Risk Retention Groups Report Financially Stable Third Quarter 2020 Results.

• Date: 13 December 2020
• Author: Powell, Douglas A.

* A review of the reported financial results of risk retention groups (RRGs) reveals insurers that continue to collectively provide specialized coverage to their insureds while remaining financially stable. Based on reported financial information, RRGs have a great deal of financial stability and remain committed to maintaining adequate capital to handle losses. It is important to note that ownership of RRGs is restricted to the policyholders of the RRG. This unique ownership structure required of RRGs may be a driving force in their strengthened capital position.

BALANCE SHEET ANALYSIS

From third quarter 2019 to third quarter 2020, cash and invested assets increased 4.8 percent and total admitted assets increased 5.4 percent. RRGs collectively reported a 3.2 percent increase to policyholders' surplus. This represents a $167.8 million year-over-year increase to policyholders' surplus. The level of policyholders' surplus becomes progressively important in times of difficult economic conditions by allowing an insurer to remain solvent when facing uncertainty.

Liquidity, as measured by cash and invested assets to liabilities, for third quarter 2020 was 147.3 percent. A value more than 100 percent is considered favorable as it indicates that there was more than a dollar of net liquid assets for each dollar of total...