RRGs have evolved although unlikely to see more start-ups

Risk Retention Groups (RRGs) are well-placed to meet the needs of today’s dynamic marketplace, however, the sector has changed and it is difficult to tell if the numbers of such groups have increased or decreased.

This is according to a CICA 2018 International Conference session, ‘RRG Hot Topics’, with speakers: Joe Deems, executive director, National Risk Retention Association; Michael Schroeder, chairman, Allied Professionals Insurance Services; and Nancy Gray, regional managing director – Americas, Aon Captive & Insurance Management.

Gross written premiums for RRGs currently sit at $3 billion+, according to the panel. Capital surplus is in the range of $4.8 billion+.

For the US, 2017 ended with 996 risk purchasing groups and 228 RRGs, however, the number of RRGs has decreased over the last few years since 2007.

Some of the reasons cited include soft market conditions, the 2008 financial crisis, and the Affordable Care Act (Obamacare), which is said to have facilitated considerable M&A activity in hospital systems and physician groups.

Schroeder suggested that it is not clear if the RRG marketplace has got bigger or smaller. While the number of RRGs has been on a downward trend since 2007, the amount of premium in the marketplace has gone up.

Looking at the current RRG composition, Gray highlighted that 57 percent of the market - or 132 entities - is made up of healthcare companies. This is followed by transportation, which made up 16 percent of the market - or 37 entities.

Deems added that the healthcare insurers in the hospital systems have become very strong in terms of their contractual relationships, which has been a depressing factor on new market entrants and start-ups.