Risk retention groups (RRGs) remain financially stable and continue to provide specialised coverage to their insureds after reporting a net income of $286.9 million in 2017, according to a report by Demotech’s senior financial analyst Douglas Powell.
Powell’s report ‘Analysis of RRGs Year-End 2017’, also revealed that RRGs collectively reported more than $3.2 billion of direct premium written last year, up 5.9 percent on 2016.
According to the report, between year-end 2016 and year-end 2017 cash and invested assets increased 4.5 percent and total admitted assets increased 4.9 percent.
The one-year loss reserve development to prior year’s policyholders’ surplus was -5.2 percent for 2017, an improvement on -2.4 percent in 2016, while the two-year loss reserve development to second prior year-end policyholders’ surplus for 2017 was -7.5 percent, an improvement on -6.9 percent the previous year.
Powell explained that these results exhibited that “RRGs collectively reported adequate loss reserves at year-end 2017”.
The report showed that underwriting results indicated RRGs were collectively profitable last year, with RRGs reporting an aggregate underwriting gain of $46.6 million.
Collectively, RRGs reported a net investment gain of $299.5 million and a net income of $286.9 million.
Additionally, the report revealed the income statement analysis ratios appear to be appropriate and have remained within a profitable range.
Powell stated that the results indicate that “specialty insurers continue to exhibit financial stability”.
He added: “It is important to note again that while RRGs have reported net income, they have also continued to maintain adequate loss reserves while increasing premium written year over year.”
“Despite political and economic uncertainty, RRGs remain financially stable and continue to provide specialised coverage to their insureds.”
