A2: Types of Private Insurers Quiz

Small United States unincorporated insurance associations, domiciled mainly in Texas, are known as A. American reciprocals. B. American mutuals. C. American captives. D. American Lloyds.

D. American Lloyds. Small United States unincorporated insurance associations, domiciled mainly in Texas, are known as American Lloyds

A reinsurance company A. Is formed to write all or part of the insurance for a parent company. B. Provides primary insurance for loss exposures that private insurers are unwilling to provide. C. Transfers losses to a primary insurer. D. Assumes loss exposures from a primary insurer.

D. Assumes loss exposures from a primary insurer. The reinsurer assumes some or all of the potential costs of insured loss exposures of the primary insurer.

A company interested in improving cash flow should consider meeting its insurance needs through which one of the following types of insurance organizations? A. Captive insurers B. Stock insurers C. Mutual insurers D. Reciprocal insurance exchanges

A. Captive insurers With a captive, instead of paying premiums to an unrelated insurer, a company can invest its funds until they are needed for claims.

An insurer that was formed for the purpose of earning a profit for its stockholders is a: A. Stock insurer. B. Reciprocal insurance exchange. C. Mutual insurer. D. Captive insurer.

A. Stock insurer. Stock insurers are formed to earn profits for stockholders.

How does a stock insurer differ from a reciprocal insurance exchange? A. Stockholders own a stock insurer. Subscribers own a reciprocal insurance exchange. B. A stock insurer provides insurance to its policyholder-owners. A reciprocal insurance exchange provides insurance to investors. C. Both are owned by stockholders. However, the reciprocal insurance exchange provides coverage to investors. D. Both are formed to provide profit to investors. However, the stock insurer is managed through a board of directors.

A. Stockholders own a stock insurer. Subscribers own a reciprocal insurance exchange. Stockholders own a stock insurer. Subscribers (members) own a reciprocal insurance exchange.

A mutual insurance company is owned by A. Independent investors. B. Policyholders. C. State insurance departments. D. Mutual funds.

B. Policyholders. A mutual insurer is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them.

All of the following describe Lloyd's, EXCEPT: A. Operated by syndicates B. Primarily insurers unusual exposures C. Insurance underwritten by a Name D. A marketplace

B. Primarily insurers unusual exposures. Lloyd's is a marketplace operated by Lloyd's syndicates where insurance is written by a Name (member/investor). Lloyd's underwriters act on behalf of syndicates to analyze risk; they are not liable to pay claims. Each Lloyd's Name is liable for the insurance he or she agrees to write.

Which one of the following describes the characteristics of a mutual insurance company? A. A corporation owned by stockholders that earns profits for the stockholders. B. An unincorporated association that provides reciprocal coverage to subscribers. C. A corporation owned by policyholders that provides insurance to its policyholders. D. An unincorporated association that earns profits for its individual investors.

C. A corporation owned by policyholders that provides insurance to its policyholders. A mutual insurer is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them.

A type of insurer that has a board of directors elected by policyholders and that may pay dividends to policyholders as a return of a portion of premiums paid is a A. Captive insurer. B. Stock insurer. C. Mutual insurer. D. Reciprocal insurance exchange.

C. Mutual insurer. A mutual insurer has a policyholder-elected board and may pay dividends to policyholders as a return of a portion of premiums paid.

Insurance Company wrote a commercial liability policy for a manufacturer of off-road motorcycles. The potential costs of the insured's loss exposure exceed Insurance Company's capacity. Insurance Company could consider which type of contractual transferring agreement to meet its needs? A. Mutual insurance B. Reciprocal insurance C. Reinsurance D. Interinsurance

C. Reinsurance Reinsurance transfers potential costs of loss exposures from one insurer to another.

A reciprocal insurance exchange A. Is a subsidiary that provides all or part of the insurance for a parent company. B. Transfers potential costs of insured loss exposures from one insurer to another insurer. C. Is an unincorporated association providing insurance coverage to its subscribers. D. Is a stock corporation providing insurance for its policyholders

C. Is an unincorporated association providing insurance coverage to its subscribers. A reciprocal is an unincorporated association providing coverage to subscribers.

All of the following are types of private insurers, EXCEPT: A. Stock insurers B. Mutual insurers C. State workers compensation funds D. Reciprocal insurance exchanges

C. State workers compensation funds A state workers compensation fund is not a private (nongovernmental) insurer.