Costly events hit mutuals harder

While the wider insurance industry has coped well with recent heavy losses stemming from natural catastrophes around the world, many mutual insurers can struggle with not just the scale of losses but the claims process following an event.

That was one of the conclusions of Barry Costi-Mouyia, technical claims director at Willis Re, speaking at the 2013 International Cooperative and Mutual Insurance Federation (ICMIF) Claims Seminar recently.

“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.

Mutual insurers often lack the global resources of their multi-national peers while their often very specific geographical spread of policyholders means many may not have recent experience of a major catastrophe.

But Costi-Mouyia also said that well mutuals would still cope well with such events.

“For a mutual insurer there is no reason why lack of experience or limited resources should adversely affect the management of catastrophe losses if a robust claims management and business continuity plan is available for implementation,” he said.

He went on to stress that “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”, noting that “these are key to ensuring efficient and timely reinsurance recoveries where it is recognised that cash flow is a prime consideration.”