Which of the following is a characteristic of a reciprocal insurance company?

A reciprocal insurance company is fundamentally an organization formed by individuals or entities that agree to insure each other, sharing the risk among themselves. This unique structure means that every member of the reciprocal is both an insurer and an insured. The key characteristic of reciprocity is that it operates on the principle of mutual aid: individuals pool their resources to cover the claims made by any of them.

This collaborative model allows members to share the financial burdens of insurance losses without the need for traditional corporate ownership or shareholders, differentiating it from standard commercial insurance companies that have a more conventional corporate structure. The lack of shareholders in a reciprocal means that profits are typically allocated back to the members rather than distributed as dividends, emphasizing the mutual benefit and risk-sharing aspect of the arrangement.

While it's common for insurance companies to be profit-oriented, a reciprocal's primary focus is on serving the interests of its members rather than generating profits. Additionally, reciprocal companies can provide coverage for a variety of risk types, not just commercial, which is consistent with their flexible operating model. Therefore, the answer that best describes the nature of a reciprocal insurance company is that it operates without shareholders and insures each other.