What is the Liability Risk Retention Act?

The Liability Risk Retention Act (LRRA) is a federal law that was passed by Congress in 1986 to help U.S. businesses, professionals, and municipalities obtain liability insurance which had become either unaffordable or unavailable due to the “liability crises” in the United States.


What is a risk retention group?

A risk retention group (RRG) is a liability insurance company that is owned by its members.  Under the Liability Risk Retention Act (LRRA), RRGs must be domiciled in a state.  Once licensed by its state of domicile, an RRG can insure members in all states.  Because the LRRA is a federal law, it preempts state regulation, making it much easier for RRGs to operate nationally.  As insurance companies, RRGs retain risk.


How does the Risk Retention Act work?

In passing the Liability Risk Retention act, Congress provided insurance buyers with a marketplace solution to the “liability crises”, enabling them to have greater control of their liability insurance programs.  To achieve this goal, Congress created two entities – risk retention groups (RRGs) and purchasing groups (PGs).


Who forms risk retention groups and purchasing groups?

Risk Retention Groups (RRGs) are often formed by trade and professional associations, which serve as the sponsor for the RRG liability insurance program.  Purchasing groups (PGs) are most often formed by insurance professionals, including agents, brokers and insurers, based upon an identified need of commercial insurance buyers.


Who regulates risk retention groups and purchasing groups?

Although the Liability Risk Retention act is a federal law, it has no enforcement mechanism of its own, and relies wholly on state insurance departments for its implementation.  For risk retention groups (RRGs), the state in which the RRG is domiciled has primary regulatory authority over the entity.  For Risk Retention Purchasing Groups the state where the RPG is domiciled regulates the RPG while the Insurance Company providing insurance to the RPG is regulated under state regulation with certain limitations applicable to the Federal Act relating to coverage, rates, and policy form, which is otherwise exempt from state regulation.






F. Darrell Lindsey
U.S. State Licensed Agent/Broker
U.S. Corporate Enterprise Risk Management Consultant (ERM)
U.S. State Approved Captive/RRG/Self Insured Manager
U.S. Approved Self-Funded Health & W. C. Plan Manager