A reciprocal insurance exchange is one of the ways insurance organizations can be structured and capitalized. In a traditional “stock” insurance company, capital is provided by shareholders, who invest for profit. A reciprocal has no shareholders. Instead, the insurer is owned and financed by its policyholders, also known as members.

As a member, a portion of your annual payments are set aside as capital or “surplus” for the insurer. Apart from this, AMIE’s start-up capital was provided as debt in the form of surplus notes issued to third parties. The reciprocal structure is common and some well-known companies that you have likely heard about, like USAA and Farmers, have organized themselves as reciprocals.

Advantages of A Reciprocal

There are several benefits to organizing as a reciprocal that AMIE wanted to take advantage of and pass on to members:

• First, a reciprocal, over time, is able to raise capital at a lower cost due to tax efficiencies related to member surplus contributions. As a result, members typically see lower rates.
• Secondly, as a member owned exchange, AMIE is able to bring together an exclusive group of individuals and families who take the same steps to protect their passions and possessions as you do. The more responsible individuals join our membership, the more all members benefit.
• Finally, the reciprocal structure allows members to participate in the excess profits of the reciprocal via surplus distributions. These distributions require approval by the Florida Office of Insurance Regulation (“FL OIR”), our domestic regulator, and will only be made in years AMIE achieves profitable underwriting results and only to active members in accordance with the Subscriber’s Agreement and Power of Attorney each member signs upon joining AMIE.

A reciprocal insurance exchange is managed by an entity known as an Attorney in Fact (AIF). In the case of AMIE, its Attorney in Fact is American Mobile Risk Management, LLC or “AMRM.” AMIE has engaged AMRM to manage its operations and provide exceptional service and claims experience for AMIE’s members.  AMRM is made up of industry veterans who have many years of experience in providing personal insurance to manufactured homeowners.

AMRM is majority owned by K2 Insurance Services, LLC – an insurance services holding company with over a $1b in premiums written annually.  K2’s support further strengthens AMIE’s ability to deliver capital and expertise to its members.

Policyholder and subscriber are interchangeable terms. A reciprocal exchange is a true peer-to-peer insurance company and policyholders are often called subscribers or members.  When you buy a policy from a reciprocal, you are part of the company. Technically speaking, you and your fellow subscribers are actually insuring each other.

Simply put, the Subscriber Agreement/Power of Attorney document is an agreement to become a member, and owner, of AMIE – becoming part of a family of manufactured home owners with similar interests.

Not to get too technical, executing the document affirms the homeowner’s agreement to a number of important things that will ensure AMIE’s success and your ability to become a member.

These things include:

1. Confirms member’s agreement to appoint American Mobile Risk Management, LLC (AMRM) as Attorney-in-Fact (AIF) in order to manage the day-to-day operations of the company, things like issuing policies and claims handling.
2. Acknowledges the member’s agreement to exchange polices – which essentially means members will pay each other’s losses. Don’t forget, our policies are non-assessable so a member will never pay more than their annual premiums.
3. Confirms the duties of the Subscriber Advisory Committee (SAC) and that they will act as the voice for members, protecting your rights as a member. The Committee will also serve as a liaison between members and AMRM.
4. Acknowledges that the Surplus Contribution, which was approved by the Florida Office of Insurance Regulation (FL OIR), is 5% of annual premiums. The member Surplus Contribution will become part of AMIE’s policyholder surplus to ensure the long-term financial security and claims paying ability.
5. Outlines the details of the Subscriber Savings Account (SSA) and the limitations on distributions from member Surplus Contributions as well as the Subscriber Savings Accounts.

In order to become a member/owner of the exchange, Florida statute requires that the Subscriber Agreement be executed by every member at the time their policy is purchased.  Unfortunately, AMIE is not able to accept new members without an executed agreement.

AMIE has formed an advisory committee that operates to supervise the activities of AMRM and ensure that Members’ voices are heard. This committee is known as a Subscribers’ Advisory Committee (SAC), which is elected annually by Members and is required to supervise the finances and operations of AMIE. The details of how this works are laid out in the Subscriber’s Agreement and Power of Attorney and the Powers of the Subscribers’ Advisory Committee, which are available to all members.

The Subscribers’ Advisory Committee (SAC) protects your rights as a subscriber – ensuring that you have an active voice in all that we do.  The committee is designed to be your sounding board – they listen to your feedback to help guide decisions with AMIE’s resources, making improvements, and creating a  path forward.

• Monitor the finances of AMIE by reviewing its financial condition, including any financial reports or other financial information submitted by AMIE to the Florida Office of Insurance Regulation;
• Monitor the operations of AMIE to the extent necessary to ensure conformity with the Subscriber’s Agreement and Power of Attorney, and make recommendations to AMRM on any operational issues;
• Recommend the selection of an independent auditor to AMRM and procure the audit of the accounts and records of AMIE and AMRM, at the expense of AMIE, and review the results of any such audit; and
• Adopt certain governance, election, voting or other rules, as the Committee determines, provided that such are not inconsistent with the Subscriber’s Agreement and Power of Attorney and these Powers of the Subscribers’ Advisory Committee.

When you get a policy from the American Mobile Insurance Exchange (AMIE), you will notice your policy includes a member surplus contribution. The surplus contribution is a small fee – 5 percent of your premium – that acts as a claims buffer, an extra financial safety net.  When comparing quotes, think of this fee as part of your premium.

A member surplus contribution actually saves you money over time. The more reserves we have to pay claims and cover operating costs, the lower we can keep our prices.

AMIE is structured as a reciprocal exchange, which means the policyholders actually own the company and AMRM manages it for a flat fee. Because our fee is fixed, we aren’t incentivized to raise rates to increase profits to appease outside shareholders – our obligation is only to our members. When you buy a policy, our “subscriber agreement” explains this relationship and the surplus contribution.

Florida regulators approved the surplus contribution, and while you can’t opt out of it, it is refundable on a prorated basis if the policy is canceled.

Policyholder surplus is an insurance company’s admitted assets minus what it owes in claims. This is a strong indication of an insurer’s financial strength and capacity to write new policies.

A greater policyholder surplus means a company is financially sound – it has more assets than losses and can easily pay claims. And surplus funds can be used for exactly that: paying for claims that exceed what reinsurance will cover (and it covers a lot). In fact, our reinsurance program is so strong that the probability of surpassing these reserves is incredibly rare. Only once in every 130 years would we expect one event to exceed our program.

Financial Strength of the Reciprocal

AMIE is an “admitted” insurance entity regulated by the Florida Office of Insurance Regulation (FL OIR). As such it is subject to the same laws, regulations and capital requirements as every other Florida domestic insurance company. Additionally, AMIE is rated A by Demotech, a leading insurance company rating agency. AMIE also takes a conservative approach to buying reinsurance to ensure it remains financially strong. AMIE’s reinsurance program is comprised of financially secure, highly rated global reinsurance companies rated A- or better by A.M. Best.