What is a reciprocal insurance company?
A reciprocal insurance exchange is the formation of an association of entities, with each member of the association assuming the risk of the other. Profits and losses are shared in direct proportion to how much insurance coverage a member has. The arrangement is similar to a mutual insurance company, which is owned by the insureds, and places premium dollars that are received into a pool, which is used to pay claims. Members of the reciprocal are referred to as subscribers rather than policyholders.
