WHAT IS A RISK PURCHASING GROUP (RPG) AND A RISK RETENTION GROUP (RRG)?
Risk Purchasing Group (RPG) — a group formed in compliance with the Risk Retention Act of 1986 authorizing a group of insureds engaged in similar businesses or activities to purchase insurance coverage from a commercial insurer. This is in contrast to a Risk Retention Group (RRG), which actually bears the group’s risks rather than obtaining coverage on behalf of group members. RPGs theoretically substitute group for individual buying—that is, liability insurance may be purchased “on a group basis.” The RPG is primary, not secondary to any other group or interest; it purchases insurance for its members and no one else; and the statute incorporates the insurance principal that the group members must consist of “substantially similar” risks. RPGs may not only use group bargaining power to negotiate more favorable terms with insurers, but by setting standards of membership and other risk management methods, they may also reduce loss experience to gain better rates.
Risk Retention Groups (RRGs) are liability insurance companies owned by its members. RRGs allow businesses with similar insurance needs to pool their risks and form an insurance company that they operate under state regulated guidelines.