Also known as: RRG · member-owned risk pool
A member-owned liability pool authorized under federal law — not a traditional insurance carrier, and typically not AM Best-rated, which means its policies may not satisfy enterprise or government contract requirements.
A Risk Retention Group (RRG) is a special type of liability insurer authorized by the federal Liability Risk Retention Act of 1986 (15 U.S.C. § 3901 et seq.). Unlike a standard insurance carrier, an RRG is owned by its members — the businesses it insures — and exists primarily to cover the group's shared liability exposures. RRGs must be chartered as liability insurers in at least one state and can then operate across all U.S. states without obtaining a separate license in each, which is one reason they can offer lower premiums: they avoid certain state-by-state regulatory costs and are exempt from contributing to state guarantee funds. That cost advantage comes with real trade-offs. First, no AM Best rating: most RRGs are not rated by AM Best or any other nationally recognized rating agency, so there is no independent third-party verification of the RRG's financial strength, claims-paying ability, or operational stability. Second, a limited coverage scope: by law, RRGs can only write third-party liability lines — coverages like General Liability, Tech E&O, and Cyber Liability — and cannot write property insurance, workers' compensation, commercial crime, or business interruption, so a business insured through an RRG must go to a separate carrier for those lines. Third, no access to state guarantee funds: if a standard carrier becomes insolvent, state guarantee funds can step in to pay outstanding claims up to state limits, but RRGs do not participate in these funds, so members bear the risk of the RRG's insolvency directly. Finally, a mandatory disclosure: federal law requires every RRG policy to carry a disclosure stating that the policy is not subject to the same state regulation as a standard insurance policy and that the state guarantee fund does not apply — a disclosure many founders overlook at purchase and only discover the implications of when a contract counterparty flags it.
Source: Liability Risk Retention Act of 1986 (Cornell LII)
Usually not. Most enterprise procurement checklists and vendor contracts require coverage from a carrier with an AM Best financial strength rating. Because most RRGs are not AM Best-rated, their policies fail to satisfy that requirement — even if the coverage limit and type look correct on paper. Always check whether the contract specifies an AM Best rating requirement before choosing an RRG.
RRGs are exempt from contributing to state guarantee funds and avoid certain state-by-state licensing costs, which can translate to lower premiums. However, this comes at the cost of no AM Best rating, no guarantee-fund protection, and a limited scope (liability lines only). The lower premium may not be cheaper once you factor in the additional carriers needed for property and other lines.
A standard carrier is an independent company licensed and regulated state by state, typically carries an AM Best rating, and participates in state guarantee funds. An RRG is member-owned, federally authorized to operate across states under a single charter, typically unrated, excluded from guarantee funds, and limited to liability lines only.
Yes. Federal law requires every RRG policy to include a disclosure that the policy is not subject to the same state regulation as a standard policy and that state guarantee fund protections do not apply. This disclosure is required regardless of whether the insured reads it or understands its implications.
Definitions are educational and may be modified by your specific policy language, endorsements, and state rules. For regulatory guidance, refer to the California Department of Insurance or the NAIC.
Last updated: July 2026.