An entity that assumes financial responsibility for potential losses, transferring risk from individuals or organizations to itself, in exchange for premium payments. These entities operate by pooling premiums from many insured parties to pay for the losses incurred by a smaller number of claimants. A stock corporation offering auto coverage or a mutual association providing homeowner’s protection are typical examples.
The role of such entities is vital to economic stability and personal financial security. They enable individuals and businesses to manage potential financial setbacks stemming from unforeseen events, facilitating investment and economic growth by mitigating risk. Throughout history, these entities have evolved from early forms of mutual aid societies to sophisticated financial institutions, consistently adapting to changing societal needs and regulatory landscapes.
