MTHEL131 Chapter Notes -Holding Company, Outsourcing, Mutual Organization
12 Mar 2014
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Majority of worldwide life and health insurance is issued by commercial insurance companies. Companies are commonly classified as stock or mutual companies. The shift from mutual to stock changes the industry"s ability to respond to the deregulation of the financial services marketplace. Separation of control and ownership leads to conflict between principle agent relationships. Life insurance industry involves three parties: company owners, company managers, policy owners. Several control mechanisms are available to help assure that management actions will not impose too much cost onto shareholders: board of directors, competition among managers seeking executive positions, threat of outside takeover. Form of an organization should provide permanence and a high degree of security of payment (corporation meets these requirements) Financial organizations that own or control one or more insurers, broker-dealer organizations, investment companies, consumer finance companies, and other financial service corporations. Formed by stock company: upstream holding company: sits at the top of the intercorporate structure, owned by stock holders.
