Other Than Life (OTL) Practice Exam

Who owns a stock insurance company?

1. By its directors

2. By its bondholders

3. By the participating policyholders

4. By its shareholders

The correct answer is: By its shareholders

A stock insurance company is owned by its shareholders, who can buy stocks in the company and have a financial interest in its success. Shareholders play a vital role in the governance and operation of the company, as they elect the board of directors and can influence major decisions. The capital raised from shareholders is used to fund the company's operations and to underwrite the insurance policies it offers. Participating policyholders, directors, and bondholders do not have ownership in a stock insurance company. Participating policyholders may receive dividends or have a say in certain company matters but do not own shares. Directors are responsible for governance but do not own the company unless they also hold shares. Bondholders are lenders to the company and have no ownership stake, as they are primarily concerned with repayment of debt rather than ownership in the firm itself. Thus, the ownership structure is clearly established as being in the hands of the shareholders.