Chapter 2

Question 1

An insurer that is owned by its stockholders and formed as a corporation for the purpose of earning a profit for the stockholders

Answer 1

Stock Insurer

Question 2

An insurer that is owned by its policyholders and formed as a corporporation for the purpose of providing insurance to them.

Answer 2

Mutual Insurer

Question 3

An insurer owned by its policyholders, formed as an unincorporated association for the purpose of providing insurance coverage to its members (called subscribers), and managed by an attorney-in-fact. Members agree to mutually insure each other, and they share profits and losses in the same proportion as the amount of insurance purchased from the exchange by that member.

Answer 3

Reciprocal Insurance Exchange (interinsurance exchange)

Question 4

A subsidiary formed to insure the loss exposures of its parent company and the parent’s affiliates

Answer 4

Captive Insurer

Question 5

The transfer of insurance risk from one insurer to another

Answer 5

Reinsurance

Question 6

Methodical examination of a policyholder’s operations, records, and books of account to determine the actual exposure units and premium for insurance coverages already provided.

Answer 6

Premium Audit

Question 7

Make basic property insurance available to property owners who are otherwise unable to obtain insurance because of their property’s location or any other reason

Answer 7

Fair Access to Insurance Requirements (FAIR) Plans

Question 8

A state law that permits any producer with a surplus lines license issued by that state to procure insurance from an eligible surplus lines insurer if the applicant cannot obtain the desired type of insurance in the admitted market

Answer 8

Surplus Lines Law