Which of the following is true about the risk retention groups?

Risk retention groups are specialized insurance entities formed by businesses with similar risks to provide liability insurance to their members. The primary purpose of these groups is to enable members to manage their risks collectively and potentially lower insurance costs by pooling resources.

The correct answer states that they engage exclusively in liability insurance, which reflects the core function of risk retention groups. They are authorized under the Liability Risk Retention Act of 1986 to provide liability coverage to their members, which can encompass various types of liability, such as professional liability, general liability, and other related coverages essential for businesses exposed to risks.

As for the other options, they do not accurately represent the nature of risk retention groups. For instance, while self-insurance might be a strategy employed within a risk retention group, true self-insurance involves risk bearing by the insured entity itself rather than through a third-party provider; hence, saying that they allow members to self-insure doesn't fully capture the essence of how these groups operate. Risk retention groups cannot provide workers' compensation insurance due to regulatory restrictions, and they do not focus on personal lines insurance, as their main objective revolves around providing liability coverage. Therefore, the emphasis on liability insurance aligns with the fundamental principle under which risk retention groups are established.