Understanding the Difference between RRGs and Captives

For business owners, sometimes traditional insurance doesn’t carry the best possible coverage options. Sometimes, there are more cost-effective options in the form of self-insurance. These are captive insurance policies. Risk retention groups or RRGs can be a form of captive insurance, but not always.

Here is what you need to know about RRGs.

The Basics of an RRG

An RRG is a liability insurance company. The owners of the company happen to be the members. Generally, businesses will pool together and create an RRG if their companies have a similar risk profile. Dental practices, healthcare practices and law firms tend to form RRGs the most often.

Major Differences Between RRGs and Captives

When it comes to captives and RRGs, both types of insurance can provide enough coverage for a business. Specific business circumstances tend to dictate which is best. Here are some of the common differences that set an RRG apart from a captive.

  • RRGs are only housed in the U.S.
  • You do not need fronting paper for RRGs
  • The insured must own stock when it comes to RRGs
  • RRGs must submit a plan of operation to the state
  • RRGs write liability coverage only
  • RRGs can be formed under traditional laws or the state’s captive laws

When it comes to your business, you must have adequate coverage. To decide what type of coverage will best suit your company, it’s important to understand the difference between risk retention group vs captive insurance.