Authorized Under Federal Products Liability Risk Retention Act
Due to the major concern of the availability and the cost liability insurance, the United States Congress revised the Products Liability Risk Retention Act of 1981 through the Risk Retention Amendments of 1986. This act is known as the Liability Risk Retention Act of 1986.
Under this act are the companies operating under the Liability Risk Retention Act of 1986 and the Federal Products Liability Risk Retention Act of 1981, in USA. Te Congress made sure to accomplish these goals with the formation of the Risk Retention Groups (RRG).
What is Rick Retention Group?
The term Risk Retention Groups refer to companies that are owner controlled and operated by its members authorized by Federal Liability Risk Retention Act of 1986. It was made to help businesses and people which have trouble in getting a liability insurance through a traditional insurance company. This is purposely grouped to solve the raging problem towards charges of high premium rates or refused to issue liability insurance to in need people and businesses from the insurance companies. This is the reason why businesses are having a hard time to be successful without facing this claims with high pay outs. With the risk retention group members, they all gather together and share risks and matters associated with their businesses effectively. This group can be chartered in one state but are able to engage in the business of insurance in all states according to specific and limited restrictions through the authorization of the federal state.
It should be noted that a risk retention group is legal considering that the insurer will bear all the risk of the policies if issues may occur. In addition, the risk retention group cannot cover personal health insurance such as auto insurance for employees or directors or healthcare and even property insurance such as fire or theft cover. It can only protect its members against liability risk such as legal compensation and costs caused by claims that follow professional faulty or mistakes of faulty products.
The most important benefit of the risk retention group is that the firm would be able to get a lesser and more reasonable rate on liability insurance compared to getting it individually. Another advantage is that firms can be both the insurers and the clients in which the firm would be able to get an idea on how to avoid situations that would enforce greater claims thus improving professional standards.
A risk retention group can only take on operation and cover members from anywhere in the country if and only if it has been registered legally in the state and is governed by laws. The purpose of the Liability Risk Retention Act is to give this group the opportunity to be exempted to the regulations of many states. The only power of the state in this case is to collect relevant taxes from the group and to force them to follow the basic and common practices of an insurance company such as settling whatever claims are made in a fair manner.