The Federal Liability Risk Retention Act of 1986

A Risk Retention Group may therefore either be a group captive with its own capital stock or a mutual insurer licensed under the laws of a single state. An important feature of the 1986 Act was to give members protection from the prohibitions against anti-trust but only provided that groups restricted their activities to the management of their own participants' liability exposures.

Under the Act, Risk Retention Groups are also exempted from participation in state guaranty funds which reduces premium cost however in the event of failure policyholders have no financial protection. The 1986 Act also permitted the formation of purchasing groups.

Unlike Risk Retention Groups these organisations do not assume risk but purely act as purchasing co-operatives to achieve savings in the commercial insurance market. The law does however require that they have common exposures and types of business and providing these criteria are met insurers offering coverage are exempt from most state laws requiring the filing of policy forms and rates.