Achieve Financial Brilliance with the 2026 CFC Exam – Crack the Code to Consulting Success!

The correct choice, mutual insurer, refers to a type of insurance organization that is owned by its policyholders. In a mutual insurer, members share in the profits and losses of the company because they essentially own the insurance entity. When a mutual insurer performs well, it can distribute dividends or reduce future premiums for its members based on the surplus. This structure aligns the interests of the policyholders with the financial health and operational performance of the insurer, creating a shared stake in the outcomes of the business.

In contrast, a fraternal benefit society primarily serves its members in a social or fraternal context, providing benefits that are not necessarily tied to a profit-sharing model. A stock insurer is structured to operate for profit and is owned by shareholders who may not necessarily be policyholders, meaning profits are distributed to investors rather than members. A reciprocal exchange is a mutual insurance arrangement where members insure one another, but it operates differently from a mutual insurer, focusing more on group risk sharing than on membership ownership of the insurer itself.

Overall, the defining characteristic of a mutual insurer is the communal sharing of profits and losses among its member-owners, which is what distinguishes it from other types of insurers.