Which type of insurer has no permanent capital stock and policyholders participate in dividends?

• A. Mutual Insurance Company
• B. Stock Insurance Company
• C. Reciprocal Exchange
• D. Reinsurer

Answer: (A)

Ownership structure and how profits are returned define this type. A mutual insurance company is owned by the policyholders, so there is no permanent capital stock issued to outside investors. When the company earns profits, those earnings are returned to policyholders as dividends or premium credits, directly benefiting the people who hold the policies. This contrasts with stock insurers, which have capital stock and pay profits to stockholders, not policyholders. Reinsurers provide risk transfer for other insurers and aren’t described by policyholder dividends, and reciprocals are another mutual-type arrangement but the classic description of “no permanent capital stock and policyholders participate in dividends” points to a mutual insurance company.