The entire premise of any kind of commercial insurance is that risk is mitigated when large groups of people are consolidated. The chances that a single person will need to pay hundreds of thousands of dollars for medical bills at some point in her life may be low, but it would be financially ruinous if it were to come to pass. By aggregating more people and sharing the economic burden of paying premiums, it is far less difficult to receive affordable coverage.
Large companies are able to easily find cost-effective insurance plans because they have so many workers who can be added to an existing pool of people. However, smaller operations don't have this luxury and may find that their benefits packages are becoming more expensive. That is why so many businesses are turning to risk retention groups (RRGs).
A risk retention group, or captive, results from the combination of multiple staffs from different companies into one pool of insurance applicants. Employers can find one another within a geographic area, in the same industry or with companies that have particularly high risk levels and are in need of collaborators. They can then reduce the overall risk that they face and find much more affordable options for health insurance and other employee benefits.
