motor vehicle operations).


A Risk Purchasing Group is an organization which purchases liability insurance on a group basis from an insurance company or a Risk Retention Group for its members. Unlike an Risk Retention Group, a Risk Purchasing Group is not an insurance company and its members do not underwrite their own coverage. However, they are subject to the same tests pertaining to membership, exposures, and types of coverages offered.

A Risk Purchasing Group is exempt from any state law, rule, regulation or order that would prohibit it or its members from purchasing insurance on a group basis, regardless of a minimum time in operation, the number of members or member participation level.
Apart from these specified exemptions, a PG must comply with all other state laws and regulations regarding its operation and procurement of insurance.

The Risk Purchasing Group must give notice of its intent to the insurance commissioner, identifying its state of domicile and principal place of business, categorize the lines and classifications of liability insurance to be purchased and provide the name and domicile of the insurance company from which insurance is to be purchased.

A Risk Purchasing Group may not purchase insurance from an insurer that is not admitted in the state where the Risk Purchasing Group is located, unless the coverage is purchased through a duly licensed surplus lines broker.