Final answer:
An insurance company based outside the United States is known as a foreign insurance company. It deals with adverse selection and moral hazard in its operations, wherein government regulation can play a key role.
Step-by-step explanation:
An insurance company that is organized or chartered in a country other than the United States is defined as a foreign insurance company. This classification refers to the regional regulatory jurisdiction rather than the scope or size of the company. It is important to understand this context, especially when considering the intricacies of adverse selection and moral hazard in insurance markets and the role of government laws and regulations that influence the insurance industry.
Insurance firms address the challenges of adverse selection by attempting to categorize potential clients into risk groups and setting their premiums based on these assessments. Government intervention in health insurance is an example of a mechanism to manage these industry challenges, particularly noted in the context of U.S. health care versus international practices, where government involvement is more prevalent.