What type of insurance company is organized by a group of businesses with similar risks?

A Risk Retention Group is a specific type of insurance company that is organized by a group of businesses that share similar risks or liability exposures. This collective arrangement allows the member businesses to pool their resources and share the financial burden associated with those risks. By doing so, they can obtain insurance coverage that may be more tailored and potentially cost-effective compared to what individual businesses might find in the traditional insurance market.

This type of insurance company operates under the provisions of the Liability Risk Retention Act of 1986, which was designed to enable businesses, particularly those in similar industries, to self-insure against specific liability risks by forming a group. Members of a Risk Retention Group are usually in similar businesses or types of professions, which allows them to effectively manage and underwrite the risks associated with their operations.

Understanding the nature of a Risk Retention Group is essential for businesses looking for efficient insurance solutions, particularly those facing similar challenges and exposures.