Among the key advantages of PGs for insurance buyers is group purchasing and negotiating power, enabling PGs to obtain tailor-made coverage, favorable rates, better policy terms and long-term commitments from insurers.

Among the advantages of PGs to insurers is the ability to provide unique rate and forms based on their loss and expense experience and to issue master policies.

Historical experience over the last 16 years shows that during soft markets, PG formations have exceeded RRG formations by more than 10-to-1.

While the rate of PG formations has not returned to its pre-2000 level, it is on an upward trend. In 2005, 47 PGs formed, 51 were formed in 2006, and 52 in 2007. Moreover, the rate of retirements (PGs closing up shop) has greatly decreased, declining from 33 in 2005 to 18 in 2007.

More than 345 insurance companies provide liability coverage for one or more of the 744 PGs tracked by the Risk Retention Reporter. Of these, however, 28 insurers underwrite 82 percent of PGs, with seven serving as leading PG underwriters–insuring more than 30 PGs each.

At the top of the list are underwriters at:

o Lloyd's of London, insuring 68 PGs.

o Lexington Insurance Company–45 PGs.

o American Specialty Lines Insurance Company–37 PGs.

o National Union Fire Insurance Company–36 PGs (Lexington, American Specialty and National Union Fire are all AIG-affiliated carriers.)

o Federal Insurance Company–36 PGs.

o American Guarantee & Liability–32 PGs.

o St. Paul Fire & Marine Insurance Company–32 PGs.

Of the 422 PGs that formed from 2000 to 2007, more than half (56 percent) were formed in three business areas–health care, professional services and property development.

Of the PGs formed in health care, 51 percent were organized to insure physicians.

Of PGs formed in professional services, 62 percent were organized to insure insurance professionals–including agents and brokers.

Of the PGs formed in property development, 51 percent were organized to insure property owners and managers of commercial and residential properties.

An almost equal number of PGs ceased operating between 2000 and 2007–434 PGs closed up shop, compared to 422 formations.

However, unlike PG formations, which were concentrated in three key business areas, PG retirements were spread across all business areas, with some sectors accounting for greater numbers than others.

Together, health care and professional services accounted for 45 percent of retirements. Four other business areas–government and institutions, manufacturing and commerce, property development, and transportation–accounted for 40 percent of retirements. The remaining 15 percent of PG retirements were spread across other business sectors.

Karen Cutts is editor and publisher of the “Risk Retention Reporter” in Pasadena, Calif. Visit www.rrr.com for information on risk retention groups and purchasing groups.