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Member, Beacon International Group, Ltd.
Affected by the soft market, the number of risk retention groups continues to fall, according to an industry newsletter.
In October, the number of RRGs declined to 236, down from 240 in September and 250 in January, according to statistics compiled by the Risk Retention Reporter, a Pasadena, California-based newsletter that tracks the RRG industry. In 2008, the number of RRGs peaked at 262.
RRG observers attribute the decline to the soft traditional market in which many coverage lines are readily available at competitive rates.
“It can be very hard for RRGs to compete in a soft market,” said Jon Harkavy, vice president and general counsel with RRG manager Risk Services L.L.C. in Washington.
Some RRGs, though, say they have been able to hold on to member-owners, even in the face of stiff competition in the traditional market.
“Historically, we have had a 99% retention rate,” said Michael Bemi in Lisle, Illinois, president and CEO of The National Catholic Risk Retention Group Inc., a Vermont-domiciled RRG.
Mr. Bemi attributes that stability to several factors, including providing high quality service, as well as consistent and stable pricing.
“We have done that from day one, and that is why we are here 26 years later,” Mr. Bemi added.
Congress first authorized RRGs, which are special multiple-owner captives, under legislation passed in 1981. Under that law, RRGs could offer product liability and completed operations coverage to member-owners nationwide after meeting the licensing requirements of one state.
In 1986, Congress expanded RRGs’ underwriting authority enabling the groups to write all commercial casualty coverages, except workers compensation.
A review of risk retention groups’ performance through the second quarter of 2014 released on Monday finds the sector healthy despite a drop in direct written premium and a rising combined ratio.