Which type of insurance company is formed by multiple similar businesses?

The correct choice is the purchasing group, which is a type of insurance company formed by multiple similar businesses coming together to purchase insurance at a reduced cost. This structure allows businesses with common interests, such as those in the same industry or profession, to aggregate their risk, thereby leveraging their collective bargaining power to secure better terms and rates for the coverage they need.

By forming a purchasing group, members can find specialized insurance products that may not be available to individual businesses, ensuring they get coverage tailored to the specific risks they face. This collaborative approach can lead to significant savings and enhanced coverage options, benefiting all participating members.

In contrast, the other types of insurance companies, such as captive insurance companies and self-insurance groups, operate differently. A captive insurance company is owned and controlled by the insured parties, primarily to cover their own risks rather than to group together for purchasing insurance. A self-insurance group typically refers to a collective arrangement where businesses set aside funds to pay for their own claims rather than purchasing insurance. Reinsurance companies provide insurance to other insurance companies and do not directly involve a group of similar businesses in forming their structure.