Which statement best distinguishes a Texas stock insurance company from a Texas mutual insurance company?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under the Texas Insurance Code provisions governing insurer organization (Chapters 547 and 801), the decisive difference is ownership structure: a stock insurer is capitalized by the sale of capital stock to investors who bear the risk of profit or loss, while a mutual insurer is a corporation without capital stock whose policyholders are the owners. Both types must be authorized by TDI and both are subject to the same reserve, solvency and market-conduct requirements, so the distinction is who owns and controls the company, not what lines it writes or where it is domiciled.
Why the other options are wrong
- A) Both are fully subject to Texas reserve, solvency and market-conduct requirements; neither is exempt.
- B) Both stock and mutual companies may be authorized for life, accident and health lines; ownership type does not limit the lines written.
- D) Domicile depends on where the company is organized, not on whether it is a stock or a mutual.
Memory hook
Stock means investors put up the money; mutual means the policyholders are the company.