Net Loss for RRGs in First Quarter of 2022 as Per Demotech

Demotech, Inc. has released its report “Analysis of Risk Retention Groups—First Quarter 2022”. The report finds that risk retention groups continue to exhibit financial stability. However, a rare net loss for RRGs was reported in the first quarter of 2022. This net loss stems from weak investment performance in the first quarter of the year.

According to the report, for the first quarter of 2022, cash and invested assets at risk retention groups increased by 4.2% and total admitted assets increased by 4.4%, over the same period in 2021. However, growth in policyholders’ surplus was more marginal, with an increase $6.3 million—less than 1 percent. This a large decline from the $974.7 million dollar—or 19.6 percent—increase in policyholders’ surplus reported in the first quarter of 2021.

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

The weak growth in surplus thus far in 2022 is likely due to risk retention groups reporting a net loss of $5.2 million through the first quarter of 2022. This breaks a long trend of net income for risk retention groups collectively.

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