Willis examines diversification opportunities for mutual insures

by Gill Montia

Story link: Willis examines diversification opportunities for mutual insures

Willis Re has been examining the challenges and opportunities offered to mutual insurers through diversification.

In a new report, the broker explains that regulations introduced in association with Solvency II have encouraged some mutual insurers to consider exploring new lines of business that have the potential to relieve regulatory capital requirements.

In addition, a greater level of diversification is likely to be looked upon favourably by rating agencies.

Mutual insurers are policyholder-owned entities and as such their capital is less flexible than non-mutual capital, the Willis Re report states, while going on to warn that committing capital to new lines of business or new territories is intrinsically riskier for mutuals compared to non-mutuals.

Robin Swindell, joint author of the report, comments “A key lesson is to pursue diversification only where it is in line with the long-term aims of the organisation, stands a reasonable chance of being profitable, and does not come at the expense of a loss of focus on other aspects of business.”

Willis Re also makes the point that whilst reinsurance alone cannot resolve all the issues facing mutuals looking to diversify, it can offer benefits in managing the process by recognising the unique nature of the relationship between a mutual and its members’ capital.