Risk retention groups: member-owned liability insurers some fleets join
Overview
A risk retention group (RRG) is a liability insurance company owned by the businesses it insures, formed under the federal Liability Risk Retention Act. It is chartered in one state and registers in others without needing their license. It may write liability coverage only, so not workers' comp or damage to your own vans, and no state insolvency guaranty fund pays its claims if it fails.
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How a risk retention group works
An RRG is an insurance company set up by businesses with similar liability risks to insure themselves. The federal Liability Risk Retention Act (15 U.S.C. 3901 to 3906) lets it be chartered as a liability insurer in one state, its domicile, and then sell to members in other states. For a fleet it is one more market next to the ones covered in replacing cancelled NEMT insurance, and it goes through the same agent and application steps described in getting NEMT insurance.
The law sets the shape of the group:
- Members only. Its owners are the members it insures, either directly or through one organization they own.
- Related risks. Members must be in businesses whose liability exposures are similar or related.
- One regulator in charge. The domicile state regulates how the group forms and operates. Every other state where it sells may require it to register, pay premium taxes, follow unfair claims practice and deceptive practices laws, and name the state insurance commissioner to receive legal papers.
- No license needed elsewhere. Outside its home state, it registers and writes coverage without obtaining that state’s license.
Before selling in a state, the group files its plan of operation or feasibility study there, covering coverages, deductibles, limits, and rates. Each year it gives every state where it does business a copy of its annual financial statement, certified by an independent accountant and carrying an opinion on its loss reserves from an actuary or a qualified loss reserve specialist.
What it can and cannot cover
An RRG may write liability insurance and nothing else. The Act’s definition of liability leaves out an employer’s liability to its own employees, so workers’ compensation and employer’s liability are off the table. It cannot cover physical damage to your property either, because that is not liability.
Example: a fleet could carry auto liability and general liability through an RRG, then buy collision and comprehensive on its vans and workers’ comp for its drivers from licensed insurers. Coverage above those layers, such as an umbrella, is a separate question for the group and your agent.
No guaranty fund behind it
No state guaranty fund pays an RRG’s claims if it fails, and that is the biggest difference from a licensed insurer. Federal law forbids states from making or letting an RRG join the insolvency guaranty associations that licensed insurers belong to. Every RRG policy must carry this notice in 10-point type:
“This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your State. State insurance insolvency guaranty funds are not available for your risk retention group.”
If the group cannot pay a claim against your company, nothing stands between that claim and your company. A state commissioner can ask a court to stop a group in hazardous financial condition, which the Act defines as being unlikely to meet its obligations to policyholders or to pay its other debts.
Checking a group before you join
- Ask its domicile regulator. Vermont’s, for example, updates its captive listing every quarter. Its June 30, 2026 count showed 80 active RRGs, 1 dormant, and 83 it had licensed that were later dissolved.
- Ask your own state insurance department. It should have the group’s registration and its certified annual statement on file.
- Get the rating. Both contracts in the next section set a minimum A.M. Best rating, so confirm the group’s rating, if it has one, before you bind.
- Read the plan. The plan of operation filed in your state shows the coverages, limits, and rates the group offers.
Will brokers and counties accept the certificate?
Not always, because many contracts are written around licensed insurers, so check before you bind. Arizona’s Medicaid subcontract terms accept insurers licensed in Arizona or approved non-admitted insurers on the state’s list, rated at least A- VII by A.M. Best. Hamilton County, Ohio wanted coverage from a company licensed to provide insurance in Ohio, also rated A- VII. An RRG chartered in another state is registered in yours, not licensed, so get the broker’s or county’s written answer first. The certificate of insurance lists the insurer behind each policy, and federal law requires an RRG’s name to include the words “Risk Retention Group,” so the reviewer will see what kind of insurer it is.
Frequently asked questions
- Will a risk retention group sell auto liability to a NEMT company?
- Yes, if a group exists for businesses with exposures like yours. Federal law lets an RRG insure the liability of members whose businesses share similar or related risks, and auto liability is liability. The group cannot also sell you collision and comprehensive on the vans or workers' compensation for drivers, so you buy those from a regular insurer.
- What happens to my claims if the risk retention group goes broke?
- They are not protected the way claims against a licensed insurer are. Federal law bars RRGs from state insolvency guaranty associations, and every RRG policy must say so in 10-point type. Unpaid claims against your company after a collapse would be yours to pay, so check the group's finances before you join, not after.
- Do I have to own part of the group?
- You have to be a member. Federal law lets an RRG insure only its members, and its owners can only be members it insures, either directly or through a single organization owned by those insured members. A business that is not a member cannot buy coverage from the group.
