YOU ASK:

What is the definition of Reciprocal Exchange?

WE ANSWER:

Reciprocal Exchange refers to an association where insurance companies agree to assume one another's risks or a portion of the risks covered.

This exchange is unincorporated and administers the "exchange" in assumption of risks. The administrator of the exchange is the attorney-in-fact. The attorney-in-fact has several roles. He recruits new members, undertakes the underwriting tasks for new business and renewals, invests the premiums that come into the exchange, as well as receiving the premiums and swapping reinsurance contracts.

The members are insurance companies, with each company assuming the role as insured and insurer. They also share the losses and profits based on how much that member bought from the exchange.

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