Risk Retention Act of 1986

Published: | Updated: January 7, 2018

Definition - What does Risk Retention Act of 1986 mean?

The Risk Retention Act of 1986 is a law enacted by the federal government which enabled parties to form risk retention groups (RRG) and purchasing groups (RPG) for certain types of liability exposures. This law came in response to a large number of pleas from the business community and municipalities across the country.

Insuranceopedia explains Risk Retention Act of 1986

According to the Risk Retention Act of 1986, the members of a proposed risk purchasing group or risk retention group must be involved in similar or related business activities in order to lawfully form an RPG or an RRG. This is a very important feature of this law because it clearly lays out which parties can form these types of associations. So, for example, several different municipalities may form an RPG or RRG, but it might be unlawful for a municipality to form one by partnering with a hedge fund.

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