Which of the following is a requirement for a risk retention group (RRG)?

The requirement for a risk retention group (RRG) to be licensed in its state of domicile is fundamental to its operation. RRGs are formed under the Risk Retention Act of 1986, which allows groups of businesses with similar exposures to create their own insurance company to obtain liability coverage. By being licensed in its state of domicile, an RRG demonstrates compliance with statutory regulations and ensures that it meets the necessary legal standards to operate as an insurer. Licensing is crucial as it confirms that the RRG is subject to regulatory oversight, protecting the interests of its members and policyholders.

For effective operation, RRGs typically need to adhere to specific rules laid out by both state and federal laws, including adherence to financial requirements. This licensing requirement underscores the accountability of the RRG and contributes to the regulatory framework designed to safeguard insured parties against potential insolvency or other coverage issues.