Which of the following types of insurers limits the exposures it writes to those of its owners?

• A. Mutual insurer
• B. Independent insurer
• C. Stock insurer
• D. Captive insurer

Answer: (D)

The key idea is ownership shape driving risk scope. A captive insurer is formed and owned by its parent company to insure that parent’s own risks, so the insurer’s exposures are essentially limited to the owners and their affiliated entities. This setup lets the parent control premiums, losses, and capital needs directly, often with some risk transfer through reinsurance but without expanding to unrelated external risks. In contrast, a mutual insurer is owned by policyholders and serves their risks collectively, a stock insurer is owned by stockholders with earnings to those owners, and an independent insurer writes business for various clients not tied to a single owner group. None of those structures inherently restricts the insurer’s exposures to its owners in the same way a captive does.