RRGs Report Second Quarter Surplus Declines as per Demotech Report

Demotech, Inc. has released its report “Analysis of Risk Retention Groups—Second Quarter 2022.” The report finds that while RRGs continue to exhibit “a great deal of financial stability,” difficult conditions in financial markets have contributed to a deterioration in a number of financial ratios and a decrease in policyholders’ surplus.

From the period from the second quarter 2021 through second quarter 2022, risk retention groups reported a 3.6% decline in cash and invested assets and 0.6% decline in total admitted assets. There was a sharper decline of 9.0%, or $548.4 million, in policyholders’ surplus. According to the report, the decline in surplus was driven by unrealized capital losses at 122 risk retention groups.

“The level of policyholders’ surplus becomes increasingly important in times of difficult economic conditions by allowing the insurer to remain solvent when facing uncertainty,” wrote report author and Demotech Senior Financial Analyst Douglas A. Powell.

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