Property Insurance

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Property Insurance
2011-07-06 11:39:44

property insure examfx
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  1. Insurance
    Transfer of financial responsiblitiy associated w/ a potential of a loss (risk) to an insur company, which spreads the costs of unexpected losses to many individuals
  2. Agent/Prodcuer
    person who acts for another person or entity known as the principle w/ regard to cocntractual arrangements with 3rd ptys, a legal representative of an insurance.
  3. Agent / agency contract
    • a cotract that is heald b/w an isurer and an agent/ producer contaqining the expressed authourity given to the agent/ producer, outlining the duties and responsibilites to the principal.
    • (agent violates contract that agent maybe held liable to insurer for breach of contract)
  4. Applicant / Proposed insured
    person who request or seeks isurance from an insurer
  5. beneficiary
    person who receives benefits from policy
  6. Death benefit
    (face amount / Face value/ coverage)

    amount paid when a claim is issued against a policy insurance.
  7. Insurance policy
    contract b/w policy owner (and/or insured) and an insur. com. which agrees to pay insured or the benefiiary for less caused by specific events.
  8. Insured
    person covered by the policy of insurace who may nto be the applicant or policyholder
  9. Insurer

    company who issues a policy of insurance
  10. Life insurance
    a coverage up on a person's life and granting, purchasing, or disposing of annuities
  11. Policy owner
    person who is entitled to excercise the rights and privileges in the policy and who may or may not be the insured
  12. Premium
    the money paid to the insurance company for the policy of insurance
  13. Insurable interst
    the insred would incur a financial loss if the insured property was damaged

    must be demonstratetd when a policy is issued

    must always exist at the time of loss
  14. Insurable interest may be created by what 3 things?
    • 1. Ownership
    • 2. Custody
    • 3. Control of a property
  15. 3 elements of insurabel risk
    1. Financial (a monetary interst)

    2. Blood (a relative)

    3. Business (a business partner)
  16. Risk
    uncertainity or chance of a loss occuring
  17. 2 Types of risk
    • 1. Pure- situations that can only result in a loss or no change
    • (no opurtunity for finanacial gain)
    • (Insurable)

    • 2. Speculative- involves oppertunity for either loss or gain
    • (Not insurable )
    • Ex. Gambling
  18. Hazzard
    condition or situation which creates or increases the probability of or extent of a probaable loss from a peril
  19. Peril
    • a specific cause of loss
    • (Ex. Fire, Wind, Hail)
  20. 3 types of Hazzards
    • 1. Physical- condition which creates or increases chanc of loss
    • (Ex. structural, occupancy, poor houskeeping, or location)

    • 2. Moral- dishonest prediposition, increases loss
    • (Ex. applicant prev convicted of arson or insur. fraud)

    3. Morale- applicants who demonstrate a careless attitued that could increase chance of loss.
  21. Named Peril
    term used in property insur. to describe the breadth of coverage provided under an insurance policy form
  22. Open peril
    Breadth of coverage provided under an insurance policy form that insures against any risk of loss that is not specifically excluded
  23. Direct and indirect loss
    property insur only covers direct losses

    *However indirect losses are related ot the direct loss and coverage can be added to direct loss policies to protect against indirect loss.
  24. Direct loss
    physical damage to buildings and or personal property
  25. Direct loss includes other damage where the insured peril was the ____________.
    Proximate cause of loss

    • Ex. -Building on fire
    • -fire dept puts it out w/ water
    • -water damages floors and walls
    • -water damage is coverd cause
    • -fire was cause for it
  26. Indirect loss

    (considered a result of direct losses)

    usually results from time it taqakes to repair or replace damaged property

    Ex. extra living expenses for home owners

    business- profits loss if business has to close for repairs
  27. Deductible
    dollar amount an insured must pay on a claim before the insurance policy provides coverage
  28. Higher deductable--------->___________
    lower premium
  29. Indemnity

    Provision in policy states in event of a loss insured is only permitted to collect only to extent of finanacial loss and is not allowed to gain financially
  30. Acutal cash value

    reinforces the principle of indemnity b/c it reconizes the reduction of value property as it ages and becomes subject to wear and tear and osolescence.
  31. Actual Cash Value formula (ACV)
    • Current replaacement cost - Depreciation
    • = ACV
  32. Replacement Cost
    cost to replace damaged property w/ like kind and quality at today's price, w/ out any deduction for depreciation.
  33. Limits of Liability
    insurer's liability for payment as stataed in an insurance policy.
  34. Per Occurrence

    a "sub limit" in a liability policy that puts a ceiling on the payment for all claims thata arise from a single accident or occurrence
  35. Per person
    the max. amount aavailalbe for payment of bodily injury to a single person in an accident, greardless of limit stated in policy for bodily inury claims
  36. Aggregated limit
    max limit of coverage available under a liabliity policy during a policy year regardless of the # of claims that may be made or the # of accidents thaat may occur
  37. Losses paid under aggrigated limits reduce availability amount for future losses but are restored on ___________.
    An aniversary of policy.
  38. Split
    seperately stated limits of liabliity for different coverages.

    Limits may be stataed on a per person, per occurence, per policy period basis or can be split b/w body and property damage.
  39. Example of a split policy

    Auto liability policy 25/50/25
    what does the 25/50/25 mean
    it would pay up to 25k for single person injury

    It would pay up to 50k for 2 people but no more than 25k per person

    it would pay up to 25k for property damage of others
  40. Combined single
    Single dolla limit applying to toal of damages for bodily injury and property damage combined, resulting from one accident or occurance.

    it may be used in any combination amounts not to exeed the single limit.
  41. Coinsurance
    (insurance to value)

    Clause states in consideration of a reduced rate, the insured agrees to maintain a certain minimum amount of insurance on the property
  42. What encourages property to be insured closer to full value?
  43. In partial loss if the insured has maintained the required percentage of insurance w/ relation to the value of the property what will the insurer do?
    pay the partial loss in full
  44. If the amount maintained is less than the coinsurance clause requirement what will the insurer do?
    only pay that precent of the loss that the isurance bears to the amount of insurance thata they should have had.
  45. In the event of a total loss in coinsurance what happens?
    the co insurance clause does not operate and the face amount of the policy is paid
  46. Formula for figuring out the loss payment
    (Insurance carried/insureance required)X Loss amount=Loss payment
  47. Accident
    sudden, unplanned and unexpected event, not under control of insured, resulting in injury or damage that is neither expected or intended.
  48. Occurrence
    • includes losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property thata is neither intended or expected.
    • (broader def of loss that "accident" b/c it includes these losses caused by repeted or continuous exposure thata is neither inteded or expected)
  49. Cancellation
    termination of in-force insurance policy by either insured or insur, prior to expiration date shown on policy.

    may be voluntary, involuntary, or in mutual accordance w/ provisions in policy.
  50. Non renewal
    termination of insur. policy by experation date by not offering a continuation of the existing policy or a replacement policy.
  51. 2 forms of liabliity
    1. criminal- based on satuatory law (not isurable)

    2. Civil- actions brought on for money damages or other such relief (insuralbe)
  52. 3 kinds of civil liability
    • 1. torts
    • 2. contract
    • 3 equity
  53. Legal Liability
    person is liable for injuries or damages to another based on negligance

    does not rquire settlement thought lawsuit

    most are settled by agreement w. out having to go to trial.

    for the liablility to pay the liaable person must be insured under applicable policy.
  54. Ablsolute liabliity
    people engaged in hazardous activities, such asa harboring wild animals, using explosives, etc

    injured party does not need to prove negligence
  55. Strict liablity
    Commonly applied in product liability

    person or business thaat manufactures or sells a product makes an implied warrenty that the product is safe.

    Business is then liable for defective products regardless of fault or negligence

    • If a product cauases inujury and
    • defect can be proven, person
    • or business will be held strictly
    • liable .
  56. Vicaraious Liability
    Master is liable for acts of servents

    Transfer liability fr one peson to another person who would probably have a greater ability to pay.

    Sone jurisdictions, parents may be held vicariously liaable for negligent acts of the children and employers liable for the acts of their employees.
  57. Negligence
    Failure to use car that reasonable, prudent person whould have taken under some circumstances (w/ exception to minors and incompetent people)
  58. Elements of Negligent Act
    If negligence leads to injury to another or damage to property of another, negligent party may be held liable for damage

    normally burden of proof is on injured party to prove other party was negligent
  59. 4 Primary elements in establishing negligence
    1. legal duty - must be shown the defendent hada a alegal duty to act or not to act

    2. Standard of Care - must have used a standard of care that breached legal duty.

    3. Proximate Cause - Act or event considered natural and foreseeable cauase of damage or event which occurs and damages property or person.

    4. Actual loss or damage - must have been suffered by party seeking recovery. (carelessness existed is not sufficient cause).
  60. Negligence must have been __________________ of damage if injured pty is to collect for damage.
    Proximate cause
  61. Burglary
    • Forced entry w/ felonious intent
    • Provieds coverage for property taken or distroyed by breaking and entering
  62. What must be present for policy to pay burglary?
    • Must be w/ felonious intent
    • Must have visible signs of forced intry
  63. Robbery
    taking of property by using violence or threat of violence.
  64. Theft
    any act of steaaling or removing property from rightful owner

    can be both burglary and robbery
  65. Reinsurance
    Contract under which one insurance company (the reinsurer) in consideration of a premium paid to it, agrees to indemnify another insurance company for part or all of its liabilites from insurance policies thaat the second company has issued .
  66. ___________is used by isurer to protect catastrophic losses.
  67. 2 Types of Reinsurance
    1. Ceding Insurer: originating company that procuders insurance on itself from another insurer (called ceding cause it cedes or gives risk to the reinsurer)

    2. Aassuming insurer or Reinsurer
  68. When reinsurance is purchased it is classified as ______________.
    Facultative Reinsurance.
  69. Reinsurance Treaty
    insurer has automatic reinsurance agreement b/w itself and reinsurer in which the reinsurer is bound to accept a fixed precentage of all risks ceded to it.

    (usuallly negoiated for a year or longer)
  70. Lloyd's Associations
    are not insurance companies

    A group of individuals who opperate an insurance mechanism using same principles of individual liablity of insurers that Lloyd's of Londen uses, in that each individual underwriter assumes as part of each risk

    Each individual promisies to pay a specifed amount in event contingency insured against occurs.

    Members only liable for their portion of risk not bound to assume any portion of defaulting member.
  71. __________________ provides support facilitis for undewriters or groups of individuals that accept risk .
    Lloyd's Associations
  72. Surplus Lines
    Insurance for which there is no readily available admitted market

    Coverages are marketed through nonadmitted insurers who specialize in offering insur. to the high risk market on an unregulated basis under each states surplus lines laws

    While the insurers are not admitted most states require that they be on that states "apporved" list.
  73. Stock companies
    owned by stockholders

    they provide money necessary to establish and operate the insur. com

    in return for their investments they share in profits or losses

    offiers and are elected by stockholders and manage stock insurance companies.

    earnings are stockholders and may be distributed by dividends on stock or kept as retained earnings.
  74. Mutual complanies
    Inusur. org. that have no capital stock but are owned by policy holders.

    Profits aare returned to policy holders as non taxable dividends (return of premiums) or as reduced premiums

    Board of turstees is chosen by the policy holders to manage the company
  75. Law of Large Numbers
    principle stataing larager the umber of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss

    forms the basis for statistical prediction of loss upon which rates for insurance are calculated.
  76. Rating Services
    2 vitally important factors to potential insureds
    • 1. Financial strength of insur. com.
    • 2. Stability
  77. Rating services

    Financial Strength
    Based on prior claims experienced, investment earnings, level of reserves (amount kept to cover policy holders debits) and maanagement
  78. Guides to insur companies financial integrity published by various independent rating sevice
    • AM Best
    • Fitch
    • Standarad and Poors
    • Moody's
    • Weiss
  79. Pair and Set Clause
    in many prop anad marine policies, says insur is not obligated to pay for total value of a set of items if only one item has been lost, damaged, or destoryed.

    Loss settlement based on reasonable fair proportion that the lost or damaged aprt bears to the total vaalue of the set.
  80. Personal lines
    contracts written for an individual
  81. Commercial Lines
    contracts written for a business
  82. Additional Insured Endorsements
    Used to add additional insureds to a policy that would otherwise include them in the defination of insured
  83. Additional Insured
    persons other than the named insured who are protected under policy
  84. Agent or Producer
    Person who acts for another or an entity known as the principal w/ regard to contractual arrangements w/ 3rd parties.
  85. Insurer as principal
    the acts of agent, while acting w/ in scope of authority are acts of insurer.
  86. Agent of insurer
    an agent will always be deemed to represent the insurer, not the insured

    w/ regards to an insurance contract any knowledge of the agent is presumed to be knowledge of the insured

    If agent working w/ in conditionsl of contract company is fully responsible.
  87. Agents responsibilites to Insurer
    • Completing app for insurance
    • submitting the app to insurere for unederwriting
    • when issued, delivering policy to policy owner
    • explaining contract
    • if insured submits payment to agent, same as submitting payment to insurer.
  88. Authority
    • Contact details authority an agent has w/ in company
    • only actions which agent is autohrized can bind the principal (insurer)
    • Agent autohrity can be quite broad.
  89. 3 types of agent authority
    • express
    • implied
    • apparent
  90. 3 types of agent authority's descriptions
    Express- authority a principal intends to grant to an agent by means of the agent's written contract.

    • Implied- not expresed or written into the contract but which the agaent is sassumed to have in order to transact the business of insureance for the principal
    • ***Implied is incdidental to express since not every single detail can be spelled out in written contract****

    • Apparent- appearance or the assumption of authority based on the actions, workds, or deeds of principal or b/c of circumstances the principal created.
    • Ex. When an insurer furnishes an agent w/ a rate book, app forms, and sales lit, the insureer cannot later deny that such a relationship existed.
  91. Agents ethics / Professional behavior
    • Business of insurerance requires honesty and good faith
    • regulated to enxure that its responsibilites to the public are upheld
    • illegal to engage in any insur. marketing practice that involves unfair compteition or a deceptive act.
  92. Fudiciary Responsibility
    • Legally obligated to preform in ethical manner
    • An insurance agent who agrees to obtain coverage for a client is obligated to excerise the same degree of care as would be expected from a responsible prudent and competent professional in the field.
  93. Fudiciary
    producer who handles insurer funds in a trust capacity.

    they do not commingle premiums collected w/ his or her own personal funds

    failure to exercise degree of care results in a loss to client agent may be held liable for loss.

    agents have been held liable for both negligence and breach of contract in numerous areas.
  94. Agents vs. broker
    brokers: represent individual client

    Agents: represent company
  95. Captive porducers
    Exclusive or camptive agents: represent only one company and are compansated by commission
  96. independent agents
    sell products of several companies and work for themselves or other agents

    owns expirations of the policies they sell, meaning they place that business w/ another insurers upon renewal if in the best of the client.
  97. Market Conduct
    The way companies and producers should conduct their business

    a type of "code of ethics" for prodcuers

    procedures are established for producers to go by for which penalities may be given for failure to comply

    • Some include
    • conflict of interest

    • A request of a gift or loan as
    • a condition to complete
    • business

    Supplying confidential info.
  98. Professionalism
    a person in a occupation requiring an advanced level of training, knowledge, or skill.

    placing the publics insterest above your own in all situations.
  99. Avoidence
    • one method of dealing w/ risk
    • eliminationg exposure to a loss
  100. Contract
    An aggrement b/w 2 or more parties enforcable by law
  101. 4 essential elements to all legal contracts
    • 1. offer and acceptance
    • 2. consideration
    • 3. competent paraties
    • 4. legal purpose.
  102. 2 elements needed to form a legal contaract
    • 1. offer
    • 2. acceptance
  103. Offer
    promise made by one party in exchange for another party's act, forbearance or return promis ( usually when app is submitted)
  104. Acceptance
    for insurance is when an applicant receives a policy and pays a premium
  105. The offer must be accepted in _____
    ______ by other party.
    exact terms
  106. Coverage in _______and ________insur. can be bound by an agent whether or not aa premium is paid.
    Property and casuality
  107. Consideration
    • Bindign force in any contract
    • thing of value which each party gives to the other
    • on the part of the insured---payment of premium and representation made on app
    • on the part of the insurer--promise to pay in the event of a loss
  108. Parties
    • Must be capable of entering into a contract in eyes of the law
    • both parties must be legal age and mentally compentent to understand the contract
    • contract to be for a legal purpose
  109. Purpose of contract
    must be legal and not against public policy
  110. Contrat of Adhesion
    • prepared by one of the parties (insurer)
    • acepted or rejected by he other party (insured)
  111. Insurance policy are not drawn up through _________ and insured has _______ to say about its provisions.
    • 1. negotiations
    • 2. little
  112. Contract Personal
    • Insurance contract is a personal contract
    • it is b/w insurance company and individual
    • company has right to decide w/ whome it will and will not do business, and insured cannot transfer insurance contracts other then life w/ out written consent of insurance company.
  113. Policy may not cover entire financial loss, so loss may be ______than _______ of policy.
    • 1. greater
    • 2. face amount
  114. Contract Unilateral
    • One of the parties to the contract is legally bound to do anything
    • insured makes no promises that can be legally binding but insurere is legally bound to pay losses covered by policy that is in force.
  115. Contract Conditional
    certain conditions that must be met by the owner and the company in rder for the contract to be executed.
  116. Contract Ambiguites
    • Insurance company has right to draw up contract
    • courts have held that any ambiguity in the contract should be interpreted in favor of insured
  117. Economic Loss
    Estimated total cost, both insured and uninsured of an accident
  118. Determining economic loss cost include:
    • Property damage
    • funeral expenses
    • wage loss
    • insurance administration costs
    • medical
    • hospital
    • legal cost
  119. Elements of Insuralble Risk
    • not all risks are insurable
    • insurers wil only insure pure risk
    • (not all pure risks are insurable)
  120. Elements of Insurable Risk
    • Not all risks are insuable
    • Insurers will only insure pure risks
    • not all pure risks are insurable
  121. Characteristics or elements that must be present to insure pure risk.
    The loss must be due to chance

    --must involve chance of loss that is outside insured's control

    the loss must be definite and measurable

    --loss that is definite as to cause, time, place, and amount

    --insurer must be able to determine how much the benefit will be and when it becomes payable

    the loss must be predictable

    --occurance can be statistically predicted

    --enables insurers to estimate average frequency and severity of future losses and set appropriate premium rates.

    the loss cannot be catastrophic

    --not insure risks that will expose them to catastrophic losses

    --must be limit insurers can be reasonable certain their losses will not exceed.

    ****Typically losses caused by war and nuclear events are not covered cause there is no data that allows for rates.******

    The loss exposure to be insured must be large.

    • --There must be a large pool of people and grouped inot classes w/ similar risks--based on law of large #'s

    The insurance must not be mandatory

    • --must not be required to issue a policy to each applicant applying.
    • --they have to make sure that certain underwriting guidelines be met.
  122. Exposure
    Unit of measurement used to determine rates chareged for insurance coverage

    large# of units having similar or same exposure to loss are refered as homogenous.

    **basis of insurance is sharing risk b/w a large homogenous group w/ similar exposure to loss
  123. Fari Credit Reporting Act (FCRA)
    administered by the federal trade commission (FTC)

    Purpose of the law is to protect consumers against the circulation of inaccuraete or obsolete info, and insure that consumer reporting agencies are fair and equitable in there treatment of customers.

    Acceptiability of a risk

    underwriter will sometimes request additional info about a particular risk from an outside source.

    consumer rights

    prohibited info
  124. (FCRA)

    Acceptability of a risk
    determined by checking the individual risk against many factors directly releted to the risk's potential for loss
  125. (FCRA)

    Underwriter will sometimes request additional info about a particular risk form an outside source.
    Sometimes reports fall under 2 catagories:
    • 1. Consumer REports
    • 2. Investigative Consumer reports

    • ***Both can onlybe used by someone w/ legit business purpose****
    • EX. Insur. underwriting
    • Employment screening
    • Credit transactions.
  126. (FCRA)

    Consumer Reports
    Written or oral info aobut customers credit character, reputation or habits collected by a reporting agency.

    • EX.
    • employment records
    • credit reports
    • other public sources
  127. (FCRA)

    Investigatvive Consumer Reports
    Similar to consumer reports cause they also provide info on consumers character rep and habits

    diff is info obtained through investigation and interviews w/ asssociates, friends, and neighbors

    cannot be made w/ out first advising cus. about report w/ in 3 days of date report was requested.

    consumer must be advised they have right to request additional info concerning nature of report and insurer or reporting agency has 5 days to porvide consumer w/ additional info.

    Reporting agency and users of info are submited to civil action for failure to comply w/ provisions of FCRA

    Consumers can collec for damages b/w 100 and 1k if there is negliect use

    if report is obtained under false pretenses or w/ out permissible purpose may be liable for damages sustained or 1k which ever is greater (instead or in addition to a fine may be imprisoned up to 2 yrs)

    If FCRA is unknowingly violated they are liable in amount equal to loss and reasonable attorney fees.

    If FCRA is willingly violated enougth to constitute a general pattern or business practice $2500 would be penalty.
  128. (FCRA)

    Consumer Rights
    Under FCRA if insurance is declined or modified b/c of info contained in either a consumer or investigative report-- consumer must be advised and provided w/ name and address of reporting agency.

    ***counsumer has right to know what was in report but not to have copy of actual report

    also has right to identity of anyone who has recceived copy of report in last 6 months and if consumer challanges any info and it is found to be inaccurae report has to be corrected and sent to anyone in pasat 2 yrs reoport has be sent to.

    before any adverse action can be taken consumer must provide copy of report and description in writing of consumer rights.
  129. (FCRA)

    Prohibiteed info.
    Consumer reports cannot contain certain types of info if report is requested in connection w/ life insurance policy or credit transaction of more then 150k

    • *****Bkrupcy more than 10 yrs old
    • *****other negative info mare then 7 yrs old
  130. Flood
    • Temp inudation
    • by water on nomrally dry land
    • mudslides usually included
  131. Fraud
    Unlawful insurance fraud

    Any insurance employee embezzling

    1034 waiver

    Anyone convicted of felony involving dishonesty or breach of tust will be fined, or imprisoned up to 5 yrs or both

    Anyone who engages in conduct that is in violation of sec 1033
  132. Unlawful insurance fraud
    Engaged in insureance to willfully , w/ intent to decive make any oral or written statement that containes either false statements or omissions of material fact.

    Info and statements made on an app

    renewal of policy

    claims for payment or benefits

    premium paaid

    financial condition

    may be fined, imprisoned up to 10yrs or both

    if it jepordized security of insurer, cannot be more than 15 yrs
  133. Any insurance employee embezling the same punishment for the unlawful insurance fraud is taken
    Less than 5 k embezzled time can be reduced to 1 yr.
  134. 1033 Waiver
    Illegal for anyone convicted of crime involving dishonesty, brach of trust, or violation of the violent crime control and law enforcement act of 1994 to work in insurance

    Unless they havae received written consent from insurance regulatory official. (director or commissioner of insurance)

    Must specify granted for purpose of 18 U.S.C 1033
  135. Anyone convicted of felony involving dishonesty or breach of turst will be _____________________________.
    fined, imprisoned up to 5 yrs or both.
  136. Anyone who engages in conduct that is in violation of sec 1033 is:
    Subject to civil penalty not more then 50k each violation or amount of compensation person receives as a result of prohibited conduct.

    ****Which ever is greater*****
  137. Industry Association
    Member companies group together by type of industry w/ which they are associated

    • Types include
    • Auto and homeowners

    Life and health



    Risk Retention

    Variable annuities and many other

    Meetins held to share research and stataistical info for their areas of expertise
  138. Insurance contract
    Agreement b/w insured and insurer

    Insurer agrees for a consideratin to indemnify insured for loss caused by specified events
  139. Insurance transaction
    Any of following (by mail or other means)

    Solicitation or inducement


    effectuation of a contract of insurance

    advising of an individual cocerning coverage or claims
  140. Insurance types
    Insurance compancy can be catagorized to how they are organized and operated

    Fraternal Associations


    Risk Retention Groups(RRG)
  141. Fraternal Associations
    Fraternal benefit society: incorp society formed soley for the benefit of its members and their beneficiaries

    Not for profit

    Operates on lodge system

    Representative form of gov

    sell only to members

    charitable institutions

    not subject to all regulations that apply to insurers.
  142. Reciprocal
    Resulting from an interchage of reciprocal agreements of indemnity among persons known as subscribers.

    Collectively known as a reciprocal insurance company or exchange

    put into effect through attorney-in- fact common to all persons

    subscribers agree to become liable for their share of losses and expenses incurred among all subscribers

    They authorize attorney-in-fact to manage and operate exchange
  143. Risk Retention Groups (RRG)
    Liability insurance company

    owned by members

    members exposed to similar liability risks by virtue of being in same business or industry

    Purpoes of RRG is to sassum and spread all or part of the liability of its group members

    RRG may reinsure another risk retention group's liability as long as members of second group are engagaed in some or similar business or industry

    Origionally Created by product Liability Risk Retention act of 1981 b/c of widespread unabailability of insurance.

    • Federal Legislation adopteed in 1986 expanded provisons of act
    • *****primary change as expansion of RRGs to all types of liability insurance (except personal liability and workmans comp)

    Must be licensed under the laws of at least one state (not all states where they may do business)