When Congress passed the Liability Risk Retention Act, it created two vehicles–risk retention groups and purchasing groups–to provide commercial insurance buyers with alternatives when liability insurance in the traditional market became unavailable and/or unaffordable.
During hard markets–the circumstance in which the act was passed–it was anticipated that RRGs, which retain risk, would dominate. It was thought that during soft markets, when ample risk financing was available, purchasing groups would form to buy from traditional insurers, using the power of group purchasing to secure the best deal for their members.
SEQ CHAPTER h r 1Typically during soft markets–when traditional insurers lower rates, which makes liability insurance more available and affordable–PG formations increase while RRG formations decline. Conversely, during hard markets–when traditional insurers raise rates and restrict coverage–RRG formations increase and PG formations decline.
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