What is the purpose of a risk retention group?

The purpose of a risk retention group is to provide liability insurance by pooling risks among its members. This type of group is established under the federal Liability Risk Retention Act, allowing its members, who are typically involved in similar businesses or professions, to come together and share their risk exposures. By pooling their resources, members can create a more stable risk-sharing environment, which often results in lower insurance costs compared to what they might pay individually in the traditional insurance market. This arrangement allows the group to cater specifically to the liability needs of its members while promoting mutual support and financial sustainability.

The other options don't align with the core function of risk retention groups. Offering the lowest rates, providing health insurance to a specific demographic, or selling life insurance exclusively to business owners does not reflect the primary objective of pooling risk for liability purposes. Thus, the correct answer accurately captures the essence of what risk retention groups are designed to do.