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A collective pool of assets of many insurance companies is an insurance pool. Pooling is something that is used to spread the loss should there be one through the issuance of high risk insurance policies. During a large catastrophic loss a single company wouldn’t be able to afford taking on that type of a risk let along paying it out.

Pooling assets; however, allows the companies the ability to extend coverage as well as to over a higher level of coverage to their policyholders. It’s very common in the insurance industry in order to manage things of a high risk nature.

Payouts and Government Incentive

With the insurance pool your insurance company is not going to pay out of pocket for your loss, the payout is going to come from the collective monies. You’ll make the claim to your personal insurance company and there really won’t be any difference in the way you see your claim processed.

The more distribution of risks the more levels of coverage and limits that can be extended to insured’s as not only do they distribute to the pool (insurance companies) but the pools are designed to be able to grow over time. Being designed in this way will allow the insurance companies to handle even the harshest level of claims.

There are instances where the insurance pools are going to be offered special incentives by the government which will add another benefit to the insurance industries pooling of assets.

There will be some cases where an insurance pool will be made due to government mandate. This would be in instances where the government mandates a pool creation to allow certain high risk candidates to be able to obtain insurance. This isn’t always the case as insurance companies most of the time will voluntarily pool their resources.

One of the examples for government mandate would be in the instance of insurance for a nuclear facility. There is no one single insurance company that is going to want to take on the risks of a nuclear facility. Should something happen at the facility it will destroy the insurance company.

Another instance of a pool would be a health insurance pool that allows those that would otherwise be deemed ineligible for coverage to still be able to obtain it. They will have access to health insurance through this pool.