What describes a system of formal risk sharing among members?

The description of a system of formal risk sharing among members aligns with the concept of a reciprocal. In this context, a reciprocal is an arrangement where a group of individuals or entities come together to pool their resources to share risks among themselves. Members contribute to a collective fund that is used to pay claims, thereby allowing them to mitigate individual financial exposure. This cooperative system enables each member to benefit from shared resources while taking part in the contributions and risk-sharing process.

The other terms represent different concepts that do not specifically focus on the structured sharing of risk among members. For instance, a fraternal group typically refers to an organization that offers social and community support rather than a formalized structure to handle risk. Limited liability pertains to the legal structure of a business, where the owners are not personally responsible for the company's debts, but it doesn't imply risk sharing among multiple members. An insurance syndicate generally refers to a group of underwriters that jointly assume an insurance risk and is less focused on mutual benefit and risk pooling among individual members than a reciprocal arrangement.