Risk retention groups face drop in written premium, higher combined ratio
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A review of risk retention groups’ performance through the second quarter of 2014 released on Monday finds the sector healthy despite a drop in direct written premium and a rising combined ratio.
Dublin, Ohio, financial analysis firm Demotech Inc. said RRGs collectively reported nearly $1.5 billion of direct written premium through second quarter 2014, a decrease of 13.4% over second quarter 2013. The report, written by Douglas A. Powell, a senior financial analyst at Demotech, said underwriters at RRGs were more selective in their underwriting in the quarter. “In regards to RRGs collectively, the ratios pertaining to premium written appear to be conservative,” the report states.
Moreover, the report said the sector’s diminished combined ratio, 100.2% for the second quarter of 2014, compared with 93.3% for the second quarter of 2013, was aberrational. Much of the underwriting losses are due to one RRG, Chicago-based Attorneys’ Liability Assurance Society Inc., which assumed significant assets and liabilities on the part of its parent company, ALAS Investment Services Ltd., during the quarter. “The second quarter result was impacted heavily by the underwriting loss reported by ALAS due to the Contribution Agreement the company entered into,” the report states. “Despite political and economic uncertainty, RRGs remain financially stable and continue to provide specialized coverage to their insureds.”
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