What is the Liability Risk Retention Act?

The Liability Risk Retention Act (LRRA) is a federal law that was passed by Congress in 1986 to help U.S. businesses, professionals, and municipalities obtain liability insurance which had become either unaffordable or unavailable due to the “liability crises” in the United States.


How does the Risk Retention Act work?

In passing the Liability Risk Retention Act, Congress provided insurance buyers with a marketplace solution to the “liability crises”, enabling them to have greater control of their liability insurance programs.


What is a Risk Retention Group?

A Risk Retention Group (RRG) is a liability insurance company that is owned by its members.  Under the Liability Risk Retention Act (LRRA), RRGs must be domiciled in a state.  Once licensed by its state of domicile, an RRG can insure members in all states.  Because the LRRA is a federal law, it preempts state regulation, making it much easier for RRGs to operate nationally. As Insurance companies, RRGs retain risk


RRGs, as insurers, issue policies to their members and bear risk.  RRGs require members to capitalize the company.


Who can be a member of an RRG?

The LRRA requires that members be homogeneous, i.e., engaged in similar businesses or activities that expose them to similar liabilities.


What kinds of insurance coverage do risk retention groups provide?

The type of insurance coverage permitted is set forth in the Liability Risk Retention Act’s (LRRA’s) definition of “liability”, which includes all types of third-party liability, such as general liability, errors and omissions, directors and officers, medical malpractice, professional liability, products liability, and so forth.  The LRRA does not extend to workers compensation, property insurance, or to personal lines insurance, such as homeowners and personal auto insurance coverage.


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