Buildings in flood zones are difficult to insure by private insurers because

Buildings in flood zones are difficult to insure by

This preview shows page 12 - 14 out of 24 pages.

10. Buildings in flood zones are difficult to insure by private insurers because the ideal requirements of an insurable risk are difficult to meet. Which of the requirements of an insurable risk are not met by the flood peril? 1. Describe the basic characteristics of stock insurers. A stock insurer is a corporation owned by stockholders. The main objective is to earn profits for the stockholders. Executive officers appointed by the board of directors manage the corporation. The boards of directors are elected by the stockholders and are responsible for the corporation's financial success. The value of a stock can increase or decrease depending on how profitable the business is. Stockholders do not need to buy insurance policies offered by the stock insurer to secure an ownership stake in that insurer. They just provide capital for an ownership stake and expect to earn dividends (and/or capital gains) on their investment. 2. Describe the basic features of mutual insurers.
Image of page 12
A mutual insurance company is a company that is owned entirely by policyholders. These companies have no stockholders. The policyholders elect the board of directors and they appoint executives. Mutual insurers, especially mutual life insurers, tend to pay dividends. Unlike dividends paid by stock insurers, they are a partial refund of the premiums paid by the policyholders because of favorable loss experience and/or investment outcomes. The dividends are not subject to income taxes in this case.
Image of page 13
Image of page 14

You've reached the end of your free preview.

Want to read all 24 pages?

  • Spring '17
  • Marek
  • insurance companies, insurance company

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture