The policyholders of the RRG are also its owners and membership must be limited to organizations or persons engaged in similar businesses or activities, thus being exposed to the same types of liability.
RRGs provide their members with the following benefits: Under the McCarran-Ferguson Act, most insurance matters are regulated at the state, rather than federal, level.
However, in the late 1970s, Congress faced an unprecedented crisis in insurance markets, during which many businesses were unable to obtain product liability coverage at any cost.
Vermont already had a fully developed captive program by the time the LRRA was passed and could offer assistance in setting up RRGs in a way that other states were unprepared to do.
Another factor that helped spur RRG growth was the increasing challenge for doctors and hospitals in the Northeast to obtain medical malpractice insurance, especially in such states as Pennsylvania and New York.
Besides hospitals and physicians, the healthcare sector provides liability insurance to nursing homes, dental practices, and HMOs.
The National Association of Insurance Commissioners (NAIC) expressed concern that the LRRA resulted in a "hazardous regulatory void."
This was echoed by the New York Insurance Department's concern that Congress has "left behind an inadequate scheme of state regulation."
The DOC observed that the "main concern of regulators lies with their reluctance to accept and rely on the licensing requirements and regulatory actions of states other than their own."
The DOC report noted that discussions with regulators about the operation of the Act "usually evoke the concern that there are certain states which they consider weak, i.e. where it is easy for a company to get licensed and regulatory oversight is lax."
The report's general prescription was for more comprehensive and competent regulation, warning that if such oversight were not forthcoming by the states, that the federal government would be compelled to fill the void.
The most recent attempt was made in March, 2011 when the Risk Retention Modernization Act (HR 2126) was introduced into Congress.
The Risk Retention Modernization Act (RRMA) includes three specific elements—the addition of property coverage; improved corporate governance standards, and the establishment of a federal mediator.
The second element of the proposed Act is to implement improved corporate governance demands that were first suggest in 2005 in the GAO's report on RRGs and later taken up by the NAIC.
In late July 2010, the Congressional House Financial Services Oversight & Investigation Subcommittee submitted a letter to the GAO to conduct a study into states over-reaching the regulation of RRGs.
The report recommended that Congress should pass legislation clarifying registration, tax and fee requirements imposed by states on RRGs, as well as providing specific definitions of the type of insurance coverages that should be permitted under the LRRA.
The RRR also produces an annual book, the Risk Retention Group Directory & Guide, which offers details for every operating RRG and analytic and financial information on RRGs.