GAO (leaving syllabus) Flashcards
Define risk retention group (RRG)
describe
license
coverage
protection
similar businesses …w/ similar risks…pool their risks…form self-insured insurance company (owned by its members)
license: don’t need license in every state it operates
coverage: commercial liability only
protection: no guaranty fund protection
adv of RRG vs private insurer (4)
- lower cost (private insurer premium reflects commission & advertising)
- learn (risk management) from other members
- owned by members → incentive for cost control
- tailored to members needs
- don’t need license in every state it operates in
disadv of RRG vs private insurer (4)
- risk pooling is not true risk transfer
- less likely to have financial strength rating
- no guaranty fund protection
- no property coverage
captives (group of companies) & pure captives (1 company)
how similar to RRG?
coverages - how similar and different to RRG?
licensing - how different to RRG?
risk types - how different to RRG?
both self insurance mechanisms (like RRG)
commerical liability (like RRG) & property coverage (NOT like RRG)
need license in every state it practices in (NOT like RRG)
don’t have to have similar risks (NOT like RRG)
T/F self-insurance mechanisms like RRG & captives are less regulated than private insurers
T – no RBC + regulators lack expertise in specialized coverages
NAIC accreditation program
what do states need to get certified to regulate insurers’ financial solvency
State need: minimum standards of state DOI regulation
solvency laws
financials exams
organizational practices
Do NAIC accreditation standards require RRG to file their financial statements using SAP?
No
BUT must reconcile to SAP (SAP is more conservative & is used in tools to assess financial strength)
Argue for vs against risk focused exams required for RRG under NAIC accreditation standards
- for: all companies (RRG and other) should have uniform baseline regulation
- vs against: costly & burdensome for small company
