This page explains risk retention groups for educational purposes only. It is not an offer or recommendation of risk retention group coverage.
What a Risk Retention Group Is
Under 15 U.S.C. 3901, a risk retention group is a company whose main activity is taking on and spreading the liability risk of its members. Its owners must be the members it insures, the members must be in businesses with similar or related liability exposure and the group must be chartered or licensed as a liability insurance company under a state's laws. The name must include "Risk Retention Group."
That makes a risk retention group a kind of group captive with a federal passport: once chartered in one state, it can write for members in other states after registering, without a full license in each.
How risk retention groups fit among other captive structures is covered in our overview of construction captive programs.
Liability Only: What It Can and Cannot Write
The Act defines liability as legal liability for damages arising from business operations, and it excludes personal risk liability and an employer's liability to its own employees, apart from the Federal Employers' Liability Act. Property is not part of the definition. For a contractor or developer, that typically points a risk retention group toward general liability, professional liability or similar lines, while builders risk, equipment, auto physical damage and workers' compensation need other arrangements.
- Typically within scope: general liability, professional liability and similar third-party liability
- Outside scope: property and builders risk, auto physical damage
- Outside scope: workers' compensation and employer's liability to the group's own members' employees
Where a project needs dedicated limits instead, see project-specific liability insurance.
What Non-Chartering States Can Still Require
Section 3902 exempts a risk retention group from most state laws outside its chartering state but keeps several powers with each state where it writes. A state can require registration and the appointment of its commissioner as agent for legal process, nondiscriminatory premium and other taxes, compliance with unfair-claims and deceptive-practices laws, participation in loss-apportionment mechanisms and examination in some circumstances. States may not require a group to join a guaranty association or use a local agent's countersignature.
Before offering coverage in a state, the group provides its plan of operation or feasibility study to that state's commissioner, and it files a certified annual statement with an actuarial opinion on loss reserves in each state where it does business.
The Guaranty Fund Notice
Because risk retention groups do not belong to state guaranty associations, the Act requires a notice on each policy in 10-point type. It includes the statement "State insurance insolvency guaranty funds are not available for your risk retention group." Members should weigh the group's capital, reinsurance and management with that in mind, since a guaranty fund would not respond if the group failed.
The same questions about capital and reinsurance belong in any captive feasibility review.
Registering in California, Texas, Arizona and Nevada
Each of the four states sets its own registration steps for a group chartered elsewhere. California Insurance Code section 132 requires notice to the Commissioner at least 60 days before doing business and taxes premiums like a foreign admitted insurer, and section 131 requires a group licensed in California to be organized under California law with a full liability license. Texas Insurance Code section 2201.152 requires the group to file its charter details, membership information and plan of operation and to designate the commissioner as agent for process, and section 2201.155 taxes Texas-risk premiums like a foreign admitted insurer.
Arizona's A.R.S. 20-2403 requires similar filings and a registration naming the director as agent for process, with premium taxes on the same basis as a foreign admitted insurer; Arizona also lists risk retention groups as a kind of group captive under A.R.S. 20-1098. Nevada's NRS 695E.150 requires a registration statement, plan of operation and appointment of the Commissioner before a group transacts insurance there, and NRS 695E.200 keeps it out of the Nevada guaranty association.
Arizona's broader captive statute is explained under Arizona captive and group captive rules.
Purchasing Groups Are Different
The same Act also allows purchasing groups, which buy liability insurance on a group basis for members with similar or related exposures from an insurer. A purchasing group is not itself an insurer and does not retain risk; it must notify and register with each state where it does business. Some contractor associations use purchasing groups to negotiate group programs without forming a risk retention group.
For structures where members do retain risk, see group captives and single-parent captives.
Quick Answer
A risk retention group is a member-owned liability insurer under the federal Liability Risk Retention Act. It insures only members with similar liability exposures, writes liability only and registers in each state beyond its charter state, where premium taxes and some state laws still apply.
Common Mistake
Expecting a risk retention group to cover workers' compensation or property. The federal definition limits it to liability, so those lines need other arrangements.
Broker Perspective
A risk retention group is one structure readers may come across. Any policy it issues is read like any other: what the forms and endorsements cover, the capital and reinsurance behind it, and whether it meets the contract's insurance requirements.
Coverage Impact
Coverage depends on the group's policy forms and endorsements, and members do not have state guaranty fund protection if the group fails.
Questions Buyers Ask
Can a risk retention group write workers' compensation?
No. The federal Act defines liability to exclude an employer's liability to its own employees, apart from FELA, so workers' compensation is outside a risk retention group.
Does a risk retention group need a license in every state?
No. It is chartered as a liability insurer in one state and registers in others, which can require registration, premium taxes and compliance with certain state laws.
Are risk retention group policies protected by state guaranty funds?
No. Each policy carries a federal notice that state insurance insolvency guaranty funds are not available for the group.
What is the difference between a risk retention group and a purchasing group?
A risk retention group is an insurer that retains its members' risk. A purchasing group buys liability coverage from an insurer on behalf of members and does not retain risk itself.
Official Sources
- 15 U.S.C. 3901-3902 (Liability Risk Retention Act), U.S. Government Publishing Office. A risk retention group is owned by members in similar businesses, assumes their liability exposure and is chartered in one state; other states may still require registration and taxes. Verified 2026-10-25.
- Risk Retention Groups, National Association of Insurance Commissioners. Risk retention groups are member-owned liability insurers formed under the 1986 federal act, domiciled in one state and able to write in others after registering. Verified 2026-10-25.
- California Insurance Code section 131 (risk retention groups licensed in California), California Legislative Information. A risk retention group licensed in California must be organized under California law and licensed as a liability insurer under the admitted-insurer rules. Verified 2026-10-25.
- California Insurance Code section 132 (risk retention groups chartered in another state), California Legislative Information. An out-of-state risk retention group files notice with the Commissioner at least 60 days before doing business in California and pays premium taxes like a foreign admitted insurer. Verified 2026-10-25.
- Texas Insurance Code chapter 2201 (risk retention groups), Texas Legislature. A risk retention group chartered elsewhere registers before offering insurance in Texas, pays premium and maintenance taxes on Texas risks like a foreign admitted insurer and does not take part in the guaranty fund. Verified 2026-10-25.
- A.R.S. 20-2403 (risk retention groups not chartered in Arizona), Arizona State Legislature. Before offering insurance in Arizona, a group chartered elsewhere files its charter details, plan of operation and a registration naming the director as agent for process; premium taxes apply as for a foreign admitted insurer. Verified 2026-10-25.
- NRS chapter 695E (risk retention groups), Nevada Legislature. Before transacting insurance in Nevada, a group chartered elsewhere files a registration statement and plan of operation and appoints the Commissioner as agent for process; it is not a member of the Nevada guaranty association. Verified 2026-10-25.
Reviewed by the Principal, Gleason Insurance Brokers, LLCUpdated
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