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Medical Malpractice: Three Advantages of Risk Retention Groups (RRGs)

3 advantages of risk retention groups RRGsRisk retention groups (RRGs) are typically used to mitigate medical malpractice risks by small to medium-sized hospitals, medical centers, and nursing homes, as well as by physician groups.

Originally created under a 1981 federal law enacted to address the reduced availability of product liability insurance, RRGs benefitted from a later act that allowed RRGs and purchasing groups to be used for all types of liability insurance, including medical malpractice.

RRGs have three distinct advantages over other available alternative risk financing vehicles:

1. Reduced Licensing Requirements -- Unlike all other forms of insurance carriers, RRGs do not have to be licensed in every state as would a traditional insurance company.

2. Ability to Market Nationwide – Although a risk retention group is licensed and created under state law, it is authorized under federal law to sell insurance in all 50 states.

3. Increased Control -- By law, all owners must be insured by the RRG, and all those insured must be owners. This enables members to have control over rates, coverage, loss control defense costs, risk management, and underwriting. They also control the selection of managers, auditors, actuaries, attorneys, and other necessary service providers.

Unfortunately, the recent difficult market and medical malpractice crises have resulted in many fronting carriers discontinuing their operations, and those that remain have increased their fees and collateral requirements significantly.

Because of such financial constraints, most groups of individuals and small organizations that gathered to form alternative risk financing vehicles in the recent past cannot afford to do so today. For this reason, many are now choosing a captive insurance entity instead of an RRG.

 

Medical Malpractice and Alternative Risk Transfer SolutionsFree Download: Alternative Risk Transfer Solutions – For an informative guide to the potential benefits of medical malpractice alternative risk transfer solutions, click here.

 

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