What is the role of a risk retention group?

The role of a risk retention group is primarily to cover the general liability risks of its members. These groups are composed of members who share similar risks and are typically formed to provide liability insurance among themselves, thus allowing them to share the costs of those risks. By pooling resources, these groups can manage and mitigate risks more effectively while maintaining control over their insurance needs.

Risk retention groups are legally defined under the Liability Risk Retention Act of 1986, which sets specific guidelines for their formation and operation. They provide an alternative to traditional insurance markets, especially for businesses seeking coverage for liability exposures that might otherwise be difficult to obtain on the commercial market.

The other options do not align with the core purpose of a risk retention group. While unrelated risks can be insured through standard commercial insurance markets, a risk retention group's focus is exclusively on the shared liability risks among its members. Additionally, such groups may cover various types of liability but do not limit themselves only to workers' compensation coverage, which is more specialized and typically addressed through workers’ compensation insurance policies. Finally, risk retention groups are not responsible for regulating private insurance practices; rather, they are subject to the regulations applicable to their structure and are aimed primarily at providing coverage for grouped risks.