Alternative Risk Structures:
RPG and RRG Creation and Management
What is a Risk Purchasing Group (RPG) and a Risk Retention Group (RRG)?
Risk Purchasing Group (RPG) — a group formed in compliance with the Risk Retention Act of 1986 authorizing a group of insureds engaged in similar businesses or activities to purchase insurance coverage from a commercial insurer. This is in contrast to a Risk Retention Group (RRG), which actually bears the group’s risks rather than obtaining coverage on behalf of group members.
RPGs theoretically substitute group for individual buying—that is, liability insurance may be purchased “on a group basis.” The RPG is primary, not secondary to any other group or interest; it purchases insurance for its members and no one else; and the statute incorporates the insurance principal that the group members must consist of “substantially similar” risks. RPGs may not only use group bargaining power to negotiate more favorable terms with insurers, but by setting standards of membership and other risk management methods, they may also reduce loss experience to gain better rates.
Risk Retention Groups (RRGs) are liability insurance companies owned by its members. RRGs allow businesses with similar insurance needs to pool their risks and form an insurance company that they operate under state regulated guidelines.
Clipeum Group’s alternative risk, Assessment and feasibility study
There are many strategies and reasons to form and RPG, or RRG, but they are not for just any situation. Our experienced team uses our “Decision Gateway” methodology to save time, and money, in order to assess the viability of the RPG, RRG, or other structure, the reasons to create one, and the implementation time and cost involved. We give decision makers the substantive information they need quickly, efficiently, in order to make decisive decisions… Go, or No-Go.
Our alternative structures team
Clipeum Group’s Alternative Structures team is experienced in every aspect of creating, implementing, and managing RPGs/RRGs in order to achieve the insurance strategy, and the business strategies, of our clients. We are licensed in all 50 states. The Clipeum Group manages our Alternative Risk Solutions domiciled anywhere in the United States or internationally.
Clipeum Group’s RPG/RRG Management Services
Creating and operating an RPG/RRG is challenging. The high costs of start-up and complex state registration requirements are often barriers to entry, not to mention the ongoing reporting and maintenance costs. Each Clipeum Group client has a dedicated support team to manage the entire lifecycle of your alternative risk structure:
- Identify The Best Domicile State, and Register in the Domiciled State
- Create By-Laws & Incorporate RPG/RRG
- National Registration of RPG/RRG in Applicable States Conducting Business
- Remitting All 50 State Fees
- RPG/RRG State Renewals
- Managing Daily Banking And Financial Administration
- Managing Accounting, Auditing, And Actuarial Services
- Full and Daily Client Support
50 state annual reporting, filings, and fees
Staying compliant with each state’s rules, rates, deadlines, and fees is a monumental task, and the cost of non-compliance is high. Failure to follow a state’s strict guidelines could result in steep penalties and fines.
Altertive Risk Structures, and their reporting, differ from those required for standard policies. One must master the nuances, especially with regards to policies written in the ES market. For example, accuracy with Stamping Fees and Surplus Lines taxes is vital when ensuring compliance. In some states, filings are due 30 days from the effective date, while others are due 60 days. Many states will require additional reporting, sometimes monthly, other times quarterly, or annually.
RPG provides its members with the following benefits:
- Unique Coverages/Exclusions
- Flexible Solution Design
- Better Pricing
- Streamline Tax Filing And Reporting
- Advantages of The Excess & Surplus Lines Markets
- Bypass many fee restrictions.
- Regulated at the Federal Level
RRG provides its members with the following benefits:
- Program control
- Long-term rate stability
- Customized Loss control and risk management practices
- Dividends for good loss experience
- Access to reinsurance markets
- Stable source of liability coverage at affordable rates
- Multi-state operations