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From set-up to management, we can
help you through the alternative
insurance process.
InLight Risk Management
develops small to large
self-insured captives and risk
retention groups to providing
comprehensive administration for a
captive insurance program or trust.
Through our strategic partnership
with MS Insurance Services we can
provide all types of alternative
risk financing vehicles including
onshore and offshore captives as
well as risk retention and risk
purchasing groups.
IRM provides a full range of
consultation services ranging from
feasibility study analysis to the
final selection of the service
provider relationship and
implementation of your program
plans. Once the self-insured captive
is established, we will continue to
provide consultations regarding
actuarial, claims, underwriting,
risk management, legal and audit
services and assistance with
strategic planning and corporate
governance.
Frequently Asked Questions
about Captives
What is a Risk Retention Group?
A Risk Retention Group (RRG) is a
liability insurance company owned
and governed by its members. As an
insurance company, the RRG retains
the risk and issues policies to its
members. The insureds represented
must be involved in similar
activities (i.e., long-term care
facilities). Further, the owners
must be insureds and the insureds
must be the owners. Ownership
profits and control are retained,
enabling the owner(s) to enhance
their business performance and
remove the inherent “peaks and
valleys” of the insurance budgeting
process. All RRG's must be domiciled
in a particular state, but once
licensed in that state, the RRG can
write business in all states in
which they register. RRG's are
typically exempt from state laws
that apply to standard insurance
companies. Consequently, they can
usually provide better pricing and
broader coverage.
What are some of the advantages of a
Risk Retention Group?
Because they are owned by their
members, allowing greater internal
control, RRG's offer many distinct
advantages over other insurance
options. In addition to improving
overall risk management, RRG's can
also be a more financially favorable
choice – through the reduction
and/or stabilization of insurance
costs. Additionally, access to
reinsurance markets enables members
to establish programs with appealing
benefits like higher limits, broader
coverage and increased capacity. And
because the RRG is owned by its
members, profits are retained and
the group enjoys a larger return on
investment.
What are some of the disadvantages
of a Risk Retention Group?
While the unique set-up of RRG's
allows for insurance coverage
availability when no other options
appear viable, there are several
considerations that should be
addressed before forming this type
of group. Initially, member
risk-capital is required and in the
event of insolvency, no state
guaranty fund protection is
provided. All members should be
aware that the loss experience of
one member could lead to the entire
group having to pay extra premiums.
Finally, an RRG is limited to
writing liability coverage only –
and there is an average 3-5-year
wait before the group can be
eligible for an A.M. Best Rating.
What is the Liability Risk Retention
Act (LRRA)?
The LRRA is a federal law that was
passed by Congress in 1986. It was
passed to help U.S. businesses and
professionals obtain liability
insurance when other insurance
options were unaffordable or
unavailable due to the liability
crisis in the United States.
What is the definition of
“Alternative Risk Transfer”?
Alternative Risk Transfer (ART)
provides innovative solutions for
protection against a range of risks.
Solutions vary according to the
group's need, providing a variety of
choices - from self-insurance to
complete risk transfers, like
captives and risk retention groups.
Originally created to allow entities
to insure their own risks, all risk
retention groups are regulated by
federal law by means of the
Liability Risk Retention Act (LRRA).
However, the LRRA has no enforcement
mechanism of its own and relies on
state insurance departments for
implementation. The state in which
the RRG is domiciled has primary
authority over the entity.
What are some methods of
“Alternative Risk Financing”
options?
1. Self-Insurance. A company or
group that is self-insured pays part
of their own insurance losses by
assuming the role of the insurer.
There are many advantages to
self-insuring, including the ability
for a group to design its own
insurance program, possibly
accessing broader coverages and
increased capacity. Also, because
the group is member-owned, there is
built-in incentive to reduce claims
and premiums. Fewer claims and lower
premiums mean greater profit for the
group. Coverages that can be
self-insured include auto liability,
professional liability, general
liability, worker's compensation and
employee benefits. It is important
to note that liability is the only
type of coverage currently allowed
to be written in these groups.
2. Captives. A captive is a
corporation formed by a business or
group of affiliated businesses, who
are not in the insurance business,
to accept insurance or reinsurance
risks in which they have a direct
interest. Captives may be set up in
several different ways, including
group, single-parent, pure and
cellular. It is required by law for
every captive to establish a board
of Directors or board of Governors
3. Risk Purchasing Group. A Risk
Purchasing Group (RPG) is a
corporation or other limited
liability association formed for the
purpose of decreasing the liability
risk exposure of a set of
professionally similar groups. RPG's
purchase liability insurance for
members on a group basis from an
outside insurance company, ideally
using “group purchasing power” to
negotiate insurance premiums. An RPG
is not an insurance company, and its
members do not underwrite their own
coverage or bear any of the risks of
an insurance company.
Securities offered through Purshe Kaplan Sterling Investments,
Member FINRA/SIPC, Headquartered at 18 Corporate Woods Blvd., Albany
New York 12211.
www.finra.org
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