A comeback for mutual insurance? Swiss Re sigma report investigates
The mutual insurance sector has undergone a modest recovery in recent years, says Swiss Re's latest sigma report "Mutual insurance in the 21st century: back to the future?" Mutual insurers' share of the overall insurance market increased from 24% of direct premiums written in 2007 to just over 26% in 2014, reversing some of the declines of previous decades. However, the segment faces challenges, including adapting to new risk-based capital requirements and more stringent corporate governance arrangements, which could put some mutuals at a competitive disadvantage. Further, mutual insurers must embrace technological disruption. Exploiting digital technology such as smart analytics and social media should allow mutuals to better serve the interests of their member-owners, while their ownership structure should enable mutuals to keep insurance affordable for some individuals and risks.
The primary purpose of mutual insurers is to provide risk protection coverage for its owner-members, rather than to make profits or provide returns to external shareholders as in the case for stock-based insurers. Over the past few years, cumulative premiums written by mutual insurers have outpaced those of the wider insurance market, with much of the outperformance concentrated during the height of the financial crisis in 2008-09.
"That mutuals' relative premium performance did not reverse once economic growth resumed after the financial crisis, suggests a degree of permanence to the segment's recovery," says Kurt Karl, Chief Economist at Swiss Re. "Some mutual groups have expanded internationally in recent years, and new mutuals have been established in a number of markets, another indication of the segment's renewed popularity."