[1] Reciprocals began in 1881 when dry-good merchants in New York were discontent with their experience with other insurers in covering their buildings.
[2] The store owners believed that they had well-maintained buildings and were being overcharged by risk rating methodologies used by insurers at the time.
[3] This definition implies three parties: the Subscribers (policyholders), the exchange (an unincorporated association), and the attorney-in-fact.
The attorney-in-fact, using a power of attorney from each subscriber, is authorized to administer the exchange and run its day-to-day operations, including issuing policies, filing rates, managing investments and handling claims.
Reciprocal insurance policies are typically nonassessable, keeping the policyholders from being charged an additional amount of money if required by the exchange.
While the products of stock companies, reciprocals, and mutuals may be practically indistinguishable to consumers, there are technical differences.
In 1981, Congress authorized the creation of risk retention groups (RRGs) to provide certain forms of commercial liability insurance.
In some states, municipalities form reciprocals to cross-indemnify towns, cities, villages, and counties.