Risk retention groups (RRGs) collectively reported almost $2.8 billion of direct premium written (DPW) through Q3 last year, a 3.5 percent increase over the same period in 2016, according to a report by Demotech’s senior financial analyst Douglas Powell.
Powell’s analysis of RRGs in Q3 2017 also found that the DPW to policyholders’ surplus ratio was 76.2 percent, while the net premium written to policyholders’ surplus ratio was 45.6 percent.
Since Q3 2016, there has been an increase in cash and invested assets (2 percent), total admitted assets (2.5 percent), policyholders’ surplus (2.5 percent) and liabilities (2.5 percent).
According to Powell, these increases demonstrate that RRGs remain adequately capitalised in aggregate and can remain solvent if faced with adverse economic conditions or increased losses.
The quarterly analysis also found that liquidity, as measured by cash and invested assets, was 68.4 percent for Q3 2017.
In the report, Powell commented: “A review of the reported financial results of RRGs reveals insurers that continue to collectively provide specialised coverage to their insureds while remaining financially stable.”
Analysis of the income statement reveals RRGs reported a $9.8 million underwriting loss through Q3 2017.
Powell concluded: “The financial ratios calculated based on the reported results of RRGs appear to be reasonable, keeping in mind that it is typical and expected that insurers’ financial ratios tend to fluctuate over time.”
“Despite political and economic uncertainty, RRGs remain financially stable and continue to provide specialised coverage to their insureds.”
