- Reciprocal inter-insurance exchange
A reciprocal inter-insurance exchange, is an insurance company referred to in
United Statesstate legislation as either a reciprocal insuranceexchange, a reciprocal interinsurance exchange, or perhaps most properly a reciprocal inter-insurance exchange and is managed by an attorney in fact(AIF). Sometimes they are referred to simply as "reciprocals".
A reciprocal interinsurance exchange is unincorporated: each member of the exchange is "individually" and "severally" liable to indemnify all the other members. As to the unincorporated personal liability of each member of a reciprocal inter-insurance exchange, there is an important distinction when compared to a partnership: members of a reciprocal inter-insurance exchange are not "jointly liable" ( [http://en.wikipedia.org/wiki/Joint_liability#Joint_liability] ), as are partners of a law firm.
Reciprocals are sometimes confused with an incorporated
mutual insurancecompany. Reciprocals have been compared to limited liability company(LLC) and limited partnerships (LP). Both the reciprocal and the LLC are made up of members. Members of a reciprocal are also sometimes referred to as subscribers. Members enter into a direct partnership with most of the features associated with a mutual [agency (law)|agency] . As is also true in the case of the LLC, there is no incorporated limited liabilityentity owned by shareholders. Share ownership and limited liability evidenced by stock certificates are not issued to each owner. However, legislation has been enacted that limits liability of members to only the assets held by the reciprocal. Therefore, for liability purposes, membership in a reciprocal is similar to ownership of shares of a corporation.
Members of a reciprocal may be either a
natural person, an LLC or LP, a partnership, or a corporation. In some states, municipalitiesform reciprocals to cross-indemnify towns, cities, villages, and counties.
The AIF is a stakeholder and a
trusteewho holds the deposits made by each member. All property entrusted to the AIF in a reciprocal remains, at all times, the property of the subscribers. In that regard, the AIF is a classic trustee, and the members are the beneficiaries of the trust.
Limited liability company
Farmers Insurance Group
*"The Regulation of Reciprocal Insurance Exchanges", by Dennis F. Reinmuth (ISBN 0-256-00676-8)
*"USAA. A Tradition of Service 1922 –1997", by Paul T. Ringenbach (ISBN 0-89865-993-0)
*"USAA: life story of a business cooperative", by Edward Clare Dunn (ISBN 0-07-018280-9)
* [http://www.capitol.state.tx.us/statutes/docs/IN/content/word/in.006.00.000942.00.doc Texas Insurance Code Subsection on Interinsurance Exchanges]
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