What type of insurance company is owned by its members and retains risk?

The correct answer, which identifies a type of insurance company owned by its members and that retains risk, is a Risk Retention Group. This type of organization is formed by a group of individuals or businesses with similar insurance needs and is designed to meet those needs collectively. Membership in a Risk Retention Group means that the members can have ownership and control over their insurance operations, allowing them to tailor coverage specifically to their crafting segment or profession.

Risk Retention Groups typically retain a significant portion of the risks they underwrite rather than passing them off to conventional insurance carriers. By pooling their resources, members can effectively manage their own risk, which can often lead to reduced costs and more customized insurance solutions.

The function and structure of a Risk Retention Group differentiate it from other types of insurance companies. For instance, while mutual insurance companies are indeed owned by policyholders and also retain some risk, they usually operate more widely across numerous types of risks and policies. Captive insurance companies are created by a parent company to insure its own risks, acting as an in-house insurer, and do not necessarily involve multiple independent members. Professional Liability Companies do not fit the description of being member-owned and are focused on specific services and professions rather than risk retention on behalf of multiple members