What is a reciprocal insurance company primarily based on?

A reciprocal insurance company operates primarily on the principle of risk sharing among its members, who are referred to as subscribers. In this model, each subscriber agrees to insure the other subscribers against losses. This creates a cooperative environment where the risks and rewards are shared collectively, rather than being distributed to shareholders, as is typical in stock insurance companies.

By pooling resources, subscribers of a reciprocal insurance company can manage risks more effectively, providing a safety net for all members. This structure emphasizes collaboration and mutual assistance, which distinguishes it from other types of insurance arrangements. The focus on risk sharing is fundamental to the operation and philosophy of reciprocal insurance. Therefore, option B accurately encapsulates the core concept of how a reciprocal insurance company functions.