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PERMISSIBLE OWNERSHIP INTEREST

IN A

RISK RETENTION GROUP

 

 

To read the exemptions more narrowly would deprive legitimate RRGs from the intended benefits of the LRRA, as it would be difficult to form a risk retention group without having identified initial participants.This view is supported by the Actís legislative history, which recognizes that solicitation of capital is necessary to establishing an RRG, and that RRGs will not be soliciting investments from the public at large, reducing the need for the consumer protection aspects of the securities laws.

 

Most RRGs cancel ownership interests at the same time coverage with the group is terminated, and simultaneously end the insuredís right to vote or receive distributions.In cases where the former insured has an equity stake that the company is obligated to return, repayment may take several years.During that period of time, the former insured may not vote or generally accrue further earnings on its equity interest, other than interest payments that may be due on the unpaid portion. Groups that have issued occurrence policies may take the view that ownership interests continue beyond non-renewal or cancellation, based on tail exposures.Similarly, insuredís under claims-made policies who purchase extended reporting periods are treated as members by some groups during the tail period.Arguably, these members continue to be insured by the group, and remain eligible to participate in ownership.

 

An RRG can provide insurance to an RPG authorized under the Act, which then makes the RPG Association the member.Each RPG Association insured member would only be an owner to the extent of his membership in the RPG Association that is the entity equity member.

 

 

 

 

 

F. Darrell Lindsey

State Approved Captive/RRG Manager

U.S. State Licensed Agent/Broker

 

 

 

 

 

 

 

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