For Members | Frequently Asked Questions
What is a risk retention group (RRG)?
A risk retention group (RRG) is a liability insurance company that is owned by its members. In 1986, Congress passed the Liability Risk Retention Act (LRRA) to help professionals obtain liability insurance, which had become either unaffordable or unavailable due to the "liability crisis" in the United States. In passing the LRRA, Congress provided insurance buyers with a marketplace solution, enabling them to have greater control of their liability insurance programs. The LRRA requires that members be homogeneous, i.e. engaged in similar businesses or activities that expose them to similar liabilities. The type of insurance coverage permitted is set forth in the definition of "liability," which includes all types of third party liability, including medical malpractice. Once licensed by its state of domicile, an RRG can insure members in all states. Because the LRRA is a federal law, it preempts state regulation, making it much easier for RRGs to operate nationally. As insurance companies, RRGs retain risk. AMS RRG is licensed and domiciled in the State of Arizona.
As insurance companies owned by their members, some of the key advantages RRGs offer relate to the control members obtain over their liability programs. This control often translates into lower rates, broader coverage, effective loss control/risk management programs, participation by RRG members in favorable loss experience, access to reinsurance markets, and stability of coverage, notwithstanding insurance market cycles.
Source: Risk Retention Reporter
Are RRGs successful?
As traditional insurance companies have abandoned the medical malpractice markets, many healthcare organizations have found a successful alternative in the Risk Retention Group. According to the Risk Retention Reporter, as of July 2009, there were 254 RRGs in operation. More than 159 RRGs have been organized by healthcare organizations and affiliated groups, covering a wide range of sponsor groups. In addition, there are more than 65 physician sponsored RRGs, including national medical specialty societies as well as regional groupings. From a security perspective, it is worth noting that the annual rate of insolvencies for traditional property/casualty insurers and risk retention groups is comparable.
What are the policy limits?
AMS RRG offers claims-made coverage up to (& including) $1,000,000 per event and $3,000,000 aggregate. Higher limits may be available on request.
Will I have to purchase separate tail coverage prior to joining AMS RRG?
Typically, we recommend that you review the options available to you: either purchase tail coverage from your current carrier and join AMS RRG on a first year claims made basis, or in most cases, we offer prior acts coverage, commonly referred to as "nose" coverage.
Is Extended Reporting Coverage, or “tail” coverage, available if I leave AMS RRG?
If you decide to cancel your policy through AMS RRG, tail coverage is available at an additional premium based upon your retroactive date of coverage. Physicians who are retiring may qualify for cost reductions when purchasing this extended reporting period coverage.
What is the expected premium to the member physicians?
Premiums are based upon traditional underwriting principles, which include such factors as the medical specialty, type and scope of practice, geographic area, and prior experiences. Additionally, underwriting criteria that are utilized by AMS RRG focus on the physician's clinical practice and the opportunity to provide risk reduction initiatives.
Are premiums offered that are significantly lower than traditional insurers?
From our perspective, one lesson learned from taking a look at the various insurance cycles in the medical malpractice industry is that under-pricing can lead to disastrous results. While it may be attractive in the short term to build a book of business, it is not sustainable over a longer period of time. AMS RRG has only been able to become as strong as we are by offering premiums that are commensurate with the risk, which reflect the opinions of the actuaries and regulators. Premium reductions can be realized, but only as we continue to recruit successful colleagues and build reserves.
Where does AMS RRG operate?
AMS RRG is domiciled and licensed in Arizona and is presently registered in 48 states and the District of Columbia. We continually monitor the marketplace and will register in other states as we deem appropriate and in accordance with our business objectives.
Is the entity based in a domicile with a long-standing and well-established reputation and substantial experience in regulation?
Arizona is an excellent domicile with appropriate concern about regulations and reserves. A Board Meeting is held yearly and all rules and regulations are strictly adhered to. Our captive manager, Aon Insurance Managers (AIM), http://www.aoncaptives.com/, is one of the leading captive service providers in the world handling over 1,100 clients. They adhere to rigid standards when recommending and selecting domiciles, ensuring that the proper local infrastructure is in place to support these risk vehicles over the long term.
Does the company have willing and able leaders as directors to fulfill the governance requirements of the program?
General and administrative management is provided by Best Practices Medical Partners, LLC, which is comprised of experienced and trusted executives and medical leaders who are committed to providing superior insurance services to physicians and their practices by specifically addressing processes that can decrease medico-legal risk. This is accomplished through the Insured Colleagues Program™.
Does the company conform to SEC disclosure regulations and are its shareholders’ agreements clear or available?
All applicable regulations are strictly adhered to and the shareholders’ agreements are readily available and can be reviewed by applicants. All applicants receive a packet of information, including a detailed Information Circular explaining the risks of subscribing for membership, attached copies of the shareholders’ agreement, the articles of incorporation and bylaws of the company, and other documentation necessary for an applicant to make an informed decision about joining AMS RRG .
Does the company have reputable reinsurance support?
AMS RRG supports and extends its own capital base through the purchase of excess of loss reinsurance under the supervision of the Arizona Department of Insurance. First negotiated after the company’s formation in the spring of 2003, AMS RRG enjoys the support of leading reinsurers. All reinsurers maintain high ratings from the major rating agencies and employ specialized underwriters who are very familiar with both the medical malpractice marketplace in the United States and AMS RRG’s business activities. The reinsurance provides excellent financial protection for AMS RRG’s policy holders.
Is there evidence that a certified casualty actuary has approved loss projections or the maximum aggregate limit?
AMS RRG utilizes the services of Aon Global Risk Consulting, prestigious and experienced medical professional liability actuaries. AMS RRG is required to file on an annual basis audited financial statements, including an annual certification of loss reserves certified by an approved independent actuary.
Who will be responsible for claims investigation or defense or how disagreements about claims handling will be resolved?
Claims administration is provided through our experienced in-house counsel, the Chief Medical Officer, Specialty Medical Directors and The Insured Colleagues Program™.
Does the company have a confidentiality statement on policyholders’ underwriting and claims information?
The Privacy Rule under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) does not apply to AMS RRG. It does, however, apply to the healthcare providers insured by AMS RRG. As physicians and leaders in the healthcare community, we are acutely aware of the sensitive nature of the health information that may be available to us and our service providers and would not do anything to jeopardize the relationships with our insureds.
Is there disclosure if membership could make physicians liable for an additional capital investment or retroactive premium assessment?
The AMS RRG policies are non-assessable as clearly stated in all policy and related documents. The stock issued by AMS RRG is also fully paid and non-assessable. As mentioned above, AMS RRG uses an Information Circular document prepared by its attorneys to ensure that all material information is disclosed to its applicants.
What are the conditions for program withdrawal, including the return of capital investments?
Members are able to cancel coverage at any time. However, as stated throughout this document, our company was formed to provide long-term solutions for physicians, not for those looking to frequently change carriers. We plan to continue to strengthen the company and build capital reserves. Therefore, all physicians are required to contribute capital and, as an incentive to commit to the program, AMS RRG discounts the value of any return of capital if an insured leaves the program within 3 years. The terms of returning capital to program members are clearly outlined in the shareholders’ agreement and the Information Circular. All AMS RRG distributions are prudently (and legally) subject to the discretion of the Board of Directors and the approval of the insurance regulators of the State of Arizona. Keep in mind that the benefits of the AMS RRG insurance program may be realized in several ways: through lower premiums, more stable insurance, reinsurance, or greater wealth for the insureds. Our ultimate goal is to maintain superior physicians and favorable working relationships leading to a long-term response for members’ medical liability challenges.
Is there a formula to value members’ shares or when dividends will be paid/return on capital investment?
By maintaining a stable and growing membership of superior physicians, the company will remain a superior alternative to traditional insurance products. However, a method of accounting for and returning capital is available to departing members, and clearly outlined in the company’s governing documents.