ref: reel030489 date: 1930-01-01 content: agree upon a plan of exchanging contracts of insurance among themselves in order to produce the premium and cash-flow savings of self-insurance and at the same time the protection, orderly and equitable means of operation of any other type of insurance company. The authority for accepting insurable risks, issuing policies, paying claims, and all other functions of a normal insurance company is outlined in a document called 'The Subscribers' Agreement' which designates the powers and duties conferred by the subscribers. Each subscriber signs this contractual agreement. This document also provides for the allocation of premiums to payment of losses, expenses, reinsurance, reserves and savings.
It is in the category of savings that the reciprocal is unique, since all savings belong to the subscribers in proportion to the premium paid by each. Such savings may be returned in cash or in the form of equity credits which become an asset to the subscriber and at the same time in total add up to the policyholders surplus of the reciprocal. If a subscriber withdraws from the reciprocal he is entitled, with due notice, to take his accumulated savings with him provided the withdrawal does not impair the surplus of the reciprocal. This unique feature of reciprocal insurance makes it particularly attractive to large groups of similar units such as associations or corporations or other similar entities.
In order to provide for the orderly management of the reciprocal the Subscribers' Agreement appoints an attorney-in-fact whose powers and duties are outlined therein and who assumes the responsibility for the operation within the limited powers chunkid: 20638 recordid: 1658 page_number: 1