Risk retention groups (RRGs) continue to exhibit financial stability, according to Q3 2012 reported financial information.
In analysing the reported results of RRGs, ratings firm Demotech observed that assets and policyholders surplus have continued to increase at a quicker rate than liabilities. Since Q3 2008, short-term assets have increased 39.5 percent and total admitted assets have increased 31.1 percent.
Policyholders surplus has increased 73.4 percent during this time, while total liabilities have only increased 10.7 percent.
Collective RRG liquidity and leverage in Q3 2012 also showed increases, with the former, as measured by liabilities to cash and invested assets, showing an improvement of 74.6 percent over the previous year, and the latter, as measured by total liabilities to policyholders surplus, coming in at 155.2 percent better than Q3 2011.
Demotech also found that collectively RRGs reported a nearly $43.9 million net underwriting gain through Q3 2012. Also, RRGs collectively reported a $185.2 million net income for the first nine months of 2012.
“The financial ratios calculated based on the third quarter results of the various lines of business for RRGs appear to be reasonable,” said a statement from the firm.
“It is typical for insurers’ financial ratios to increase and decrease period over period. In looking further, RRGs have collectively reported an underwriting gain at each year-end since 2004. Equally as important, RRGs have collectively reported a net income at each year-end since 1996. The third quarter results of RRGs indicate that these specialty insurers continue to exhibit financial stability.”
