By Lenny Giteck

According to the results of a study by consulting firm Demotech, Inc., the RRG industry was financially solid at the end of 2019 and throughout the year. The study involved researching 224 risk retention groups every quarter.

Demotech provides financial stability ratings for property and casualty insurance companies. Douglas A. Powell, Senior Financial Analyst at Demotech, conducted the research and formulated the report.

Powell’s research revealed that in 2019, RRGs had an underwriting loss of $152 million, which was offset with a net investment gain of $531 million. The study concluded the following:

“Despite political and economic uncertainty, RRGs remain financially stable while providing specialized coverage to their insureds. The financial ratios calculated based on the reported results of RRGs appear to be reasonable, keeping in mind that it is typical and expected that insurers’ financial ratios tend to fluctuate over time.

“The results of RRGs indicate that these specialty insurers continue to exhibit financial stability. It is important to note again that while RRGs have reported net income, they have also continued to maintain adequate loss reserves while increasing premium written year over year. RRGs continue to exhibit a great deal of financial stability.”

Of course, the COVID-19 crisis has upended the U.S. economy since the end of last year. “Obviously,” says Powell, “it is certainly possible the results for RRGs will not be as positive this year as they were in 2019, especially regarding investments and profitability.”

To see a detailed analysis of the study results, click here.