Changes in reinsurance market mean opportunity for mutual insurers: Willis

Mutual insurers are in a strong position to take advantage of changes in the traditional reinsurance market, including a flood of capital, Willis Re said this week.

In its recent April 1 renewals report, the global reinsurance broker said that there is currently about $35 billion of capital that has the reinsurance entered the market from various sources.

Read more: Influx of new capital a threat to reinsurers: Willis Re

That flood of capital, along with changing distribution models, “has left many reinsurers concerned over both their existing portfolios and their access to future growth,” the company said.

However, that provides mutual insurers – companies where policyholders, not external shareholders, are the “ultimate owners” – with the “perfect opportunity to strengthen their existing relationships with traditional reinsurers and to forge new ones,” Willis Re said.

“Traditional reinsurers are very aware that while some larger commercial buyers are reducing their use of reinsurance in this phase of the reinsurance cycle, mutual buyers value long-term sustainable relationships throughout the entire cycle,” Robin Swindell, executive vice president of Willis Re commented in a statement.

Because mutual insurers have less access to capital outside of their policyholders, they are often dependent on reinsurance to deal with catastrophes and large losses, Willis Re said.

During the 2013 International Cooperative and Mutual Insurance Federation Claims Seminar Tuesday, Barry Costi-Mouyia, Willis Re’s technical claims director, also said that claims arising out of catastrophe losses are especially acute for mutual insurers.

“Mutual insurers’ policyholder memberships are typically drawn from similar homogenous groups. These concentrations can lead to the impact of catastrophes being felt more sharply,” he said.

However, if a strong claims management and business continuity plan is in place, mutual insurers don’t need to be adversely affected by catastrophe losses, even if they lack experience or have limited resources, he said.

“…Solid preparation and an understanding of the requirements likely to be placed on the mutual insurer by its reinsurers in a claim situation is crucial,” he added. 

“Seismic changes occurring in the traditional reinsurance market are clearly favourable for mutual insurers,” company CEO John Cavanagh added in a statement. 

“Willis Re has always been a strong advocate of the long-term business models characterised by mutual insurers, and will continue to provide analytical and transactional support to our clients in this important market.”