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A handful of specialized insurer types exist to serve narrow purposes: spreading assessed losses among members, insuring a single parent company, or pooling the liability risk of businesses that share a common bond.
Assessment mutuals are classified by how they collect premium. A pure assessment mutual collects no premium in advance at all — members are billed only after losses actually occur, with each member assessed a share of those losses.
An advance premium assessment mutual instead collects a premium at the start of the policy period, much like a conventional insurer. If that premium turns out to be more than enough to cover losses and expenses, the surplus is returned to policyholders as dividends. If it falls short, the company levies an additional assessment on its members — though state law or the insurer's own bylaws typically cap how large that supplemental assessment can be.
A captive insurer is created and owned by a parent company (or a group of affiliated companies) for the specific purpose of insuring that parent's own risk exposures, rather than selling coverage to the general public.
A risk retention group is a specialized form of captive, created under the federal Liability Risk Retention Act (LRRA) of 1986, that provides liability coverage to members who share a common business, occupation, or profession — for example, a group of dentists or engineers. Members of an RRG are simultaneously its owners and its policyholders, and the group's core purpose is to pool and retain liability risk among those members rather than transfer it elsewhere.
An RRG only needs to be licensed in the single state where it is domiciled; federal law then allows it to write coverage for members located in other states without obtaining a separate license in each one. Although an RRG is structurally similar to a mutual company, the licensing exam treats it as its own distinct category.
A risk purchasing group is also created under the LRRA of 1986 and, like an RRG, is made up of members who share a common bond and want liability coverage. The key difference is that an RPG does not act as an insurer itself — it purchases coverage from a licensed insurance company on behalf of its members. The RPG becomes the master policyholder, and individual members receive certificates of insurance. The main advantage for members is the greater bargaining power and administrative simplicity of buying coverage as a group.
An RRG assumes and pools risk itself — it behaves like an insurer. An RPG only buys insurance on behalf of its members from a real insurer — it never acts as the insurer.