When a subcontractor's certificate lists a Risk Retention Group as the carrier, the standard verification process does not apply. You cannot look up an A.M. Best rating. Your state's guaranty fund will not backstop a claim if the carrier fails. Your COI platform may not have the RRG in its carrier database.

Preferred Contractors Insurance Company Risk Retention Group LLC reviews and similar RRG evaluation searches have increased 340% since 2022, according to industry search data. GCs are trying to figure out whether these carriers are legitimate and financially sound. The answer requires a different checklist than the one you use for admitted carriers.

This checklist covers every verification step a GC should complete before accepting an RRG certificate on a construction project. Use it as a project-level compliance document.

The 12-Step RRG Verification Checklist

Step 1: Confirm the RRG Exists in the NAIC Database

The National Association of Insurance Commissioners maintains a public database of all registered Risk Retention Groups. Every legitimate RRG must register with the NAIC.

Action: Search the NAIC Risk Retention Group database at content.naic.org. Enter the exact entity name. Confirm the registration is active, not expired or revoked.

Red flag: If the RRG does not appear in the NAIC database, stop. Do not accept the certificate. The entity may not be a legitimate insurance company.

Step 2: Verify Domicile State Licensure

An RRG is licensed in one state (its domicile) and registers in other states where it operates. The domicile state's insurance department is the primary regulator.

Action: Contact the domicile state's insurance department or search their online database. Confirm the RRG holds an active license, not just a registration.

What to record: License number, effective date, domicile state, types of coverage authorized.

Step 3: Check Registration in Your State

While an RRG only needs licensure in its domicile state, it must register (file a notice) in every other state where it writes policies.

Action: Check your state insurance department's records for the RRG's registration. In most states, this is searchable online under "risk retention groups" or "non-admitted entities."

Red flag: If the RRG writes policies in your state but has not filed the required registration, the sub's coverage may face challenges at the claims stage.

Step 4: Request the Annual Financial Statement

RRGs must file annual financial statements with their domicile state. These are public records.

Action: Request the most recent audited financial statement from the RRG directly or from the domicile state regulator. Review the following:

Financial Metric	Healthy Threshold	Concern Level
Surplus-to-premium ratio	Above 35%	Below 25%
Combined ratio	Below 100%	Above 110%
Loss reserves adequacy	Fully funded per actuary	Deficient by more than 10%
Investment portfolio quality	80%+ investment-grade	Over 30% speculative
Premium growth rate	Under 20% annually	Over 40% annually
Member assessment history	None in 3 years	Assessed within 12 months

Step 5: Identify Any Financial Strength Ratings

Most RRGs are not rated by A.M. Best. However, some carry ratings from alternative agencies.

Action: Check these sources for a rating:

Demotech (demotech.com) - Financial Stability Ratings
Kroll Bond Rating Agency - Insurance company ratings
The RRG's own website for any published ratings or financial certifications

What to accept: A Demotech rating of A (Exceptional) or A' (Unsurpassed) provides reasonable confidence. Ratings below B are a concern.

Step 6: Verify Coverage Forms and Endorsements

RRG policies may not use standard ISO forms. The coverage grants, exclusions, and endorsement options may differ from what you expect from a standard GL policy.

Action: Request the declarations page and key endorsement pages from the sub's policy. Verify:

General liability coverage with per-occurrence and aggregate limits meeting your contract requirements
Additional insured endorsement available and matching your contract terms
Waiver of subrogation endorsement if contractually required
Products-completed operations coverage extending beyond project completion

Red flag: If the RRG cannot provide additional insured endorsements or uses a policy form that excludes construction operations commonly covered by ISO CG 00 01, the coverage is inadequate.

Step 7: Confirm Claims-Handling Procedures

RRGs handle claims through their own staff, through third-party administrators, or through the domicile state's regulatory process.

Action: Ask the RRG or the sub's agent:

Who administers claims? (In-house or TPA?)
What is the average claim resolution time?
How are claims reported? (Online portal, phone, email?)
Does the RRG have claims staff or counsel in your state?

Why this matters: If a claim arises on your project and the RRG's claims operation is in a different state with no local presence, resolution will take longer and cost more.

Step 8: Assess Member Composition and Concentration

RRGs pool risk among their members. If the membership is concentrated in one trade, one geography, or one project type, a localized catastrophe could drain the pool.

Action: Review the RRG's annual report or marketing materials for information on:

Number of active members
Geographic distribution
Trade or specialty mix
Largest single member's percentage of total premium

Concern threshold: If one member represents more than 15% of total premium, or if 80%+ of members operate in one state, concentration risk is elevated.

Step 9: Check for Regulatory Actions or Orders

Domicile state regulators can issue consent orders, corrective action plans, or supervision orders against RRGs with financial or operational problems.

Action: Search the domicile state insurance department's enforcement actions database. Also check the NAIC regulatory actions database.

Red flag: Any active consent order, supervision arrangement, or corrective action plan within the past 3 years warrants additional scrutiny or certificate rejection.

Step 10: Review Reinsurance Arrangements

RRGs purchase reinsurance to protect against catastrophic losses that exceed their retained risk. The quality and adequacy of reinsurance directly affects the RRG's ability to pay large claims.

Action: Request information on the RRG's reinsurance program:

Who is the reinsurer? (Check the reinsurer's A.M. Best rating)
What is the RRG's retention level before reinsurance attaches?
What is the total reinsurance limit?

Minimum standard: The reinsurer should carry an A.M. Best rating of A- or better. The RRG's retention should be reasonable relative to its surplus.

Step 11: Compare Coverage to Your Contract Requirements

Pull your subcontract's insurance requirements section and compare each requirement against what the RRG policy actually provides.

Action: Create a compliance matrix:

Contract Requirement	RRG Coverage	Compliant?
GL $1M per occurrence	Check declarations	Y/N
GL $2M aggregate	Check declarations	Y/N
Additional insured - ongoing ops	Check endorsement	Y/N
Additional insured - completed ops	Check endorsement	Y/N
Waiver of subrogation	Check endorsement	Y/N
Primary and non-contributory	Check endorsement	Y/N
30-day cancellation notice	Check certificate	Y/N
Products-completed ops tail	Check policy term	Y/N

Step 12: Document Your Due Diligence

Keep a record of every verification step you completed. If a claim arises and the RRG cannot pay, your documentation shows you performed reasonable due diligence when accepting the certificate.

Action: Create a file for each RRG-insured subcontractor containing:

NAIC registration confirmation
State licensure/registration verification
Financial statement summary and your assessment
Rating information (or documentation that no rating exists)
Coverage verification matrix
Date of verification and reviewer name

When to Reject an RRG Certificate

Reject the certificate and require the sub to obtain standard market coverage if:

The RRG does not appear in the NAIC database
The domicile state license is expired, revoked, or suspended
The RRG is under regulatory supervision or consent order
The surplus-to-premium ratio is below 25%
The RRG cannot provide required endorsements (additional insured, waiver of subrogation)
The RRG has no reinsurance or the reinsurer is unrated
The RRG has assessed its members within the past 12 months

Frequently Asked Questions

How often should I re-verify an RRG's financial status?

Annually at minimum, and whenever the sub's policy renews. RRG financial conditions can change quickly because their membership base is smaller than traditional carriers. Set a calendar reminder 60 days before each annual renewal to run through the checklist again.

Can my subcontract require standard admitted carrier insurance only?

Yes. Many GCs include language requiring insurance from carriers rated A- VII or better by A.M. Best. This effectively excludes most RRGs. However, this may limit your subcontractor pool, particularly in specialty trades or high-risk categories where standard market availability is limited.

What is the difference between an RRG and a surplus lines carrier?

Surplus lines carriers are insurance companies writing non-standard risks in the excess and surplus market. They are licensed in their domicile state and listed on approved surplus lines lists in other states. RRGs are member-owned and operate under federal law rather than state-by-state surplus lines regulation. Both lack guaranty fund protection.

Do RRGs ever fail?

Yes. Between 2000 and 2025, approximately 35 RRGs became insolvent or entered runoff. The construction sector has seen several RRG failures, leaving policyholders and their additional insureds without coverage for pending claims. This is why due diligence is essential.

Is the sub's agent responsible for RRG verification?

No. The sub's insurance agent facilitates the placement, but the GC is responsible for verifying that the coverage meets contractual requirements. The agent may assist with providing documentation, but the compliance decision rests with the GC's risk management process.

Can I charge the subcontractor for the extra verification work?

Not directly in most cases. However, you can include contract language requiring subs with non-standard insurance to provide additional documentation at their own cost, including financial statements, rating letters, and coverage verification from the RRG. This shifts the administrative burden appropriately.

RRG verification requires steps that standard COI platforms do not automate. SubcontractorAudit's pay application audit flags non-admitted carriers at upload, creates verification task lists for your team, and tracks RRG compliance status across your entire schedule of values.