The legal forms of Conventional Insurance

The legal forms of Conventional Insurance

What are the legal forms of Conventional Insurance?

From historical background of conventional companies, we find that three predominant legal forms have been used as follows:

  1. Association of Individuals (Lloyds);
  2. Stock companies; and;
  3. Mutual associations.

A Lloyds Association is an organisation of individuals joined together to underwrite risks on a co-operative basis. Here the individual underwriter assumes risks in his own name and does not bind the organisation for his obligations. Each underwriter is individually liable for losses on which he has assumed risks. Thus it can be said that a Lloyds Association is proprietory organisation bent on profit and the  underwriter is always an individual. On the other hand, a stock company is the corporate body of stock holders which is organised a.s a profit making venture in the field of insurance. However, the mutual companies, and the clubs or associations are organised as non-profit corporate body which is owned by policy holders as there are no stock holders.