24 February 2015Services

RRGs: financially stable despite drop in numbers

A decrease in the amount of risk retention groups (RRG) in 2014 has not affected their financial strength.

This is according to a Demotech report on RRGs in the third quarter of 2014, which added that the financial ratios calculated based on the reported results of RRGs appear to be reasonable.

Demotech’s analysis of reported financial information showed that policyholders’ surplus increased 72.5 percent, or over $2 billion, while liabilities increased about 60 percent over a five-year period, despite the decrease in RRGs.

Douglas Powell, senior financial analyst, Demotech, said: “The results of RRGs indicate that these specialty insurers continue to exhibit financial stability. It is important to note again that while RRGs have reported net income, they have also continued to maintain adequate loss reserves while increasing premium written year over year. RRGs continue to exhibit a great deal of financial stability.”

Len Crouse, JLT Towner Insurance management partner, said: “While some RRGs dissolved to take advantage of very low commercial rates, those that remain understand all of the benefits of alternative risk financing, not just price. These financial stability results prove that, as a group, risk retention groups are well run.”