During 2003, four RRGs were created to provide liability coverages to homebuilders and contractors, while this year, two already have been formed to provide coverage for insureds in that sector.

Taking a closer look at the composition of these RRGs, it's notable that several have been established by large homebuilder organizations to provide coverage for subcontractors or to insure homebuilder warranties, while others have been formed by homebuilder associations to provide coverage for members.

A captive manager who has assisted in the formation of several RRGs said he receives calls almost daily from state homebuilder associations who want to set up such facilities for their members, calling it the “me-too syndrome,” as association executives learn of RRGs being formed to insure members of homebuilder associations in other states.

As liability coverage for contractors becomes increasingly expensive, and in some cases unavailable, more RRGs can be expected to form to fill this growing need.

Another interesting development is the formation of RRGs in new business areas in which such entities have not previously employed. A new RRG added to our listings in May is the first of its kind, providing general liability to entertainment industry productions, including nightclubs, special events, concerts and similar activities.

With RRGs becoming increasingly popular, the emergence of these alternative market entities in an even greater range of sectors can be anticipated.

(Note: The 15th annual edition of the “Risk Retention Group Directory & Guide, 2004″ is available. It contains in-depth profiles of 151 RRGs, including 60 new entities added to this year's edition. Also included are listings for more than 400 service providers. To order, visit www.rrr.com.)

Karen Cutts is managing editor and publisher of the “Risk Retention Reporter,” a monthly newsletter based in Pasadena, Calif.

Reproduced from National Underwriter Edition, May 21, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.