In today's uncertain world, insurance costs can pose a hefty burden for homeowner's associations and co-op and condo boards trying to keep budgets balanced and costs lows. One potential solution to that burden may be a risk purchasing group—or RPG—which can make insurance easier to afford while offering even more coverage than some homeowner's associations might have thought they could afford.
The Origins of RPGs
Risk purchasing groups first became an option for associations with the passage of the 1986 Liability Risk Retention Act, a federal law that helped U.S. businesses, professionals and municipalities obtain liability insurance that had become either unaffordable or unavailable due to the skyrocketing costs at that time. The law allowed for the creation of organizations that would allow co-ops, condos and hundreds of other groups with similar liability needs to join together and purchase insurance, maximizing their bargaining power enabling them to secure quality insurance at more reasonable prices.
The 1986 act overrode other existing state legislation that might have prohibited such groupings, says Ken Hager, chief operating officer of Preferred Property Risk Purchasing Group Inc., in Holmdel.
According to Hager, "When you deal with a risk purchasing group, you have the buying power that individual homeowner's associations don't have. If you were to buy a $15 million umbrella policy [on your own], it might cost $10,000 to $15,000 a year. If you qualify for a risk purchasing group, you'll get it for $3,000 or $4,000."
When it comes to price and amount of coverage, it would seem tough to beat the bargaining power of an RPG. Since their inception, RPGs have become a valued alternative to traditional means of insurance. Hager says his company, which was founded in 1996, has doubled its number of policies nearly every year, with more than 10,000 associations and 1.2 million units currently in the group nationwide. "During the 1990s, it was a soft insurance market," says Hager, "but risk purchasing groups have still grown, and should continue to grow."