How is a reciprocal inter-insurance exchange defined?

A reciprocal inter-insurance exchange is defined as a managed insurance company operated by an attorney-in-fact. This type of organization facilitates the sharing of risks among its members, who are typically policyholders. Each member of the exchange agrees to insure one another's risks, effectively creating a system of mutual insurance.

The attorney-in-fact serves as a representative for the members and is responsible for managing the day-to-day operations, underwriting, and claims processing. This structure allows members to benefit from lower costs and shared resources while ensuring that claims are handled efficiently. The reciprocal arrangement fosters a sense of community among policyholders, who have a vested interest in each other’s well-being, aligning their incentives toward minimizing risk and managing losses collectively.

By contrast, an incorporated insurance entity typically seeks profit motives and may not operate on a mutual basis like a reciprocal. Similarly, a mutual agreement among shareholders does not reflect the nature of reciprocal exchanges, nor does a standard liability corporation define the unique structures and operations prevalent in reciprocal inter-insurance exchanges.