50. An insurer established and owned by a parent firm for the purpose of insuring the parent firm's loss exposures is known as a
Answer: C
A captive insurer
A captive insurer is specifically established and owned by a parent firm to provide insurance coverage for the loss exposures of that firm. This structure allows the parent company to manage its own risk more effectively.
A) stock company.
A stock company is an insurance company owned by shareholders who may not be related to the insured entities. This option does not fit the definition of an insurer established specifically for a parent firm’s loss exposures, as stock companies are typically focused on profit for their shareholders rather than serving the needs of a single parent company.
B) mutual company.
A mutual company is an insurance organization owned by its policyholders, who are entitled to vote on company decisions and receive dividends. While it represents a collective interest, it does not specifically refer to an insurer created for the purpose of covering the risks of a single parent firm.
C) captive insurer.
A captive insurer is precisely defined as an insurance company that is formed and owned by a parent firm to insure its own risks. This allows the parent company to have direct control over its insurance and risk management strategies, making this option the correct answer.
D) fraternal society.
A fraternal society is an organization that provides insurance benefits to its members, who typically share a common bond or affiliation. This option does not align with the concept of an insurer established solely for a parent firm’s loss exposures, as fraternal societies operate on a different model focused on mutual aid among members rather than corporate insurance needs.
Conclusion
The captive insurer is the only option that accurately describes an insurance entity created and owned by a parent firm specifically to manage its own risk exposures. Other options, such as stock companies, mutual companies, and fraternal societies, do not meet this definition, as they serve broader or different purposes that do not align with the needs of a single parent company.