In the 20-year history of the Liability Risk Retention Act, the use of risk retention groups and purchasing groups--entities created by Congress to provide liability insurance to commercial insurance buyers--has been shaped by the hard and soft markets.
During hard markets--when liability insurance becomes unaffordable and unavailable as insurers raise rates, cease writing business, or nonrenew coverage--RRGs are formed in greater numbers. By contrast, during soft markets--when insurers lower rates and broaden coverage--PGs form in greater numbers.
In observing RRG and PG formations over the life of the law, what's of particular interest is the sea change that took place after 2001. Prior to then, the average number of RRGs formed between 1990 and 2000 was 5.6 per year. This is compared with 92.6 PGs formed during the same time.
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