Reinsurance can be crucial to ensure mutual insurers survive difficult periods, according to Willis Re president Paddy Jago.
Addressing mutual and cooperative insurers at the Meeting of Reinsurance Officials yesterday focussed on the implications for mutual and co-operative insurers of external factors such as the economic environment, regulatory changes, model change and the impact of recent catastrophic losses.
"Reinsurance - surrogate capital - can be the difference between survival & extinction for mutual insurers" he said, "The tail of large catastrophes is always bigger than we think, and it's at the upper end of your reinsurance where the potential capital problems really lie. For a group who rely on their reinsurance for survival, you need to ask the question - have we got it right at the top end?"
Jago also talked of the ever present threat of competition within a mutual's backyard.
"You (mutuals) are product focussed and know your market, but the competition will fight your knowledge with their price" he said. Jago asserted that reinsurance should not restrict the coverage offered by mutuals, and argued that because a mutual's targets and goals were so very different than the ‘for profit' competition, reinsurers needed to adopt an approach that suited them.
"Mutuals are so commendable" he said. "The team ethos and club environment, which is often born out of adversity, that you are there to serve your policyholders, resonates."
"Willis Re set up a mutual division specifically to better understand and to take care of the needs of our mutual and co-operative clients. Our commitment to ICMIF as one their supporting members underlines that commitment. The best way for us to anticipate the challenges faced by mutual, and to work with them to find solutions through reinsurance is undoubtedly to maintain a close relationship with ICMIF and their members."
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