These organizations are composed of a group of persons, firms or corporations commonly termed "Subscribers" who exchange contracts of insurance on the Reciprocal or Inter-Insurance plan through the medium of an attorney-in-fact. Under this plan, each Subscriber executes an agreement identical with that executed by every other Subscriber, empowering the attorney-in-fact to assume on his behalf an underwriting liability on policies issued by the Exchange covering the risks of the other Subscribers. The attorney-in-fact assumes no liability as an underwriter. The Subscribers' Liability is several and not joint an is limited by the terms of the Subscribers' Agreement.

An agreement between two or more insurance companies by which the risk of loss is proportioned. Thus the risk of loss is spread and a disproportionately large loss under a single policy does not fall on one company. Acceptance by an insurer, called a reinsurer, of all or part of the risk of loss of another insurer. A company issuing an automobile liability policy, with a limit of $100,000. A fire insurance company which issues a large policy generally reinsures a portion of the risk with one or several other companies.

Premiums ceded to other affiliated and nonaffiliated insurance companies.

The total ceded reinsurance recoverables due from non-US affiliated for paid losses, unpaid losses, losses incurred but not reported (IBNR), unearned premiums and commissions less funds held from reinsurers expressed as a percent of policyholders' surplus. This ratio measures a company's dependence upon its reinsurers and the potential exposure to adjustments on such reinsurance.

The sum of after-tax net income and unrealized capital gains, to the mean of prior and current year-end policyholders' surplus, expressed as a percent. This ratio measures a company's overall after-tax profitability from underwriting and investment activity.

Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.

These entities, formed under the Liability Risk Retention Act of 1986, enable businesses or professionals with similar risks to band together to provide needed liability overages for each other. Under statue, RRGs are precluded from writing certain coverages; most notably property lines and workers' compensation. RRGs predominately write medical malpractice, general liability, professional liability, products liability excess liability coverages. RRGs can be formed as a mutual or stock company, or a reciprocal.