Those states regulating risk retention groups as captives historically have had a far better solvency record than states that regulate them as traditional insurers.
Even excluding the large number of RRG formations occurring since 2000, the track record of states regulating RRGs as captives, versus those regulating them as traditional insurers, is still significantly better.
Of the 25 states that have enacted captive laws, 19 authorize RRGs to form as captive insurers. Captive laws provide advantages to start-up companies, such as RRGs. These include lower capital and surplus requirements, the use of letters of credit, and greater flexibility with regard to investments.
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