Demotech, a financial analysis firm, has conducted a review of risk retention groups, finding that they have strong financial stability.
The report found that over the past five years, RRGs have maintained adequate capital to handle losses.
Balance sheet analysis comparing the last five years of results revealed that cash and invested assets, total net admitted assets and policyholders’ surplus have all continued to increase at a faster rate than total liabilities.
Liquidity in Q3 2013 was approximately 66.4 percent. A value less than 100 percent is considered favourable as it indicates that there are more liquid assets in total than combined liabilities.
This is an improvement on Q3 2012, when there was 68.3 percent liquidity. This ratio has improved steadily each of the last five years.
The figures show that despite political and economic uncertainty, RRGs remain financially stable and continue to provide specialised coverage to their insureds.
Douglas Powell, the author of the report and an analyst at Demotech, said: “In reviewing the reported financial results of risk retention groups, one gets the impression that this is a group of insurers with a great deal of financial stability. Based on third quarter 2013 reported financial information, RRGs continue to effectively provide specialised coverage to their insureds.”
