Types of Insurers

Loyd's Associations

"Loyd's of London" Not insurance companies. They provide a hub for the exchange of information among member underwriters who actually transact the business of insurance. -Insurance provided by individual underwriters, not companies. -insure unusual risks; hole-in-one contest, athletes arm, celebrities hair.

Self-Insurers

A business that pays off its own claims. Reserves funds to cover losses. Retains risk rather than transfers.

Risk Purchasing Groups

A group of businessmen from the same industry that join together to buy liability insurance from an insurance company. -NOT THE INSURANCE COMPANY

Fraternal Benefits Societies

-Provides insurance and other benefits organized a lodge system. -Must be a member; religious or ethnic group. -Income tax advantages

Reciprocal Insurers

-Unincorporated/Subscribers -Members are assessed if a loss occurs to any member of the group -Managed by an attorney-in-fact

Risk Retention Groups

An insurer formed for the sole purpose of providing liability insurance for its policyholders. -Policyholders must all be members of the same type of business. -They are regulated by the state where they are headquartered and can operate in other states as well. *Liability insurance company created for policyholders from the same industry *Example- a car dealers' risk retention group in which only one car dealers can be policyholders

Stock Insurer

A business formed as a corporation and owned by its stockholders (aka shareholders). -the corporation is run by a board of directors elected by the stockholders. -profits from the insurance operation may be distributed to the stockholders as dividends. These dividends are taxable to the shareholder. Dividends are never guaranteed because profits can never be guaranteed. -the policies issued by stock insurers are called NON-PARTICIPATING (NON PAR) policies since dividends never go to the policyholders in this arrangement. -owned by stockholders -dividend is not guaranteed -dividend is paid by stockholder -dividend is taxable to stockholder -issue non-participating policies

Mutual Insurers

Mutual insurers elect a board of directors who oversee the operation of the company and is owned by its policyholders (customers). -Funds that remain after pausing claims and operating costs may be distributed to the policy owners as dividends. -In a mutual insurance company, dividends are considered as a refund of overpaid premiums and are not taxable. -Mutual policies are referred to as participating (PAR) policies because the policy-owners participate in the operating results of the company. -Mutual companies are referred to as participating (PAR) companies because they sell PAR policies. *owned by policyholders *dividend is not guaranteed *dividend is not taxable; considered refund of premium *issue participating policies