What limitation does an RRG have when re-insuring another RRG's liability?

An RRG, or Risk Retention Group, is a unique type of insurance company that allows its members, who are typically involved in similar types of businesses or industries, to pool their resources to mitigate liability risks. The primary characteristic of an RRG is that it is created to underwrite liability risks of its own members, and this necessitates that those members share similar insurance needs and exposures.

By requiring that members are engaged in similar businesses or industries, RRGs can effectively tailor their coverage and risk management strategies to address the collective risks they face. This alignment is essential because it enables a more accurate assessment of risk and promotes better underwriting practices. Additionally, when pooling resources and liabilities, it helps to stabilize the insurance provided due to shared experiences, claims, and mitigation measures.

The other scenarios mentioned, such as needing to consist of large corporations or members from different industries, do not align with the fundamental purpose of an RRG, which is geared towards like-minded businesses sharing common risk profiles. The option regarding state-admitted insurers is also not relevant in the context of RRGs re-insuring one another, as RRGs operate under specific regulatory frameworks allowing them to manage their own risks as groups fundamentally based on shared characteristics.