Editing Insurance (section)

==Insurance companies==
{{more citations needed|section|date=January 2019}}
[[File:Republic Fire Insurance Company certificate.jpg|thumb|Certificate issued by Republic Fire Insurance Co. of New York {{Circa|1860}}]]
Insurance companies may provide any combination of insurance types, but are often classified into three groups:<ref name=":0">{{Cite news|url=https://www.investopedia.com/features/industryhandbook/insurance.asp|title=The Industry Handbook: The Insurance Industry|date=7 January 2004|work=Investopedia|access-date=28 November 2018|archive-url=https://web.archive.org/web/20180907000042/https://www.investopedia.com/features/industryhandbook/insurance.asp|archive-date=7 September 2018|url-status = live}}</ref>

* [[Life insurance]] companies, that provide life insurance, annuities and pension products and bear similarities to [[asset management]] businesses<ref name=":0" />
* Non-life or [[property insurance|property]]/[[casualty insurance]] companies, which provides other types of insurance.
* [[Health insurance]] companies, which sometimes provide life insurance or [[employee benefits]] as well

General insurance companies can be further divided into these sub categories.
* Standard lines
* Excess lines

In most countries, life and non-life insurers are subject to different regulatory regimes and different [[tax]] and [[accounting]] rules. The main reason for the distinction between the two types of company is that life, annuity, and pension business is long-term in nature – coverage for life assurance or a pension can cover risks over many [[decade]]s. By contrast, non-life insurance cover usually covers a shorter period, such as one year.

===Mutual versus proprietary===
{{Main|Mutual insurance}}
Insurance companies are commonly classified as either [[Mutual insurance|mutual]] or proprietary companies.<ref>{{cite book|title=IF1 – Insurance, Legal & Regulatory|year=2011|publisher=Chartered Insurance Institute|isbn=978-0-85713-094-5|author=David Ransom|page=2/5}}</ref> Mutual companies are owned by the policyholders, while shareholders (who may or may not own policies) own proprietary insurance companies.

[[Demutualization]] of mutual insurers to form stock companies, as well as the formation of a hybrid known as a mutual holding company, became common in some countries, such as the United States, in the late 20th century. However, not all states permit mutual holding companies.

===Reinsurance companies===

[[Reinsurance]] companies are insurance companies that provide policies to other insurance companies, allowing them to reduce their risks and protect themselves from substantial losses.<ref name="The Business Model of Reinsurance Companies">{{cite web |last1=Ross |first1=Sean |title=The Business Model of Reinsurance Companies |url=https://www.investopedia.com/articles/insurance/082916/business-model-reinsurance-companies.asp |website=Investopedia |access-date=26 August 2021}}</ref> The reinsurance market is dominated by a few large companies with huge reserves. A reinsurer may also be a direct writer of insurance risks as well.

===Captive insurance companies===
{{Main|Captive insurance}}

[[Captive insurance]] companies can be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers. In short, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity, which is a 100% subsidiary of the self-insured parent company; of a "mutual" captive, which insures the collective risks of members of an industry; and of an "association" captive, which self-insures individual risks of the members of a professional, commercial or industrial association. Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices.

The types of risk that a captive can underwrite for their parents include property damage, public and product liability, professional indemnity, employee benefits, employers' liability, motor and medical aid expenses. The captive's exposure to such risks may be limited by the use of reinsurance.

Captives are becoming an increasingly important component of the [[risk management]] and risk financing strategy of their parent. This can be understood against the following background:
* Heavy and increasing premium costs in almost every line of coverage
* Difficulties in insuring certain types of fortuitous risk
* Differential coverage standards in various parts of the world
* Rating structures which reflect market trends rather than individual loss experience
* Insufficient credit for deductibles or loss control efforts

===Other forms===
Other possible forms for an insurance company include [[reciprocal inter-insurance exchange|reciprocals]], in which policyholders reciprocate in sharing risks, and Lloyd's organizations.<ref name="Lloyds Organizations">{{cite web |last1=Liberto |first1=Daniel |title=Lloyd's Organizations |url=https://www.investopedia.com/terms/l/lloyds-organizations.asp |website=Investopedia |access-date=26 August 2021}}</ref>

===Admitted versus non-admitted===
Admitted insurance companies are those in the United States that have been admitted or licensed by the state licensing agency. The insurance they provide is called '''admitted insurance'''. Non-admitted companies have not been approved by the state licensing agency, but are allowed to provide insurance under special circumstances when they meet an insurance need that admitted companies cannot or will not meet.<ref>{{cite web|url=https://www.investopedia.com/terms/a/admitted-insurance.asp |title=Admitted Insurance |website=investopedia.com |date=29 January 2018 |access-date=15 January 2019}}</ref>

===Insurance consultants===

There are also companies known as "insurance consultants". Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy among many companies. Similar to an insurance consultant, an "insurance broker" also shops around for the best insurance policy among many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client.

Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions. Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. These companies often have special expertise that the insurance companies do not have.

===Financial stability and rating===

The financial stability and strength of an insurance company is a consideration when buying an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, a more financially stable insurance carrier reduces the risk of the insurance company becoming insolvent, leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool or other arrangements with less attractive payouts for losses). A number of independent rating agencies provide information and rate the financial viability of insurance companies.

Insurance companies are rated by various agencies such as [[AM Best]]. The ratings include the company's financial strength, which measures its ability to pay claims. It also rates financial instruments issued by the insurance company, such as bonds, notes, and securitization products.