A purchasing group is not an insurance company. Rather, a purchasing group can be any group of persons with similar or related liability risks who form an organization, whose purpose is to purchase commercial liability insurance on a group basis. No specific requirements are imposed regarding the legal structure of a purchasing group. In the case of a trade association, a simple resolution of the board authorizing the organization's officers to make arrangement to purchase commercial liability insurance on a group basis would be sufficient to establish the purchasing group.

Members of a purchasing group must be in similar or related businesses which exposes them to similar or related liability risks.

A risk retention group is any corporation or other limited liability association, which is organized for the primary purpose of and whose primary activity consists of assuming and spreading all or any portion of commercial liability exposure of its members; which is chartered and licensed as a liability insurance company and is authorized to engage in the business of insurance under the laws of any state, or prior to January 1, 1985, was chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands.

The owners of a risk retention group must also be its insureds. Membership is limited to persons in similar businesses or activities with respect to the liability to which they are exposed.

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