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Difficulty: MediumTypes of Insurers

Suncoast Financial Group is an insurance company incorporated under the laws of Delaware. It recently expanded its operations into Florida, successfully applying for and receiving a Certificate of Authority from the Florida Office of Insurance Regulation to sell life insurance policies. Suncoast is owned by private investors who hold shares of the company, and its board of directors routinely declares taxable dividends based on corporate profits.

Based on its legal structure and operations in Florida, how is Suncoast properly classified?

  1. A foreign, admitted stock insurer that covers pure risksAnswer
  2. B
    A foreign, admitted mutual insurer that covers pure risks
  3. C
    A domestic, admitted stock insurer that covers pure risks
  4. D
    A foreign, admitted stock insurer that covers speculative risks

Answer

A foreign, admitted stock insurer that covers pure risks
The correct classification accurately synthesizes the four variables provided in the scenario. 'Foreign' applies because the company is incorporated in Delaware but doing business in Florida. 'Admitted' applies because it holds a valid Certificate of Authority. 'Stock' applies because it is owned by private investors who receive taxable dividends. Finally, it covers 'pure risks' because life insurance fundamentally deals only with the chance of loss or no loss, not financial gain.

Step-by-Step Solution

1
Analyze the domicile of the insurer relative to its operating state.
The company is incorporated in Delaware but operating in Florida, making it a foreign insurer.
An insurer is classified as domestic only in the state where it is incorporated.
2
Determine the authorization status of the insurer.
The company holds a Certificate of Authority in Florida, making it an admitted (authorized) insurer.
A Certificate of Authority is the legal license granting an insurer admitted status in a state.
3
Identify the corporate ownership structure.
The company is owned by investors holding shares who receive taxable dividends, defining it as a stock insurer.
Stock insurers are driven by shareholder profit, whereas mutual insurers are owned by participating policyholders.
4
Determine the type of risk being insured.
The company sells life insurance, which covers pure risks.
Insurance is designed to cover pure risks (no chance of financial gain), distinguishing it from speculative risks like gambling or investing.

Key Concept

Insurer Classification by Domicile, Authority, and Ownership
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Topics

Types of Insurers

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