CPCU 520 Chapter 1 Exam Questions and Answers| New Update with 100% Correct Answers
Four ways to classify P&C insurers 1) Legal form of ownership 2) Place of incorporation 3)
Licensing Strength 4) Insurance distribution systems and channels
Risk retention group A group self-insurance plan or group captive insurer operating under
the auspices of the Risk Retention Act (RRA) of 1986
Purchasing group Authorized by the Liability Risk Retention Act of 1986, a group formed to
obtain liability coverage for its members, all of which must have similar or related exposures.
The Act requires a purchasing group to be domiciled in a specific state. In contrast to risk
retention groups (RRGs), purchasing groups are not risk-bearing entities.
Main legal forms of ownership Proprietary, Cooperative, Pools, Government
Proprietary Insurers insurer formed for the purpose of earning a profit for its owners
Four types of proprietary insurers Stock insures, Lloyd's of London, American Lloyd;s,
Insurance Exchange
Stock Insurers most prevelent proprietary insurer. Owned by stockholders who elect board
of directors
Lloyd's of London Marketplace similar to stock exchange. Members are corporations that
are investors. American Lloyd's is a smaller version
Insurance Exchange Similar to Lloyd's, acts as a market place. Members can be individuals,
partnerships or corporations and they belong to syndicates.
INEX An example of an insurance exchange
, Cooperative Insurer owned by policyholders and formed to provide insurance protection at
a minimum cost.
Five types of Cooperative Insurers Mutual Insurers, Reciprocal Insurance Exchange,
Freaternal Organizations, Capital Insurers, Risk Retention groups, Purchasing Groups
Mutual Insurer Most common cooperative insurer. No stockholders just policyholders that
elect board of directors. Some suplus is retained but most returned to policy holders. Not liable
for each others losses.
Reciprocal Insurance Exchange Cooperative insurer. Members of a group contract to insure
each other that is run by an attorney in fact. Tax benefits.
Attorney in Fact organization that runs a reciprocal insurane exchange
Fraternal Organization cooperative insurer that resembels a mutual insruer but includes a
social function. Primarily writes life and health.
Pools Several insurers join together to insure large exposures. Operate as a syndicate or as
reinsurance. Many are required by law especially with auto and workers comp
FAIR plan an insurance pool required by law in which private insurers are ablet o insurer
unmet property insurance needs in urban areas
Four main government insurance programs National flood, TRIA, workers comp (competes
with regular), automibile insurance plans
Residual market issued by states with autombile isnure, makes insurance available through
shared risk mechanism
Four ways to classify P&C insurers 1) Legal form of ownership 2) Place of incorporation 3)
Licensing Strength 4) Insurance distribution systems and channels
Risk retention group A group self-insurance plan or group captive insurer operating under
the auspices of the Risk Retention Act (RRA) of 1986
Purchasing group Authorized by the Liability Risk Retention Act of 1986, a group formed to
obtain liability coverage for its members, all of which must have similar or related exposures.
The Act requires a purchasing group to be domiciled in a specific state. In contrast to risk
retention groups (RRGs), purchasing groups are not risk-bearing entities.
Main legal forms of ownership Proprietary, Cooperative, Pools, Government
Proprietary Insurers insurer formed for the purpose of earning a profit for its owners
Four types of proprietary insurers Stock insures, Lloyd's of London, American Lloyd;s,
Insurance Exchange
Stock Insurers most prevelent proprietary insurer. Owned by stockholders who elect board
of directors
Lloyd's of London Marketplace similar to stock exchange. Members are corporations that
are investors. American Lloyd's is a smaller version
Insurance Exchange Similar to Lloyd's, acts as a market place. Members can be individuals,
partnerships or corporations and they belong to syndicates.
INEX An example of an insurance exchange
, Cooperative Insurer owned by policyholders and formed to provide insurance protection at
a minimum cost.
Five types of Cooperative Insurers Mutual Insurers, Reciprocal Insurance Exchange,
Freaternal Organizations, Capital Insurers, Risk Retention groups, Purchasing Groups
Mutual Insurer Most common cooperative insurer. No stockholders just policyholders that
elect board of directors. Some suplus is retained but most returned to policy holders. Not liable
for each others losses.
Reciprocal Insurance Exchange Cooperative insurer. Members of a group contract to insure
each other that is run by an attorney in fact. Tax benefits.
Attorney in Fact organization that runs a reciprocal insurane exchange
Fraternal Organization cooperative insurer that resembels a mutual insruer but includes a
social function. Primarily writes life and health.
Pools Several insurers join together to insure large exposures. Operate as a syndicate or as
reinsurance. Many are required by law especially with auto and workers comp
FAIR plan an insurance pool required by law in which private insurers are ablet o insurer
unmet property insurance needs in urban areas
Four main government insurance programs National flood, TRIA, workers comp (competes
with regular), automibile insurance plans
Residual market issued by states with autombile isnure, makes insurance available through
shared risk mechanism
