What is a Reciprocal Insurer?

A Reciprocal Insurer is defined as an unincorporated group of individuals or entities that mutually agree to insure one another. This arrangement allows members to share risk among themselves, and they do so by creating a pool of funds contributed by all members, which is used to pay for any claims that arise. In a reciprocal exchange, each member is both an insurer and an insured, and they cooperate for their mutual benefit.

This structure differs significantly from a corporation owned by stockholders, which operates for profit and is overseen by a board of directors. Additionally, while mutual benefit societies and nonprofit organizations may provide valuable services to their members, they are distinct entities with different operational frameworks and goals. Reciprocal insurers specifically focus on mutual risk sharing without the formal structure of a corporation, emphasizing collaboration among members to achieve their insurance needs.