Arkansas Insurance Adjuster Practice Exam

A captive insurance company exists to:

1. provide insurance for its parent company.

2. operate through an attorney-in-fact to provide benefits for its members.

3. provide insurance for insurers.

4. meet the needs of the general public.

The correct answer is: provide insurance for its parent company.

A captive insurance company is typically formed by a parent company to provide insurance coverage exclusively for its own risk management needs. Option B, operating through an attorney-in-fact, is a method used by risk retention groups, not captive insurance companies. Option C, providing insurance for insurers, is incorrect as captive insurance companies do not generally provide coverage for other insurance companies. Option D, meeting the needs of the general public, is incorrect as captive insurance companies are not designed to serve the general public, but rather a specific company or group.