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Question
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Hi Ken,
Do you have an opinion on the benefits or drawbacks of going with a risk retention group type policy versus a standard admitted policy? Is it true that the policy limit is essentially shared between all members on a risk retention type policy during any given year? I was told that if one policy holder has a policy limit level claim that the rest of the policy holders would not be able to also put in a policy limit claim that same year?
Thanks,
Brian Selltiz
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Answer
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A Risk Retention Group is federally chartered and has to be domiciled in one state. Typically a Risk Retention Group is organized when coverage in an area is difficult to find or unstable, and it is often formed by the members of the industry the insurance is geared to insure. The alarm industry has one Risk Retention Group, Security America Risk Retention Group, or Sarrg. It's was organized by the National Burglar and Fire Alarm Association, which has since changed its name. It is owned by the various policy holders that form its group.
First, Sarrg members are not liable for the insurance coverage of the policy holders; there is no pooled liability. One policy holder's claims do not affect another policy holder's claims or coverage. Where concern is often raised is that Risk Retention Groups are not backed by the vast resources of giant insurance companies, and typically are not admitted carriers in a state so it doesn't share in a state's failed insurance pool should the carrier go belly up. It would not be unreasonable to question the resources of a Risk Retention Group before deciding to obtain insurance from it.
Sarrg is a safe bet. It carriers reinsurance from another insurer, I believe Lloyds of London presently. Sarrg is also rated by A M Best.
Could a rash of claims exhaust Sarrg and its reinsurance? I suppose so, but claims exceeding your policy limits is more likely to be a concern. What makes Sarrg stand out is that its Claims Administrator is from the alarm industry, understand the claims and how they should be defended. When appropriate competent counsel is selected to defend the alarm company policy holder. This factor alone is the most important attribute in my opinion. If you have a claim it will be foremost in your mind as well. I can't keep track of the calls I get from angry and concerned alarm company owners complaining that their carrier selected counsel they don't approve of because they have no understanding of the alarm industry or applicable laws.
Because Sarrg is alarm industry operated it has lower operating costs and I believe that is reflected in its lower premium requirements. Give them a call. I listed Sarrg in The Alarm Exchange and I wouldn't have if I had reservations recommended it.
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