Arizona Life and Health Practice Exam

Which of the following types of insurers limits the exposures it writes to those of its owners?

1. Captive Insurer

2. Mutual Insurer

3. Stock Insurer

4. Reinsurer

The correct answer is: Captive Insurer

The correct answer is a captive insurer because this type of insurance company is specifically designed to provide insurance coverage primarily for the risks of its parent company or group of affiliated companies. Captive insurers serve the needs of their owners by focusing on the exposures that are directly related to those owners' businesses or operations, thus limiting the scope of the risks they underwrite. Captive insurers can help their owners manage insurance costs, tailor coverage to fit specific needs, and retain more control over their risks. This structure is particularly beneficial for organizations that face unique risks or have difficulty obtaining adequate insurance coverage in the traditional market. Mutual insurers, on the other hand, are owned by policyholders and typically offer coverage to a broader range of customers rather than being limited to just those of its owners. Stock insurers are corporations owned by shareholders and also provide insurance to the general public, while reinsurers primarily provide insurance to other insurers, transferring some of their risk and usually do not directly deal with policyholders. Therefore, they do not limit their exposures to just their owners.