What is a defining trait of a "reciprocal insurer"?

A defining trait of a "reciprocal insurer" is that it is owned by its policyholders and managed by an attorney-in-fact. Reciprocal insurers are unique entities where policyholders, who are also known as subscribers, collectively provide insurance coverage for one another. This mutual arrangement means that the policyholders share risk and, in turn, have a vested interest in the financial wellbeing of the organization.

The management aspect involving an attorney-in-fact is critical because this individual or entity is responsible for overseeing the daily operations and claims handling of the reciprocal insurer. This structure fosters a cooperative model where the focus is not solely on profit but on the mutual benefit of the members involved.

This ownership and management structure contrasts significantly with traditional insurers, which are typically set up as for-profit entities governed by a board of directors, or regulatory bodies that may not include input from policyholders. Therefore, understanding the ownership and management dynamics of reciprocal insurers is essential in recognizing their distinct role and characteristics within the insurance industry.