Arizona Life and Health Practice Exam

What type of insurer restricts the exposures it writes to those of its owners?

1. Mutual insurer

2. Captive insurer

3. Standard insurer

4. Surplus lines insurer

The correct answer is: Captive insurer

A captive insurer specifically focuses on providing insurance coverage to a limited group of owners, typically the parent company of the captive or its affiliates. This structure allows the owners to tailor the insurance policies to fit their unique risk management needs while also having greater control over the underwriting process and the premiums they pay. Captive insurers are often established to cover risks that may not be adequately provided for by traditional insurance markets. On the other hand, mutual insurers provide coverage for a broader group of policyholders who are also the members or owners. Standard insurers operate in the open market, offering policies to the general public without the restriction of insuring only their owners. Surplus lines insurers offer coverage for high-risk or unusual exposures that standard insurers are unwilling to underwrite, further indicating a market approach that doesn't focus on restricting coverage to a specific group of owners. Therefore, the defining characteristic of a captive insurer is its restriction to insuring only the exposures of its owners, making it the correct answer.